Red tape strangles savings

WHO would be a financial services provider in the current fetid atmosphere for savings in Britain? Not a moment passes without the heavy hand of review and regulation making it more difficult to create, market and account for savings products.

It now emerges that even the best capitalised of the nation's insurers, such as Aviva, may have to delay publication of their next report and accounts because of a failure of clear leadership on accounting issues.

Aviva would like to reflect the new realistic accounting for the liabilities of life companies, but this has been made difficult because of a shift to new international standards.

The private pensions industry has enough to cope with in the passage of the new Pensions Bill and the creation of a fund to protect future retirees caught up in wind-ups.

Despite this, the Department for Work and Pensions has produced a new 229-page piece of research.

This reports on how far pension funds have gone in adopting the recommendations of the Paul Myners review of 2001.

It found that private funds had been slow in implementing Myners' recommendations on issues ranging from transaction costs to performance monitoring and activism.

This is not surprising. Many funds have been struggling simply to keep their heads above water in a climate where weak stock markets, the loss of tax advantages and an ageing population have plunged pensions into a deficit of £60bn for FTSE 100 companies.

Closing the gap has become a circular process since transfers of cash into the pension fund digs a hole in a company's earnings, making its own shares less attractiveto investment managers. On top of all this, the Financial Services Authority will next week issue new guidelines on fairness - very laudable after the mis-selling of pensions and endowments, but yet another layer of red tape.

It can be little wonder that Britain's savings rate has fallen to lamentable levels.

It is possible that a return to higher interest rates may cool the buy-to-let property market and lead people back into pensions and insurance products. But until the regulatory bombardment eases and better tax incentives are provided it is unlikely.

Argos advance

NOT all British shopkeepers are struggling despite recent events at Marks & Spencer. GUS, which owns the catalogue shopping chain Argos, put up a dazzling sales performance in the first quarter of the year with like-forlike sales up 9%.

Argos increasingly is becoming the store of choice on the High Street for electrical goods, challenging market leader Dixons. It is being assisted by its web and telephone shopping services. Less impressive so far are the group's sales returns from Homebase, where the offering is still blurred and there is a great deal of catchup to be done with market leader B&Q.

There was a huge amount of interest at the annual general meeting as to whether Sir Victor Blank, having guided GUS through a period of great change, would jump ship and take over the chair at M&S. But Blank was definitive, arguing that his ' obligations' were with GUS.

The main debate from the floor was as to whether GUS should sell off credit-checking group Experian or its stake in Britain's leading high fashion brand Burberry. No one is going to quarrel with GUS hanging on at a time when both offshoots are doing well. There is no pressure to deliver immediate cash to shareholders who are - in any case - to receive a payout of £200m.

It is only companies under pressure, such as M&S, which find it necessary to resort to property revaluations and sell-offs to support the share price. Clearly, a credit crunch, brought on by higher interest rates, could have an impact on GUS. But none of this looks like denting a share price which has made the group one of the best-performing FTSE stocks over the last four years.

Bank pause

THE Monetary Policy Committee was unanimous in deciding to hold rates at 4.5% in July. But no one should take the pause as a permanent halt. The Bank is clearly still concerned about the lack of spare capacity in the economy.

And although some survey evidence shows a softening of house prices, the latest actual lending figures, from the Council of Mortgage Lending, suggest that demand for home loans is still strong.

The minutes make it clear that base rates will have to rise further if the inflation target of 2% is to be met over a two-year time horizon. There is likely to be sufficient evidence of price dangers in the August inflation report to justify further rate increases.