Shrinking the ferries fleet

IT IS now almost 15 years since an attempt by European Ferries and P&O to merge their cross-Channel ferry businesses was blocked by the then Tory Secretary of State for Trade and Industry, Nicholas Ridley, despite the looming competitive threat coming from the Channel Tunnel.

That was a major setback to early efforts by the industry to cut its cloth according to the likely demand, and though it has tried frequently to catch up since - the block on mergers having long ago been abandoned - it still has not got its structure right.

It still appears to have too much capacity - too many ships chasing too few passengers - with the result that competition is not just ferocious but positively suicidal. Fares on some cross-Channel routes in this year's high season were lower than they were 30 years ago.

The Channel Tunnel can certainly be blamed for part of this, but low-cost airlines have also taken their toll. Rather than pop over to France for a short break, people these days pop along to Stansted or Luton instead and fly almost anywhere in Europe for not much more than it would cost to take the car over to Calais.

As a result, declining numbers are using the ferries, and that seems set to continue. And to make matters worse, at regular intervals extra capacity appears from the French side which may not be subsidised in the conventional sense but does nevertheless take a more relaxed view than P&O on the need to make a profit.

Today's news that P&O is once again going to cut capacity is therefore not a surprise. The hard part is believing that this time enough has been done to bring stability to the industry.

The company clearly hopes it has, and Lord Sterling, now probably in his last of 20 exceptional years at the helm of the group, clearly wants to leave it in the best possible shape before he hands it on.

But managing decline is the toughest of all executive skills and it would be sad, but no real surprise, if we were to have more of these announcements in the years to come.

Rich irony

THE Tory attacks on Chancellor Gordon Brown's speech at the Labour Party conference were all a bit too predictable.

Shadow Chancellor Oliver Letwin, for example, said it offered no action for the pensioners who are paying one-third of their disposable income in council tax.

It offered no action for the first-time buyer who is paying £1,000 in stamp duty on a £60,000 house. And it offered no action for the owner of an ex-council house whose family now faces 40% inheritance tax.

David Willetts, the Shadow Secretary for Work and Pensions, in his turn noted with sadness the complete absence of any new thinking on pensions.

Surprisingly, though, neither of them picked on one thing that would pull the rug from under a lot of the Chancellor's claims for building 'a better, fairer Britain'.

In Labour's years in Government, according to figures compiled by the Institute for Public Policy Research, the gap between the richest and poorest has widened considerably.

At the time of Lloyd George's People's Budget in 1909, just 1% of Britons owned 70% of the national wealth, but thanks to death duties, which broke the hold of the landed aristocracy, and the growth of middle class affluence, by the end of the 1980s that figure was down to 17%.

Yet during the 1990s, and particularly as the decade progressed, the trend reversed.

While the top 1% increased their share of the total wealth from 17% to 22%, it was not simply confined to them. The richest 10% of the population now own more than half the nation's wealth - a rise to 54% from 47% in the 10 years to the year 2000.

And, of course, the huge salaries and bonuses enjoyed by many who work in the City and big business are now the stuff of legend. Indeed, it was probably the pay explosion in the City which began in the 1980s that was the engine behind the growing accumulation of assets by the wealthiest 10%.

Whether or not people think this matters will probably depend on their political views, which in turn might well be coloured by whether they are in the 10% band, or hope to be one day soon.

But before the Labour Party faithful - most of whom are not in this group - roll over and let Gordon Brown tickle them, they should ponder the fact that the first increase in wealth inequality in this country for almost a century has taken place substantially under his Chancellorship.