Expert View: Good connections cause bad smells

Apart from my dental records, there wasn't much proof of identity the security guards didn't ask for. Downing Street is no easy place to get into these days and I hadn't quite realised what "dropping in for a drink" at No 11 would mean. I shuffled through procedures with the other City old hands, most of whom hadn't been here in years. Looking at the machine guns, one whispered: "Use a four-letter word and they look like they'd shoot you." I certainly wasn't going to try saying "euro".

Apart from my dental records, there wasn't much proof of identity the security guards didn't ask for. Downing Street is no easy place to get into these days and I hadn't quite realised what "dropping in for a drink" at No 11 would mean. I shuffled through procedures with the other City old hands, most of whom hadn't been here in years. Looking at the machine guns, one whispered: "Use a four-letter word and they look like they'd shoot you." I certainly wasn't going to try saying "euro".

The relationship between the Government and business is showing signs of strain. There were times last week when the euro tensions really brought this out. It is a continuing complaint of those of us in capitalism that while this Government will often talk of "what's best for business", it hardly ever asks us. It is astounding how often measures have been introduced without consultation and later withdrawn as unworkable.

This is often attributed to the tiny number of Labour MPs who come from a business or finance background, in sharp contrast to the last Tory government. There is also a big difference in the tiny number of sitting Labour MPs who are on the boards of any major quoted company, let alone finance house.

But before we complain too loudly, consider the growing scandals surrounding the current US administration and its business dealings. These have led critics to suggest that the war in Iraq and subsequent restructuring is essentially a cash-raising exercise for "friendly" business interests, if not for members of the Bush team themselves.

Much of the fire has been directed at oil industry giant Halliburton, once run by vice president Dick Cheney, who won an exclusive $90m (£56m) contract in Iraq with breathtaking speed. Then there's Bechtel, which was given a $680m contract to restore Iraq's infrastructure. Bechtel has reportedly donated nearly $1m to the Republican party over the past four years.

These and other Iraqi contracts are part of a web of complex and politically sensitive connections. Last week it was reported that James Woolsey, the CIA boss, is a director of Paladin Capital, which is seeking to raise $300m for companies whose anti-terrorist products will benefit from a planned $60n outlay by the government. Elsewhere, Donald Rumsfeld was a non-executive at ABB when it won a £125m contract for two light water reactors in North Korea.

Of course, there is an upside to having politicians so close to business. Think how quick the US regime has been to respond to the accounting scandals. The speedy investigation and legislation contrasts sharply with the slow grind on this side of the pond. We in Europe are now forced to respond to decisions the Americans have already taken. But any whiff of the pork barrel leaves a bad taste in the mouth. The General Accounting Office, which monitors US government spend, has promised to look into the awarding of Iraqi contracts.

Apart from the euro, the main issue in Downing Street last week was the morality of the Iraq war. The accusation is that, in the absence of evidence, the Government is rewriting the casus belli as humanitarian, not self-defence. This "moral" approach is called a "Gladstonian foreign policy", though as Professor Richard Shannon recently pointed out, Gladstone's own intervention in Egypt benefited his own actively managed portfolio, which held significant Egyptian stock.

Gladstone's portrait hangs opposite Disraeli's in No 11, and (I'm told) a signed photo of George Bush sits in No 10. I'm not sure Tony or Gordon have actively managed portfolios or will ever collect company directorships. But maybe that's no bad thing.

christopher.walker@tiscali.co.uk