Outlook: Killing off the monkey may not save the organ grinders

Accident in waiting; Browne vs Brown

They thought it was all over a long time ago. ITV Digital has taken its time in going bust, but finally it is now. ITV bosses at Carlton and Granada have a long list of excuses for the demise of their pay-TV platform. They blame Sky for charging too much for content and for the crippling price war that ensued during the digital land-grab race, they blame the Government for failing to act against Sky until it was too late, and they blame the Government again for the weakness of the signal. Even the BBC gets it in the neck for taking so much pleasure in ITV's misery. Greg Dyke, its director-general is assigned special blame not only for failing to support the platform, but for undermining it at every available opportunity in the BBC's own self interest. ITV is victim to nothing short of a full-blown conspiracy, Carlton and Granada would have you believe.

All these factors no doubt played their part, but the ultimate culprit was our old friend management hubris. It was hubris that caused ITV to try to make a go of ONdigital, as it was then called, even after the main content provider, BSkyB, was forceably ejected from the consortium. It was also hubris that made ITV outbid Sky for second class football rights and hubris that made its owners persist with the platform long after it became obvious to all but ITV that it had been hopelessly outsmarted and outmanoeuvred by Sky.

Carlton and Granada are hardly alone in losing their shirts on the digital land-grab race, and then ultimately failing anyway. But there were key misjudgments in the débâcle, the scale of which would normally demand resignations at the highest level. The manner in which ITV has cut and run from its commercial obligations makes the situation that much worse. Yet despite all this, there appears no particular appetite in the City for sacrificial scalps. This owes much to the hope that Charles Allen, chairman of Granada, and his counterpart at Carlton, Micheal Green, can now redeem themselves by bringing about the long awaited final consolidation of ITV into one company. Don't count on it. ITV may be in a parlous state, but it still has more than half of all TV advertising in the UK. Clearance by the competition authorities is by no means guaranteed.

Accident in waiting

So that's all right then. David Clementi, deputy governor of the Bank of England, doesn't think there is a bubble in the UK housing market and as a consequence he he is not convinced there is any need to put up interest rates to choke it off. This is perhaps just as well, because with business activity at a standstill, the economy as a whole needs an interest rate rise like a hole in the head right now. The housing market is about the only thing that's keeping the economy going, so it would ill become any policy maker to put a dampener on it.

But whether the Bank of England would wholly share Mr Clementi's view there is no bubble is a different matter. The chairman of the Financial Services Authority, Sir Howard Davies, has now twice publicly expressed concern about ever rising house prices, and after yesterday's renewed surge in house price inflation as measured by the Nationwide Building Society, it is easy to see why.

According to the Nationwide, house prices are now 16.5 per cent higher than a year ago, and the market defies all recent predictions of a slowdown. No other investment seems to offer anything like the same rates of return, nor is any other investment so easily borrowed against. It is no wonder that so many people are attempting to climb on the buy-to-let bandwagon. Forget Isas and pensions. Property seems to offer the ultimate, fail-safe, geared investment and everyone wants a part of it. You don't even need capital to participate; the bank will lend as much as you want.

Cheap and easy credit are the main driving forces behind the renewed surge, so if there is a bubble, then it is the Bank which is to blame. Central bankers have never been good at dealing with asset price bubbles. Having first raised the issue of irrational exuberance in the stock market as far back as 1996, Alan Greenspan, chairman of the Federal Reserve, then seemed to forget all about it. By cutting interest rates and easing credit conditions in the aftermath of the emerging markets crisis, he arguably helped prompt the final, mad, speculative dash for technology stocks.

A bit like Mr Clementi, he even by the end appeared to be denying that a bubble existed. It was only really possible to identify bubbles, he said, with the benefit of hindsight, and he publicly questioned whether it was right for him to pit his judgement against that of "hundreds of thousands of informed investors". The rest, as they say, is history. It is a belief religiously held by central bankers that controlling asset price inflation is no part of their job except in so far as it impacts on the price of goods. Ignoring the technology bubble very nearly caused a fatal road crash for the US economy, and it is not yet entirely certain that it won't.

As it happens, the US economy is now suffering (enjoying?) the same degree of house price inflation as the UK. The housing market is helping to prop up the US economy in the same way as it is here. Mr Greenspan is as sanguine about it all as Mr Clementi. The stock market is turned over 100 times a year, he pointed out in a recent testimony to Congress; housing is less than 10 per cent, which he thought "scarcely tinder for speculative conflagration". On one level he may be right. Some technology stocks have lost 99 per cent of their value and tens of billions of dollars have gone down the drain in the technology bust. That's not going to happen in the housing market.

But that property prices have become too high, that many are borrowing recklessly to finance their purchases, and that there will be tears if the economy fails to revive as planned, seems all too possible.

Browne vs Brown

Lord Browne is not the first businessman to put his trust in New Labour. When the chief executive of BP was made one of Tony Blair's first "people's peers" it seemed that Big Oil was hand in glove with Number Ten. When Mr Blair's "gatekeeper" Angie Hunter swapped Downing Street for Britannic House, where she is now Lord Browne's fixer, it re-inforced the impression.

Then Gordon Brown walloped BP and the rest of the UK North Sea oil sector with a tax rise. Like the increase in employers' National Insurance contributions, it came from left field and, like the NI move, it amounts to a tax on jobs. OK, so the $200m extra in tax that BP will pay this year is small change for such a large company. Worldwide, BP pays $5bn a year in taxes.

But at the margins it might make a difference when BP comes to weigh the balance between investing in the North Sea or another region where the tax regime is more benign. The £600m the Chancellor will raise in a full year from his new North Sea tax would be enough to build three new hospitals. But what Mr Brown can never know is how many mobile international investments which otherwise would have come to the UK will now go elsewhere. With that investment come jobs and corporate profits which all generate more tax revenues for the Exchequer. Labour cannot yet be accused of killing the golden goose, but Mr Blair has certainly given it one more incentive to lay its eggs elsewhere.

jeremy.warner@independent.co.uk