Jeremy Warner's Outlook: All at sea on pensions as ministers turn again

Murdoch v Malone; Manchester Utd
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The Independent Online

There are more U-turns in the Government's pension policy than the Westminster plumbing system. Having this week made the proposed, industry funded compensation scheme for pensions retrospective, so that it would become liable for the £875m shortfall in the Turner & Newall pension fund - which in itself was a breathtaking breach of previous pledges - the Government yesterday executed another nifty U-turn.

There are more U-turns in the Government's pension policy than the Westminster plumbing system. Having this week made the proposed, industry funded compensation scheme for pensions retrospective, so that it would become liable for the £875m shortfall in the Turner & Newall pension fund - which in itself was a breathtaking breach of previous pledges - the Government yesterday executed another nifty U-turn.

The Turner & Newall shortfall will now not fall on the Pensions Protection Fund (PPF) if the winding up begins before the fund comes into operation next April. Instead it will fall on the Government's own financial assistance scheme (FAS). This will be a relief for all the privately funded pension schemes that were expected to cough up for destitute Turner & Newall employees, but won't be of much comfort to the T&N members themselves, as the £400m earmarked by the Government for the FAS is hopelessly inadequate even for existing liabilities, let alone those of Turner & Newall. However, if the winding up begins after April, then the Turner & Newall liability will fall to the PPF. All clear now?

What is clear is that the Government's handling of what all along has been a deeply flawed Bill has become a complete farce. If this were the private sector, Malcolm Wicks, the Pensions minister, would already be out of a job, such is the all too apparent scale of his incompetence. Yet policy climbdowns are now so common in government that it could be regarded as victimisation to single him out for the chop. The compensation scheme is in itself a terrible idea which forces the solvent to bail out the insolvent. There could scarcely be a greater deterrent to those employers still limping along with final salary pension scheme.

The collapse in the occupational pensions sector is not all the Government's fault, but a large part of it is, not least the decision to abolish the tax credit on dividends at an accumulated cost to the industry so far of £40bn. The Pensions Bill is well meaning enough, but as often occurs when the Government tries to reinforce through regulation a dying system which it would like to perpetuate, the Bill will have only the reverse effect of hastening its demise.

Ministers don't seem to have a clue what to do about the growing pensions crisis. The Prime Minister wants a citizen's pension but the Chancellor says there is no question of restoring the earnings link for the basic state pension, which is the only way of making it viable. This muddled Bill deals with a different part of the pensions landscape - the endangered species of private sector defined benefit schemes.

Most people on final salary pension arrangements now work in the public sector. It will come as no surprise to learn that the public sector will not be obliged to contribute to the Bill's Pensions Protection Fund. One law for the tax funded public sector, another entirely for the great unwashed, labouring away in the private sector to pay for the gilt edged pension arrangements of the designers of this Bill.

Murdoch v Malone

It was no wonder that Rupert Murdoch dashed off after the BSkyB annual meeting yesterday without giving his usual kerbside press conference. Past performances have included musings on which political party he might back at the next election, his views on the Iraq war, having children in your seventies, and his own mortality. The affairs of BSkyB, of which he is chairman, were usually an afterthought. The same would have been true this year. Sky's subscriber growth numbers, or even its controversial share buy-back proposals, look mundane set against the bigger Murdoch story of the moment - his growing stand-off with the rival media tycoon, John Malone of Liberty Media.

Knowing that whatever he had to say on this matter would inevitably overshadow anything that Sky wanted publicised, he decided to beat a hasty retreat. The day would instead belong to his son, James, now chief executive of BSkyB. No discredit to James, but it was a bit dull by comparison. The first-quarter subscriber growth numbers were better than analysts had been guided to expect, but not as strong as once hoped for. With much higher marketing spend now kicking in, the company's target of 8 million subscribers by the end of next year looks easily achievable. So now on to the only question in town; what's Mr Malone's game?

Mr Murdoch claims to be losing no sleep over Mr Malone's surprise disclosure of plans to take his stake to 17.1 per cent of News Corp's voting rights, yet he's rattled enough to put in place an elaborate poison pill, which would massively dilute Mr Malone's interest if he tried to buy more. Mr Murdoch is also visibly angered by the discourtesy of Mr Malone's approach. He consulted Mr Murdoch on neither his initial purchase of a 9 per cent stake last January, or his latest purchases, which seem to have been conducted in a deliberately underhand manner. Mr Malone insisted yesterday that his investment was "entirely friendly" and he took no offence at the poison pill, which he described as a "friendly pill", as it wouldn't affect the increase in his stake to 17.1 per cent.

Yet it is not hard to see why Mr Murdoch should see things differently. His grip on News Corp may seem all embracing, but over the years the family stake has been reduced to less than 30 per cent of the votes, which is not enough to maintain control against a determined interloper. Nearly 10 years Mr Murdoch's younger, Mr Malone could interfere with plans for the succession, for which Mr Murdoch is grooming two of his sons, including James. Or he could force him into an unwanted asset swap. Small wonder that Mr Murdoch dashed off yesterday. Stealing his son's thunder is the least of his worries.

Manchester Utd

In declaring war against Man Utd by voting three directors off the board, Malcolm Glazer seems to have undermined his bid hopes for good. Both his bankers, JP Morgan, and his public relations firm, Brunswick, last night resigned in protest at his tactics.

JP Morgan had advised strongly against going through with the threat to remove directors if Mr Glazer's demands of due diligence were refused. They had only agreed to provide a financing if the deal could be done amicably. Yet Mr Glazer's actions amounted to a declaration of war.

Without JP Morgan the present bid is dead in the water. Mr Glazer may struggle after this to find alternative bankers. None the less, his actions in attempting to destabilise the company are in nobody's interests but his own. He was furious with the board for refusing to allow him the due diligence he needed to proceed with a £3-a-share offer.

If this were any ordinary business, then Sir Roy Gardner, the chairman, would have already opened the books and the deal would be done. Yet in his view, backed by legal advice, a football club as venerable as Manchester United must obey a higher calling than mere shareholder value. Like most private equity takeovers, Mr Glazer's bid is largely financed by debt. Manchester United has never had any debt, a financial strength that allows it both to keep ticket prices lower than they tend to be at other top clubs, and liberally to purchase top drawer players.

As it happens, this is an argument that could be used against all highly leveraged takeover bids, where the need to service and pay off high levels of debt mean the company must be run in a more disciplined way than is perhaps the case when it is wholly equity financed. Personally I see no reason why a football club should be treated any differently from a retailer or any other kind of business. The Manchester United board got itself into the position where it is protecting the supposed interests of the club's fans to the disadvantage of its shareholders. Yet in behaving so aggressively Mr Glazer surrendered any high ground that he had. His tactics have backfired badly and the prize has slipped from his grasp.

jeremy.warner@independent.co.uk

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