Outlook: Soros's tilt at Bush makes case against dollar Jeremy Warner

Rail confusion; Equitable Life

George Soros, speculator, financier and philanthropist, says that the central purpose of his life has become George Bush's defeat at November's presidential election. Mr Soros is driven more by his disgust over American foreign policy than any concerns he might have over George Bush's handling of the economy, yet he also thinks economic policy making in the US is geared to only one purpose, which is getting the President re-elected, and he believes there will be a heavy price to pay for the present profligacy once the election is over.

On both counts Mr Soros is right. His new book, The Bubble of American Supremacy: Correcting the Misuse of American Power, is a devastating critique of overarching and ill-judged ambition on the world stage. The war in Iraq was plainly a mistake, which has only served to divert attention away from the real hotbeds of global terrorism in Afganistan and Saudi Arabia.

But forget for the moment its long term geopolitical consequences. The war has also helped lock the US into a vortex of ever growing public and private debt from which escape, like Iraq itself, may prove impossible without severely unpleasant consequences. At a time of soaring public spending commitments, the Bush administration is slashing taxes in the mistaken belief that consequentially strong economic growth will eventually magic away the ballooning budget and current account deficits. President Reagan tried exactly the same thing. It didn't work for him and it seems highly unlikely to work for President Bush either.

Eventually and inevitably, the collapsing dollar, in combination with the present heady cocktail of lax fiscal and monetary policies, will spark a surge in inflation, bringing higher interest rates and a sharp slow down in consumption and growth. But what does Mr Bush care? He only has to keep the economy going for long enough to get re-elected, knowing that what happens thereafter doesn't matter because he is only allowed two terms as President anyway.

Perhaps the biggest curiosity of it all is why the supposedly independent Alan Greenspan, chairman of the Federal Reserve, should be so happy to play along with the President's re-election strategy. But then he too has a vested interest in the present insanity, which is to prove for posterity that he was right all along not to puncture the bubble and has successfully dealt with its aftermath.

Rail confusion

The inability of the rail network to cope this week with snow of any type, let alone the wrong kind, reinforces how necessary Alistair Darling's review of the industry is. Thameslink, never one to miss a chance to turn a drama into a crisis, reverted to an emergency timetable after a few flakes fell on the line north of London and its antiquated rolling stock ground to a halt.

But the more pointed question is what sort of review the Transport Secretary has in mind. His eight-page statement to the Commons earlier this month announcing the review was long on rhetoric but painfully short on detail. Is this not just a way of shunting the railways into the sidings long enough for Mr Darling to find out how much he will get out of the Chancellor from this summer's public spending review?

There was no consultation document to reveal what might be on Mr Darling's mind. Nor was there a clear timetable, less still any meaningful terms of reference. Furthermore, is it not wholly apparent who is conducting the review. The chairman of the Strategic Rail Authority, Richard Bowker, is "co-ordinating" industry responses to the review. But no one is very certain about what they are supposed to be responding to. And it is far from clear that at the end of the review there will still be a strategic role for the SRA anyway. In short, confusion reigns. Not perhaps an unusual state of affairs for the rail industry, but nevertheless an unsatisfactory one.

The blueprint Mr Bowker has in mind is clear enough, as far as London and the South is concerned at least. He wants to create large "super franchises" at each of the main London termini where all services - regional, commuter and long-distance - are brought under the control of a single operator.

The first fruits of the strategy were delivered yesterday when National Express signed the Greater Anglia franchise. Next up will be a Greater Kent franchise and after that will come a Greater Western one, centred on Paddington. In theory, this will remove the friction caused by a plethora of separate train operators fighting over the same piece of track and the same station platforms. It might even lead to some more joined-up thinking and joined-up services.

But it does not explain how the wheel-rail interface, as the engineers like to call it, can be streamlined into one seamless system. Privatisation broke the railways into a hundred different pieces, but that process is now slowly being reversed as Network Rail takes more functions back in-house. The longer the review goes on the more inevitable becomes the solution - single operation of track and train. Why, Mr Darling might even acknowledge the reality of public ownership and call it British Rail, only the Fat Controller at No 11 won't allow it.

Equitable Life

Two and a half years after being commissioned to write a report on the near collapse of Equitable Life, Lord Penrose is finally ready to publish. Yet even now it won't be the full, unexpurgated version. Instead it will be a sanitised text to take account of the various legal actions the board is pursuing against past directors and auditors. The recent, unexplained decision to call in the Serious Fraud Office to investigate possible monkey business in the run-up to closure will further cramp Lord Penrose's style.

Policyholders hope Penrose will give them the ammunition they need to sue the Government for regulatory failure, or at least that it will support the moral case for compensation. Don't hold your breath. There's not a snowball in Hades chance of Lord Penrose's findings backing state handouts. Indeed, a bit like Lord Hutton's investigation of the Gilligan affair, the reason why this somewhat curious, non-statutory investigation of the Equitable Life débâcle was commissioned in the first place was finally to bury the case for compensation once and for all.

According to the Whitehall satire, Yes, Minister, the main purpose of an official Government investigation is to play an uncomfortable set of events off into the long grass for as long as it takes for everyone to forget they ever had any significance in the first place. In this case, the policyholders action group has ensured the noise is still as intense today as it was when Equitable was closed, yet still their case seems a hopeless one. My bet is that if Lord Penrose blames anyone at all, it will be everyone but the Government he'll throw the book at. That won't help policyholders one jot, since it is only the taxpayer that has pockets deep enough to make a difference.

The Parliamentary Ombudsman has already effectively cleared the Financial Services Authority by agreeing with the FSA's own conclusion that the die was cast long before it came into existence. There was, therefore, nothing the FSA could have done other than attempt to limit the damage. That leaves the case for compensation dependent on earlier regulatory failure, which will be equally hard to demonstrate. The Equitable débâcle was caused by the fact that way back when the society mispriced the sale of guaranteed annuities. As the cost of these obligations began to climb, Equitable ran out of money to meet payments to everyone else.

To support the case for compensation the report has to show that regulators knew that the products had been mispriced and further that unless Equitable reigned back on payouts, it would eventually be unable to meet its obligations. This seems rather unlikely. Rather more probable is that regulators were misled as to the true state of Equitable's finances, but such a finding would not place liability with the Government. Penrose has been a long wait, but I regret to say it probably won't have been worth waiting for.