Outlook: Mr Vickers and the OFT put BSkyB in the festive mood

Cadbury's deal; Pension plans

Christmas has come a week early for Rupert Murdoch's BSkyB and the man in the red suit and white beard is John Vickers. The director-general of Fair Trading cuts an unlikely figure as Santa Claus but he has handed Sky some present. The OFT's ruling that Sky has not used its dominant position in pay television to undermine the cable companies and the now defunct ITV Digital rounds off a quite remarkable year for Mr Murdoch.

What is it with regulators and the Murdoch empire? His broadsheet newspaper has sailed through two competition inquiries which found it guilty of selling at a loss (which is careless) but not of engaging in predatory pricing (which is illegal). Now his satellite television business has benefited not once but three times in the past year from favourable regulatory and political decisions. First the Communications Bill paved the way for Mr Murdoch to acquire Channel 5 if he so wishes. Then the telecoms regulator Oftel ruled that Sky could continue to charge BBC and ITV for carrying their channels on its platform.

Now, after an investigation lasting more than two years, the OFT has decided Sky has no case to answer after all on the most commercially sensitive and potentially damaging allegation levelled at the company: namely that Sky forced its pay-television rivals to operate at a loss by over-charging them for the rights to distribute its premium sport and film channels.

This represents a complete about-turn by the OFT which only a year ago concluded the exact opposite in its preliminary findings. Since then Sky has bombarded the OFT with 800 pages of written evidence and attended any number of oral sessions to explain why the OFT got it wrong. Mr Vickers has now seen the error of his ways and decided that Sky has not been squeezing the margins of its rivals unfairly. In fact, he reckons that they would be profitable if only they were run as efficiently as Sky. Admittedly, this is a "borderline" verdict and one which, moreover, depended heavily on the evidence submitted by Sky as to the allocation of costs between its programming arm and its distribution arm. Nevertheless it is enough to clear Sky of any breach of competition law.

NTL and Telewest, which between them have wiped out billions of pounds in shareholder value trying to compete with Sky, probably don't know whether to laugh or cry.

As for Mr Murdoch, the sky really does now appear to be the limit. The £2bn investment in a digital satellite platform is behind him and Sky is now in profit. ITV Digital is dead and Sky has cleverly blocked anyone else from picking up its mantle through its Freeview venture with the BBC which has taken up ITV Digital's licence and spectrum. Merry Christmas, Mr Murdoch.

Cadbury's deal

Has Cadbury Schweppes bitten off more than it can chew? Its £2.7bn purchase of the US gum company Adams from Pfizer has left a sour taste in the market's mouth and, at first blush, it is easy to see why. The deal virtually triples the amount of debt on Cadbury's books and reduces its credit rating to two notches above junk bond status. The resulting 250 per cent increase in interest payments will be enough to depress profits next year and use up all of Adams' free cash flow until 2005.

But equally, Cadbury's would have received a kicking from the market had it allowed Adams to slip through its fingers – and rightly so for in many respects the deal ought to be a no-brainer. The acquisition makes Cadbury's the biggest sweet maker in the world but more importantly it takes it into the fastest growing sector of the market – functional confectionery. If you think this sounds like an oxymoron go and wash your mouth out – preferably with some Halls mentholated throat pastilles or a stick of Dentyne. Sales of "functional confectionery" – sweets which actually do you some good – are rising at more than twice the rate of chocolate and sugar-based sweets while Adams sugar-free gum is selling at three times the rate. If Cadbury's cannot do better with Adams best-selling brands than a pharmaceutical company which regarded the business as incidental, then it really ought not to be in charge of a sweet shop.

Moreover, the purchase of Adams takes Cadbury's firmly into the US – a market where up until now its presence has largely been limited to fizzy drinks. There is some scope for revenue synergies – Dr Pepper's rots you teeth but Trident White will turn them back into the right colour.

But the bigger benefits will be had through cost savings. Cadbury's is too polite to say so until Adams has actually changed hands, but there is a lot of scope for closing factories and combining marketing and procurement functions. The $125m of efficiency gains it expects to make is almost certainly an underestimate.

America has been the corporate graveyard for many a British company but Cadbury's walks in with its eyes open. It has had a presence there for 40 years and half its earnings now come from the US market.

Adams may look like a consolation prize for Cadbury's after the disappointment of the failed Hershey sale and there is no doubt that John Sutherland has paid a full price. He is about to be elevated to the chairmanship – move has not made him flavour of the month with the corporate governance police. But in time the Adams deal should restore that ring of confidence.

Pension plans

Andrew Smith, the Secretary of State for Work and Pensions, does not get to the despatch box very often and when he stood up yesterday to tell Parliament all about his "radical and sweeping" plans to solve the pensions crisis, most of his solutions had already been well-trailed in advance.

As so often with this Government, Mr Smith's package of measures flattered to deceive. His promise to sweep away the "incomprehensible maze" of tax regimes which apply to pensions is at least a start – particularly when the Chancellor is intent on going in the other direction and making the tax system as complicated as possible with yet more footling measures and new credits introduced every Budget.

But the £200m this will save employers in administration costs pales against the £5bn Gordon Brown took away in his first Budget with the abolition of dividend tax credits.

Likewise the intention to enable employees to work beyond pensionable age while still being entitled to draw their occupational pension is a step in the right direction. Declining equity markets and annuity rates will make it a necessity for many people while increasing longevity will make it a possibility.

But Mr Smith's Green Paper has failed to grasp the nettle in two important respects. One is to the need to raise the state pension age to a level which takes into account how much longer we all live. The other is to commit to some form of compulsory occupational pension – a move supported by both trade unions and big business.

Admittedly, these are difficult issues to confront. The poorest would suffer most from an increase in the pensionable age and it is hard to force someone to pay into an occupational pension which loses money as has been the experience with many defined contribution schemes in recent years.

Mr Smith has kicked the issues into the long grass by appointing Adair Turner to chair a commission. The good news is that the pensions gap is not as big as the scaremongers claim – thanks in part to the equity we now have in our houses. The bad news is that is getting wide enough to demand some bold action when the next pensions Green Paper is published.

m.harrison@independent.co.uk