Tories fail on regulation
THE robust defence of free market capitalism made by Chancellor Philip Hammond at the Tory conference clearly is needed.
But what was missing from Hammond’s speech was recognition of why consumers find Labour’s proposals for wholesale nationalisation and repatriation of PFI contracts attractive.
Jeremy Corbyn and John McDonnell’s rhetoric may be driven by Marxist tendencies, but the reason why Venezuelan-style economics has resonance is more complicated.
Citizens feel let down by the way that utility services are delivered. The CAA jumped to attention over the Monarch Airlines collapse, but why was it so slow to respond to Ryanair’s finagling over compensation and BA’s poor performance after its computer meltdown? Elsewhere there is consumer anger over the ‘feather and rocket’ pricing in the energy market – where domestic bills race ahead when wholesale prices rise and drop slowly, if at all, when they fall.
Thames Water customers may well wonder why work on replacing Victorian pipes stops at night and weekends for cost reasons, while hundreds of millions of pounds of dividends are shipped to overseas owners.
All of this can be put down to weak regulation which has failed to protect the consumer interest.
Left to their own devices, companies generally put profits, dividends and the share incentive pay for executives ahead of the consumer or public interest. Communications regulator Sharon White is so frustrated by the behaviour of the telecoms companies that she has taken to the public prints to protest.
Court actions by Three (owned by Hong Kong’s Hutchison) and BT/EE in the mobile market means that the upgrades to 4G and 5G cellular networks almost certainly will be delayed.
This potentially might have been avoided had the Competition & Markets Authority shown some teeth and prevented BT from taking a short cut back into mobile by buying EE and dominating the market.
BT’s poor attitudes to competition are illustrated by the way in which it has run Openreach until now. It took a huge campaign by competitors for Openreach to be separated so that competitors can gain easier access to the ducts, tunnels, dark fibre and the rest which would give the country better and faster broadband.
White should go further and force a full spin- off of Openreach, if she wants real progress to be made.
The Tories must shake up the current regulators. The Government needs to place aggressive advocates of free markets in place, disbanding remnants of the quangocracy put in place by New Labour.
Where necessary it must enhance powers of the regulators, giving them the rights to fine up to 10pc of turnover when companies, such as Thames Water, pollute the nation’s rivers with sewage.
The Rail Regulator should have the power to fine companies and unions alike when they disrupt services on Southern.
Robust action by newly installed and empowered regulators could heal the reputation of the Conservatives of being a soft touch with the utilities and kill the public ownership threat.
They should get on with it, rather than fighting like ferrets in a sack over Brexit.
Catalan bolthole
THE clumsy intervention of the police in the Catalan independence referendum shows how fragile post-Franco democracy still is in Spain. It is also a distraction for Madrid at a moment when the Spanish economy is starting to repair after its long euro and banking nightmare.
The enthusiastic vote for breaking free also helps better understand why Catalan’s biggest bank, Banco Sabadell, chose to throw its lot in with Britain by buying newly floated TSB for £1.7bn in 2015.
The deal offers investors an escape route to Europe’s biggest financial centre should the breakaway of Catalonia end in grief. Shares in Sabadell fell heavily and ended up 4.5pc down. Uncertainty in the home market is all the more reason for TSB to get on and launch its new digital platform now scheduled to be unveiled in November.
Hopefully it will do a little better than Barclays with its ‘Smart Investor’ option.
Toxic gains
CAUSING trouble can be very profitable. British staff at Elliott Management, persecutors of Akzo Nobel, collected a neat £66m in earnings last year, with directors’ pay jumping from £2.6m to £6.2m.
Worth all the fuss, if less profitable than the big bucks made in Argentine bonds.