I rather doubt claims that being Chancellor of the Exchequer is the best job in government after the premiership. James Callaghan said that you either leave the job in time or in disgrace.
So I suspect that what most of the grinning, jowly faces on BBC2’s How To Be Chancellor last Sunday were really telling us is that being an ex-Chancellor is the best job in the world. One certainly retains an air of authority in a way that former Prime Ministers do not. As so often in life, there is much greater professional longevity in being number two than number one.
We will have to wait a couple of years, at least, to establish whether Gordon Brown will leave in time or in disgrace. But it was another insight from the programme into the running of the Treasury that I thought was of greater interest than the life expectancy of Chancellors.
Away from the hurly-burly of the Budget is the chaise-longue of Treasury forecasting. It was said that this economics discipline was no more accurate than the long-range weather forecast – and up popped Norman Lamont to confirm that Treasury statistics would regularly contradict the anecdotal evidence of business people, only for the instincts of business to be proved correct a year or two further on.
This set me thinking about other government departments and how this year’s policy could become next year’s shibboleth to be knocked down. Take the Department of Trade & Industry and its two-month-old President, Margaret Beckett. Late last week, she overruled the Monopolies & Mergers Commission’s qualified approval for the takeover of Carlsberg-Tetley by Bass.
Not only has Beckett powerfully reversed the Conservative Government’s long-standing policy towards the beerage – sound off about market forces and then do a deal with the industry – she has confounded the industry’s conventional wisdom of just a year or so ago that a combined Carlsberg/Bass would save jobs and brands.
It is worth trying to recall that conventional wisdom now. The background from which it grew was erstwhile Trade Secretary Lord Young’s half-minded acceptance of the MMC’s proposals to break the brewers’ hold on their tied houses. The 1989 Beer Orders consequently required a degree of tied-house disposal, uneconomic locals were closed, other outlets were converted into tenancies with Draconian leases and the price of a pint rose well ahead of the rate of inflation.
Meanwhile, the brewers engaged in a potentially ruinous price war to supply the big buying groups and some discovered that they could no longer afford to make beer. The situation was exacerbated by imported beer brands continuing to make progress – last year, foreign brands had accounted for one-third of the British market. Foreign brand-building was the order of the day – Anheuser Busch was said to be sinking 18m in Budweiser advertising in the UK.
Against this background, Allied Domecq sought to dispose of Carlsberg-Tetley because it was to all intents and purposes bust. OK, so it was making an operating profit of some 50m, but without the benefit of its support agreement with Allied Domecq, which ends this year, it would make serious losses. That’s why, after all, Allied wanted to sell.
Whitbread had a squint at the deal and looked elsewhere. Bass became the only game in town. Bass would have returned to the top of the brewing league, with a share of some 35 per cent – much lower than Anheuser Busch’s 45 per cent of the US market or Interbrew’s 50 per cent of the Belgian market. More importantly, a Bass deal and subsequent rationalisation would have saved more jobs, it was argued, than the alternative, which was (and is) seen as a slow demise of Carlsberg-Tetley.
With Bass promising cost savings similar to those enjoyed by Scottish & Newcastle from Courage and new capital investment, this was a deal where it could be argued that market forces, denied from the industry for so long, should have been allowed their head.
But that was then. A year is a long time in brewing and, after the most protracted of competition inquiries, Bass appears to be quite happy to see the deal blocked. Its shares rose some 20p to about the 740p mark in the wake of the MMC ruling, demonstrating that the market believes Bass, now relieved of an undertaking to dispose of 1,900 pubs, will do better in competition with Carlsberg-Tetley than through ownership of it.
Beckett now has to turn her attention to the proposed merger of Guinness with Grand Metropolitan. This is about national championship and will be harder for her to call politically. But, whereas it is commonly said that MMC referrals frustrate the urgency of companies to consolidate and compete, it may be that cool-headed regulatory examination can take some of the heat out of corporate derring-do and lead to more considered assessment of market opportunities.
It would be interesting to know how many companies would have walked away from major takeovers had they been made to think about them for longer. I wonder, momentarily, whether Granada’s shareholders are now entirely happy to own Forte.
I’m not suggesting that no company should be allowed to strike while irons are hot. I simply submit that it may not solely be the Treasury’s outlook that is as inaccurate as a weather forecast.