Nicholas Spearing, a competition partner at the City law firm Freshfields, said: “After 25 years of a toothless regime, it seems odd to be bounding towards imprisonment.” The Competition Act gave the Office of Fair Trading power to levy fines and conduct “dawn raids” on companies suspected of running cartels. Ruth Lea, head of policy at the Institute of Directors, said the announcement was unnecessary “This is a bit of anti-business politicking…. Where are all these cartels? They have just brought in pretty vicious measures. We don’t know that fines are not working,” she said.The Confederation of British Industry warned the changes would move Britain out of line with European law.

European businessmen do not face criminal sanctions for forming cartels, it said. John Cridland, deputy director-general of the CBI, said: “Why are we importing the American regime? How does this stand with the European single market?” He suggested this would place British firms at a competitive disadvantage, as French and German companies would be able to form cartels without fear of jail whereas their British counterparts would be deterred by the harsh penalties.Mr Spearing said: “Most cartels are formed by salesmen who get together in some pub and hatch a plan so they can all meet their sales targets. They don’t gain much financially from it but do it to keep their jobs. In these circumstances, prison seems a bit harsh.”The bankruptcy reforms came under fire too. The Government wants to get away from the “one size fits all” approach and seek to make a distinction between “responsible” bankrupts and those that are “reckless”. The good guys, deemed unlucky rather than malicious, could be discharged from debts and released from restrictions within 12 months.

However, there would be tougher penalties for the minority “who abuse their creditors and the public”, with restrictions lasting between two and 15 years.Stephen Gale, a partner at the law firm Herbert Smith, said the distinction was unworkable and the new leniency towards the majority of failures would encourage profligate behaviour, so damaging the British economy.”Where do you become good and cease to be bad?” he said. “This is such a nonsense that it is going to produce huge amounts of litigation. I guess, as a lawyer, I should welcome that.”Melanie Johnson, a minister at the DTI, said the initiatives announced yesterday were part of Labour’s broad plan for its second term of office. They aimed to create a “world-class” competition regime for the UK.”The first term was about stability. The second term is about higher levels of sustainable growth, which requires an increase in productivity and competition in our economy,” Miss Johnson said.The package was clearly driven by Gordon Brown. He needs to keep the economy chugging along at a decent rate to reap the tax revenues necessary to put money into public services.