大象传媒

The big supermarket groups have given new meaning to the retailers' axiom that their business is all about property and location.

has found evidence that they buy up land around superstores as a defensive barrier to prevent rivals muscling in on their territory.

It is a way for the Big Four supermarket groups - led by Tesco - to acquire and retain a lovely huge local market share.

Here are the numbers. There are 187 stores owned by one of the Big Four - that's Tesco, Asda, Sainsbury's and Morrison - which have more than 40 per cent of all retailing floorspace within a 10-minute drive-time. Or to put it another way, there are 187 supermarkets with massive local market shares.

Now in these 187 supermarket fiefdoms, the commission says that "110 landsites associated with 105 different stores are a cause for concern in terms of their ability potentially to constrain entry by a competing retailer". In other words, a supermarket group is typically sitting on a precious piece of land near an existing store and doing nothing much with it, largely to prevent a competitor building on it.

And that's not all. The commission says it has unspecified concerns about a further 54 controlled landsites in these areas.

It certainly looks like anti-competitive behaviour on a magnificent scale. And the supermarkets use all the tricks in the book to control the relevant land: exclusivity arrangements, restrictive covenants, leases to friendly third parties and so on.

The commission is proposing two remedies, neither of which will appeal to Tesco et al. It wants to force retailers to sell land in areas where there are few superstores, and it wants to prohibit retailers from using covenants or exclusivity arrangements that would prevent land being snapped up by a competitor.

All of which sounds quite right, except that some people will not like the wider context in which the commission is planting these recommendations.

That context is that it believes that too few of us have a proper choice of superstores, that for the market to function well we should all have easy access to three or at least two of these vast barns of groceries and consumables.

So it wants the planning system changed to provide greater opportunities for edge-of-town developments. And it suggests there should be a new competition test that would allow any planning decision to take account of whether any local retailer has become too dominant.

In other words, as I wrote here yesterday, it thinks the UK could benefit from having a load more superstores. Not everyone will concur. Do you?

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The two faces of Tesco are: 1) a great British success story built on a fearsome determination to win in a competitive market, to the great benefit of consumers; 2) a monster with excessive market share, which takes over entire towns and squeezes suppliers till the pips squeak.

So has the seen Jekyll Tesco or Hyde Tesco, during its 17-month investigation of the groceries market?

My sense is that it regards Jekyll Tesco as the dominant personality but that the preliminary findings (due to be published tomorrow) will be seen as curbing some of Hyde Tesco鈥檚 allegedly noxious habits.

That said, Tesco will not be singled out for special treatment by the commission. The recommendations will apply to all the big supermarket chains.

But because of the way that Tesco has acquired very large market shares in many towns and districts, inevitably it will be most affected by proposed reforms.

For me, the big story out of the commission鈥檚 report will be an attempt to give all of us a greater choice of supermarkets in our local areas.

And the debate it may spark is whether we actually want more supermarkets, whether the benefits of greater competition outweigh what many see as the negative impact on communities and landscape of superstore proliferation.

The commission believes that Tesco鈥檚 large national market share is not a particular problem, even if it does take one in every three pounds we spend in supermarkets.

More relevant is that only about a third of us have three superstores within relatively easy reach of us.

Some of us will see that as a blessing. But for proponents of competition, that鈥檚 a sign of inadequate competitive tension in some parts of the country.

How can it be corrected?

Well I would expect some technical proposals from the commission that could have far-reaching consequences.

It is likely, for example, to say that supermarket groups should be prohibited from buying up land near to an existing store and then sitting on it undeveloped for years with the intent of preventing a competitor from muscling in.

So supermarket groups may be forced to sell off those chunks of their so-called land banks that are competition-spoilers.

And it is also likely that there鈥檒l be a ban on the groups鈥� use of restrictive covenants whose point is to prevent any parcel of land being developed by a competitor.

As the biggest holder of land, Tesco is bound to be seen as the most at risk here.

There may also be quite good news for Tesco鈥檚 competitors, in that I would expect the commission to agree with Kate Barker 鈥� the economist who advised Gordon Brown when chancellor on reform of the planning system 鈥� that the so-called 鈥渘eeds test鈥� should be abolished. The needs test is a stipulation that new retailing capacity should only be developed in a locality if there is a demonstrable need for it, irrespective of competitive issues.

But if local competition is the big thing, who should decide whether Poole or Perth needs a new Sainsbury or a new Asda? Should it be the local authority?

Well the commission will probably say that its sister competition authority, the , should have a wider role going forward.

The commission may argue that the distinction between a supermarket group buying an existing supermarket and buying property should be abolished, and that the OFT should have a role assessing the implications of each kind of deal 鈥� which would be logical.

Interestingly, however, the commission thinks that the groups鈥� superstores and their convenience stores operate in separate markets. It believes shoppers use small shops for motives and purposes that are very different from those they have when going to a huge supermarket. Which sounds a bit odd to me, but that鈥檚 what the research suggests.

Anyway it means, for example, that in assessing whether there are enough Tesco superstores in Bicester, its umpteen little shops there would not be regarded as a particularly important factor.

And what about the poor beleaguered suppliers? Well the Competition Commission did not come up with evidence that they are being systematically mistreated, in spite of trawling through thousands of e-mails sent by buyers at the big chains.

What鈥檚 more, to state the obvious, when suppliers provide supermarkets with more stuff at a cheaper price, that is in theory good news for shoppers.

