Water engineering contractor BIWATER has won two overseas contracts together worth Pounds 27m. The larger contract, worth Pounds 20m, is from the Nigerian Federal Miniistry of Agriculture for the completion of the Kagara dam and water treatment plant in Niger State. The earth filled dam will provide irrigation in Kagara town and the surrounding area.

The second major contract is in Cyprus and has been awarded by the Larnaca Sewerage and Drainage Board. The Pounds 7m turnkey project is to provide wastewater treatment facilities and effluent storage reservoirs.

WILTSHIER CONSTRUCTION GROUP has been awarded contracts worth over Pounds 30m. All Wiltshier regions are represented in a list which ranges from a Pounds 1.5m police station to be built for Eurotunnel at Folkestone in Kent to housing projects valued at a total of Pounds 2.5m in the Glasgow area.

Education is represented in the form of a Pounds 1.5m infants school at Herne in Kent, a Pounds 2.1m lecture theatre block for the Metropolitan University of Leeds, and a Pounds 2.6m major education facility in Leeds.

The group's recently established Midlands operation at Dudley is reflected in the award of a Pounds 2.8m contract for a 95-bed hotel in Cardiff for Friendly Hotel.

LAING SOUTH WEST has been awarded a contract by British Airways to build a high-technology centre for the specialist repair and servicing of aircraft electronic components at Llantrisant, mid Glamorgan.

The Pounds 30m development is being undertaken by British Airways in association with the Welsh Development Agency. The avionics facility will comprise three two-storey buildings, car parking, access roads and service yards plus minor buildings.

Providing a total gross floor area of about 12,780 sq metres, the main buildings will house 12 production units for repairing and servicing avionics equipment plus two support units to service the testing equipment.

A highly serviced environment is required to support the extensive computer and sensitive equipment needed in each unit. An important feature is the automated storage and distribution system. Completion of the whole project is scheduled for April 1994.

No-one else has made a success of it yet, but Karin Foseke is prepared to give it a go. The new director of equity products at Liffe, London's derivatives exchange, next week sets about the arduous task of selling equity and index options to British institutions and the investing public.

LTOM, the traded options market under the umbrella of the stock exchange, was a failure. Merged into Liffe and under a new roof for the past year, equity index options have faired slightly better, but the volume on individual stock options has actually dropped. Why does Foseke think she can do better?

The Swedish-born American citizen, who says she acts American or Swedish depending on what mood she is in, acknowledges that is 'a good question' but believes her background should enable her to tackle the problem afresh.

She spent 18 years in the US, including at the Beverley Hills office of Prudential-Bache Securities advising on equity options strategies. She then moved to London, where she and her husband Peter Jorgensen were hired as a team to develop the London end of Swedish exchange OM - she as business development director, he as managing director.

While OM London more or less owed its existence at the start to Swedish turnover tax (abolished at the end of 1991) driving business offshore, many members of the London exchange community were impressed with Foseke's drive. Since leaving OM early last year, she has been at WestPac London as head of distribution within the financial markets group, but says she missed the buzz of an innovative, successful market.

At Liffe, Foseke, whose boss is business development managing director Roger Barton, will have to tread carefully with those members of LTOM who had wanted a managing director representing their interests and reporting directly to the chief executive. There is also unhappiness at how long the appointment took to make.

Meanwhile, the advice from one LTOM old hand, who readily admits past mistakes and welcomes a fresh face, is simple: 'I hope she doesn't listen to us.'

*****

Stephen Unwin, formerly head of banking at Kleinwort Benson and who before that ran Kleinwort's banking operations in the US, has joined Butte Mining as a non-executive director.

Butte has never made a profit since it was floated on the London stock exchange six years ago; it startled the mining industry last May by launching a legal action in the US against 70 defendants, including former directors and advisers, claiming damages of at least Dollars 325m.

Unwin, 52 and now a consultant, says he would not have joined the Butte board 'if I did not believe in the merit of the litigation. It will take a year or two, but I said I would help out at this difficult time for the company.'

He stresses that he was not acting as a consultant to Butte and says that so far he has not discussed whether he would be paid anything as a director.

David Lloyd-Jacob, Butte's chairman, says he has known Unwin for about ten years since they both worked in New York and recently had increasingly been seeking his advice. He says: 'Butte needs to ensure we have the financial resources to fight the US case to the end. With his financial background, Unwin is an ideal addition to the board.'

The BALFOUR BEATTY PROJECTS & ENGINEERING company has been awarded a Pounds 33m contract by the Ministry of Defence for works services management for the entire MoD estate and installations in Gibraltar.

The Royal Navy, Army and Royal Air Force installations form an important operational and logistic base in support of Nato's southern flank.

The contract is a major achievement as Balfour Beatty Projects & Engineering is believed to be the first works services manager appointed for an overseas Ministry of Defence base. Gibraltar has been a British base since 1704.

As works services manager, Balfour Beatty Projects & Engineering will be responsible for managing the annual maintenance and minor new works budget of about Pounds 10m per annum.

The works services manager contract is initially for three years and Balfour Beatty Projects & Engineering will be responsible for the facilities in Gibraltar from June 1993 after a three month hand-over period.

What should the chief executive of a large quoted company do if he discovers that he has a serious, potentially fatal illness? How much of the problem should he make public, and when?

This was the awful question which confronted Michael Walsh, chairman of US conglomerate Tenneco, on Tuesday last week when doctors told him he had a brain tumour.

Walsh's response conformed with the face-the-facts regime he has imposed on the formerly flabby Tenneco since he took over as chief executive a year ago - complete and immediate disclosure.

He held telephone conference calls with securities analysts and the press early the following morning, in which he explained the nature of the problem, the treatment intended, and the median survival rate for patients in his condition (five to six years).

He declared that he had virtually no symptoms, apart from a slight limp, and that the tumour would have no effect on his ability to carry out his job. A letter from his doctor supported this judgment.

Why then, did he announce the news so quickly? Walsh said that if he had failed to act, rumour and speculation would have developed over his health, and this could have been damaging to investors in the company.

'Little deceptions become big deceptions.' he added. 'Pretty soon all your energies are going into managing the problem, not the business.'

Numerous US lawyers and management consultants suggest that Walsh acted in an exemplary fashion - that full, frank and immediate disclosure of serious medical problems is in the best interests of a publicly quoted company and its shareholders.

Indeed, US securities law obliges publicly quoted companies to disclosure facts when these are 'material' to its business.

But as Keith Kearney, of New York lawyers Davis, Polk & Wardwell points out, this gives companies a fair degree of latitude in what they report on matters medical.

Privately-owned US companies are under no legal obligation to report health problems. Coincidentally, this was underscored last week when TLC Beatrice, a foods group, only disclosed that its chairman, Reginald Lewis, had brain cancer the day before he died.

Publicly tracking the course of a disease can be much more of a grey area than initial disclosure of the problem, pitting respect for an individual's privacy and suffering against shareholders' right to know.

Time Warner faced this when Steven Ross, chairman and creator of the giant media group, was found to have prostate cancer. The company revealed the problem in November 1991 but insisted for months that Ross remained in control of the business, while working from home. It announced last June that he had taken temporary leave of absence for further treatment. Ross died in December.

Walsh has waived all confidentiality about his medical condition with Tenneco's board, which will be kept fully informed by his doctors and will then have to decide what, if anything, to make public. Admirers of Walsh are hoping that no news will be good news.

LIKE the gardeners who use its innovative lawnmowers, trimmers and other machines for preening their gardens, Flymo has always prided itself on being able to follow a fairly straight line. Yet in the past few years it must have performed more gyrations than almost any other company which geared up well ahead of this month's dismantling of European trade barriers. In response to sharp changes in the marketplace, it has had to rethink strategy and tactics several times.

The rethinking done by this successful British company, which employs 450 staff, has been considerable. Since the Financial Times last wrote about its continental European strategy four years ago, it has changed tack on several counts, most recently just two months ago.

Having abandoned hope in the late 1980s that the 'hover' mowers which made its name on its home market would ever sell in mass-market volume on the Continent, it has now revised its view again; thanks to improved product design, hover sales are starting to accelerate in several continental countries, notably France, Denmark and Norway.

On the other hand, the 'wheeled rotary' mower which Flymo launched in 1989 especially to suit continental markets 'has not done well there - we've found it much tougher than we expected', admits Les Evans, the managing director. Only a quarter of its sales have been made on the Continent. But with the addition of a roller it has sold unexpectedly well in the UK, carving out a new segment.

Thanks to the hover boost, Flymo's continental export drive has been transformed from a tentative toe-dipping exercise in 1988 into a rapid forward march. In spite of a slide in prices, the value of its total exports - most of which go to the Continent - has nearly doubled to Pounds 15m, and is pitched to quadruple over the next four years. At the same time total sales have risen by 'only' a half, to Pounds 73m.

It had inadequate influence over how its products were distributed and sold by the various continental sales companies of its parent group, Electrolux. But it has now persuaded most of them to slash overheads and sales prices by cutting out the wholesaling link in their distribution chains. They now sell direct to retailers.

It is on the verge of annexing staff from those sales companies and integrating them into its own organisation, run from Newton Aycliffe in north-east England. This single European organisation will have key managers dispersed across several countries.

That some of these steps have been made necessary, and others possible, is thanks to three factors.

First, the speed with which, against all expectations, a European 'single market' in lawn and garden machinery is being created by several combined forces: the rise of powerful retail chains, some of which are selling across national borders; a flood of cut-price, low-specification, standard imports from Italy and the US; and the impact of the recession on consumers' readiness to buy these machines. Little is now made of the climatic variations and different consumer habits which just four years ago were expected to keep the European market fragmented indefinitely.

This retail-driven convergence of consumer buying patterns has enabled Flymo to cut production and inventory overheads by slashing the number of variants of each product. Instead of seven, it now has just two: for the UK (with a 240 watt voltage, and different plug), and for the rest of Europe.

The second enabling factor behind Flymo's rethink is the financial strength which has brought it through four of the worst years for European garden machinery that anyone can remember, because of the way drought combined with recession. That strength flows from the company's low break-even point and its commitment to product innovation even through hard times; the latter pays off in the form of a stream of successful product launches, and in healthy cash flow.

The third factor - partly the result of the previous one - is the backing that Evans has had from his Swedish parent in his sometimes fraught discussions with Electrolux sales companies across Europe. It has helped him considerably that, 18 months ago, he was promoted to the position of a European 'product line manager' within Electrolux, reporting direct to its president in Stockholm.

Previously, he had a product line manager above him. As part of the move, Evans was given responsibility for the consolidated profitability of all Flymo's sales, including those through staff in continental countries who in other respects reported to local Electrolux managers.

For companies in other industries faced with intense price competition and over-costly distribution arrangements in European markets, Flymo's experience over the past four years is especially instructive, in spite of its unusual position within a large multinational.

In 1988, it was faced with trying to sell through a set of sister companies which were unused to having direct relations with retail chains. Instead, they used wholesalers to distribute to specialist dealers.

In most national markets, the structure of the distribution chain for imported machines was also so complicated, and the mark-ups for each link (sales company, wholesaler and retailer) so generous, that selling prices had to be pitched up to twice as high as those in Britain. They were far higher than for local manufacturers.

In extreme cases, Electrolux sales companies were trying to make a margin of 40 per cent, wholesalers 20 per cent and retailers 40 per cent. The resulting consumer price in Scandinavia was more than four times the factory cost, against less than 2 1/2 times in Britain.

'This created a vicious circle,' says Phil McGrath, Flymo's sales director. 'It drove sales down to the extent that we were literally going backwards. With the French and German markets shifting quickly from feature-driven brands to own-label low-specification imports through hypermarkets and other retail chains, it was very serious.'

But this situation also gave Flymo a perfect opportunity to confront the sales companies. It began to attack the problem by showing them a spreadsheet with the UK manufactured costs and all the mark-ups, plus the consolidated result which Flymo wanted to achieve. It explained that this could be done only if the sales companies cut out the wholesale link, and added mass distribution to their network of specialist dealers.

A further weapon which it was able to wield over the sales companies was the growth of cross-border retailing, which has been rapid over the past couple of years on the Continent. Evans and McGrath told the Danish, Norwegian and Swedish sales companies that they would have to sell at a common price, as would those in Benelux, Germany, Austria and Switzerland. 'We said 'if you don't co-operate, the retailer will buy from your sister company across the border',' says Evans. With product specifications no longer varying between countries, 'that was a hell of an incentive'.

In the short term, from 1990, Flymo used its financial muscle to subsidise local losses while the sales companies cut prices and broke into the mass market. Some of the national Electrolux sales companies were also ready to help foot the bill for a time. 'We had to support some markets more than others, but we saw it as a brand investment,' says Evans.

In the medium-term, the obvious answer was to cut overheads to the bone by redesigning the entire structure of Flymo's sales, internal administration, warehousing and distribution so as to remove duplication of activities between head office and the sales companies.

There will be a single warehouse - probably at UK headquarters - provided delivery across Europe in three days can be guaranteed.

A project team began work on the details last November, just after Evans and McGrath - in another rethink - had decided to move straight to a pan-European structure, rather than via an interim one with four regions. From this autumn in France, local sales staff will be transferred to Flymo, plugging directly into its UK computer network and all its other systems. Shipping, but not invoicing, is already being done direct from Newton Aycliffe. In late 1994, the same structure will be extended to other continental markets.

From then on, Flymo will really be operating as a single market company.

AFTER A week of worryingly bleak indicators on the UK economy, today's M4 lending figures and Confederation of British Industry manufacturing trends survey will be scrutinised all the more carefully for signs that consumer and business activity is stirring.

M0, mainly notes and coins in circulation, has shown a strong rise for two consecutive months, but M4 bank lending - bank and building society lending - fell by Pounds 600m in November. Most economists are forecasting only a moderate rise in December.

'It seems that underlying demand from both the personal and corporate sectors remains hesitant, though we expect some pick up in response to the lower interest rates over the next six months,' said Ms Ruth Lea, chief economist at Mitsubishi Bank in London.

The CBI survey will give an indication of business sentiment, activity and pricing intentions. Many economists are expecting a more optimistic survey than the last quarterly analysis which was carried out before most of the latest base rate cuts.

This week also sees the last of the current series of UK trade figures. After Thursday there will be no more data for intra-EC trade until June while a new system, in line with the single market, is introduced.

The black-out will be imposed on a sad state of affairs. The visible trade deficit in November was a worse-than-expected Pounds 1.4bn, with the value of imports up by more than the increase in exports. That took the cumulative trade deficit for the first 11 months of last year to Pounds 12bn.

Here are some of the week's other economic highlights. The figures in brackets, from MMS International, are the median of economists' forecasts.

Today: UK, Confederation of British Industry quarterly industrial trends survey, December M4 (up 0.4 per cent on month, up 4.3 per cent on year), December M4 lending (Pounds 1.8bn), major British banking groups' monthly statement, December building societies net new commitments (Pounds 2bn); Italy, January CPI, cities (up 5 per cent on year); US, December existing home sales, fourth quarter housing vacancies, auto sales January 11-20.

Tomorrow: France, December trade balance (FFr1.1bn surplus); US, January consumer confidence (78 per cent), fourth quarter employment cost index (up 0.8 per cent on quarter), Johnson Red Book, December Treasury Budget (-Dollars 32bn); Japan, November coincident indicator.

Wednesday: Japan, December industrial production (down 0.2 per cent), December retail sales (down 5 per cent on year); US, Alan Greenspan testifies before the Joint Economic Committee in Washington regarding policy and economic outlook; Canada, December industrial production price index (up 0.4 per cent on month), raw materials price index (down 0.3 per cent on month); Germany, the Construction Industry Union, IG Bau, sets wage demand.

Thursday: UK, December current account (Pounds 1.3bn deficit), December visible trade (Pounds 1.5bn deficit), December new vehicle registrations; France, December CPI; US, fourth quarter GDP (up 3 per cent), GDP deflator (up 2.5 per cent), Initial claims week ending January 16 (350,000), state benefits week ending January 9, money supply data for week ending January 18; Australia, fourth quarter CPI (up 0.7 per cent on quarter, up 0.6 per cent on

year).

Friday: France, December unemployment rate; US, December durable goods orders (up 1.2 per cent), December durable shipments, December personal income (up 0.3 per cent), December personal consumption expenditure (up 0.6 per cent), January Chicago NAPM, January Michigan Sentiment index, December export price index, import price index, January agriculture prices, December bank credit; Canada, November real GDP (up 0.2 per cent on month), November employment earnings (up 2.6 per cent on year); Japan, December housing starts (up 8.9 per cent on year), December construction starts.

During the week: Japan, January trade balance, December current account, December trade balance, December foreign bond investment; Germany, regional January cost of living, preliminary cost of living (up 0.9 per cent on month, up 4.2 per cent on year), December M3, December import prices (flat on month, down 2.4 per cent on year); Italy, December official reserves (L53trillion), December trade balance (l8trillion deficit), December hourly wage (up 2.1 per cent), December balance of payments (L3.4trillion surplus), December cumulative PSBR (L161.7trillion), December bank lending (up 11.5 per cent), December M2 (up 6.7 per cent on year); Belgium, January CPI (up 2.3 per cent on year).

RESULTS DUE

A FALL in interim profits is expected when WH Smith, the retail and distribution group, announces figures to the end of November on Wednesday.

Losses in Do It All, its do-it-yourself joint venture with Boots, will drag profits lower, from Pounds 50.1m to around Pounds 45m pre-tax, analysts reckon, including the pension credit Smith enjoys. Investors will also be looking for a report on Christmas trading.

It is the January sales which are critical for MFI Furniture Group, the kitchen and bedroom retailer which floated last summer and which reports for the first time in its new form on Thursday.

Although last year's January sales were strong, brokers think MFI could have beaten the numbers this year.

As for the interim figures, to November 7, brokers are somewhat in the dark without any comparable figures. Estimates are for a fall in operating profits from Pounds 24.2m to around Pounds 18m to Pounds 20m.

Misys, the acquisitive computing services group led by a former Hanson executive, Kevin Lomax, is due to report its interim results on Thursday. Pre-tax profits are expected to increase to around Pounds 6.3m from Pounds 3.59m a year earlier.

The group has made a spectacular comeback since its disastrous 1990-91 financial year when its shares bottomed at 63p. They now stand at 375p.

Unitech, the international electronics group, is still bearing the scars of the slowdown in the Japanese economy.

The company, which ranks as the world's largest manufacturer of power supplies for electronic equipment, is likely on Thursday to report a decline in first half pre-tax profits to Pounds 4.1m from Pounds 7.8m in the comparable period.

UK COMPANIES

TODAY

COMPANY MEETINGS:

Estates & Agency Hldgs., Institute of Directors, 116, Pall Mall, SW, 10.30

Mining & Allied Supplies, Institute of Directors, 116, Pall Mall, SW,

10.30

Ptarmigan Hldgs., Institute of Directors, 116, Pall Mall, SW, 10.30

BOARD MEETINGS:

Finals:

Lookers

Princedale

St. Andrew Tst.

Templeton Emerging Markets

Interims:

GT Japan Inv. Tst.

Hong Kong Inv. Tst.

TOMORROW

COMPANY MEETINGS:

Archer (AJ), Lloyds, 1, Lime Street, EC, 10.30

Drayton Recovery Tst., 11, Devonshire Square, EC, 11.45

Hanson, Barbican Hall, Barbican Centre, EC, 11.00

Whessoe, Armourers Hall, 81, Coleman Street, EC, 12.00

BOARD MEETINGS:

Finals:

Domino Printing Sciences

Heritage

Shandwick

Interims:

Budgens

Cantors

Dale Electric

Lister

Murray Smaller Markets

Reject Shop

Wood (John D)

WEDNESDAY JANUARY 27

COMPANY MEETINGS:

Lynx Hldgs., Grosvenor House Hotel, Sheffield, 11.00

Tate & Lyle, Barbican Hall, Barbican Centre, EC, 11.30

BOARD MEETINGS:

Finals:

Allied Textile

City & Commercial Inv.

Securiguard

Interims:

Davies (DY)

Dyson (J& J)

Richmond Oil & Gas

Smith (WH)

THURSDAY JANUARY 28

COMPANY MEETINGS:

Chemring, Alchem Works, Fratton Trading Estate, Portsmouth, 2.30

Control Securities, Chartered Insurance Institute, 20, Aldermanbury, EC,

9.00

Dundee & London Inv. Tst., Royal Exchange, Dundee, 12.00

Ramus Hldgs., Palace Road, N, 11.00

BOARD MEETINGS:

Finals:

Cardiff Property

Derby Trust

Partridge Fine Arts

Stakis

Warner Estate

Witan Inv.

Interims:

Farepak

Independent Inv.

Kleinwort High Inc. Tst.

Korea Asia Fund

MFI Furniture

Misys

Prism Leisure

Property Trust

Proteus Intl.

Unitech

FRIDAY JANUARY 29

COMPANY MEETINGS:

Cooper (Frederick), Park Hall Hotel, Park Drive, Goldthorn Park, Wolverhampton, 12.00

Quality Care Homes, 18, St. Cuthberts Way, Darlington, 11.00

Tunstall Group, Whitley Lodge, Whitley Bridge, Yorks., 2.00

BOARD MEETINGS:

Final:

Greenfriar Inv.

Interims:

Brandon Hire

Ensor

Etonbrook Properties

Goodhead

McKay Securities

Markheath

Raglan Property Tst.

Wholesale Fittings

Wiggins

Company meetings are annual general meetings unless otherwise stated.

Please note: Reports and Accounts are not normally available until approximately six weeks after the board meeting to approve the preliminary results.

DIVIDEND & INTEREST PAYMENTS

TODAY

BAA 6.25p

Bankers Tst. New York Dollars 0.78

Brit. Airports Fin. Fltg. Rate Gtd. Nts. 1996 Y216,757

Canon Fltg. Rate Nts. 1996 Y10,640

CPC Int. Dollars 0.30

Debenhams 7 1/4 % Un Ln '02/07 Pounds 3.625

Do. 7 3/4 % Un Ln '02/07 Pounds 3.875

FKI 1.2p

Forte 10 3/4 % Bd. 1996 Pounds 107.50

General Electric Dollars 0.63

Harris (Philip) 2.2p

Hazlewood Foods 2.3p

Hydro-Quebec Fltg. Rate Nts. July 2002 Dollars 244.09

Itochu Fltg. Rate Nts. 1997 Y106,403

Lewis (John) 10 3/8 % Bd. 1998 Pounds 743.54

Do. 10 1/2 % Bd. 2014 Pounds 1050.0

Morgan Guaranty Tst. New York 12 3/8 % Dep. Nts. 1994 Pounds 123.75

Parkland Textile 1p

Do. A N/Vtg. 1p

TGI 0.5p

Treasury 12% 1995 Pounds 6.00

Treasury 13 3/4 % '00/03 Pounds 6.875

UK 8 1/4 % Treas. Nts. Jan. 1995 Ecu82.50

Whitecroft 4.1% Cm Pf 2.05p

Wolverhampton & Dudley Brews 7.1p

Woolwich Bldg. Scty. Fltg. Rate Nts. 1995 Pounds 150.0

TOMORROW

Bristol & West Bldg. Scty. Fltg. Rate Nts. 1996 Pounds 207.95

Do. Fltg. Rate Nts. 1996 (1982 Iss.) Pounds 204.16

Co-operative Bank Sb. Fltg. Rate Nts. 2000 Pounds 102.40

Molex Dollars 0.0075

Do. Class A Dollars 0.0075

Sears 12 1/2 % Bd. 1996 Pounds 125.0

Treasury 2 1/2 % IL 2016 Pounds 2.1333

Treasury 7 3/4 % Ln '12/15 Pounds 3.875

York Waterworks 3.05p

Do. A 3.05p

WEDNESDAY JANUARY 27

Asprey 1.1p

Bank of Montreal Fltg. Rate Db. Ser. 10 1998 Dollars 191.03

Bank of Nova Scotia CDollars 0.28

Cosalt 6.5p

Fine Art Devs. 3p

Gold Fields of SA Cv Rd Pf R1.45

Mitsubishi Fin. 7 1/2 % Sb. Nts. 2002 Dollars 375,000

Osborne & Little 2p

THURSDAY JANUARY 28

Commonwealth Bank of Australia 13 1/2 % Ln. 2010 Pounds 6.75

Bradford & Bingley Bldg. Scty. Fltg. Rate Nts. Jan. 1995 Pounds 198.49

Can. Imperial Bank of Commerce CDollars 0.33

Canadian Pacific CDollars 0.08

Do. 4% Gross N/Cm. Pf. (CDollars ) CDollars 0.02

Do. (Pounds ) 0.666667p

Do. (Interchng/Transferable) 0.666667p

Courtaulds 3.8p

Drayton Recovery Tst. 3.95p

Dundee & London Inv Tst 8.2p

Honda Motor 5.9% Bd. 1997 Y439,222

Do. 6% Bd. 1999Y446,667

Tesco 10 3/8 % Bd. 2002 Pounds 103.75

Treasury 8 1/2 % Ln. 2000 Pounds 4.25

Treasury 9% Ln 1992/96 Pounds 4.50

FRIDAY JANUARY 29

Abbey Natl. Sterling Cap. 10 3/8 % Sb. Gtd. Bd. 2002 Pounds 913.58

ABI Leisure 2.19p

Abtrust Pf Inc Inv 2.90625p

Acorn Inv. Trust 1.5p

Airsprung Furniture 3.15p

Allen 1.65p

Allied Irish Banks Sb. Prim. Cap. Perp. Dollars 104.27

Auto Funding Class A Fltg. Rate Nts. 1996 Pounds 206.31

Bank of Nova Scotia Fltg. Rate Db. 2000 Pounds 194.15

Blenheim 6.3p

BOC 7% Gtd. Bd. 1997 Dollars 350.0

Borthwicks 0.5p

Bridport-Gundry 2.6p

Bristol & West Bldg. Scty. Fltg. Rate Nts. 1993 Pounds 221.86

Can. Imperial Bank of Commerce Fltg. Rate Db. 2084 Dollars 196.98

Carr's Milling 2.9p

Chase Manhattan O'seas Banking Fltg. Rate Nts. 1993 Dollars 26.54

Cheam A 4p

Do. B 4p

Chemical Banking Fltg. Rate Senior Nts. 1999 Dollars 42.29

Chemring 21.72p

Citicorp Banking Gtd. Fltg. Rate Sb. Cap. Nts. Oct. 1996 Dollars 132.71

Do. Gtd. Fltg. rate Sb. Cap. Nts. Jan. 1997 Dollars 132.71

Cranswick 2.4p

Daiwa Int. Fin. (Cayman) Sb. Fltg. Rate Nts. 2001 Dollars 976.35

Dartmoor Inv. Tst. 2.5p

Dow Chemical Dollars 0.65

Estates & Agency 0.5p

Fenner 2.5p

Gartmore Euro. Inv. Tst. 1.1p

Gen. Motors Acceptance Corp. of Can. Fltg. Rate Nts. Nov. 1996 CDollars 564.11

Govett American Endeavour Fd. Dollars 0.0552

Graig Shipping 1p

Guaranteed Export Fin. Gtd. Fltg. Rate Nts. 1995 Pounds 506.81

Halifax Bldg. Scty. Fltg. Rate Ln. Nts. 1996 Pounds 28.13

Ivory & Sime 1.75p

Leigh Interests 2.46p

Macallan-Glenlivet 3.5p

Melville Street Invs. 1.5p

MEPC 14.75p

Mexico Fd. Dollars 2.55

Mezzanine Cap. & Inc. Tst. 2001 1.5p

Moorgate Smaller Co's Inv. Tst. 1.8p

Morland 5.98p

Murray Inc. Tst. 2.25p

Natl. Australia Bank Fltg. Rate Nts. 1997 Dollars 195.90

Nationwide Bldg. Scty. Fltg. Rate Nts. 1996 (Ser. 2) Pounds 28.13

Next 6 3/4 % Cv. Bd. 2002 Pounds 36.38

NHL (1) Sec. Dfd. Int. Mtg. Bckd. Fltg. Rate Nts. 2028 Pounds 393.63

NMC 0.5p

Northern Investors 2p

PHH Corp. Dollars 0.30

Ralston Inv. Tst. 1.1p

River Plate & Gen Inv 5.9p

Royal Bank of Can. Fltg. Rate Db. 2005

Dollars 28.70

Secured Loan Fin. No. 1 Class A Mtbg. Bckd. Fltg. Rate Nts. 2018 Pounds 164.93

Do. Mezzanine Mtg. Bckd. Fltg. Rate Nts. 2018 Pounds 227.50

Shires Inv. 4.2p

Throgmorton Tst. 7 1/4 % Cm. 1st. Pf. 2.5375p

TMC PIMBS Fouth Fin. Iss. 5 2029 Pounds 148.64

Tor Inv. Tst. 10p

Transamerica Dollars 0.50

USF & G Dollars 0.05

Whessoe 5.8p

Wolseley 9.45p

Do. 10% Db. 1990/95 Pounds 5.0

SATURDAY JANUARY 30

Henderson Highland Tst. 1.4p

Nationwide Bldg. Scty. 3 7/8 % IL Ln. 2021 Pounds 2.8137

Tiphook 4.9p

SUNDAY JANUARY 31

Aegis 55% Cv. Rd. Pf. 2.75p

Airflow Streamlines 10% Cm. Pf. 5p

Beattie (J) 6% Cm Pf 2.1p

Bentalls 5 1/2 % Cm. Pf. 1.925p

Britannia Bldg. Scty. 13% Perm. Int. Bearing Shs. Pounds 65.18

Brit. Dredging 8% Un Ln 1993/98 Pounds 4.0

Brit. Petroleum 8% Cm 1st Pf 2.8p

Do. 9% Cm. 2nd Pf. 3.15p

Chemical Banking Dollars 0.30

Dixons Cv. Rd. Pf. 2.5p

English & Scottish Investors 11% Db. 2014 0.5p

First Nat. Fin. Corp. 6.3% Cv. Rd. Pf. 3.15p

Guildhall Prop. 6 7/8 % 1st. Mtg. Db. 1990/95 Pounds 3.4375

Hanson 9 1/2 % Cv Sb Bd '06 Pounds 47.50

Haslemere Ests 10 1/2 % 1st. Mtg. Db. 2016 Pounds 5.25

Hse of Fraser 6% Un Ln '93/98 Pounds 3.0

Do. 8 1/4 % Un Ln 1993/98 Pounds 4.125

Iceland (Rep. of) 14 1/2 % Ln. 2016 Pounds 7.25

Land Sec. 10% 1st. Mtg. Db. 2030 Pounds 5.0

Leeds & Holbeck Bldg. Scty. 13 3/8 % Perm. Int. Bearing Shs. Pounds 67.06

Lewis (J) Props. 9 1/4 % Mtg Db 1992/97 Pounds 4.625

Liberty 6% Cm. Pf. 2.1p

Do. 9.5% Cm. Pf. 4.75p

Lowe's Dollars 0.08

Lynton 10.25% 1st. Mtg. Db. 2017 Pounds 5.125

Malaysia 10 3/4 % Ln '09 Pounds 5.375

Marley 6 1/2 % Cm. Pf. 2.275p

McKechnie 6% Cm. Pf. 2.1p

Murray Ventures 11.1% Db. 1991/96 Pounds 5.55

Pressac 10.5% Cm Pf 5.25p

Prestwick 7 1/4 % Cv Rd Pf 3.625p

Rank Org. Cv Cm Rd Pf 4.125p

SCE Corp. Dollars 0.70

Seton Healthcare 1.7p

Skipton Bldg. Scty. 12 7/8 % Perm. Int. Bearing Shs. Pounds 64.55

Smith & Nephew 5 1/2 % Cm Pf 1.925p

Smith New Court Cv Rd Pf 3.25p

Smiths Inds. 11 1/4 % Db. 1995/2000 Pounds 5.625

S & U 31.5% Pf. 1.96875p

Tesco 4% Un. Deep Discount Ln. 2006

Pounds 2.0

Toronto-Dominion Bank CDollars 0.19

Transport Dev 12 1/2 % Un Ln 2008 Pounds 6.25

TR High Inc. Tst. 1.4p

Wace 8% Cv. Pf. 4p

Whitbread 11 5/8 % Db 2011 Pounds 5.8125

PARLIAMENTARY DIARY

TODAY

Commons: Questions to National Heritage Secretary and Chancellor of the Duchy of Lancaster. National Lottery Bill, second reading.

Lords: Agriculture Bill, Report. Bankruptcy (Scotland) Bill, third reading.

Committee: Public accounts - social security appropriation account 1991-92, 4.30pm. Witness: Sir Michael Partridge, permanent secretary, social security department, and Mr Michael Bichard, chief executive, Benefits Agency.

TOMORROW

Commons: Health questions. Questions to the Prime Minister (taken by Leader of the House Tony Newton). Debate opened by the Opposition on 'the crisis in the health service'. Financial Assistance to SCA Aylesford, motion. Food Protection (Emergency Prohibitions) (Oil and Chemical Pollution of Fish) Order.

Lords: Asylum and Immigration Appeals Bill, second reading. Parliamentary Constituencies (Wales) (Miscellaneous Changes) Order. Debate on aid to Malawi.

Committee: Social security - the operation of pension funds, 10.30am. Witness: Mr Basil Brookes, ex-finance director MMC.

WEDNESDAY

Commons: Environment questions. European Communities (Amendment) Bill, committee.

Lords: Debates on motor transport in city centres, recruitment and training of of those engaged in residential care of children and Europol. Housing (Fitness Standard) (Amendment) Bill, second reading.

Committees: Environment - eco-labelling. 9.15am. Witnesses: department officials.

Transport - future of the railways. 10.15am. Witnesses: Lord Prior of Brampton; Sir Bob Reid, chairman of British Rail. 3.15pm. Witnesses: Castle Cement Ltd; Mr K Irvine, British Bus; Mr J Smith, former BR senior manager; Mr R Horton, ex-chairman of BP now on board of BR.

Defence - UK peacekeeping and intervention forces, 10.50am. Witnesses: Ministry of defence officials.

Foreign affairs - role of the United Nations, 11.00am. Witness: British Red Cross.

Employment - management of large-scale redundancies, 4.15pm. Witness: Sir Peter Walters, chairman, Blue Circle industries.

Health - community care, 4.15pm. Witnesses: representatives of regional health authority/social services inspectorate monitoring teams and the community care support force.

Public accounts - property services agency appropriation account 1991-92. 4.15pm. Witness: Sir Geoffrey Chipperfield, chief executive and second permanent secretary, PSA.

Education - local management of schools, 4.30pm. Witness: Mr Eric Forth MP, parliamentary under-secretary for schools.

Treasury and civil service - EC monetary and budgetary matters, 4.30pm. Witness: Sir John Cope MP, paymaster-general.

THURSDAY:

Commons: Agriculture questions. Questions to the Prime Minister (taken by Leader of the House Tony Newton). European Communities (Amendment) Bill, committee.

Lords: Social Security Bill, remaining stages. Insurance Companies (Amendment) Order. Industrial Training Levy orders. British Railways Bill, second reading. Salmon (Definition of Methods of Net Fishing and Constructions of Nets) (Scotland) Regulations.

Committees: Foreign affairs - role of the United Nations, 10.30am. Witness: Mr Douglas Hurd MP, foreign secretary.

National heritage - privacy and media intrusion, 10.30am. Witnesses: the Guild of British Newspaper Editors; Mr Robert Borzello; Mr Tony Hall, director, news and current affairs, BBC.

FRIDAY

Commons: Backbench business - Freedom and Responsibility of the Press Bill.

Lords: Not sitting.

THE south-east of England will lag behind most of the rest of the nation in a slow economic recovery this year, according to National Westminster Bank.

The region is expected to show below-average growth of less than 0.6 per cent, while Wales and the north will grow by up to 1.1 per cent, Mr David Kern, the bank's chief economist, writes in the February issue of its Economic and Financial Outlook.

Growth for the UK as a whole this year will be 0.9 per cent, but unemployment will continue to rise, reaching 3.35m by the end of this year, an increase of 13 per cent over the year. Unemployment in the south-east will grow by 18 per cent by the end of the year. The jobless rate in the south-east in December was 10.1 per cent, and the rate nationally was 10.5 per cent in January.

The bank expects interest rates to fall a further 1 percentage point soon. As a consequence, headline inflation will fall to a low of 1.8 per cent in May. The headline figure was 2.6 per cent this month.

Underlying inflation, which excludes mortgage interest rates, will drop to 3.5 per cent over the next few months from 3.7 per cent this month. But inflation will rise and increase pressure to raise interest rates towards the end of the year. As a result, underlying inflation will be 4.8 per cent next year.

THE GOVERNMENT is considering raising the retirement age for women to 65 and using the cost savings to encourage millions of people to opt out of the state basic pension scheme in favour of their own personal pensions.

The plan is still in the early stages of development and has grown out of the government's review of plans to equalise pension ages for men and women.

Raising women's retirement age to 65, although politically unpopular, will generate Pounds 3bn in savings, while lowering men's retirement age to 60 will cost about the same amount. Equalising at 63 produces no cost savings.

Mr Peter Lilley, social security secretary, is expected to recommend raising the retirement age for women to 65 to match that of men in a white paper to be published in late spring.

The government's own social security advisory committee recommended equalising at 65, but using the cost savings to help the worst-off among the elderly - mostly women with no occupational pension.

But government ministers are said to have reacted unenthusiastically to the proposal and the Treasury has taken the view that any cost savings should be diverted to general revenues.

Ministers are said to be aware of several stumbling blocks that could make opting out of the state basic pension scheme difficult.

They are aware that a big hurdle to any change would be a sharp increase in costs to the Treasury in the early stages of transition. This would see revenues from national insurance contributions fall without any parallel re-duction in pension payment liabilities.

The plan envisages using the Pounds 3bn in cost savings from equalising at 65 to cover the shortfall in national insurance contributions that will result from the opt-out.

The UK operates a 'pay-as- you-go' system in which national insurance contributions pay the pensions of those who have already retired.

If significant numbers of workers were to opt out of the basic scheme, there would not be enough money to pay present pension liabilities. It is possible that in the early years of an opt-out scheme additional tax revenues would have to be committed to meet basic pension costs.

Also, ministers are concerned that if the scheme does not provide for automatic diversion of national insurance contributions to a personal-pension scheme, individuals might be tempted simply to spend the tax break and fail to save for their old age.

The scheme is one of a number of radical measures under study by Mr Michael Portillo, the chief secretary to the Treasury.

It aims to build on the right to opt out of the state earnings related pension scheme (Serps), taken up by about 4.5m people since the right was introduced in 1988.

MANY BUSINESSES risk insolvency because they are not ready to cope with the end of the recession, a study by accountancy firm Grant Thornton says.

The survey of 108 members of the Confederation of British Industry in the north-west found that most expect sales to grow in the next three years and more than half will need extra finance for capital spending or working capital.

But the study, by Mr Amin Amiri, a corporate finance partner at Grant Thornton, shows poor planning, inadequate use of financial and management information, and reluctance to employ proven management techniques or to seek help from professional advisers.

Risks appear greater among medium-size companies turning over less than Pounds 5m. More than 70 per cent will require extra funding in the near future, but some believe they will need less than their expected growth suggests.

The study shows many companies relying on a bank overdraft to fund expansion. Most said they had been able to get extra facilities from their banks in the past.

But the report warns those relying heavily on overdrafts that with working capital tight in all businesses 'an increase in trading may result in insufficient funds and an inevitable collapse of businesses'.

The report says that 54 per cent of companies surveyed do not make use of available information on their own industry and their competitors, 30 per cent do not have a business plan and 46 per cent have made no projections for up to five years ahead.

'Lack of overall and comprehensive information to allow business planning is not limited to smaller businesses and is evident among some large ones,' the report says.

It concludes: 'There seems to be some reluctance to use professional management techniques and professional advisers when dealing with an acquisition or a project requiring funding.'

DISCOUNT food retailers are becoming a significant force in the food market and could double their sales by 1996, according to Verdict, the retail market research company.

In a report published today, Verdict says discounters have doubled their annual sales in 10 years, to Pounds 4bn last year. Their numbers are increasing, leading to intensified competition in the sector.

Two years ago there were only three discount chains trading in the UK - Kwik Save, Lo-Cost, part of the Argyll group, and Normans, part of the Merchant Retail Group. These have been supplemented by two discount retailers from Germany - Aldi and Netto.

Existing supermarket chains have introduced discount formats to revive the fortunes of old or underperforming stores. These include Food Giant and Solo (both operated by Gateway), Pioneer (the Co-op) and Dales (Asda). Isle of Man-based Shoprite has opened 33 discount stores in Scotland and plans 22 more this year.

A comparative survey by Verdict found that Netto offered the cheapest prices for a basket of 40 basic items. Its total was 16 per cent lower than the average of the lowest available prices for a similar basket at Sainsbury, Tesco, Asda and Safeway stores, and 10 per cent lower than the average among the 10 discounters surveyed. Next cheapest were Kwik Save, 14 per cent cheaper than the superstores' average, and Aldi, 12 per cent cheaper.

Sales of goods at petrol forecourt shops increased by 10 per cent to almost Pounds 1.7bn last year, research group Corporate Intelligence says in a report today.

Although cigarettes, confectionery and ice cream remained the leading items, sales of grocery goods were growing. The report predicted sustained growth in forecourt shop sales at well above the rate for other retailing outlets.

Verdict on Food Discounters. Verdict Research, 112 High Holborn, London WC1V 6JS. Pounds 525.

LAMBETH council's ruling Labour group has failed to agree the form of an inquiry into its chief executive's allegations of 'unprecedented' fraud, in spite of meetings lasting into the early hours of Saturday morning.

Mr Steve Whaley, Labour leader on the south London borough, said yesterday that reports that Mr Andrew Arden QC, a leading housing-law practitioner, would carry out the inquiry were 'premature' and that a decision would not be taken until further meetings in 10 days' time.

One Labour councillor reported 'strong disagreement' over the nature of the inquiry while opposition councillors said they were not consulted about either the remit of the investigation or the choice of investigator.

The Labour leadership, dismayed at the resurrection of its 'loony left' local government image, is anxious for a swift response to allegations in the report by Mr Herman Ouseley, the chief executive, that over the last 10 years payments of more than Pounds 10m were not properly authorised, with contracts and redundancy payments awarded illegally and many cases of over-charging.

It could be several weeks before any inquiry starts and Lambeth's Labour group has agreed it should have until June to report.

Mr Michael English, secretary of the Labour group, said any inquiry should be 'as wide-ranging as possible'. As well as a QC he wants it to include an accountant, a civil engineer and possibly a trade unionist.

Mr Arden conducted Hackney council's inquiry into claims of a freemasons' corruption racket in the late 1980s.

Mr Keith Fitchett, deputy leader of Lambeth's Liberal Democrats, said that further inquiry into the Mr Ouseley's report was 'superfluous'. He added: 'It should now be a matter for the police. One of the major reasons for the current scandal is that recommendations of the last full inquiry into malpractice in the borough, in 1987, were not implemented.'

Friday night's debate on Mr Ouseley's report was acrimonious. The council's housing and direct-services departments tabled responses of more than 100 pages. Opposition councillors claimed that information in the hands of some Labour members had not been made available to them.

Police are already investigating claims made in Mr Ouseley's report.

Observer, Page 13

AFTER 27 years creditors of an insolvent insurance company have been offered their first payment, signalling an end to one of the longest company liquidations.

Liquidators of St Helen's Insurance, which stopped writing new business in 1966, have offered to pay a dividend at the end of next year provided creditors agree to make no further claims against the business.

The company has less than Pounds 30m in assets against liabilities of nearly Pounds 87m, indicating a maximum dividend of 34p in the pound.

Creditors have been warned that they may have to wait until next century for their money if they refuse to accept the offer.

