The folly of state control
SENIOr civil servants are precious about sharing personal views. Freed from this convention, former Treasury mandarin Lord Nick Macpherson is able to cut loose, describing Labour’s key policy of nationalisation as ‘corrosive’. The behaviour of the privatised utilities has been disgraceful.
The water companies have siphoned off billions in dividends which should have gone into clean water, not the pockets of overseas buccaneers.
The railways have delivered nothing but higher prices, rotten service and missed deadlines for modernisation.
And the power companies adopted the rocket-and-feather approach to setting tariffs, rapidly raising rates when wholesale prices go up and hardly reducing them when prices drop.
Shadow chancellor John McDonnell’s response is public ownership. But that can never be the right answer.
Macpherson wants to see post-Brexit UK maintain the state aid regime which places a lid on Government subsidy to firms.
An unwanted legacy of the financial crisis has been the lengthy support of rBS and the way in which low interest rates allowed ‘zombie companies’ to keep going, including those owned by unscrupulous private equity players.
The case against nationalisation is that ministers are not good at managing themselves, let alone huge companies. When it comes to big decisions on ending strikes, investments and sacking people they are never going to make the correct choice.
The answer is not McDonnell’s Marxist nationalisation, but tough regulation. It is not impossible. Sharon White at Ofcom has brought BT’s Openreach to account and is almost certainly partly responsible for Gavin Patterson’s departure as chief.
In the face of the nationalisation threat, the water companies are seeking to clean up their act, closing down Cayman Island offshoots and tidying up their share registers. Macpherson says he is a ‘great fan’ of McDonnell. One cannot possibly think why.
The shadow chancellor is a wolf in sheep’s clothing, with preposterous economic ideas. The harm he would deliver to the economy through nationalisation, dismantling Britain’s flexible labour market and high taxation, doesn’t bear thinking about.
Bad sport
SPOrTS Direct’s Mike Ashley is Britain’s most enigmatic entrepreneur. He has ruined Britain’s most elegant sports shop Lillywhites, turning it into a flea market, yet boasts he wants to convert House of Fraser into the ‘Harrods of the High Street’.
He defied the corporate governance mavens by refusing to part company with his chairman Keith Hellawell and longstanding non- executive director Simon Bentley. Then he dispensed with their services on the day of the annual meeting.
He says he won’t attend the meeting in Soho, then shows up. Bentley reveals the board has discussed buying all of Debenhams, then the company denies it.
Ashley is taking on the mantle of Sir Philip Green as the so-called saviour of the High Street. The big difference is that Ashley runs a public company so shareholders and advisory groups can hold him to account. New chairman David Daly, a former Nike executive, may look perfectly acceptable, but whether he is strong enough to rein in Ashley’s excesses, such as sweetheart deals for family members, is unknown.
If confidence in Sports Direct is to be restored then a robust chairman able to keep shareholders informed and ultimately sack the chief executive – even one with 61pc of the shares – is required.
Until then, best to give shares in Sports Direct a wide berth.
Egos unleashed
JP MOrGAN has a long history of playing a central role in times of financial turmoil.
Chairman Jamie Dimon followed in this tradition during the financial crisis, absorbing rival investment bank Bear Stearns and retail bank Washington Mutual.
It was all far from smooth and JP Morgan ended up paying fines of £10.7bn relating to the past behaviour of the saved banks.
Dimon is planning to step back from dayto-day operations, ceding power to co-presidents Gordon Smith and Daniel Pinto, giving him space to run for US president. He joins a list of bosses, including Starbucks founder Howard Schultz and Michael Bloomberg, who think they have a shot.
After Trump, anything is possible – but voters might think that one deal maker is enough, already.