Skinflint's City Diary
It is part of the business of the City to maintain appearances and to profess a conventional respectability, which makes it surprising that the editor of the Financial Times should look without disapproval at the role of the marauding capitalist during the present takeover boom. He argues that the ultimate decision on a takeover is for the shareholders, ignoring the pyramiding and chain-letter effect of these mergers and the irresistible appeal of puffed-up, yet underwritten, new shares offered during the takeover battles. The marauders' momentum coupled with shareholders' inertia caused by capital gains tax makes takeovers the fashionable equivalent of the three card trick. In the past I have suggested that these activities might be controlled by making simple rules for those who wish to build up through share exchange. They would be required (a) to publish three-monthly accounts; (b) to accept that there should be no commercial connection between the handling of fiduciary funds and conglomerate activity; (c) to unscramble share dealing profits and to set these down apart from trading profits; (d) not to use nominee names for share holdings; and (e) not to utilise backto-back or other loans to directors (to buy their own shares) from merchant bankers with which the conglomerate has deposits or any dealings.
The chairman of Slater Walker Securities, Jim Slater, came down firmly on Monday in an article in the Financial Times on the side of the angels and for reform of insider dealing, saying specifically that "the nominee holding system should be abolished" in a trenchant and wellargued statement. Let us hope that with his powerful voice added to the debate his old partner Peter Walker will not be content with the relatively modest statement about company reform due in a week or two, but will set up a large scale inquiry into the possibility of a full-time professional body similar to the Security and Exchange Commission in America to clean up the deplorable morality of the City of London, sanctified only by time.
The City's friend
Peter Walker, Mr Fixit and friend of the City, always reminds me of the deprived but hard-trying hero of some learning-bypost advertisement with an anxious but proud mother hovering near as he says: "They laughed until I sat down at the piano."
Nothing noticeable has happened since he took over the Department of Trade and Industry though I fear the interests of the City are closer to his heart than those of industry. Dramatic city reform in the shape of a Securities and Exchange Commission will not be his first concern nor do serious proposals for curbing the property boom emanating from his direction seem likely. Only last week on television he was dismissive of the profits made from property speculation, saying that they are taken care of by current tax legislation, including income tax and surtax, which may take up to 75 per cent. Walker is a former small broker in mortgages and insurance and more recently an inactive partner in Slater Walker Securities and knows well enough that only the doltish pay more than standard capital gains tax or corporation tax on land profits, except for those property companies that choose to push dealing profits through their profit and loss account as earnings to boost their share price. Roll-over relief and, at least three stratagems to avoid capital gains tax completely are widely known. The property boom must be contained, as Peter Walker should realise, not because people are making profits (though the new levels of rent are dangerous to employment) but because the inevitable correction of values will lead possibly to bank, institutional and private sector instability.
Freeze interest
It is deplorable that the Government should have been deluded by the Bank of England and the City into excluding interest from the prices and incomes standstill. Since the announcement of the freeze there has been admittedly a call for special deposits, but, running true to form, the banks quickly chimed up to say that they will have to increase interest charges to borrowers (but presumably not interest paid to depositors) to make up for what they lose. I should not have thought it particularly onerous for them to carry the imposition of special deposits with the huge level of free customers' deposits they now receive rather than raising interest charges to borrowers. In strict equity the scaling down of the interest-bearing part of depositors' money received in the same ratio as the call for special deposits would have been fairer, even if this meant some small fall-off in new deposits.
Old Tweeds
The elderly tweeded choleric folk who run horse racing in this country now read balance sheets and are business-like. They are united only in their defence of the,i bookmaker and resist utterly any move toj a tote monopoly or even an increase to the Tote's competitiveness by the opening of high street branches.
Is only England sane?
Horses and Courses is a new book by David Hedges and Fred Mayer published by Seeker and Warburg at £6.50. The epilogue is an immensely authoritative attack on bookmakers, suggesting that racing will only survive successfully with a Tote monopoly. The title of the chapter is the argument — 'Are the Others Mad and Only England Sane?' If the reactionaries who rule racing are pushed awaY and reform becomes possible, let us hope that it is on a time scale that does not mean huge compenSation to bloated book' making interests. The first stage might be the widening of the Tote's power to compete, and gradually, as private bookmaking dwindles and becomes less profitable, the aim should be towards monopoly. It is long way away but let us hope that an enlightened politician will attempt reform since New Zealand's experience with a Tote monopoly applied to England would mean £30 million a year for racing.
Dressage
Concerning the developing sense of, business of the more rustic members 01 the Jockey Club, a well known young trainer has been telling me a story he swears is true of one of these elderly gents who visited his bank near Newmarket. Tb teller noticed that the old gentleman line dressed in a manner that could only be described as forgetful. To save embarrass' meat the teller scribbled and passed acroSs a slip of paper, "Don't look down but please adjust your dress." The short-sighted old sport, conscious that members of the Jockey Club shoOld know their way in business, is reported te have signed the note with some satisfac' tion and passed it back.
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