Victory for financial press

ALMOST any story which appears on the financial pages of our national newspapers could move markets.

Indeed, by disseminating information about companies, shares and the economy, the City pages play a role in the price formation process.

Newspaper articles - whether they are in the Financial Times, the Daily Mail or other publications - have an impact on share prices on a daily basis.

Imagine then that each time a story was written and a share price went down, the firm concerned felt that it could sue the pants off us.

If financial journalists became too afraid to write critical pieces, then readers and investors could soon be deprived of legitimate information.

That is why the decision by Mr Justice Tugendhat to strike down the claim by stockbrokers Collins Stewart for £230.5m of damages is vital to the freedom of the press.

Collins Stewart claimed that an FT article, which made disputed allegations against the broker, led to a sharp fall in its share price. It demanded the paper make up the price difference in a lawsuit that would have cast a cloud over the future viability of the FT and opened a chasm in the accounts of its parent Pearson.

Fortunately Mr Justice Tugendhat saw the case as a 'waste of time'.

FT Editor Andrew Gowers should be applauded for not caving into the pressure from Collins Stewart. As he has noted, it would have been a 'very dark day for journalism' had the action been allowed to proceed.

The FT is not yet out of the woods. It still faces a libel case and Collins Stewart alleges that the overhang of the damage to the firm's reputation done by the original FT article has soared from around £8.5m to £37m. That will now have to be decided at a full trial before a judge and jury.

The job of assessing the final damages - if the jury were to find against the FT - will be in the hands of a judge. That should at least prevent some of the bizarre awards seen in past libel actions.

Budget hole

HOW worried should we be about the public finances? By this stage of the financial year, they should be improving strongly if the Chancellor is to meet his Budget promise of £33bn of net borrowing this year.

But with five months of the financial year gone, the budget deficit has reached £22.8bn, which is where it was at the same stage of last year.

The deficit in September, at £5bn, is way above City forecasts.

Predicting the outcome of the public finances is difficult. It is particularly hard this year because of special factors. Revenues are benefiting over the short term from the buoyancy of the oil price, which on current trends could add £3bn or more to government coffers in 2004-05.

Working in the other direction are the ongoing costs of the Iraq war over which the Treasury has little direct political control.

So far the costs are estimated as at least £7bn, but the conflict is far from over.

What is as interesting are the underlying trends. For borrowing to come down this year it is critical that revenue targets are met.

Best estimates suggest that tax receipts are rising by just over 7%, which is not too far off the estimates in the Budget. If growth in tax receipts were to continue at this pace for the rest of the year, the Treasury can probably scrape through without its numbers being questioned.

But that assumes that the economy continues to grow at a healthy clip. There are questions about this given the rise in oil prices and the recent surveys pointing to a manufacturing and services sector slowdown.

There are now real concerns that Gordon Brown's 'golden rule' which requires borrowing only for investment over the economic cycle, will be breached. Then the Chancellor will have no choice but to raise taxes if fiscal credibility is to be maintained.

But no one should expect Brown to concede this point until after the election.

Citigroup coup

THE overnight departure of Sir Deryck Maughan as international chairman of Citigroup removes from office the most senior British banker on Wall Street.

Maughan is paying the price for Citigroup's regulatory problems in Japan.

But no doubt Citi's byzantine internal politics played a part.

No one should forget that it was Maughan who essentially steered Salomon Brothers out of the bond market scandal it faced in the 1990s and safely into the hands of Citigroup.

Despite the circumstances of his resignation it would be surprising if there were not a queue of banks and companies on both sides of the Atlantic ready to trust his hand on the tiller.