Outfoxing the regulators

ONE of the reasons why Jeremy Corbyn’s plans for bringing utilities back into public ownership have such resonance is that industry regulators demonstrate little backbone.

Only recently has water regulator Ofwat come to grips with debt structures based in the Caymans. Ofgem has had some success with its backing of energy comparison sites and easy switching but it has been a slow burn.

To her credit, Sharon White at Ofcom has had enough of BT’s poor delivery of broadband and the company’s effort to grab a larger share of the 5K spectrum for its EE network, and has seen it off in the courts.

Given BT’s history of stifling competition in broadband through its domination of exchanges and control of underutilised ducts and poles, it should never have been allowed to splash out £12.5bn on buying mobile operator EE.

That deal, it may be remembered, was nodded through by merger watchdog the Competition and Markets Authority (CMA). A parallel deal – O2’s offer for Three – was blocked in Brussels.

Now the CMA has been flaccid again. It has rejected opposition from much of the convenience stores industry and allowed Tesco, with a dominant 28.2pc share of the UK’s grocery market, to grab even more, with the £3.7bn purchase of Booker. Not long ago Tesco boss Dave Lewis was selling valuable overseas assets to bolster finances. Now he is doubling up in Britain.

It is hard to see how it is going to help price competition in the convenience store market if Tesco owns Booker, which operates 200 cash and carry outlets up and down the country.

Booker is the main supplier of independent, family- owned and run corner shops offering all manner of local services from bus passes to dawn newspaper deliveries and lottery tickets. They are the backbone of many communities. We are told that Tesco’s primary interest in Booker is to try to capture the ‘out of home’ catering market which supplies chains such as Wagamama as well as Rick Stein’s upmarket eateries.

There is nothing to prevent Tesco, with its chain of almost 2,500 convenience stores, from weaponising Booker, to further dominate the market, undermining the incomes of small neighbourhood shopkeepers. That can only reduce consumer choice.

The failure by the CMA to defend small businesses, competition and the consumer is to be deplored, and adds to the distrust of regulators.

Javid mission

GIvEN the huge political sensitivities of private-sector housing it would be easy for Tory Communities Secretary Sajid Javid to put leasehold reform on the back burner.

It is to his credit that he has pushed the issue in government and has high hopes that it will be on next year’s legislative agenda. Housebuilders are already on the naughty step over undeserved fat cat pay.

But the reputation of firms such as Taylor Wimpey has been immeasurably damaged by selling homes on leasehold contracts, with escalating ground rents which are then sold to unscrupulous financiers as an asset class. Javid is proposing a ban on new leasehold house sales and will also legislate to restrict ground rents on flat and apartments to a peppercorn of zero.

Prejudice against retrospective legislation and contract law makes it difficult to roll back the ground rents on the thousands of leasehold homes sold over the last decade.

So Javid and his aides are hoping to use some old-fashioned jawboning to convince the housebuilders to revisit the contracts or provide some kind of compensation to affected homeowners.

In addition he is asking the Law Society to come up with a simpler and cheaper formula which allows leaseholders to lengthen leases or buy the freehold.

All of this is being done in the face of opposition by lobbyist Pagefield.

It has picked the wrong cause.

Equity boost

STRANGE to hear the new caring, sharing IMF advocating tax reforms to deal with the UK’s deficit and debt problems.

Two of its proposals: heavier taxing for the self-employed and widening the vAT net are already regarded as politically toxic.

A third idea, to offer tax relief to companies raising equity, looks a much better bet. It would neutralise bias towards debt – as at Toys R Us and Four Seasons – and may encourage firms to invest.

Spreadsheet Phil should give it a whirl.