Jeremy Warner's Outlook: Darling risks a bloody nose in trying to be even-handed over media ownership rules

Tricky stuff, these media ownership rules, as well as politically very dangerous territory. Is it better for politicians to support Rupert Murdoch in his commercial endeavour, and by so doing hope that he repays the favour by marshalling his newspapers behind them at election time, or do they gain more Brownie points with the voters by trying to be even-handed and curtail his influence?

Alistair Darling, Secretary of State for Trade and Industry and very much a "Brownite" in terms of his political allegiances, seems to have aligned himself with the latter point of view by asking Ofcom to investigate the public interest issues surrounding BSkyB's acquisition of a 17.9 per cent stake in ITV. He's taking quite a risk by doing so. The Murdoch camp was spitting tacks over the decision yesterday, and with good reason in some respects.

Few other issues were as extensively debated when the Communications Bill was going through Parliament as whether Mr Murdoch should be allowed under the new law further to extend his already powerful position in UK media. Ultimately, the debate resulted in the so-called "Murdoch clause" which, subject to usual competition rules, allows him to buy up to 20 per cent of a terrestrial broadcaster on top of all his other interests.

Now Mr Darling seems to be saying, "er, we didn't really mean that". Instead he cites bits of the legislation governing plurality of media ownership to justify asking Ofcom to investigate.

To do this, he has had to resort to what may be the technicality of "guidance notes" which specify the "exceptional circumstances" where he might be allowed to intervene. The legal contortions Mr Darling has had to go through to justify his decision fair make the head ache just thinking about them.

In any case, Sky's dispensation has all of a sudden disappeared. Bad call on Mr Darling's part? Or is he just doing his duty by acting on the loud-mouthed barrage of complaint that has been coming from Richard Branson and Virgin Media?

What is certainly true is that, thus far at least, Sky has misjudged the ease with which it would be able to negotiate the regulatory maze. The Office of Fair Trading has already determined that the 17.9 per cent stake is a "material" interest, and therefore seems quite likely to recommend reference to the Competition Commission on competition grounds. Now there is some possibility of Mr Darling referring on public interest grounds too. Having asked Ofcom to take a look, he'd be hard pressed to ignore its advice if it came down in favour.

What makes this regulatory quagmire so intriguing is its politics. Alistair Darling doesn't so much as blow his nose without the Chancellor's say-so. The decision would also have been extensively vetted by No 10.

Richard Branson and his Virgin Media group have been on a mission to paint Sky as the bully boy of the media landscape. Virgin had hoped to acquire ITV itself, but was thwarted by Sky's purchase of the 17.9 per cent stake. Since then, Virgin has endeavoured to manufacture a row with Sky over carriage charges for non-premium Sky channels. Again, it has complained long and loudly about how Sky's "unreasonable" behaviour in raising charges demonstrates that Sky is trying to crush all competition before it. The Virgin boss's campaign with regulators and politicians is plainly having the desired effect.

How dangerous this is for Labour obviously depends on the eventual outcome, but even these early skirmishes will not have helped its relationship with Britain's most powerful media baron. Ironically, the effect thus far of Sky on the media landscape has been to promote consumer choice and plurality, not to diminish it. Sky has done more than any other platform to make available a plethora of different channels and points of view. If Islamic fundamentalism is what turns you on, then you can get it on Sky.

So the argument is not really about choice in viewing material. Would Sky attempt to close down ITN so that more people would watch Sky News if it were able to influence ITV? Well possibly, but the battle is not essentially about limiting choice. Rather it is about who controls that choice and how it is sold. There is a sizeable element in the Labour Cabinet which is worried about Mr Murdoch's power and influence.

Mr Darling wants to be seen to be doing the right thing. It is important to him, and the integrity of the new legislation, that he's not regarded as Mr Murdoch's poodle. As such, he's applied a presumption of guilt to Sky's position rather than innocence. He'll just have to hope that regulators don't do the same. The decision to refer is ultimately his. He'd much rather not have to make it.

Private equity: not really a taxing issue

Seemingly everyone now has a view on private equity, a story which until the last month has rarely made it beyond the business pages. Even Hazel Blears, a candidate for the Labour Party deputy leadership, has come wading into the debate to contradict all her rivals by saying, essentially, that she thinks private equity a jolly good thing. She'd get my vote for being contrarian alone, though I doubt her view will endear her to the grass roots, where private equity is widely seen as the latest manifestation of the unacceptable face of capitalism.

The best argument that can be made for private equity has always been that, because it operates in the vanguard of the creative destructiveness of capitalism, it helps to improve the efficiency of the economy and thereby general prosperity. As Ms Blears points out, there are plenty of cases where, far from destroying jobs, it has helped save them by reinvigorating the companies it buys. Corporate change, however, is never easy, and by disrupting people's lives, it can frequently have devastating consequences for those directly affected by it.

Even so, there is much nonsense building up around the argument. One of the misconceptions is that private-equity activity costs the Exchequer money. This turns out to be a total canard, at least in so far as the UK is concerned. This is not simply because London is a centre for European private equity as a whole, and therefore brings a lot of business to these shores. It is also wrong in terms of the specifics of what private equity does to the tax base.

True enough, gearing up companies with debt tends to collapse their profitability, at least for a time, which means less corporation tax for the Government. However, it also generates interest on the debt, which is likely to get taxed. How much tax the Exchequer raises from it depends crucially on where the interest is paid. Quite a lot will be to non-taxpaying overseas interests.

Yet because of the City's position as a financial centre, and its role in financing leveraged buyouts throughout Europe and beyond, it may be that the UK is a net tax beneficiary of private- equity activity. It is not just the interest and fee income generated from UK buyouts that the City will be paying tax on. There will also be quite a bit of tax paid on overseas private-equity activity too. Bizarrely, leveraged buyouts are allowing Britain to tap into the corporate tax base of rival countries.

It therefore makes no sense for the UK to follow Denmark by ending the tax deductibility of interest payments. The Government would only raise less tax.

Tesco joins 50-year elite borrowers

Investors were falling over themselves to subscribe to Tesco's 50-year sterling bond yesterday. This possibly says more about the madness of pension fund trustees than the credit- worthiness of Tesco. Yet if I had to lend my money at just 5.2 per cent a year for the next 50 years, I guess I would feel more comfortable about placing it with Tesco than almost anywhere else.

j.warner@independent.co.uk