CITY AND SUBURBAN
Giving the pension funds a kick in the bottom line
CHRISTOPHER FILDES
Nigel Lawson comes up to his fourth Budget with one defeat still to avenge his bruising, at the time of his second Budget, from the pension funds. Since then he has approached their tax pri- vileges, not by direct assault, but by infiltration and encirclement. Lower tax rates make privilege less worth having. (An apologist for the Archbishop of Can- terbury sought to explain the other day why his Grace was publicly opposed to cutting taxes — it would mean that the reclaimed tax on charitable covenants would go down.) The Peps scheme, within its chosen limits, gives the individual inves- tor some of the pension funds' tax advan- tages. Personal pensions rumble slowly forward. What was startling, the other day, was to hear David Walker, the Bank of England's most outspoken director, sug- gest, twice, that the main battle need not be abandoned. He told the funds so to their association's collective face. They owned (he said) a third of the shares on the stock market, they had freedom from tax and freedom of action: if not used with commensurate responsibility, `no such pri- vilege will long be endured'. Mr Walker was reminding them where the bottom line was. He had many changes to urge on them — most notably, to forget what he called the 'bogus dilemma' of short-term or long- term investment, and concentrate on more active ownership. Reforming a badly run Company was not something they should leave to the takeover bidders. He cajoled them, he reasoned with them — but he threatened them.
Own goal
THE bijou homes to be built on Fulham's football ground — craven cottages? bear out the warnings of Nicholas Daven- port, in whose columns I humbly tread. Nicholas, who had taken time out of high finance to sit on the Chester Committee on Association Football, explained that the game was so structured that clubs could fail as businesses, but could not succeed. If they made profits, their shareholders (and thus their share price) could not benefit, for the League put a ceiling on dividends. The only beneficiary would be Corporation Tax. How to offset that tax? Not by improving the grounds, for that would be a capital transaction, and not allowable. Transfer fees, though, are trading ex- penses, allowed against tax. So a prosper- ous club had no choice but to inflate the transfer market and invest its money in some wasting asset of an overpriced goal- keeper. Compulsory improvidence, Nicho- las said, was the road to ruin — or the building site.
BBC's free parking
ETTINGTON Park is one of the best hotels I have ever stayed at, and certainly one of the most expensive. I hope the BBC top brass enjoyed themselves there last weekend. It is a grand Victorian country house, home of the Shirleys, now laid out for the best American carriage trade to nearby Stratford-upon-Avon. Those enter- taining baths, equipped with so many jolly jets from different directions! Those su- perb ministrations of the chef, Maitre Quinn, lured away from his command at the Ritz! That wine list, lengthy, learned, balanced, easily attaining the premiers crus and the finest vintages! The pleasure of a swim in the indoor pool before a glass of champagne before dinner! There the gov- ernors of the BBC and its most senior management gathered to think forward with their new director-general, Michael Checkland. Mr Checkland came away announcing the need for economies. If the BBC is to have the resources to develop, he says, staff must go. It is like the BBC to complain of a guaranteed income linked to the cost of living, on the grounds that the cost of the BBC's living is bound to rise faster than other people's. (Who is so lucky as to be under the average?) It is equally typical of the BBC culture to use 'accoun- tant', Mr Checkland's professional qual- ification, as a term of abuse. Such attitudes in the chartered BBC and the franchised oligopoly of the ITV companies reflect their privileged positions in the market. The remedy is freer markets, and the prescription is technological change — as the Stock Exchange and the newspaper industry have shown. The BBC's chair- man, Duke Hussey, is a veteran of that industry in its unreformed days, contend- ing with the genial customs and practice of Associated Newspapers, fighting and los- ing a Passchendaele to assert manage- ment's right to manage the Times. Now his chosen general goes into the field, equip- ped with no better weapons. Mr Hussey must wish him better luck. I should feel more respect for Mr Checkland, and more confidence in his campaign's success, if he had not established a tactical headquarters at Ettington Park — and more respect and confidence still if his first act as director- general had been to cancel the booking. But, when I stayed at Ettington, I paid my own bill.
The bright side
THE Aids boom shows the stock market in uninhibited form. Any share in any com- pany which might have anything to offer in dealing with the plague becomes the hot- test property. First come the phar- maceutical companies, respected names like Glaxo and Wellcome, whose resear- chers may enable them, years ahead, to offer some kind of treatment: the Japanese have bought their shares by the truckload. Then London International Group, which at other times does not like to be known as the nation's dominant supplier of con- traceptive sheaths. That is not a research- based, technologically advanced product in the same class as Wellcome's, but the share price still responds. Now BTP, which stands for British Tar Products. Is tar good for Aids? Well, BTP has let it be known that it has a fluid in which the Aids virus cannot live. I should not think the virus can live in sulphuric acid, either, but that is no reason to buy ICI. The BTP shares, though, went through the roof. What a funny coincidence that BTP has a bid on its hands. At least it all shows the market's propensity for looking on the bright side. Jerry Goodman, who writes as 'Adam Smith', tells in Supermoney of a group of Wall Street analysts in the heartland of General Motors. They were disturbed, presciently, about indications of decline in America's smokestack industries. They were shown one production line whose manager explained, in despair, that 14 per cent of the staff used heroin. An analyst brightened up: '14 per cent? Jeez! Who makes the syringes?'
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