St Helen's represents a microcosm of the calamities which have hit insurers in the past 30 years. The company, founded in 1938, temporarily ceased underwriting in 1965 after receiving claims for more than Pounds 1m following Hurricane Betsy. This caused catastrophic damage to property in the south-east of the US and generated what was then the largest insured loss from a single disaster - more than Dollars 1bn.

A capital restructuring in 1966 failed to remedy the company's difficulties. Since then St Helen's has been hit by a growing number of claims for asbestosis, medical negligence, and product liability.

Shareholders to the company - mainly Lloyd's syndicates and corporate insurers - continued to keep it solvent with new equity until 1984, when liquidators were finally appointed.

New claims notified to the company have continued to grow to more than 1,000 a month currently, including many caused by environmental pollution clean-up costs in the US.

Mr Ian Bond, joint liquidator and a partner at Coopers & Lybrand Bond, said that the alternative for creditors was to wait for payment until all claims came in, which could be another 20 years.

LABOUR WILL this week seek to anticipate a Treasury review of the high-street banks' treatment of their customers by publishing its own damning report on charges, interest-rate margins and commissions.

At the same time Mr Gordon Brown, the shadow chancellor, will charge the government with serving the interests of the banking community before those of the public as a direct consequence of the Tories' many close personal connections with the sector. Labour's report will list several Tory MPs or former MPs who sit on bank boards or act as bank consultants.

Mr Brown is due to meet members of the Bank Action Group, a consumers' lobby, before a conference on banking practice tomorrow at which he will renew Labour's call for a public inquiry into alleged excessive charges and inadequate services. Labour says bank charges have increased by Pounds 1.5bn since 1989 and customer complaints have risen from 1,682 to 10,109 a year over the past five years.

Meanwhile, the Treasury review of banking practices, expected to be unveiled this week by Mr Norman Lamont, the chancellor, may call on the banks to appoint internal ombudsmen to tackle the complaints of small-business customers. The review is expected to confirm that there has been a large increase in business tariffs but is also thought likely largely to exonerate the banks from charges that they have not passed on interest-rate cuts.

POLITICAL infighting in Mr John Major's cabinet over issues ranging from the future of the coal industry to reform of the police has been fuelled by a new row over the health service.

The latest dispute, which has brought to a head long-simmering disagreements over the role of regional health authorities, means there are now more than half-a-dozen unresolved arguments in the highest ranks of the government.

The rows have fuelled an atmosphere of intrigue around the cabinet table, with senior ministers accusing each other of making pre-emptive strikes through press leaks.

Mr Major has publicly characterised the differences as healthy debate. He has also sought to stamp out charges from the rightwing of the Tory party that the debate over subsidies for the coal industry represents a crucial test of his government's free-market credentials.

In the prime minister's view it is question of pragmatism rather than principle - some subsidy for the industry is essential to avoid a renewed Tory rebellion which might overturn the government's 21-seat Commons majority.

Senior Downing Street aides have been seeking to identify the sources of the leaks. Initial suspicion over the coal leak has fallen on Mrs Gillian Shephard, the employment secretary, and Mr Michael Howard, the environment secretary.

The fury of Mr Michael Heseltine, trade and industry secretary, at the persistent attacks on his plans is mirrored by the irritation of Mr Kenneth Clarke, the home secretary, at ministerial briefings against his plans for the police. Several cabinet ministers - including Mr Howard; Mr William Waldegrave, the public-service minister; and Mr David Hunt, the Welsh secretary - have attacked Mr Clarke's proposal to deprive local authorities of their role in police authorities. Mr Douglas Hurd, the foreign secretary and Mr Clarke's predecessor at the Home Office, has written to the prime minister to register his objections.

The latest dispute over the health service - quite separate from the wrangling over implementation of the Tomlinson report on London's hospitals - has pitted Mr Clarke and Mr Waldegrave against Mrs Virginia Bottomley, the health secretary. After an acrimonious meeting of the relevant cabinet committee the two former health ministers have forced Mrs Bottomley to rethink plans to give regional health authorities a significant role in the supervision of NHS trust hospitals.

Mr Hurd has emerged as Mr Waldegrave's sole ally in his attempts to secure firm commitments from cabinet colleagues to reduce Whitehall secrecy as he prepares a white paper on open government. One colleague has described Mr Waldegrave as a 'persistent nuisance' but Mr Major is promising him his personal backing.

In a separate dispute over how the government should respond to the prospect of the jobless total topping 3m, Mr Norman Lamont, the chancellor, is resisting proposals by Mrs Shephard for an expensive package to guarantee work for the long-term unemployed. Other internal battles include that between Mr Malcolm Rikind, the defence secretary, and Mr Ian Lang, the Scottish secretary, over the future of the Rosyth and Devonport naval dockyards.

Mr Major's trip to India will ensure that the disputes simmer at least for the rest of this week, but Downing Street is promising a clutch of decisions early next month.

Senior officials are making the best of the public airing of internal debates by claiming it gives the lie to criticism that the government is not confronting difficult decisions.

PAY CURBS for public-sector employees are guaranteed to provoke a hostile reaction from unions, Ms Rhiannon Chapman, director of the Industrial Society, the independent advisory and training organisation, said yesterday.

She said ministers might have underestimated opposition to the 1.5 per cent wage limit, and warned of the dangers of the government's plan to abolish wages councils, which set minimum rates for low-paid workers.

'It is not obvious how the economy will be helped by licensing poverty-pay cowboys to undercut reputable companies providing a respectable service,' she wrote in the society's newsletter. 'It is possible that ministers calculate that employment legislation has emasculated unions to the point where opposition to these steps is unsustainable. They should think again.'

TWO young British designers have taken legal action against Giorgio Armani, one of the giants of Italian fashion, for allegedly copying their design.

Mr Antoni Burakowski and Ms Alison Roberts - known professionally as Antoni & Alison - claim that a T-shirt in this winter's Armani collection is based very closely on one that they designed in 1989 and displayed in Italy, including Mr Armani's home base of Milan.

The Antoni & Alison T-shirt bears the words 'I feel amazing fantastic incredible brilliant fabulous great', while the Armani shirt says 'I feel outrageous amazing brilliant terrific great' with a similar lay-out.

Mr Mark Stephens, Antoni & Alison's London solicitor, said yesterday that a writ had been issued against Mr Armani personally and against three of his companies. The first pre-trial hearing is due on Thursday.

In their defence, the Armani companies admit that the design printed on their T-shirt was 'inspired' by Antoni & Alison but deny any wrong-doing. They say the original design is 'neither artistic nor original'.

Antoni & Alison would be seeking damages in the region of Pounds 300,000, Mr Stephens said. Armani had already withdrawn its T-shirt from sale in the UK.

Mr Burakowski said the case was ironic because 'Armani himself is a frequent victim of copying and often has to sue people to protect his name'.

SIR GORDON Borrie, the former director-general of fair trading, has become chairman of the Money Advice Trust, which collects donations from banks and building societies to fund debt counselling at institutions such as citizens advice bureaux.

Sir Gordon, who succeeds Sir George Blunden, has been appointed in an effort to raise the level of donations. Although the trust has a target of attracting donations of Pounds 3m a year, it received only about Pounds 235,000 last year, its second full year of operation.

The trust has had difficulty attracting donations from building societies because they have wanted to maintain the repayment of mortgage arrears as the first priority for those in debt.

Sir Gordon said, however, that he believed attitudes among building societies were changing because they were realising the value of independent debt counselling.

The trust, which was established after a call from Sir Gordon in 1987 for the credit industry to contribute to debt counselling, has funded support services for money advisers and is trying to establish a national telephone debt counselling service.

Mr Adam Carnegie-Brown, director of the trust, said it was maintaining its target for private-sector donations in spite of the low level achieved last year. The trust's annual report and accounts will be published soon.

He added that the trust had attracted an additional Pounds 20,000 of benefits in kind and it had been encouraged by the number of new donors. He said it would be wrong to revise the Pounds 3m target downwards because it would send an inappropriate signal.

AFTER 10 weeks of public consultation, two-thirds of responses received to British Nuclear Fuels' controversial Thorp reprocessing plant at Sellafield in Cumbria are opposed to the plan.

There has been strong support for the plant from local councils and unions, however. They are concerned that abandoning the plant and its 1,200 jobs would worsen unemployment in Cumbria.

The public consultation, which ends today, is being conducted by HMIP, the pollution inspectorate. It must assess whether the plant would threaten health or the environment, and it needs to decide within weeks whether to hold a wider public inquiry, which could take months or even years.

The complex questions raised over Thorp, which has agreed contracts worth about Pounds 6bn with overseas customers, mean that its future will also depend on an interdepartmental government debate which has been taking place since November.

BNFL has said there is no health or environmental reason why the plant should not start operating, and there is a sound economic case that it should do so soon. However, environmentalists have repeatedly challenged this.

By Friday night the pollution inspectorate had received 20,000 responses from the public, local authorities and industry in addition to 38,000 written responses in the months before the 10-week period of formal consultation started. Of the 20,000 letters, 13,400 were against the start of the plant and 6,600 in favour. Many of the rest are standard letters organised by environmental groups.

The main support for the plant has come from local councils and unions. Copeland Borough Council, whose region includes Sellafield, has written to the inspectorate saying that authorisation should be granted, but that BNFL should continue to try to reduce radioactive discharges.

Cumbria County Council, which held a special meeting on Friday to agree its submission to the pollution inspectorate, has argued that there are no radiological grounds for holding back from commissioning Thorp.

The Sellafield unions, campaigning under the slogan 'Trust Thorp', expect today to deliver about 14,000 letters from members of the public supporting Thorp to the inspectorate.

MR JOHN MacGregor, transport secretary, yesterday denied that rail privatisation would bring widespread line closures but refused to guarantee that the present network would be preserved indefinitely.

He was responding to speculation that the privatisation plans, published in the Railways Bill on Friday, could lead to the closure of up to 1,000 miles of branch and rural lines.

Mr MacGregor said on BBC1's On The Record that lossmaking services would continue to be subsidised and statutory closure procedures would be just as rigorous under the new regime as they were now. 'I can't give a guarantee for all time because obviously if no one is actually wanting to go on a particular line, then that would be a candidate for closure,' he said.

He also tried to play down fears of big fare increases after privatisation. 'I see no reason why, as a result of our proposals, prices should rise any more than they have been rising recently,' he said.

Mr Charles Kennedy, MP and president of the Liberal Democrats, called on opponents of rail privatisation from all quarters of the Commons to unite against the bill. He said: 'I believe that we should use our collective imagination on this issue to isolate the government diehards and be seen by the public to be getting our act together where relevant in the national interest.'

AFTER 27 YEARS, creditors of an insolvent insurance company have been offered their first payment, signalling an end to one of the longest company liquidations.

Liquidators of St Helen's Insurance, which stopped writing new business in 1966, have offered to pay a dividend at the end of next year provided creditors agree to make no further claims against the business.

The company has less than Pounds 30m in assets against liabilities of nearly Pounds 87m, indicating a maximum dividend of 34p in the pound.

Creditors have been warned that they may have to wait until next century for their money if they refuse to accept the offer.

The misfortunes of St Helen's are typical of the calamities which have hit insurers in the past 30 years. The company, founded in 1938, temporarily ceased underwriting in 1965 after receiving claims for more than Pounds 1m following Hurricane Betsy. This generated what was then the largest insured loss from a single disaster - more than Dollars 1bn.

A capital restructuring in 1966 failed to remedy the company's difficulties. Since then St Helen's has been hit by a growing number of claims for asbestosis, medical negligence, and product liability.

Shareholders in the company - mainly Lloyd's syndicates and corporate insurers - continued to keep it solvent with new equity until 1984, when liquidators were appointed.

MR PADDY Ashdown, the Liberal Democrat leader, yesterday joined prominent members of Labour's front bench in arguing for a fundamental overhaul of the workings of the monarchy.

His remarks will stir fresh debate on the opposition benches at a time when the Labour leadership has been trying to play down the issue for fear of alienating royalist voters.

A straw poll of 100 Labour MPs in The Sunday Telegraph yesterday showed almost a quarter want a republic, 32 per cent a monarchy along Dutch or Scandinavian lines and only 14 per cent back the royal family continuing unchanged.

Meanwhile, Dr John Habgood, the archbishop of York, said the religious make-up of the country had changed so much that the Church of England must debate the privileged position it held with the monarchy.

On the BBC Heart of the Matter programme he said he believed the coronation oath, in which the sovereign pledges to uphold the Church of England, would have to be revised when a new king or queen ascended the throne.

Mr Ashdown said on the BBC's Breakfast With Frost programme he believed it unlikely that Britain would opt for a 'bicycling monarchy' as witnessed elsewhere in northern Europe.

But Mr Ashdown added: 'We could strip away some of the pomp and circumstance of the monarchy, bring it closer to the reality of life in Britain.

'I hazard a guess that that's a view held, for instance, by Prince Charles and perhaps her majesty herself.'

Arguing that Britain looked increasingly out of date and also advocating the case for the disestablishment of the Church of England, he added that the royal family could easily perform its constitutional role by functioning on a more modest scale.

The Liberal Democrat leader's comments add to the difficulties of Mr John Smith, who has intentionally sought to avoid entering into the controversy over the royal family's future.

The Labour leader had been planning to make a speech on constitutional reform early next month, but has now postponed it.

A TOTAL of 34 per cent of central London employers think the ability to speak a foreign language is of 'no importance' in hiring secretaries, a survey by Gordon Yates Group found.

Of 500 employers questioned only 16 per cent believed it was of 'considerable importance' while half said it was of 'limited importance'.

SIGNIFICANT benefits can be achieved by contracting out government computer services to the private sector, a report from the Organisation for Economic Co-operation and Development says.

It adds that savings of 20 per cent to 30 per cent can be made and the quality of service improved.

Complex Contracting Out for Information Technology. OECD. Free.

MR JACK CARR, assistant general secretary of the Manufacturing Science and Finance Union was demoted at the weekend to national officer status. A panel of the union's executive unanimously found him guilty of 'inadequacies in reporting and controlling' the union's spending.

The full executive will be asked to ratify Mr Carr's demotion on February 13. Mr Carr has the right of appeal to the executive.

AN ATTEMPT by Mr Michael Heseltine, the trade and industry secretary, to win parliamentary time for legislation to modernise the regulation and protection of trademarks has been rebuffed by the government's business managers.

A bill to implement the EC trademark directive as well as updating trademark law more generally has been drafted for some time, but Mr Tony Newton, leader of the Commons, and the government whips have made it clear it cannot be introduced in the current session because of the amount of other business.

Supporters of the bill point out that beyond the straightforward merits of legislating, doing so would strengthen the UK's case for having the EC trademarks office in London rather than in one of the other three cities that have applied for it.

THE NUJ journalists union will today seek a High Court injunction to stop the management of the Daily Mirror newspaper from introducing a five-night shift for sub-editors, Raymond Snoddy writes.

Journalists say the change from four to five shifts a week was introduced without proper warning or consultation. Department heads were told on Friday that staff rotas introducing a five-shift week were to start yesterday. Sub-editors, who can work as late as 3am, traditionally work a four-night week. Reporters work a five-day week.

The change will not mean an increase in the number of hours worked. The 34-hour week specified in the union agreement will be spread over five shifts.

Mr Peter Woods, of Stephens Innocent, the NUJ's legal representatives, said it was possible to vary the terms of the agreement but not unilaterally and without consultation.

The Mirror's management said the agreement provided for five-day working and that four-day working had grown up 'almost without the management knowing about it'.

Staff at the Daily Mirror were working normally yesterday but under protest at the new shift pattern.

MR ROBERT Evans, the chairman of British Gas, has warned the prime minister that Britain needs large, viable companies if it is to compete overseas.

A joint venture between British Gas and India's Gas Authority is expected to be agreed this week as part of Mr John Major's tour of India. The contract, to set up and operate a distribution network in Bombay, is worth Pounds 100m. Further projects in India could follow.

Mr Evans, who accompanied Mr Major to India, said such projects depended on financial strength and large-scale research and development.

British Gas is awaiting a report by the Monopolies and Mergers Commission on its possible break-up and Mr Evans said: 'If we were small and fractured like the electrical industry I think that we would find it very difficult. You do require large, viable entities.'

He had a private talk with Mr Major during the flight to India and said afterwards that the prime minister agreed 'that we need strong British companies'.

Downing Street indicated that Mr Major had yet to consider the possible implications of the MMC investigation into the dominant market position of British Gas.

Mr Evans said the government's reaction would be 'to some extent political decisions'. The spliting of British Gas into a transport and storage arm and a trading arm has been proposed by Ofgas, the industry's regulator.

The gas distribution network was a natural monopoly but a break-up could jeopardise further price cuts in addition to those British Gas had made since privatisation. He added: 'If we are to continue that kind of progress we have really got to have access to the cheapest possible gas. We are in a global marketplace and we need global players.'

British Gas had regarded overseas expansion as a priority because it had 'virtually saturated' the UK market. But Mr Evans acknowledged there was resistance in many countries to foreign investors buying into utilities.

The company estimates that spending on gas-related activities in India could be worth up to Pounds 2bn in the next 10 years.

COMPANIES are increasingly unconcerned about whether their secretaries are able to speak a foreign language, a survey shows.

The survey, by Gordon Yates Group, covered 500 employers in central London. It found that 34 per cent thought that linguistic skills are of 'no importance' in hiring secretaries.

Only 16 per cent believed it was of 'considerable importance' while half said it was of 'limited importance'.

The lack of interest shown by London's companies in employing secretaries who are versatile in a foreign language has grown over the past 12 months, according to the survey.

Secretarial Salaries in Central London 1992-93. The Gordon Yates Group, 25 Maddox Street, London WIR OAB. Pounds 12.50

SIGNIFICANT benefits can be achieved by contracting out government computer services to the private sector, a report from the Organisation for Economic Co-operation and Development says.

The Paris-based organisation says countries which have put computer services out to tender can save 20 per cent to 30 per cent of costs, even when the contract is won by the in-house team. Contracting out also improves the quality of service, especially where governments lack the staff with necessary skills.

The report appears as the UK government plans to increase the contracting out of Civil Service work 50-fold, with information technology services accounting for the largest proportion by value.

The OECD says sharing government information technology development with the private sector can stimulate industrial development, especially among small and medium-sized enterprises. This could improve a country's international competitiveness in these applications.

Benefiting from this requires careful preparation, a clear understanding of expectations, a good contract, strong project management and constant monitoring. Unforeseen costs can arise where performance is unsatisfactory or staff are demotivated.

Complex Contracting Out for Information Technology. OECD. Free.

A PLAN to allow millions of people to opt out of the state retirement pension is being examined by senior ministers as part of the government's wholesale review of the welfare state.

The scheme is one of a number of radical measures being studied by Mr Michael Portillo, the chief secretary to the Treasury. It aims to build on the right to opt out of the state earnings-related pension scheme which has been taken up by 4.5m people since 1988.

Ministers are aware that a big hurdle to any change would be a sharp increase in costs to the Treasury in the early stage of a transition. This would see revenues from National Insurance Contributions fall without any parallel reduction in pension payment liabilities.

MR PADDY Ashdown, the Liberal Democrat leader, yesterday joined prominent members of Labour's front bench in arguing for a fundamental overhaul of the workings of the monarchy.

His remarks will stir fresh debate on the opposition benches at a time when the Labour leadership has been trying to play down the issue for fear of alienating royalist voters.

A straw poll of 100 Labour MPs in The Sunday Telegraph yesterday showed almost a quarter want a republic, 32 per cent a monarchy along Dutch or Scandinavian lines and only 14 per cent back the royal family continuing unchanged.

Mr Ashdown said on BBC TV's Breakfast With Frost programme he believed it unlikely that Britain would opt for a 'bicycling monarchy' as witnessed elsewhere in northern Europe.

But Mr Asdown added: 'We could strip away some of the pomp and circumstance of the monarchy, bring it closer to the reality of life in Britain.

'I hazard a guess that that's a view held, for instance, by Prince Charles and perhaps her majesty herself.'

Arguing that Britain looked increasingly out of date and also advocating the case for the disestablishment of the Chruch of England, he added that the royal family could easily perform its constitutional role by functioning on a more modest scale.

The Liberal Democrat leader's comments add to the difficulties of Mr John Smith, who has intentionally sought to avoid entering into the controversy over the royal family's future.

The Labour leader had been planning to make a speech on constitutional reform early next month, but has now postponed it.

Dr John Habgood, the archbishop of York, said the religious make-up of the country has changed so much that the Church of England must now debate the privileged position it holds with the monarchy.

He said on the BBC Heart of the Matter programme he believed the coronation oath, in which the sovereign pledges to uphold the Church of England, would have to be revised when a new king or queen ascended the throne.

MR LES ASPIN, the new US secretary of defence, yesterday said there were signs that Iraq was moving its surface-to-air missiles back into the no-fly zones. The US would need to watch the missiles in the next few days.

Mr Aspin said it was too early to say if President Saddam Hussein had broken his self-declared goodwill ceasefire. 'I think we're going to wait a couple of days to make sure,' he said.

A US Navy jet bombed a radar site in southern Iraq on Saturday. US military officials said they believed the aircraft had been fired on from the ground but confirmed that Iraqi radar had not, as at first believed, locked on to it. Iraq denied firing on the aircraft and said it remained committed to its ceasefire declaration.

A United Nations team of nuclear weapons inspectors is set to fly into Baghdad today on a delayed but routine mission. They are expected to examine damage to the al-Rabiya site, south of Baghdad, which was attacked last week by US cruise missiles.

The mission, the 17th by nuclear weapons inspectors to Iraq since the end of the Gulf war, is led by Mr Maurizio Zifferero.

He said after the US raid that he was 'very keen' to log the damage caused by the attack. The eight-member team will join about 70 UN inspectors who returned to Iraq last week. A team of ballistic missile experts will also fly into Iraq today.

EMPLOYEES at the New York Post voted last night to accept a temporary 20 per cent pay cut that the owner, property developer Mr Peter Kalikow, says is needed to keep the newspaper open.

The cut, to be accompanied by a 25 per cent increase in the newspaper's cover price, was proposed by Mr Kalikow on Friday after Bankers Trust, the Post's banker, said it would no longer provide a Dollars 5m (Pounds 3.2m) revolving line of credit.

If the staff had rejected his proposal, Mr Kalikow had threatened to shut down the 192-year-old Post, the oldest newspaper in the US.

While three of the Post's nine unions had agreed to the month-long pay cut on Saturday, it was not until last night that the remaining six unions agreed. Union leaders representing the paper's 720 employees had advised members to accept the pay cut.

But the drivers' union did not agree to take the pay cut until late in the day, and it was expected last night that publication of the newspaper would be temporarily suspended.

Yesterday's decision ensures that Bankers Trust will provide credit to the Post for 30 more days, giving Mr Kalikow more time to find a buyer, or an investor, to save the paper.

Mr Kalikow says he has been in talks with three unnamed groups of investors. Speculation about their identities yesterday centred on Canadian businessman and newspaper owner Mr Conrad Black, on the New York Daily News, the Post's main tabloid rival, and on Mr Rupert Murdoch, who sold the paper to Mr Kalikow in 1988 for almost Dollars 38m (Pounds 25m).

BRAZIL'S President Itamar Franco has appointed two women to run key ministries, completing his cabinet and confirming the government's centre-left slant.

Ms Yeda Crusius, an economics professor from the university of Rio Grande do Sul, takes over the important Planning Ministry from Mr Paulo Haddad, who was recently named economy minister. Ms Luiza Erundina, the left-wing former mayor of Sao Paulo, Brazil's largest city, is to be administration minister.

Both appointments have met widespread approval. A leading light of the radical Workers' Party (PT), Ms Erundina was widely respected as mayor, as well as for her no-nonsense attitude and honesty - a crucial qualification after the corruption scandal which brought down the last government.

Her acceptance of the ministry has, however, angered the leadership of the PT, which is theoretically in opposition but which now has two members in the government.

Ms Crusius, a member of the Social Democrats, is a friend of Mr Haddad and thus expected to avoid the usual conflicts between the economy and planning ministries.

She joins the economics team amid growing fears over inflation. After more than a year of monthly inflation between 20 and 25 per cent, predictions for this month have been revised to 28 per cent and the president has summoned supermarket owners to explain basic food price rises of 40 per cent.

After accepting the post on Saturday, Ms Crusius said her priorities included development and cutting interest rates. Describing the free market as 'a utopia', she said the state had a role in co-ordinating the market.

Economics Notebook, Page 15

INDIAN Airlines pilots called off a 45-day strike yesterday after the government said it would consider their demands sympathetically, the Press Trust of India (PTI) news agency reported, Reuter reports from New Delhi.

PTI said Civil Aviation Minister Ghulam Nabi Azad assured the pilots their demands would be considered 'within the shortest possible time'. The Indian Commercial Pilots Association said it was satisfied with Mr Azad's assurance and flights would resume tomorrow.

TURKEY and Syria have agreed to find a settlement this year to the long dispute over the allocation of water from the Euphrates river, according to the joint statement issued following last week's meeting in Damascus, writes John Murray Brown from Ankara.

Resolution of this riparian dispute could open the way for vital financial support from hitherto wary international donors for Turkey's Dollars 23bn (Pounds 15.1bn) Gap development project which makes exhaustive use of the Euphrates for irrigation.

THERE are few things as upsetting as seeing your own obituary in the newspapers. Recently life has been a bit like that for Malaysia's nine sultans, or hereditary rulers, who take turns as king.

The royalty is involved in a bruising battle with Dr Mahathir Mohamad, Malaysia's powerful prime minister. Over the weekend one of the country's national newspapers pointedly printed a list of the world's monarchs who had fallen by the proletarian wayside since the war.

The sultans sit in their palaces, bombarded by adverse publicity, sensing that their days of high living could be at an end.

Dr Mahathir wants to limit the sultans' powers. Last week the prime minister introduced a bill to parliament that would do away with constitutional provisions giving the royalty immunity from prosecution.

The move followed an incident in which the sultan of the southern state of Johor is alleged to have abused, then beaten up, a sports official.

But Dr Mahathir has a problem. The constitution stipulates that any action which alters the position of the royalty must be approved by the sultans themselves.

Persuasive techniques have been applied to make the sultans agree to the constitutional changes. Stories of royal high living and various alleged abuses of royal power began to appear in the media. The sultans seemed persuaded.

But then, at the last minute, they turned on Dr Mahathir, unanimously rejecting the constitutional changes.

Since then, the government gloves have come off. The government started by announcing that relatively trivial royal benefits, like special licence plates for their lavish fleets of cars, must go.

Special wards in hospitals reserved for the royalty would be opened to the public. Dr Mahathir would no longer seek a weekly audience with the king. There would be no more state funds for the upkeep of royal yachts, and no more allocations for work on royal homes.

By the end of last week Dr Mahathir had moved forward the big guns. In future, he said, funds would be given to the royalty only in strict accordance with the regulations. In effect, this means the withdrawal of many millions of dollars from the royals' purses.

Each day fuller stories of alleged royal misdemeanours have emerged.

One sultan is said to have been in the habit of opening fire on vehicles careless enough to come close to royal motorcades. Another is said to have sold timber concessions worth millions of dollars pay gambling debts.

There have been tales of manslaughter and, in one case, murder, with allegations made in parliament that a sultan killed his golf caddie.

The sultans are not entirely defenceless against this government directed barrage. Some sultans are extremely wealthy and able to cope with the tighter financial times.

They are still revered by many who see them as symbols of Malay identity. There are also those who also point to what they see as the lavish lifestyle of Malaysia's 'new rajas' - some government ministers themselves.

Dr Mahathir insists he does not want to do away with the monarchy. But there are fears that the prime minister is seeking to add to his powers.

Parliament has passed Dr Mahathir's constitutional amendments. They now go to the king for approval. Dr Mahathir says he is determined to make the amendments law.

But if the rulers continue to withhold their consent then a constitutional crisis will develop.

MR ROBERT REICH, labour secretary in President's Bill Clinton's new cabinet, used to set a test each year for his graduate students at the Kennedy School of Government, Harvard University.

The idea was simple. The students were asked to vote for one of two options for economic growth rates in the US and Japan over the next decade: either the US and Japan both grow at 1 per cent a year, or the US grows at 2 per cent a year and Japan grows at 3 per cent.

The minority group of foreign graduates voted for the latter option. But most of the aspiring American public policy students, and thus the majority of the 250-strong class, preferred the former option - and thus a lower US growth rate - rather than have a faster-growing Japan. The reason, presumably, was that they recognised the link between economic supremacy and political power and thus the implicit threat that Japan poses to the world's largest democracy.

There was an echo of this sentiment in the recent remarks of Mr Michael Boskin, the outgoing chairman of the council of economic advisers. Pouring cold water on unease about the supposed long-term decline of the US economy relative to other countries, he pointed out that the US has a growing share of the industrial output of the developed economies and the highest level of industrial productivity.

Yet the Kennedy School students should not be totally satisfied with these comparisons. Yes, the US still has the largest gross domestic product in the world. Using current exchange rates, which understate US incomes, Japanese GDP is still only 60 per cent of US GDP. But no statistics can disguise the fact that Japan is catching up. Japanese GDP grew at 4.1 per cent a year between 1979 and 1990 compared to 2.3 per cent a year in the US, although France, the UK and west Germany all posted slower growth rates than America.

Mr Boskin is also correct to highlight America's relatively high level of labour productivity, as the chart shows. Value-added output per worker in manufacturing was 14 per cent higher than in Japan in 1990 and 75 per cent higher than in Britain. But, once more, Japan is catching up. Business sector productivity, which also includes energy and private service industries, grew by an average 3 per cent a year in Japan in the 1980s. Germany managed a modest 1.6 per cent a year, but US business sector productivity grew by a mere 0.5 per cent a year.

This recent dismal record of US productivity growth in the business sector, alongside a declining share of investment in GDP, helps explain why the US electorate was in a mood for change at the recent election. It also justifies the remark of Ms Laura Tyson, Mr Boskin's successor at the CEA, that America's recent economic performance posed a potentially devastating threat to US living standards.

Yet the evidence is slightly harder to interpret than Ms Tyson suggests. Average real wages barely grew at all in the 1980s, while the real wages of the low paid fell sharply. But disposable income per head was able to grow at 1.5 per cent a year, over twice as fast as economy-wide productivity. The reason is that the number of US wage earners grew relatively rapidly as a proportion of the total population, by 0.5 per cent a year. The rise in female employment as a percentage of the female population in the 1980s was greater in the US than in Japan or the main European countries. And the percentage of US men with jobs also rose, by 1.6 percentage points, while the ratio of male employment to the population fell elsewhere.

So the growth in US living standards, while slower than in Europe, was spread across a greater proportion of the population. The UK, by contrast, is currently managing to achieve rapid productivity growth, but only because employment is falling even faster than output. President Clinton plans to boost employment and productivity growth during his first administration. But unless he finds a way to increase investment and the skills of the labour force, he will find that these objectives are contradictory.

------------------------------------------------------------------------ INTERNATIONAL ECONOMIC INDICATORS: NATIONAL ACCOUNTS ------------------------------------------------------------------------ Figures for GNP/GDP are in billions of European currency units (Ecu). The first breakdown is in current prices and the second shows growth rates in the constant price series. ------------------------------------------------------------------------ UNITED STATES ------------------------------------------------------------------------ Gross Private Private Govt. Net CURRENT National Cons. Invest. Spend. Exports PRICES Product -------------as a % of GNP------------ ------------------------------------------------------------------------ 1985 5,317.6 65.8 17.6 19.1 -2.9 1986 4,349.2 66.6 16.8 19.5 -3.1 1987 3,937.8 67.2 16.5 19.4 -3.1 1988 4,147.8 67.2 16.2 18.7 -2.2 1989 4,780.6 66.9 15.8 18.5 -1.5 1990 4,349.0 67.6 14.4 18.8 -1.2 1991 4,596.0 68.3 12.7 19.1 -0.4 4th qtr. 1991 4,593.7 68.4 12.8 18.9 -0.3 1st qtr. 1992 4,642.2 68.7 12.3 18.8 -0.1 2nd qtr. 1992 4,646.7 68.7 13.1 18.8 -0.6 3rd qtr. 1992 4,332.3 68.6 13.0 18.8 -0.6 ------------------------------------------------------------------------ ------------------% growth in ------------------- CONSTANT PRICES GNP Cons. Invest. Govt. Exports ------------------------------------------------------------------------ 1985 2.9 4.4 -1.5 6.1 1.2 1986 2.8 3.6 -1.5 5.2 6.6 1987 3.0 2.8 1.9 3.0 10.5 1988 4.0 3.6 3.2 0.6 15.8 1989 2.7 1.9 1.4 2.0 11.9 1990 0.9 1.2 -5.7 2.8 8.1 1991 -1.2 -0.6 -10.6 1.2 5.8 4th qtr. 1991 -0.3 0.0 -0.5 -0.6 7.4 1st qtr. 1992 1.4 2.0 3.5 -0.9 9.6 2nd qtr. 1992 1.4 1.5 9.9 -1.2 5.1 3rd qtr. 1992 2.1 2.1 7.9 0.3 5.8

------------------------------------------------------------------------ JAPAN ------------------------------------------------------------------------ Gross Private Private Govt. Net CURRENT National Cons. Invest. Spend. Exports PRICES Product -------------as a % of GNP------------ ------------------------------------------------------------------------ 1985 1,780.2 58.7 28.0 9.5 3.7 1986 2,033.3 58.4 27.7 9.6 4.3 1987 2,102.2 58.4 28.4 9.4 3.8 1988 2,466.0 57.5 30.4 9.1 2.9 1989 2,625.2 57.3 31.5 9.1 2.1 1990 2,322.0 57.0 32.5 9.0 1.4 1991 2,726.2 56.2 32.2 9.1 2.5 4th qtr. 1991 2,843.3 56.2 31.5 9.3 3.0 1st qtr. 1992 2.866.9 56.5 31.4 9.1 3.0 2nd qtr. 1992 2,850.3 56.1 31.3 9.3 3.3 3rd qtr. 1992 2,714.6 56.8 30.7 9.3 3.2 ------------------------------------------------------------------------ ------------------% growth in ------------------- CONSTANT PRICES GNP Cons. Invest. Govt. Exports ------------------------------------------------------------------------ 1985 5.1 3.3 6.5 1.7 6.5 1986 2.7 3.4 4.3 4.5 -5.3 1987 4.3 4.2 8.2 0.4 4.6 1988 6.3 5.2 14.2 2.2 10.7 1989 4.8 4.3 9.6 2.0 15.0 1990 4.8 4.0 7.9 1.9 10.6 1991 4.1 2.2 3.8 1.7 4.8 4th qtr. 1991 3.2 2.9 0.5 0.3 5.9 1st qtr. 1992 2.6 3.7 -0.3 0.6 3.6 2nd qtr. 1992 2.0 1.6 -0.3 2.4 3.3 3rd qtr. 1992 1.1 1.4 -2.9 3.9 1.2

------------------------------------------------------------------------ GERMANY ------------------------------------------------------------------------ Gross Private Private Govt. Net CURRENT National Cons. Invest. Spend. Exports PRICES Product -------------as a % of GNP------------ ------------------------------------------------------------------------ 1985 825.5 56.4 19.5 19.9 4.1 1986 911.2 55.0 19.5 19.7 5.7 1987 967.5 55.3 19.2 19.8 5.6 1988 1,015.6 54.7 20.0 19.6 5.8 1989 1,087.2 54.4 20.6 18.6 6.4 1990 1,189.4 54.1 21.0 18.2 6.7 1991 1,287.1 53.9 21.2 17.8 7.1 4th qtr. 1991 1,306.0 54.1 20.8 17.8 7.3 1st qtr. 1992 1,346.4 53.6 22.0 17.8 6.7 2nd qtr. 1992 1,354.6 53.3 21.7 17.9 7.1 3rd qtr. 1992 1,375.6 53.5 20.2 18.8 7.5 ------------------------------------------------------------------------ ------------------% growth in ------------------- CONSTANT PRICES GNP Cons. Invest. Govt. Exports ------------------------------------------------------------------------ 1985 2.1 1.5 -0.9 2.0 7.6 1986 2.2 3.4 3.9 2.5 -0.1 1987 1.4 3.3 1.2 1.5 0.5 1988 3.5 2.5 7.8 2.2 5.6 1989 4.0 3.0 6.7 -1.6 11.9 1990 5.0 5.3 7.1 2.4 11.7 1991 3.6 3.6 4.2 0.5 12.7 4th qtr. 1991 1.3 1.8 -1.9 2.2 6.6 1st qtr. 1992 1.2 0.6 6.3 3.6 3.4 2nd qtr. 1992 1.1 -0.4 0.1 2.8 3.7 3rd qtr. 1992 -0.1 1.4 -4.0 2.0 2.6

------------------------------------------------------------------------ FRANCE ------------------------------------------------------------------------ Gross Private Private Govt. Net CURRENT Domestic Cons. Invest. Spend. Exports PRICES Product -------------as a % of GDP------------ ------------------------------------------------------------------------ 1985 691.8 60.8 18.9 19.6 0.7 1986 746.1 60.2 19.6 19.2 1.0 1987 770.5 60.6 20.2 19.1 0.1 1988 815.2 59.8 21.4 18.7 0.1 1989 877.7 59.5 22.1 18.3 0.1 1990 938.1 59.8 22.1 18.2 0.0 1991 967.5 60.3 20.8 18.6 0.3 4th qtr. 1991 985.7 60.6 19.9 18.8 0.8 1st qtr. 1992 1,002.9 60.1 20.2 18.6 1.0 2nd qtr. 1992 1,017.4 60.0 19.6 18.7 1.6 3rd qtr. 1992 1,035.4 60.4 19.5 18.7 1.4 ------------------------------------------------------------------------ ------------------% growth in ------------------- CONSTANT PRICES GDP Cons. Invest. Govt. Exports ------------------------------------------------------------------------ 1985 1.9 2.4 2.8 2.3 1.9 1986 2.5 3.9 8.8 1.7 -1.4 1987 2.3 2.9 5.1 2.8 3.1 1988 4.5 3.3 9.8 3.4 8.1 1989 4.1 3.3 7.8 0.3 10.2 1990 2.2 2.9 2.2 1.9 5.5 1991 1.1 1.5 -2.0 2.9 3.6 4th qtr. 1991 1.8 2.1 -3.3 2.8 5.0 1st qtr. 1992 2.6 2.2 -2.3 2.5 8.3 2nd qtr. 1992 2.2 1.3 -0.9 2.7 6.3 3rd qtr. 1992 1.6 2.2 -4.7 2.5 4.0

------------------------------------------------------------------------ ITALY ------------------------------------------------------------------------ Gross Private Private Govt. Net CURRENT Domestic Cons. Invest. Spend. Exports PRICES Product -------------as a % of GDP------------ ------------------------------------------------------------------------ 1985 561.8 62.6 22.5 16.7 -1.9 1986 615.7 62.2 20.9 16.5 0.4 1987 658.4 62.4 21.0 16.9 -0.3 1988 710.5 61.9 21.5 17.1 -0.5 1989 790.8 62.4 21.3 16.9 -0.6 1990 861.1 62.0 20.7 17.7 -0.4 1991 932.1 62.5 20.3 17.7 -0.5 4th qtr. 1991 956.9 62.7 20.1 17.5 -0.7 1st qtr. 1992 968.1 63.0 20.1 17.4 -1.0 2nd qtr. 1992 968.2 63.5 3rd qtr. 1992 ------------------------------------------------------------------------ ------------------% growth in ------------------- CONSTANT PRICES GDP Cons. Invest. Govt. Exports ------------------------------------------------------------------------ 1985 2.6 3.0 1.8 3.4 3.2 1986 2.9 3.7 1.4 2.6 2.5 1987 3.1 4.2 4.6 3.4 4.7 1988 4.1 4.2 6.3 2.8 5.4 1989 2.9 3.5 2.3 0.8 8.8 1990 2.2 2.8 2.0 1.3 7.8 1991 1.4 2.8 1.4 1.7 -0.8 4th qtr. 1991 1.7 2.5 6.4 1.5 -1.8 1st qtr. 1991 1.9 2.5 6.1 1.4 5.3 2nd qtr. 1992 1.6 2.3 2.5 1.1 4.3 3rd qtr. 1992 0.8 1.8 -6.3 0.8 9.5

------------------------------------------------------------------------ UNITED KINGDOM ------------------------------------------------------------------------ Gross Private Private Govt. Net CURRENT Domestic Cons. Invest. Spend. Exports PRICES Product -------------as a % of GDP------------ ------------------------------------------------------------------------ 1985 606.5 61.3 17.1 20.7 0.9 1986 573.7 63.1 16.9 20.6 -0.7 1987 600.9 63.2 17.8 20.2 -1.1 1988 709.5 64.1 20.1 19.5 -3.6 1989 766.0 64.1 20.6 19.2 -4.0 1990 770.2 63.6 19.0 20.0 -2.6 1991 820.8 64.0 15.7 21.2 -0.9 4th qtr. 1991 829.2 64.2 15.6 21.3 -1.1 1st qtr. 1992 824.8 64.4 15.4 21.5 -1.3 2nd qtr. 1992 847.4 64.4 15.1 21.8 -1.3 3rd qtr. 1992 825.5 64.8 15.0 21.8 -1.6 ------------------------------------------------------------------------ ------------------% growth in ------------------- CONSTANT PRICES GDP Cons. Invest. Govt. Exports ------------------------------------------------------------------------ 1985 3.9 3.8 3.5 0.0 5.9 1986 4.1 6.4 2.2 1.8 4.7 1987 4.8 5.5 10.2 1.2 5.6 1988 4.4 7.4 18.1 0.6 -0.1 1989 2.1 3.3 5.2 0.9 3.8 1990 0.6 0.7 -7.4 3.2 4.9 1991 -2.3 -2.0 -13.2 2.7 0.2 4th qtr. 1991 -1.2 -2.0 -3.9 1.3 2.2 1st qtr. 1991 -1.3 -1.9 0.7 1.4 4.4 2nd qtr. 1992 -0.8 -0.2 5.1 -0.6 2.5 3rd qtr. 1992 -1.0 0.3 3.4 -0.8 0.8 ------------------------------------------------------------------------

Seasonally adjusted data used in all cases. Statistics for Germany apply only to western Germany. GNP/GDP is broken down into private consumption expenditure, investment (the sum of gross fixed capital formation and the change in stocks), general government final consumption, and net exports (exports of goods and services minus imports of goods and services). The US includes investment by government in the government series rather than under investment. Quarterly GNP/GDP totals are annualised. The growth rates are the percentage change over the corresponding period in the previous year, and are positive unless otherwise stated. The figures in the fifth column of each set of growth rates refer only to exports, rather than to net exports. Data supplied by Datastream and WEFA from national government sources.

MR Zachaeus Chesoni, the former judge who supervised Kenya's general election last month, was dismissed from the bench in May 1990 following the discovery that a state-owned bank was seeking his imprisonment in a bankruptcy action, according to the Commonwealth report on the poll published last night.

This and other disclosures from a Commonwealth file on Mr Chesoni, appointed chairman of the electoral commission by President Daniel arap Moi a year after his dismissal, are likely to reinforce opposition claims that Mr Moi's election victory was not free and fair. Opposition leaders sought Mr Chesoni's replacement as chairman of the electoral commission, but failed to get Commonwealth backing.

The documents, summarised in an annex to the report, were given to the Commonwealth observer group before Christmas. No mention of them was made in the group's initial assessment of the poll, issued on January 1. The heavily qualified endorsement of the election process was reaffirmed in yesterday's final report.

The annex says in 1984 Mr Chesoni's 'business involvements caused him severe financial embarrassment'. Bankruptcy proceedings were filed against him personally and winding up proceedings against the company through which he operated his business. The action was initiated by the Kenya Commercial Finance Company, a part of the state-owned Kenya Commercial Bank. In a letter to Mr Chesoni cited in the annex but not published, Mr Mathew Muli, then attorney-general, writes: 'His Excellency the President. . . has sadly accepted your retirement.'

