CITY DIARY
CHRISTOPHER FILDES
Six to four against Barclays-Lloyds-Martins! That was how the Monopolies Commission split; and if it sounds like the latest quotation from William Hill, it is, I think, a fair price.
The 'two-thirds rule'—which means that two- thirds of the Commission must oppose a miner before the President of the Board of Trade is empowered to forbid it—caught most observers unawares; and indeed the President, for his part, could at least have brought the numbers of the Commission up to a point where they were divisible by three. As things are, he is supposed to be in an embarrassing position: that is to say, he and the Government as a whole have to make their minds up. How embarras- sing that is depends, I should have thought, on the merit•of the minds concerned.
One undeniably awkward consequence is that the decision will—almost certainly—have to be taken before the Board of Trade's white paper on merger policy can be published. Announced by Mr Crosland in the early spring, this was originally expected to be out in time for the Derby. Here we are at the Newmarket July meeting, and the white paper is still not in sight.
The decision over the triple merger, whatever it is, cannot avoid implications of general policy which will either dictate the form of the white paper or else make it look silly.
That can't be helped. Other snags which are supposed to lie in wait for the Government will not, I think, give much trouble. The lawyers are already arguing about the clause in the Bank of England Act which enables the Treasury to give directions: this applies to monetary policy, and nobody knows whether it would stretch to include mergers. But in any case, as Mr Paul Bareau said last week, the most powerful instru- ment of credit control in the City of London are the eyebrows of the Governor of the Bank of England; and their power goes beyond matters monetary. There was no Bank of England Act to enforce the recommendations of the Colwyn Committee, .which set the pattern of the 'Big Five' banks that lasted for fifty years from 1918. Mr Bareau, as it happens, was speaking at Allen Harvey and Ross's conference on sterling eeiinicates of deposit, the new London money market which will get under way next month. They will be another weapon in the battle for deposits—a battle which over the last decade the joint-stock banks have been losing. It will be more than a pity if our banking system offsets this move towards keener competition with a counter-move towards monopoly.
For those (like myself) who urgently want to know what the Industrial Reorganisation Corporation thinks it's doing and why, its account of the Cambridge Instrument affair is essential reading. Certainly it is more instructive than Monday's muddled debate in the Com- mons. Obviously the IRC thought its solution was what the instrument industry needed: but it is news that the question asked was 'What would be best for Kent?' rather than 'What would be best for Cambridge?' Kent, says the IRC, was the biggest of the independents: if it was to keep pace, it needed the access to academic and other laboratories that Cambridge —and only Cambridge, I wonder?—could give it. So the IRC awarded Cambridge to Kent.
To express a preference between two possible partners for Cambridge—both of whom, as the lac says, had attractions—is one thing. To force that preference through at whatever cost is quite another. I find it astonishing that the IRC does not even attempt to argue this point : it is content to say that it formed a view and acted accordingly. If I held shares in Kent, I should invoke heaven's protection from such friends as this. The IRC, having bought Kent stock in order to keep up the value of the bid, natvt.has 30 per cent of the equity—which, in due course, it will dispose of. That seems guaranteed to depress the market: it is an inter- esting specimen of a tap without a tip.
For a neutral observer's view of the IRC, let me commend to you Professor Richard Groves, who is chairman of the economics department at Harvard. He led the Brookings inquiry, and wrote the section on government and industry. Of the lac-sponsored mergers, he says: 'These combinations embody a theory, now fashionable in the British government, which might be caricatured as follows: in order to achieve industrial efficiency, find the most efficient firm in Britain and merge the rest of them into it.' Not enough thought, he goes on, has been given to the three principal objections: that the firm's efficiency may not survive the merger; that efficient managements are merely mortal; and that there is an increased degree of monopoly. Such, no doubt, is the consequence of what Professor Caves calls 'creating remedy devices, in the inverted faith that the wielders of the tool will perceive whereupon to employ it.'
London Airport, computers, British European Airways—this story has all the ingredients. It reaches me from a northern exporter, who flew in to London the other day on a first-class ticket from India. He went over to a BEA desk and asked if he could get on the next plane to Manchester. They fed the inquiry into their reservations computer and back came the answer: Sorry, no seats. Drifting across to take a brief glass of gin, he caught sight of another BEA desk, and repeated his question. 'Man- chester?' said the girl. 'You're just in time for the next plane, sir—plenty of room. "But your computer said it was full up."Ah, yes, but that's because you have a first-class ticket. There are noltest-class seats on the Manchester flights. So far as our computer is concerned, you can never get to Manchester.'
The Tories' wicked financier friends are con- spiring to do the Government down—or so the Prime Minister has been telling that ultra- sophisticated financial centre, Newtown (Mont- gomeryshire). No doubt his beady eye is on the National Discount Company, which—as I was saying last week—has passed its interim dividend because it hates the look of the Government's credit. In his next speech the Prime Minister will doubtless point out that the National's directors include Lord Aldington, for four years deputy chairman of the Conser- vative party, and also Mr Enoch Powell. Once this complete explanation has been published, the pound will be expected to soar, or even ride high; and when it doesn't—well, there must be another conspiracy. - Mr Wilson can console himself with the thought that President Herbert Hoover had the same trouble. Simeon D. Fess, chairman of the Republican National Committee, was heard to complain in the great slump that 'persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilise the stock market as a means of discredit- ing the administration. Every time the adminis- tration official gives out an optimistic statement about business conditions, the market drops.'
But perhaps I do the Prime Minister an in- justice. I observe (in the business end of The Times) a cheering headline: 'PEERAGE FOR MARKET.' Is all forgiven?
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