But the commission can鈥檛 ignore the widespread belief that suppliers are being bullied and bashed up 鈥� and that they are just too frightened of retribution to squeal.

So there may be some changes to the code of practice governing relations between producer and supermarket.

And the commission will suggest, but only as one possible option, that an ombudsman could be appointed, to whom suppliers could take their complaints.

It鈥檚 the British way: if in doubt, create a new watchdog or ombudsman.

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All weekend, wave after wave of schadenfreude has been crashing on the head of Stan O鈥橬eal, the chairman of Merrill Lynch. After Merrill announced those colossal losses on inventories of sub-prime loans reprocessed into noxious collateralised debt obligations, O鈥橬eal could not survive.

The point is that Merrill鈥檚 historic strengths have been as an agent, a broker, not a risk-taker. So its veterans into the 鈥淚-told-you-so鈥� dance when 鈥渘ew Merrill鈥� came a cropper from putting its capital at risk in the manufacture of securities out of loans to US homeowners with poor credit histories.

But it鈥檚 the ghost of Christmas yet-to-come that really did for O鈥橬eal. I can be confident of that from the tedious moaning of old mates who work at Merrill. They鈥檙e whinging that they are being short-changed on this year鈥檚 bonuses because of the humungous losses chalked up on sub-prime. If they鈥檙e making a sacrifice for the good of the firm, someone has to pay.

The real power in any investment bank rests with its fee-generators and top traders, rather than with its shareholders or even its board, because it鈥檚 curtains for the firm if they鈥檙e alienated.

Merrill鈥檚 board, in negotiating O鈥橬eal鈥檚 departure, has simply been trying to preserve the integrity of a giant, money-making collective.

For the rest of us, the Merrill mess is an occasion to breathe a sigh of relief about what might have been 鈥� and cross our fingers about what might yet be to come.

Just imagine the carnage if the credit losses of a Merrill Lynch had been married to the intrinsic funding weakness of a Northern Rock.

A great deal has been made 鈥� rightly 鈥� about the flaws in the global financial system, in which trillions of dollars of loans have been packaged up into a dizzying number and variety of securities that have then been sold and then resold. What we learned from the panic that ensued in markets this summer is the potential harm that flows when major financial institutions have no idea what has happened to the risks associated with all that lending.

But the differing debacles at Merrill Lynch and Northern Rock point to at least one saving grace, which is that the worst loan losses have not occurred in a major institution with inadequate access to liquid funds,

However that may be due to luck more than anything else. And we cannot assume it won鈥檛 run out.

As the last week, we may be about to enter a second horrible phase of the credit crunch. A general tightening of credit conditions could cause serious difficulties for weaker borrowers, if they鈥檙e unable to refinance their debts, and also wider discomfort if there is a slowdown in economic growth.

Which is why all the bankers I meet are still battening down the hatches and are desperately trying to ensure they have access to sufficient cash or liquidity to weather any storm.

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Ever since the run on Northern Rock, its chairman Matt Ridley was always going to resign 鈥� simply because there is nothing more humiliating and damaging for a bank than suffering a flight of capital.

At the ritual humiliation of Rock executives by the Treasury Select Committee earlier this week, Ridley was asked how he felt after having brought shame on the British banking industry. It was hard not to feel his pain as he mumbled his excuses.

This former journalist 鈥� whose lack of experience running any substantial business has been widely criticised 鈥� is being replaced by Bryan Sanderson, one of the breed of BP lifers who populate the boardrooms of Britain.

Sanderson's more recent appointments were as chairman of the big international bank, Standard Chartered, and of Sunderland Football club. Also he was at the apex of BUPA, the private health business.

Can he help take Northern Rock out of intensive care?

To say it won't be easy is an understatement. Northern Rock is now in receipt of 拢16bn of emergency funding from the Bank of England - and money markets are a long way from being liquid enough again to refinance all that now or in the near future.

But Sanderson has committed to stay on till a solution is found - and if only part of the businss can be sold, he'll remain with the rump.

But why on earth, at the age of 67, is he coming out of retirement to fill the most rickety seat in British business? Well like many from the North East, he wants to restore dignity to an institution that was a great source of local pride.

It will never be restored to its former glory. But if Sanderson can manage either its sale or break-up in a way that preserves jobs and some value for its shares, he'll be a proper toon hero.

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There are times when the non-executive directors of a company have to decide what鈥檚 in the interests of shareholders, in a way that can seem patronising and out of touch with what those investors are thinking.

But even if you accept that investors don鈥檛 always know what鈥檚 good for them, it was surprising to read from the UK鈥檚 last remaining independent brewer of any size, , that a 鈥減roposed break-up bid from Heineken and Carlsberg鈥� is unsolicited and unwelcome鈥�.

and have indicated (and will firm this up in a few days) that they want to pay well over 拢7 for something that yesterday morning was trading in the market at nearer 拢6. And yet that odd couple from the Continent was told to hop off in no uncertain terms.

Few companies have reacted with such hostility to a putative bid since I was a cub reporter in the 1980s. That was the bad old days of boards being almost wholly detached from the interests of their owners. It was a rather depressing time of managerial capitalism, when directors behaved like oligarchs accountable to almost no one.

Make no mistake, I can see why the executives of a company may not be ecstatic that their company could fall into new ownership. Even if they keep their jobs, they would probably find themselves rather lower down the food chain in an enlarged group.

What鈥檚 more, it is natural for their employees to be anxious.