It goes on: 'With regard to bankruptcy proceedings against you personally, the bank has been directed not to press with bankruptcy proceedings but may proceed with the winding-up of the company. Any proceedings that may have been commenced are to be terminated or withdrawn from the court record in accordance with the rules.'

In February 1990, says the annex, Mr Chesoni was reappointed an acting justice of appeal 'presumably on the basis that his financial affairs had been brought to order. In fact that was not so. An application to commit him to prison in High Court case 1234 of 1984 was listed for hearing on 18 May 1990. He was asked to resign but did not do so.'

The Judicial Service Commission found Mr Chesoni's conduct 'inconsistent with the position, dignity and judicial integrity' of a judge.

A letter to Mr Chesoni from the Chief Justice, Judge Robin Hancox, demands his resignation 'in view of your extreme financial embarrassment' and says Mr Chesoni 'did not see fit to apprise' him of the application for his imprisonment. On May 15 Mr Chesoni was told that his appointment as acting justice of appeal would be revoked.

Earlier this month the Financial Times reported that in 1984 a state-controlled bank was ordered not to implement a bankruptcy judgment against Mr Chesoni. The action was revived in 1990, said the article, but in 1991 the bank was again ordered not to pursue it, say Nairobi legal sources.

In a statement issued before the Commonwealth report was made public, Mr Chesoni said: 'It is absolutely untrue to suggest that the government played any part in resolving the (bankruptcy) dispute.'

Mr Chesoni says in April 1984 he faced a claim for KSh18m (Pounds 322,000) plus interest. Of this, KSh17m was repaid, and agreement reached on payment of the balance.

'Prior to April 1990 execution proceedings had been taken against me,' says Mr Chesoni: 'As a result an order was made that I pay KSh3.5m and the balance to be agreed.'

His lawyers subsequently 'negotiated a full and final settlement of my liability'. The sale of family property had raised KSh3m and he is no longer indebted to the bank, says the statement.

The Commonwealth report says Mr Chesoni's conduct as electoral commission chairman 'cast a cloud over the electoral process', but his performance 'improved dramatically' from mid-November. It adds that the observers 'have not received information which would cast doubts' on denials by Mr Chesoni and other commission members that they 'were associated with' or 'taking directions from' Kenya's ruling party.

A United Nations team of nuclear weapons inspectors is set to fly into Baghdad today on a delayed but routine mission. They are expected to examine damage to the al-Rabiya site, south of Baghdad, which was attacked last week by US cruise missiles.

The mission, the 17th by nuclear weapons inspectors to Iraq since the end of the Gulf war, comes one day after Mr Les Aspin, the new US secretary of defence, said there were signs that Iraq was moving its surface to air missiles back into the no-fly zones. He said the US would need to watch the missiles in the next few days.

The eight-member team will join about 70 UN inspectors who returned to Iraq last week after Baghdad belatedly agreed to their direct access to the country following intense US and UN pressure.

A team of ballistic missile experts will also fly into Iraq today.

UN officials said a large team of chemical weapons inspectors who entered last week had met no resistance from Iraqi officials in resuming work destroying chemical and biological weapons.

Mr Zifferero's team will undertake what he described as 'essential follow-up work, verifying equipment has been destroyed'. He said the al-Rabiya site, a complex of several factories, housed several heavy machine tools used in the construction of uranium enrichment calutrons which his inspectors had tagged for destruction on visits before the US raid.

TUGS and firefighting vessels battled through the weekend to control a fire on board the Maersk Navigator (left), a 255,000-tonne, fully laden supertanker drifting between the Indonesian island of Sumatra and the Indian Nicobar Islands, Kieran Cooke writes.

A spokesman for the ship's owners yesterday claimed that 'Extensive cooling of the vessel's hull is taking place and realistically it should be possible to extinguish the fire within the next 72 hours.'

The ship's Danish owners yesterday said 'a few tens of tonnes per hour' of crude was leaking from the vessel, and a narrow 15-mile slick of oil had been sighted.

Queen's Counsel, former British cabinet minister and erstwhile European trust-buster - knows what it means to hit the ground running. But even by his standards, the initiation to his new job as EC commissioner for external economic affairs has set a demanding pace.

On January 2, four days before he formally took over the post, he found himself closeted all day with the seasoned US trade representative, Mrs Carla Hills, discussing an unfamiliar and highly technical subject: the prospects for a deal in the Uruguay Round of multilateral trade negotiations.

As power switched from President George Bush to his successor, Sir Leon has been plugging away to ensure that the trade talks do not get lost among competing priorities for the new administration.

Also, as the European Commission attempts to regain its bearings after the tumult of the last 12 months, he has been labouring to carve out a fiefdom to replace his previous stronghold at the head of the competition directorate.

In the US at least, he appears to be making headway. On Friday, within hours of the swearing-in of the new US trade representative, Mr Mickey Kantor, contacts had been opened to arrange a visit by Sir Leon to Washington. If as he hopes a meeting can be fixed this week, it will be an important sign that the momentum has not completely gone out of the Uruguay Round.

The European Commission vice-president is in no doubt as to where the onus for success or failure now lies. Indeed, he seems relieved that the Community is no longer in the dock as it was over agriculture last autumn. 'Everything depends on the attitude of the US administration,' he says. 'What we have to establish is how high a priority it is for (President Bill) Clinton. We just don't know.'

Sir Leon insists that the negotiations have not been marking time this month, despite another clutch of missed deadlines. The EC and US now have a clearer understanding, he says, of what sort of deal they will be able to strike on market access, notably concerning tariffs on textiles. In the end, the talks that continued in Geneva right up to Mr Clinton's inauguration were scuppered by the lack of time and by the ebbing authority of the outgoing administration.

It has not been easy for outsiders to predict the new team's stance towards the Gatt talks, and formulation of a coherent US policy may still have to await the outcome of Washington turf battles - - Mr Lloyd Bentsen, treasury secretary, Mr Ron Brown, commerce secretary, Mr Robert Rubin, director of the National Economic Council, and Ms Laura Tyson, chairwoman of the Council of Economic Advisers, all have claims to expertise in the trade area. But Sir Leon suspects that as the dust settles, Mr Clinton's approach will turn out to differ little from that of his predecessor.

'Nothing has happened so far to lead me to think they will take a fundamentally different view' from the Bush administration, he says. 'If that is correct, and they give it adequate priority, it should be possible, with difficulty for all, to reach agreement this year.'

Even that heavily qualified prediction will strike many observers, weary of years of mistaken optimism over the Uruguay Round, as unrealistic. For one thing, the negotiators do not have all year; in theory at least, they are working to a deadline of March 2, the date on which the congressional 'fast-track' authority under which the US administration is negotiating expires.

The reality, as Sir Leon knows, is not quite so clear-cut. Mr Clinton could go to Congress in March with a very general statement of intent to reach a Gatt deal, while still negotiating with the EC and other contracting parties. Congress would then have 90 days to approve.

Though the commissioner does not say so himself, playing it long like this could have an extra advantage: it would mean that the EC itself would not have to pronounce on a Uruguay Round deal until after the French legislative elections in late March. At that point France, which threatened to veto the EC-US deal on agriculture at the end of last year, might be able to take a more relaxed view of the overall Gatt package.

Could internal divisions within the Community or the Commission destroy this delicate timetable? Sir Leon does not seem concerned. He notes that Mr Jacques Delors, the French president of the Commission, was party to an EC-US statement in December urging completion of the round by January 15 and that 'not one voice has been raised, within or outside the Commission' against his energetic pursuit of further talks.

Sir Leon clearly wants to use his new post - with its weighty portfolio covering trade relations with other industrial countries, anti-dumping policy and, crucially, aid to eastern Europe and the former Soviet Union - to set the tone for a more outward-looking European Commission.

On eastern Europe, for example, he wants to make a strong push to get EC governments to accelerate the improvement of market access for central European countries' products, including some categories that have hitherto been regarded as too domestically sensitive for liberalisation.

'There is no better way of helping the countries of central and eastern Europe than expanding trade opportunities,' he says, a tune which he will probably be heard playing with great frequency this year.

But what of the new Commission itself? Three weeks into its term, it is attracting mixed notices. There have been reports of friction - not least between Sir Leon and Mr Hans van den Broek, who has responsibility for the EC's external political relations and enlargement.

There are also suggestions that the new team may slacken off in its enforcement of the single market and competition policy, and mutterings that the Commission is chastened and demoralised after having been used by member states as a whipping boy last year.

Sir Leon dismisses such talk. He says that what some see as new-found timidity on the part of the Commission reflects the Community's desire to apply 'subsidiarity' - to take decisions and implement them at the appropriate level - and in the case of the single market, a sensible period of stock-taking.

On external policy, he sees no reason why he should not be able to work closely and constructively with his fellow liberal Mr Van den Broek. Whether the Commission as a whole is more or less economically liberal than its predecessor is, he insists, 'much too early to say. We haven't had any votes yet, and that's what sorts things out.'

Nevertheless, even Sir Leon cannot quite disguise the overall political uncertainty that pervades the Brussels executive these days. This Commission is, after all, appointed only for two years; it may lose Mr Delors to French politics before the end of 1994; and the jockeying is already under way as to who will succeed him. Might Sir Leon be a candidate, as is being mooted privately within the British government? He laughs, and will say only: 'I think that that is not a question that has arisen at the moment.'

---------------------------------------------- THE SIZE OF THE EC TELEPHONE MARKET ---------------------------------------------- Total revenue 1990 (Ecu m) ---------------------------------------------- Germany 21,227 UK 18,671 France 17,988 Italy 14,537 Spain 6,225 Netherlands 4,193 Belgium 2,371 Denmark 2,113 Ireland 987 Portugal 970 Greece 153 Luxembourg 153 ---------------------------------------------- Source: European Committee ----------------------------------------------

THE advent of the single market on January 1 marked a small step in the liberalisation of Europe's telecommunications industry. Some of the business of carrying computer data was opened to competition.

The industry and its customers barely gave the change a second thought. Their executives were busy lobbying Brussels over plans for far more dramatic deregulation: the opening up of the business of carrying ordinary telephone calls, a market worth Ecu90bn (Pounds 73bn) in 1990 and valued now at an annual Ecu110bn.

At stake is control of a fast growing industry. Turnover in European telephone calls is rising by more than 8 per cent a year, according to Daiwa Institute of Research in London.

This industry is dominated by a handful of state-owned monopolies. They earn almost 90 per cent of telephone revenues in the EC.

The European Commission wants this to change. It has called for representations from suppliers, customers and governments on how far liberalisation should go. These submissions should be filed by the end of this month.

The Commission has asked for views on four alternative proposals. One would be to freeze the process of liberalisation, reversing present policy. The second approach would call for Brussels to bring in centralised rules to cut the cost of calls - a policy which would contradict the EC's new emphasis on subsidiarity, or making decisions at the lowest level of government.

The other alternatives - which seem in practice more likely - would be to decide on either a partial deregulation or sweeping changes of the kind introduced in the UK.

The Commission has said it wants to see at least some further deregulation. But many member states are opposed to this. Views spread from the strongly free-market British Telecom and Mercury Communications, the UK post and telecommunications organisations (PTOs), to the pro-state monopoly governments in southern Europe.

Executives in London and officials in Brussels now suggest that the anti-liberalisation governments are bending to the will of the free-marketeers. This would be no mean victory. Voice telecommunications represent the core of an industry still seen in many countries as an arm of government. The debate is heavily influenced by ideology and emotion.

Publication of the Commission's plans was twice delayed last summer, partly because of concern about its impact on France's Maastricht referendum in September.

The conservatives have already lost ground. The Commission has pushed through reforms in the non-core activities of the PTOs. Legislation opening up the equipment market, for example, was approved in 1988.

Countries that a decade ago were once staunch opponents of liberalisation have allowed a measure of competition since the late 1980s. The UK remains the only EC country with two PTOs, but Germany and France have introduced competition into mobile telephony and in satellite links. Last week, a subsidiary of the US company MCI Communications received French government approval to run an independent satellite telecommunications network in France.

'In a matter of a very few years, attitudes have changed,' says Mr Jonathan Rickford, BT's director of government relations. The UK, which deregulated in the early 1980s, 'used to be regarded as a piece of Anglo-Saxon eccentricity. Now it is seen that that is the way the world is going.'

None the less, recent political moves suggest that obstacles to deregulation may increase. In the EC commission, responsibility for telecommunications has passed to Mr Martin Bangemann, who adds it to his industry portfolio. Mr Karel van Miert, a Belgian socialist, has taken over competition policy from the free-marketeer Sir Leon Brittan.

Both Mr Bangemann and Mr Van Miert believe competition should not be the overriding factor in policy decisions - a sentiment in line with the attitude of some state telephone monopolies.

EC commissioners intend to approve a draft proposal on deregulation by early March. This would be presented to telecommunications ministers on May 10.

Commission officials concede it will take a year or more of detailed negotiations before legislation is approved. But, depending on the outcome of negotiations during the next few weeks, Europe's will to make real progress in deregulation will be tested very soon.

ENGLISH-speaking industrialised countries head the world's crime league, with some types of offence twice as common in the US, England or Australia as in France or Germany, according to an intergovernmental report.

The report is the most authoritative study to date comparing crime around the industrialised world. Sponsored by interior and justice ministries and police agencies, the report is based on surveys carried out last year and in 1989 among 55,000 respondents in 20 countries.

'With the most obvious exceptions of Japan and Switzerland, all industrialised countries suffer from an appreciable level of property and aggressive crime,' the report says. 'For the public, being a victim of crime has become a common feature of life in most urban areas.'

The report suggests governments' ability to curb rising crime is limited. It puts forward a number of proposals, including better security standards for cars and measures to discourage beer consumption - held to be a factor behind violence.

But it also sounds a note of fatalism. 'Put bluntly, this (rising crime) seems to be the price for living in an affluent, urbanised and democratic society, regardless of government policy on crime, or the way in which communities try to organise themselves.'

Among the more controversial findings, England and Wales are recorded as having registered the greatest increase in overall crime between 1988 and 1991. The number of respondents saying they had been the victim of one or more crime rose 56 per cent during the two periods in England - much more than indicated in previous UK crime surveys and in police statistics.

The study, co-ordinated by the Dutch Justice Ministry, is based on questioning of random samples of adults, normally 2,000 people in each country.

They were asked to report whether they had been victims of crime during the past 12 months - in 1988 and/or 1991. Attitudes towards crime were also polled. Eight countries held surveys in both years.

Such so-called 'victimisation surveys' offer a more reliable guide to international crime trends than countries' police statistics, where comparisons are distorted by divergences in crime reporting.

In view of uncertainties associated with polling methods, the report's authors - Mr Jan van Dijk of the Dutch Justice Ministry and Ms Pat Mayhew of the UK Home Office - caution about using the study to draw 'firm conclusions'.

Nonetheless, some sharp international differences emerge. Northern Ireland, in spite of frequent sectarian violence, ranks as one of the industrial world's least crime-ridden areas. On the other hand, New Zealand and the Netherlands, belying their peaceable reputations, have some of the most severe law and order problems. Crime in Poland and Czechoslovakia is shown as much higher than indicated by police figures.

In most countries, fear of crime is closely linked to actual prevalence of offences. In England, fear of burglary - which is much higher than in the rest of Europe - has increased since 1989, in line with actual burglary risks.

In one sign of exaggerated alarm over violence, fears of street crime are much higher than the real risks in Japan and West Germany.

Car theft appears roughly six times more prevalent in England, Italy, Australia, New Zealand, France and the US than in the Netherlands and west Germany.

Burglary is much more frequent in non-European countries, with Australia, New Zealand, the US and Canada among the leaders, and rates also high in Poland, former Czechoslovakia and England.

Sexual assaults on females appear highest in Czechoslovakia, Poland, Australia, Canada, and west Germany.

Matching incidence of sexual violence, the highest rates of aggressive crime are in North America, Australia, New Zealand and Poland.

Robbery is most common in Spain, Poland, the US and Italy.

The survey highlights differences in attitudes towards police. People who had reported an offence were least satisfied with the police response in Poland, Norway, Italy, Czechoslovakia and Spain.

Criminal Victimisation in the Industrialised World. Netherlands Justice Ministry. Tel 070-3707225. UK Home Office Tel 071-2734600.

-------------------------------------------------------------- CZECHOSLOVAKS AND NEW ZEALANDERS MAIN TARGETS FOR BURGLARY -------------------------------------------------------------- Per cent of victims during past 12 months -------------------------------------------------------------- Sexual Assaults Burglary Car assault with force theft -------------------------------------------------------------- New Zealand 1.5 2.5 4.3 2.7 Netherlands 0.9 2.0 2.2 0.4 Canada 1.8 2.3 3.2 1.1 Australia 1.9 2.8 4.0 2.7 US 1.5 2.2 3.5 2.3 Poland 2.0 1.9 2.2 0.6 England/Wales 0.3 1.1 2.5 2.8 Czechoslovakia 2.4 1.4 4.3 0.7 Italy 1.0 0.4 2.4 2.7 W. Germany 1.7 1.9 1.3 0.4 Sweden 0.8 1.4 1.4 1.7 France 0.6 1.5 2.4 2.4 Scotland 0.8 1.1 2.0 0.8 Switzerland *0.0 0.7 1.0 *0.0 N. Ireland 0.4 1.1 1.1 1.6 Japan na na 0.9 0.7 -------------------------------------------------------------- *No crime in this category reported by respondents --------------------------------------------------------------

DANISH voters say they have only modest expectations from the new four-party coalition led by Mr Poul Nyrup Rasmussen, chairman of the Social Democratic party, while business fears it will lead to higher costs and therefore to a loss of jobs.

Mr Rasmussen spent yesterday putting together his cabinet, which he will present to Queen Margrethe today. It is expected that the administration - which will assume Denmark's current presidency of the European Community - will include at least a dozen Social Democrats, three members each from the Radical Liberal party and the Centre Democrats and two from the Christian People's party.

The change of government is a change of faces more than of policies. The three centre parties which have joined the government were all supporters of the outgoing non-socialist government. Furthermore, many areas of policy, including defence and fiscal policy, are subject to multi-party compromise agreements binding on all participants for the rest of this year and in some cases longer.

EC policy is hammered out in the all-party market affairs committee of the Folketing (parliament) and will therefore also not be subject to sudden change as a result of the new government.

One of the foremost tasks for the new government will be to achieve a majority for the Maastricht treaty on European union in a referendum to be held probably in May. However, a poll by the Vilstrup institute, published in the national daily Politiken, showed 63 per cent of Danes would vote Yes and 37 per cent No. A month ago 70 per cent were in favour and 30 per cent against.

Three quarters of voters polled by a weekend Gallup survey said they did not think the government would succeed in reducing unemployment, which is top priority in its programme.

Two thirds doubted that it would succeed in lowering personal income taxes, another aim, or lead to a significant increase in real wages.

A DECISION by Nato to impose a no-flight zone over Bosnia-Hercegovina would 'without a doubt' influence the military situation, and bring an end to the war in the former Yugoslav republic, Mr Manfred Worner, secretary- general of the western military alliance, has told a German newspaper.

But if the decision is taken, Mr Worner warned that Germany must finally decide if it will allow its crews to staff the alliance's Awacs, the surveillance aircraft needed to impose the ban.

In the clearest signal to date from Nato, the secretary-gengeneral, who is German, told the Hamburg daily Die Welt that the 16 member states of the alliance, with the support of the UN security council, must 'by all appropriate means' stop the conflict spreading to Macedonia, and the Serb-controlled southern province of Kosovo.

Although he did not go into detail about how the conflict could be contained, German and western military officials recently said Nato was now making contingent plans to impose a no-flight ban over Bosnia from Geilenkirchen, western Germany, close to the Dutch border, where the Awacs are based.

The problem is that the 18 Awacs aircraft are commanded by a German general, and a third of the crew are German personnel. Under Germany's constitution, the deployment of the Bundeswehr, or military, from activities outside the Nato area, is banned.

Attempts over the past 10 days by the ruling coalition of the Christian Democratic Union/Christian Social Union, and the Liberal the opposition Social Democratic parties, to agree on constitutional amendments have failed.

Mr Worner said any German withdrawal from the Awacs fleet would damage its efficiency. 'My hope is that Germany will keep its pilots, crews and other personnel in that fleet. . . Germany will surely not put at risk its ability to act as a member of the alliance,' he said after a Nato meeting in Brussels on Friday.

General Klaus Naumann, the chief of Germany's armed forces, said Germany should withdraw from the command of the Awacs fleet if Bonn refused to participate in imposing a no-flight zone over Bosnia-Hercegovina.

Both Bosnian Serb and Croat forces from Croatia repeatedly fly over Bosnian air-space in contravention of a tacit agreement at last August's London peace conference to respect a ban on flights.

THE Czechoslovak currency will be split into separate Czech and Slovak crowns 'within a few days', a senior adviser to the Czech central bank told the Czech news agency CTK at the weekend, writes Patrick Blum from Prague.

At a conference of German and Czech businessmen in Coburg, Bavaria, Mr Vladimir Jindra, adviser to the central bank governor, also forecast the new Czech crown would be fully convertible in two years.

Changing crowns into hard currency is subject to strict limitations, but uncertainty about the money's future has led to a rush for foreign exchange both on the official and black markets.

The crown was not to be split until the summer but analysts expect this to happen much sooner. A spokesman for the central bank said yesterday that no date had been set and the timing would require agreement between both central banks.

A previously unknown Moslem group, the Islamic Salvation, has claimed responsibility for yesterday's killing of one of Turkey's leading journalists, writes John Murray Brown from Ankara.

Mr Ugur Mumcu, 50, columnist with the Istanbul daily Cumhuriyet and an authority on Islamic and Kurdish terror groups, was killed by a car bomb outside his home in the Turkish capital of Ankara.

Prime minister Suleyman Demirel immediately vowed to track down the killers.

Vienna saw Austria's largest rally for 50 years at the weekend, when 200,000 Austrians gathered to protest against an anti-foreigner initiative by the right-wing Freedom Party, writes Eric Frey from Vienna.

The demonstration was scheduled to coincide with the start of a controversial petition drive by the FPO and its charismatic leader, Mr Jorg Haider, calling for stricter immigration laws and other measures directed at foreigners.

The FPO has won support for its anti-foreigner platform and nearly doubled its share of the vote in elections in Austria's second largest city of Graz yesterday, to 21 per cent.

ONLY about one in four French - 26 per cent - are satisfied with President Francois Mitterrand, according to a weekend Ifop poll, writes David Buchan in Paris.

This is the French leader's lowest score since last August. The lift which the Maastricht referendum campaign and public sympathy for his prostate cancer gave Mr Mitterrand has now clearly worn off. Ifop gives a slightly increased favourable rating of 32 per cent to Mr Pierre Beregovoy, the prime minister.

Both men score ahead of their Socialist party, which is expected to win only 20 per cent of the vote in the March parliamentary election.

Representatives of EC governments and training organisations are meeting in Belgium today to explore ways of breaking the link between European crime and unemployment, writes David Marsh.

The three-day meeting at Louvain near Brussels, organised by the Commission's employment and social affairs directorate, brings together experts from ministries and voluntary organisations from the 12 member countries.

The meeting will exchange ideas and information on projects to rehabilitate ex-offenders, highlighting a new approach to tackling the Community's growing law and order problems.

In the UK, roughly half of adult males convicted of offences commit another crime within two years - establishing a vicious circle in criminal behaviour. The so-called 'recidivism' rate is thought to be similar in other EC countries.

Statistics indicate that ex-offenders with jobs are three times less likely to recommit crimes than those unemployed. EC ministries and training organisations are planning a working party to tap funds for ex-offenders' employment projects and monitor how different countries achieve solutions.

The Commission is spending an initial Ecu1.5m (Pounds 1.2m) this year to finance projects connected with rehabilitation. One aim of this week's meeting is to allow national agencies to gain access to training funds from organisations and budgetary programmes elsewhere in the EC. Already the Netherlands and Germany are co-operating on a cross-border programme for integrating ex-offenders. A similar scheme is under way involving Luxembourg and the UK.

MR Jozsef Antall has fended off the strongest challenge to his leadership of Hungary by facing down a far-right bid for power within the conservative governing party.

The prime minister's moderate camp within the ruling Hungarian Democratic Forum held on to its majority in the party presidium, conceding few seats to the extremist Volk-national wing, at the congress which ended yesterday.

Mr Istvan Csurka, the populist author who whipped up the far right with anti-semitic and anti-communist polemics, last night appeared chastened that he had been so clearly confronted and defeated.

Nevertheless, his support among the party activists was sufficient to save his place on the party presidium.

Qualified victory over the far-right gives Mr Antall the chance of appealing to moderate voters and boosting the Forum's popularity in time for the elections from the derisory 8 per cent it shows in the latest opinion polls.

Government officials said that the main lines of economic and foreign policy would not change as a result of the congress.

But the congress did give priority to an anti-communist programme, which would see trials of communist officials responsible for the suppression of Hungary's 1956 uprising against Soviet occupation; and to a purge of former secret police agents from positions of responsibility.

MR JOHN MAJOR is ready to consider shelving proposals for a new privacy law if newspapers respond to the Calcutt report by significantly strengthening the Press Complaints Commission.

The government has signalled its determination to introduce criminal legislation against the use by the press of electronic surveillance, bugging and trespass.

But Mr Major is hesitant over separate proposals for civil law measures to protect individual privacy. Senior officials have begun drafting legislation but the prime minister has made known his preference for tighter self-regulation of the press.

An extension of the law of tort to cover privacy is backed by a number of senior cabinet ministers including Mr Kenneth Clarke, home secretary, and Mr Douglas Hurd, foreign secretary.

It would give individuals the right to sue for compensation when they believed they could prove that their private lives had been unreasonably invaded by intrusive behaviour or reporting.

Mr Major recognises such a law would face practical difficulties. Without an expensive extension of the legal aid system, redress would remain out of reach for the ordinary individuals it would be designed to protect.

The government would also face pressure for a loosely framed public interest defence to avoid charges that its main concern was to protect politicians and others in public life.

So far, however, the press has not indicated willingness to undertake voluntarily the radical reform of self-regulation sought by Mr Major.

Newspaper editors agreed last week to strengthen the complaints commission by guaranteeing a majority of lay members on the self-regulatory body. But the editors deferred a decision to underwrite its independence by ceding the industry's control over appointments.

Three New Zealand hikers claimed they saw and photographed a moa, a big flightless bird believed extinct for 500 years.

Emma Thompson won the US Golden Globe best dramatic actress award for her performance in Howard's End. Miranda Richardson was named best musical or comedy film actress for her role in Enchanted April.

LEADING members of the Organisation of Petroleum Exporting Countries appear broadly to agree on the need to cut output by up to 1m barrels a day to counter the fall in crude prices.

Signs of an emerging Opec consensus were cautiously heralded by Mr Alirio Parra, the cartel's Venezuelan president. He arrived in Kuwait yesterday as part of a tour of leading Opec producers, prompted in part by concern over the weaker trend in oil prices.

Mr Parra said that following talks with the Saudi Arabian and Iranian oil ministers there was a 'consensus on the type of measures' the cartel should take at its next meeting on February 13. Then, Opec ministers are due to set an output ceiling for the second quarter.

His remarks follow a proposal this weekend from Mr Hisham Nazer, the Saudi oil minister. He said Opec members should make pro rata cuts to bring output down by 1m barrels a day from a first quarter ceiling of 24.85m b/d agreed at Opec's last meeting in November. The target figure excludes output from Ecuador, which has since left the cartel.

Mr Nazer's proposal followed talks in Paris this weekend with Mr Parra, who in turn held discussions in Tehran earlier yesterday with Mr Gholamreza Aghazadeh, the Iranian oil minister. Mr Parra described both sets of talks as 'positive', adding: 'We have a broad consensus, the Saudis and the Iranians, as I only talked to the two major producers so far.'

Any effective Opec deal to cut output substantially would hinge on a deal between Saudi Arabia and Iran, Opec's two biggest producers. Saudi Arabia, which says it is pumping 8.4m b/d, has tenaciously guarded its expanded post-Gulf war oil output. Iran, which was allocated a ceiling of 3.49m b/d in the November agreement, has long been among the most vociferous Opec advocates of output cuts to push prices closer to Opec's nominal target price of Dollars 21 a barrel.

However, both countries appear to be responding to broader Opec concern over prices which, for the basket of Opec crudes, have lately fallen to about Dollars 16 a barrel, down from an average of more than Dollars 18 a barrel in 1992. A Gulf Arab official familiar with Saudi oil policy said yesterday: 'There is a general feeling that the fundamentals are not very good for output right now. There is general agreement among members to cut production by around 1m barrels a day.'

Opec's cause has not been helped by 'leakage' of extra production among several members which, according to industry estimates, has put actual Opec output somewhat above 25m barrels for the first quarter.

Iran's president Mr Ali Akbar Hashemi Rafsanjani, who also met Mr Parra yesterday, was quoted by Tehran Radio as saying too many Opec members had been exceeding their November allocations: 'If oil producers reduced their production by 10 per cent, they would have 20 per cent surplus income,' he said.

Agreement among Opec mem-bers to cut output could place particular pressure on Kuwait, where Mr Parra held talks yesterday with Mr Ali al-Baghli, the Gulf state's oil minister. Since the Gulf war, Kuwait has considered itself immune from any restrictions on output while it recovers its prewar output level, makes up for lost revenues and pays for its reconstruction.

However, a senior Gulf Arab official said Kuwait was likely to be urged to freeze output for the second quarter at present levels - which Mr al-Baghli yesterday put at 1.778m b/d - as part of a bid to support prices. Mr Parra will also visit Qatar, Algeria, the United Arab Emirates and Oman, which though not an Opec member has often acted in tandem to support prices.

NEGOTIATIONS on a peace settlement for Bosnia-Hercegovina came to a virtual standstill in Geneva yesterday in the face of the weekend's fighting in Krajina, a Serb-populated enclave of neighbouring Croatia.

Mr Dobrica Cosic, president of the rump federation of Yugoslavia, said before leaving for Belgrade that no further progress in the talks was possible until Croatia ended its 'aggression' against Krajina. The offensive, launched on Friday on the eve of the resumption of the Geneva talks, 'seriously undermines and compromises the peace effort here'.

He called on the co-chairmen of the Geneva conference, Mr Cyrus Vance and Lord Owen, to ask for a special session of the United Nations Security Council 'to strongly condemn' the Croatian action and to put an end to what he described as 'a veritable war' in the Krajina region.

Mr Cosic's statement followed strenuous efforts by the two international mediators at the weekend to persuade the leaders of the parties involved in the Krajina conflict to stop the fighting. The co-chairmen said yesterday that they had expressed their 'grave concern' about the flare-up to President Franjo Tudjman of Croatia.

Mr Vance said that Mr Tudjman had given them an assurance that he was immediately going to order local commanders to stop the fighting. Last night Mr Tudjman appeared on Croatian television to say his army had ended its offensive after seizing a main route linking the south and north of the country.

However, Yugoslav deputy prime minister Radoje Kontic said that instead of withdrawing, the Croats were continuing their attacks. More than 500 Serbian civilians and 150 fighters had been killed.

The mediators had also received an undertaking from Mr Cosic and the Bosnian Serb leader, Mr Radovan Karadzic, that they did not intend to become involved in the renewed fighting between Croats and Serbs, but that they would leave it to the UN to find a solution.

The offensive was launched by the Croats in a 65-mile-long zone. This has been under the protection of UN troops since Mr Vance negotiated an end to a war between Croatia and the federal Yugoslav army a year ago, following Croatia's declaration of independence.

Croat forces launched a powerful armoured assault on Zemunik airport near Zadar and an attack towards the Serb-held towns of Benkovac and Obrovac, according to Tanjug, the Belgrade-based news agency. The Croatian government said 120 Serbs and 10 Croats had been killed in three days of fighting around the Maslenica bridge and Zemunik airport, near the Adriatic port of Zadar.

General Zivota Panic, the Yugoslav army chief of staff, warned that his forces may intervene in Croatia, raising fears of an all-out Serbo-Croat war.

'In the upcoming period the army will undertake measures to defend the endangered Serbian people (in Croatia) and extend humanitarian and all other help,' Gen Panic said in a letter to Indian General Satish Nambiar, the UN force commander.

He warned that the Yugoslav army would fulfil its pledge to defend Croatia's Serbs, who comprise 13 per cent of the 4.7m population.

George Graham adds from Washington: President Bill Clinton is expected to hold a National Security Council meeting early this week to evaluate his administration's policy on former Yugoslavia.

Mr Clinton has made clear that he believes something more must be done in Bosnia, and that 'ethnic cleansing' in particular cannot be allowed to stand unchallenged by the international community.

He is, however, reluctant to commit US ground troops to the region.

Worner warns on no-fly zone, Page 2

MOST OF the 12,000 workers at Yanase & Co, Japan's largest dealer in imported cars, have been ordered to take public transport to work, in an attempt to give potential car buyers the impression that the country's clogged roads are becoming less congested.

Trying to push-start a stalled car market, Mr Jiro Yanase, the 76-year-old chairman of Yanase, which sells Mercedes-Benz and General Motors vehicles, has also asked makers such as Toyota Motor and Nissan Motor to forbid their employees from driving to work.

As Japan's economy has slowed, so have car sales. Motor vehicle registrations were down by 7.2 per cent last year. Registrations of imported cars fell 7.7 per cent, prompting carmakers to consider new gimmicks to prompt customers to trade in and, preferably, trade up.

However, carmakers think Mr Yanase's strategy a touch quirky. Toyota and the Japan Automobile Manufacturers' Association both noted that the 'idea itself is interesting', but suggested improving transport infrastructure rather than keeping their employees off the road.

The edict from Mr Yanase is not only a response to recession but another example of the sometimes eccentric policies of successful Japanese companies dominated by a charismatic figure. For example, Minebea, the world's leading maker of bearings, diversified into pig raising because of a lingering boyhood fascination of its late chairman with those animals.

Mr Yanase originally asked that only Tokyo employees be banned from driving to work. But he has now extended the ban to branches and subsidiaries throughout Japan.

A Yanase manager in Nagoya, central Japan, said about 8 per cent of employees are exempt, either because they live too far from the office or for health reasons. But the rest of the branch's 600 employees are not allowed to drive to work.

'We check the car park three times a day to make sure that no unauthorised employees have driven in,' the manager said. 'If they break the rule once, they will be given a warning. If they break it again and again, they will be admonished and their salary may be cut.'

Growing clamour for a stronger voice, Page 12

Hans Sewering, a former Nazi elected to be president of the World Medical Association, withdrew after Jews protested that his past stripped him of any right to the post.

A 10-year-old Irish hunter was killed at Alton in the latest of a series of knife attacks on horses in Hampshire and neighbouring counties. Twenty two horses have been mutilated in the county in the past nine months.

Scotland, already hit by widespread flooding, was braced for more high winds and snow. A drifting butane tanker was brought under control only 200 yards from the shore at Aberdour, Fife. Gales had torn the ship from its moorings and set it adrift.

Reuter adds: Police arrested four Sikh militants after foiling a plot to bomb independence day celebrations due to be attended by Mr Major. The UK prime minister will today meet his Indian counterpart, Mr Narasimha Rao, when the subject of terrorism is expected to be discussed.

THE thick set of reports which the Department of Trade and Industry issued yesterday will make depressing reading for the coal lobby.

The independent consultants hired by the DTI to illuminate the debate support in grim detail what the government has claimed all along: that British Coal's present size cannot be justified commercially, and that it will have to undergo deep cuts very quickly if it is to have any worthwhile future.

The comfort is that a cost-cutting exercise might save a small number of pits currently listed for closure.

As the four reports make clear, British Coal is in a shrinking market where its costs are far above those of foreign competitors.

John T. Boyd Company, the US mining engineers which examined the viability of British Coal's pits, commends the corporation for its 234 per cent increase in productivity over the last seven years but points out that Australian and US coal miners are still three to five times more productive. Because British Coal can never hope to match overseas producers - partly for reasons beyond its control such as geology - its future is irrevocably linked to whatever it can secure of the UK market.

However Caminus Energy, which was asked to look at future demand for coal in the UK, expects it to fall from 95.2m tonnes in 1991-92 to 71m in 1997-98 at the most, possibly as little as 58.6m. The difference depends on the way energy prices move over the next few years. If they stay high British Coal will be able to retain more of the market, but if they weaken, it will lose out. Caminus says its main rival is natural gas, which provides much cheaper new generating capacity than coal.

Faced with this harsh reality, the question is how far British Coal can go in bringing down its costs, because the cheaper the coal it can produce, the greater the share of the market it will command. The reports look at 21 of the 31 pits which British Coal wants to close - the other 10 were listed for immediate closure and are being examined separately.

John T. Boyd visited all the pits under review and came up with two possible scenarios. In the first it assumed that working practices are unchanged, but that new technology is introduced and labour reductions are accelerated - a continuation of present trends. In the second it assumed that work practices are improved to create more flexible shifts, and that mining regulations are changed to allow further cuts in manning levels.

The differences are striking. In the second scenario British Coal could be producing 13m to 19m tonnes more coal annually by April 1996, depending on the exact cost level. It would, however, have to bring its costs down substantially. UK coal is costed at Pounds 1.51 per gigajoule for the next set of contracts starting in April, against international prices of Pounds 0.90. John T. Boyd assumes prices can be brought down to the Pounds 1.10 to Pounds 1.40 range.

The market prospects are assessed by Caminus which also looked at different scenarios. In the first it assumed international fuel prices would be high with coal trading at Pounds 1.21 a gigajoule. In this case sales would be 53.9m tonnes in 1997-98. In the second it priced coal at only Pounds 0.90 a gigajoule, and sales fell to 22.8m tonnes.

Although this showed, again, that British Coal will do better in a high-price market, both forecasts are well down on the 85.7m tonnes sold last year. There is a ray of hope here for the miners because the 1997-98 figure includes 42.4m tonnes of coal for the power generators, well above the 30m which British Coal now expects to sell to them. But to achieve this extra 12.4m tonnes everything - the cost savings and the international fuel price - would have to go British Coal's way.

Although Caminus does not say what this would mean in terms of pits and jobs saved, the rule of thumb is 1,000 jobs and one pit for every 1m tonnes.

All the reports go into how British Coal could cut its costs in some detail. John T. Boyd provides a string of recommendations, including giving the local colliery manager more autonomy, further introduction of new technology, and changes in existing work restrictions and statutes.

Ernst & Young, the accountancy firm, was asked to look at administrative overheads which, it says, have not fallen in line with cuts at the workplace. It believes British Coal could save Pounds 73.6m to Pounds 107.1m a year by 1996-97 by cutting and simplifying the administrative system. But this would involve the loss of about 3,000 white-collar jobs. Ernst & Young recommended that a small corporate office be retained in central London, with other headquarter services re-located close to a colliery. The number of regional groups should be halved and business systems modernised.

PIMS Associates, management consultants, said savings in overheads of Pounds 90m could be achieved if British Coal matched international standards. But its report doubts that it could ever match the best-practice benchmark in the industry of Pounds 75,000 of value added per employee in the next few years. A more realistic level, it says, is a 20 per cent improvement to Pounds 47,000 in three years.

The reports are therefore a vindication of the government's aim of cutting back British Coal.

Critics will say that they take no account of aid received by other power sources - for example the nuclear levy. But the presumption is that the UK energy business must ultimately stand on its own two feet.

MAIN POINTS

John T. Boyd:

In the context of reduced market size, the general strategy and overall future for each pit announced in October appears reasonable.

Significant cost reductions, plus improved safety and productivity, could be achieved by the application of modern technology.

Important to address technological and structural problems as soon as possible to achieve cost benefits and a healthy, competitive industry.

Past performance is not a reliable measure of future potential as all collieries in the list of 21 would need to achieve substantial improvements in productivity and operating cost.

Caminus Energy:

UK market for coal set to contract sharply over the next five years, primarily because of reduction in coal use for power generation in England and Wales as new gas-fired plant comes into operation.

Gas prices would need to increase to about double the level of existing contracts in real terms for coal to become more economically attractive in new plant.

--------------------------------------------- Pits under threat*** --------------------------------------------- Economic ranking Case 1* Projected margin pounds per gigajoule --------------------------------------------- 1 Maltby 0.21 2 Hatfield 0.15 3 Prince of Wales 0.10 4 Frickley 0.10 5 Point of Ayr 0.04 6 Bentley - 7 Rossington -0.02 8 Wearmouth -0.06 9 Calverton -0.08 10 Kiveton Park -0.09 11 Bilsthorpe -0.13 12 Silverdale -0.11 13 Shirebrook -0.13 14 Markham -0.15 15 Bolsover -0.23 16 Clipstone -0.26 17 Rufford -0.28 18 Shariston -0.38 19 Bevercotes -0.42 20 Westoe -0.52 21 Easington -0.55 --------------------------------------------- Case 2* Projected margin pounds per gigajoule --------------------------------------------- 1 Maltby 0.41 2 Hatfield 0.35 3 Prince of Wales 0.27 4 Frickley 0.27 5 Rossington 0.28 6 Point of Ayr 0.18 7 Wearmouth 0.12 8 Silverdale 0.14 9 Bentley 0.11 10 Shirebrook 0.08 11 Bilsthorpe 0.04 12 Calverton 0.02 13 Clipstone 0.01 14 Kiveton Park -0.01 15 Rufford -0.03 16 Markham -0.05 17 Bevercotes -0.19 18 Shariston -0.23 19 Bolsover -0.38 20 Westoe -0.46 21 Easington -0.55 ---------------------------------------------

------------------------------------------------------- British coal costs and output (in April 1996) ------------------------------------------------------- Case 1* Case 2** Cost level pounds m tonnes m tonnes per gigajoule ------------------------------------------------------- 1.10 2 15 1.20 13 32 1.30 22 41 1.40 34 47 ------------------------------------------------------- Source: Boyd ------------------------------------------------------- *** The list does not include 10 mines earmarked by British Coal for early closure * Case 1 assumes present mining regulations in force ** Case 2 assumes law changes to allow longer shifts and there are compulsory redundancies -------------------------------------------------------

----------------------------------------------------------------------- Projected British coal sales ----------------------------------------------------------------------- High coal scenario (m tonnes) 1991/2 93/4 94/5 95/6 96/7 97/8 ----------------------------------------------------------------------- Power sector 73.0 34.9 41.2 43.6 40.9 42.4 Non-power sector 11.3 10.6 10.7 10.7 10.7 10.6 Exports 1.4 1.3 1.2 1.1 1.0 1.9 ----------------------------------------------------------------------- TOTAL 85.7 46.8 53.1 55.4 52.6 53.9 ----------------------------------------------------------------------- Assuming high international fuel prices and 9 gigawatts of combined cycle gas turbine in England & Wales 1997-8 ----------------------------------------------------------------------- Low coal scenario (m tonnes) 1991/2 93/4 94/5 95/6 96/7 97/8 ----------------------------------------------------------------------- Power sector 73.0 10.7 13.6 16.0 16.0 16.3 Non-power sector 11.3 9.1 7.7 6.6 6.3 6.0 Exports 1.4 1.2 1.0 0.9 0.7 0.5 ----------------------------------------------------------------------- TOTAL 85.7 21.0 22.3 19.2 23.0 22.8 ----------------------------------------------------------------------- Assuming low international fuel prices and 12 gigawatts of combined cycle gas turbine ----------------------------------------------------------------------- Source: Caminus Energy -----------------------------------------------------------------------

THE GOVERNMENT yesterday claimed vindication for its decision last October to close 31 coal mines after independent reports pointed to an unprecedented decline in the market and broadly backed the selection of pits chosen for closure.

However, the likelihood that the government will change its mind on some of the pits was reinforced by the conclusion of one of the reports, by John T Boyd, a US mining consultancy, that 13 could be profitable if there were significant changes to working practices.

