In the national interest MONEY

CHRISTOPHER FILDES

The City is used to shocks; professionally, in- deed, it is something of a shock-absorber. The astonishing turn of events in the battle for Cambridge Instrument will no doubt seem less astonishing as time goes by. For this very reason it is important to realise that the Industrial Reorganisation Corporation's activities mean more than am affront to the City's way of doing things. They are the most obvious and repre- hensible signs of a dangerous tendency that has been present in our public and business lives for some years; and by that I mean not inter- vention but irresponsibility.

Consider the IRC'S history. It was set up at the initiative of Mr George Brown in the early day of his time at the Department of Economic Affairs. In formal terms, its charter was as wide as could be; and if its capital was not in theory unlimited, a starting figure of £150 million meant that it wouldn't be held baek for want of money. In practice, though, its brief was cir- cumscribed. It would have to work with indus- try. Its task was not to enforce its own solutions, but to enable industry to reach solutions which were desirable but, for one reason or another, could not be attained without help. The tae's part was to overcome inertia—to get the wheels rolling—and to provide finance if that were what was lacking. The bid for Elliott-Automa- tion by English Electric is a textbook example: both sides wanted the deal, the me favoured and fostered it; -and a loan overcame the central difficulty, that English Electric's liquidity was too strained to take. on Elliott's problems as well. It is, incidentally, quite untrue to say that the sac was ready to push this deal through even if a rival bidder appeared. Mr Ronald Grierson was still at the . wheel; and the policy he had sought to impose would never have allowed it.

Indeed, it is no coincidence that Mr Grier- son's departare.from the IRC was followed by a change in its attitude to its work. He was for moving gently; not just because softly, softly is no bad way of catching business monkeys, but also, I think, on the broader grounds that the lac was a public body using public money in a way that was bound to be closely scrutinised. This view became less fashionable as the IRC found its feet and built up its self-confidence. Today you hear more of forming a judgment and then backing it. After all, the money is there, the powers are there, the lac can reason- ably think that the expertise is there : why should it not have the courage of its convictions?

For thb answer to that, I invite you to follow the course of the Cambridge Instrument affair. The scientific instrument industry was one

which the 111C had known for some time, and had views on : the Ministry of Technology

had been pressing the case for mergers and

bigger units. The unit that many people would have preferred was a three-way link between

Hilger and Watts, Cambridge, and the instru-

ment section of AEI: negotiations were started, but came to nothing. So Rank, by bidding for

Cambridge, was the catalyst. The Re invited Rank to explain its plans, and seemed to be satisfied with them; but the Cambridge board

opposed them. They thought, rightly, that the bid was too cheap : there was also a clash of personalities: So they found another partner, in George Kent, which put in its counter-bid. This otlered a grouping that the IRC liked better. It said so; and it also said that Cambridge-Kent would be able to draw on it for money. The statement is instructive: The IRC has decided that it shollid not remain passive in this situa- tion, and it is therefore supporting the renewed Kent offer. The inc recognises, of course, that the final decision must rest with the share- holders of the companies concerned.'

That was a fortnight ago. The tae's next inter- vention made it clear what the shareholders' freedom of decision meant. Rank having outbid Kent, the lac came into the market as a direct buyer of stock, and within a day had secured enough to prevent Rank from getting a majority. The Cambridge ruling families own 25 per cent or more of the stock : the IRC now has 29 per cent and is the largest shareholder. Add the shares that Kent has bought in the market, and there is more than enough to stymie Rank. In addition, the IRC has been buying Kent shares to prop up the value of the bid, which is partly an offer of shares. The market's judgment is ex- pressed by the price of Cambridge, now some three shillings below the notional value of Kent's bid. I remark, in passing,- that each of the companies in the three-way link origin- ally proposed will have gone to a different partner: AEI to GEC, Cambridge to Kent, and Hilger and Watts—if the current bid goes through—to Rank.

Clearly, from the City's point of view, the IRC has changed the rules of the game decisively and for the worse. Once you bring on to the takeover scene a bidder with -a bottomless purse for whom no price is too high, you determine in advance who will win the battle. More; since all other bids are rendered meaningless, who will bother to make them, and how will the market price be formed? If Rank had known that its last bid (which but for the tae's share- buying would have settled matters) was going to be trumped in this way, would they have gone to the trouble and expense of instructing Kleinworts to make it? When the situation re- curs, will not the IRC-backed bidder get what he wants at the price he cares to name? The queue of those anxious to ingratiate themselves with the IRC will stretch from Pall Mall to Threadneedle Street.

But the trouble goes deeper. If the Inc has abandoned the form which Mr Grierson tried to

impose on it, and is using its powers to the full, that is not surprising. Any group of able and ambitious men is likely to play its hand to its limit. A longer-established example is the Prices and Incomes Board, which has set itself up as an advisory—and for that matter supervisory— body interested in the whole field of British business. There are plenty of such bodies about : the Donovan report would give us another, If (say) the Monopolies Commission has not made the running, that is partly because Mr Roskill,

QC, is a different cast of person from Mr Aubrey Jones or Sir Frank Kearton—indeed, its most

notable recent activity was to rap Sir Frank's company severely across the knuckles—and partly because the more recently established the body, the wider its mandate and its powers.

It is now time to realise that bodies such as the IRC are, in an exact sense, irresponsible. They are not answerable to any minister: they write their own brief : they do what they ' choose. Partly they reflect a ministerial belief that a stagnant British scene is all the better for agitation, and that agitators are, therefore, good in themselves. I should call this view puerile : even if I accepted it, I should still think the price too high. I forbear to recall whose prerogative is power without responsibility.

'There are no villains in the piece,' wrote Shaw of Saint Joan. 'It is what men do at their best, with good intentions, and what normal men and women find that they must and will do in spite of their intentions, that really concern us.'