David Prosser: Why foreign ownership of key infrastructure can be good for Britain

Outlook Should we care about foreign ownership of our key infrastructure? The Office of Fair Trading, which has spent a good deal of this yearconducting a stock-take of the UK's infrastructure, said yesterday that a third of it is now owned by foreign investors – a far higher level than many other countries would countenance.

Even leaving aside the matter of national pride, maybe we should have been more protectionist. On the face of it, foreign ownership of BAA, for example, did not do much for the performance of our airports. And gas and electricity bills have gone up during the period in which the majority of our home energy companies have been owned from overseas.

Instinctively, it feels like we are taking a risk by giving up control of what effectively constitutes the backbone of the British economy. Foreign owners must, by definition, be less concerned with our national interest. And there may be times when this interest comes into conflict with their own (this is the thinking in countries where strict rules on foreign infrastructure ownership are applied).

The facts of the matter, it turns out, are a little different – at least according to the OFT's analysis. It says there is no evidence of foreign owners managing infrastructure assets more poorly than domestic operators. On the contrary, the main driver of performance in each sector, the watchdog concludes, is the extent to which owners have to compete with each other, rather than their nationality.

Since foreign buyers tend to pick up existing infrastructure assets rather than starting new businesses, their entry to themarket does not directly improve competition. But it does in one sense: all companies face pressure to operate efficiently, or risk seeing their shareholders sell up in favour of better performers. The greater the number of potential buyers, the greater the pressure, so Britain's open-door policy should benefit efficiency.

That does not always equate to a better outcome for consumers. Where industries are lacking both effective competition and energetic regulation – the energy sector comes to mind – the benefits of efficiency may not be fairly distributed. But that is nothing to do with foreign ownership.

Some people are always going to feel uncomfortable with foreign buyers swooping on this sort of business. Fair enough. But the OFT's analysis suggests there is no economic case for imposing new restrictions on overseas ownership. On the contrary: it is to be encouraged.

Early access to tax-free pension cash

Watch out for what may be a popular pension reform coming soon. Under the current rules, savers with private pensions may take up to 25 per cent of their funds as a tax-free cash lump sum (rather than a retirement income), but not before the age of 55. The Government is set to relax this restriction, allowing people earlier access to their pension pots, provided they use the money for certain defined purposes – educating children, perhaps, or paying off a mortgage.

It sounds like a good idea. One of the downsides to a private pension is that your money is tied up until you retire, even if you find yourself suffering serious financial hardship in the meantime. Why not give people access to their own money, provided they do not simply want to fritter it away?

Actually, there are a number of good reasons. One is that pension fund savers get generous tax relief on their contributions – partly on the understanding that they will be less of a burden on the State in old age if they have been encouraged to put money by for retirement. Another is that pensions work on the principle of compound interest: the longer your money is invested, the more savings it should generate. And aren't the rules complicated enough already?

In extreme circumstances there can be a case for this reform. It seems perverse, for example, that a small minority of people have their homes repossessed each year despite having savings that would pay their debts. In general, however, the worry is that we do not save enough for old age; why raise the chances of more people reaching retirement only to find themselves short of cash?

Say 'non' to Cantona's bank campaign

Three days to go to Eric Cantona's day of action against the banks. For those of you who have not come across the former footballer's campaign, he is proposing that, to punish the bankers, we turn up en masse at our banks on Tuesday and demand they give us our money. "If there are a lot of people withdrawing their money the system collapses," he explains. "No weapons, no blood, or anything like that."

There are many reasons to admire Mr Cantona – his sublime spell at Manchester United, his acting in Ken Loach's Waiting for Eric, even his willingness to confront racist football fans – but this initiative is not one of them. Direct action is appealing, but not if the protesters are the ones who end up losing out.

We have seen one bank-run in this country already this century. When, three years ago, panic spread about the solvency of Northern Rock – a name Mr Cantona will remember from his games against Newcastle United – queues formed at its branches as desperate customers tried to get their money back. Rock's executives suffered – many of them lost their jobs – but so too did everyone else caught up in the panic.

Banks operate on trust: they invest most of our money on the basis that not everyone will want it back on the same day. If everyone does demand their cash all at once, the bank can't pay and the system, as Mr Cantona predicts, begins to fall apart. What happens next? Well, look around. You end up with a credit crisis, a ruinous recession, national debt and years of pain.