One of the 31, Point of Ayr, in north Wales, seems almost certain to remain open after Boyd said its 'room and pillar' mining system should be applied at other collieries. 'Priority should be given to continuation of this pit to demonstrate the feasibility and economics of the system.'

Boyd said British Coal's strategy for selecting the 31 pits originally earmarked to close appeared reasonable. Among the 21 since granted a stay of closure by the government, the consultancy ranked Maltby and Hatfield the most economic, and Westoe and Easington the least so.

Mr Tim Eggar, energy minister, said the reports broadly confirmed the assessments which led to the original decision in October to close the pits.

The government would consider the reports in its white paper on energy but he added that no pit would be viable unless there was a market for coal.

Mr Robin Cook, shadow trade and industry minister, said the reports made it hard to believe that ministers were carrying out a searching review of energy policy.

The report by Caminus Energy, 'tells us nothing more than that on present policies coal is being shut out from the electricity market. We knew that in October,' he said.

Mr Arthur Scargill, president of the National Union of Mineworkers, said the reports failed to take account of subsidised imports and more expensive forms of energy including nuclear power. Mr Neil Greatrex, president of the breakaway Union of Democratic Mineworkers, said all 31 pits could be profitable.

At Westminster last night there were fears that publication of the documents could provoke a split among members of the cross-party trade and industry select committee, which meets to finalise its report on the sector early next week.

There were suggestions that Tory committee members might use the independent reports to argue for recommendations that would save too few of the 31 threatened pits to be acceptable to some Labour members.

The select committee report is expected to be published on Friday.

Among the reports, Boyd suggested that six of the 21 pits whose future is undecided could operate on a profitable basis within three years.

The number would rise to 13 if laws restricting changes in working practices and management were removed.

Caminus Energy said that in a free market where rival fuels were relatively cheap, British Coal's total sales, failing contractual arrangements with generators, could fall from 86m tonnes this year to 21m next.

The two other reports, by Ernst & Young and Pims, suggested ways for British Coal to make significant savings in management costs, presaging the loss of up to 3,000 redundancies among senior staff.

Government backed, Page 4

FORD REALLY has got its most important new model in years right first time.

Two weeks ago, I wrote here that if the Mondeo's on-road performance lived up to its paper promise, it ought to breathe new life into Ford. But I wondered out loud if, like quite a few new Fords in the past, it might have some aggravating drawback that would put me off.

It has not. I judged the left-hand drive 1.6, 1.8 and 2.0 litre Mondeo saloons and hatchbacks I tried in southern France last week well able to look rivals like the Vauxhall Cavalier (Opel Vectra), Nissan Primera, Toyota Carina E and Peugeot 405 in the eye.

Owners or users of the veteran rear-wheel driven Sierra that Mondeo replaces may well find it so much better that they will feel it has moved up half a class.

As multi-valve engines go, those powering the Mondeo are good without being outstanding. One can say the same of the standard five-speed gearbox. But what makes Mondeo shine is the thoroughness with which Ford has tackled noise, vibration and harshness.

All the cars felt reassuringly solid and throughout two days of energetic driving were squeak and rattle free. I started with an entry-model 1.6 litre. At around 130 kph (81 mph) on the autoroute - all right, just a bit more - there was barely a whisper of wind and tyre noise and only a soft hum from the engine.

Away from the autoroute's smooth tarmac the ride was supple, shock-absorbent and quiet. (Mondeo is shorter than Sierra, but its wheelbase is longer and the track wider). The medium low profile 65 series tyres did not roar on coarse surfaces, nor thump when hitting potholes. Four up and with a boot full of luggage, it handled with elegance and ease. Power assistance, standard on all Mondeos, takes away steering effort but you still know what kind of surface the tyres are on.

The 90 horsepower 1.6 litre engine spins freely up to high revolutions in the gears but pulls smoothly in fifth from under 30 mph (50 kmh). The 1.8 litre, 115 horsepower Ghia I tried next felt much peppier, a 2.0 litre, 136 horsepower model more muscular still. The 1.8 and 2.0 litre Mondeos were enjoyable, even stimulating, to drive on the uncrowded D roads of the Var. There were times when I convinced myself the 2.0 litre could easily have been an Audi or BMW. But the 1.6 litre rode best; the least powerful, narrowest-tyred models always do.

Visibility is good over the short, downswept bonnet and the driving position is fine. The Ghia's soft leather seats with power adjustment could have come from a Pounds 30,000 car.

So does the Mondeo have no flaws at all? Not quite. A six-footer finds it difficult to be comfortable in the rear seat because head and legroom are meagre unless the person up front is short-legged. The overall gearing of the 2.0 litre models - only 20 mph/32 kmh per 1,000 rpm - is too low. Of course, it makes for great flexibility in town and vigorous acceleration in fourth or fifth - but who wants to cruise a 2.0 litre car on an autoroute at more than 4,000 rpm?

There is no rear-seat problem in the spacious Mondeo estate because the cushion is lower. I shall be surprised if the 2.0 litre cars do not go on sale with revised gearing.

Unquestionably, Mondeo is off to a good start. There will be sighs of relief at Ford from March onward as it begins eroding the gains General Motors (Vauxhall and Opel), Rover and Peugeot have made at the ageing Sierra's expense.

The latest Escort has persuaded some Sierra buyers to trade down to a smaller but nicely furnished and more modern car of equal performance. Mondeo may do the same with Scorpio users.

Imagine a really posh model with the US designed and made 2.5 litre V6 engine, electronically-controlled automatic transmission and traction control system, leather trim and air conditioning. It would match or exceed Scorpio standards of luxury and performance without the bulk - and it is coming before long.

So, too, are the four-wheel drive models, the turbocharged and intercooled 1.8 diesels and the estate cars.

All we need to know are the prices, due for release just before the Mondeo's public debut at Geneva in March. If they are as keen as whispers suggest, Ford's recovery prospects will be brighter than seemed possible a few months ago.

Correction (Published 26th January 1993) appended to this article.

BRITISH AIRWAYS staff might feel angry and humiliated by the publicity surrounding the Virgin Atlantic 'dirty tricks' campaign, but the company's customers show no sign of abandoning the airline.

At Heathrow airport yesterday Ms Yvonne Kirk, a retail consultant, said: 'If you've got a nine or 10-hour flight ahead of you, you're more worried about service than anything else.'

Ms Kirk, who was waiting to board her club class flight to Japan, said 'looking after myself' remained her top priority in choosing flights.

BA staff said they had received no complaints from customers about the events.

Ironically, it has been Virgin which has remained most nervous of publicity. Airport staff at Gatwick airport yesterday refused to allow Virgin passengers to be interviewed in the airport. According to the airline this was to avoid charges of 'profiteering' from the events.

Some BA passengers at Heathrow expressed disappointment with the airline's behaviour but said it would not affect their choice of carrier.

A senior manager flying club class to Chicago with BA said: 'There's been a lot of discussion among my colleagues about it. We are all surprised that British Airways would do this.' But she added: 'I normally fly British Airways, and I don't intend to change.'

Even customers of Virgin Atlantic interviewed at Heathrow said the 'dirty tricks' campaign would not stop them flying BA in future.

Mr Marvin Goodman, an American businessman waiting to board a Virgin flight, said he would continue to fly with BA 'whenever convenient'. He added: 'I wouldn't change my travel plans because of this kind of brouhaha.'

Ms Louise McDonald, a transatlantic economy passenger with Virgin, said there were still good reasons for flying BA. 'All the stories reflect badly on them, but you've got to look at the safety.'

Travel companies booking flights for corporate clients said they had no evidence that disaffected customers were preparing to abandon BA. So great is the airline's power in the travel business, however, that some felt they should say even that anonymously.

A manager with one large business travel chain said: 'We're uncomfortable talking about it. BA is a very big business partner of ours and we also have strong business links with Virgin.'

He added: 'This story might have caused a lot of controversy, but the bottom line is that BA have a very loyal customer base that they've developed over many years. It's bad publicity for them, but whether it will result in any downturn in their business I very much doubt.'

Mr Alan Coles, vice-president of business travel operations at American Express, said companies would hesitate before changing airlines. 'A lot of our customers have corporate policies with particular airlines.'

Mr Coles said American Express had had experience in the past of business travellers wanting to change airlines, but that was usually because of rumours that the carrier was in financial difficulty.

Mr Bruce Shepherd, the company's retail sales director, said: 'It's sad that we have two major airlines airing their differences publicly, but at the end of the day both of them have a good following. It's the fare level and the quality of service that determine what airline people fly.'

CORRECTION

SOME editions of the FT on Saturday mistakenly gave the impression that Mr Bruce Shepherd was retail sales director of American Express. Mr Shepherd holds this position at AT Mays.

ENTE Nazionale Idrocarburi, the Italian state energy group, has put Agip Coal, its coal production subsidiary, up for sale, Mr Franco Bernabe, the ENI managing director, said yesterday, AP-DJ reports from Milan.

Agip Coal, with a turnover of L550bn (Dollars 369m) in 1992, has mining operations in the US, Australia and continental Europe.

The Italian government is moving towards privatisation of ENI and has announced its intention to sell Nuovo Pignone, the mechanical engineering subsidiary

Earlier this month, the government asked ENI to draft a proposal for a stock market listing of its Agip and Snam oil and gas subsidiaries by the end of March.

HAFNIA, the troubled Danish insurer, has extended by a week the deadline before which potential bidders can make offers to buy the group because of the emergence of new interest.

Credit Lyonnais, the state-owned French bank, yesterday refused to comment on speculation suggesting that it was the new party considering a bid.

Potential bidders have until January 29 to submit their bids. Hafnia said the deadline had been extended to allow interested parties more time to conduct due diligence examinations.

Several insurers have expressed interest in buying Hafnia's Danish general insurance and banking business. Skandia of Sweden, Scandinavia's biggest insurer, yesterday confirmed its interest.

Mr Johan Bergenstjarna, Skandia chief of staff, said yesterday that Skandia was one of the companies conducting due diligence at Hafnia. Two Danish companies, ALM Brand and Codan, in which Sun Alliance of the UK has a 65 per cent stake, have expressed an interest.

Two other companies, Tryg Forsikring and Germany's Allianz, Europe's biggest insurer, have been mentioned as possible bidders, although Allianz said yesterday that it had 'no comment whatsoever on such rumours'.

Hafnia suspended payments to its creditors last year, after sustaining heavy losses in its portfolio of investments. The group owns nearly 34 per cent of Baltica, a rival Danish company, and 14.8 per cent of Skandia,

Mr Steen Parsholt, Hafnia executive in charge of selling off the company's activities, told Reuters there had been great bidder interest in taking over the insurer.

Hafnia's UK life insurance operation, the Kendal-based Prolific, was sold late last year to Scottish Provident, the mutual life insurer.

Transamerica Corporation, the large San Francisco-based insurance and financial services conglomerate and Sedgwick, the London-based insurance broker, are to pump Pounds 12m (Dollars 18.24m) into their jointly-owned London market insurance subsidiary, River Thames Insurance.

The cash injection, which is in proportion to the two companies' equity holdings, increases the net worth of River Thames to Pounds 26m.

Transamerica and Sedgwick respectively own 51 per cent and 49 per cent of the group.

River Thames will adjust its strategic direction to focus more tightly on specialist and treaty reinsurance business.

Pre-tax losses at River Thames amounted to Pounds 9.5m in 1992 and Pounds 3.6m in 1991, with underwriting losses jumping to Pounds 16.4m from Pounds 10m.

Premium income increased to Pounds 90.7m in 1992 from Pounds 85.4m in 1991

THE Angolan government has offered to hold immediate peace talks to end a resumed civil war against the Unita rebel movement after suffering a series of military reverses, Reuter reports from Luanda.

It remains unclear however whether the rebels will attend.

Diplomats said Unita had taken an oil platform offshore from Soyo but would free 17 foreigners held since the guerrillas captured the town, Angola's second most important oil centre, on Tuesday.

State radio said the government put forward a five-point proposal for talks to be held today in Addis Adaba, giving into Unita demands for political as well as military matters to be discussed at the meeting first proposed two weeks ago.

The proposal called on Unita to respect May 1991 peace accords, honour an immediate ceasefire, accept the results of September elections, allow the free circulation of people and goods and respect the UN role in the country.

But Unita, which scuppered earlier negotiations by setting last-minute conditions, said it was not given enough time to prepare for the talks, which the government said should be organised by the United Nations. 'Unita welcomes the talks that will begin soon in the Ethiopian capital under the auspices of the United Nations,' '' Unita's Washington office said.

'Unfortunately, the fierce fighting in Huambo and the government's massive indiscriminate aerial bombardments makes it impossible to assemble our delegations and arrange transport as quickly as we would like.'

Unita and the government signed an accord in 1991 ending 16 years of civil war in the southern African country which gained independence from Portugal in 1975.

But fighting resumed in earnest this month after Unita rejected the results of September elections and took control of 70 per cent of the country.

Diplomats said the government was apparently on the defensive after the loss of Soyo and its inability to take Huambo, Unita's headquarters in the central highlands, in two weeks of heavy air and artillery raids.

JOHN FAIRFAX Holdings, the Australian newspaper group, which is 15 per cent-owned by Mr Conrad Black's Daily Telegraph group, expects pre-tax profits of ADollars 105m (USDollars 72.4m) in the year to June, compared to earlier forecasts of ADollars 94m.

Share option prospectuses lodged with the Australian Securities Commission, said revenue was expected to be 3 per cent lower than the earlier forecast of ADollars 782m because of slow economic growth.

Fairfax said the forecast improvement in profit reflected reduced costs and lower interest charges.

The Daily Telegraph, meanwhile, is seeking government approval to lift its stake in Fairfax to 25 per cent.

THERE are two Robin Leigh-Pembertons, the man who is giving way to Eddie George.

There is the governor who is liked and admired by Bank of England executives and his fellow directors on the Bank's court, the man who codified the Bank's role, gave greater responsibilities to executives and made the Bank less secretive.

The other Leigh-Pemberton is a man described by a City banker as 'the most able gentleman farmer ver to be governor'. Mr Leigh-Pemberton has been criticised in the City and Westminster for taking too long to professionalise the Bank's supervision department, which monitors banks' soundness and honesty.

He was an unlikely choice for governor. His previous job, from 1977 to 1983, was chairman of National Westminster Bank, and no clearing banker had ever before been chosen as governor. When prime minister, Mrs Margaret Thatcher chose him for the post and earlier in his career he had been set on becoming a Conservative MP.

Nonetheless, on some of the main economic issues of the 1980s he took an independent line.

He strongly, though vainly, supported the former chancellor, then Mr Nigel Lawson, in his attempt in late 1985 to take the pound into the European exchange rate mechanism and was delighted when the pound did finally join the system in 1990.

The previous year he had alienated both Mr Lawson and Mrs Thatcher by signing the Delors report on economic and monetary union, which paved the way for the Maastricht treaty. His copy of the report is among his proudest possessions and it sits in the top drawer of his magisterial desk at the Bank.

However, his enthusiasm for the ERM may have clouded his judgment. The humiliating circumstances of Black Wednesday could perhaps have been avoided if the Bank had taken a less sanguine view of its ability to defend the pound.

His record on banking supervision is also patchy. The need for more professionalism in the supervision department was made clear by the collapse of Johnson Matthey Bankers in 1984. The Bank had ignored a series of warning signs. The Bank then succeeded in upsetting Mr Lawson by omitting to tell him that it was injecting Bank funds into JMB, causing him inadvertently to mislead the Commons.

The final chapter of the JMB affair was less unsatisfactory. The Bank eventually recovered all funds put into JMB and the supervisory department became more effective following the 1987 Banking Act.

Probably the supervision department's greatest achievement was during the onset of the 1989 recession when it prevented the collapse of a string of small and medium-sized banks, which were put at risk by an escalation in bad debts.

However, it faced criticism for failing to detect the widespread fraud at the Bank of Credit and Commerce International, the corrupt international bank, until early 1991. The recent government inquiry into BCCI by Lord Bingham concluded that the Bank could have been more methodical and aggressive.

Mr Leigh-Pemberton regards the attacks on him in the press and parliament over the Bank's supervision of BCCI, which was closed in mid-1991, as the most stressful period in his Bank career. On the other hand, he has played an influential role in harmonising the bank regulations of different countries.

In 1986, together with Mr Paul Volcker, then chairman of the US Federal Reserve, he initiated the negotiations which led to the Basle international standard on banks' capital adequacy ratios.

Mr Leigh-Pemberton was on the point of retiring after only eight years in the post, but decided to wait until after the last election. He thus had to contend with both BCCI and Black Wednesday. If he was hoping for a gentle end to his career, he has been sorely disappointed.

MR EDDIE GEORGE picked up his nickname of 'hard Eddie' for his unstinting efforts to secure price stability.

Last night, in a brief statement welcoming the appointment, Mr Norman Lamont, the chancellor, said he had 'made clear to the new governor that his central responsibility should be to support the government in our determination to bring about a lasting reduction in the rate of inflation'.

The statement encapsulated the relationship the chancellor expects to have with the top man in Threadneedle Street after he takes over in July. Mr Lamont (if he is still in Number 11 Downing Street) will be on the same wavelength as Mr George about the Bank's main policy goal.

By recounting the chancellor's instructions to Mr George, the statement also made clear there is no possibility under this government of the Bank becoming independent so long as there is no move to a single European currency.

But that does not mean that the Bank will not face economic policy challenges, and possibly tensions with the Treasury, during Mr George's five year term.

Behind the windowless curtain wall that contributes so much to the Bank's aloofness and mystique, the Bank's court, or board of directors, has already started a debate about its future.

This will have to consider how much priority to give to price stability and how much to the Bank's other tasks such as safeguarding and developing London's financial markets, supervising the banking sector and giving some protection to industry in times of trouble.

On the question of supporting the government against inflation, Mr George will take over an institution that already has aspirations to play a more prominent role in policy making.

Next month the Bank will publish the first of its quarterly reports on inflation that form part of the more open conduct of monetary policy that has followed sterling's departure from the European exchange rate mechanism.

Mr Robin Leigh-Pemberton, the present governor, has promised that these reports will 'put the Bank's professional competence on the line'. They will not be restricted to a discussion of the past but will cover likely future developments to produce a 'wholly objective and comprehensive analysis of inflationary trends and pressures'.

It is easy to imagine circumstances in which such reports could bring the Bank into conflict with the government, so long as the chancellor and Treasury call the shots on interest rate changes.

Mr Lamont is no doubt sincere in his determination to bring underlying inflation down to between zero and 2 per cent by the end of this parliament.

But will chancellors or prime ministers always be so high minded, particularly if an election is looming?

Mr George will also become the UK's representative on the European Community's committee of central bank governors. Although the future of the EC's ambitious project for economic and monetary union has been under a cloud since the September crisis that saw sterling and the lira quit the ERM, the governor's committee is pushing ahead with work on Emu.

As the committee considers a future Europe-wide monetary policy, the challenge for Mr George will be to ensure that he can prevent moves that might undermine London's role as an international financial centre.

His expertise on financial markets will be an undoubted asset that should offset any difficulties arising from sterling's position outside the ERM.

YESTERDAY'S appointment was welcomed by central bankers and government officials in continental Europe as a sign that the Bank's stewardship would pass into a safe pair of hands.

One central banker in continental Europe said the British government was 'setting a very high store by real professionalism'.

As a man with a discreet presence on the international financial circuit for more than two decades 'Eddie knows his interlocutors well,' the central banker said. 'There is high regard for his professional capacity and his ability to communicate. And he's quite a good diplomat.'

Mr George's appointment appeared likely to win support in Washington, where he is viewed as the official at the Bank who showed the most awareness of problems in the Bank's handling of BCCI.

MR EDDIE GEORGE'S appointment was given a generally warm welcome by City economists, who acknowledged his reputation for taking a hard line against inflation in the UK in recent years.

Mr John Shepperd, head of bond research at SG Warburg, said Mr George had a reputation in the City as a hardliner on monetary policy who would give the battle against inflation top priority. 'He may be very cautious about easing interest rate policy,' he said.

Mr Keith Skeoch, chief economist at James Capel, also referred to the governor-designate's reputation as a hard man on monetary policy, saying that there should not be any doubts about his credibility in fighting inflation.

But he added: 'The problem at the moment is knowing how much independence the Bank will have in formulating policy. The really important question is still whether the government will stick to its anti-inflation objectives.'

Several economists said Mr George's strong understanding of financial markets would add to the Bank's credibility at a time when it has a high profile in currencies and gilts.

Mr Skeoch said: 'The new governor has been responsible for gilt market operations at the Bank, and that is an important experience to have had at a time when the issue of government funding is so high on the agenda.'

Several economists suggested, however, that Mr George is a technocrat who has made his career at the Bank of England, and that this may make him too secretive about the nature of monetary policy.

Mr Peter Spencer, chief economist at Kleinwort Benson, said the incoming governor was very resistant to having visible indices of monetary policy. 'He is the sort of person who wants to conduct policy in a highly discretionary, judgmental way,' he said.

City analysts were uncertain - and divided - about Mr Rupert Pennant-Rea's appointment as deputy governor. One senior city economist said the new deputy would have a large say in the presentation of policy, while another claimed that he had never heard his name.

THE BANK of England's powers are greatest in two areas which normally attract very little public interest - and about which Mr Eddie George talked only in passing yesterday.

These two areas are defined in the Bank's statement of principles as: Preserving the stability of the banking system through the work of the Bank's supervisory division operating under the 1987 Banking Act;

Encouraging the competitiveness and efficiency of markets in the City of London.

There has been a widespread debate in the City and in Westminster recently about whether it is appropriate for the Bank to retain these roles.

The Bank's effectiveness as a supervisor has been called into doubt by criticism of its performance in monitoring the activities of the Bank of Credit and Commerce International, the corrupt international bank which was closed in 1991.

Lord Bingham's report said the Bank should have been more aggressive and methodical.

In response the Bank has set up a specialist investigations unit and a legal unit within the supervision department, both headed by outsiders.

Mr George has never worked in the supervision department and therefore escaped criticism in the Bingham report. He said yesterday that for now he perceived there was a strong case for retaining the supervisory functions within the Bank.

However, his replacement as deputy, Mr Rupert Pennant-Rea, argued forcefully in a recent Economist editorial that the supervision department should be separated from the Bank.

Some bankers believe that if the supervision department were separated from the Bank, it might adopt a tougher approach to the banks it regulates.

They also say there is an argument for streamlining the supervision of banks with the supervision of other financial institutions, now carried out by the Securities and Investments Board and several self-regulatory organisations whose functions are under review by Mr Andrew Large, SIB chairman.

There have also been concerns among some bankers and regulators that the Bank is often reluctant to take punitive action against leading City institutions for fear of damaging the City's reputation.

They have argued that the Bank's effectiveness as a supervisor is reduced by its allegedly conflicting goal of promoting the efficiency of London markets. Critics feel there is only a fine line between encouraging the efficiency and effectiveness of markets on the one hand and acting as a sponsor of the City as a place to do business. In practice, the governor has often played a public relations role on behalf of the City. Mr Leigh-Pemberton has for example campaigned vigorously for any future European Central Bank to be located in London.

Mr Pennant-Rea's chief argument for separating the supervisory department is that the bank would suffer from a severe conflict of interest if it were given independent powers to set interest rates.

The argument is that a central bank's responsibility for ensuring the soundness of banks might deter it from raising interest rates to combat inflationary pressures, if it feared doing so would damage commercial banks. However, most Bank executives are convinced that such a conflict is most unlikely in practice.

On the other hand, Mr Pennant-Rea points out that most independent central banks, such as Germany's Bundesbank, do not have direct responsibility for the supervision of banks. He believes a narrowly focused central bank is a more efficient central bank.

THE chairmen of two Commons committees are considering calling for a full inquiry into Civil Service standards of conduct and impartiality following the payment of Pounds 4,700 of public money towards the legal fees of Mr Norman Lamont, the chancellor, in evicting a tenant from his London house.

The inquiry idea is floated by Labour MPs Mr Giles Radice, of the Civil Service sub-committee, and Mr Robert Sheldon, of the public accounts committee, tonight on BBC2's scrutiny programme.

Mr Radice says: 'It is very likely that we will proceed into a full inquiry into the relationship between ministers and civil servants and the conduct of civil servants.'

CORRUPTION and malpractice on an 'unprecedented' scale have cost the south London borough of Lambeth upwards of Pounds 10m, according to a confidential report by Mr Herman Ouseley, the council's chief executive.

The report is a catalogue of work done without proper authority, unauthorised redundancy payments, overcharging by the council's direct-labour organisation and overcharging by former council employees brought in as sub-contractors by the organisation.

Some cases uncovered involve double charging. The most serious cases involve the borough's housing department.

The findings of Mr Ouseley's report may be investigated by the Serious Fraud Squad, whatever action the council itself takes.

The report, debated by councillors at an emergency meeting last night, suggests that police be called in and recommends that an independent enquiry be established. It also raises the issue of disbanding the direct-labour organisation and putting its services out to tender.

The allegations involve officials, council workers and contractors and go back more than 10 years.

Throughout most of the period in question Lambeth was under the control of a leftwing Labour administration.

Lambeth's finances have long been in a critical state. It has the highest poll tax in England - Pounds 425 after capping - and more than Pounds 157m outstanding in uncollected rents, poll tax, and rates.

Mr Steven Whaley, the council's Labour leader, called for a 'no-holds-barred' inquiry by a leading barrister, but conceded that the council had not been as 'vigorous and vigilant' as it should have been.

Mr Keith Fitchett, Liberal Democrat leader, said the report reflected 'a complete breakdown of managerial control in Lambeth, arising from the . . . debilitating relationship between the Labour party and local government unions.'

Mr Peter Evans, deputy leader of the council's Conservative group, called the report a 'whitewash' and said it was 'the tip of the ice-berg'.

Mr Jack Straw, Labour's environment spokesman, said he wanted 'strong and effective action to deal with the quite appalling abuses revealed by this report'.

'We expect to see decisions taken quickly to ensure that these abuses are never allowed to happen again.'

ISRAELIS yesterday got the news they had been waiting for all week. It was not about Iraq, or the Palestinian deportees crisis. It was the naming of the 'other woman' in a scandal which has engulfed Mr Binyamin 'Bibi' Netanyahu and threatened his powerful bid to become leader of the rightwing opposition Likud party and, perhaps, Israeli prime minister.

The scandal, inevitably dubbed 'Bibigate', is much more than a tabloid potboiler over Mr Netanyahu's self-confessed adultery. He himself has made it a central issue in his campaign to succeed retiring former premier Mr Yitzhak Shamir as party leader in March.

Mr Netanyahu, a former junior minister, is best known as Israel's high-profile spokesman during the Gulf war. He says an alleged attempt by Likud rivals to blackmail him over an extra-marital affair symbolises the corruption within Israeli politics which he means to end in a new era of American-style open democracy. His opponents counter that his accusations belie an erratic man who they say is consumed only by personal ambition.

The scandal emerged when Bibi , as everyone calls Mr Netanyahu, appeared on television to announce that his wife Sara had been telephoned with a threat to make public a videotape of Mr Netanyahu in a 'compromising romantic situation' if he did not withdraw from the leadership election. Mr Netanyahu admitted to an affair which he said had ended, but denounced the alleged blackmail as the work of supporters of an unnamed Likud rival who, Bibi said, surrounded himself with criminals. He reported the issue to the police, who are investigating the blackmail allegations.

Yesterday, newspapers fuelled the row when they revealed that the woman in question was Mr Netanyahu's former public image adviser whose husband is now seeking to divorce her, citing her relationship with Mr Netanyahu.

Mr Netanyahu's blackmail accusation was assumed to be aimed at the camp of Mr David Levy, the former foreign minister. Mr Levy dismisses the allegations as preposterous. His supporters say Bibi was angered that Mr Levy, in a tireless round of appearances at private events such as marriages, bar-mitzvas and circumcisions, had registered more party members for the leadership contest than Bibi. The outburst, they say, was an attempt to damage Mr Levy.

Both Mr Levy and the other main Likud candidate, the po-faced Mr Binyamin Begin, scorn Mr Netanyahu's Americanisation of Israeli politics, with his well-financed, highly-personalised public campaigning.

But Mr Netanyahu, educated at the Massachussetts Institute of Technology, is far from beaten. His approach to politics does appear to be in tune with modern Israelis. He has several times been voted the country's most desirable man. Yesterday, a poll put him, at 34 per cent to 28 per cent, ahead of Prime Minister Yitzhak Rabin in public popularity and streets ahead of both Mr Begin and Mr Levy.

'I believe I will become prime minister. My self-confidence is untouched,' Mr Netanyahu said in a newspaper interview.

Police were hunting a security van driver who disappeared with a reported Pounds 1m in cash. The guard vanished during a delivery in Felixstowe, Suffolk, and his van was later found empty.

THE PRESS Complaints Commission, so trenchantly rubbished by Sir David Calcutt's report on press and privacy, seems still to show signs of unintelligent life. This week it invited Prince Charles, the Prince of Wales, to complain to it about the publication of tape recordings alleged to be between the heir to the throne and Mrs Camilla Parker Bowles.

The Prince, of course, will do no such thing. His advisers over recent years may not have been the most brilliantly perceptive of their generation of Sandhurst graduates but even the most inbred of equerries is surely not so moronic as to plunge the Prince voluntarily into further controversy with the press.

It is, besides, condescending of Lord McGregor, the accident prone chairman of the Press Complaints Commission, to imply that the Prince and his staff would not already have considered and rejected such a suicidal course of action.

They had decided months ago, when the Daily Mirror first revealed the existence of the tapes, that to take any action against newspapers considering publication of them, on grounds of an invasion of privacy, would be to acknowledge that the tapes were genuine. For it is not far-fetched to suggest that most ordinary people - that is, those who do not write for or run newspapers - regard what they read in the tabloid press as fantasy. Often hugely enjoyable fantasy, but fantasy nonetheless.

The coverage of the Royal family in particular has come so much to resemble a soap opera, that most readers will be too bemused and confused to know what is real, what is based on reality, and what is sheer fiction.

The soap opera effect is greatly enhanced by the press's increasing tendency to cover the lives of fictional television characters as if they were real people. This week even the serious broadsheet press carried on their news pages reports of the fate of a an invented television detective called Chief Inspector Morse. As for the tabloid papers, they had whole pages devoted to convincing their readers that, somehow, Chief Inspector Morse is a real person, rather than just a lucrative part of the repertoire of the actor John Thaw.

This tendency of the press to write about television characters as if they were real people is merely an exploitation of popular wishful thinking. We have always warmed to the story-teller's art of confusing fact and fiction. The success of such long-running radio series as The Archers is precisely because many listeners regard the script-writers' inventions as the dialogue of real people, overheard, as if through a particularly porous neighbour's wall.

The Prince of Wales's advisers should take heart from this phenomenon. Indeed so should the whole Royal family. They should - if they do not already - recognise that there are two public views of them, coexisting, but mutually contradictory.

First, there is what the public see at Royal occasions: processional, full of pomp and circumstance, immaculately choreographed by centuries of tradition. This looks and is real (indeed the public can go and watch it) even though it is denounced by such Labour MPs as Jack Straw and Marjorie Mowlem as out of place, not of this century.

Second, there is the Royal family as it is written about in the popular press. This is not real, because it is not tangible, it does not correspond to what we see of the royal family on our television screens, in officially sanctioned programmes such as Elizabeth R. Such programmes are denounced by the new realists as a public relations gloss, a deception upon the public. But they are far more powerful in forming the public image than any amount of hostile investigative journalism.

Newspapers are right to pander to the television image of Chief inspector Morse: they know that the public believes what it sees, not what it reads. So the Prince of Wales is right to steer well clear of the Press Complaints Commission. That is part of the world of fantasy which has not got the power it thinks it has to take away his right to the throne. Instead he should continue to stick to processions, grand gala openings, and polo. That is the real world, or at least the one we all want to believe in.

Dominic Lawson is Editor of The Spectator.

NATIONALITY, race, religion: sometimes these labels seem to serve only as a pretext for murder, or for war.

Mebrura is a Moslem, her husband Majo a Serb. They are well-educated, middle-class refugees from Sarajevo, the besieged capital of Bosnia- Hercegovina.

Mebrura Muminovic was born in Banja Luka in northern Bosnia, has an Arab name and comes from a Slav family that converted to Islam hundreds of years ago under the Turkish occupation. She has visited a mosque only once. She used to think of herself as Yugoslav. Now she calls herself Bosnian. Emotionally, she feels English.

As a child she was required to declare her race: Serb, Croat or undecided. 'I came back from school and asked my father: 'What shall I say?' He said: 'Who do you sit with?' I said: 'Duna, a Croat girl.' So I said I was Croat. When I was 12 they asked me again. My mother said: 'Who are you sitting with?' I was sitting with Svetlana, so I wrote down 'Serb'.

'Finally we were able to call ourselves Yugoslavs. So I became Yugoslav for the rest of my life. I couldn't say I was Moslem because that was a religion and we weren't religious in any way.'

Her husband interrupted. 'Moslem is an unhappy name. You could never have found a more tolerant version of Islam anywhere in the world than in Bosnia. These people are Slavs. They are not descendants of Turks. They are as pure Slavs as you can be in the Balkans. And all the Moslems, or most of them, consider themselves to be part of Europe.

'But a terrible thing could be taking place. Feeling betrayed, feeling left alone for slaughter, the previously docile Moslems could really become what is called fundamentalist.'

Majo Topolovac was born in Sarajevo. The couple met there while working for Bosnian television. In 1969 he secured a four-year contract with the BBC World Service in London, where the pair married and where their two children were born. Because of that, they were able after returning to Sarajevo to evacuate their children in 1991. Mebrura, learning she was on two death lists, escaped last April. Majo, after months living in the TV building under shell and sniper fire, where he filed over 100 reports for the western media, secured a UN pass last August.

Today the warring parties are due to meet again in Geneva to discuss the proposed cantonisation of Bosnia-Hercegovina along ethnic and religious lines. For Mebrura and Majo Topolovac, however, this is an ex post facto solution. The civil war, they say, was not caused by racial or religious tensions: those were merely the instruments deployed, with the help of sycophantic journalists, for power-grabbing by a corrupt and opportunist ex-Communist clique.

The couple are vociferous in their analysis of the causes of the Yugoslav bloodbath but they seem helpless to comprehend its brutality. They concede, however, that history played some part.

Majo said: 'This is what I call the grandfathers' war. You have grandfathers, especially in Serbia, with their grand- children on their knees whispering in their ears: 'We have to pay them back, these Moslems, these Turks, these Croats.' It's their distorted view of history, their unfulfilled hatreds which they learned from their own grandfathers.'

His wife said: 'It all really depended on the way you were brought up. In my case, I was told by my mother that her parents were killed in front of her eyes by the Ustashe (Croat fascists) - but I was told only when I was 25 or 26. She could have brought me up hating Croats. She could have brought me up religious. But she didn't'

Majo said: 'On my father's side, 42 males were killed in the last war, the youngest a child of two and a half, mostly by Ustashe but also by Chetniks (Serb nationalists). That was because my family were anti-Nazi, anti-fascist - not really pro-communist but pro-socialist.

'Yet I was never brought up to hate. I was not told that Croats killed my father: it was the Ustashe. It's very important to draw this distinction between ordinary Serbs and these extremists. Even if 100,000 Serbs are involved in this war, what about the other 9,900,000 who are not?'

Ethnic tensions were whipped up by propaganda, said Mebrura, in what she called a 'media war'. Objectivity was abandoned, journalists took sides, and the public was fed a diet of preposterous lies - for example, that Moslems had been feeding Serb babies to the lions in Sarajevo zoo. Some of these journalists, Mebrura said, should be tried as war criminals.

So who started the war, I asked?

'Ask yourself who hopes to gain from it,' Majo said. 'The old opportunist members of the Communist Party. It was the only way for them to stay in power.'

It was an opportunist war exploiting a peasant mentality.

'During the shelling of the water queue in Sarajevo, one magnificent old man shouted up to the hills in Serbo-Croat: 'You peasant]' He didn't despise peasants as such, what he meant was this mean mentality that allows you to shell even a water queue.'

'It's what rural life can do to civilised people,' said Mebrura. 'You call it a civil war. Actually it is a war by uncivilised people against civilised people, by peasant, illiterate crooks and gangsters attacking normal, intelligent, civilised people.'

Her husband twisted his head to the side and drew his hand across his throat: 'They are peasants who kill people like killing pigs. In fact, they are trained to kill like that.'

Mebrura and Majo Topolovac may be accused of having a partial view. They are a sophisticated and versatile couple. Outside her radio and television work Mebrura has trained as an actress and fashion designer and she paints in her spare time. Majo has written plays and won prizes for his children's stories.

They were both admirers of Tito, though not practising Communists.

Mebrura said: 'To my mind the only mistake Tito and the Communist Party made was that after the war we should have all declared ourselves Yugoslavs and had our religions if we wanted. It was ridiculous to have to declare your nationality as if it was equivalent to your religion.'

Are you sorry Communism collapsed?

Majo replied: 'No. I think it was a better alternative than this senseless killing. But no, it was a dead end - as practised there, anyway.'

They both agreed that war was made possible by the weakness of the federation after the 1974 constitution that gave republics virtual statehood. It had been launched by opportunist politicians and crooked businessmen as a cover for their corruption, and reinforced by the confiscation of some Dollars 12bn (Pounds 7.8bn) of hard-currency savings mostly accumulated by Yugoslavs working overseas.

Now they are in exile themselves and drawing the dole in a cheap flat in north London.

'I think I lived here in my previous life,' said Mebrura. Majo, always the more restless and talkative, chipped in: 'We really feel we belong here. We always looked on England as the Old Country. We felt emotionally English. We are terribly pro-British and pro-Royal family. Nationality is what one feels oneself to be deep inside. It's a matter of emotional choice, like choosing one's wife. You just feel it's her. We should never have left.'

I asked them whether, therefore, they understood the west's hesitancy about military intervention to break the siege of Sarajevo.

'It's totally incom- prehensible,' Mebrura said.

'In the beginning the situation was so clear that anyone in their right mind would have intervened. If they had silenced the artillery round Sarajevo last April or May that would have stopped the war.'

The Serb extremists had already lost the war, said her husband, because they were overstretched and under- manned. They were now hoping to buy time to gather themselves for the push against Kosovo, possibly Macedonia, and later against Albania and Bulgaria. That would draw in Greece and Russia, Turkey and the Islamic nations - we would see an 'Orthodox jihad' against Moslems and Catholics.

I pointed out that western governments were unwilling to risk their soldiers' lives in a war their electorates did not understand. Should our soldiers be ready to die under a UN flag?

Mebrura answered: 'Nobody likes that soldiers are killed, but soldiers are for that. That's why they have decided it's going to be their job. I wouldn't like any soldier to die, but yes, I think so.'

What has this whole experience taught you?

'I think this should be said,' Majo replied. 'Now I know that what is considered to be impossible is actually possible. No one really believed that such atrocities could take place.

'Now I know how thin this crust of what we call civilisation is, how thin and how fragile. We all thought it was impossible in Yugoslavia. We all think it's impossible in Europe. But Hitler was only 50 years ago.

'Civilisation is just thin ice and you can so easily fall through that ice into this murky and turbid water of mutual killing, which is endless if not stopped. This is the main lesson I draw.'

Mebrura was reflecting while her husband spoke.

She said: 'I am just saddened that cynicism overrules everywhere. I am pretty sure that 100 per cent of the world's politicians know exactly what's happened there. When I say cynical, I mean that for selfish or other reasons they don't do anything to help at least those innocent civilians. Yet how come they suddenly decide they have to intervene again in Iraq?'

Do you want to go back?

'No, I don't. It's not my city any more. How can I trust anyone any more?'

Do you have no feeling of guilt that you are here, safe?

'I don't feel guilt because here I can disseminate the truth, talk to ordinary people. Anyway, we had to leave. They would have killed us.'

Is there nothing for you to go back to even if peace is restored?

'For me not - apart from my family and friends. The country that used to be doesn't exist any more. They have destroyed everything - even our woods where we loved to go mushrooming. They have destroyed even our woods, our beautiful mountains.'

Majo spoke. 'It's not Sarajevo any more.'

You have no country left to love?

'You have answered it.'

UNTIL Tuesday, there was not a lot I knew about the European single market. Without exaggeration, the quantity or mass of what I did not know about the European single market was in danger of collapsing, under its own gravity, into a black hole, to go with all the other black holes that astronomers are discovering.

On Tuesday, however, there was an FT survey - The European Single Market - which set everything to rights. Wittily and authoritatively, it plugged the black hole of my ignorance with analysis, graphs and matter. One of the articles I enjoyed was a piece by David Marsh that sought to dispel anxieties about life in the new Europe.

It was couched in the form of 'assertions' and 'facts.' For example: 'ASSERTION: A Commission directive will oblige fishermen to wear hairnets aboard their boats. FACT: Untrue.' The writer (he happens to be a twin: a fact resonant with disconnectedness) then explained why this was untrue. All that is wanted is strict hygiene conditions at fish-processing plants, including the wearing of head-covers. Similarly, he gave the lie to the assertion that EC regulations require Christmas trees to sport regularly-spaced needles, or that the EC wants to outlaw the dye that gives smoked haddock its 'distinctive golden hue.'

All extremely jolly. Not to be outgunned, I decided to employ the astounding resources available to this column in such a way as to put the Marsh formula

of assertion and counter-fact to global and cosmological use:

ASSERTION: Readiness by the world's central banks, which hold 35,000 tonnes of gold, to sell some of this metal, is a bleak pointer for the gold price, currently rolling drunkenly at around Dollars 330 an ounce.

FACT: Untrue. Two months ago I sold Pounds 3,250 worth of gold shares. This important market indicator should loom as large on all graphs as Pheidias's chryselephantine statue of Zeus loomed at Olympia, before its removal to Constantinople, for it signals an imminent recovery in the gold price, perhaps of some magnitude.

ASSERTION: Italy's crack-down on the Mafia, plus efforts by the Rome government to control the budget deficit, overhaul the economy, eliminate corruption and initiate constitutional reform, mean that prospects are looking rosy for Europe's most stupid country.

FACT: Untrue. Italy cannot be salvaged. The barbarians are at the gate. Book your holiday now, before it disintegrates entirely.

ASSERTION: The French are becoming less selfish and more neighbourly.

FACT: Untrue.

ASSERTION: The arts are not in terminal decay.

FACT: Untrue. The arts are all washed up. Good music ended with Rahkmaninov. Picasso had his moments, but no one will ever paint a better picture than Botticelli's Primavera. Literature and architecture are sculling round in circles. From now on, the only worthwhile art will be that produced by computers.

ASSERTION: The eclipse of Soviet communism heralded the end of totalitarianism.

FACT: Untrue. With world population growth spiralling out of control, nations will indeed coalesce into Orwell's Eurasia, Eastasia and Oceania, with the apparatus of government in each of these blocs shared between the four great ministries of Nineteen Eighty-Four, Minitrue, Minipax, Miniluv and Miniplenty.

ASSERTION: Nasa's Seti programme - its Search for Extraterrestrial Intelligence - is proving a damp and costly squib. No alien radio transmissions have been detected and none can be expected, because Man is alone in the universe.

FACT: Untrue. Nasa has eavesdropped on thousands of alien conversations since Seti's launch last October, but is too terrified to admit it. The reason for Nasa's dread is its discovery that Earth is regarded as the pariah of the galaxy. Reason: Earth is the only planet in the Milky Way on which a warring, cannibalistic, drug-crazed, pig-ignorant and irredeemably criminal species devoted to xenophobic mass killing and the destruction of its own environment has ever reached the summit of the food chain. Anxious to help out, a group of alien civilisations has attempted to provide Earth with better leaders. John Major is a robot. But there are problems with his circuitry. Some of his wires are crossed. These civilisations have fonder hopes of the model installed in the White House this week.

