Bill Jamieson:A few days in the job and Mandy's already riding roughshod over shareholder democracy

Published on Wednesday 22 October 2008 22:29

AN INSTANT pundit is our Lord Mandy. Two weeks into his new role as business minister and he confidently declares government support for HBOS to be contingent on its takeover by Lloyds TSB. With press attention focused on luxury yachts, Russian aluminium oligarchs, the shadow chancellor and political donations, he found time on Tuesday to declare that the government's recapitalisation of Lloyds TSB and HBOS "is predicated on the merger going ahead".

This is the clearest statement yet from the government on the highly controversial question as to whether the capital positions of the two banks were considered together or separately for the purposes of the government rescue plan.

Little wonder First Minister Alex Salmond asked Alistair Darling last night for "urgent clarification".

Lord Mandelson added for good measure that he had "heard nothing that suggests the merger wouldn't go ahead". Clearly, he has not been reading The Scotsman for the past two weeks – or noticed the public position adopted by the First Minister, whose speech at the SNP conference opposing the proposed takeover was widely reported in the media.

Alex Potter, analyst at stockbroker Collins Stewart, said he could not understand the government's persistence in pushing for the take-over when the available liquidity package would do more to help the banks. "It seems to show the weak grip that Lord Mandelson appears to have on ways to stabilise the financial system. If the funding had been granted a few weeks earlier, there would have been no need to create such an anti-competitive animal."

Interestingly, Standard & Poor's and Fitch Ratings both assigned ratings to a new 20 billion debt programme set up by Bank of Scotland last week on a par with the sovereign rating of the UK. This suggests HBOS is enjoying the benefit of government guarantees of its debt paper without the need for a take-over.

And Lord Mandelson seems cavalier over shareholder democracy. The take-over is subject to approval by both sets of shareholders, Lloyds TSB (800,000) and HBOS (2.1 million). They have not yet seen an offer document. And the scheme requires a 75 per cent majority of both. How ironic if Lloyds TSB's dividend-loving owners put Lord M in his place – and flung the proposal out.