And all of us should be fearful about the implications for the economy 鈥� the national economy and local ones 鈥� if new owners were to curtail investment or even cut back production.

Also, we should feel a bit nervous that another brick in the foundations of the British economy may well end up in overseas hands 鈥� and wonder again whether it matters that the ownership structure of Heineken and Carlsberg makes it harder for any bidder to take over one or both of them.

In Scotland and the North East, where S&N has its roots and residual operations, there will be particular concern about all this. If there were any doubt about the sustainability of S&N鈥檚 plant in Gateshead, that would unsettle a part of the UK whose confidence has already been dented by the Northern Rock debacle.

That said, it would be slightly odd for S&N to play the nationality card. In the past, it closed down totemic breweries in and . And of its 37,000 employees in directly owned businesses, joint ventures and investments, only around 4,500 are in the UK. It has interests all over Western Europe, Eastern Europe and Asia.

So will the board鈥檚 furious reaction to Heineken鈥檚 and Carlsberg鈥檚 ambitions lessen the potential damage 鈥� if there be any 鈥� to British economic interests?

That鈥檚 doubtful.

In fact shareholders are now more likely to put explicit pressure on the board to resist whatever temptation they may feel to stand in the way of a proper takeover offer.

Or to put it another way, the aggression of the board may well rebound on itself.

Brewing is a global, consolidating industry. Other big drinks businesses, and especially , won鈥檛 want to see Heineken and Carlsberg snatch S&N鈥檚 desirable brew and will be weighing possible offers of their own.

S&N is 鈥渋n play鈥�, to use the ghastly City expression. And, almost as a law of nature, it will now be taken over.

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At 8.30pm on September 13, I disclosed on 大象传媒 News 24 that Northern Rock had approached the Bank of England for emergency financial support 鈥� and then spent the rest of that evening elaborating on that scoop in reports for the Ten O鈥機lock News, radio bulletins, 大象传媒 online and so on.

Since then, I have been criticised by readers of this blog and others for being in some way being responsible for the run at Northern Rock, which began the following morning.

I鈥檝e not responded to the criticism, largely because it goes against the grain to write about my stories. As a journalist, I broadcast and write about things in the world that seem to me to be important, not about myself.

But since the chairman and chief executive of Northern Rock both told the Treasury Select Committee that they believed the 鈥渓eak鈥� to me had exacerbated the woes of their bank, I felt I could no longer keep schtoom.

The first thing to say is that I cannot possibly know whether anyone decided to take their money out of Northern Rock as a direct result of seeing my broadcasts.

But here are a few thoughts that seem to me to be relevant:

1) I was in a position to broadcast many hours before I actually did that the Bank of England, in its role as lender of last resort, had been approached for help by the Rock. The reason I held off was because I wanted to ascertain whether Northern Rock was insolvent 鈥� whether its loans were bad 鈥� in addition to having got itself into the parlous state of finding it impossible to finance itself in the normal way.

Having been given the assurance that there was nothing seriously wrong with Northern Rock鈥檚 loan book, I then felt able to broadcast. Why? Because I was then able to give appropriate context to the story. I was able to say that there was both bad news and good news. The bad news was that Northern Rock had committed a cardinal sin for a bank, which was that it had failed to ensure that its sources of funding would continue in all market conditions. But the better news was that with the Bank of England stepping into the breach, depositors ought not to lose any money.

I鈥檝e reviewed our broadcasts of the night of September 13. And if I have any doubts about what I said it is that 鈥� in the light of the subsequent run on the bank 鈥� I may have given too much reassurance to depositors rather than too little. Because, as the governor of the Bank of England, Mervyn King, has pointed out, it was rational for depositors to remove their funds.

2) This was a story I had been working on for weeks, if not years. I first about Northern Rock鈥檚 business model in July 2003, when I was City editor of the Sunday Telegraph. And when money markets seized up on August 9, I 鈥� and other journalists, and many in the City 鈥� identified Northern Rock as being vulnerable. For example, Numis, the stockbroking firm, in mid-August stopped giving any kind of recommendation on the Rock鈥檚 shares, because it felt unable to value the company while there were doubts about how it was going to raise finance.

And on August 16, in my blog, I wrote that Northern Rock was 鈥渢he stock to watch鈥� because it was 鈥渉eavily dependent on funding from the bond market鈥�.

I took my own advice. I watched what was happening to this bank closely, because of the likelihood that it would generate news of a substantial nature.

Also, as Adam Applegarth, the chief executive of Northern Rock, pointed out today, vast numbers of bankers, officials, regulators and corporate advisers knew both that Northern Rock had run into serious difficulties and that it was approaching the Bank of England for succour. In other words, it was immensely unlikely that the Rock would be able to keep its plight secret.

In those circumstances, it is extraordinary that it and the Bank of England started the detailed negotiations on the terms of the emergency loan on September 13 (though it wasn鈥檛 signed off till the early hours of September 14) with a view to announcing what had happened the following Monday, September 17. How could it possibly believe it could keep the news out of the public domain all through the Friday and the weekend?

What鈥檚 more, the Rock formally told the Bank of England it needed to tap it for help on September 10, the Monday. It almost beggars belief that the Rock and the Bank thought they could keep a lid on what was going on till a full week later.

3) Of course I understand that Northern Rock and the authorities feel that if they had made the announcement of the Bank鈥檚 support in their own time and in their own way, depositors might not have quite been so alarmed. But none of them are actually claiming that the run would not have happened. Because when they ask themselves whether they would have kept their savings in a bank which had been forced to ask the Bank of England for emergency help, they know what the answer is.