IN A few weeks' time ten years will have passed since William Walton's death. It probably seems more: most of his major works, including the First Symphony, the Violin Concerto and Belshazzar's Feast, date from the 1930s and it is the style of that decade that one takes away so vividly from almost all his music - its cinematic sweep, its unabashed romance, the echoes of jazz, the violent premonitions of impending disaster.

This was the decade in which music in Britain might be said decisively to have broken with its insular past. Walton was the first to shake off conservatism and it might be thought that the international flavour of his music would have ensured an international following after his death. But that is not quite how it has worked out: apart from Previn and Slatkin, there are few conductors from overseas who get beyond the most obvious handful of Walton's works.

To that select group, however, one more can be added. Vladimir Ashkenazy has shown an unexpected willingness to forage in Britain's musical heritage during his years in London as a conductor, taking in a number of performances and recordings of Walton's music. To mark the composer's death he has put together two complete Walton programmes and, if the second is as good as the one on Thursday, they will constitute an important tribute from a non-British musician.

The main item was Belshazzar's Feast. This favourite work more or less selects itself, as Walton produced so few full-scale concert scores, but the performance had a panache that made it out-of-the-ordinary. When Solti conducted Belshazzar, he gave it a primeval violence worthy of Stravinsky; Ashkenazy reminded me more of Rakhmaninov's Symphonic Dances (1940) in the music's glorying of rhythm and orchestral glamour. It was a joyous performance, well supported by the Brighton Festival Chorus and John Connell, the bass.

Some very fine playing from the Royal Philharmonic Orchestra (resplendent brass, warm strings) was already presaged in the Suite from Henry V. Too much pastiche is incorporated for this to be regarded as valuable Walton, although the composer seems to have retained an interest in his film scores (I recall him making a special visit to see his Hamlet at the Aldeburgh Festival in the 1970s).

What ensured this first concert of the pair was an important event, as opposed to a merely enjoyable one, was the deeply-felt performance of the Cello Concerto, which came in between. To judge from the heady atmosphere they created from the opening bars - sultry evenings on Walton's Ischia perhaps, tempered by pensiveness and melancholy - Mischa Maisky, the cello soloist, and Ashkenazy would seem to have a hot line to Walton's unique sound-world. If the next ten years are to see a widening of Walton's popularity, this Concerto looks a good place to start.

Sponsored by NEC (UK) Ltd. Second concert of the pair January 30

MAX Stafford-Clark, the departing artistic director at the Royal Court, says that he had been thinking about performing King Lear there for a good five years. It is an intriguing idea and one can see why it was so long in gestation, for the Court, although the stage is very tall, is a relatively small theatre and Lear is by all conventional standards a very large play. Clearly the challenge was to find a new approach appropriate to the place.

Stafford-Clark has pulled it off. This is not the classic Lear of grand poetry and sweeping gestures. It is more a bourgeois soap than a regal tragedy. But for the first time in my experience it comes across as a cracking good story. The pace of the production is prodigious - it lasts barely more than three hours. And because of deliberately going down a notch or two in the social scale, the capacity to move is if anything enhanced.

There are some dramatic transformations of the stock version of the play. At the start Goneril and Regan seem entirely justified in their dislike of their father's habit of bringing 100 unruly retainers to their country seats. They want to get on with giving their dinner parties and running their homes in peace. A more subtle change is is that they are not remotely look-alikes, hardly even recognisably out of the same stable. Lia Williams's Goneril is svelte, blonde and notably well-dressed. Saskia Reeves's Regan plainly cares less about her appearance. But they are both enamoured of the same man: Edmund, the bastard son of the Earl of Gloucester, played with a northern Irish accent by Adrian Dunbar. Here is soap of a very high order.

Tom Wilkinson's Lear does not look like an old man, certainly not at the beginning. He is red-faced, has a large moustache and seems rather coarse, more a country squire than a king. This belies what is to come. Wilkinson plays the final scenes with Cordelia with magnificent pathos. By then, he has aged. The key to his character is that he seems genuinely to fear going mad. When he does it is the onset of madness that makes him first feel for other people. The 'poor, naked wretches' speech is the beginning of his understanding. Wilkinson takes the verse in his stride; he does not pander to it, but never squanders it. His triumph in the acting is that he is a distressed human being; the kingship is secondary.

There are some wonderful moments. The scene where Edgar leads his father to the brink of suicide over the cliffs of Dover can scarcely have been better done. The tension in what by now has become a thriller is breath-taking. Played by Iain Glen, Edgar has a claim to being the most outstanding actor in the production after Wilkinson's Lear.

Eccentricities crop up. The Fool is presented by Andy Serkis as a drag queen. If there is subtlety here, I missed it, though one has always wondered about Queen Lear and her influence on the family. With the line 'My poor Fool is hanged', the Fool's body is seen suspended from a rope high up in the background. Perhaps only fidelity to the text let the Fool be retained; it is the least satisfactory role in the Stafford-Clark interpretation.

The dress is spread across the 20th century to about the late 1950s: trench coats, British military uniform, green army jumpers and jodhpurs. Cara Kelly's Cordelia comes back from France kitted out like a colonel's lady on an afternoon's ride. There is no obvious reason for the wardrobe, except that they have to be dressed in something.

The thunder and lightning are terrific, using the height of the stage to the full, and there is an authentic whiff of cordite, guns being employed along side swords. In short, this is probably the most exciting production of Lear you will ever see. It is also the most enjoyable one of a play which, apart from some of the verse, I have always disliked intensely. Here paradoxically is Lear at the Court without the court, an experience unlikely to be repeated. Go]

Royal Court Theatre, (071) 730 1745

'BILL AND Hillary Clinton are going to trigger a cultural renaissance in this country from MTV (Music Television) to the most sophisticated arts,' said Ed Markey, Democratic Congressman from Massachusetts, at a Washington cocktail party on Wednesday night.

We will probably have to chalk up Markey's extravagant statement to inauguration-night ebullience, but there is an undeniable sense among those interested in America's cultural life that Clinton's presidency brings new hope for the arts in America.

'Bill Clinton has shown himself to be a person who's culturally aware and concerned, and I expect that his administration will bring new thinking about the National Endowment for the Arts (NEA). We've had many years of a suffocating environment for the arts, and I look forward to a change in attitude,' said Del Reisman, a screenwriter and President of the Writers Guild of America, West.

The past 12 years of Republican leadership have been at best indifferent, and at worst openly hostile, to the arts. Since Reagan took office in 1981, NEA funding has dropped 36 per cent. The last three years have been particularly embattled ones for the NEA as controversies over the funding of politically outspoken and sexually explicit art by such artists as Andres Serrano, Robert Mapplethorpe and Karen Finley have provoked a national 'art war' about what constitutes obscenity and appropriateness.

Little is known for sure about what Clinton's arts policy will be. The arts have not been at the top of his agenda during his campaign. Though Clinton advisors did work with the NEA during the transition, they did not issue a statement of arts policy. But Clinton's record on, and attitudes towards, the arts bode well for the country's cultural future.

Clinton and Gore's campaign platform included a promising, if pithy, statement on the arts, defending artists' freedom of expression and advocating government support of the arts through the NEA. Though their campaign initially opposed content restrictions for NEA-funded art, Clinton has equivocated on this point. He said in the October 1992 Equity News that, 'While I believe that publicly funded projects should strive to reflect the values that most communities share, I strongly support and will defend freedom of speech and artistic expression.' Just what Clinton defines as community values remains to be seen.

Speculations are flying about whom Clinton will appoint as NEA chairman. The position was particularly politicised last February when the Bush administration asked John Frohnmayer to step down from the chair and replaced him with staunch conservative Anne-Imelda Radice. Radice's use of her veto power on several gay-themed projects which had already received peer panel approval won her few friends in the arts community. She stepped down voluntarily this week with 'no regrets.' Longtime NEA bureaucrat Ana Steele will serve as acting chair until Clinton appoints someone to the position. Rumored to be under consideration are Yale School of Drama dean Lloyd Richards, chairperson of the Dayton Hudson Foundation Cynthia Mayeda, New York State Council for the Arts chair Kitty Carlisle Hart, actress Lauren Bacall, and FOB (Friend of Bill) Deborah Sale, who was a member of the transition arts team.

The NEA's total budget - Dollars 174 million in 1993 - is in Federal terms insignificant. But NEA grants are crucial to the life of arts organisations, particularly small ones, and breed more money: corporate and private funders view a NEA grant as a quality stamp and are more likely to lend their support to arts institutions that are NEA funded.

Clinton's record on the arts as Governor of Arkansas is fairly strong. Arkansas' state budget arts allotment is the seventh lowest in the country, but it has remained constant during the recession while other states have slashed arts budgets or eliminated them entirely.

'We're not the biggest agency in the state, but Governor Clinton kept in touch,' says Bill Puppione, Executive Director of the Arkansas Arts Council. 'There was a feeling among arts administrators that the Governor knew what was going on and that they had access to him,' Puppione says.

In its 1987 education reform package, instituted by a board that included Hillary Clinton, Arkansas added an arts requirement for high school graduation, one of the first American states to do so. Education and the accessibility of the arts, prominently mentioned in Clinton and Gore's campaign platform, are likely to figure in their national arts policy.

Beyond policy, the president has the opportunity to influence public opinion about the arts through his personal behaviour, and this is where Clinton is likely to make the largest impact. Cynics deride Clinton's sax-playing appearences on talk shows and at presidential galas as image-mongering, and those of higher brow consider his musical preferences - Michael Bolton, Kenny G, Fleetwood Mac - the aesthetic equivalent of McDonald's decaf. But Clinton's active interest in music has humanised him to the public.

And though some call Clinton's choice of an African-American woman, Maya Angelou, to read her poetry at his inauguration pandering to political correctness, he was the first President since Kennedy to include a poet in the inaugural ceremonies.

The Clintons led an active cultural life in Arkansas. They were subscribers and donors to Little Rock's Arkansas Repertory Theatre and hosted fundraisers for the theatre and other Arkansas arts organisations and Hillary Clinton was on the board of the state's largest ballet company.

Cliff Baker, Artistic Director of Arkansas Rep, says that the Clintons were known to creep into the balcony of his theatre on a Sunday night 'just because they wanted to see the show, not because they wanted to be seen.'

AFTER THE Controllers came the Director-General, though in Radio 4's Sunday afternoon debate Airing the Future he had only a brief innings at the end of things, his rival debaters being senior executives from both the BBC and independent outfits, with some members of the public. He must have heard much that he would not agree with.

He repeated what we should know: that the Corporation seeks the best talent, does not seek imitative work, is ready to adapt to changes in society; and he turned down a proposal made earlier by Joan Bakewell that the licence should be charged at 'a fair rate' of Pounds 140. The 24-hour rolling news was described by foreign correspondent Charles Wheeler as 'the worst idea yet'; Sir Robin Day, very cross, said it was one of the few good ideas the BBC had had. The DG did not deal with it.

Radio 4's Saturday night Classic Serials move from next week to Sunday afternoons (another good idea). Last Saturday we had Gun before Butter instead, about Inspector Van der Valk, more familiar on television, here played by Ian Hogg. It consisted mostly of a soliloquy by Lucienne (Sophie Thompson), whom Van der Valk reckoned to have killed her lover Stam (Roger Hume); there was little detection, just adventure and romance. Nicolas Freeling's novel was adapted by Philip Martin, who also directed.

Radio 3's Sunday play was another Stoppard adaptation from Schnitzler, Liebelei, now Dalliance. This too deals with honour among prosperous Austrians, but introduces a Schnitzler special, the guileless working girl. Fritz (Douglas Hodge) is dallying with Christine (Rachel Joyce), but more seriously, offstage, with a married lady of his own class, whose husband challenges him. The emotional acme of the plot comes when Fritz's friend Theodore calls on Christine to explain that Fritz has been killed in an 'accident'. The plot is trivial, but the comprehension of the characters makes it deeply moving, and the playing under Jeremy Howe was first-class, with Hugh Grant as Theodore and Hetty Baynes as Mizi, Christine's friend.

Nick Ward's Red Sky at Night (Radio 4, Monday) was a kind of adaptation too, though Ward (who also directed) says it was 'inspired' by DH Lawrence. (It was introduced by a reading of Lawrence's essay Hymns in a Child's Life). The tale tells how Alfred (Paul Copley) quarrelled with his wife Katherine (Julia Ford) because he spent their money on booze, then was killed in a pit accident. The direction called up most pictorially the mining world of Eastwood, where Lawrence came from.

The difference between poverty in Lawrence's day and our own was seen on Thursday in Octopus Boys, the first of Radio 5's series, The Collection. Lawrence would hardly understand it. What are these Giros? What is the YTS? Why are all these young people 'in care', whatever that means? How come they have flats on the council?

Well, it is not strange to us, and writer Judith Johnson has caught it adroitly. Mickey (Neil Anthony), 17, on the run from a hostel, lives off Sharon and Kelley, who live off the dole; but what he wants is work on the Octopus ride at a fair. At the fair, he and Sharon (Sunetra Sarker) find Pounds 2000 of the Octopus management's money, and steal it. 'We could go to Barbados,' Sharon proposes. But the boys from the Octopus catch up with them. No happy end: how could there be? The vigorous production is by Martin Jameson.

Radio 1's refreshing social concern was reflected in Saturday's Pink Pop, where the involvement of gay people in pop music was displayed in song and story. Presented by Laurie Pike, this was not one of their great investigative numbers, but honest, interesting, fair and fun. No 'helpline' attached to this one.

CONTEMPORARY jazz has split into two distinct camps (leaving aside fusion, trad and similar afflictions for the moment). In the one, young musicians like the Marsalis clan, trumpeter Roy Hargrove, and even aggressive saxophonist Steve Coleman all continue a jazz tradition that calls for standards, or their own nervy compositions that could pass for standards, to be interpreted in the conventional bop idiom.

In the other camp, lying more languidly, are chamber groups led by people like saxophonists John Surman, Jan Garbarek, or drummer Paul Motian, who have wider terms of reference. They take the essence of folk tunes, pop songs - and sacred standards - and perform on them a musical chromatography. Guitarist Bill Frisell belongs to this group and is more often heard gently dissecting the likes of Bill Evans alongside Paul Motian. In his own latest collection of covers, where Dylan collides with Madonna, Ives with Sousa, he has taken deconstruction toward its limit, however. So hard to swallow are some of the selections that purchasers of the new album, Have a Little Faith (Elektra Nonesuch 7559-79301), are well advised by its title and need to persevere.

Set in a quartet consisting of Kermit Driscoll (electric bass), Joey Baron (drums) and Don Byron (clarinets) for this UK tour, Frisell's trademark notes, bent by an assortment of pedals, work hard at suppressing the message of familiar tunes. He releases component parts of a melody tortuously, creating a tension which is then relieved by a slashing power chord and more snatches of the familiar. I never imagined I would be glad to hear Madonna's 'Live To Tell' coming through the ether of improvisation.

Vague and fogeyish, Frisell treads this precarious line determinedly, the rhythm section clattering about pleasantly behind and dreadlocked Don Byron squeezing in only occasionally with leaping clarinets. Opening at the QEH with Aaron Copland's Billy the Kid suite, he moved jauntily through the Americana of Muddy Waters, Dylan and Charles Ives, the dislocated arrangements and earnest knob twiddling giving alternately comic and poignant meaning to 'classics'. The resulting abstraction is as fresh and intelligent as that of his peers in the other camp - but is it still jazz?

Tour continues to Dartington, Cambridge, Southampton, Leeds, Birmingham andSheffield. Sponsors: Arts Council Contemporary Music Network

COULD IT happen at last? Is the Arts Council about to raise its chopper and axe the grants of some of the 150 clients that still look to it for sustenance?

It is one of the vagaries of arts funding in the UK that, despite frequent huffing and puffing and the occasional minor sacrificial victim, once you are in with the Arts Council your organisation is supported for life. The Regional Boards are more vicious, especially to community projects, but the leading theatre companies, dance troupes, art galleries and orchestras never suffer more than the occasional frozen grant from the Council.

But, by a nice irony, the platitudinous strategy document finally produced this week, A Creative Future, is to form the basis of - guess what - a radical strategy. Within three months the Council will decide its funding priorities on the basis of the guidelines mapped out in this document. It promises to go for quality rather than quantity, and to scythe off not just individual client companies but whole areas of funding, while lavishing more resources on key objectives.

This will not mean the end of literature, touring opera, or regional theatre. But it could mean a system which rewards creativity, educational work, access - all the new buzzwords - and hits hard at the routine potboilers. Basically, the controversial decision of the Eastern Orchestral Board to fix its grants to concert promoters in line with the popularity of the composers programmed - a Pounds 450 grant if you put on Tchaikovsky, Pounds 1,000 for Mahler, building up to Pounds 2,000 for Harrison Birtwistle - will become the national template.

So, in theory, if the Royal Opera House, facing a growing deficit, plans more performances of Tosca, Carmen and Boheme in its 1993-94 season, it can anticipate a reduced grant. But since the Council thinks that Covent Garden is at last getting its act together, this is unlikely to happen. More likely victims are the orchestras and regional theatre companies which play safe with a diet of Beethoven and Ayckbourn.

What has happened spasmodically in the past - as in the reduction of the Council's grant to the RPO because it favoured programmes of popular classics which attracted big audiences - will become the norm. Arts groups with an impressive youth programme, or which commission new dance works, or tour round village halls, can expect more.

The Council has the advantage of a lower grant for 1994-95, down Pounds 5m to Pounds 220m,which can justify some pruning. Nothing has yet been settled, but the likely blueprint is more for living artists, less for dead masters. In May some unadventurous regional theatre companies or dance troupes might lose all their subsidy.

That is until the specialist panels, the vested interests and the local lobbyists start kicking up a rumpus and the Council backs down. There is also the chance that the Heritage Minister, Peter Brooke, who is being lobbied by his good friend, the Arts Council chairman Lord Palumbo to rescind the Pounds 5m cut, will deliver more cash for 1994-95. The eventual bloodletting is likely to disappoint Dracula.

The auction houses see no early end to the recession and are drastically reducing staff. Christie's did it in one foul swoop before Christmas; Sotheby's favours the gradual approach. Another 15 went in London this week. There is a sad case of shooting the messenger because the main casualty is Fiona Ford, a Sotheby's loyalist for 25 years, who resigned as head of the press office when her department was shorn of two staff. Casualties have been among support workers, but departures from the top echelons are expected. WITH Art 93 at the Business Design Centre in Islington (until Sunday), London at last has a contemporary art fair which can stand comparison with those in Chicago, Basle, Frankfurt and Madrid. It is also more populist than in the past, with decorative prints priced around Pounds 250 alongside grittier abstract sculptures costing Pounds 100,000 plus.

In a recession dealers take few chances, and anyone put off contemporary art by the lumpen choices for the Turner Prize can have their enthusiasm re-fired. The first buyer was dealer Leslie Waddington, who snapped up an Anthony Caro sculpture from Anneley Juda and a David Mach sculpture from William Jackson. He got a small discount - but, these days, so can you.

Also active was Unilever, which is showing its corporate collection on the upper gallery and adding to it all the time, buying a Martin Kane painting from Jill George for Pounds 4,000 and six works by Royal College of Art student Nicholas Morris for a total of around Pounds 1,200 from the Contemporary Art Society's Mini-market, where works start at Pounds 100.

But perhaps the most eye catching exhibit is Michael Roosen's stand, which displays 48 portraits by Zsuzsi Roboz of leading contemporary artists, including Hockney, Rego, Frink and Bacon. He insists on selling the collection intact, for around Pounds 160,000.

With the IRA making a pre-Christmas visit to the theatre too much of a drama for some last month, attendances in the West End in 1992 are likely to match, rather than overhaul, the 10.9m set the previous year. This is still some achievement, given the recession and the fact that 1991 produced the second best total on record.

But there are causes for alarm. After a good first half 1992 got progressively stickier and more seats than ever were sold at a discount. There are signs that private angels are less keen to regularly lose money backing plays and that producers are having to dip into their own bank balances to put them on.

But theatre owners, instead of being only interested in rent, are now considering themselves part of the play. The most striking commitment was by Maybox, owner of seven West End theatres, which agreed to cover the production costs of Sam Mendes' ambitious season at the revamped Donmar Warehouse which, because of its small size, can never be commercially viable. The success of his first production, Assassins, helped secure the Donmar Pounds 100,000 and a year's sponsorship from Carlton TV, which relieves Maybox of its burden.

ANTHROPOLOGY AND PHOTOGRAPHY 1860-1920 edited by Elizabeth Edwards Yale Pounds 19.95, 275 pages W EUGENE SMITH AND THE PHOTOGRAPHIC ESSAY by Glenn G Willumson Cambridge Pounds 55, 351 pages

CAN YOU trust a photograph? Do you believe that the camera never lies? Or is a photograph the most dangerous medium of all, apparently a straightforward image but one in fact selected and determined by the photographer's frame of cultural reference, and, as it is reproduced, consciously or unconsciously encouraging a social or ideological stance? Two exceptional new books on the history of photography address this question from different, but equally fascinating, backgrounds. Anthropology and Photography traces the creation and use of photographs in early British anthropology, and is worth buying purely for its abundant 19th century photographs of Fijian cannibals, Hiawatha-style chiefs, Congo dancers and the rest.

But its point is our changing evaluation of these photographs, which at the time were seen as objective documentation of inferior, exotic races but now demonstrate the prejudice and cultural conditioning of the age. So a soft-focus Samoan woman from the 1890s, her naked breasts garlanded with flowers, is a classic western male erotic fantasy not worlds away from Sarah Bernhardt on stage. South Sea Islands youths with limed blond hair and huge earrings are captioned 'dandies'. Saddest are six Batwa pygmies, kidnapped in central Africa, exhibited 'live' at the Hippodrome with 17 polar bears and some Scottish dancers, and so famous that they were invited to the House of Commons. The photograph of them dressed in children's sailor suits taking tea on the terrace with MPs is a giveaway of the 1900s anthropological belief that 'primitives' were in the 'childhood of mankind' stage. 'What did they think of the greatest Legislature in the world? What dim conception did they form of its purpose and work?' asked the photographer Benjamin Stone.

It is through such anecdotes, or case studies, that this book builds up a cumulative picture of the worldview that made colonial domination possible. In the Andaman Islands, an officer fascinated by 'junglees' ('wayward but attractive children') took stereotyped photos like 'Andamanese Shooting, Dancing, Sleeping and Greeting'. They were sent home doctored - for example bunches of grass were scratched on to the plate of a naked chief and his wife, both smoking pipes. Symbolic emasculation, but the photos helped the army learn more about the Andamanese, and its policy of subjugation worked: a final photo shows a dance celebrating Edward Vll as Emperor of India.

The interpretation of photographs in this book also tells anthropology's own story, from its start as an unreflective, patronising study of 'primitive' people to a self-conscious discipline examining meaning in any society. Several decades on, W Eugene Smith and the Photographic Essay is an account of the camera as political and social advocate, seen through the work of Life magazine's most famous photographer. Eugene Smith took shots for the human interest photo-essays that made Life a mass circulation, high-quality magazine. But he was also an absolutist and a driven man, formed by the Depression, when his bankrupt father killed himself, and by the moralism of his Catholic convert mother.

As a war photographer, he switched from warmonger (he wrote home about a knife 'good for Japs, underbrush or steak') to pacifist whose photos were so unrelenting about the human cost of war that the Pentagon censored them. At Life, as photo-essays like 'Country Doctor' and 'Spanish Village' show, he had a mission precisely of his time: to portray and improve life for the ordinary poor through a new type of intimate, immediate picture which showed everyday peopke working, eating, getting ill, giving birth.

But did he really photograph Everyman? With carethis book examines the genesis of specific photo-essays, from choice of topic through research to the selection of strongly interpretative images from a 2,000-negative contact sheet. The result was benign propaganda, finding the 'perfect' American example: the young and photogenic country doctor, his stoop, look, gesture implying exactly the mix of hard work, poverty, committed satisfaction; the Main Street, Anytown, setting which must also be picturesque (Kremmling beneath the Rocky Mountains was chosen). For Smith, the triumph was to portray a secular saint; for Life, to tell a human story with a topical health care angle; for 'Amerika', Life's Russian translation, to advertise, by cropping and centering and magnifying, the great American dream.

Gradually Smith's political mission clashed with Life's - in 'Spanish Village' he wanted to stop US aid for Franco - and he resigned, had breakdowns, died at 59 with Dollars 18 in the bank. But anyone interested in the social outlook that saw the rise and fall of 'Everyman' magazines like Life and Picture Post, and in the history of photographic journalism and how newspapers manipulate material, will enjoy this account of his life and work.

As Smith realised, the visual image is becoming our dominant mode of communication. But one reason it is so powerful is that most of us don't have the visual grammar to respond to it in the sophisticated way with which we dissect and interpret words. Both these elegant volumes are compelling and topical attempts to change that.

BALLETIC triple bills have not been popular with audiences for 20 years and more. The tradition has grown up among Western ballet-goers - and it is one entirely owed to the Royal Ballet's example in performing 19th century classics, and then finding in Ashton, Cranko, MacMillan, Bintley, choreographers able to extend the full-evening creation - that a 'real' evening at the ballet means a long dramatic work, involving all the resources of a company.

This nonsensical view has been accepted by ballet companies world-wide, driven by the box-office imperative. Major troupes trot out variously tiresome versions of the old war-horses, buy in evening-long works from other companies, and the public flocks. Smaller ensembles sell titles rather than ballets to their audience, and with little conscience offer shrunken and shoddy productions under familiar names. (I report, with unwavering gaze, that there is a version of Nutcracker currently on view in Europe which also involves elements from A Christmas Carol).

The triple bill, which once offered a range of balletic experience, a variety of dancing, a choice of choreography, a happy display of dancers' artistry in varied roles, flourishes only with New York City Ballet, where Balanchine's genius was expended in making a treasury of short pieces that remain the supreme example of classical ballet in our century. Elsewhere, box-office receipts will tell a tale of failing attendance for evenings comprising three contrasting works, no matter how great their merits. Prohibitive seat-prices mean that audiences will go for what they think are the big, safe, cast-iron productions. If it's swans, it must be good, is their motto. And, as these columns never tire of saying, the reverse is true.

The Royal Ballet has, with a bravery every ballet-goer must commend, made a serious effort in recent years to wean its public off swans and Veronese lovers through intelligent (usually]) triple bills. Much of the history and artistic achievement of ballet in our century is to be found in such works. The current Covent Garden programme of Apollo, Judas Tree, Symphony in C is a fine one - it will be on view twice next week - and it is in the main very well danced. (I record that, after the fashion of the one-time Nureyev circuses, advertisements announce that 'Irek Mukhamedov will dance at every performance').

Certainly Mukhamedov's presence - in either Apollo or Judas Tree - is reason enough to go. Both ballets gain in significance from his artistry. On Thursday, he was replaced as the Foreman in Judas Tree by Zoltan Solymosi. Solymosi's interpretation lacks the fervour that drives Mukhemedov's reading - it misses, as yet, something in emotional and dynamic ferocity - but it is a worthy account of the role. The revelation of the performance was Leanne Benjamin's appearance as the woman, a characterisation of extraordinary sexual and technical pungency. Each pose and provocative movement, the shifts between belligerent sluttishness and invulnerable dignity, were superbly understood and stated: the ballet seemed to be about the woman as victim - and ultimate victor - rather than about betrayal. It was a beautiful and piercingly credible impersonation.

Mukhamedov's view of Balanchine's Apollo at this performance was one which saw the role in a single span, and gave it emotional and physical momentum from first moment to last. He exposed the dramatic substructure of the choreography. He showed us the reason for every action by the young god, and without communicative fuss - nothing over-emphatic - he provided an armature for the dance action.

It was a reading more powerful, more dense, than any I have seen before. It would look out of place in New York City Ballet performance today, but this Royal staging does not aim for the speed or the purged clarity that is now the NYCB style in the piece. We are shown Apollo as drama rather than rite: and the choreography is rich and resonant enough to sustain both interpretations. As Terpsichore, Viviana Durante made an elegant, pure-toned debut.

About Symphony in C, most radiant of ballets, I am less happy in these current performances. Girls are being sent out to do women's jobs - ballerinas are in short supply at Covent Garden - and to do Balanchine justice, we must see diamond clarity and unforced grandeur. It is, nonetheless, a work of cumulative joys, and it ends an admirable triple bill on the happiest of notes.

This triple bill is given final performances at Covent Garden on January 27 and 28.

CHINESE ROUNDABOUT: ESSAYS IN HISTORY AND CULTURE by Jonathan D. Spence WW Norton & Co, Pounds 15.95, 400 pages

WHEN Montesquieu declared 'I believe that we will never completely understand the Chinese', over a century had passed since the first sustained western contacts with China. The admiration of the early visitors had been tempered by disillusion, but misunderstanding persisted. Despite the subsequent growth of Chinese studies and increased contact, misperceptions remain today.

This '400 year old history of confusion' is one of Jonathan Spence's favourite themes. In the first section of this collection of essays he discusses people who managed to penetrate the confusion - notably Sidney Gamble, a 20th-century sinologist and photographer - and others who, despite their efforts, were part of it: Montesquieu's Chinese acquaintance in Paris, Arcadio Huang; the Jesuit scholar and confidant of the Chinese emperor, Matteo Ricci; the 16th century Portuguese traveller, Mendes Pinto; and Andre Malraux and his literary contemporaries.

These are delightful and subtle portraits. Like Gamble's photographs, they catch 'the evanescent moment in which a particular face, a gesture, a juxtaposition of elements, comes to be more than itself and to speak for a whole time and culture.'

Spence rejoices in details - the size of Arcadio Huang's conjugal bed, for example - and unexpected explanations. Grammar, he suggests, was the cause of Ricci's initial happiness in China. On leaving India Ricci no longer had to teach Greek, a highly inflected language, and found the study of Chinese, which has 'no articles, no cases, no number, no gender, no tense, no mood', much more enjoyable.

But what distinguishes Spence is not his recognition of the complexity of Chinese culture, for others have accepted this. Rather it lies in his refusal to be baffled by China, having accepted that complexity is not a bar to understanding. These self-selected essays manifest his determination 'to think about China with precision . . . and to be fair and thorough.'

Confrontation with a new culture is a disorientating experience. The first few hundred years of Buddhism in China were marked by an attempt to ease understanding of the new religion by linking its ideas and practices with Daoism, an indigenous Chinese tradition. A similar process took place in the early years of Christianity in China, shown in Ricci's Buddhist robes and his retelling of Bible stories for Chinese consumption.

But later Buddhists and Christians realised that, in stressing the similarities with native systems, differences were often forgotten and an accurate understanding of the new religion was not possible. The cliches which abound in western literature on China are a result of trying to explain China in Western terms. Spence challenges the cliches and presents a more sophisticated view in which differences are not distorted or glossed over. Speaking of the values expressed by an elderly Chinese philosopher he writes, 'we may not accept or approve of them, but it is hard to deny that there was something truly worth saying at the centre of his being.'

Although the essays are grouped thematically rather than chronologically, those in the first section, on cross-cultural interaction, and the fourth, on post-1949 China, contain Spence's most recent and most confident work. While the portraits are enthusiastic, the tributes to his various teachers express respect and admiration for people who also refused to be baffled. The only piece in the other sections which rivals these in depth of feeling is 'Tiananmen', written after the events of June 4, 1989.

The remaining sections contain a miscellany of lectures and book reviews. They cover subjects as diverse as the cost of an imperial dinner, the 19th-century debate on whether to prohibit or legalise opium, and the importance of tradition in 20th-century political debates, displaying Spence's self-admitted and welcome 'hare-brained eclecticism' although lacking the sparkle of the rest.

In his essays Spence, like the 16th century Dominican friar Gaspar da Cruz, has sought 'those elusive elements that would give the complete picture of China'. Many others have done the same over the past four centuries. Spence, however, remains one of the few to realise the impossibility of the task.

JANACEK'S OPERAS: A DOCUMENTARY ACCOUNT by John Tyrrell Faber & Faber Pounds 25, 405 pages

JUST AS recognition in his own country came late to Janacek, so his reputation was slow to spread more widely. Outside Czechoslovakia his growth to popularity has been a post-Second World War phenomenon; that of the Janacek literature has been even more recent. Through his writings over the last 25 years John Tyrrell has established himself as a leading scholar in this and the wider field of Czech opera; this book, based on his work in the Janacek archive at Brno, draws together a wealth of documents relating to the genesis, publication and early performances of Janacek operas.

Janacek, one of this century's greatest musical dramatists, endured many setbacks and suffered particular humiliation at the hands of unsympathetic theatre directors. His long struggles run through the book like a leitmotif, making reading that is at once illuminating and depressing.

Since the composition of Jenufa took him the best part of ten years, and was overshadowed by the death of his daughter Olga, its rejection in 1904 by the National Theatre in Prague proved a severe blow. It was only in 1916, after the first Prague performance finally took place, that the 61-year-old composer was able to write, 'I am beginning to believe in my life and my mission'; in 1904 his sole response had been to 'deaden the pain with work' - but, as he added, 'I've got problems with a libretto'.

That work was Osud ('Fate'), and while the libretto did indeed prove problematic (Janacek made up the scenario as he progressed, and to this day it verges on the incomprehensible), its complications were overshadowed by the difficulties he incurred writing The Excursions of Mr Broucek. At least his troubles with publishers here were his last. After Broucek, the composer produced his librettos virtually single-handedly, and the remaining four operas flowed more freely (his last, From the House of the Dead, was written in under 11 months).

But it would be simplistic to link this too closely to the great flowering that characterised Janacek's final phase: there was also his growing love for Kamila Stosslova, which, though unrequited, gave him added creative impulse.

Perhaps most interesting is the background to Janacek's seldom-heard early operas Sarka and The Beginning of a Romance. The first took a libretto by the Czech symbolist poet Julius Zeyer which both Dvorak and Smetana had turned down. Janacek based the second on a short story by Gabriela Preissova, whose The Stepdaughter he later made into Jenufa.

As the title of the book suggests, this is a collection of sources which relate to the nine extant operas. One longs for more - Janacek's thoughts on the genre, or on the operas of other composers, would be fascinating, though some of these would admittedly lie outside the scope of the book. It is a pity that little account is given of his projected operas. Though the evidence for some of these may be slight, musical sketches for at least four incomplete stage works exist: The Housewife was to have been based on another of Preissova's texts, and two others, Anna Karenina and The Living Corpse, two Tolstoy projects, evince the deep sympathy for Russian subjects reflected elsewhere in his oeuvre.

In general, though, Tyrrell has marshalled his material splendidly, to make it both scholarly and readable. His sources are meticulously listed in an appendix, leaving the text arranged and linked as a flowing documentary narrative. Containing as it does much material that has not appeared in English before (and some, indeed, that has not been published anywhere), this is a major addition to the Janacek bibliography.

THEORY OF WAR by Joan Brady Andre Deutsch Pounds 14.99, 208 pages THE ORIENT-EXPRESS by Gregor von Rezzori Chatto & Windus Pounds 13.99, 208 pages COSMO COSMOLINO by Helen Garner Bloomsbury Pounds 13.99, 221 pages

THE AMERICAN civil war may have ended in the official abolition of black slavery, but its chaotic aftermath also produced a new generation of human chattels: unwanted white children who were sold to the highest bidder for as little as Dollars 15. One of these 'bounden boys' was Joan Brady's grandfather. And in Theory of War, a fictionalised account of his life and her journey into the past, she explores the psychological legacy of slavery.

At four, Jonathan Carrick is bought by Alvah, a sadistic tobacco farmer, and his dehumanised mate, Wify. He is beaten, tied up, and starved. They remove his teeth to sell them for dentures. But the main focus of Jonathan's inarticulate anger is not the brutish Alvah but his ambitious son George, who actively provokes the bounden boy's envy, setting in motion a lifetime's rivalry and resentment.

At 15, Jonathan runs away. He eventually finds an education, a wife and a faithless vocation as a preacher. But he cannot escape his hatred for George, by now a successful politician. After half a century of separation, they are reunited in a final, fatal confrontation.

Joan Brady's novel is in part an act of personal catharsis - an attempt to exorcise the emotional scars transmitted down the generations. But it also universalises the individual's story into a symbolic parable of human cruelty and its effects. If the novelist's artistry sometimes gets in the way of the raw experiences she describes, Theory of War still achieves a genuine tragic weightiness.

Gregor von Rezzori's The Orient-Express is another novel about reclaiming the past. Its unnamed narrator, born into the pre-war cultural elite of central Europe, has been an American capitalist since the 1940s. At 65, afflicted by a delayed bout of adolescent angst, he decides to revisit the scenes of his real adolescence and take a trip on the newly refurbished Orient-Express.

In what follows, the external journey is soon subordinated to an interior monologue which unfolds like a slow motion dream sequence. Fragments of memory appear and dissolve - and it is up to the reader to piece together the facts of the narrator's life.

We see the fussy Armenian aunts of his childhood; his first sexual experience on a train with a woman in a silver turban; his student obsession, fed by an overdose of Nietzsche, with suicide. Central to his present ennui is an inability to forge emotional relationships with women. His thoughts return again and again to his alienated marriage and to his empty encounters with prostitutes.

Cultural schizophrenic and nostalgia victim, von Rezzori's narrator is suffering from serious depression. At times his sanity seems under pressure. But though his states of mind are minutely recorded, he is too introverted to invite empathy.

After all this relentless introspection, Helen Garner's ability to present characters actually relating to one another is something of a relief. Her world is low-key and domestic. But Cosmo Cosmolino - which contains two short stories in addition to the title novella - is wry, individual and stylistically mature.

Garner's characters were young in the 1970s, caught up in the fashionable utopianism of the time. But the communes have long since dispersed, and, looking back, you have to decide whether the intervening years represent a growing up or a loss of innocence.

The two short stories deal with death. In Recording Angel, a man contracts a brain tumour and we witness the effects on his wife and best friend. In A Vigil, a virtual suicide is followed by a hellish crematorium scene. But Cosmo Cosmolino itself is a story of rebirth, in which Janet's buried existence is given a jolt by the arrival of two lodgers, aimless Raymond and Maxine with her batty New Age ecstasies.

Garner has an impressive ability to infect imaginative life into mundane objects, and to focus on an individual character or situation without generalising. Her choice of words is always eloquently precise. And it is the honesty of her prose style, rather than any particular gift for storytelling, which stands out.

E E CUMMINGS: COMPLETE POEMS 1904-1962 edited by George J Firmage Liveright & W W Norton Pounds 33, 1,102 pages

IN THE 60 years between 1870 and 1930 there emerged a remarkable number of poets in the US. About one, TS Eliot, there can be no doubt as to his international reputation. Ezra Pound's significance, too, is without question despite his less appealing persona. Robert Frost's poetry was received with acclaim in Britain long before he was recognised in his own country.

But there were others, less well understood outside the US, who are also of considerable importance. Wallace Stevens and William Carlos Williams are of this number. Then there were Edwin Arlington Robinson, Carl Sandburg, Robinson Jeffers, Marianne Moore, John Crowe Ransom and Hart Crane. Of this latter group the most provocative was the son of a New England Congregational minister. His name was Edward Estlin Cummings and he was born in 1894 in Cambridge, Massachusetts.

Cummings had been publishing poems since his early 20s but he did not become widely known until the appearance of his prose work The Enormous Room. This savage attack on authority was the result of being imprisoned by the French in the First World War for something he wrote in his letters while he was serving as a member of the Norton Harjes Ambulance Unit.

The Enormous Room sent readers back to Cummings's first book, Tulips and Chimneys, published in 1923. Some of the 'Songs' in Tulips, like 'all in green went my love riding', have a fin de siecle flavour, but 'Chimneys' contains such now-well-known language experiments as 'In Just-/spring' and 'Buffalo Bill's/defunct'. There are also attacks on 'Cambridge ladies who live in furnished souls' and who would not find at all acceptable such poems as ''kitty', sixteen, 5'1, white, prostitute' and the sardonic 'Humanity i love you'.

If in the early poems there was a too obvious desire to epater les bourgeois it was evident by the 1930s that Cummings had something more serious on his mind. In ViVa and No Thanks we see him pushing forward the boundaries of communication, attempting to use words as he did paint on canvas - as in the notorious grasshopper poem ('r-p-o-p-h-e-s-s-a-g-r').

In New Poems and 50 Poems Cummings abandoned such extreme modernist experiments and developed a new and more intimate form of lyricism seen at its best in 'this little bride & groom' and the powerful and moving 'my father moved through dooms of love'.

One of the most striking things about him is his defiant individuality in an age of conformity - his readiness to attack what he saw to be the ills of society ('a salesman is an it that stinks Excuse', 'a politician is an arse upon/which everyone has sat except a man'). In Cummings's introduction to the Collected Poems of 1938 he said 'The poems to come are for you and for me and are not for mostpeople'. But to be uncivilly disobedient like a bohemian Thoreau is one thing. What about the calibre of Cumming's verse?

RP Blackmur counted 'flower' 48 times in Tulips and Chimneys, concluding tartly that for Cummings the word must contain 'an almost unlimited variety and extent of meaning'. Any attempt to evaluate Cummings's contribution to poetry must therefore take into account the fact that he does not always exploit the fullest resources of the English language. Like Henry Miller in prose he was outre, shocking - sticking out his tongue at what HL Mencken called the 'booboisie'. On the other hand it cannot be denied that life leaps from his best poems.

Cummings is least successful when he is being self-consciously hard-boiled, as in 'Poem, or Beauty Hurts Mr Vinal' or 'she being Brand/-new'. He is far better in his ironic comments on war like 'my sweet old etcetera' and 'plato told/him' and in his ability to catch the flavour of low-life speech, as in 'ygUDuh'. But he is best of all in such tender and unsentimental lyrics as 'the little horse is newlY/Born'. Simplicity has its virtues and although Cummings's poems might seem a little contrived today, there is a freshness about them which makes the reader return again and again with a sense of delight.

George J. Firmage has revised, corrected and expanded the Complete Poems of 1973 using the original manuscripts and getting the typography right. He has also added poems from Cummings's Harvard years and from the Dial Papers, and his translations of Horace. It is all here, and although one cannot say with one's hand on one's heart that it adds a great deal to our perception of Cummings's quality as a poet, it certainly does not detract from it.

SHADOWS OF FORGOTTEN ANCESTORS by Carl Sagan and Ann Druyan Random Century Pounds 17.99, 505 pages

NEITHER the New Ageist title nor the mawkish cover illustration does this book justice. Within, it is a feast. Absorbing and elegantly written, it tells of the origins of life on earth, describes its variety and character, and culminates in a discussion of human nature and the complex traces of humankind's evolutionary past - hence the 'shadows' of the title. This is fascinating science gracefully purveyed. The exposition is leisurely, literate and wry, sometimes self-indulgent but always pleasingly so. It is an amazing story masterfully told - easily the best popular introduction to ethology and evolutionary biology now available.

The story begins at the beginning: with the turbulent mass of dust and gas which spawned the sun and its planets, and prompted the frightening early history of earth. Thereafter the tale unfolds more circumstantially. Its proper commencement lies with the stromatolites, single-celled organisms living in colonies, whose fossils date back three and a half billion years. From these most ancient of creatures life's perilous history stems.

To recount that history Sagan and Druyan have to explain genetics and evolutionary theory. They do it with exemplary lucidity. Thus armed, they give dazzling accounts of insects, snakes, apes, humans, and much besides, aiming to give us a sense of humanity's place in the evolutionary scheme by exhibiting the enormous variety and curiosity of life and the connections which unify its story. 'We achieve some measure of adulthood', the authors write, 'when we recognise our parents as they really were, without sentimentalising or mythologising, but also without blaming them unfairly for our imperfections.' When with similar dispassion we understand something of our evolutionary inheritance - our biological parentage - we come of age as a species.

