Jeremy Warner's Outlook: Well that's a relief. A sensible strategy from the Pru, not a load of unachievable targets

If it were that easy, why's no one done it?; Hampton Court's damp squib
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This reassuringly boring conclusion was not what the City wanted or expected to hear, although anyone with half a brain could have seen it coming. Mr Tucker was a member of Prudential's executive committee for six or seven years before taking his year long "sabbatical" with HBOS, so he was hardly likely to rip up a strategy he was both partially responsible for and intimately involved in implementing.

Yet it is not what new brooms, hired for their supposedly miracle-working abilities, are meant to say, and as a sign of the City's displeasure the shares were marked down 2 per cent yesterday against a rising stock market.

How different it would have been had Mr Tucker littered his presentation with ambitious targets and hairbrained schemes for achieving them, yet he's eschewed such foolhardiness. This again is an encouraging sign, for it demonstrates that Mr Tucker intends to be there for the long haul. He's is not going to give the City the rope with which to hang him in the meantime.

Most corporate restructurings are a complete waste of time and money, serving only to create the illusion of activity while in truth achieving nothing other than demoralisation. Mr Tucker has had the wisdom to resist the siren calls of the management consultants and investment bankers, all hungry for their fee.

Mr Bloomer was fired not because operationally Prudential was going to hell in a handcart, but because he lost the trust of the board and the City after a series of startling U-turns in approach which destroyed his credibility as a chief executive.

He insisted that the dividend wouldn't be cut; it was. He tried to sell Egg, the company's internet bank, but failed. He said there would be no rights issue; but there was. And having said the UK market was no longer worth devoting new capital to, he all of a sudden decided it was.

Yet operationally, he left the Pru in pretty good shape. The rights issue that cost Mr Bloomer his job has left the company well capitalised too. Mr Tucker is poised to reap the rewards, though of his own endeavors as much as Mr Bloomer's, for it was largely Mr Tucker who built the most dynamic bit of the Pru as it is today, its fast-growing Asian business. Unusually for a company that fires its chief executive, the Pru was not in a state of crisis when it happened, and it therefore doesn't need to engage in root-and-branch change.

In any case, there is more to the strategy review than meets the eye. What Mr Tucker has done is confirm the Pru's commitment to both Egg and the US business, where previously there had been equivocation. He's also articulated a credible multi-brand strategy for the UK market, confirmed that the Asian business will be strong enough to start returning cash to shareholders from next year while at the same time continuing to grow strongly, and identified up to £25m of synergies from establishing a global data centre.

The City wanted targets, the more ambitious the better. Wisely Mr Tucker has chosen steady-as-she-goes strategic thinking instead. All in all, an excellent start.

If it were that easy, why's no one done it?

Much excitement in the City yesterday over remarks by Mike Parton, the chief executive of Marconi, to the effect that the development of a secondary market in pension-fund assets and liabilities might allow shareholders to claw back the £490m placed in escrow to deal with any future deficits in the Marconi pension fund.

If Mr Parton can persuade someone else to take on the risk instead - say an insurance company or financier like Hugh Osmond - then the pensions regulator would surely allow release of the money from escrow and shareholders would reap the rewards. And if he can do that, then there is surely a read through for other publicly quoted companies with deficits in closed, final-salary pension schemes. Pay a third party a little bit of money, and there's the opportunity to get shot of the problem for good.

I was sceptical about this proposition even when it was first suggested, and having had a night to sleep on it, I'm now more sceptical still. If it were really that easy to solve the pension-deficit problem that plagues so many publicly listed companies, why hasn't anyone done it already? Here's the answer.

A secondary market already exists in bulk annuities, which is bound to get bigger as more pension funds mature. There are only two serious players in this market at the moment: Prudential and Legal & General, but even these giants of the insurance sector have limited capital capacity for underwriting such business, so over time we can expect them to be joined by others. Yet I'm not sure that partial sale to a bulk annuity provider is what Mr Parton has in mind.

In a bulk annuity transaction, the pension fund pays the insurer a sum of money to assume the liability of servicing members with their pensions. The insurer may have a less exaggerated view of the costs of doing this than the pension fund, but it's an expensive business nonetheless. In the Marconi case, there are approximately £3.7bn of liabilities backed by just £2.6bn of assets.

Any insurer would struggle to underwrite such a huge liability, but even assuming the capacity exists for such a transaction, Mr Parton would likely be charged a whole lot more than the £2.6bn of assets plus £500m he has in escrow for the privilege.

Indeed, it is hard to see why any company would want to pay an insurer the sums that would be demanded for assuming the liability of an entire pension scheme with liabilities stretching perhaps as many as 50 years into the future. Sure enough, it would free management from an irritating distraction, but any chief executive who sits around worrying about his pension deficit when there's a business to be run is an idiot.

To crystallise future liabilities by paying a third party to take them on would be an almost reckless misuse of capital. Rising markets are in any case beginning to inflate away many of these deficits. Given time, they will cease to be a problem in most cases. So I'm not sure the Marconi precedent has quite the significance it is being credited with.

What it does show is that the Pensions Regulator is in deadly earnest. All appropriate action will be taken to prevent pension liabilities bouncing back on to the Pensions Protection Fund. This won't of itself halt corporate restructurings and capital payouts in their tracks, but it will make many of them harder to do, and it is bound to limit the amount of value investors and bankers can hope to extract from companies.

The Pensions Regulator has made it absolutely plain. Pension liabilities are to be treated like other unsecured creditors. They are no longer things to be swept under the carpet as a problem for another day. Is this a good thing? Well perhaps, but forcing companies and their investors to recognise the long-term costs of providing final-salary pensions hardly does anything to encourage them. Only in the public sector, the last bastion of defined benefit pensions, does everyone seem oblivious to who pays the bill of this fast-dying privilege.

Hampton Court's damp squib

Tony Blair wants today's summit of European leaders at Hampton Court to be a forum for discussion on how Europe should meet the challenge of China and globalisation. Almost everyone else wants to discuss Britain's budget rebate, and who should get what share of it once it is handed back.

Originally planned as a two-day event, complete with Tudor banquet stretching long into the night, the organisers have been forced to prune it back to just a day. There's little appetite for the thorny issue of globalisation, it would seem, and some European leaders struggle to see why they are turning up at all.

Yet at least Mr Blair seems to recognise the urgency of the matter. There's very little time left for Europe to rise to the challenge of Chinese advancement. At the present rate of non-progress in economic and labour market reform, Europe stands to be not a winner, but a major loser from the now irreversible trends in globalisation. But rather than support the transformation of Europe into a more competitive economy, political leaders seem intent only on hindering it.

Future generations will curse their paralysis.

j.warner@independent.co.uk

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