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A slightly odd from Northern Rock this morning about how the expressions of interest in saving it - from the likes of Virgin - are all terribly preliminary and uncertain. Whoever drafted it has a Masters in the use of the conditional tense.

What does it mean? Err. Well, I mentally paraphrased it as "the share price is too high". Ouch.

The point is, and to give credit where it's due, Northern Rock would not be in business and hopeful of recovering from its recent spot of bother if it were not for the Bank of England and the Treasury.

Without the 拢13bn and rising of emergency loans made by the Bank and underwritten by the Treasury, Northern Rock's liquidity crisis would by now have become a solvency crisis: it would have gone bust.

And in the absence of the 100% insurance provided to all Northern Rock retail depositors by the Treasury, the bank would find it hard to raise a bean in new money even now.

The Treasury is being paid for all this support - though its refusal to disclose how much makes me fear that it is not being paid enough.

Also, the putative bidders for Northern Rock - Virgin, Flowers, Cerberus - would not be remotely interested in doing a deal if the government had not stemmed the Rock's crumbling by gluing it together with public money.

So what bemuses me is why the Treasury is not taking equity in the Rock. The hard truth is that the Rock's shares would be worth a big fat zero without the support of taxpayers' money.

That's our money, to state the obvious. And there is quite a powerful argument that we should share in any upside in the value of Northern Rock, since it鈥檚 our readies that to a large extent are generating that upside.

If, for example, Virgin and its well-heeled friends were proposing to acquire all of Northern Rock's existing shares at a decent premium and instantaneously terminate all public support that would be one thing. But they aren't.

The Virgin consortium simply wants to heavily dilute those long-suffering holders by buying a vast quantity of new shares for the cheapest price the Rock's board would tolerate and repay the Bank of England loans over time.

The risk of converting the Rock into Virgin Money would be shared with the current shareholders, and with taxpayers, unless and until all those emergency loans can be repaid and that state insurance is cancelled.

Some might feel it would be simpler and cleaner for the Treasury to be the bidder. But since it is queasy about carrying out an explicit nationalisation, it should perhaps take some of the equity action as and when a takeover takes place.

If the public-sector financial support remains in place for weeks or months after a takeover (as it will have to, as the sine qua non of a deal, whatever the Treasury may hope), the quid pro quo should surely be an option or warrant over new Rock shares for the Exchequer.

If we are paying for the elaborate care that should eventually take the Rock out of intensive care, shouldn't we get some of the spoils?

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It has been like walking on eggshells trying to establish how agreement was reached late last night to end the post workers' strike.

No one - either from CWU union or the Royal Mail - wants to go on the record.

Why?

Because the deal still has to be ratified by the 16 members of the CWU's postal executive.

And given that emotions among postal workers are running high in a dispute that's been dragging on since June, their assent cannot be taken for granted.

But if there was one thing that tipped the balance, it was that Brendan Barber, general secretary of the Trades Union Congress, somehow succeeded in translating what both sides were saying into language they could all understand.

So who has won and lost?

Well, as far as i can gather, the big pillars of what Royal Management wanted from its workforce remain in place.

The value of the pay rise this year remains at the 2 1/2 per cent offered.

The attractive final salary pension scheme will be closed to new members.

And - most important for Adam Crozier, Royal Mail's chief executive - there will be a reform of allegedly inflexible working practices. Which for Crozier means that the company can invest 拢1.2bn in new kit and "modernisation" over the coming five years, safe in the knowledge that productivity of this business will improve.

For Crozier, that was the life or death issue. With the onset of competition in the postal market, Royal Mail was haemorrhaging custom to lower-cost competitors. For Crozier, it was "become more productive or die".

But, just to be clear, this is not a slam-dunk victory for management.

My sense is that there have been important concessions.

Perhaps the most important one is that negotiation on the detail of new working arrangements will be devolved to local areas, not imposed in Stalinist style from the centre.

What this reflects is the hard reality that many postal workers have lost any trust in Crozier and in the Royal Mail's chairman, Allan Leighton.

So, of course, there must be a risk of localised disputes, as these new more flexible working practices are put in place.

But for management, what is important is that all posties are now expected to be productively employed during all of their agreed hours, before overtime kicks in.

And, I think, there has been some tweaking by management on the terms of the pension-fund changes, of benefit to those who want to retire at 60, among other things.

What does it all mean? Well, assuming it all goes through, Royal Mail can move on to the next phase in its development - which is to catch up with its rivals in becoming more efficient.

But make no mistake, there are lessons here for management as much as for the workforce and trade union.

Negotiation on pay and working conditions has been going on for at least eight months - and for most of that time, neither side seemed to have even the most basic understanding of the other side's concerns.

And there has been well over a week of strikes - which has cost the business a bomb and been a massive inconvenience and expense to its long-suffering customers.

That is hardly what you would expect of a thoroughly modern business.

Many would say it reflects as badly on the management as it does on the trade union.

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We now appear to have strayed into 鈥測ou couldn鈥檛 make it up鈥� territory in respect of the future of Northern Rock 鈥� with Sir Richard Branson riding to the rescue on his jumbo.

He is putting together a consortium of investors to take a majority stake in Northern Rock, which would keep its stock market listing but would be rebranded as Virgin Money.

The business would be run by Jayne-Anne Gadhia, a Virgin veteran who has been working with Branson on developing a mortgage business for him.

