Gordon Brown is both the most cerebral and the most unashamedly populist of modern chancellors. It is a combination that guarantees his place in the hall of fame of British politicians of the postwar years, whether or not he achieves his ultimate ambition of becoming premier (and I would still bet on him getting there, even though the odds I am offered get longer every day).

Just occasionally, however, Brown the rasping football nutter gets the better of Brown the student of arcane theories of international competitiveness. And it was the Dunfermline bootboy who initiated a lengthy onslaught against big British banks, in the form of a series of reviews of their role in the British economy.

The culmination is a lengthy report by the Competition Commission on banking services provided to small businesses, which has just been handed to him and to Patricia Hewitt at the DTI. Brown got stuck in to the banks for two reasons. First, the respectable one, is the widespread view that a cause of the poor productivity of British industry has been the weakness of small businesses, which is in turn thought to be the result of a financial system skewed against them.

The other premise, less respectable but equally compelling, is that it is always good politics to kick the banks. Indeed, only banks and bankers have seen a decline in reputation and public respect to rival the descent of politicians and political parties.

However, my hunch is that this is going to be a punch-up with few blows actually landed. At first blanch, that may seem odd, because the commission has concluded that the banks make far too much money out of small businesses and also that there is not enough competition in this banking segment.

The problem is that the one biggish thing the government could do, which would be to put a cap on what the banks can charge, would have the harmful effect of reducing competition. The imposition of pricing constraints on small business loans or other banking services would persuade both the banks in this market and others thinking of joining the market to reduce their commitment to it. It is not particularly difficult for the banks to shift their capital to some other kind of business, as they have been warning ministers none too subtly.

So it is an interesting moment for Brown. He is confronted with a choice between his conspicuous commitment to competition and what would undoubtedly be a popular move to put the banks in a pricing straitjacket. Or, to put it another way, it is a choice between Brown the Brain and Brown the Boot.

I think - and hope - he will choose to be intellectual and dull. Reforms are likely to be limited to a series of changes making it easier for small businesses to shop around for a bank, have a clearer view of prices on offer and sack a bank that was too expensive or was providing a poor service. Banks that make it difficult for customers to move their accounts may face fines and they may be required to record customers' credit histories on CD-Roms that would be transferable from bank to bank.

Brown should take heart that he did the best he could for small businesses within hours of becoming chancellor. What matters most to them is the ability to plan ahead, free from the fear of big cyclical swings in demand, inflation or interest rates. So his most important reforms were to transfer control of interest rates to the Bank of England and get a grip on the public finances.

---

Is Rupert Murdoch immortal, as well as omnipresent? I pose the question because last month, it became clear that he believes he will live for ever. This was manifested in one of his rare public failures. After 18 months of negotiation and expensive preparation, Murdoch lost a $25bn bidding war for DirectTV, the largest satellite television business in the US.

The deal was supposed to be the crowning glory of a 50-year adventure to become the unrivalled media capo di capi. His satellite interests - including Star in Asia and Sky in Europe - would have enveloped the globe.

Now, most 70-year-olds would have been driven by a sense of their own mortality to do anything to win this last and most important battle. But Murdoch resisted the temptation to buy this business on terms that did not meet his financial criteria - and it would not have been that hard for him to win, as the rival bidder, Echostar, lacks his size and spread of interests (and Murdoch was being backed by Microsoft and John Malone).

So I must admit to a grudging admiration for the way he has handled himself, having seen too many good businesses destroyed by the rash behaviour of old men in a hurry. A close associate of young Mr Murdoch, who sits on one of his boards, tells me he is playing "a long game" and believes there is a good chance that US regulators will block the Echostar bid.

Were that to happen, DirectTV could yet be snaffled by Murdoch. And failing that, he apparently has "plans B, C and D" - or an assortment of other possible takeovers - to fall back on.

Hmm. I had originally been sceptical of the life-prolonging qualities of the green tea to which Murdoch is said to have become addicted, under the influence of his Chinese wife. But I am thinking of taking it up.

Robert Peston is editorial director of QUEST(TM); www.csquest.com; e-mail: rpeston@csquest.com

Post your comment

Please note: you will need to login or register before you can comment on the website