The crowning of King James

NOW that Lord St John and his happy band of 'independent' directors have done their stuff and decided that 30-year-old James Murdoch is the best person anywhere to run the world's most successful satellite television company, BSkyB, we can expect two things to happen.

The first is a publicity blitz - already under way last night - assuring the investment world that the younger Murdoch is the finest young TV executive of his generation and that BSkyB's outside shareholders are more than lucky to secure his services.

The second is that the big battalion shareholders, fresh from tasting blood at the new ITV, will not take the governance issues at BSkyB lying down.

BSkyB sought to address these issues by appointing Lord (Jacob) Rothschild as an independent deputy chairman and giving Allan Leighton, another man for all seasons, the top job on the audit committee.

Those who know and have worked with James Murdoch describe him as a remarkable young man who has put his wayward past behind him and did a fine job turning around Star TV, Murdoch's Asian operation.

He converted a lossmaker into a profitable enterprise. Indeed, of the Murdoch offspring James is seen as the one most likely to take over the whole shooting match once his father Rupert has - as he gracefully put it at News Corp's Adelaide agm - 'been carried out'.

In that sense BSkyB, where Rupert is chairman, is a training pitch on the way to the core of the empire that is now centred in the United States.

But BSkyB, in which outside investors have shown enormous patience through the years of losses and investment, is a valuable plaything. Making the Wayne Rooney of satellite broadcasting chief executive at this point, as Sky moves through the 7m subscribers mark and starts to throw off handsome profits, seems a little risky.

This is even more so when it faces enormous challenges, not least from the European Commission, which dislikes its deal with the Premier League in Britain.

BSkyB promises a strengthened board including Jacob Rothschild as a powerful non- executive deputy chairman to keep the family, with its holding of 35%, in check.

This is an inadequate response. The National Association of Pension Funds should follow through on the threat of its chief executive Christine Farnish and deploy the 'nuclear bomb' by calling an egm.

Then shareholders will have their say on directors who have acted in a supine fashion.

Bold move

GORDON Brown has returned to his office at the Treasury to the sound of cymbals. The latest surveys-show a rude recovery in manufacturing and a boom on the High Street.

After last week's record borrowing figures and the jump in the Nationwide house price index, a rise in base rates on Thursday is now inevitable.

Analysts such as John Butler of HSBC are now bold enough to suggest that a half point rise to 4% is more likely than leaving rates on hold.

Although it may be tempting to deliver a shock to consumers borrowing beyond their means, the Monetary Policy Committee may feel the need to be cautious to protect the industrial recovery.

The output numbers from the purchasing managers survey are strikingly strong, putting manufacturing at its highest level since December 1999 and output at a seven-year high.

After a severe recession in industry there will be concern that a sharp interest rate shock might knock back confidence.

Business could find itself squeezed by the rise in the pound - up 3% against our main trading partners over three months - and by higher borrowing costs.

This would be particularly disappointing at a time when the American economy is in take-off mode, after the lift in third-quarter growth, and the improving picture emerging from Germany - all of which should help exports.

Arguably all a quarter point rate rise this week would do is to restore the situation to what it was in July when the Bank eased because of worries about the global economy.

If it really wants to send a tough message to borrowers and lenders, it needs to go further with a jump back to 4%.

That would be a direct hit on housing, ending the August/ September spike in prices.

By hitting expectations of inflation and a short-term interest rate rise on the head, it might actually flatten medium- and longer-term interest rates, helping companies issuing bonds for expansion.

The MPC has a finely-judged decision to make. My betting is that it will get more bang for its buck by going for a half-point now and then taking a fresh look at conditions in early 2004.