A recommendation too far: Coalition rejects Heseltine’s foreign takeover activism

Ministers have turned down Michael Heseltine's call for the government to become more active in its handling of foreign takeover bids.

The government has responded positively to 81 of the Conservative peer's 89 recommendations following his report, No Stone Left Unturned, published in October last year.

But among the rejected proposals was a suggestion that officials take a more active interest in takeovers by foreign investors, too.

Heseltine had said Whitehall could do "far more" to engage with potential foreign investors, even using powers in the Enterprise Act 2002 to "allow ministers to consider takeovers and mergers to ensure our long-term industrial capabilities are given proper consideration".

That could have helped ministers prevent Kraft's 2010 takeover of Cadbury, for example, which proved intensely controversial in the approach to the general election.

Heseltine had suggested acting "in exceptional cases to discourage unwanted investments", but ministers firmly rejected the idea.

"The government is committed to open markets and is equally committed to engaging with companies and investors to promote investment which benefits the UK economy," the government response noted.

The government also rejected his call for two-tier English local authorities to seek to become unitaries, the creation of a Development Corporation for London and an enhanced legal status for chambers of commerce.

The coalition's divisions over the Heathrow third runway also prevented it from accepting Heseltine's call for the issue to be resolved urgently.

Green light for decentralisation

But ministers nevertheless signalled their approval of the vast bulk of Heseltine's decentralisation recommendations, in a move prompting disbelief among trade unions.

The coalition confounded union leaders' expectations by giving the green light to sweeping moves to transfer responsibility for billions of pounds of funding to the regions.

Heseltine's report, No Stone Left Unturned, surprised many by recommending greater collaboration between the public and private sectors.

"He will have his work cut out in convincing ministers of this new approach, who are going to have to change their attitude towards civil servants, public bodies and unions if they want this strategy to succeed," former TUC general secretary Brendan Barber said at the time.

Now ministers have praised Heseltine's report as "compelling" and accepted 81 of his 89 recommendations, which will strengthen the ability of England's cities to contribute to sustainable growth.

"Lord Heseltine has laid down the challenge," chancellor George Osborne and business secretary Vince Cable said in the foreword to the government's formal response. "This government is ready to rise to it."

Local enterprise partnerships will be expanded, a business bank will be created to address investment problems for firms short of capital and the education system will be shaken up to improve young people's skillsets.