Watchdogs ready to tune in

THE putative merger of Capital Radio and GWR has all the appearances of an important step towards realignment in commercial radio. As was the case at ITV, the door to consolidation has been opened by more relaxed ownership rules and new technology.

The arrival of reasonably-priced digital radio sets is likely to lead to the roll- out of more digital stations. A stronger commercial broadcasting network will look more capable of taking on the ubiquitous BBC, which is already off to a head start.

But no one should assume that such a coming together is a done deal. As was the case at ITV, there are governance issues to be overcome.

Investors are less than enthusiastic about a carve-up of top jobs between Capital's David Mansfield and GWR's Ralph Bernard.

No one wants a repeat of the Carlton-Granada experience where the division of the spoils led to open warfare between institutions, led by Fidelity, and the board of Carlton.

There must also be a suspicion that the regulators will want to take a look at the competition issues. Until now the governing principle for the Competition Commission in radio is that 'thin' mergers, which lead to amalgamations across a range of regional markets, are acceptable.

But 'thick' mergers, which lead to domination of local markets by individual players, are less desirable. Moreover, there is a belief that in the case of media deals the authorities need to look at markets in the round.

Radio mergers must be examined in relation to the owners' market shares in other local media, including newspapers and freesheets.

Several operators in the radio market, including the Daily Mail & General Trust, which owns 29.9% of GWR, and the Guardian Media Group also have local newspaper operations.

So as far as the authorities are concerned, it may not simply be a matter of adding up commercial radio market shares.

As was the case with ITV, the advertisers will also want to make sure that a new commercial radio operator does not use its pricing power to increase rates to unacceptable levels.

Together, Capital and GWR control some 37% of the commercial radio market. They doubtless will argue they are rivals in a far bigger advertising market competing with television and local newspapers.

But there is an alternative view that a new £770m commercial radio elephant would be out of scale in some local markets.

It would not surprise me in the least if the Office of Fair Trading and the Competition Commission decided they want to take a closer and more empirical look.

Taxing times

MOST of the attention in the latest economic data will be on the real live evidence the housing market is in retreat.

The latest numbers from the Council of Mortgage Lenders show a 20% drop in the number of new home loans in August. So higher interest rates are doing the trick for the Bank of England.

But as important to many of Britain's households will be the state of the public finances. Borrowing in the five months to August stood at £18.8bn against £18.9bn at the same stage in 2003-2004. The good news is that tax receipts have been picking up momentum as the economy has recovered, albeit less speedily than the Chancellor predicted in his March Budget. So far they are up 6.5% on last year, against the forecast 7.6% rise.

Current spending also is increasing at a faster rate than predicted at 6.6% against the Budget projection of 5.2%. Public sector investment has not been growing as fast as Gordon Brown wanted. So within the borrowing data, current spending is rising too fast and investment too slowly.

This is significant because of the 'golden rule', which states that current spending has to be in balance over the economic cycle. This clearly is not happening. Indeed, on present trends the golden rule is in serious danger of being breached. So as well as falling house prices, middle-Britain can start looking forward to some serious tax rises after the next election.

I bet we won't read about that in the next manifesto leak.

Sock therapy

M&S investors can rest easy now that Stuart Rose has revealed his strategy for lifting the company out of the sales doldrums.

Male customers can look forward to brightly-coloured socks to go with the conservative greys, navys and blacks currently on the racks.

It is small attention to detail like this that Rose tells the Telegraph's fashion editor will put the dowager of the High Street back on track. Well that's a relief!