Van Miert alarmed at wave of power mergers

Karel Van Miert, the European competition commissioner, yesterday made clear that he was concerned about the latest wave of mergers in the electricity industry, which he said was taking the UK back to "square one."

Speaking at a Labour-sponsored conference at which Tony Blair and Gordon Brown made the keynote speeches, Mr Van Miert appeared ready to align himself with Labour fears about the re-emergence of the structure of vertical integration between generators and distributors in the electricity industry.

This was broken up at the time of privatisation when the UK separated generation and distribution.

The Monopolies Commission is believed to have given conditional clearance to takeovers of distributors by the two generators, National Power and PowerGen, while Southern Company of the US, which already owns a distributor, has said it would like to merge with National Power. The Labour Party has fiercely criticised the moves.

Mr Van Miert said he had noticed "with some concern" the mergers under way in the UK energy sector, which came at a time when the European Commission was "trying to go in the original British direction. It now appears that at the end of the day you are back to square one."

He suggested that EU member governments would be asking the commission why it was taking the stance it did, if the UK was reverting to the old structure.

Scrutiny of the current round of electricity mergers in the UK is the responsibility of the British government ,not the commission, and Mr Van Miert did not suggest he was about to take action himself.

The conference also heard Adair Turner, director general of the CBI, call for the party's anti-inflation commitment to be enshrined in a "clear and specific target at around the present level of 2.5 per cent" and he also asked Gordon Brown, the shadow chancellor, to pledge to increase the independence of the Bank of England.

It is thought to have been the first time a director general of the CBI has spoken at a conference organised by Labour.

Mr Turner continued the CBI's efforts to remain politically neutral by rejecting both Tory and Labour claims about the health or otherwise of the economy and Britain's relative position in the international pecking order.

He said: "The record neither supports the assertion that we have a uniquely flourishing economy with all the problems solved, but nor does it support the idea that we continue in relative decline and require a revolution in performance."

Growth had been about average for Europe over the last decade and "while it has not been any better than average it has not been worse."

Speaking after Mr Brown and Margaret Beckett, the shadow trade and industry minister, had torn into the Government's claims of improved economic performance, Mr Turner said Britain was an attractive place to do business.

In terms of productivity, the UK had closed some but not all of the gap with main competitors, but while other European countries still ran large balance of trade surpluses the UK ran a deficit.

Mr Turner reaffirmed opposition to Labour's support for the European Social Chapter and a national minimum wage. But he said Labour had made significant strides towards a more business-friendly approach to economic policy.

It plans to issue a "business manifesto" as a challenge to both the main parties in July in the run-up to the next election.

Mr Turner said a flexible labour market was needed to deliver low unemployment. Business opposed the Social Chapter, he said, not so much because of what was in it today but because it could lead, in the future, to the imposition of labour market rigidities seen in some Continental countries.

On the minimum wage, he said: "It is one of the causes of high unemployment in France, and would increase unemployment here. We believe that there are better ways to fight the impact of low pay - via extension of the in-work benefit system and focusing personal tax reductions on lifting people out of the tax net altogether."