A check on greed

FAT cat hunting is becoming a major City sport. The latest crop of pay rises, sometimes in the face of poor performance, shows why. Add in the massive cost of board pensions and it is easy to see why questions are being asked.

Challenges are coming from bodies not traditionally associated with shopfloor revolt. The Association of British Insurers and the National Association of Pension Funds are not exactly Bob Crow and the rail strikers, or even the Countryside Alliance.

None the less, their Cityside Alliance is blowing some bracing air into sterile boardrooms. For many years, to be challenged by institutional shareholders was to be savaged by a dead sheep.

Even now our money masters are fearlessly showing their anger by abstaining on pay votes, rather than voting against. But this month alone the NAPF is registering its mild-mannered protest at no less than 21 company meetings.

The rising tide of corporate correctness is washing up some oddities. Shell's boss Sir Philip Watts has taken the brunt of criticism in the oil industry. Yet his £1.8m pay last year is barely a third of his BP rival Lord Browne's package.

It is also true that some of the high priests of fund management are frequently paid more - and for worse performance - than the company bosses they criticise. The sight of fat cats being pursued by even fatter ones has its funny side.

But tougher scrutiny is valuable. Disclosure requirements on directors' pensions have highlighted a new area of concern. Thus we learn that on top of Rolls-Royce chief executive Sir John Rose's £1.1m pay package last year, it would cost £5.3m on the open market to fund his annual pension entitlement of £294,000.

This is at a time when Rolls, with a market value £1.4bn, has £3.8bn of UK pension assets and £5.4bn of liabilities.

What sticks in the craw more than anything is payment for failure. Departing Telewest chief Adam Singer has walked off with £1.8m. The shares are down from 563p to 2p.

In contrast, eyebrows have been raised at Luc Vandevelde's earnings at Marks & Spencer. But having transformed morale and profits at the famous retailer, he is worth every penny.

The core problem about directors' pay is that it is set by other directors in an atmosphere that easily degenerates into mutual back scratching. The best remedy is for bad practices to be challenged more forcefully. How refreshing it would be for the NAPF or the ABI to move beyond abstention.

They could tell the next company pleading that it must match bloated US-style pay packets that its bosses should shove off and get a job there. More likely is an explosion-of 'box ticking' that will immerse directors ever deeper in red tape.

Board pay abuses, though short of the greed-crazed excesses of the US, need strong checks. But once these have been tested, we need to get back to the business of creating wealth.

Brown's Budget blow
IT is hardly a good omen for Gordon Brown's sums that last year's borrowing seems already to have ridden £1bn higher within two weeks of his Budget. Public sector net borrowing is now put at £25.2bn for the year and £8.1bn for the March quarter.

That adds to doubts that the £27bn ceiling for this year will be held. Simon Rubinsohn, at fund manager Gerrard, expects £30bn. Much depends on the Chancellor being right to assume a strong bounce in tax revenue.

Sceptics fear sluggish corporation tax and job losses among City high rollers will undermine growth. Current receipts rose just 1.7% last year.

Hopes that interest rates would fall again to kick-start growth took a knock from the Monetary Policy Committee's April minutes. Only two of the nine members voted to cut rates.

Though the MPC saw clear signs of economic weakness, it pointed out that oil prices had fallen $10 a barrel and sterling had dropped 5% since February. Both these should improve the chances of recovery. Members seemed concerned that the pound's fall could also add between 0.5% and 1% to inflation next year.

Money market rates of 3.57% for May signal that dealers think a base rate cut from the present 3.75% probable, but far from certain. Much depends, as the MPC acknowledges, on whether consumer spending picks up again with the Iraq conflict coming to an end. It seems likely that it will, though not regaining last year's frantic pace.

Brown has driven the economy well. But it is tricky to drive with your boot on the spending accelerator and your fingers crossed.