It is still early days and a deal is by no means certain. But Branson is in earnest: there鈥檒l be an official statement from the company soon-ish.

There are, of course, big obstacles, not least of which is that Northern Rock has now borrowed 拢13bn in emergency funds from the Bank of England 鈥� with the loans underwritten by the Treasury 鈥� and all of that would have to be refinanced by any successful bidder.

And, what鈥檚 more, the Treasury is also insuring (for a fee) all deposits at Northern Rock.

No deal will take place with any bidder, Virgin or anyone else, if all the government support were to be withdrawn immediately on completion of the deal. In current market conditions, refinancing all that would be just too difficult.

So the chancellor faces a troubling decision in respect of how quickly to demand his (our) money back.

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Throughout the 1990s, Gordon Brown 鈥� as shadow chancellor and then chancellor 鈥� banged on about the need to end Britain鈥檚 short-term investment culture at breakfast, lunch, tea and high tea.

As someone who strayed into his path a good deal, his puritanical and laudable determination to find a way of rewarding those who take a long-term approach to wealth creation became familiar (not to say wearing). And he succeeded in creating one of the most benign tax environments of any developed economy for those who were prepared to stake their livelihoods on creating a living, breathing enterprise.

So 鈥� as you may have gathered from earlier blogs (here and here) 鈥� I was shocked on Tuesday when his successor at No 11, Alistair Darling, abolished so-called taper relief for capital gains tax.

Taper relief meant that those who hold on to assets for longer payer a lower rate of capital gains tax when they sell the relevant assets.

In other words, whether you build a business up over 30 years and then dispose of all or part of it, or whether you buy a bunch of shares at 9am and then sell them at a fat profit at 10am, you鈥檒l now pay exactly the same 18% rate of tax.

And, what鈥檚 even more extraordinary, Darling cut the tax payable by most speculators by more than half while increasing the tax payable by genuine wealth creators by 80%.

This is the equivalent of the Treasury saying 鈥渓et鈥檚 turn the UK into a hedge-fund paradise, where the biggest rewards go to those who search out the easiest short-term profits鈥�. It鈥檚 a really odd signal for the government to send out.

And those who鈥檒l be punished by the tax change also include hundreds of thousands of individuals in Save as You Earn company share schemes. They currently pay 5% or 10% tax when they sell the shares they accumulate (depending on the marginal rate of income tax they pay). But that鈥檒l rise to 18%.

It effectively sounds the death knell for such schemes, which have been a great boon in aligning the interests of employees with their employers.

All that being said, many will say hooray that Darling should wish to simplify the capital gains tax system. I can see why he thinks that having a single 18% rate, with no tapers and no discrimination between any kind of investment, should be attractive.

Such simplicity is incredibly attractive and desirable. But it is being acquired at a steep cost for what may turn out to be millions of employers and employees 鈥� the entrepreneurs and employee shareholders 鈥� whose determination and morale are vital to all our economic futures.

All of which is to say that business pressure for a re-think will not abate. And if Gordon Brown doesn鈥檛 move fast, he may find himself under attack from the business leaders whose endorsement matters so much to him.

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Although many will see the reform of capital gains tax as an attempt to force the mega-bucks earners of private equity to pay more tax, its signficance goes well beyond that.

There will now be a single rate of capital gains tax at 18 per cent.

When John Major was prime minister in the 1990s, that would have been seen as the very epitome of a pro-capitalist reform.

But Gordon Brown when he was chancellor reformed the system so that many entrepreneurs and business creators now pay only 10 per cent tax, so long as they hang on to the relevant assets for a couple of years.

So for them, and private equity, this reform represents a steep tax rise.

However for many ordinary investors in the stock market or property, there will be a big cut in capital gains tax.

They currently pay up to 40 per cent tax on their capital gains, and that will now fall to 18 per cent.

But, interestingly, the gains are greatest for speculators, those who don't hold on to their assets for more than a few days or months.

The net impact of all this is to raise money for the Treasury - as much as 拢900m by 2010.

That probably tells you all you need to know - that most businesses will complain and see the change as anti-business.

And who knows what behavioural changes it will bring about? With the flat rate of capital gains tax now so different from the top rate of income tax, there's a huge new incentive for many of us to trade in shares and other property - at a time when there may be a bit of a bubble in these markets.

UPDATE 19:30 There was a firestorm of outrage earlier this year when it became widely know that private-equity executives pay tax at 10 per cent or less on rewards that may run to millions of pounds in a single year. Today's capital gains tax reform will push up the tax payable by some of these.

How many multi-million private-equity earners will be affected? On my reckoning perhaps 30 or 40, in a good year.

But there will also be an 80 per cent tax increase in the tax taken from hundreds of thousands of creators of small businesses, as and when they sell their businesses.

These entrepreneurs are the real dynamos of the economy. Should they really be penalised to ensure that a few private-equity plutocrats pay more to the Exchequer? Some will see that as profoundly unjust.

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There are a couple of eye-catching measures of significance for investment and business in the pre-Budget report.

The first and most important is a simplification of capital gains tax. And it seems to be a bold simplification. It looks as though there will be a single CGT rate of 18 per cent. No more tapers depending on how long assets are hold. No more distinction between so-called "business" assets and non-business assets. Just a single rate of 18 per cent.

