Outlook: Take your seats for the Gunfight at the Carlton Corral

Brown's black hole; Down the Tubes
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The Independent Online

High noon, indeed. In place of the shoot-out the City had expected some time next year between Michael Green and Charles Allen, we now have the spectacle of the Gunfight at the Carlton Corral unless Mr Green hands in his guns and resigns as executive chairman of the single ITV company by midday today.

Fidelity's Anthony Bolton makes an unlikely Wyatt Earp, riding into town to clean up a particularly nasty case of corporate malgovernance. Mr Bolton has been christened the Quiet Assassin but nobody can quite work out who he is supposed to have bumped off to earn this sobriquet. The Carlton non-execs, led by Sir Brian Pitman and John McGrath, make an equally unlikely Clanton gang. If anything, Mr McGrath has more in common with Doc Holliday since they both once knew a thing or two about drink.

It is a cliché but we really are in unchartered territory. Institutions have been known to gang up on a hapless chief executive and drive him out of town - think of Ian Harley at Abbey National and Brendan O'Neill at ICI to name just two. There are also plenty of examples of chairmen being handed the pearl-handled revolver when they have outstayed their welcome - think of Sir Ralph Robbins at Rolls-Royce.

But never before have the owners of a company taken on the entire board of that company in quite such a public and final way, demanding not just the head of the chairman (and, it transpires, the chief executive) but challenging the very authority of the non-executive directors who are, in theory, there to represent the interests of the shareholders.

It is not as if the non-execs at Carlton or Granada are, to use Tiny Rowlands' immortal phrase, mere decorations on a Christmas tree. Michael Green and Charles Allen may be forceful characters. But they cannot intimidate the likes of George Russell and James Crosby at Granada, nor Carlton's Sir Sydney Lipworth and Sir Brian Pitman, a giant both literally and figuratively.

And yet, in demanding the resignation of Mr Green and nominating a replacement, Fidelity and its fellow institutions have in effect declared that Carlton and Granada might just as well have stuffed dummies, or perhaps stuffed monkeys, sat around the boardroom table.

Forget about Higgs and combined codes and corporate governance and the advisability of allowing the men who brought you ITV Digital to run what will be Britain's biggest commercial broadcaster. This is about raw power. A Mexican stand-off which neither side can afford to back out of without tremendous loss of face. It is hard to see how Carlton can defeat the will of shareholders who claim to speak for half of the company. It is equally hard to see how Mr Bolton can settle for anything short of total capitulation followed, who knows, by Charles Allen's head on a plate in the sequel.

Wyatt Earp emerged victorious at Tombstone although his brothers Virgil and Morgan were left badly wounded. Will history repeat itself? Stay close to your TV set for today's gripping instalment.

Brown's black hole

As acts of political suicide go, taxing profits on the sale of first homes ranks right up there alongside slapping VAT on children's clothes or abolishing old age pensions. Which explains why the Treasury reacted with such fury to the claim aired over the weekend that Gordon Brown was contemplating just such a measure. Apart from being somewhere to live, the family house has, for many, become the retirement income of tomorrow following the rise in property prices and the plunge in pension values - a decline which has been exacerbated by the Chancellor's abolition of dividend tax credits.

Nevertheless, Mr Brown looks increasingly likely to have to find some way of filling the black hole which is opening in the public finances. The £11bn which would be raised by imposing capital gains tax on house sales is, by a pleasing symmetry, almost exactly the size of the deficit Ernst & Young's Item Club is forecasting this year.

If Mr Brown does not soak householders - raising VAT to 20 per cent is another of the more apocryphal predictions - then he will have to cut public spending to stick within his golden rule which says that over the economic cycle, the Government may only borrow to invest, not to pay nurses salaries and the like.

Not so says Ruth Kelly, Financial Secretary to the Treasury, because that ignores all the credits the Chancellor was able to bank in the early years of the cycle, not least from the £22bn auction of third generation mobile licences. It also ignores the economic recovery which should see corporate tax revenues begin to rise strongly again in the coming years.

What it boils down to is when Mr Brown choses to declare that the current economic cycle has ended a new one has begun. In this respect, he has plenty of scope for sleight of hand, much as he has in deciding whether Britain has met the five economic tests for entering the euro.

If the public finances look like they are going to continue deteriorating, then it will be in the Chancellor's interest to declare the cycle over soon. On the other hand he would be loathe to do that before the next election since it would mean going to the polls with a very large deficit in the public finances. In those circumstances, voters would have to take it on trust that Labour would not whack up taxes as soon as the election was safely out of the way. After all the stealth taxes of the last seven years, not a great manifesto to take to the electorate.

Down the Tubes

The rise in the Jarvis share price which followed its "decision" a fortnight ago to quit above-ground rail maintenance always looked like a gravity-defying exercise. So it has proved. The shares returned to earth with a bump yesterday after another spot of bother, this time with below-ground railways.

The cause of the weekend Tube train derailment at Camden Town on the Northern Line has not yet been established. But it must worry passengers and investors alike that it happened on a part of the Underground network maintained by Tube Lines, a consortium in which Jarvis has a one-third interest. Equally worrying, it was the second Underground derailment in the space of three days - the earlier one also occurring on a stretch of track maintained by Tube Lines.

Jarvis's stated reasons for handing back its rail maintenance contracts with Network Rail were that the financial returns were too low to justify the reputational damage done to the company every time there was an incident on a stretch of line for which it was responsible.

Withdrawing from rail maintenance, so the theory went, would "de-risk" Jarvis and make it a more attractive proposition. But last weekend's events have demonstrated that an Underground accident could inflict just as much damage on the reputation and share price of Jarvis as one which happens above ground.

What would Jarvis now do? De-risk the company further by giving up more of its railway business? Whilst it is true that a company without any contracts is risk-free, it also tends to be profit-free.

It would be premature to write Jarvis off on the basis of a couple of incidents - even though they follow in a long line of earlier incidents involving the company including the Potters Bar disaster. But it is clear also that this is a company which is heavily exposed with ome 60 per cent of its profits come from the rail industry in one shape or another. Camden Town may yet prove to be no more than a blip. Tube Lines, which has pledged to spend £4.4bn modernising the Tube, may yet be the answer to decades of chronic under-investment. But as things stand, passengers and investors will take a lot of convincing.

m.harrison@independent.co.uk

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