Brown told to slow spending

GORDON Brown is not one of the world's great listeners when it comes to outside advice on how to run the economy. Having outsmarted the forecasters many times and delivered nearly seven years of uninterrupted growth, he may feel he is entitled to think he knows best.

But he would do well to heed the advice of the Organisation for Economic Co-operation and Development (OECD).

It recognises that Brown will come close to delivering on his growth promises with output rising by 2.75% this year and 3% in 2005. But it fears the wheels may come off the track without some changes of direction.

The brakes need to be put on housing and consumption, the main drivers of the British economy. But that mainly is a job for the Bank of England.

As Mervyn King, governor of the Bank of England, indicated in his groundbreaking Villa Park speech, homeowners may not have to wait very long for more costly mortgages.

Certainly, the foreign exchanges heard the message from the Bank and OECD loud and clear and the pound surged to $1.82, more than three cents up on the day.

The main interest in what the OECD has to say is in public services. It believes that the government's spending splurge is starting to deliver better education and health, but the speed at which the money is being splashed out is forcing up wages and the cost of contracts.

It advises a pause in the 7.25% annual spending increases on health and the 5.75% rise in education spending. We will know more about the Chancellor's plans on this front in the June spending review - if he is still at the Treasury.

On the public finances overall, the OECD has clear concerns.

Maybe, as Brown claimed in the Pre-Budget Report, it will be possible to limp through to the end of the present economic cycle without breaking his own fiscal rules.

But the OECD says that a sizable part of the £37bn budget deficit forecast for the current and future fiscal years is 'structural' - which means it will not be wiped out by faster growth.

In fact, the Budget deficit is projected as getting worse rather than better in 2005 when it will be more than 3% of total output.

The OECD calls on Brown to begin adjusting now by slowing or cutting spending and/or raising taxes.

The more cost saving that takes place, the less interest rates will have to rise and the less blood on the carpet later on. All very well except that Labour has the small matter of an election to get through by 2006 at the latest.

Black watch
DEPENDING on which side of the Atlantic you are sitting, the race for control of Hollinger International's large stable of newspapers, including the Telegraph titles, is all over or just beginning.

Sir David Barclay felt confident enough about the outcome to speculate in the Guardian on how he intends to run his newly-acquired titles - including the possibility of going tabloid.

But in a rapid retraction he quickly let it be known through advisers that the papers would not, after all, be supporting Labour. 'We will not change the editorial position of the Telegraph,' he said.

In the US, far from speculating on the future political direction of the Telegraph titles, it is thought that the Barclay brothers could yet be left at the starting post.

The New York Times, which has been leading the Black watch, notes that when you boil down the complex Black shareholdings in Hollinger International, they represent an economic interest of just 15%. This is something which Lord Black consistently failed to recognise. Indeed, he has been insisting that he is still chairman of Hollinger Int.

The view in the US is that the action taken by the Securities & Exchange Commission last Friday in Chicago passes control of the company's assets to Richard Breeden, the former SEC chairman. He heads the 'special committee' which is seeking to reclaim up to $200m from Black and associates.

This, it is argued, could give Breeden the right to sell assets to pay off debts. When all this is done with, the Barclays will receive their share - if anything is left.

Barr none
ONE family firm willing to ring the changes is AG Barr, founded in 1875 by the present chairman Roger Barr's great grandad. Barr is stepping back from the company which gave the nation fizzy drinks Irn-Bru and Tizer to make room for new chief executive Roger White, brought in from baker RHM.

There will be no Barrs in the next management generation and the family is looking to hired hands to protect and increase the value of its 25% holding. No takeover bids are reported of late, but they could bubble up again.