That would be a great benefit to most people who buy and sell shares or other assets. But it will mean that private equity and those who own shares in their own companies will pay a higher rate of tax - because the 10 per cent rate for them, payable if they hold their assets for two years, will go.

Anyway, don't get carried away with excitement. It is a tax raising measure - and will raise between 拢700m and 拢800m a year.

There will also be an attempt to raise more money from those allegedly wealthy people who classify themselves either as non-domiciled or non-resident. Non-doms who have lived here for more than seven years will pay a flat rate of 拢30,000 for the privilege of being non dom.

If that looks familiar, it is. George Osborne, the shadow chancellor, proposed something very similar (though he thought it would raise significantly more than the Treasury claims).

The reason for excluding those who have lived here for less than seven years is not to scare away the bright foreign bankers who come to the City for a few years and then go elsewhere.

And there appears to be bad news for the separate category of non-residents, who arrive on a Monday and jet back to Monaco or some other tax haven on a Friday, in order to minimise tax payable here.

The day they travel will now count as a whole day in the UK, which means they will be able to stay in the UK for much less time than hitherto if they want to preserve their privileged tax status.

I imagine that Sir Philip Green, who does the Monday to Friday commute, may feel a bit grumpy, as will others of the Monaco set.

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The chief executive of the , Hector Sants, has just dumped on the Bank of England in an extraordinary way.

He has told the Treasury Select Committee that the crisis at Northern Rock could have been avoided if the Bank had pumped additional liquidity into the banking market.

In a way, it is a statement of the bloomin鈥� obvious.

But it is nonetheless highly embarrassing for the Bank to be put on the spot like this by the City watchdog 鈥� which has joint responsibility with the Bank and the Treasury for preventing financial crises.

Nor can the Bank take any comfort from the refusal of the chairman of the FSA, Sir Callum McCarthy, to disclose to the Committee whether he urged the Bank of England to provide such additional funds to the banking market.

McCarthy鈥檚 silence appeared to be eloquent testimony to a major policy rift with the Bank.

It is very difficult to see how the collegiate, tripartite system of Bank, Treasury and FSA for steering the City through storms can survive such tensions.

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There has been a disturbing outbreak of common sense at the Treasury. It has that it will provide Northern Rock with the kind of stable funding and protection for depositors that should allow the bank鈥檚 board to avoid selling the business at a knockdown price in a fire sale.

In fact, Northern Rock now has till February 2008 to decide whether it makes sense to sell itself. It鈥檚 odds on that the bank will be sold, but at least the Rock now has the time to judge the seriousness of the multiple expressions of interest it has received from putative buyers.

The Treasury鈥檚 big decision 鈥� made after consulting the Bank of England and the Financial Services Authority 鈥� is to provide full protection for all retail deposits made at Northern Rock after September 19.

This probably makes Northern Rock the very safest place for anyone to put their cash in these uncertain times.

If such succour turns out to be controversial, it will be because Northern Rock鈥檚 competitors 鈥� especially the smaller banks like Alliance & Leicester and Bradford & Bingley 鈥� may feel that the Rock has now obtained an unfair advantage.

Why would anyone not put their cash into Northern Rock right now, unless it starts paying a dreadfully low interest rate? Whatever today鈥檚 pre-budget report discloses today about a deterioration in the public sector finances, Northern Rock鈥檚 guarantor, HMG, is not going bust.

Now Northern Rock is paying an arrangement fee to the Treasury for this insurance, which will remain in place until normal market conditions resume.

And it would also pay to the Bank of England a small percentage of any new deposits it takes 鈥� in order to deter it from offering a crazily attractive interest rate to woo customers.

But whatever that arrangement fee and payment to the Bank of England turn out to be, they are by definition not commercial terms for the insurance 鈥� for the simple reason that Northern Rock simply could not obtain such insurance in the marketplace.

So in the interests of maintaining a level playing field for banks, I wonder if the Treasury would be able to refuse to provide the same insurance on the same terms to other banks, if they demanded it.

The Treasury says it would turn them down 鈥� unless they were in dire straits.

And I guess no bank would want to admit it needed such state insurance, because that would be a dangerous admission of fragility which would alarm customers.

Even so, it is plausible that the protection for Northern Rock constitutes unfair state aid, of the sorted prohibited by the EU.

Also agreed today is a widening in the range of collateral Northern Rock can pledge to the Bank of England in return for the emergency loans it is drawing for the Bank.

This has been done to help Northern Rock take advantage of the 拢10bn or so of commercial funding on offer from Citigroup, the world鈥檚 biggest bank.

At the moment, the Rock cannot borrow from Citi or any other commercial lender who may make funds available, because the Bank has taken a charge over all Northern Rock鈥檚 prime assets.

But now that the Bank has agreed to lend against the security of assets of lower quality, the Rock can pledge the better stuff to Citi.

It all means that 鈥� with copious state support 鈥� Northern Rock can plot a course towards perhaps becoming a normal commercial operation again one day.

This won鈥檛 happen overnight. As of now, it has borrowed almost 拢11bn from the Bank of England in emergency support. And it may be forced to borrow another 拢10bn or so from the Bank in coming months, as its existing liabilities come up for renewal.

That said, Northern Rock鈥檚 shareholders can breathe a small sigh of relief that the Treasury is no longer trying to get the troubled bank off its books at a speed that would squish the value of its equity to zero.