Every page yields nuggets. The kind of lesson to be learned from biological understanding is well illustrated by the following juxtaposition of facts. Humans find it convenient to geld male domestic animals. 'One or two skilled motions of the blade - or a deft bite by a reindeer-herding Lapp woman - and the testosterone levels are down to manageable proportions', the authors remark. Only a few males are left intact for breeding purposes. In the wild, when one male is defeated by another in a mating contest - and this applies to creatures as different as snakes and apes - the conquered male's testosterone levels decline steeply and he slinks away. One major effect, as with domestic animals, is that trouble is kept within bounds.

Parallels must be treated cautiously. Humans and chimpanzees share 99.6 per cent of their active genes, inherited from a common ancestor. By any standards this is close kinship. But the differences - outstandingly, language and what language makes possible - are more obvious than the similarities. Still, as the authors show in four fascinating chapters on monkeys and apes, both the parallels and differences are highly instructive. One female chimp, taught to sort pictures of humans and non-humans into different categories, placed pictures of chimps in the 'human' file.

The authors venture some controversial sallies. Sagan is famous for arguing that there must be life elsewhere in the universe. Here he and Druyan make an analogous suggestion: that consciousness might be a more pervasive feature of terrestrial life than most thinkers allow. Even insects, they muse, could have a measure of awareness beyond the merely reflexive. The naturalist Jakob von Uexkull wrote, 'When the dog runs, the dog moves its legs. When the sea urchin runs, the legs move the sea urchin.'

But Sagan and Druyan are not so sure. After describing the astounding engineering skills of the spider, they remark, 'she spins her web now. She reaps the reward later, perhaps much later. Does she know what she's waiting for? Does she dream of succulent moths and foolish mayflies? Or does she wait with her mind a blank?' Such innocuous-seeming questions prompt others that are among philosophy's deepest.

Analogy presents the authors with their most dangerous temptation. Parallels between animal and human characteristics can enlighten remarkably, but also mislead. Yet although they sometimes tread close to the edge, Sagan and Druyan are alert to the risks, and indeed end the book by warning against them. One is left with a strong sense that what underlies their remarkably skilful and accessible account is high scientific competence. It is this which makes their book so good.

AT THE HEART OF A TIGER: CLEMENCEAU AND HIS WORLD 1841-1929 by Gregor Dallas Macmillan Pounds 25, 598 pages

DEATH, says a French proverb, turns a life into a destiny, imposing definition on a stretch of time which might, at earlier stages, have looked amorphous. With some public figures, however, it is not death itself but a late break, a sudden call to arms or power in old age, that gives a long and varied life its permanent shape. So with Georges Clemenceau.

Born in 1841 under France's last king, he was raised as a disciple of Pascal, Michelet and Comte; he became mayor of Montmartre during the Franco-Prussian War and the Commune. A 'man of Victor Hugo', he subsequently kept the flame of moderate Republicanism going through the vicissitudes of the Second Empire and the chequered Republic that followed it, battling with the likes of Boulanger on the one hand and Ferry and Jaures on the other and raising an early and decent voice in favour of Dreyfus.

More than once during these decades his career seemed to himself and others all but over - 'I am unrecognised in my home, betrayed by my friends, dropped by my party, ignored by my electors, suspected by my country . . . creditors bang on my door . . . I have nothing, nothing.'

He was almost 73 at the outbreak of the 1914-18 war, and 76 by the time supreme command passed to him. Poincare, a long-term jealous colleague and now demoted rival, added to his existing accusations of obstinacy, swashbuckle and 'incurable light-mindedness' the charge that Clemenceau was increasingly deaf, portly and incapable of reasoning.

Yet it was in Clemenceau's grey-gloved hands (he had begun to suffer from nervous eczema) that near-defeat was turned into victory and the peace that many of the French would have sought earlier on almost any terms became an Armistice imposed by France and her allies. The old man had at last become the 'tiger' - as in the lean title of this overweight work. The sharpest image left to the world is of the hunched, moustachioed carnivore crouched between Lloyd George and Woodrow Wilson in the treaty hall at Versailles, standing as ever for justice, unwittingly doing his bit to set the scene for another war in which he would act as a model for another fighter-come-late-to-greatness: Winston Churchill.

Of course this odd-shaped life poses problems for the biographer. Gregor Dallas has had to accompany his subject a long way before finally reaching, if not the heart of the tiger, at any rate the heart of the story. At times he loses himself in whole thickets of carefully scrutinised trees while giving his reader little indication of the overall shape of the wood.

When at long last he sweeps out onto the devastated uplands of the First World War battlefields, the panoramic view is impressive. But, just because he knows the way himself, he fails to erect adequate signposts along the route. Although the book's comprehensive and sometimes overtly instructive style suggests that it is intended for the general reader, Dallas again and again omits pieces of basic information that are in fact necessary to the proper understanding of all this detail.

The events of 1870-71 are described with a wealth of descriptive energy as befits a key period in Clemenceau's life - but if you did not know already about the Prussian assault, why the Commune supervened and what it represented, you would be in a complete fog as to what was really going on. And although Dallas quotes Clemenceau's famous put-down after Boulanger shot himself in 1891 on the grave of his mistress ('Il est mort comme il a vecu, en sous-lieutenant') there is, almost unbelievably, no mention of Boulanger's revanchist doctrine on Alsace-Lorraine and thus no adequate discussion of the war scares of 1886 and '87. Similarly, when we reach the moment of Jaures' assassination in 1914 only days before the outbreak of war, no mention has at that point been made of Sarajevo or of 'the German menace' at all.

More minor, but more irritating because more specific, is Dallas's failure to tell us, when dealing with Zola's J'Accuse article, that L'Aurore was Clemenceau's own paper. Indeed he has a circumlocutionary, novelist-like way of creeping up to his favourite moments and then pouncing on them, which does not make for coherence.

I do not want to sound ungrateful. I have learnt a good deal from this book, whose cognitive scope extends from the dawn of the Revolution to the Fall of Petain and Laval, and will keep it by me. Like Braudel, who is clearly his master though oddly unacknowledged, Dallas is at his best when describing events in the context of their settings. His earlier work deals with the peasantry of the Loire (Clemenceau's native land); to accompany him there, or to the northern mines of Zola's Germinal, or to the forest that now covers the destroyed villages near Verdun, is a treat. Perhaps, for his next work, he will chose a topic more rooted in one place and era and so really expand his gifts.

SENTIMENTAL JOURNEYS by Joan Didion HarperCollins Pounds 15, 319 pages

I COULD die reading Joan Didion. It would be the perfect way to go - slipping effortlessly into the deep, dark spiral of the long goodbye while gorging on the unimprovable sentences with which Joan Didion constructs her narratives.

Consider the perfection of this short passage: 'I was 10 years old when 'the atomic age', as we called it then, came forcibly to the world's attention. At the time the verbs favoured for use with 'the atomic age' were 'dawned' or 'ushered in', both of which implied an upward trend to events. I recall being told that the device which ended World War II was 'the size of a lemon' (this was not true) and that the University of California had helped build it (this was true).'

In the opinion of her publisher, Sentimental Journeys is Joan Didion's 'latest foray into the ailing American psyche', a world of disconnectedness that Didion lacerates with the 'severe, crystalline beauty' of her prose.

What the publisher does not emphasise is that most of the essays here are warmed-up potatoes: they appeared first in magazines. Nevertheless, not everyone is a devoted reader of The New York Review of Books or The New Yorker, let alone New West, so the publisher is performing a service.

The collection does not start well. Its opening section is entitled 'Washington' and contains an essay largely about Nancy Reagan - 'Her social skills, like those of many women trained in the insular life of the motion picture community, were strikingly undeveloped' - that is strikingly second-hand, as well as sub-standard. But then the focus moves to California, where Didion is more at home. Curiously, even this section opens with a dud, Girl of the Golden West, which is about Patty Hearst and is that most unusual thing: a completely useless piece of writing.

Then things take off. Los Angeles Days is an essay about the five-month 1988 Writers Guild of America strike against the Hollywood studios; Fire Season about . . . the California fire season; and Sentimental Journeys (by now we have moved to New York) about the gang-rape of a white middle-class jogger in Central Park in April 1989. All three show Didion at her best: as reporter, as interpreter and as stylist.

The style is crucial. There are better, more industrious reporters than Didion, and her insights are sometimes highly odd. Quite often, I suspect, we are not gaining a privileged view of the hidden springs of American culture, business or politics, but a privileged view of the inside of Joan Didion's head, where billions of exotic chemical connections bearing no relation to reality are completed every second.

But so what? Cosmologists are now tending to the view that there is an infinite number of universes, popping into, and out of, existence all the time. Where Joan Didion came from, no one can imagine; where she is going must be extraordinarily weird. How I wish I could follow her.

Flamingo is reissuing Joan Didion's Slouching Towards Bethlehem and The White Album in paperback at Pounds 6.99 each.

ORGANISING the Weekend FT's Lunch for a Fiver has made me feel like a restaurateur again. Initially, I wondered if it had been priced too low for restaurants to offer the right menus. Were there enough restaurants to satisfy demand? Was I, as one leading restaurateur wondered, sending out false signals about the financial state of the restaurant trade? The initial reactions, reported last Saturday, were encouraging, but any concerns finally evaporated on Monday. A financial journalist from a rival newspaper phoned to say that she had returned satisfied, in the company of a former cabinet minister, from her Pounds 5 lunch at Frederick's, in London, N1. Her Pounds 5 menu had been excellent and served with the same attention to detail as the restaurant's normal lunchtime menu at three times the price.

A neighbour, finance director of a large public company, told me that he was taking advantage of the scheme to take a number of his staff out for a Pounds 5 lunch as a thank you gift. Other restaurants have also reported a marked increase in the number of larger bookings as a result of the lower unit price being offered.

Martin Lam at Ransome's Dock, London, SW11, said that on Monday lunch he had served 34 customers compared with an average of 20 on Mondays and that the per capita spend had been Pounds 18. On Tuesday he served 54 customers - this surprised him since the restaurant can only seat 50.

The Brasserie at the Cafe Royal in Regent Street, London, W1, was fully booked on Monday, a day when usually, according to general manager David Pantin, it is never more than half full. Its menu was a model of what a creative chef such as Herbert Berger can do for Pounds 5. A salad of mussels and baby clams with coriander pesto and balsamic vinegar was followed by braised lamb shank with garlic confit and root vegetables. They had to turn customers away the following day and are busy converting tables normally used for pre-lunch drinks into dining tables to satisfy demand.

One of the reasons for the success of 'Lunch for a Fiver' has been its simplicity. All you have to do is choose your restaurant, phone to make a booking specifying that you are coming for the FT menu - two courses for Pounds 5 - and arrive on time. Remember it applies to weekdays only and finishes on Friday January 29.

A number of restaurants are already full for the whole period but there is always the possibility of a cancellation. And, like any sale bargain, a little patient hunting will make the eventual prize more satisfying. Try to be a bit flexible with your timing - eating closer to 12 than 1pm - and you may stand a better chance of a table.

Attention all wine collectors. It is rare enough to have the chance to taste the Bordeaux first growths together, particularly from such a glamorous and highly priced vintage as 1982. But, at an exceptionally luxurious event planned for Wednesday, February 3 at the Savoy Hotel in London, the pre- dinner tasting will include not just this line-up but six Corton-Charlemagnes and six de luxe champagnes. Suitable palate sharpening for the dinner and accompanying wines as sumptuous as Chx Leoville-Barton 1985 and Pichon-Lalande 1982. There is a catch, but if wine collectors were honest with themselves and their cellars, it is probably a relatively small one. Tickets cost a donation of a case of wine worth at least Pounds 250, to be auctioned by Sotheby's on April 21 in aid of the Tommy's Campaign for research into fetal health. More information from Susie Roberts on 071-620-2654.

The Gulf is not the most obvious place in the world to learn about wine, but the Wine and Spirit Education Trust, has been running courses out there this month for Inchcape Middle East.

The WSET (tel: 071-236-3551) is the official body for formal wine trade education, but there are many other approaches to liquid evening classes to choose from, even in London. The Wine School of Fulham (071-736-7009) has an array of excellent, non-stodgy speakers, Christie's South Kensington (071-581-3933) has some marvellous classic wines, while Winewise in Islington (071-254- 9734) offers a useful balance between the two. Many of the livelier wine merchants offer one-off tastings too, notably Winecellars of Wandsworth (081-871-2668) and La Vigneronne of South Kensington (071-589-6113).

------------------------------------------------------------------------ WHERE TO GET LUNCH FOR A FIVER Lunchtimes Monday January 18 until Friday January 29 ------------------------------------------------------------------------ Adlards, 79 Upper St Giles Street, Norwich Tel: 0603 633522 Al San Vincenzo, 30 Connaught Street, London W2 2AF Tel: 071 262 9623 Alastair Little Bar, 49 Frith Street, London W1V 5TE Tel: 071 734 5183 Anchor, 34 Park Street, London SE1 Tel: 071 407 1577 Angel, 101 Bermondsey Wall East, Rotherhithe, London SE16 Tel: 071 237 3608 Argyll, 316 Kings Road, London SW3 5UH Tel: 071 352 0025 Armadillo, 20-22 Mathew Street, Liverpool Tel: 051 236 4123 Au Jardin des Gourmets, 5 Greek Street, London W1 Tel: 071 437 1816 ------------------------------------------------------------------------ Bahn Thai, 21a Frith Street, London W1 Tel: 071 437 8504 Balzac, 4 Wood Lane, London W12 Tel: 081 743 6787 Beauchamps, 23/25 Leadenhall Market, London EC3 Tel: 071 621 1331 Belgo, 72 Chalk Farm Road, London NW1 Tel: 071 267 0718 Bistrot Bruno, 63 Frith Street, London W1 Tel: 071 734 4545 Bistrot 190, 189 Queen's Gate, London SW7 5EU Tel: 071 581 5666 Boyd's, 135 Kensington Church Street, London W8 7LP Tel: 071 727 5452 Brackenbury, 129-131 Brackenbury Road, London W6 0BQ Tel: 081 748 0107 Brasserie du Marche, 349 Portobello Road, London W10 Tel: 081 968 5828 Brasserie Forty Four, 44 The Calls, Leeds Tel: 0532 343232 ------------------------------------------------------------------------ Cafe des Arts, 82 Hampstead High Street, London NW3 Tel: 071 435 3608 Cafe Flo, 149 Kew Road, Richmond, Surrey Tel: 081 940 8298 Cafe Flo, 676 Fulham Road, London SW6 Tel: 071 371 9673 Cafe Flo, 334 Upper Street, Islington, London N1 Tel: 071 226 7916 Cafe Flo, 127-9 Kensington Church Street, London W8 Tel: 071 727 8142 Cafe Flo, 205 Haverstock Hill, London NW3 4QG Tel: 071 435 6744 Cafe Flo, 51 St. Martins Lane, London WC2 Tel: 071 836 8289 Cafe Italien, 19 Charlotte Street, London W1 Tel: 071 636 1969 Cafe Rouge, The Pizzeria, Hays Galleria, Tooley Street, London SE1 Tel: 071 378 0097 Cafe Rouge, 7a Petersham Road, Richmond, Surrey Tel: 081 332 2423 Cafe Rouge, 26 High Street, Wimbledon, London Tel: 081 944 5131 Cafe Rouge, 390 Kings Road, London SW3 Tel: 071 352 2226 Cafe Rouge, 2 Lancer Square, Kensington Church Street, London W8 Tel: 071 938 4200 Cafe Rouge, Unit 209 Whiteleys Centre, Bayswater Rd, London W2 Tel: 071 221 1509 Cafe Rouge, 200/204 Putney Bridge Road, London SW15 2NA Tel: 081 788 4257 Cafe Rouge, 46/48 James Street, London W1N 5HS Tel: 071 487 4847 Cafe Rouge, 855 Fulham Road, London SW3 Tel: 071 371 7600 Cafe Rouge, 6-7 South Grove, Highgate Village, London N6 Tel: 081 342 9797 Cafe Rouge, 19 High Street, Hampstead, London NW3 Tel: 071 433 3404 Cafe Rouge, 31, Kensington Park Road, London W11 Tel: 071 221 4449 Canal Brasserie, 222 Kensal Road, London W10 Tel: 081 960 2732 Chinon, 25 Richmond Way, London W14 0AS Tel: 071 602 4082 Cibo, 3 Russell Gardens, London W14 8EZ Tel: 071 371 6271 ------------------------------------------------------------------------ Dan's, 119 Sydney Street, London SW3 Tel: 071 352 2718 Daphne, 83 Bayham Street, London NW1 0AG Tel: 071 267 7322 dell'Ugo, (Ground Floor) 56 Frith Street, London W1V 5TA Tel: 071 734 8300 Dickens Inn, St. Katherine's Way, London E1 Tel: 071 488 9932 Del Buongustaio, 283 Putney Bridge Road, London SW15 Tel: 081 780 9361 Drones, 1 Pont Street, London SW1 Tel: 071 235 9638 ------------------------------------------------------------------------ Florians, 4 Topsfield Parade, Middle Lane, London N8 8RP Tel: 081 348 8348 Fredericks, 106 Camden Passage, Islington, London N1 Tel: 071 359 2888

Fresco] Bucklesbury, Queen Victoria Street, London EC4 Tel: 071 248 0095 ------------------------------------------------------------------------ Gilbert's, 2 Exhibition Road, London SW7 Tel: 071 589 8947 Grahame's Seafare, 38 Poland Street, London W1 Tel: 071 437 0975 Grill St Quentin, 2 Yeomans Row, London SW3 Tel: 071 581 8377 ------------------------------------------------------------------------ Hilaire, 68 Old Brompton Road, London SW7 3LR Tel: 071 584 8993 ------------------------------------------------------------------------ 192, 192 Kensington Park Road, London, W11. Tel: 071 229 0482 I Sardi, 112 Cheyne Walk, London SW10 Tel: 071 352 7534 Issimo] 10 Lime Street, London EC3 Tel: 071 623 3616 ------------------------------------------------------------------------ King's Head, Ivinghoe, Leighton Buzzard, Bedfordshire Tel: 0296 668264 ------------------------------------------------------------------------ L'Accento, 16 Garway Road, London W2 4NH Tel: 071 243 2201 L'Altro, 210 Kensington Park Road, London W11 1NR Tel: 071 792 1066 La Belle Epoque, 61-63 Dublin Road, Belfast Tel: 0232 323244 La Brasserie, 60-61 St Mary Street, Cardiff Tel: 0222 372164 La Rive Gauche, 61 The Cut, London SE1 Tel: 071 928 8645 La Truffe Noire, 29 Tooley Street, London SE1 Tel: 071 378 0621 Le Cafe des Amis du Vin, Covent Garden, London WC2 Tel: 071 379 3444 Le Marche Noir, 2-4 Eyre Place, Edinburgh Tel: 031 558 1608 Le Mesurier, 113 Old Street, London EC1 Tel: 071 251 8117 Le P'tit Normand, 185 Merton Road, London SW18 5EF Tel: 081 877 0996 Le Poulbot (Cafe), 45 Cheapside, London EC2 Tel: 071 236 4379 Les Saveurs, 37a Curzon Street, London W1 Tel: 071 491 8919 Lusso] 15 Lowndes Street, London SW1 Tel: 071 235 2525 ------------------------------------------------------------------------ Markwicks, 43 Corn Street, Bristol Tel: 0272 262658 Mijanou, 143 Ebury Street, London SW1 Tel: 071 730 4099 Ming, 35-36 Greek Street, London W1 Tel: 071 734 2721 Mon Plaisir du Nord, 359 The Mall, London N1 Tel: 071 359 1932 Monkeys, 1 Cale Street, Chelsea Green, London SW3 Tel: 071 352 4711 Mr Garraways Fish House, 46 Gresham Street, London EC2 Tel: 071 606 8209 Mr Pontac's Candlewick Room, 45 Old Broad Street, London EC2 Tel: 071 628 7929 ------------------------------------------------------------------------ Newtons, 33 Abbeville Road, London SW4 9LA Tel: 081 673 0977 Normandie, Elburt Lane, Birtle, Manchester Tel: 061 764 3869 ------------------------------------------------------------------------ Odette's, 130 Regents Park Road, London NW1 Tel: 071 586 5486 Oriel, 51 Sloane Square, London SW1 8AX Tel: 071 730 4275 Osteria Antica Bologna, 23 Northcote Road, SW11 1NG Tel: 071 978 4771 ------------------------------------------------------------------------ Palio, 175 Westbourne Grove, London W11 Tel: 071 221 6624 Pierre Victoire, 10 Victoria Street, Edinburgh Tel: 031 225 1721 Pierre Victoire, 8 Union Street, Edinburgh Tel: 031 557 8451 Pierre Victoire, 38-40 Grassmarket, Edinburgh Tel: 031 226 2442 Pierre Victoire, 52 Coburg Street, Edinburgh Tel: 031 555 6178 Pizzicato, 34 Rupert Street, London W1 Tel: 071 734 0122 Pomegranates, 94 Grosvenor Road, London SW1B 3LF Tel: 071 828 6560 ------------------------------------------------------------------------ Restaurant and Arts Bar, 76 Wigmore Street, Jasons Court, London W1 Tel: 071 224 2992 RSJ, 13a Coin Street, London SE1 Tel: 071 928 4554 Rouxl Britannia, 14 Finsbury Square, London EC2 Tel: 071 256 6997 ------------------------------------------------------------------------ Scarto] 10a The Broadway, London SW1 Tel: 071 222 3338 Sheekey's, 28-32 St. Martins Court, London WC2 Tel: 071 240 2565 Simpson's-in-the-Strand, 100 The Strand, London WC2 Tel: 071 836 9112 Sloans, 27-29 Chad Square, Hawthorne Road, Edgbaston, Birmingham Tel: 021 455 6697 Smiths Restaurant, 25 Neal Street, London WC2 Tel: 0 71 379 0310 Smollensky's Balloon, 1 Dover Street, London W1 Tel: 071 491 1199 Smollensky's on the Strand, 105 The Strand, London WC2 Tel: 071 497 2101

Snows on the Green, 166 Shepherds Bush Green, London W6 7PB Tel: 071 603 2142 Sonny's, 3 Carlton Street, Hockley, Nottingham Tel: 0602 473041 Sonny's, 94 Church Road, London SW13 Tel: 081 748 0393 Stephen Bull Bistro, 71 St. John Street, London EC1 Tel: 071 490 1750 ------------------------------------------------------------------------ The Cafe Royal, (Brasserie) 68 Regent Street, London W1 Tel: 071 437 9090 The Lindsay House, 21 Romilly Street, London W1 Tel: 071 439 0450 The Marsh Goose, High Street, Moreton-in-Marsh, Gloucestershire Tel: 0608 52111 The Vintners Rooms, 87 Giles Street, Leith, Edinburgh Tel: 031 554 6767 The Ubiquitous Chip, 12 Ashton Lane, Glasgow Tel: 041 334 5007 Turner's, 87-89 Walton Street, London SW3 Tel: 071 584 6711 Tutto] 17-20 Kendall Street, London W2 Tel: 071 724 4637 Ransome's Dock, 35 Park Gate Road, London SW11 Tel: 071 223 1611 Riva, 169 Church Road, London SW13 9HR Tel: 081 748 0434 The Red Fort, 77 Dean Street, London W1 Tel: 071 437 2525 Tuttons Brasserie, 11-12 Russell Street, London WC2 Tel: 071 836 4141 ------------------------------------------------------------------------ Veronica's, 3 Hereford Road, London W2 Tel: 071 229 5079 Villandry Dining Rooms, 89 Marylebone High Street, London W1 Tel: 071 487 3816 ------------------------------------------------------------------------ Waltons, 121 Walton Street, London SW3 2HP Tel: 071 584 0204 Wheelers, 1-4 South Molton Street, London W1 Tel: 071 629 2471 Wheelers, 20 Dover Street, London W1 Tel: 071 629 5417 Wheelers, Alcove, 17 Kensington High Street, London W8 Tel: 071 937 1443 Wheelers, 125 Chancery Lane, London W2 Tel: 071 404 6071 Wheelers, 19-21 Great Tower Street, London EC3 Tel: 071 626 3685 Wheelers, 9-13 Fenchurch Buildings, Fenchurch Street, London EC2 Tel: 071 488 4848 Wheelers, 33 Foster Lane, London EC2 Tel: 071 606 8254 Wheelers, 12a Duke Street, London W1 Tel: 071 930 2460 Wheelers, 19 Old Compton Street, London W1 Tel: 071 437 2706 Willoughby's, 26 Penton Street, N1 Tel: 071 833 1380 ------------------------------------------------------------------------ Young Bin Kwan Korean Restaurant, 3 St Alphage High Walk, London EC2 Tel: 071 638 9151 Zoe, 3-5 Barratt Street, London W1 Tel: 071 224 1122 ------------------------------------------------------------------------

ANYONE WHO wants to dispel mid-winter gloom after the January sales should head for London's Montpelier Street, where Bonhams is mounting its second Decorative Arts Today selling exhibition.

From January 25 to February 7, Bonhams is offering a rare opportunity to see under one roof the work of leading British designer-makers - no fewer than 140 of them this year. Most is for the home: furniture, lighting, rugs, wall-hangings, glass, ceramics, tableware, silver and beautifully bound books, but it also includes jewellery.

When Bonhams decided to sell exciting new work in this way last year, the gamble paid off. Paul Whitfield, deputy chairman, said: 'First in at the door was the chairman of another leading London auction house - last out was Mick Jagger, who had bought 18 works.' This year's exhibition promises to be richer, bigger and even more diverse. As soon as work is sold, it is replaced by another piece by the same designer. All exhibits have been designed and made in the 1990s and, after last year's success, most of the designers have created work specifically for the exhibition.

For instance, Senior Carmichael has made a backgammon table in American cherry, with a concealed playing surface and holding coloured sycamore stones and leather shakers and dice (Pounds 3,500), and two matching chairs (Pounds 985 each). Glen Hinton has made a hall table in carved wood, patinated copper and laminated glass (Pounds 1,800), Martin Grierson an elegant drop-leaf table in ripple sycamore with ebony stringing and six chairs (Pounds 7,750), while Bob Crooks is showing his first glass chandelier (Pounds 1,860) and Alan Caiger-Smith his one-off pieces - sadly the last chance to buy his new work in London, because his Aldermaston Pottery closes in May.

All the designers were encouraged to produce objects that are practical as well as decorative. Dining tables and chairs, coffee tables, mirrors, side tables, lamps, screens, candlesticks and coffee cups are among the objects featured. Architect Jack Schneider has designed a striking dressing table, in burl poplar and zebrano veneer and lacquered MDF, with a large, round bevelled mirror (Pounds 3,560), while John Whittle has made an unusual bedroom wardrobe, incorporating blue ash veneer (Pounds 1,005).

The exhibition sets out to show the wealth of design talent and craftsmanship in Britain today. It also illustrates the great diversity of styles. There is finely crafted wood-based furniture deriving from the Arts and Crafts Movement by designers such as Alan Peters, Ashley Cartwright, Jeremy Broun and Richard Williams; sculptural, minimalist furniture by Ron Arad, whose surprisingly comfortable steel chair has a flexible, woven, polished steel tug which rolls up to form a foot rest; Danny Lane's dramatic two-metre glass table with six legs; painted furniture by Tony Isseyegh showing the Bloomsbury Group's influence; and more eclectic and flamboyant styles, from Regency-inspired metal work by Adrian Reynolds to a Baroque-influenced candlestick by Felicity Evans.

The price range is from Pounds 15 to more than Pounds 12,000. Collectors' items such as John Makepeace's library chair carved in burr elm with pivoted leather lecturns for reading and writing (Pounds 11,850), an exquisitely made treasure chest by Robert Ingham (Pounds 3,100) and a delicate cloissonne enamelled egg box (Pounds 1,360) by Maureen Edgar should not deter less well-heeled prospective buyers.

There are wooden bangles from Pounds 15 by Hayley Smith, wooden bowls by Bert Marsh from Pounds 25 (turned wood is an increasingly accessible collectable for those of modest means - a piece by another exhibitor, Steve Howlett, was recently bought for the Sainsbury Collection) and silver rings with bright artificial stones by Tina Engell from Pounds 100. There are also hand-printed and painted cushions by Neil Bottle from Pounds 75, ties from Pounds 32, colourful anodised aluminium plates and bowls by Patricia Hamilton from Pounds 35, sensuous coloured jugs by Marianne Buus from Pounds 90 and ceramics from Pounds 40 by Chris Carter (the Sainsbury Collection has bought some of his work, too) and Sarah Perry (who was taught by Lucie Rie and Hans Coper).

The designers were asked to keep their prices low and many have produced some particularly good buys. Bev and Mark Houlding, who make fantastic painted and lacquered screens, have offered to make an edition of four screens, painted on one side only, for Pounds 2,000, half their usual price. Camilla Meddings, one of a number of young designers using old gilding and lacquering techniques in a contemporary manner, is exhibiting a mirror (Pounds 140) which depicts Artemis and Apollo, using tarnished copper and gold leaf.

There is exceedingly good value in wallhangings from established designers including Noel Dyrenforth, the leading contemporary British batik exponent (Pounds 350), and the much respected weaver, Peter Collingwood, whose linen and steel hanging costs only Pounds 220. Also, a Richard La Trobe Bateman child's highchair in cleft ash is going for only Pounds 395]

Some reasonably priced bound books are being exhibited. Jan Lindsay produces bookbindings with blank pages so that you can create your own book; the bookbindings (Pounds 390), made from oak boards with white goatskin thongs, are based on early 12th and 13th century manuscripts.

For anyone considering commissioning contemporary furniture in 1993, Decorative Arts Today provides an opportunity to compare the work of more than 60 furniture designers. Bonhams will happily make the introductions. Apart from the well-known names mentioned above, Fred Baier, Ronald Carter, Rupert Williamson, Toby Winteringham, Mark Brazier Jones and Tom Dixon are exhibiting, as well as many unknown recent graduates.

Peta Levi is curator of the Decorative Arts Today exhibition; weekdays 11am to 6pm; weekends midday to 6pm.

THERE IS something irresistible about Seville oranges. The name of them, and the heady scent released when a fingernail is run across the skin, are as brilliant as summer sunshine, just the spirit-lifter needed to dispel the gloom of dank-dark January.

At this time of year, unlike high summer, the idea of holing up in the kitchen for a jam session is not unappealing. The cosy warmth is inviting and there is an undeniable glow of satisfaction to be gained from making your own preserves.

What has become my standard marmalade recipe - one which is made with a little less sugar than traditional marmalade - is given below.

If time is short, it may make more sense to buy marmalade and to enjoy more immediate returns from the purchase of a few Seville oranges by turning them into a sharp and zesty pudding for Sunday lunch.

Wendy Brandon is an ace marmalade maker, from whom I am as happy to buy as to make my own. Her range is wide, using citrus fruits of all kinds and a variety of additional flavourings. They include spiced lemon, orange with ginger, grapefruit and elderflower, satsuma, kumquat, orange with molasses and rum, pink grapefruit with campari, and lime with tequila.

Her marmalades come with a choice of sugar content (the traditional ratio, reduced sugar, and with no added sugar at all). They are stocked by a few select shops and can be bought by mail order: Wendy Brandon, Felin Wen, Boncath, Dyfed SA37 0JR. Tel: 0239-841568. Fax: 0239-841746.

Another commercial offering of which I am especially fond is Twinings' 'Earl Grey' marmalade. Although high in sugar, this is delectable, made with bergamot, that most aromatic of bitter fruit. Its zesty oil gives good-quality Earl Grey tea its characteristic fragrance.

It is a marmalade I will go a long way to buy, which is just as well, since it involves a pilgrimage to central London - it isavailable only to personal shoppers at Twinings shop in the Strand, London WC2.

Nowhere near so distinctive but chunky, dark and good is Duerr's extra thick-cut, traditional marmalade, which has the advantage of being stocked by grocers and supermarkets countrywide.

REDUCED SUGAR MARMALADE

(makes enough to fill eight jars) Organic fruit, or at any rate unsprayed, is desirable for marmalade-making and any other recipe that uses the zest or peel.

4 lb Seville oranges; four lemons; 6 lb granulated or preserving sugar.

Squeeze the juice from all the fruits into a preserving pan. Put the pips and the membrane remaining in the citrus shells into a loosely-tied, butter muslin bag. Shred the peel coarsely or finely as you like it, and add it to the pan with the bag of pips and 8 pt cold water.

Cook over very low heat for two to three hours until the peel is so tender that it can be squashed between finger and thumb, and the liquid has reduced by about half.

Remove the bag of pips and membrane (squeeze it with a wooden spoon in a sieve so all the pectin-rich juices drip back into the pan) and discard it.

Add the sugar and stir over very low heat until it is fully dissolved, then cook at a rolling boil until setting point is reached - when a thermometer will read 220'F (104'C). This usually takes 10 to 15 minutes.

Skim, let the marmalade stand for 10 minutes or so, then stir to distribute the peel evenly in the jelly, and pot in the usual way.

LITTLE SEVILLE PUDDINGS (serves 6)

For those who want to enjoy the zesty scent and lovely taste of bitter oranges without the labour of marmalade-making, here is a good pudding for Sunday lunch. How many oranges you will need depends on their size and juiciness: six is a fair average.

8 fl oz freshly-squeezed Seville orange juice and several pinches of finely grated zest; 6 oz caster sugar; 3 oz softened butter; four large eggs; 2 oz flour; 8 fl oz milk; fromage frais or whipped cream for serving.

Beat the butter and sugar with an electric whisk until creamy. Beat in the orange juice, gradually, then the egg yolks, one at a time. Do not worry if the mixture looks curdled. Beat in the flour, then the milk, adding it slowly.

Whisk the egg whites to snowy peaks and fold the Seville orange juice mixture into them, adding pinches of zest as you do so.

Ladle the mixture into six individual souffle dishes which have been lightly buttered. Stand them in a roasting tin and add enough hot water to come halfway up the sides of the dishes.

Bake at 350'F-375'F (180'C-190'C) gas mark 4-5, for about 40 minutes until puffed up, coloured and softly set. The surface of the puddings will crack as they cook and the mixture becomes light and spongy on top and creamy underneath.

Little Seville puddings are best to eat about 10 minutes after they come out of the oven. They sink a little as they cool, so dress them with dollops of fromage frais or cream and a pinch of zest just before bringing them to table.

ANYONE with more than a passing interest in fashion will know the identity of the British Designer of the Year. But the clothing exporter of the year? Who is that? Media and public interest is invariably design-led, yet high fashion designers turning over much more than Pounds 1m are the exception in the UK.

Clothing companies notching serious export success tend to be far less glamorous. Names from the heady realms of design, such as nostalgic Mulberry, menswear genius Paul Smith and cashmere leaders Pringle, have been winners but, more likely, are purveyors of men's duffle coats, inexpensive cotton separates or frilly children's wear. Yet these kind of companies are the main contributors to a total annual UK clothing export figure of more than Pounds 2bn. In spite of the recession, the figure is still increasing - albeit more slowly than in 1990.

Such unsung heroes of British fashion had their moment of glory this week, at the 1992 Apparel Export Awards. Organised by the British Knitting and Clothing Export Council, an industry-funded body which promotes clothing exports by helping firms exhibit abroad and linking them with potential agents and buyers, the awards, which I helped to judge, were presented at a gala dinner in London by the council's president, the Princess Royal, who, with her no-nonsense approach to glamour, is the perfect royal patron for this cause.

Choosing eight winners from 74 nominees was serious business for a judging panel drawn from journalism, industry and banking.

To be eligible, a company needed to have achieved continuing export growth over the past three years, if possible to have increased its workforce and to have a clear strategy for future growth. This was not easy last year and, several firms where exports grew quickly up until 1991, reported a slowdown.

Eventual winners varied from traditional outerwear firms to a glove-maker and a small-scale designer of upmarket cashmere with no formal training. Some have always pursued export markets while others have only recently altered their strategy, faced with a shrinking home market, to tackle them. Many are family-run and all share the conviction that, apart from the need for high-quality products efficiently delivered, successful exporting depends on personal contacts with, and visits to, the customers. The good designs displayed by this year's winners suggest that overseas buyers increasingly recognise that British fashion is not just about tradition but about innovative design that is also saleable.

We spotlight four of the winners:

Ghost, womenswear winner, is recognised as a high-fashion leader, specialising in soft, flowing shapes made from piece-dyed, Italian-woven viscose crepe which gains its character from the shrinkage induced by the dyeing process. Innovative styling has recently given the label a high media profile. The spring collection was shown in neo-hippy, grunge style but individual pieces remain comfortably wearable.

London-based Ghost has increased its export sales over the past three years from Pounds 1.3m to almost Pounds 2m - they now account for 70 per cent of its total. The firm's founder and managing director, Tanya Sarne, oversees every aspect, creating the range with designer Andrea Sargeant, who lives in Italy, and a UK-based team.

Married in the 1970s to the singer Mike Sarne, Tanya says she learnt then to juggle limited amounts of money. With stylish commercial acumen she has increased the turnover from Pounds 250,000 in 1985 to about Pounds 2.75m.

The US now accounts for one-third of total business, followed by Scandinavia. She says: 'The secret is personalities - getting agents and customers who like and understand the clothes, which are very individual - and maintaining contact. We give an initial reply to any communication within one day and we make on-time, complete deliveries'.

Dents Gloves, accessories winner, has taken exporting seriously since the arrival of managing director John Roberts three years ago. The 200-year-old company had lost its way promotionally, in spite of high-quality products, and was suffering from a fall-off in the home market. Roberts redirected the company from contract work to export, investing heavily in high-quality brochures and packaging, taking a high profile abroad at trade exhibitions and producing design innovations such as bright silk linings to raise the fashion image.

The result has been an increase in exports from 14 per cent to 70 per cent of total sales. Italy, itself a byword for top-quality leather, provides the best market. Roberts is very critical of lack of government support for the industry. 'Companies get help with their first few foreign shows but that is quite inadequate to build a new market which is very expensive for small companies,' he says. 'It's typical British short-term thinking.' The support to which he refers comes from the Department of Trade and Industry and amounts to about 50 per cent of the cost of a 15 sq m exhibition stand at the exhibitor's first three appearances in any one country, or five in certain cases.

The lingerie section needs retitling as the winner - H G Porter and Co - is the first men's nightwear company to win in the awards' seven-year history. Chairman Arthur Porter, the founder's grandson, has made a 'concerted and strategic effort on export to Europe since 1989, preparing for the single market. Before that, our exporting was piecemeal, relying on chance personal contacts.'

The Strabane-based firm was founded as a shirtmakers, going into nightwear through restructuring in 1965. 'We had relatively little specialist competition so there was a niche,' says Porter. 'Since then I've become obsessed with pyjamas.'

The results of extensive market research in Europe led to updating a traditional British look and seeing each country as a regional variant, not a different market. Exports have almost doubled in two years and he has taken on 30 extra employees. He credits his workforce, the BKCEC and the Northern Ireland Industrial Development Board.

Belinda Robertson wins the Natwest Award for small businesses with her Pounds 440,000 sales of which almost 90 per cent are exported. Her cashmere design firm started almost by accident when she modelled knitwear and thought the designs boring, sketched some ideas of her own and found she could sell them.

She moulds and drapes cashmere so it looks more like woven fabric, a style with upmarket success especially in the US. She says the secret is 'all in the contacts - through them I show abroad privately, which is what top-level customers like.' She also finds her Edinburgh base an advantage - 'customers are delighted to visit because they can take in a little golf and tourism.'

CHAY Blyth was in ebullient form. It takes an experienced observer to distinguish between this mode and the normally effervescent Blyth, but it was thus. 'Wow, isn't that fantastic,' he shouted as a crudely ugly racing yacht docked beneath the green hills of Hobart, Tasmania.

British Steel II had her boom jury-rigged as a mast, and a second spar (borrowed from a much smaller yacht) in place as a mizzen. Aboard, her 14 crew looked much thinner than when they had left Rio on November 15. British Steel had been dismasted halfway between Cape Horn and New Zealand, 2,500 miles from land in the iceberg-strewn wastes of the Southern Ocean. It is as far from land and outside assistance as it is possible to be.

Her voyage to rejoin the other nine yachts racing around the world in the British Steel Challenge, created by Blyth to give fare-paying amateurs a taste of world-class ocean sailing, has become a classic of ingenuity and guts.

Skipper Richard Tudor, 32, had already become renowned as probably the hardest-driving of the 10 professionals helming the 67ft steel yachts. After winning the training race around the Fastnet and the first Solent-Rio leg, Tudor's boat was favourite to take overall victory in the 28,000-mile epic which will call at Cape Town before finishing back in the Solent during late May.

'It's been such an unbelievable experience. The shock and fear and then teamwork to survive. I'm not sure that dismasting isn't more of an achievement than winning the race,' said crew member Louise Broadbent of Leeds, as the battered yacht moored up.

Once safely alongside Constitution Wharf, where Tasmania's unfortunate convicts once landed, the stories began to emerge of the rough, freezing night when the 90ft mast fractured just above deck level and toppled overboard - a month from the nearest land. A stainless steel bottlescrew, a component that has now failed on almost every other yacht in the fleet, disintegrated and left the spar without its main supporting wire.

'I thought we'd hit an iceberg,' recalled Marcus Gladwell, who was in his bunk directly below the broken fitting when disaster struck. 'The first noise of metal exploding woke me up, then came the banging of the mast against the hull.

'If the yacht had been made of anything except steel I'm sure the rig would have bashed through the side and sunk us.' In the dark and confusion it took nearly an hour, using massive bolt-cutters, to cut the wires holding the damaged mast to the yacht and let in sink 7,000ft to the ocean floor.

After that came the realisation that from being leaders of the 28,000-mile race and favourites to win, British Steel II was effectively out of the hunt. 'Some people were fairly depressed in the aftermath,' said Tudor, going on to explain the irony of the incident.

'At the time we weren't pushing the boat hard. We were nicely placed just behind the leader Nuclear Electric and there was no need. Had we been pushing I could have forgiven myself for the damage,' said Tudor, a former professional sailmaker from Pwllheli. His only similar accident was losing the mast of his Mirror dinghy when he was eight.

Although he is shrewd enough to conceal it, Tudor is bitterly disappointed that a design or manufacturing failure has dashed his hopes of glory. In a shed adjoining Constitution Wharf lie the masts from three other yachts, all seriously damaged from the same flaw in the overall rig.

Andrew Roberts, technical director for the race and virtual designer of everything aboard except the hulls themselves, is certain that metal fatigue caused the same component to fail on eight of the 10 yachts. Certainly there are some expensive bills waiting to be apportioned and insurance assessors, spar-makers and metallurgists can be found holding animated conversations in odd corners of Hobart.

Without the full mast and sails to balance the yacht, British Steel II began a wicked corkscrewing motion through the 40ft waves. 'From that point we just thought about survival, not racing,' said crew member Yvonne Flatman, a trading standards officer in 'civilian' life.

The ultra-competitive Tudor rejected the easier notion of running with the prevailing winds to Chile. He was determined to reach Hobart in time to participate in the final two legs of the race. British Steel II used its motor to reach Hobart, disqualifying itself from that leg and the race overall.

'We knew we were deep in iceberg country and we didn't have enough food or fuel to do anything except sail out of it. It was my decision to stay in the race and head for Tasmania,' said Tudor. A spare mast has been flown out for British Steel II. The others are being repaired with new aluminium sections, some over half the length of the original spar.

'Of course I'm surprised at the damage we've suffered. I honestly thought the boats were built more substantially than that - if only because I'm responsible for the repair bills,' said Blyth, who created and owns the race concept.

'But we've got them all here safely and that's a huge relief.' Not least because next month Blyth is expected to announce plans for a successor race in even bigger yachts with more competitors. Against considerable scepticism he has proved that a taste for adventure and danger lurks within even the most deskbound of us.

