London keeps its head as Wall Street sneezes

Wall Street sneezed and London shrugged. The extent to which British financial markets have succeeded in decoupling from those in the US was amply demonstrated again yesterday as the FT-SE 100 responded to Monday's sharp fall in the Dow with a 3 point rise while bonds hardly budged at all.

There are compelling reasons why Britain and the rest of Europe should not slavishly follow Wall Street. The corrections on the other side of the Atlantic were always likely to be more pronounced anyway because the bull run in equities has been much stronger over there than here.

But more significantly, the US and Europe are clearly at quite different stages in the cycle. The evidence of economic improvement, and not just on the jobs front, is much more apparent in the US, making the next move in interest rates there more likely to be upwards to counter an inflationary threat

The Treasury's Six Wise People - with the usual exception of Patrick Minford - may think that the UK is also heading for a tightening in monetary policy.

But yesterday the market preferred to concentrate on the less than compelling case for higher interest rates contained in the latest output figures which point to sluggish growth and the need for a cut if anything in the cost of borrowing.

Moreover, there are electoral cycles as well as economic ones. It is looking increasingly unlikely that the Government will be able to hit its growth forecast of 3% this year while keeping inflation within the 2.5% target range.

The Treasury Panel says as much but faced with a choice between the two it points to the need to raise rates to choke off an incipient rise in inflation.

It may be that the Chancellor Kenneth Clarke puts more store by his inflation target than his growth forecast. But whether a Prime Minister with one eye on a vanishing Parliamentary majority and the other on electoral survival agrees is another matter.

A further rate cut to accelerate growth at the expense of a gentle nudge upwards in inflation may be a temptation that is too hard to resist. The outcome of the Tamworth by-election this Thursday may tell us whether the Government is in the mood to succumb.

Labour sees light on media ownership

There are welcome signs from the Labour front bench that competition policy rather than cumbersome thresholds and ceilings might guide an eventual Labour Government in the development of rules on media ownership.

The Government's current efforts to liberalise the media sector, which have fuelled a sharp share price rise among the affected companies, are far too complicated, and merely repeat many of the obvious mistakes from the past. Restrictions under the last bill, in 1992, gave rise to a range of legal wheezes aimed at getting around the rules. The same will happen again this time.

Far better would be to use tough competition policy to weed out near- monopolies and curb market abuses, leaving companies to get on with the business of building truly competitive media conglomerates.

The effect of the current proposals on media cross-ownership is perverse. Two large newspaper groups are singled out for special treatment under the proposed rules -- Rupert Murdoch's News International and the Mirror Group, owner 43 per cent of the Independent. Neither will be able to own more than 20 per cent of an ITV company. But News International is unlikely to want any more TV -- certainly not of the traditional, terrestrial kind. Through BSkyB, it has already spent billions building a near-monopoly in pay-TV in the UK, where the growth rates far outstrip those in the commercial "free" TV business. Lacking the scale of a News International -- which is part of Mr Murdoch's $10 billion parent company -- Mirror Group cannot afford to build an equivalent pay-TV presence from scratch. Far easier would be to invest in an ITV company, providing it with a balance to its newspaper interests. But it will be constrained from doing so under the Broadcasting Bill.

Much bigger companies, including Associated and United-MAI, escape the cross-ownership limits, because their newspapers don't sell as many copies. This is far too crude a measure, however. Who is to say that the Daily Mail is not more influential than the Daily Mirror? Labour is suggesting a far more robust set of rules governing commercial activities -- surely a better approach. In the first instance, Labour intends to propose an amendment to the Broadcasting Bill in the Commons, just as it did in the Lords, to raise the ceiling from 20 to 25 per cent, thereby freeing Mirror Group.

This is unlikely to be accepted by the Government. But if Labour gets in expect a real change in the way media is regulated. Market concentration, and not artificial limits and thresholds, will be the acid test.

Ominously near a coup over pensions

Martin Broughton, the chief executive of BAT, along with other leading CBI figures including Sir Richard Greenbury, is close to pulling off an unwelcome coup over directors' pensions disclosure. They appear to be isolating the National Association of Pension Funds in the argument over how disclosure should be implemented.

To recap on this arcane but important little debate, Sir Richard's report on top pay last year recommended disclosure of the annual increase in value of directors' pensions, rather than the cash cost to the company in pension contributions.

Actuaries assumed that meant disclosing the capital value, which in the case of a large pay rise such as the 75 per cent awarded to Cedric Brown at British Gas would mean admitting in the company's annual report to a multi-million pound benefit. Of the original participants in the Greenbury report, only the NAPF appears to be firmly committed to the principle of disclosing capital values.

The idea rang alarm bells not just in boardrooms and corporate public relations departments but also in government, which would face a rerun of fat cat headlines as the election approaches.

This would be a gift to Gordon Brown, the shadow chancellor, who made so much political capital last year out of directors' pay. Not surprisingly, he backs disclosure of capital values.

The CBI's alternative is to disclose not the capital value but the increase in the annual retirement pension earned by a director during each financial year, a number that will rarely run above six figures. With the Stock Exchange likely to fall into line and the actuaries themselves not as united as they first appeared, the game is nearly over.

But shareholders, for whom the accounts are written in the first place, should not give up because this is an important issue of principle. Capital values are the by far and away the most meaningful disclosure when it comes to large future pension liabilities, and anything else is a fudge.