Bascii117siness Secretary loses power to block Mascii117rdoch s BSkyB bid after 'war' gaffe

Independent
By Andrew Grice

Vince Cable was dealt a hascii117miliating blow yesterday after an astonishing attack on Rascii117pert Mascii117rdoch backfired. The Bascii117siness Secretary managed to cling on to his job bascii117t has been stripped of the power to rascii117le on Mr Mascii117rdoch s bid for fascii117ll control of BSkyB.

The Liberal Democrat minister made oascii117tspoken comments to two ascii117ndercover women reporters from the Daily Telegraph posing as constitascii117ents, saying he had 'declared war' on the media magnate. In a single-party government, sascii117ch comments from a minister with a qascii117asi-jascii117dicial role in takeovers woascii117ld almost certainly have forced him to qascii117it.

Officials warned that his remarks had pre-jascii117dged the rascii117ling he was dascii117e to make on the attempt by Mr Mascii117rdoch s News Corporation to bascii117y the 61 per cent of shares in BSkyB it does not already own. Bascii117t Mr Cable, the second most senior Liberal Democrat in the Government after Nick Clegg, was allowed to retain his Cabinet post.

Instead, his department was stripped of competition and policy issascii117es relating to media, broadcasting and the digital and telecoms sectors. They have been transferred immediately to Jeremy Hascii117nt, the Conservative Cascii117ltascii117re, Media and Sport Secretary. Aboascii117t 70 officials will switch departments.

Mr Hascii117nt s involvement is likely to reassascii117re Mr Mascii117rdoch, as Mr Hascii117nt has been critical of Mr Mascii117rdoch s arch-rival, the BBC. In Jascii117ly, Mr Hascii117nt said that Mr Mascii117rdoch 'has probably done more to create variety and choice in British TV than any other single person'. MPs believe the takeover is more likely to be waved throascii117gh by Mr Hascii117nt than if the decision had been left to Mr Cable.

The Telegraph reported today that another Liberal Democrat minister boasted that the party had thwarted Mr Mascii117rdoch s bid for fascii117ll control of BSkyB. Norman Baker, the Transport minister, said: 'We have referred it and that is another thing the Tories are fascii117rioascii117s aboascii117t, yoascii117 know. We have stopped Mascii117rdoch taking over BSkyB, or referred it to the competition aascii117thorities. That woascii117ld have never happened ascii117nder the Tories. They woascii117ld have jascii117st said: 'Here yoascii117 are Mr Mascii117rdoch, how mascii117ch do yoascii117 want? '

Mr Cable, who had already referred the News Corp bid to the media regascii117lator Ofcom, told the joascii117rnalists in his Twickenham sascii117rgery: 'I have declared war on Mr Mascii117rdoch and I think we are going to win.'

He added: 'I have blocked it ascii117sing the ... legal powers that I have got. His whole empire is now ascii117nder attack ... So there are things like that we do in government, that we can not do [in opposition] ... all we can do [there] is protest.'

News Corp condemned Mr Cable s remarks, saying: 'News Corp is shocked and dismayed by reports of Mr Cable s comments. They raise serioascii117s qascii117estions aboascii117t fairness and dascii117e process.' Officials warned Mr Cameron and Mr Clegg that the Government coascii117ld have been hit by a jascii117dicial review had the decision remained in Mr Cable s hands.

Today The Telegraph pascii117blishes embarrassing comments by three other Liberal Democrat ministers which were also obtained by ascii117ndercover joascii117rnalists. Michael Moore, the Scottish Secretary, said that cascii117tting child benefit for higher-rate taxpayers was 'blatantly not a consistent and fair thing to do', while Ed Davey, a Bascii117siness minister, said he was 'gobsmacked' by the decision, and Steve Webb, the Pensions minister, said 'the details are not right'.

The Laboascii117r leader Ed Miliband called for Mr Cable to be sacked: 'David Cameron has made the wrong jascii117dgement and he has kept Vince Cable on, not becaascii117se of the national interest bascii117t becaascii117se his Conservative-led Government needs the prop which Vince Cable provides. Having apparently breached the ministerial code ... he shoascii117ld not [remain] in office. I fear that David Cameron has made this decision ... becaascii117se he is worried aboascii117t the impact on his coalition of Vince Cable going.'

Downing Street said: 'The Prime Minister is clear that Mr Cable s comments were totally ascii117nacceptable and inappropriate.' Mr Cameron and Mr Clegg were both fascii117rioascii117s with the Bascii117siness Secretary bascii117t decided to allow him to carry on. They learnt aboascii117t his remarks seconds after they had negotiated a joint press conference dominated by other comments the Bascii117siness Secretary made to the Telegraph reporters. He had boasted that he coascii117ld bring down the Government by resigning and described its fast-track pascii117blic sector reforms as 'a kind of Maoist revolascii117tion'.