THE rugby was no laughing matter at Murrayfield last Saturday, not even if you were Scottish and celebrating a handsome 15-3 victory over the Irish in the opening game of the international championship. What did you think of it, Fergus Slattery was asked? 'Murrayfield is a lovely stadium,' said the distinguished former Irish international, deliberately elliptically. 'It was very windy.'

If Slattery was being polite, then it was in marked contrast to the newspaper reports of Ireland's 12th successive game without victory in the championship. 'Miserable Ireland sink to a new low at Murrayfield' ran a headline in The Sunday Independent. The story beneath said: 'You don't often sense misery at a major sporting occasion but it was present at Murrayfield yesterday. You only had to be Irish to feel it. For the ailing team touched a new low and emerged from a dull match the authors of nothing.'

Mick Doyle, who was Ireland's coach when they won the Triple Crown in 1985 (and when they were whitewashed in the championship the following season) wrote in the same paper: 'This was the worst ever (display) by an Irish side.' I have news for him. I have seen worse Irish teams than this but I have never seen such a limp one. The traditional Irish fire was absent. They seemed brow-beaten and uncertain of themselves, which are hardly Irish characteristics.

By Tuesday, feelings had quietened and the remarks of Moss Keane were all the more welcome for being so honest and low key. 'Our flair for rugby has been curbed by our obsession to follow every one else,' said Keane, another former international. 'Doing the unusual, as was our instinct, had a more unsettling effect on the opposition. Where has the old fashioned footrush gone? Working on fitness is fine and essential but when you have players going out to play to a sterile, pre-ordained pattern foreign to their traditions then you are getting nowhere.'

Rugby is of relatively little importance in the scheme of sports in Ireland, a comfortable fourth behind Gaelic football, hurling and soccer. Only an estimated 12,500 play rugby compared with 30 times as many in England, for example.

'We used to close the gap that existed between us and other countries in three ways,' said Slattery. 'First, we picked our best players. Then we were better organised, and thirdly we gave 100 per cent for 80 minutes. We are doing none of these now and we are showing our lack of resources.'

The Irish always seemed to be larger than life - on and off the field. Seared into my memory and liver is the effect of a Sunday spent in the company of Keane during the 1977 Lions' tour of New Zealand. For Keane it was a day of rest, which meant that for everyone else it was anything but. No wonder he was nicknamed Rentastorm. He roamed the hotel press-ganging players and journalists to join him for a drink. He came across me just before midday, as far as my memory goes, which is not very far, for obvious reasons. I escaped to my bed barely vertical and far from sober after a mere eight hours at the court of King Moss.

A few months later Keane was the host during a day in Dublin. The liver received a second battering but what sticks more clearly in the mind is his driving rather than his drinking. Cackling with laughter and dwarfing the tiny gear lever in his massive left hand, the Kerryman piloted his way around the fair city in a screech of tyres and a blur of brakes.

'Are you an ambler gambler,' he roared again and again as he diced with the traffic lights. 'I am.'

It was around men like Keane and Willie-John McBride and Syd Millar, all of whom had voracious appetites for life and rugby, that Ireland built their pack in days gone by. Keane was once advised that the second row forward playing opposite him was soft and a punch would be a good manoeuvre. 'At the first line-out I bopped him one,' Keane recalled. 'Then bash] He hit me straight back. I thought to myself: 'Bejabbers, I hit the wrong man'.'

Men like Keane have disappeared - at least for the time being. 'We used to have players in key positions who always did the right thing,' said Noel Murphy, the Ireland manager. 'We have not got men like this any more.'

I have a solution. The IRFU should look at - I am sorry for mentioning this word, and I will wash my mouth with soap - but what they should look at is soccer in Ireland. Some years ago it was in as much disarray as rugby is now.

With the sort of ingenuity and disregard for convention that the Irish professional golfers showed by staging the Irish Masters in Portugal, the soccer authorities called in the best man to become team manager: Jack Charlton, an Englishman who lived in Northumberland.

Charlton revitalised the national team, taking them to the late stages of the World Cup finals in Italy in 1990. One possible candidate to revitalise the Irish rugby team is the brilliant French coach Pierre Villepreux. He could be found a job teaching English or French in a school in Dublin. Are the Irish big enough to make such a break with their traditions?

SUSSEX was remote from civilised society until George IV, the Prince Regent, turned Brighton from a fishing village into a seaside resort centred on his pleasure dome, the Royal Pavilion.

Then, with the advent of the railways in Victoria's reign, Sussex changed for ever. The county of woods and sticky clay, where travelling in a carriage was a nightmare and where blacksmiths and forgemasters worked the iron, burning the trees and damming the streams to make 'hammer ponds', became a Home County.

Bankers and stockbrokers, and their clerks, moved out of London and set about creating wonderful gardens of rhododendrons and azaleas. (A century ago, trains to town took the same time as today. The choice of stations was better.) The Sussex they moved to had largely escaped 18th century gentrification - there are no Georgian stone stately piles.

Instead, wood, daub, and brick and tile are the basis of the Sussex vernacular, and near the South Downs, knapped flint also. The houses are distinctive - their frames are half-timbered, with a filling of daub, bricks or flint, with the upper part sheathed in vertical hanging tiles as a protection from the weather. Roofs are tiled and low, giving most Sussex houses the look of cottages. Inside are low, head-hammering beams and brick floors and fireplaces, often wide enough to have an inglenook.

The affluent 19th century commuters hastened to enlarge their homes, or build new ones in the same style, as has continued to happen ever since. With their look hardly changed for 400 years, it can be hard today to spot the original bits in an 'old' Sussex house.

As a result, they exude the reassurance of sharing in a living tradition. Sussex is a large county that divides into three parts. West Sussex, bordering on Hampshire, has the attractions of Chichester and its cathedral, theatre, and harbour, and the Roman palace at Fishbourne, racing at Goodwood, and a beautiful, unspoilt hinterland.

Mid-Sussex is the London-Brighton corridor along the M23/A23 (now being improved) and the railway line, with easy access to Gatwick, Glyndebourne (closed for 1993) and the gardens at Wakehurst Place and Nymans. East Sussex flattens as it nears Kent and the Channel tunnel, and oast houses (for hops) begin to appear.

A splendid example of a typical East Sussex house newly on the market is the 18th century New House Farm at Bodiam, (where the National Trust has a famous castle) and close to Battle, where William of Normandy conquered Harold in 1066. Brick and hung tiles mask its timber frame. Cluttons in Haywards Heath (0444-441166) are offering it at around Pounds 350,000, with the adjacent triple oast house for around Pounds 200,000, and up to 320 acres of farmland.

More expensive and basically 16th century (when a family called Thatcher obtained the property at the dissolution of the monasteries), is Arches Manor at Framfield, near Uckfield and Lewes, with John D Wood (071-493-4106) and Batcheller & Thacker in Battle (0424-775577) at around Pounds 600,000. Nearby is the 17th century Buckham Hill Farm at Isfield, a house rich in oak and with an 18th century barn offered by Cluttons, at Pounds 575,000.

The Stable Cottage at Wadhurst near Tunbridge Wells, with a Victorian coach house that could be converted, is available at around Pounds 110,000 from Knight Frank & Rutley in Tunbridge Wells (0892-515035). Next door, Hamptons (071-293-8222) offer the big house, Best Beech Place, a 1920s Sussex-style oaken splendour with garden by Gertrude Jekyll, at around Pounds 850,000. For keen shots, Knight Frank & Rutley are selling Platts Farm at Burwash looking across to Rudyard Kipling's old house (Batemans) at around Pounds 500,000, to include barns and outbuildings, 71 acres and two duck flighting ponds.

Oldcastle at Dallington near Battle is a house that grew over 300 years but did not change its Sussex style. Humberts in Lewes (0273-478828) will sell it to you with nine acres for about Pounds 625,000. Or they offer the attractive 17th century Oak Ferrars Farm at Piltdown, with outbuildings and three acres for about Pounds 269,000.

An intriguing East Sussex conversion is the flint Place Barn at Wilmington, nestling under the Downs with views to the giant, chalk-cut Long Man of Wilmington, who stands on the slope holding a stave in either hand. The Barn (Humberts, around Pounds 275,000) won a Civic Trust award in 1982.

Another recent conversion is the Coach House at Halland near Lewes, a handsome brick building that has the merit of not being cottage-style. Watsons in Heathfield (0435-865077) offer it at around Pounds 320,000. The best Sussex-style house in East Sussex is called Toad Hall: its name must be reflected in the price of Pounds 395,000 (from Fox in Haywards Heath, 0444-450105). It is an impressive Wealden hall that could have belonged to an ironmaster, dating back to the 15th century.

But finest of all is a manor house, early 17th century and listed Grade II*, built in stone by an ironmaster to show he was above the common Sussex cut, and on offer for only the third time in its history. Court Lodge at Ashburnham near Battle (Knight Frank & Rutley, under offer at around Pounds 450,000) comes with a Grade II barn and 48 acres, including 27 acres of vineyards which the vendor would like to rent back from the new owner for Pounds 175 an acre.

In mid-Sussex, a similarly grand manor, now a romantic ruin, is part of Brambletye Manor Farm near East Grinstead. The total price for a typical Sussex house, ruins, 26 acres, swimming pool and tennis court is around Pounds 495,000, or Pounds 100,000 less excluding the farmyard (from John Powell in Forest Row, 0342-822261, or Savills in Sevenoaks, 0732-455551). Odder still, and dearer at around Pounds 1.25m, is Laughton Manor near Lewes (from Hamptons in Mayfield, 0435-872294), a cream-stucco early Victorian villa with an Italianate belvedere tower that has popped up in the country from Belgrave Square or Regent's Park.

About half that price is a delightful house (from Fox), the Elizabethan East Mascalls in Lindfield near Haywards Heath, which a Cheshire family built with the ornamental half-timbering familiar in the north west. They must have brought their joiner down with them. Nearby Cockhaise Mill Farm is for those who want to run a business, as it comes with a thriving farm shop (with game licence, sausage licence, ice cream licence and liquor licence). Petfood is a new line and doing well. Humberts offer it at around Pounds 585,000.

Another neighbour is the many-bedroomed 16th/17th century manor called Tremans at Horsted Keynes, listed Grade II* (Humberts, around Pounds 550,000). Arthur Benson, librettist of Land of Hope and Glory called it 'almost incredibly picturesque'.

Top marks go to Michael Winter-Kaines, a retired British Airways captain who is marketing his Windmill Cottage at Rowhook, near Horsham, himself (0403-790513) at Pounds 330,000, provided there is no chain. Not wanting to pay agents' fees, he has produced an excellent, straightforward brochure for an attractive listed Grade II house and cottage and barn, and is amazed at how many people have replied to his advertisements and how nice they are. 'They are delighted to deal directly,' he says.

If you want to farm in mid-Sussex, the 425 acres of Little Danny Farm at Hurstpierpoint is virtually all the estate once belonging to the imposing Elizabethan manor house called Danny (now retirement housing with the Mutual Households Association). It is an attractive proposition: mixed farming, lovely country, parkland and lakes, in the lee of Wolstonbury Hill (National Trust) on the Downs, and yet no distance from Brighton. Being sold in lots by Humberts, the total asking price is around Pounds 1.3m.

Going west, Jackson-Stops in Midhurst (0730-812357) offer an essence of cottagey Sussex in Old Hill at Lurgashall, near Petworth, three cottages and a mill run together for around Pounds 220,000. The garden is crammed with specimen plants. At Washington they are selling (with King & Chasemore in Pulborough, 0798-872081, at around Pounds 445,000) an 1820s old vicarage, a good late Georgian box of a house for those who do not thrill to the wealth of head-height old oak that is the hallmark of Sussex.

there was an African hunting dog not far ahead. We set off on foot, treading silently and hardly daring to breathe. We had barely reached the bend in the track which led through thick mopane scrub when the wild dog doubled back and met us face to face. We had walked into the middle of a hunt.

This was one of those chance encounters which turn an African safari from a holiday into an adventure. One way of maximising the chances of such encounters is to choose your destination carefully. With more areas opening up for visitors, opportunities are increasing.

Zambia's South Luangwa national park has long been noted for its walking safaris and its exciting night drives, while North Luangwa has only recently been opened to visitors, although on a limited scale. Zambia was one of the pioneers of walking safaris. They are generally well planned and full of interest.

Abercrombie & Kent, Worldwide Journeys and Expeditions, Twickers World, and Art of Travel all go to Luangwa Valley, but of these only Art of Travel specifically includes North Luangwa. Expect to pay Pounds 1,855 and up for 14 days.

While the walks in Zambia take you from one fixed camp to another, Richard Bonham's walking expeditions into Tanzania's enormous Selous game reserve are more in the traditional safari mould. Strings of porters are used, and you sleep under the stars. Worldwide Journeys and Expeditions offers these safaris from Pounds 3,950.

The traditional theme is repeated elsewhere in Tanzania where Gibbs Farm Safaris takes clients into the vast grass seas of the Serengeti. Camping in luxury tents, you will not see another vehicle in spite of the open country. Nigel Perks, who runs GFS, has an uncanny knack of finding the most elusive of animals. These safaris can be booked through Art of Travel, while Twickers World has fly-in safaris to the Serengeti from Pounds 2,615 for 17 days.

A destination that has become much more accessible now that Air Namibia operates direct flights from Heathrow is Namibia. With its good road network, this southern African country makes an excellent destination for a fly-drive tour. Etosha national park has plenty of elephant, black rhino and lions, and a stay at Okaukuejo, with its floodlit water hole, is not to be missed.

One country to rejoin the safari scene recently is Uganda, which has gorillas. The borders of Zaire, Rwanda and Uganda meet in the volcanic massif which forms the last stronghold of the mountain gorilla. It is particularly good to see that gorilla-watching in Rwanda is possible again now, as the continued conservation of these primates depends so much on western visitors. Twickers World has a 23-day tour including visiting chimpanzees in Tanzania from Pounds 1,675, while Abercrombie & Kent has a four-day add-on to a standard safari for around Pounds 1,021.

Mana Pools national park on the banks of the River Zambezi in Zimbabwe is not only excellent for walking but is one of the highlights of a canoe safari down the Zambezi, a leisurely way to see game, especially hippos and crocodiles, at quite close quarters.

In turn, overland transport comes in many forms. Abercrombie & Kent offers a traditional ox-wagon safari on the shores of Kenya's Lake Naivasha (two days, Pounds 480 ex-Nairobi), or a camel safari in northern Kenya (three days, Pounds 307 ex-Nairobi), while there is the opportunity to explore parts of the Kalahari desert in Botswana on all-terrain vehicles.

Botswana's Okavango delta, a rich mixture of glittering channels, clear lagoons, water-lilied pools and sandy, palm-treed islands, has never been easy to travel around. One way is to take an unhurried safari in traditional mokoros, dug-out canoes, which are poled through the placid waters of this enormous labyrinth of waterways by local guides, with an occasional walk on one of the thousands of islands.

Telephone numbers: Abercrombie & Kent, 071-730-7795; Art of Travel: 071-738-2038; British Airways Holidays: 0293-611611; Dragoman: 0728-861133; Explore Worldwide: 0252-319448; Exodus Overland: 081-675-7996; Guerba Expeditions: 0373-826611; Southern Africa Travel: 0904-692469; Sunvil Holidays: 081-568-4499; Twickers World: 081-892-8164; Worldwide Journeys and Expeditions: 071-381-8638.

'Tunis is a land of liberty,' wrote the Chevalier d'Arvieux, a French diplomat, over three centuries ago. 'Religion disturbs no one; they pray to God when they must, fast when they cannot do otherwise, drink wine when they have money, get drunk when they drink too much and no one finds any harm.'

THESE words ring true today and explain, as much as the sand and deep blue sea, why more than 2m Europeans travel to the only country in the world whose name is derived from a fish, tuna. The bulk of those who travel to Tunisia go on summer package tours. Others have discovered that off the beaten track, North Africa's smallest country has much to offer.

First of all it boasts splendid ancient ruins, the most dramatic of which are in Dougga, on the western uplands near the Algerian frontier, and a collection of Roman mosaics in the Bardo museum in Tunis which is second to none. For those interested in Muslim architecture, the fortified town and grand mosque of Qairwan, which dates from the 8th century, is but the most remarkable of many scattered around the country.

The Jewish faith boasts the oldest synagogue in Africa on the island of Jerba, Ulysses' fabled land of the lotus eaters. Every spring, a pilgrimage to the Ghriba synagogue attracts Jews from all over the world to a country where their presence, though much reduced today, spans nearly 3,000 years.

For their part, Christians can turn their thoughts to St Augustine, who delighted in the pleasures of Carthage before preaching a more austere creed as bishop of Hippo in what is now Algeria. On a warm summer night, Carthage still evokes a courtesan past her prime but is still attractive.

Neighbouring Libya is virtually closed to foreign visitors. This is the first country an ancient traveller from the east would have crossed on his way to the 'Maghreb al Aqsa,' or 'Western land of the setting sun' as people in the Middle East still call the maghreb. Yet, on the sea shore, the setting of the roman ruins at Leptis Magna and Sabrata, both an hour's drive from the capital, Tripoli, are exceptional.

Before its present troubles, Algeria attracted maybe 200,000 foreign visitors, mostly headed for the Sahara desert. A quarter of a century ago, the country's leaders set their mind against developing tourism; as a result, Africa's second largest country boasts few decent hotels, most of the state-controlled ones being very run down.

Gone are the late 19th century days when guides were published in London called Algiers, The Playground of the Rich, and wealthy English families built what are to this day the most elegant houses in the Mustafa Superieur residential area of the city.

Yet those who brave discomfort and explore the Tassili plateau, the mountains around Tamanrasset and the oasis of Timimoun and Tahrit, can discover something of the beauty and magic of the desert.

Waiting to be discovered are the strange petrified stone forest of the Tassili, with its thousands of dark silhouettes reminiscent of fur trees weighed down by snow which, on closer inspection, are sandstone needles, and thousands of pre-historic drawings scattered over 50,000 square miles.

The red needles of the Hoggar mountains near Tamanrasset are quite as unreal. For those interested in architecture there is the town of Ghardaia, founded by the puritan Mozabite sect of Sunni Islam which proved the great inspiration for Le Corbusier's art.

Nearer Algiers, the roman ruins of Tipaza enabled Albert Camus to experience 'the happy lassitude of a wedding day with the world.' To Camus, the ruins of Tipaza were far more 'modern' than many a modern city. This absinthe- and jasmine-scented paradise has, however, today fallen victim to the violence which has engulfed Algeria.

Morocco, for its part, boasts almost too many riches: skiing in the Atlas mountains; swimming in the pool of any number of very comfortable hotels in Marrakesh; trekking in the same mountains in late winter or spring through Berber villages which appear like Cubist paintings hung on steep rocks.

For those who prefer the sun and sea, Morocco's long Mediterranean and Atlantic coasts offer fun all year round. Resorts vary in tone, though Morocco does not greatly encourage package tours and a number of its hotels cater for the seriously rich. The Palais Jamai in Fes, one of the glories of Islam, the Mamounia in Marrakesh and the Minzah in Tangiers are in the grand tradition.

The variety and quality of Moroccan food, which is often sweet-sour, adds to any trip, a true feast providing a seemingly endless flow of dishes. Save for less than half a century as a French protectorate, Morocco has always been independent.

Morocco's glory is its Berber and Arab architecture. The 1,000-year old religious capital of Fes is dominated by the minarets of 100 mosques. Unfortunately, mosques and other religious buildings are not open to non-Muslims.

Beyond the red city of Marrakesh, from where in winter the visitor can gaze at the 13,000-ft summits of the Atlas 30 miles away, lie Taroudant, Tafraout and other old towns.

As the traveller descends to the plain from the frozen passes above, he realises he has landed at the gateway of the Sahara. The contrast is intoxicating, and never more than in late winter when the southern slopes of the Atlas are covered with almond trees in flower.

'THERE, Roger, There] Ooooohhh, Yeesss]'

I was sitting in a bright green and yellow six-wheeled truck with buffalo horns wired to the bonnet and rows of old cinema seats in the back, and beside me was a girl so excited she was almost dribbling in my ear. It was irritating. My name is not Roger. There are moments when I wonder why I like travel.

There were about a dozen of us in the truck, an old Swedish army vehicle that had seen more African miles than a truck deserves to. Currently it was in the service of a tour company that takes prawn-pink European tourists into the dusty countryside of southern Gambia and shows them the sights.

The excited squeaks and coos had begun early in the morning, before we had even left the strip of Atlantic coast where the tourist hotels range the beach. Roger was sitting on one side of the truck, Jane on the other. Both had binoculars to their eyes, cameras around their necks. Never had two more enthusiastic discoverers set foot in Africa. It took me some time to work out what it was they were discovering.

'Yaaaah]', Jane would let loose a barely restrained shriek, rocking the seat beside me. 'Its a drongo]'

But what was a drongo? I would gaze in the direction that Jane was training her binoculars, and try to imagine what one looked like. Was it the little anthill-looking thing off to the left? Or the spiky tree behind the anthill? Or maybe the little tin shack just behind the spiky tree? I could see nothing at all.

This inexplicable behaviour began to get on my nerves. It was some time after we had visited Uncle John's country palm wine bar, but a few minutes before being held up for sweets and pens at the Jambur primary school, that I borrowed a pair of binoculars from a fellow tourist and realised what Jane and Roger were getting so excited about.

It was birds.

Take a pair of binoculars outdoors in The Gambia - anywhere: hotel gardens, the potholed streets of Serrekunda town, into the peanut fields or mangrove swamps along the Gambia River - and suddenly what can at times appear to be a miserably poor and tourist-ridden country is transformed into a series of vignettes of astonishing wealth and beauty. I arrived in the Gambia knowing and caring nothing about birds. When I left I was well on the way to becoming one of that most hopeless of species, the addicted birdwatcher.

The Gambia has had few fair shakes since it became a British slave-trading entrepot in the 18th century. An historical and geographical aberration, it is the result of commercial conflict between British and French colonial trading interests. While France, master of much of north and west Africa, laid effective claim to the huge territory of Senegal, the British were able to hang on to the Gambia River, the sluggish, mangrove-bordered waterway which flows through its heart.

The result, today, is a country which, while some 300 miles long, posesses land only 15-to-30 miles wide on either side of the river. With no hinterland, The Gambia's options are few. Ninety per cent of its meagre wealth comes from peanut exports. Its population is one of the densest, fastest expanding and poorest in Africa. Tourism is one of its brighter hopes. Just five hours' flight from London and with six months' guaranteed sunshine during the northern hemisphere winter, it is an increasingly popular package destination.

If The Gambia's history and geography have made it a place where North and South collide, its river has also incited a more gentle kind of meeting. One of the few waterways to flow through this vast semi-arid region of west Africa, The Gambia attracts millions of birds every year. Each dry season hundreds of species, most African, some European migrants, congregate on the country's riverbanks, beaches, mudflats, forests and grasslands.

Does an annual winter colloquium of birds sound slightly tedious? Perhaps, in England, it might. But this is no dull, grey-brown meeting of humble nuthatches and self-effacing finches. This is Africa, and its penchant for flamboyance, oddity, excess and gaudy allure has been passed on to its feathered inhabitants. The birds of The Gambia are, quite simply, outrageous, and make the country one of the premier birdwatching areas in the world.

One early morning a few days after my south Gambia tour I set out with Lamin Sidibeh, a Gambian who at 29 is fast building a reputation as a professional bird guide. He is known far away in England to the BBC - the Bedfordshire Bird Club - two of whose members I had met walking goggle-eyed about the lush gardens of the Senegambia Hotel.

Hard-core birdwatchers have a habit of drifting away in mid-sentence, their eyes suddenly fixed on some object above your left shoulder, but I did manage to hold them long enough to find out that Lamin is one of the best in the business.

Among old Africa hands it is common to find that an early interest in big game watching is replaced by a deep and long-lasting enthusiasm for birds. There is greater variety, often more technical skill and personal knowledge needed in spotting them, and a great deal less preparation and money involved.

To sight a white rhino requires a costly expedition into a game park. To spot the much smaller but equally spectacular malachite kingfisher - a brilliant jewel of a creature - you might only have to gaze up at a telephone line while ambling over to a restaurant for lunch.

Lamin and I, for example, began that morning in a not terribly auspicious sounding place close to the hotel area, the Kotu sewage ponds. It sounds ghastly, but there we saw a whole series of delicate waders, birds like the blackwing stilt that mince around perched on thin pink legs that make up two-thirds of their height. We saw the cormorant-like African darter drying its wings after diving, and an English visitor, the grey heron, spearing its sharp bill into schools of little fish.

From that point on, the morning was an unending succession of discoveries and surprises. In a spiky, harvested millet field, where peasant women were collecting stalks to feed their cattle, we came across a Senegal coucal with green tail, white breast, black head and red wings and eyes, scuttling through the stubble catching lizards.

In an irrigated rice field we watched a snowy white cattle egret wrestling with a frog almost too big to get down its narrow throat.

On a mud flat by a small estuary we watched a bar-tailed godwit, a bird with a beak almost as long as its body, poking around the mangrove roots catching fiddler crabs for breakfast.

I had passed the Fajara golf club any number of times without thinking much of it. Its fairways are yellowed, its greens brown. That morning it became an entrancing place: all you have to do is look up. There we saw a giant kingfisher, a full 18 inches long from beak to tail, flash by in a brilliant blue streak. Not far away, in that strangest of African trees, the baobab, we watched bright green long-tailed parakeets peck at the fruit that is used to make cream of tartar.

Standing by the hollow of a neem tree - West Africans use its leaves as a malaria remedy - Lamin whistled a scale of liquid, ascending notes; they were similarly answered from inside the hollow, and in a minute or two a pearl-spotted owlet emerged to blink sleepily at us. One of the aerial wonders we spotted up a tall palm tree was not a bird at all, but a palm wine tapper doing his morning rounds, shinnying up and down collecting gourds of sweet fermented sap.

I shall not go on. Suffice it to say that in one morning I saw 55 different kinds of birds, each new one as exciting and different as the last. I cannot decide which I like best, but I think I would plump for the tiny nectar-drinking sunbirds, impossibly bright creatures in yellow, scarlet and ruby.

I did not quite see the full range, though: there are said to be 507 species of birds in The Gambia. Even Lamin has seen only 378. But I have not given up. If, in the future, you come across a wild-eyed twitcher crouched in some distant palm grove muttering 'Yeesss] It's a drongo]', it might be me.

Nicholas Woodsworth travelled c/o The Gambia Experience (tel: 0703-730888), a specialist tour company that offers return air fare from London and seven nights' accommodation with breakfast at the Kairaba Hotel for Pounds 448-Pounds 548. Lamin Sidibeh can be contacted c/o Customs & Excise, Wellington St, Banjul, the Gambia (tel: 94852).

OF ALL the nations struggling toward democracy, few seem to have less natural aptitude for the task than Russia and South Africa. Neither is politically tolerant by nature: throughout history, both have proved themselves excellent autocrats, corrupt and terrible tyrants.

But now Moscow and Pretoria, bitterest enemies for decades, have become strange comrades in battle: falteringly, they fight the tide of culture and history to pursue a liberal democratic goal which seems to recede as often as it draws nearer.

Neither is likely to follow a straight path to democracy - if indeed, they ever get there. But both are committed to ruling by consent and not coercion; and a return to either totalitarianism or apartheid is out of the question. Both must therefore search for a more or less democratic form of government which can hold anarchy at bay while protecting the minimum of civil liberties.

So far the move to democracy has fostered chaos, crime and violence in both countries. Many already yearn for a strong man to restore order. In South Africa, a prominent mixed race politician complains (only half in jest) 'I miss apartheid'; and most Russians would probably understand this nostalgia for authoritarian certainty.

But in the longer term, a betting man would probably conclude that Russia will stay the course to full democracy - however circuitous - and that South Africa will not. Both face formidable obstacles to democratisation, chief among them problems of ethnicity and economic hardship. But South Africa has a further overwhelming disadvantage: the rigid correlation between wealth and race decreed by apartheid.

For democracy is scarcely the obvious solution for a country where the majority is poor, black and impatient and the minority white, rich and powerful: democracy invites the individual to use his vote to obtain a fairer share of wealth; but any government which indulges the urge to redistribute wealth will alienate white skills and capital, and jeopardise economic growth. Either way, the incumbent government would suffer at the ballot box - and would probably soon decide to dispense with democratic elections.

As Alexis de Tocqueville pointed out more than 150 years ago: 'When the people rule, they must be rendered happy or they will overturn the state.' But in South Africa, the 'state' would not give up without a fight; a new government may well be tempted to impose its will - in the national interest, of course - rather than hand over to the opposition.

Not surprisingly, most South Africans reject this scenario: indeed, they find cheer in the midst of political upheaval by counting their considerable blessings in comparison with Russia. South African democrats will inherit intact the one most necessary condition for democracy: a market economy. That economy may have been damaged by 40 years of 'Afrikaner socialism', which used state capital to set up nationalised industries dominated by the 'white tribe of Africa'. But repairing its flaws is a small task compared with that facing Russia's economic reformers. From nothing, they must create financial markets, draw up a detailed body of company law and construct all the institutional supports necessary to capitalism.

South Africa inherits these things from the apartheid state; and before the African National Congress decides to tamper with this inheritance, it should reflect on the ways in which capitalism underpins the democratic system which the ANC professes as its goal. In developed democracies, the private sector functions as an important check on the power of governmental authority; and the market economy holds out the best hope of a prosperity which is essential to bolster democracy from below.

Paradoxically, South Africans will also inherit from apartheid - a most undemocratic ideology - the infrastructure of a thriving political democracy which Russia struggles so painfully to build. South Africa has political parties, independent courts, lobby groups and all the paraphernalia of parliamentary democracy, which can surely be adapted for a multi-racial future. But in Russia the Communist Party, which invaded every aspect of personal and public life, has deeply discredited the very notion of 'party'; indeed, there are few coherent party alternatives to President Boris Yeltsin, himself something of a one-man band.

Progress towards the establishment of an independent judiciary in Russia is perhaps more advanced: the new Constitutional Court represents a milestone on the path to democracy. But Russia has no tradition of challenging state power through the courts - certainly not under communism, when challenging party decisions was effectively forbidden - and it lacks the institutional depth (the courts, the judges, the independent lawyers) present in South Africa. Even in the worst days of apartheid abuse, South Africa's courts managed to preserve much of their independence.

But democracy requires more than political parties, elections and courts: a vigorous civil society (everything from trades unions to churches, women's groups to chambers of commerce) is necessary to frustrate the would-be tyrant. Such civil infrastructure is well developed in both black and white South Africa - and almost non-existent in Russia. Organised business and labour in South Africa could counter-balance government power; civic associations in black townships could prove a further check on central government; and with three-quarters of the population actively religious, the churches will remain a major political force.

What is more, South Africa will inherit a state machine which actually works; in Russia, where party and state were practically indivisible, the collapse of the one has destroyed the other. No new South African government is likely to face the crisis of executive power which currently assails Moscow.

So that is the triple challenge facing Russia: to create a modern state, a modern market economy and democratic political institutions, and to do so simultaneously under conditions of great economic hardship.

But however daunting the immediate crisis, Russia will probably muddle through in the end to democracy and prosperity. And South Africa, whatever its early advantages, may not. Western democracies will continue to provide moral support to Russian democrats (however unreliable their financial backing), while South Africa will rapidly be left to itself on the remote tip of a forgotten continent. And over time, the gross inequalities of South African society could prove too much for a fledgling democracy.

Both face problems of ethnicity and economic deprivation which threaten democracy; but in South Africa, crucially, they are linked. While Russians struggle (more or less) equally to survive, race determines the degree of hardship experienced by each South African. As long as that is so palpably true, it is hard to see how democracy can take root.

But even if South Africa - perhaps Russia too - reverts temporarily to authoritarian rule, there can be no returning to the specific abominations of the past. Totalitarian communism and apartheid are ruled out forever. The future can scarcely be worse.

Patti Waldmeir's Paper, 'Is Democracy achievable in Russia and/or South Africa?' is obtainable from the Center for Strategic and International Studies Suite 400, 1800K St NW Washington DC

ONE THING the papers shared this week was Clinton fatigue. Editorials from Dublin to Lublin made half-hearted attempts not to be boring but failed. The inauguration of a president remains, as ever, the crossroads of history that lead to a new beginning and the quest for the rebirth of the American dream. Only Paris-Normandie had an interesting view of the new man in the White House: 'It is as if Pontarlier town council were put in charge of France.' Pontarlier is, incidentally, much nicer than Little Rock.

So, like the papers, I pursued last week's topic: unacceptable behaviour and, my special interest, cross-frontier variations in definitions of it. The research programme accidentally revealed that the British can deal easily with the wilder shores of human emotions and the French cannot.

I discovered this thanks to AFP, the French news agency. The test involved the revelations concerning a telephone conversation supposedly between a male member of the royal family and a woman with whom he was evidently on good terms. Sure enough the British, and English-speakers in general, were assumed to be able to deal with the raw truth. When the story broke in Australia, the English service of AFP gave it 1,000 words.

In French, however, it was compressed to under 200 words and the sole reference to the contents of the 'presumed transcription' noted that the two 'do not hide either their love or their reciprocal physical attraction'.

And yet the French at home have few inhibitions. Political debate is larded with words that I would not transcribe even in asterisks. Comedy shows on television can consist of a stream of jokes that make the average British stand-up comic sound like Noel Coward.

Such material can also provide the basis for what passes for German humour yet it would be unacceptable in Spain or Britain. But these two countries themselves differ on what is acceptable. In my local paper, among advertisements for plumbers and electricians, is a column of notices detailing the facilities available for making, yes, telephone calls of a lubricious nature. Such items used to decorate Spanish papers but not since the phone lines were closed last month in response to widespread public pressure.

Yet those same papers, often liberal and leftish, freely advertise the services of transvestite prostitutes, among others. Afternoon television programmes for children can be interspersed with items where youngish females progressively divest themselves of what do seem to be rather uncomfortable garments.

National sensitivities involve not only the intimate side of life. The delicacy of the British struck me this week in a bus which had a sign saying, 'We would prefer you not to eat or drink on this bus. However, if you do would you please take your litter with you.' I spent some time working out how this would translate. German is not suitable for conveying moral uncertainty or the doctrine of the second best; the nearest I got was Essen und trinken verboten. In French the warning is like something from a home for the incontinent elderly; in Italian, an invitation to steal the bus; in Russia, nobody sufficiently resourceful to possess the items involved would be fool enough to leave anything behind. And in Czech, the sign would be a trap to ensnare the man with a sandwich in an endless bureaucratic nightmare.

The same 9A bus also saw the entrance of an inspector who treated even those without a ticket with some deference. This was a savage contrast with what I remember from my time in Vienna, where, in similar operations, two young toughs board a tram at opposite ends, the doors slamming tight shut behind them. They adopt the demeanour of those who had mastered the techniques of extracting confessions efficiently, open their denim jackets to expose heavy metal badges and shout Kontrollieren. Not surprisingly nobody is without a ticket.

The purpose of this digression is to set the scene for my favourite opinion poll which appeared again in the Vienna tabloid, Kurier, the other day. The question was: 'Which groups would you find objectionable as neighbours?' Top of the poll were Turks and Romanians; the least unpopular of the nine were Slovenes and Jews. (Discussion of the prevalence of anti-Semitism in this part of the world often fails to reflect the rich spectrum of prejudice that characterises Austrian society.) Commentators noted that there had been a steady fall in the level of hatred from the peak in 1988, the year newspapers demanded that 'Waldheim must go' following revelations about his wartime past that he had prefered to conceal.)

I have asked many questions about this poll over the years: is a list of 'detestees' presented to respondents or can they supply their own? Whatever happened to the Poles who once led the field but now get scarcely a mention? And, has anybody ever included the Viennese on the list?

But the question I suppose I am really asking is this: would The Sun publish the results of such a poll if it were conducted in Britain?

James Morgan is economics correspondent of the BBC World Service.

In a sudden leap, there are flowers again, a wonderful prelude to the unpredictable dance which the seasons now work for us all.

Last week, there seemed to be nothing; then, on Saturday, there were hundreds of crocuses wrapped like yellow pencils; on Sunday, there were aconites in churchyards and on Monday, snowdrops were spattering the ground once more.

We are a month ahead of schedule, while the last of the winter's roses are still waiting to leave the stage and their green leaves make a curious backdrop to a new year. After weeks of gloomy rain, these early visitors stand out like drops of sunshine.

They remind me that it is time for gardeners to get moving. Before they start, they will need little reminding that their art is never cheap.

Mirrored in our gardens' microcosm, all economic life is reflected. Once upon a time, we used to supply ourselves, grow our own plants and pay people to help us look after them. Since the 1970s, the trade has changed as rapidly as anything in business life.

Consumers want different things: busy householders will pay for shops to display plants for immediate sale; garden centres have multiplied and keen, fresh stock has become the cult of the visiting public.

With their usual subtlety, sellers have traded on their two best human allies, impulse and impatience. Why wait for years when money can buy you a plant which already looks reassuringly bigger than other people's? If you like it, take it away in the car boot.

Here, technology has come to the rescue. In this new age of polythene, plants can be turned out of their plastic containers at almost any season: they can also be moved from one country to another. At this point, the question of the economy and its prospects confront us all through a twist in our national idea of ourselves.

We all know the stereotype: British goods may be declining; the monarchy may be intercepted on the wrong frequency, but at least we Brits know how to garden and our gardening is the envy of Europe. Tourist boards promote it; even the French have to admit that it is better than theirs; economists sometimes blame it for other sins.

I have sometimes been told by serious pundits that a reason why British industry is losing its competitive edge is that employees are more interested in their gardens and that the managers are waiting every day to get back to the roses or the real business of life, so amply covered in the Weekend FT.

Nobody could dispute the art of our flower gardens at their best or the widespread love of gardening, planting and growing. However, I do think that the better examples are rather rare and that visually, much of our gardening (including bits of mine) is engagingly awful.

I do also notice how this national art is called 'English gardening', as if nothing of any significance happened on the Celtic fringe. If I had to choose only one public garden in the kingdom, it would always be the Edinburgh Botanic Garden, but perhaps it is too Olympian to object to the English insult.

What does amuse me, and in future may alarm me, is that the backbone of the best garden centres, many of our nurseries and our garden landscaping is not actually grown in England or even in Britain. Dreamy English gardening is all very well in a summer's haze, but many of its greatest nurseries buy the plants for it in the Netherlands and Belgium.

You can see why this piece of national double-think will soon have economic consequences. Personally, I will rely ever more on seeds. But the irony is not going to disappear quietly or without cost.

Of course there are planty 'people' all over Britain with their own cottage industries and home-grown lists of lesser-known specimens. Yet they cannot supply the trade with much of its better shrubs, hedging plants, bulbs and border plants because they do not specialise or grow to the right scale perhaps, or, to be charitable, have such a good European soil. Whenever you see a particularly big and seductive plant in the garden centre, it is highly likely to have been imported from a Dutchman or a Belgian who would not know how to pronounce Miss Jekyll's name.

This nice little irony prompts me to two conclusions, one of which is analytic, the other is commonsense. Like machine tools, the plants for Englishpersons' gardens are now being imported en masse from abroad.

Many argue that Britain would have a bright economic future in heavy industry if only engineering was part of our daily culture. Those people ought to stop and consider the case of gardening. Gardening is agreed to be not just a cultural taste but a national obsession: nonetheless, our big traders and designers have to import a mass of its basic materials because their obsessive nationals cannot grow it for themselves.

My second conclusion is simply prudential. Now that so many retail sources are depending on plants from Europe, their cost is not exactly going to obey the chancellor's happy predictions while the currency is suffering from wilt. Flower bulbs have already made a nonsense of the retail index because most of them come in from the Netherlands and this season's summer lilies, hyacinths and gladioli have had surcharges of 15 per cent or more imposed on them.

Matters have not been helped by an awkward season in 1992 for many of the maincrop bulbs in which the Dutch, especially, excel. As for evergreen yew, box and well-grown specialities such as viburnum or witch hazel, the same price rises will soon apply wherever the retail trade has grown to depend on foreign stock.

The moral, therefore, is to swap impatience for self-sufficiency and start to grow as much as possible from seeds from one's own garden and seed lists. The choice of seeds is one of the pleasures of late January and next week, I will be scanning for a short list. This year, however, it has an extra economic thrust.

I have already pre-booked my seeds of regale lilies, white galtonias and mixed agapanthus. I have opted for patience with the late-flowering lespedeza whose silky leaves and rose-purple flowers are such a blessing in autumn and I will be trying for half-hardy daturas from seed. Anything the Dutch can do I can surely do half as well: from a seed packet, you always raise more than you need, with a margin of error which allows even an Englishman without illusions to compete.

'I'VE been in the British textile industry for 30 years. It has been one long retreat. Those of us who are still here think of ourselves as equivalent to the survivors of Stalingrad.'

PETER Duxbury is looking forward now to a business life better than mere survival. The London Scarf Company, which he set up a little more than a year ago designing and contracting out the printing of scarves for big department stores, has turned in remarkable first-year sales of Pounds 870,000. 'We have just started in the tie market as well. I'd hope to do overall perhaps Pounds 1m in our second year.'

London Scarf is a classic example of an infant business created by people already experienced in the same trade by working for large companies. Duxbury was a manager at Josef Otten, an Austrian textile distributor. He finished his days there in 1991 by winding up that company's British trading operations.

He decided to set up on his own, taking with him two Josef Otten employees. He had promised orders from Jacqmar, a UK scarf brand whose operations had been serviced by companies Duxbury had once worked for.

The idea was to design scarves in London and have them made by low-cost printers in China, Japan and Italy for importation into Europe.

'We decided we could develop a product which we would target on major retailers rather than a mass of small shops. Joseph Otten had 400-500 customers for its scarves. We have 23 which are most of the big department store groups.'

Duxbury had Pounds 100,000 of his own to put at the company's disposal. 'The company is well funded. It had to have good secure footing or I would not have gone into it.'

On top of that, Duxbury negotiated with Hambros Bank a reserve figure of more than Pounds 40,000 to be tapped into if necessary. 'Hambros have been wonderful. They have given us every support.'

As it happens, setting up London Scarf was not expensive. Duxbury puts start-up costs at about Pounds 15,000. That included legal fees and first payments on a smallish works studio whose yearly rent. for 500 square feet in London is a rather high Pounds 14,000.

In its first year, the company produced 100 designs and close to 200,000 scarves, all but 10 per cent of which were silk. A little over a half of production was supplied wholesale to department stores. The rest - still using London Scarf designs - were bought direct by stores from the scarf printers, Duxbury's company collects an agency fee.

London Scarf takes most of its designs from paintings submitted by freelance artists. An artist receives about Pounds 350 for a design and its colour work. Selected designs are air-mailed to one of London Scarf's three manufacturers - in Tokyo, Shanghai and in the scarf printing area near Lake Como in Italy.

A typical London Scarf product uses 10 to 12 colours. Much more expensive Hermes scarfs might have up to 30. In preparation for printing, each colour (with its own part of the overall design) must be converted by the printer into an individual 'screen', usually made of nylon. Each colour with its pattern is printed separately on each scarf, the silk moving underneath the fixed screens through which dye is poured.

'Surprisingly, the process is much more automated in China than in Japan but actual material handling is much more advanced in Japan,' says Duxbury.

'For the same money you get a better scarf from China than from Japan,' says Jane Swan, who also came from Josef Otten. 'It is thicker and hemmed by hand.'

The cost of designing a scarf and producing its colour screens (a further Pounds 1,000) must be absorbed in the price. Production runs for a scarf design range from 500 to about 6,000. London Scarf makes a relatively tight average return of between a third and 40 per cent, measuring the price it receives for each scarf against the cost of producing them. The biggest margins, as so often happens, are enjoyed by the retailers. A silk scarf retailing at Pounds 20 will be bought by the retailer for about Pounds 7.

