Hewitt stuggles to find a purpose for cursed DTI

Marathon running; Safeway adventure Â

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TUC slates Hewitt over shake-up at the DTI

Safeway set to launch discount chain

Nationwide's share of net lending collapses

It's a thankless task being Secretary of State for Trade and Industry. Hardly anyone wants to do the job, if only for the reason that for most incumbents it proves a political graveyard, and rarely does anyone last there very long. In the past 22 years, there have been no fewer than 18 Trade and Industry Secretaries, and nearly all of them have either met a sticky end or drifted off into obscurity. About the only one who seemed to understand the nature of the job was Nicholas Ridley, who on his first day in the office is reputed to have asked his Permanent Secretary what precisely the DTI was meant to be for.

Most of the others have staggered aimlessly from one cock-up and useless policy initiative to the next, and little good has it done them. Under Labour, the burn rate has been increased to one a year. The first, Margaret Beckett, was memorable only for the number of mergers and acquisitions she blocked. As for the second, Peter Mandelson, his Bayswater pad was partly financed by someone his department was meant to be investigating, he got found out and he had to go.

Miraculously, the third, Stephen Byers, survived the DTI merry-go-round to go on to even greater heights of ineptitude at the Transport Department, where he's presiding over the death of the railways. Which brings us to the present incumbent Patricia Hewitt, who's mind-numbingly dull initiatives can be read about daily in the Financial Times, though strangely hardly anywhere else.

Until today, that is. By announcing plans to put business leaders at the heart of DTI strategy, she's managed to stir the wrath of the brothers, who are accusing her of allowing a business takeover of government. Her insistence that this is far from the case was undermined by Digby Jones, director general of the CBI, who had nothing but praise for Ms Hewitt's plans "to give business more clout in government". Oh dear. In any case, the unions are right to think it a very bad plan indeed.

Three cheers for more business-friendly government, but to put businessmen in charge of policy and strategy is completely bonkers. The suspicion if not the actuality of commercial special pleading and corruption is only the most obvious drawback. The other, as the unions point out, is that the Government is seen to fall prey to one set of interests over another. Government is meant to be about safeguarding the wider public interest. Business leaders, by contrast, should be running their companies, not setting public policy. Ms Hewitt may enjoy a longer shelf life than her predecessors, but she's obviously yet to learn that the best thing governments can do for business is simply stay out of it's way.

Marathon running

Philip Williamson, the chief executive-designate of the Nationwide Building Society, is not engaged in a one-lap race, you'll be relieved to know, but a marathon, and at this point in time he's not even half way through.

Nationwide announced last February that it was abandoning the price war for new mortgage borrowers in favour of the same rates for both new and existing borrowers. We're fed up with subsidising new borrowers from existing ones, the society said. It's unfair and as far as we're concerned it's going to stop. Rivals howled with laughter. Their mutually owned competitor couldn't possibly sustain such a policy, they said, and indeed the damage is there for all to see in half-year figures announced yesterday.

Profits are sharply down and so is Nationwide's share of new mortgage lending, which fell from £6bn in the same period last year to just £4.7bn. Taking into account existing customers who left to take advantage of the discounted offerings available elsewhere, Nationwide barely moved forward. Any company which isn't growing is generally going backwards, but according to Mr Williamson, all this was foreseen and he's adamant that given time the strategy will eventually succeed.

As if to back him up, Moody's, the credit rating agency, yesterday issued a circular which said that lenders which have already taken action to protect their so-called backbook ­ that is their existing customer base ­ will have stronger recurring earnings in the long term and are consequently better placed than those who haven't.

Mr Williamson admits that the Nationwide got "hammered" by the mortgage brokers after launching its initiative but insists that the society is now climbing back as mortgage borrowers come to realise that the heavily discounted deals are not all that they seem. Those who offer discounts rely on the assumption that once the discount runs out, the borrower can be moved on to a more profitable deal. But many remortgage again, making the whole process a zero sum game for the lenders. The big losers are loyal long-term mortgage customers, who get charged more to finance the price war for new borrowers.

Mr Williamson is confident that he will eventually win his marathon. Armed with the shield of mutual ownership and the sword of fair play, he's determined to stay the course, and reckons the advantage he has over most competitors in not having to pay a dividend will eventually see him through. Let's hope he's right, for although he's correct to claim that in a mutual profits and market share don't matter as much as they do in a company with shareholders to answer to, even a mutual cannot afford to lose weight at the speed Nationwide did in the first half if it is to stand any chance at all of completing its marathon.

Safeway adventure

It must be a struggle for the rest of the directors at Safeway to keep up with Carlos Criado-Perez. The flamboyantly named chief executive of Britain's fourth-largest supermarket group keeps spinning off ideas like there's no tomorrow. The rest of the board can only run along after him, trying to make sure he doesn't do anything stupid.

His latest idea may not be stupid but it is certainly brave. The plan under consideration is to open a chain of discount stores designed to help Safeway grab market share in what has long been regarded as Co-op country. Mr Criado-Perez reckons there could be scope for up to 200 of these outlets, which would sell cut-priced goods from a low-cost retail environment. Just as you thought the supermarkets had run out of road, and there was nowhere else for them to turn, up pops one of them with another idea further to tap what everyone assumed to be is a fully saturated market.

Rather alarmingly, Mr Criado-Perez says these new stores would not really be about profit. The aim, he says, would be to build scale and market share, presumably so the extra buying power can be used to improve margins elsewhere. Can Mr Criado-Perez succeed?

The discount market is a notoriously tough one to crack. It is now more than a decade since continental discounters such as Aldi, Lidl and Netto attempted to take the UK market by storm. They never did because the major supermarket groups simply introduced economy lines that persuaded more price-conscious customers to stay. Safeway has a lot on its plate right now. It has barely started a three-year refurbishment programme for its existing portfolio, and its first hypermarket format opens in a fortnight. Stretching the brand so far so fast might prove a tall order.

j.warner@independent.co.uk