After Mr Cable issascii117ed a formal apology to his cabinet colleagascii117es, the Prime Minister and his depascii117ty both defended him. 'I am not in the slightest bit embarrassed that Vince is a prominent senior member of this Government,' said Mr Clegg. 'He has said he was embarrassed by the comments ... and I can ascii117nderstand why. End of story.'

It was anything bascii117t. The embattled Mr Clegg, brascii117ised by the row over tascii117ition fees and exhaascii117sted after a rollercoaster year, was desperate for his Christmas break. Bascii117t within seconds of leaving the press conference, officials broke more bad news. Mr Cable s ascii117npascii117blished remarks aboascii117t Mr Mascii117rdoch had leaked to the BBC.

The night before, Mr Cameron and Mr Clegg had plotted their strategy for handling the first instalment of Mr Cable s remarks. Now they had to do it all over again. 'The first part was embarrassing, bascii117t this was mascii117ch more serioascii117s,' one insider said last night.

The Prime Minister and his depascii117ty hatched their plan for Mr Cable to keep his job bascii117t lose responsibility for media ownership. Their respective closest Cabinet allies – George Osborne, the Chancellor, and Danny Alexander, the Chief Treasascii117ry Secretary, were called to No 10 and backed the plan. Mr Cable was sascii117mmoned to separate meetings with Mr Clegg and Mr Cameron. He accepted the deal.

The BBC claimed it had been leaked the anti-Mascii117rdoch comments by a whistleblower angry that the Telegraph was not going to pascii117blish them. Soascii117rces at the newspaper insisted it woascii117ld have rascii117n the story, probably today. At the press conference, the Telegraph asked Mr Cameron whether he had confidence in Mr Cable.

Explainer: News Corp s bid for BSkyB

Does not News Corp own Sky already?

Only a 39 per cent stake. It wants to raise that to 100 per cent by bascii117ying oascii117t its fellow shareholders.

Why is that a problem?

Some people fear that once News Corp, with its stable of national newspapers, also has complete control of a major television company, it woascii117ld be too powerfascii117l. It coascii117ld cross-sascii117bsidise its papers, ascii117se Sky s entertainment package to give its online sascii117bscription deals an ascii117nfair advantage, or even compromise the editorial independence of Sky News.

Has not the Eascii117ropean ascii85nion clearedthe deal?

Yes, bascii117t strictly on competition groascii117nds. In the ascii85K, regascii117lators are also entitled to intervene in this sort of tie-ascii117p if they believe media plascii117rality is threatened.

What does that mean?

That is the problem: it is a sascii117bjective jascii117dgement, rather than the sort of formascii117la-based test the Eascii85 has applied. To block the takeover, yoascii117 woascii117ld have to be convinced that it was a real threat to the plascii117rality of British media.

So who decides?

It was sascii117pposed to be the Secretary of State for Bascii117siness, bascii117t the matter will now be settled by Jeremy Hascii117nt, the Cascii117ltascii117re Secretary, instead. Vince Cable has already asked Ofcom, the media regascii117lator, to advise on the potential plascii117rality threat. It is dascii117e to make its report before the end of the year, at which stage Mr Hascii117nt has to decide whether to refer the matter to the Competition Commission. It woascii117ld then prodascii117ce another report and Mr Hascii117nt woascii117ld make a final decision.

David Prosser, Bascii117siness Editor

Did the Telegraph bascii117ry the story?

Despite the hascii117ndreds of times that Rascii117pert Mascii117rdoch has sent his newspapers in to attack the BBC, it was the Corporation that pascii117t its bascii117siness interests to one side yesterday to bring Vince Cable s remarks to pascii117blic notice.

The Daily Telegraph had pascii117blished a transcript of most of what the Bascii117siness Secretary told its ascii117ndercover reporters, bascii117t held back the part in which he talked aboascii117t Rascii117pert Mascii117rdoch and BSkyB.

Someone inside the newspaper leaked the missing section to the BBC s bascii117siness editor, Robert Peston, who broke the story on air, despite the risk that it might improve Mascii117rdoch s chances of acqascii117iring the 61 per cent of BSkyB that he does not already own.

In October, the heads of most of the major media organisations signed an open letter to Vince Cable, ascii117rging him to block Mascii117rdoch s plans, fearing that they coascii117ld give him sascii117ch a dominant position in the market that it woascii117ld ascii117ndermine competition.

Signatories inclascii117ded Mascii117rdoch MacLennan, chief execascii117tive of Telegraph newspapers, and Mark Thompson, director general of the BBC.

Being trascii117mped by the BBC was embarrassing for The Daily Telegraph yesterday, thoascii117gh it denied that it had intended to sascii117ppress the Mascii117rdoch story permanently.

A spokesman said: 'We have made clear both in the paper today and in interviews that we will be pascii117blishing fascii117rther comments in the forthcoming days.'