Labour and City must grow up and mend fences
A LETTER leaked today from City fund managers berated Transport Secretary Stephen Byers for his handling of Railtrack and warned Chancellor Gordon Brown that fund managers would be very unwilling to lend to a Government that had demonstrated it could not be trusted.
This rather stole the thunder from the chairman of the British Venture Capital Association chairman Edmund Truell, who had planned a keynote speech for tonight on the issue.
But in many ways Truell's comments are the more telling because he acknowledges the efforts made by the Government to help venture capital by cutting capital gains tax and by encouraging pension funds to put money into the business. And he speaks for an industry which is looking for opportunities to invest.
His main point is that he wants both sides to grow up a bit, and to recognise that they need each other. Truell understands that there is money to be made by backing properly structured public sector projects. The Government understands, but needs to acknowledge more openly and less grudgingly that it needs private money, and is prepared to see investors make a profit.
Railtrack has clearly undermined the relationship between public and private sector, and significantly increased the level of return private capital demands to deal with the robbers of Whitehall.
One wonders, though, if Truell is not underestimating the scale of the problem, and how fast it is deteriorating. Though the Government may not realise this, it is effectively facing a buyers' strike from City institutions. They are not going to be lightly fobbed off.
Indeed the longer this goes on, the more concessions they will demand and it does look as if nothing short of a major climbdown by the Government on the issue of compensation for Railtrack shareholders will calm them down - together with a pound of flesh from Byers.
It is not yet clear whether Portia Blair is ready to sacrifice the hapless Transport Secretary to achieve this - or even to understand that he needs to. But Truell is clearly correct when he says this strained or indeed broken relationship is in no one's long-term interest.
No rate of return, however inflated, will compensate the City for a long term for a breakdown of trust, and as former Labour Chancellor Denis Healey discovered just before he had to call in the IMF in 1976, no government can shun the City when it needs it to pay its bills. Finance and government really do need to get together, and fast, to mend their fences.
Davies clears air
'SOME high-octane nonsense' has been written about the Financial Services Authority's market abuse regime, chairman Sir Howard Davies said in a speech last night. He was not just thinking of this column. Some of it, he added, was 'high-priced, high-octane nonsense emanating from well-paid lawyers'. So he set out to calm things down and convince his audience that the FSA is not out scalp-hunting.
'Some companies have been advised that they must radically alter their disclosure practices and say as little as possible about their future prospects,' he went on. 'Others have suggested that firms must now make statements about prospective plans and confidential discussions with their bankers even before they have crystallised.'
In fact, says Davies, the listing rules have not changed and these 'specifically allow firms not to disclose impending developments...'. So that's all right then - provided lawyers read the speech too.