However don鈥檛 be fooled into thinking the rescue is without very serious costs for Northern Rock and its owners. There will be an incremental one-off charge of up to 拢50m in the results for the year to December 31 just in respect of an indemnity to pay all costs incurred by the Treasury, the Bank of England and the Financial Services Authority in respect of their work on Northern Rock, plus the pickings of the Rock鈥檚 own advisers.

And that hit to profits does not include any of the punitive interest charge levied by the Bank of England.

Make no mistake, the Rock鈥檚 shareholders are paying a very steep price for the crisis at their institution.

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Long long ago, in a world where central banks could control interest rates and commercial banks lent to each other as a matter of routine, two British banks began a titanic contest to win control of ABN Amro, the pride of Dutch finance.

Today, in this new world of poisoned money markets ruled by fear and mistrust, the gruelling struggle may well be over, in all but name.

A consortium led by Royal Bank of Scotland, whose other members are Fortis of Belgium and Santander of Spain, was already well ahead. Its 鈧�70bn-odd offer is worth vastly more than Barclays' bid - because at a time when all institutions are hoarding cash, RBS's readies are seen by investors as much more desirable than Barclays' shares.

Within hours, RBS and partners should clear their last formal obstacle. Europe's competition authority is expected to announce that it is placing no prohibitive conditions on the takeover taking place.

At that moment, Barclays' board would privately recognise that it's game over - although they may not admit as much publicly till Friday or even Monday (just in case RBS encounters some unlikely last minute hitch before its offer closes in a formal sense).

As and when RBS and co carry off ABN, it will be a big moment. Barclays will have to answer the what-now question. Having shouted very loudly that it saw its future as a global giant, pumped up by ownership of ABN, it needs to explain why its shareholders should feel just as excited by its growth prospects as a rather smaller institution.

That said, Barclays' failure was arguably in the interests of its owners. As I wrote on September 7, this summer's mayhem in the banking industry made it questionable whether it was remotely rational for any bank to add to its management burden by buying another bank.

A few months ago it may have seemed heroic of Barclays to initiate the largest ever cross-border banking takeover of all time. Now it seems hubristic.

So what of RBS? It bravely becomes significantly bigger in global investment banking and commercial banking at a time when retrenchment might seem more appropriate.

Investing against the cycle is often a recipe for success. But would RBS have launched this deal all those months ago if it knew then what it knows now about the fragility of confidence among providers of credit?

RBS is a legendary cost-cutter. And doubtless it will display those talents to the full in the integration of its bits of ABN, after that bank is broken up and shared out between the troika.

However it is very difficult to argue that the banking trio is obtaining assets from ABN on the cheap. Note that RBS's share price has fallen by 15% or so since the consortium said in the spring that it wanted to buy ABN, while the consortium's largely cash offer for ABN was actually nudged up.

The 15% fall in RBS's share price may well be a proxy for the fall in the intrinsic value of ABN, given what has happened to banking markets over the past couple of months. And the part of ABN that has surely been most hurt would be what RBS will end up owning. That is the operation that deals with the bruised clever clogs of private equity, hedge funds, other banks and the treasury departments of companies.

RBS's redoubtable chief executive, Sir Fred Goodwin, would rather stick pins in his eyes than overpay. But he faces his toughest ever challenge to prove this is the right deal at the right time.

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Competition policy is to be used to ensure that free-to-air broadcasting should not be allowed to wither and die.

That is the kernel of the provisional ruling that acquisition of a 17.9 per cent stake in would result in a substantial lessening in competition and operates against the public interest.

The Commission has effectively taken BSkyB as a proxy for pay television and ITV as the proxy for free-to-air services.

It believes that BSkyB has an incentive to prevent ITV making the kind of substantial investments that would allow free-to-air to thrive as we move towards and through 鈥渄igital switchover鈥� (when the traditional analogue broadcast system is turned off for good).

The Commission has also concluded that 叠厂办测叠鈥檚 17.9 per cent holding gives it the means to frustrate such investments by ITV.

It charges, for example, that BSkyB might use its voting rights at ITV to

a) Reduce ITV鈥檚 investment in new programmes

b) Limit ITV鈥檚 ability to bid for spectrum that would allow ITV to provide high-definition television in competition with Sky鈥檚 current monopoly of HDTV

c) Frustrate takeovers by ITV that would increase its competitive strength.

The Commission adds that BSkyB would somehow be able to mess up attempts by ITV and the 大象传媒 to launch a free satellite service as a result of its 鈥渋ndirect influence due to its industry knowledge and standing鈥� (this latter charge by the Commission is very odd).

What does it all mean?

Well BSkyB will not be able to use all - or perhaps any - of the votes attached to its 17.9 per cent stake. That could mean that it is forced to sell all or some of its stake 鈥� which would be painful for BSkyB, since it paid 135p a share compared with the current ITV price of 104p. The book loss on the holding right now is over 拢200m.

Or BSkyB could be forced to give formal undertakings that it won鈥檛 use the voting rights attached to its shares, thereby forcing it to be a passive investor. That might not be wholly satisfactory to ITV, since the stake would effectively become dead money, in the sense that BSkyB could not be relied upon to provide precious new capital in a rights issue (if such were needed).

So it鈥檚 quite big stuff from the Commission. It鈥檚 a slap to BSkyB just in case it ever harboured the thought that it could thrive by deliberately sabotaging free-to-air TV.

Oh, and for other companies in whatever industry, there appears to be a new rule that a stake of 17.9 per cent in a rival gives almost as much control as owning the whole thing 鈥� which is the equivalent in the takeover game of writing a new offside rule.

