Outlook: That's it Mrs Beckett, stick with Adam Smith

We told you so, Carlsberg-Tetley was saying with evident glee yesterday as it announced it was ditching three of its five breweries with the loss of up to 1,500 jobs. We told you that if we were not allowed to merge with Bass, then the fall out in terms of job losses would be worse. If we'd been allowed to merge, then most if not all these jobs could have been saved. How ironic, then, that it was a Labour trade and industry secretary, Margaret Beckett, who banned the deal and condemned all those hard- working folk from Aloa and Wrexham to the certainty of the dole queue. She should be ashamed of herself. Or should she?

There is indeed a certain irony in Mrs Beckett's vigorous and uncompromising approach to competition policy. It would never have happened under Old Labour. Given the choice between jobs and free market principles, jobs would have won every time. Even her Conservative predecessor, Ian Lang, would have balked at the idea of riding rough shod over the people of Scotland and Wales in defence of the finer points of laissez-faire economics. So why did she do it?

There was actually never any guarantee from Bass that it would keep all five breweries open. Although its business plan didn't envisage job losses on the scale announced yesterday, there is not much doubt that if it makes sense for Carlsberg-Tetley to do this as an independent company, it would have made even more for a company enjoying the sort of monopoly power Bass/Carlsberg-Tetley would have had.

Margaret Beckett was not led down this path by her mistrust of what Bass was saying, however. There's more to it than that. Mrs Beckett believes mergers are essentially a bad thing, that they undermine employment and enterprise, and that the propensity of British industry to engage in them has been one of the factors behind our post-war decline. This may seem an exaggerated view in some respects but fundamentally she is right.

Mrs Beckett makes a strange convert to the doctrines of Adam Smith and she arrives at her policy via a very different route. But essentially she is applying the same set of principles - the belief that a key factor behind innovation and job creation is vigorous competition. Her decision to stop Bass and Carlsberg-Tetley merging may come at a short-term cost to jobs, but by ensuring that a competitor is not removed from the market place, it will eventually pay back in spades. Not all mergers are bad but whenever they are proposed it is always worth recalling that famous passage from the Wealth of Nations: "People from the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices."