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Outlook: Golden shares

THAT SOUND of rattling in Whitehall yesterday was the Government dusting off its collection of golden shares in privatised industries. They have lain neglected in cupboards for so long that the Treasury had trouble initially recalling how many it still owned. For the record, the answer is fourteen, including shares in British Aerospace, Rolls-Royce and a clutch of electricity companies ranging from British Energy to the National Grid. Their main purpose is to prevent anyone the Government deems inappropriate - in other words foreign - from acquiring the company in question.

The reason for the sudden bout of renewed interest is the latest pronouncement from Brussels, declaring that some golden shares constitute a breach of EU law guaranteeing free movement of capital. Mario Monti has his eye principally on the French, whom he suspects will wave their golden share in Elf Acquitaine to ensure that the Anglo-Saxons are not allowed to intrude on its takeover tussle with TotalFina.

But BAA, the owner of Heathrow, Gatwick and Stansted, has also been caught in Mr Monti's spotlight. No single shareholder may own more than 15 per cent of BAA without the say so of the Deputy Prime Minister, John Prescott. Unless the EC has forgotten, this is 15 per cent more than a private investor can hold in most other airports around Europe. Moreover, there is no limit on the proportion of BAA shares which may be held collectively overseas, unlike BAe and Rolls-Royce, where the ceiling remains 29.5 per cent.

In principle, there is little justification for governments retaining indefinite golden shares, since they merely protect the companies in question from the rigours of open markets. Since they are rarely used either, at least on these shores, there is even less purpose in retaining them.