Take politics out of merger decisions altogether

COMMENT: `Present legislation places the Secretary of State in a quasi-judicial position when deciding whether or not to allow takeovers to proceed. That is always a dangerous place to leave an ambitious politician'

A lot of people have had good cause to rue Ian Lang's capricious approach to mergers policy over the last year. But George Simpson, now managing director of GEC, is not one of them. When GEC bid for the warship builder, VSEL, the Monopolies and Mergers Commission decided it should be sent packing on the not unreasonable grounds that Britain only had three such yards and GEC already owned one of them.

Fortunately for GEC, Michael "National Champions" Heseltine, was in charge then at the Department of Trade and Industry and he duly brushed the MMC's recommendations aside. Would GEC have fared differently had Mr Lang then been in the hot seat?

In short, it is impossible to say. Mr Lang has executed so may U-turns since he arrived that if he isn't dizzy and thoroughly confused, then the rest of the business community certainly is. In his last pronouncement on the subject, the President of the Board of Trade made it crystal clear that mergers which increased market domination or created national champions were not on. Since then he has blocked the Bass/Carlsberg Tetley deal but approved British Airways' alliance with American Airlines. How's that for consistency?

Step forward Mr Simpson to inject some clarity. In his other incarnation as a member of the cumbersomely titled Commission on Public Policy and British Business, Mr Simpson has the chance to strike a blow for all those not as fortunate as GEC.

A report due out from the commission next week will conclude that the Government's competition policy is in a mess. That much we knew. It hardly takes a committee of the great and the good to point out that this administration's track record has been contradictory, weak and riven by short-term political considerations.

Would Labour perform any better? Probably not. The old-style corporatism that would creep back in would almost certainly put paid to a rational or consistent competition and mergers policy.

The core of the problem, as the commission's report highlights, is that present legislation places the Secretary of State in a quasi-judicial position when deciding whether or not to allow takeovers to proceed, and on many other matters concerning competition policy. That is always a dangerous place to leave an ambitious politician.

The solution proposed by the commission is to allow ministers to continue making the final decision but then require them to set out their detailed reasoning in public, thus making the whole process transparent. This doesn't go far enough.

While there is something to be said for making sure the buck ultimately stops with elected politicians, there is a stronger case for removing temptation from the grasp of departmental ministers altogether and allowing the courts or some kind of independent cartel office to act as final arbiter. As things stand, competition policy is too often determined by political whim or favour. Removing these powers from the politicians would go a long way towards depoliticising the process, making pro-competition policy a generally accepted thing across the political divide, as it is in the US.

Break-up of Sears must be on the way

It is just as well that Liam Strong, chief executive of Sears, is a lover of military history. His hero is General Ulysses S Grant, whose motto was: "Find your enemy, then move in on him and hit him hard and keep on hitting him." Sadly for Mr Strong, the City has identified him as the enemy at Sears and has been hitting him hard for some time. He now appears fatally wounded.

The polished, almost impish Ulsterman is unlikely to go quietly, however. He is fighting for his business reputation. When he jetted in to Sears from British Airways five years ago, Mr Strong was thought capable of great things. But indecisiveness and caution appear to have got the better of him.Formats and management have been chopped and changed. And the radical pruning of the Sears portfolio was delayed until it was too late.

Sears has proved a woeful investment in the Strong years. Institutions were giving him one last chance to prove that Sears could trade its way out of difficulties. He has bodged it and it now appears certain that he will be offered up for sacrifice. To be fair, there is an argument that Sears was always a mess that was beyond the wit of even the brightest manager. Unfortunately that will not help Mr Strong now. The City is in no mood for excuses.

And whither Sears in all this? As an empire it is crumbling and a break- up is surely not far away. Lord Wolfson, the new chairman of Great Universal Stores and Next, has a theory that most of the strongest retailers are single-brand entities. There was never any worthwhile link between most of the disparate Sears formats. Now the name looks set to be consigned to the dustbin of British retail history. It will not be mourned.

No life insurance revolution yet

The theory behind the move to fuller disclosure of life insurance charges, which began in 1995, was that it would focus the minds of customers on the best value products. As the business then flowed to the better companies, the rest of the industry would have to slash its costs and reduce its charges to remain competitive.

But so far it has not happened, at least judging by this year's statistics from the Personal Investment Authority, which show only a very small overall reduction in charges, and a slight increase among the companies which were already at the low end of the scale. So soon after the start of the disclosure regime it would perhaps be surprising if the market had been radically transformed. These things take time.

New information must be absorbed and understood. Just as important, the present framework for disclosure allows loopholes which will have to be tackled before customers can rely on the figures. Companies can easily distort the figures by, for example, arranging charging structures so that there is a good return for policies held to maturity but spectacular levels of charging in the first few years. The effect is to slash returns for those who quit early. There is plenty of room for tightening up in this area.

However, let us not be churlish about it. There is evidence that the pressure of disclosure is forcing change on the industry. Look at the decision by Eagle Star this week to offer a policy with a full refund of charges to those who quit in the first two years.

However, it will take a long time to counteract the damage done by the personal pensions mis-selling scandal and the continuing high level of charges which have discredited private sector pension providers in many eyes, most significantly, those of the Labour Party. The party's proposed stakeholder pensions are a way of bypassing high-cost personal pensions by setting up large pooled funds. Having been dragged kicking and screaming into cutting its charges, the insurance industry may find it has left it too late.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future