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Most interest in the will focus on their promise to cut taxes paid by the dead - a constituency which, according to most of the polls, may have a significant influence on the outcome of the next election.

But I am much more interested in their identification of the non-dom class of super-rich as the most deserving victims of a hefty tax increase.

Once upon a time, the Conservative party revered those wealthy individuals who live in the UK but claim non-domicile status and pay precious little tax here. In fact, the party raised more than a bob or three in donations from these jet-setting plutocrats, a few of whom - by sheer chance - ended up with honours.

But now that the shadow chancellor George Osborne needs to raise money to fund promised cuts in stamp duty and inheritance tax, he has decided that the non-doms are the group whose squeals about a tax rise are least likely to resonate.

In little over a year or two, due to all that noise about how little tax is paid by the super-rich, the non-doms have gone from de facto owners of the old Tory party to tax victims of the new Cameroon one.

Osborne will this morning announce that all non-doms would pay a steep, once-a-year charge of 拢25,000 for the privilege of belonging to the non-dom club. That would be on top of any tax they already pay to the Exchequer on that portion of their global income classified as UK earnings.

How much additional revenue for the Exchequer would that raise? Well official figures show that in 2005 there were 112,000 non-doms. And accountants believe that, thanks to the City boom, this may have risen to 200,000. If some non-doms become doms or flee these shores rather than pay the 25 grand membership fee, the take from the new levy could be about 拢3bn (and to reiterate, that's additional to the 拢3bn or so they already pay).

As it happens, the Tories' own estimate of the yield from the plutocratic poll tax is a bit higher, at 拢3.5bn.

It's a mini Nixon-goes-to-China moment: Tories soak super-rich; Labour nervous about asking them for the price of a cup of tea, for fear they take their putative wealth-generating skills to a competitor economy. It's a topsy-turvy world.

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is famed for being one of the world鈥檚 most conservative financial institutions. So it is both humiliating for it and troubling for us that it is the first of the world鈥檚 top-flight banks to disclose a substantial loss from this summer鈥檚 turmoil in credit markets.

Take it as a warning that the relatively strong performance disclosed last week by some of the leading Wall Street investment banks does not mean all banks will emerge almost unscathed from the debacle triggered by the collapse of the market in US sub-prime residential loans.

The mess is doubly embarrassing for UBS since it took a substantial hit in the dry-run for this summer鈥檚 market mayhem, the crisis afflicting the giant hedge fund, , in 1998.

The statement that UBS put out this morning is a little opaque, but the headlines are:

1) It will make a pre-tax loss for the quarter of just under $700m, its first quarterly loss for nine years;

2) The main culprit is the fixed-income, rates and currencies division of its investment bank, which made 鈥渘egative revenues鈥� of around $3.4bn;

3) The source of the losses are the 鈥渓egacy positions鈥� of its now-closed hedge-fund and proprietary trading business, , together with holdings in its mortgage-backed securities trading business;

4) It has taken significant though unspecified write-downs on positions in 鈥渟uper senior AAA-rated tranches鈥� of collateralised debt obligations.

The losses on CDOs are particularly piquant and are further proof that these manufactured securities do not always do what they say on the label: triple-A rated bonds are not supposed to incur 鈥渟ignificant鈥� losses.

Here鈥檚 UBS鈥檚 predictable explanation. It says that the underlying cause of most of this mess is 鈥渢he deterioration in the US sub-prime residential mortgage-backed securities market鈥� which was 鈥渕ore sudden and more severe than in recent history鈥� 鈥� and the ensuing illiquidity that led to 鈥渟ubstantial valuation losses鈥�.

To its credit, UBS is doing less of the 鈥渘ot our fault, guv鈥� routine than you might expect of a famously stuffy global bank. The chairman and chief executive of the investment bank, Huw Jenkins, is stepping down, to be replaced 鈥渇or the foreseeable future鈥� by the chief executive of the whole bank, Marcel Rohner. Jenkins will however be retained as 鈥渟enior advisor鈥� to Rohner. And there are various other senior management changes, all designed to improve the bank鈥檚 control of risk.

Also, it has begun that process of shedding staff which I warned about a few weeks ago (see Scything the City). UBS鈥檚 employee numbers will be cut by 1,500 before the end of the year.

And there is an ill-augury for its competitors. It has taken a loss on its relatively small exposure of loans to private-equity buyouts. With somewhere between $300bn and $400bn of these loans sitting on other banks鈥� books, that implies its rivals may be sitting on losses of between $20bn and $40bn just on the private-equity or leveraged buyout debt they have been unable since July to place in the market.

UBS is big enough to more than weather this storm. For the year as a whole, it will make a substantial pre tax profit of somewhere around $8.5bn. But other banks likely to be damaged by the sub-prime fallout are not quite as big and robust.

UPDATE 12.50: Citigroup has now joined UBS in the roll-call of sub-prime shame. It has announced that it expects third quarter post-tax profits to slump by 60 per cent. Why? Well there is $1.3bn of losses on sub-prime mortgage backed securities and $600m of losses on fixed-income trading.

But the big story, which I hinted at above, is $1.4bn of pre-tax writedowns on private equity loans. This is cringe-making for Citi鈥檚 chief executive, Chuck Prince, who in July told the FT 鈥� using notoriously hubristic language 鈥� that his bank was 鈥渟till dancing鈥� in the private equity market, long after it was obvious that the private-equity bubble had been pricked and was deflating at an alarming rate.

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