THOUSANDS of ordinary Railtrack shareholders put their money where their mouths were to sue the Government over the company’s demise. They have not wasted it, even though they lost their case in the High Court yesterday.
The ancient law of malicious misfeasance is hard to prove of politicians, whose actions are normally coloured by personal prejudice and advantage. It became impossible when Mr Justice Lindsay decided that he must treat Stephen Byers as a credible witness and not a liar. There are many versions of the truth about the Railtrack plot, some more economical than others.
The former Transport Secretary emerged in court as a cynical, incompetent lightweight. He decided at an early stage that Railtrack must go. Then he chose the most unfair and most damaging method of renationalising railway infrastructure, believing it to be the easiest.
The railways plunged to their nadir not in the aftermath of the Hatfield crash but during the lengthy, needless hiatus between Mr Byers sending Railtrack into administration and its transfer to Network Rail. If investors had been given the option of ceding control, today’s trains would be more reliable.
Of all the e-mails and documents to emerge as a result of the shareholders’ action, the most telling is Mr Byers’s draft public statement on the administration order. He explains, with a generous dollop of truth, that any company dealing with the State runs the risk of losing the confidence of the Government. An official with a great future spotted that this would undermine public private partnerships across the board. “No market can take us seriously,” the official noted, “if they think creditworthiness depends on political will and confidence.” But that is the case, whatever the final statement said. Scares about Mr Byers returning have proved false. But the over- arching, darkly conspiratorial Treasury regime exposed in the court case is still operating and may soon move to No 10.
Shareholders may not have been specifically targeted for abuse, but were regarded with contempt, most colourfully as grannies who would lose their blouses. Railtrack was largely owned on behalf of ordinary people saving for retirement. When pension funds become grannies whose interests count for nothing in Treasury thinking, it is not surprising that Gordon Brown and his haughty acolytes have wreaked havoc on the private pension system.
What really counted for the Treasury was not the welfare of Britain’s railway system, let alone pension savers. It was ensuring that Railtrack debts did not count as National Debt when it was renationalised.
Fund managers holding Railtrack shares chose to accept the compensation ministers were belatedly obliged to offer and forget about it. If small investors had not been stronger, the truths of Treasury thinking and behaviour would remain secret.
The Courts are overused. Vanni Treves’s ill-judged case achieved nothing and will soon need to be abandoned altogether; the truth about Equitable Life had already come out in the Penrose report. The BCCI liquidators’ misfeasance case against the Bank of England will be even harder to stand up and the Bank’s inadequacies have already been judicially exposed. When there is a plain injustice, however, institutional investors should hold arrogant ministers accountable, both to uncover the truth and to shame them to behave better.
Testing time
THE Chancellor usually prefers to be seen as the friend of “grannies”, handing them free television licences and proffering pension credits. The OECD, however, in the scathing report on the UK economy it published this week, was critical of the credits.
It pointed out that under the system that Gordon Brown has devised, the number of pensioners subject to means testing will grow “substantially” in the future. The OECD realises, as Mr Brown does not appear to, that such means testing is a disincentive to the saving that the country needs to stimulate.
The OECD’s solution is for a higher basic state pension, lifting “one of the lowest state pensions in the OECD”, and severe limits on means testing. This is in line with what most pensions experts advocate, and most politicians. The Lib Dems’ pensions spokesman, Lord Oakeshott of Seagrove Bay, described the report as “a devastating critique of the present Government means testing regime and an important addition to the important consensus that is growing up on the issue of pensions”.
When Lord Turner produces his Pensions Commission final report at the end of next month, it is likely to follow a similar line, advocating a later retirement date to help to pay for the increased state pension.
The Government might find it difficult to ignore the mounting body of opinion that says that the Chancellor is wrong.
Hilton gamble
DAVID MICHELS, boss of Hilton Group, has long dreamed of reuniting Hilton hotels worldwide, but hoped to be the man to run it. Chris Bell, who runs Hilton’s Ladbrokes betting business, may be the real winner from the deal to unscramble Hilton. Ladbrokes was the foundation of Hilton Group, but became hidden behind a hotel facade. It was also getting left behind because it could not take part in the wave of consolidation sweeping the more traditional parts of the betting sector. Just how stultifying this semi-conglomerate status can be is exemplified by Rank, whose casino and bingo interests are Mr Bell’s favoured target if Ladbrokes regains its independence.
Rank has continued to suffer from the divided concentration of a group made up of three unrelated businesses, even as it has faded into corporate insignificance. Rank is trying to sell its film services division, but single-mindedness may have come too late for both companies. Private equity houses are stalking Rank and already inquiring about Ladbrokes. Gambling has almost the perfect profile for a levered private equity structure.
Going for broker
THE exodus of clients from Cazenove continues, with Marks & Spencer and BAA the latest. That unfortunate episode in which JPMorgan supported the Glazers’ takeover of the Cazenove client Manchester United stoked suspicions about the broker’s coupling with the American bank. Yet there remain very few in the City who can read the market as well as the Cazenove chairman, David Mayhew. When eventually he decides to bow out of the firm, there will be a renewed clamour for his services as a board member, rather than a broker.