Duxbury says the pre-tax margin for the first year was about 5 per cent but he is looking for an eventual return on capital of 30 per cent. London Scarf's main competitors include two US companies, Echo and Liz Claiborne, as well as in-house designers some stores employ.

About a quarter of the company's sales are in France. The Monoprix chain placed the largest order the infant company has so far enjoyed - one of Pounds 50,000. Duxbury is keen to find agents for his scarves in Germany, Spain and Scandinavia. Apart from reducing dependency on the UK's Pounds 7m silk scarf market, such expansion would prove particularly lucrative. The idea is to sell the design in a number of countries. This would raise profits by spreading design and screen-production costs. Nylon screens, which are stored at the scarf printers, last for three years before corroding.

London Scarf caters for the middle mass market. 'We'll wait for two years before deciding whether to go into boutiques. A typical boutique buys from a merchant a scarf for Pounds 15 and sells it for Pounds 50.'

The downside is that this would force London Scarf into becoming a holder of stock, another cost burden.

Duxbury would like to have scarves printed in the UK but says the one silk printer capable of doing it - a company used by Liberty's - has high production costs. London Scarf will almost certainly stick to overseas silk printers for its ties. 'We are crashing into the tie market although it is very competitive,' says Duxbury. 'We have so far done 7,000 for France. We are expecting to do 60,000-70,000 ties this year.'

In recession, retailers squeeze the margins of little companies like London Scarf. But tough trading has a silver lining. Swan says: 'What has helped us is that department stores are cutting their numbers of buyers and, as they are more hard pressed, they tend to depend more on our advice.'

The London Scarf Company, 301 Blackfriars Foundry, 156 Blackfriars Road, London SE1 8EN. Tel: 071-721-7070

IN THE pre-computer age it was often said that the business manager's problems were aggravated by lack of data. Now the reverse is true.

Managers suffer from an overload of data. This plethora of data has reached such proportions that often the managers have difficulty seeing the wood for the trees. When it comes to decision making or problem solving it is not raw data but information that is needed.

Information and data are not synonymous. Data is merely the building blocks of information: it is the interpretation of data that provides information. Only when we bring together these pieces of information are we able to distinguish a recognisable pattern.

There are many software packages that support the organisation of our ideas and thoughts. Most computer programs of this type allow the collection of pieces of information as well as rapid and easy restructuring of the individual ideas.

Packages such as PC Outline adopt a sequential and linear approach, Brainstorm is more hierarchical; the opening screen shows just the trunk of your thoughts while lower screens gradually reveal more and more branches and detail. CK Modeller takes a new and innovative approach much closer to gestalt methodology. CK Modeller is described by its originators - Idon Software - as a package for management thinking. It moves from the six elements of Edward De Bono's perceptions on lateral-thinking to a ten-colour map of ideas, thoughts, issues and assumptions which can be manipulated on the computer screen.

A reasonable analogy is the jigsaw puzzle. Most people when attempting a new puzzle tip all the pieces on to a flat surface. Using the reference illustration as a guide, they gather together the pieces which appear to relate to particular parts of the picture.

CK Modeller uses much the same method. But, instead of prepared pieces, coloured hexagons are marked with your thoughts. The hexagon allows more relationships to be formed than the simple list of linear, or hierarchical based software. When you have exhausted this initial thinking task you form clusters of those ideas that seem to fit together.

As these separate clusters form you may recognise how particular clusters link together. Other clusters, at this stage, may have no links. It is CK Modeller's ability to show these missing links of the problem that makes it unique.

You have to make up pieces, using new ideas, that will actually tie the different clusters together. These, initially, may be quite tenuous links: they may be merely annotated arrows. But, as your thoughts progress the separate clusters become more part of the whole and you will gradually build a complete model of your problem or extended idea.

The use of colour within CK Modeller is psychological, and a further step towards understanding of the issue at hand. Psychologically, red is the colour of danger, green is for growth, freshness and the new. By encapsulating this evocation within the structure of the problem we are able to pick out parts which signal danger, or require action, from areas that merely convey information. The completed model will be an icon of the overall thought process and will convey all the nuances of ideas brought forward.

The system of thinking in hexagons is not new - though its use with computer has only recently been made generally available. The computer version offers considerable advantages over its manual counterpart.

First, it offers the ability to construct larger models than would be possible with hexagons and whiteboard. The model might be part of a network of sub-models and by using objects called activators CK Modeller can launch other models or even other computer applications that contain the raw data on which the ideas are based. These ideas of cognitive kinetics may be new to you.

Initially, because of my previous experiences and the way I use outliners, I had some learning to do before I could grasp the concepts - though when I explained the principles to my 20-year-old daughter she immediately recognised its potential. What I had struggled to understand, she grasped within minutes. Operating the software is simplicity itself. There is no intensive keyboard input as most operations are carried out on a graphics window using a mouse.

CK Modeller is unlike most other computer applications. When the appropriate formulae and data requests have been put into a spreadsheet or database the computer takes over the work.

CK Modeller requires effort. While it supports your thinking and allows you to restructure your thoughts in a matter of minutes you remain in complete control.

In the user manual that accompanies the software there is a suggestion that once you have encapsulated all your ideas in a model the next step is to build a new lattice using the same set of hexagons. Only, this time, take a hexagon from the periphery of the original cluster and regard it as the central theme of your new model. As it will form a different perspective of the problem it will also reveal new relationships and dependencies between individual items. But that, as they say, is another story.

CK Modeller, with manual, a book 'Thinking with Hexagons' and a magnetic travel kit for hexagon planning without a computer, is Pounds 395 plus VAT and Pounds 5 shipping from Idon Software, Edradour House, Pitlochry, Perthshire, PH16 5JW. 0796 473709

FOR BREADTH of choice, the 'international balanced' unit trust sector offers more opportunities than any other.

A quick look at their specifications shows why. According to the Unit Trust Association, these funds 'have less than 80 per cent of their portfolio invested in either equities or fixed interest securities'.

Geographical areas are not mentioned. Fund managers, provided they keep a balance, can invest in virtually any security, anywhere in the world, which they believe will perform well. Such funds may be the unit trust world's answers to the stately galleons of the 'international general' investment trusts, which have broadly spread international assets.

Managers face a different challenge from that in most other sectors. Usually their remit is tight. They must stay in, for example, UK smaller companies, even if they think these companies will underperform. Outperformance comes from superior stock selection.

In the international balanced sector, asset allocation, not stock selection, is the determining factor. Ideally, they will ride with the best-performing asset of the moment, switching when necessary, and avoiding sharp changes or speculative moves by retaining balance.

The only trust with a ten-year record, Gartmore Global Income & Growth, appears to have delivered this, with growth of 538.45 per cent over ten years according to Micropal (offer-to-bid, with income reinvested). The powerful UK equity market performance of the mid-1980s lies behind much of this, while more recently holdings in Far Eastern equity markets and in international bonds have kept the fund growing at a respectable, if more sedate, rate.

Its asset allocation at the beginning of the year included a wide mix, with 79 per cent in equities - 19 per cent in the UK, 10 per cent in continental Europe, 5 per cent in Japan, 27 per cent in the US and 18 per cent in the Far East and in emerging markets. There is a 4 per cent UK cash holding, and Gartmore also holds European, Japanese and American bonds.

This reflects the 'top-down' asset allocation which the company also uses for its segregated pension funds. This dictates being overweight in emerging markets, the UK and the US, and underweight in Japan and Europe.

Whittingdale Challenger, second over five years, could hardly present a greatest contrast. It holds no equities at all, and is split between cash and bonds. Roughly 70 per cent of the fund is in gilts (UK government bonds), and the managers are in the process of reducing exposure to the dollar and moving in to French francs and bonds. It went overweight in the dollar last year, enabling it to log 22.42 per cent growth during 1992.

Whittingdale has built its reputation as a gilts manager, and does not wander far into the equity markets. However, the fund, occasionally, has held equities over the last few years.

Look to the third strongest performer, The Master Portfolio, managed by Capel-Cure Myers, and yet another world asset allocation view emerges. Capel-Cure has 52.5 per cent in UK equities, 15 per cent in Europe, 15 per cent in the US, and 17.5 per cent in cash and bonds.

This diversity means that investors looking for a trust must also adopt a different approach. Most managers try to make these trusts the potential bedrock for a portfolio, which will handle clients' asset allocation for them.

For example, the Master Portfolio is intended to mirror the portfolio which would be established for an investor who came to an investment house with Pounds 1m to invest, according to Kenneth Levy of Capel-Cure Myers. Its minimum investment, of Pounds 50,000, is in line with this ambition.

Similarly, Whittingdale Challenger wants to be treated as a 'benchmark' for other funds. So there might appear to be some sense in having a heavy international balanced holding, to be complemented by smaller holdings when they seem necessary. Interest has increased in recent years among managers, with 18 funds launched in the last five years, so there is now choice.

But choosing a fund is difficult because they vary so widely. Anyone willing to do some rudimentary asset allocation of their own - or with a portfolio manager prepared to do it - can switch into sector funds managed by companies with strong stock selection expertise in that area. Good asset allocators may not have access to the best stock-pickers.

International balanced funds work better than funds of funds (which have only managed 39.11 per cent growth over five years) at giving customers the best of all worlds, and Gartmore's 10-year figure shows their potential strengths in the long term.

But they look weak by comparison with the grand old ladies of the international general investment trust sector. Over the same five-year period when international balanced unit trusts rose 54.91 per cent, on average, Law Debenture managed 166.8 per cent, Bankers 164.46 per cent, Alliance 159.39 per cent, and Second Alliance 155.09 per cent. The average for the sector was 119.11 per cent.

The erosion of investment trust discounts will have exaggerated these figures, but they suggest the old dependables might provide a stronger foundation for a portfolio. The international balanced sector has a place, but only as an add-on to investment trusts.

--------------------------------------------------- Best performing international balanced funds over five years --------------------------------------------------- % growth --------------------------------------------------- Gartmore Global Income & Growth 79.02 Whittingdale Challenger 72.54 The Master Portfolio 55.53 Marlborough Managed 45.13 Royal Life International Cautionary 39.73 ---------------------------------------------------

--------------------------------------------------- Best performing international balanced funds over three years --------------------------------------------------- % growth --------------------------------------------------- Stewart Ivory Managed Equity 43.4 Whittingdale Challenger 36.97 Gartmore Global Income & Gth 30.22 Marlborough Managed 29.37 Mercury Portfolio 19.89 Average 18.75 ---------------------------------------------------

I am sole executor in a relation's will. I paid a lot of her bills out of my own resources, some of these arising before I had power of attorney. I kept a record of these as I had been looking after her affairs for some two years. Clearly I wish to debit her estate with these before inheritance tax is levied as they fell due before her death. The solicitor is implying that I should have mentioned these before obtaining probate. Is it not enough to give records in the corrective affidavit? They amount to nearly Pounds 2,000.

I note that you have paid bills on behalf of the estate and have now obtained probate. It should be possible to obtain a corrective affidavit to take the expenses into account when calculating inheritance tax and also ensure that you can obtain a rebate.

If an executor advances money out of his own pocket to pay the debts of his testator, he is entitled to be repaid in full, in priority to the creditors. He is also entitled to an allowance of interest for the money so advanced. Repayment will come from the estate and his liability must be allowed for in calculating inheritance tax.

This reply was provided by Barry Stillerman of accountants Stoy Hayward.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

When my aunt died many years ago she left her estate in trust to pay the income to a friend for the remainder of her life and, on her death, equally between her nephews and nieces. The will did not include a non-apportionment clause.

The life tenant died on June 2 1992 and the trust investments were sold soon after, including useful holdings in Guinness and Shell. Both these companies had then just paid their 1991 final dividends, which were properly paid to the life-tenant. However, the trust solicitors inform us that her estate is entitled to a proportion of the future dividends for the year to December 31 1992, although the finals will not be declared or paid until nearly a year after her death and will not actually be received because the holdings have been sold.

We are told strict apportionment must be applied and that we could have delayed the sales until after the dividends had been received, although this would have meant waiting a year for any benefit to be received and taking a chance on the state of the market 12 months hence. Is this right?

The trust's solicitors are correct. Section 2 of the Apportionment Act 1870 provides for apportionment on a daily basis of dividends.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

WITHOUT any approach or warning whatsoever, my next door neighbour has informed me by letter that branches from my tree have caused damage to his garage roof and that he has had this repaired and cut my branches. He informed me that he would be sending me the bill for this work which he hoped I would pay promptly.

I replied denying responsibility, saying that I had noticed for many years a tile missing from his garage roof, and that this had been caused by storm and I refused to pay. I also mentioned it would have been neighbourly for him to have spoken to me previously. Incidentally, the adjoining houses, including my accusing neighbour's, all have roof tiles missing now or have had replacements, because, I assume, of weather conditions.

My neighbour has now sent me an account for Pounds 55 showing replacement of approximately seven tiles, securing six tiles and cutting my branches.

My gardener says the branches would not have lifted off roof tiles or damaged them as they tend to grow away from the tiles. My neighbour also asks me to cut back branches overhanging his property at another part of our common boundary. What is your advice?

Your tree will have caused both a trespass and a nuisance to the extent that branches have grown across the boundary with your neighbour. If your neighbour can prove that the damage of which he complains was caused by those branches, he is entitled to require you to pay for the repair. This is ultimately a question of fact. Your neighbour can require you to cut trespassing branches, and can cut them himself if he wishes; but he cannot charge you with the cost.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

THERE IS a distinct family air about the Lowland Investment Company, which is managed by the Henderson Administration group.

The trust derived its name from the Henderson family's origins in the lowlands of Scotland. Its largest investment is in the Henderson management group (4.8 per cent of the portfolio as of September 30); and Lowland's largest shareholder (with a 23 per cent stake) is Witan, another Henderson-managed trust.

The current manager of the trust is James Henderson, a member of the founding family, and eldest son of Lord Faringdon, chairman of Witan Investment Trust. Henderson, 31, who studied economics at Pembroke college, Cambridge, took over the trust management in mid-1990.

Lowland was founded in 1963 as a means of giving younger fund managers within the Henderson group a trust to look after. Raymond Cazalet, the current chairman, was the first manager to take the helm.

These familial links have brought success. Lowland produced the third best share price performance of all investment trusts over the last ten years, with a rise of 735 per cent*. Share price performance figures can be distorted by the effect of discounts but the trust is also top of its sector (UK income growth) in terms of net asset value growth over the same period.

The objective of the trust is to produce an above-average dividend, which increases over time. James Henderson says his investment approach is to look for companies which can produce income growth, rather than opting for the ultra high yielders. He searches for companies with undervalued assets and earnings and ends up with some of the duller stocks that have not been in the headlines.

Compared with TR City of London (profiled last week) the trust has a much greater concentration on the medium and smaller companies sectors. Only 40 per cent of Lowland's portfolio is in FT-SE 100 Index stocks, while 30 per cent is in medium-sized companies and 30 per cent in smaller.

This concentration, says Henderson, has played a crucial part in the trust's success over the last decade. 'We've had exposure to the medium and smaller companies without being completely committed to them' he says.

The trust's ten largest stakes are: Henderson, British Gas, British Airways, National Power, Prudential, Boots, GKN, Thames Water, Morgan Crucible and AAH. In terms of sectors, the trust currently has a heavy weighting in capital goods (29 per cent versus the All-Share weighting of 13 per cent). The rest of the portfolio is split 20 per cent consumer, 19 per cent financial and 32 per cent other groups.

Although the trust is in the UK income sector, around 9 per cent of the portfolio is in Europe; but since getting income would be a problem if the portfolio had too heavy an overseas exposure, the trust is unlikely to put more than 25 per cent overseas.

The trust's short term performance has been slightly less impressive than its 10 year record; as the graphs show, net asset value fell sharply in 1988 and 1990. Lowland has produced a slightly below average performance for its sector over three and five years.

Currently the fund is taking a rather aggressive approach. It has a 15 per cent gearing level, having borrowed Pounds 6m of debentures and bank facilities of Pounds 4m (when a trust gears up, it hopes that equity returns will more than make up for the cost of borrowing money). 'This is the highest gearing we've had for a bit', says Henderson, 'over the last year, we became increasingly confident that we could find value in the medium term.'

Analyst Hamish Buchan of County NatWest says Lowland is a much smaller trust than TR City and the shares are tightly held, with around 70 per cent of the equity in Henderson or Cazenove-related hands. This restricts liquidity, says Buchan but this is not too much of a problem for private investors.

Buchan says Lowland is 'a sound and solid security for the individual', although he adds that the trust has been trading at a small premium to its asset value.

Normally when investment trust shares go to a premium, investors start to look for alternative funds which are at a discount. However, Lowland's portfolio may benefit if the much awaited smaller company revival finally occurs.

Key facts. The trust has net assets and a market capitalisation of around Pounds 54m, as of January 21. The net asset value was 230.7p, almost equal to the share price of 231p. The dividend yield is 4.9 per cent. The annual management charge is 0.4 per cent.

Board. The board includes one Henderson employee, Richard Smith, who was the manager of the trust until 1990, and is still the managing director. The chairman is the first manager Raymond Cazalet, a former chairman of the Association of Investment Trust Companies; other directors are John Morrell, who is also a director of Law Debenture; John Kemp-Welch, a Cazenove partner; and Peter Troughton, a director of W H Smith.

Savings scheme and Pep details.

The minimum monthly investment for both the savings scheme and the personal equity plan is Pounds 100, with Pounds 2,000 for lump sums. There is a 1 per cent fee on both purchases and sales and an annual fee of Pounds 20.

*According to figures from the Association of Investment Trust Companies.

THE TABLE shows capital gains tax (CGT) allowances for assets sold in December. To use it, multiply the original cost of the asset for the figure shown for the month in which you bought it.

If you subtract the result from the proceeds of your sale, the result will be your taxable gain or loss.

Suppose that you bought some shares for Pounds 8,000 in September 1983 and sold them in December 1992 for Pounds 18,000. Multiplying the original cost by the September 1983 figure of 1.618 gives a total of Pounds 12,944.

Subtracting that from the proceeds of Pounds 18,000 gives a capital gain of Pounds 5,056, which is below the 1992-93 CGT allowance of Pounds 5,800. If you realised no other gains during the year, the profits should be tax-free.

If you sell shares bought before April 6 1982, you should use the March 1982 figure. The RPI in December was 139.2.

---------------------------------------------------------------------- CGT INDEXATION ALLOWANCES: DECEMBER ---------------------------------------------------------------------- Month 1982 1983 1984 1985 1986 1987 ---------------------------------------------------------------------- January - 1.685 1.603 1.526 1.446 1.392 February - 1.678 1.596 1.514 1.441 1.386 March 1.752 1.675 1.591 1.500 1.439 1.384 April 1.718 1.652 1.570 1.469 1.425 1.367 May 1.705 1.645 1.565 1.462 1.423 1.366 June 1.701 1.641 1.561 1.459 1.423 1.366 July 1.700 1.632 1.562 1.462 1.427 1.367 August 1.700 1.625 1.548 1.458 1.423 1.363 September 1.701 1.618 1.545 1.459 1.416 1.359 October 1.692 1.612 1.535 1.456 1.414 1.353 November 1.684 1.606 1.531 1.451 1.402 1.346 December 1.687 1.602 1.532 1.449 1.397 1.348 ---------------------------------------------------------------------- Month 1988 1989 1990 1991 1992 ---------------------------------------------------------------------- January 1.348 1.254 1.165 1.069 1.027 February 1.342 1.245 1.158 1.063 1.021 March 1.337 1.240 1.147 1.059 1.018 April 1.316 1.218 1.113 1.046 1.003 May 1.311 1.210 1.103 1.043 1.000 June 1.306 1.206 1.099 1.038 1.000 July 1.305 1.205 1.098 1.040 1.003 August 1.290 1.202 1.087 1.038 1.002 September 1.284 1.194 1.077 1.034 1.000 October 1.271 1.185 1.068 1.030 1.000 November 1.265 1.175 1.071 1.027 1.000 December 1.262 1.172 1.072 1.026 - ---------------------------------------------------------------------- Source: Inland Revenue ----------------------------------------------------------------------

HIGH RETURNS and convenience are usually the two most sought after attributes of a bank or building society account.

Depositors are required to follow a few simple principles to obtain the higher returns - the larger the amount of money deposited and the longer the capital is left untouched, the greater the rewards.

Ninety-day accounts operate on this principle. The building society finds it cheaper to administer accounts which do not have a large number of transactions. In theory, they are able to pass this saving on to the depositor in the form of higher rates.

The snag for many investors is that the higher returns come at the expense of reduced accessibility to their money. Unless 90-days notice is given, the saver suffers 90 days loss of interest.

This is not a problem if money is not needed in a hurry, but three months can be a long time to plan ahead and foresee financial needs. And if a good return becomes available, for example, in the form of a competitive guaranteed product, it can be a big disadvantage to forego the 90-days interest in order to be able to get funds out before the offer closes.

But is it even true that 90-day accounts pay the highest returns? The tables show the highest rates currently available on 90-day, postal and instant-access accounts, on amounts of Pounds 500, Pounds 1,000, Pounds 2,500 and Pounds 10,000.

A comparison of the rates on postal and 90-day accounts shows that 90-day accounts do not always pay the highest rates. Birmingham Midshires matches the 7.25 per cent gross rate paid by Scarborough's 90-day account on Pounds 500. The best of the 90-day rates are higher on Pounds 1,000 than the postal accounts, but the postal accounts beat 90-day rates on amounts of Pounds 5,000, Pounds 10,000 and Pounds 25,000.

For example, the two highest 90-day rates on Pounds 10,000 are Halifax (7.75 per cent gross) and Alliance & Leicester (7.60 per cent gross). Both rates are beaten by postal account rates on not only the Pounds 10,000 tier but also on Pounds 5,000. Skipton and North of England are paying 8.35 per cent gross and 8.20 per cent gross on Pounds 5,000, while rates on Pounds 10,000 are 8.45 per cent gross at North of England and 8.3 per cent gross from Northern Rock.

As postal accounts are administered centrally, costs are lower than for accounts operated through a branch network. Low overheads and a smaller staff allow competitive rates to be passed on to the depositor.

The accounts are advertised as instant-access, meaning that notice does not have to be given for withdrawals, but they are not instant in terms of ready accessibility to the cash.

With most postal accounts, it will normally take a week before you have the funds. If you send off a withdrawal request on a Monday, the earliest you could hope to receive a cheque is on Wednesday. It will then take at least three working days for the cheque to clear, so usually you will not be able to draw cash until the following Monday. However, it should be remembered that most instant access branch accounts also require notification for large withdrawals.

The tables show that rates on 90-day accounts are higher than those on instant-access branch accounts. The rates are 1.25 percentage points higher on all tiers, apart from Pounds 1,000, where the difference is fractionally higher at 1.45 points.

Those with 90-day deposits should check the rates they are being paid and consider moving over to postal accounts which will allow them higher rates and much faster access to their money.

----------------------------------------------------------------------- Highest 90 day rates ----------------------------------------------------------------------- Building society Account Minimum Rate deposit (pounds) (%) ----------------------------------------------------------------------- Scarborough Scarb' Ninety 3 500 7.25 Tipton & Coseley Investment share 500 7.00 Teachers Minster 90 1,000 7.45 Scarborough Scarb' Ninety 3 1,000 7.25 Teachers Minster 90 5,000 7.45 Scarborough Scarb' Ninety 3 5,000 7.25 Halifax Premium Extra 10,000 7.75## Alliance & Leic Bonus 90 10,000 7.60### Scarborough Scarb' Ninety 3 25,000 8.50 Alliance & Leic Bonus 90 25,000 7.90### ----------------------------------------------------------------------- Source: Moeyfacts. ##Bonus of 0.25 per cent if no withdrawals in a year. ###Bonus of 0.5 per cnet if no withdrawals in a year -----------------------------------------------------------------------

----------------------------------------------------------------------- Highest postal rates ----------------------------------------------------------------------- Building society Account Minimum Rate deposit (pounds) (%) ----------------------------------------------------------------------- Birmingham M'shires First class 500 7.25 Scarborough First post 500 6.80 Norwich & Peterboro' Postmaster 1,000 7.00 Bradford & Bingley Direct Premium 1,000 6.55 Skipton Money Post 5,000 8.35 North of Eng Edinburgh 5,000 8.20 North of England Edinburgh 10,000 8.45 Northern Rock Go Direct 10,000 8.30* Skipton Money Post 25,000 8.60 Northern Rock Go Direct 25,000 8.55* ----------------------------------------------------------------------- Source: Moneyfacts. *Rate fixed to 1/4/93 -----------------------------------------------------------------------

----------------------------------------------------------------------- Highest instant access rates ----------------------------------------------------------------------- Building society Account Minimum Rate deposit (pounds) (%) ----------------------------------------------------------------------- Portman Instant access 500 6.00 City & Met City Gold 500 5.75 Portman Instant access 1,000 6.00 Teachers Minster Spire 1,000 5.80 Teachers Minster Spire 5,000 6.20 Portman Instant access 5,000 6.00 National Counties Instant access 10,000 6.50 Chelsea Instant Option 10,000 6.25 Manchester Super Access 25,000 7.25 Birm M'shires Quantum Instant 25,000 6.75 ----------------------------------------------------------------------- Source: Moneyfacts -----------------------------------------------------------------------

ARBITRAGE, THE art of trading to take advantage of different prices in different markets, is one of the oldest games played by financial wheeler-dealers.

Now, the UK's Inland Revenue is falling victim to the same trick. The Business Expansion Scheme, introduced as a tax incentive to encourage the wealthy to risk investing in small enterprises, has become a device to help banks and top-rate taxpayers to take slices of the state's money.

In the process, it has also converted a significant part of the UK's damaging stock of repossessed housing into private rented accommodation. This is good news for the homeless and for homeowners in houses where values are dropping. But whether the government intended the windfall for top-rate taxpayers to be so generous is another matter.

When the arbitrage scheme is finely tuned, it works as follows: an institutional lender (usually a bank) finds itself with a large stock of repossessed housing; dumping it on to the market at current values would increase its loss.

Instead, the bank sets up a BES company which takes control of the property. That company must then rent out the property under 'assured tenancy' regulations for five years to qualify for BES reliefs. The bank covenants to buy back the property at the end of five years, at a price only slightly in excess of that paid.

Meanwhile, investors buy shares in the BES at Pounds 1 a time. Thanks to BES tax relief, they receive 40p in tax relief, if they pay top-rate tax, so they have effectively only invested 60p.

Six months later, the bank offers a loan against the BES shares of 72p for every Pounds 1 share. That represents a substantial mark-up over six months for someone who has only parted with 60p. The loan is on a 'non-recourse' basis, so the BES shares themselves offer the only security which the banks can use.

So investors can leave the investment, for a profit, after only six months. Meanwhile, the banks have received Pounds 1 and paid out only 72p for it. Both sides have thus profited handsomely from the relief.

Non-recourse schemes were first introduced in September last year and have proved popular. Banks involved included Barclays, TSB, and Bank of Scotland.

The Inland Revenue, meanwhile, is allowing both banks and wealthy investors to make some very easy money. Basic rate taxpayers, who effectively invest 75p per Pounds 1, cannot benefit from this trick.

For those not prepared to lock their money away for a long term, the attractions of non-recourse schemes are undeniable. Most schemes launched so far have been oversubscribed within a week, and many investors have put money into the BES for the first time.

But this creates dangers. Bank-guaranteed non-recourse loan schemes genuinely have a low level of risk. But many other schemes launched in the next 12 months will not be so watertight. Others will be highly speculative.

Some schemes, mainly involving universities, offer a 'guaranteed' return after five years. These returns will usually be greater than those on offer after five years in schemes which offer a six-month loan, so they might be preferable if the five-year term is not a problem. In many cases, these schemes are guaranteed only by the universities themselves, so the credit risk is greater than for a bank-backed scheme.

Other 'entrepreneurial' schemes make no guarantee, and simply aim to profit as much as possible from any gain in the property market. They have unlimited potential growth, but no safeguard against a continued decline.

Schemes launched this week demonstrate the differences: Flexit, sponsored by Richard Ellis Venture Consultants, has exit arrangements backed by the Royal Bank of Scotland. The loan available after six months is high, at 74p for every Pounds 1, but the return after five years is only 105p. It will purchase new homes for Fairclough Homes, a subsidiary of AMEC, and is not involved in repossessions. The Ridings Companies, sponsored by Capital for Companies, will buy new houses from the developers Tay Homes and Persimmon. A non-recourse six-month loan of only 71p per Pounds 1 has been underwritten by the Bank of Scotland, but 105p per share has been guaranteed at the end of five years.

Pathfinder Repossessions II, backed by Johnson Fry, is returning to the market. As its name implies it will buy repossessed property, in London. However, it offers no guarantees. The aim is to make as much money as possible, but this would be vulnerable to a weak property market, or to any mistakes by managers.

Capital Prime Properties, also sponsored by Johnson Fry, is a hybrid. It is offering loans at the rate of 60p per Pounds 1 invested after six months. These loans are not repayable until the end of the five-year BES period, but they are on a full recourse basis - if the property market does not recover, you will have to pay more at the end of five years. If it does, you could make a profit.

THE INLAND Revenue, which is spending Pounds 2m on an advertising campaign to encourage 10m people to reclaim Pounds 800m in overpaid tax, says the main reason for the lack of claims is apathy. However, a Weekend FT reader has a different explanation.

'It is not that people do not bother to reclaim tax overpaid, but unless my own tax office is an exception to the norm, most people give up in despair,' says Robert Anderson, of Sheriff Hutton, in Yorkshire.

Anderson was 65 years old in 1991. As his total income was below Pounds 13,500, he was entitled to the maximum age allowance. He could therefore claim for a refund of tax for the year ending April 1992, and for a smaller refund for 1991.

He completed a tax return and details of the amount he thought he had overpaid for 1990-91 in January 1992. 'From then until the end of July, I had continually to telephone and write to get some action,' he says. 'During this time, I dealt with no fewer than eight different people in the same section, each one of whom totally ignored any previous correspondence and started again from scratch, and it was only when I finally demanded to speak to the section head that I obtained any sense.'

He was told that his case could not be handled by one person because of holidays, part-time workers and sickness absences.

'During all this time I must say I was treated with courtesy, and each letter came with a profuse apology, for the last mistake on their part; however it soon became obvious to me that the ordinary tax officer in most cases didn't even know which form I should complete,' says Anderson.

This year, Anderson has worked out that he is due for a rebate of about Pounds 150 but, 'I had decided that it was not worth the stress trying to obtain it.'

However, he has just received a coding notice for 1993-94, which allocated only the basic allowance to him, ignoring his married status and age allowance.

'I am resolved to do battle again,' he says. 'The point I am trying to make is, that the Pounds 2m the government is to spend on advertising would be better spent in trying to educate the tax officers and improve the system.'

WH Smith, the retail and distribution group announces figures to the end of November on Wednesday. Losses in Do It All, its do-it-yourself joint venture with Boots, will drag profits lower, from Pounds 50.1m to about Pounds 45m pre-tax, say analysts, including the pension credit Smith enjoys.

The January sales are critical for MFI Furniture Group, the kitchen and bedroom retailer which floated last summer and which reports for the first time in its new form on Thursday. Although last year's January sales were strong, brokers think MFI could have beaten the numbers this year. As for the interim figures, to November 7, brokers are in the dark without comparable figures. Estimates are for a fall in operating profits from Pounds 24.2m to around Pounds 18m to Pounds 20m.

Misys, the acquisitive computing services group led by a former Hanson executive, Kevin Lomax, is due to report its interim results on Thursday. Pre-tax profits are expected to increase to around Pounds 6.3m from Pounds 3.59m a year earlier. The group has made a spectacular recovery since its disastrous 1990/1 financial year when its shares bottomed at 63p. They now stand at 375p.

Unitech, the international electronics group, is still bearing the scars of the slowdown in the Japanese economy. The company, which ranks as the world's largest manufacturer of power supplies for electronic equipment, is likely to report a decline in first half pre-tax profits to Pounds 4.1m from Pounds 7.8m in the comparable period.

LOWER base rates have caused many investors to see the attractions of permanent interest bearing shares. Pibs are relatively new. The first issue was launched in July 1991 by Leeds Permanent building society.

Pibs are not like ordinary shares which give investors a chunk of a company's assets. They are instead a way for building societies to raise capital and they form part of the loan structure of the society.

They are better compared with gilts than shares, but instead of being issued by the government, they are issued by building societies. Like gilts, they pay a fixed income and pay interest twice a year net of basic rate tax. They are also exempt from capital gains tax.

Most gilts have a date on which the capital is repaid. But Pibs are irredeemable, which means there is no repayment date. Investors can get their capital back only by selling in the stock market and, like all stock market investments, the price will fluctuate.

It is also worth bearing in mind that they are deeply subordinated. This means that if the building society were to collapse, investors with Pibs would be behind all other lenders, depositors and shareholders for repayment. In addition, there is no compensation scheme to protect investors.

Since the Pibs market is self-contained and small, Paul Killik of London-based brokers, Killik & Co, warns that, 'failure by one building society in the Pibs market could do enormous damage to the others'.

Moreover the building society is under no obligation to maintain interest payments. Nor does it have to pay skipped interest payments at a later date.

'People think that because Pibs are issued by building societies, they cannot lose money. This is patently wrong,' said David Nugent of Pilling & Co, Manchester-based stockbrokers.

However, so long as investors understand that what they are buying is similar to an irredeemable preference share rather than a fixed interest building society bond, Pibs can be useful.

Their main attraction lies in the fixed yields which are substantially higher than current variable rates of interest. The table shows yields and prices of Pibs at mid-day Thursday.

The after-tax income that an investor receives is in the range of 8 to 9 per cent, compared with variable rates of about 4.5 per cent net in an instant access building society account. Non-taxpayers can reclaim the tax owed to them.

As with government stocks, the yields and prices of Pibs have an inverse relationship to each other. As prices rise, the yield falls and vice versa. But once the Pibs are bought, the yield to the investor will remain fixed forever, unless disaster befalls the building society.

The table shows that prices of Pibs have been rising since they were issued, so people wishing to buy now get a lower, but still high, yield. Some of the issues were aimed at the institutional market and will be beyond the reach of most investors. But the minimum investment in many others, such as those launched by Britannia and Bristol & West, is Pounds 1,000.

So, who should buy Pibs? Johnson Fry, which runs a portfolio investing in 10 Pibs, says that 'A lot of elderly people, who do not care too much about their capital, buy them to fix their income.' Killik believes that they have a place in a fixed interest portfolio, but not on their own. He suggests combining them with gilts and other preference securities.

There are several ways of buying Pibs. One is to purchase them through a stockbroker. Pilling, for example, charges 1 per cent commission on the first Pounds 10,000 and 0.5 per cent thereafter, while charges at Killik are 1.2 per cent on the first Pounds 10,000 and 0.4 per cent after that.

Pilling's Nugent believes that Pibs are attractive at the moment, but their price could fall from September or October if inflation rises. Fixed interest investments become less attractive when inflation is on the way up.

London-based broker, Dunbar Boyle & Kingsley has put together five Pibs - Bristol & West, Coventry, Leeds & Holbeck, Newcastle and North of England - with a National Westminster irredeemable preference share, to produce income which is paid out 12 times a year.

The minimum investment is Pounds 14,000. There is an initial charge of 2 per cent but no annual management fee. The portfolio currently pays an income of about 8.3 per cent net per annum.

Johnson Fry's Pibs portfolio is based on a similar concept. It packages 10 Pibs to produce quarterly income. The initial fee is 4 per cent but there are no other charges until the fifth year, when there is a quarterly administration fee of Pounds 20 plus VAT. The minimum investment is Pounds 20,000 and the portfolio is currently paying net interest of about 8 per cent.

Those who like the idea of Pibs but are worried about risks to their capital may be interested in a fund launched last November by Exeter Fund Managers. Exeter Balanced has a weighting of about 70 per cent in Pibs, with investment trust zero dividend shares making up the balance.

The idea is that Pibs provide the high yield while zeros (which do not pay income) provide capital growth for the fund. The yield for investors is therefore much lower than on Pibs held as a single investment; it is currently 4.7 per cent net. The minimum investment is Pounds 750 and there is an initial 5.25 per cent charge with an annual management fee of 1 per cent.

Since the Pibs form part of a unit trust, investors are protected by the Investors Compensation Scheme. The fund is however, liable for capital gains tax, but losses are allowable for CGT purposes.

TWO MORE life offices have announced reduced with-profits pay-outs for 1993. But they have cut bonuses in different ways.

Following Norwich Union, many companies have opted to cut reversionary bonuses, which are declared annually and cannot be taken away from the value of the policy if it runs to maturity. This is to reflect lower anticipated investment returns and to strengthen reserves. Lower annual bonuses relieve pressure on reserves.

Pay-outs at the end of 10-year policies have been dropping significantly. Royal Life has opted to cut its reversionary bonus by 0.5 percentage points to 3.25 per cent. Its terminal bonus, added only at the end of the policy to reflect more recent performance, has been left broadly unchanged. Ten-year pay-outs have dropped by 8.9 per cent, while 25-year maturities, assuming the policy was taken out by a 29-year-old man paying Pounds 30 per month, rose 1.1 per cent to Pounds 55,632.

Scottish Provident maintained its reversionary bonus on conventional business, but growth rates for unitised with-profits life and pensions funds dropped from 9.25 per cent to 8.5 per cent, and from 11.0 per cent to 10.0 per cent respectively. Terminal bonuses have also been reduced. Ten-year endowment pay-outs, using the same assumptions, fall by 4.0 per cent from Pounds 7,129 to Pounds 6,844, while 25-year pay-outs fall 1.7 per cent to Pounds 56,409.

AS FINANCIAL companies try to persuade cautious investors to leave their traditional safe haven in the building society, guaranteed products are evolving at breakneck speed.

The latest version from Citibank Life is a complex product which aims to counter some of the flaws in other guaranteed products - inflexibility and the lack of an income facility.

The 'Stockmarket Bonus Bond' has strong similarities to Hypo Foreign & Colonial's Protected Capital Plus, which was launched last summer.

The guarantee occurs on a quarterly basis. If the FT-SE 100 Index rises over three months, investors receive part of the gain; if the index falls, their capital remains intact. Once a gain is locked in, it cannot be lost. The cumulative effect of these guarantees is to reduce the impact of stock market volatility sharply .

But the investor does not receive all the rise of the Footsie, nor the yield on shares in the index. The proportion of Footsie's gain will vary from quarter to quarter; Citibank indicates a range of 45 per cent to 94 per cent. For the forthcoming quarter, the proportion will be a net 52.5 per cent (60 per cent for pension products).

To add to the complications, one must then take account of the charges (which are 5 per cent initial and 1 per cent annual) and the bonus allocations. Investors will receive extra allocations for investing early (2.2 per cent before February 10, falling to 0.5 per cent before March 24), or for investing more than Pounds 10,000.

So it is rather difficult to estimate exactly how well an investor will do. Citibank has found that over the past five years, an investment of Pounds 30,000 would have grown into Pounds 47,492 net of all charges and tax - but smaller investments will not have done as well because of lower allocation rates.

All returns are paid net of tax which cannot be reclaimed, but basic rate taxpayers will face no further charge. Higher rate taxpayers will face a further liability, but can take advantage of top slicing relief, which allows the investor to divide the gain made on the bond by the number of years it has been held.

The income facility allows investors to make regular withdrawals, for a minimum of Pounds 50, or irregular withdrawals, with a minimum of Pounds 250. If the market does not rise in a particular quarter, these withdrawals will cause the investor's capital to drop.

The product is technically an insurance bond, so investors can withdraw 5 per cent of their capital a year with no immediate tax liability (there may be a tax charge on final encashment).

Flexibility is an important aspect of the bond; the product rolls on indefinitely, and the investor can withdraw money at any time, although it is a long- term investment.

Investors could be forgiven for being bemused by the product's complexity. It is hard to predict how it will work in practice. It seems, likely, however, that a top-rate taxpayer would still be better off buying a low-charging index fund, such as Gartmore's; this carries no guarantee but there is little point in buying any equity-based product unless you think the market will rise.

THE sharp increase in boardroom activity this week has been dominated by directors' sales. With the FT-SE 100 Index pausing for breath, directors have taken advantage of share prices often standing at record levels.

Faber Prest's mixture of specialist services has proved an effective defensive combination. The share price, refecting the improving profit figures, has risen from 130p in May 1991 to the current level of 380p. Chairman Richard Prest has sold 155,000 shares at 377p. He remains the largest shareholder on the board.

Dalepak Foods had a mixed year so far as share price performance is concerned. Interim profits were marginally lower than last year and the chairman's statement suggested thefinal year outcome would be broadly similar. The interim announcement was accompanied by details of sales by four directors, including Christopher Ivory, chief executive. In total, they sold 100,000 shares at 315p, but each of the directors is left with a residual holding greater than 100,000 shares.

Property shares have enjoyed a good run since Black Wednesday but Peter Levy, chairman of Shaftesbury, has not been deterred; he bought 105,000 shares at 47p. At the same time Neil Benson, a non-executive director bought 20,000 shares, also at 47p.

Angus MacDonald, Directus Ltd

----------------------------------------------------------------------- DIRECTORS' SHARE TRANSACTIONS IN THEIR OWN COMPANIES (LISTED & USM) ----------------------------------------------------------------------- No of Company Sector Shares Value directors ----------------------------------------------------------------------- SALES Bellway C&C 73,768 242 1 Bespak Hlth 5,000 31 1 Betterware Stor 100,000 233 1 Bradford Property Prop 10,000 16 1 Concentric EngG 3,000 12 1 Dalepak Foods FdMa 100,000 315 4 Faber Prest Misc 155,000 584 1 Great Portland CULS Prop 150,000nom 147 1 Henderson Admin OthF 2,000 17 1 Laird Group Motr 87,860 259 1* McKechnie OthI 20,000 79 1* Neotronics Tchnlgy Elcs 15,000 24 1 Rank HovisMcDougall FdMa 65,300 185 2* Rathbone Bros OthF 35,000 89 1 Reed International Med 65,000 410 1* Savills Prop 100,000 39 1 Seton Healthcare Hlth 50,000 163 3 Sheldon Jones FdMa 150,000 72 1 Tibbett & Britten Tran 25,000 159 1 Tomkins Cong 757,000 1,892 1* Trinity Intl Med 4,303 15 1* TT Group EngG 685,000 1,678 2 Wassall Cong 1,635,748 3,370 3 Yule Catto Chem 10,000 27 1 ----------------------------------------------------------------------- PURCHASES Allied Leisure H&L 460,000 114 1 Babcock Intl EngG 50,000 18 1 Burndene Inv Motr 7,275 27 1 Cullen's Holding FdRe 189,333 21 2 Eastern Electricity Elcy 9,900 42 1 Elliott (B) EngG 85,316 50 1 Scot National St Pf InTr 7,600 12 1 Shaftesbury Prop 135,000 63 3 Southern Radio Med 652,740 326 1 Thompson Clive Inv InTr 23,600 29 3 TT Group EngG 1,193,458 1,993 7 Wassall Cong 49,368 102 1 WPP Med 100,000 55 1 ----------------------------------------------------------------------- Value expressed in pounds000s. Companies must notify the Stock Exchange within 5 working days of a share transaction by a director. This list contains all transactions, including the exercise of options (*) if 100% subsequently sold, with a value over pounds10,000. Information released by the Stock Exchange 11-15 January 1993. ----------------------------------------------------------------------- Source: Directus Ltd, Edinburgh -----------------------------------------------------------------------

THE ECONOMIC news may have been gloomy for some time, but investors have actually enjoyed quite good returns over the past five years. Interest rates have been high for much of the period, but equity-based products have also shown decent profits despite the impact of adverse factors such as the UK recession and the Gulf War.

The table shows that most commonly-held investments have managed to beat inflation and that a significant number of products have produced nominal returns of more than 50 per cent. It also may tell you what you should have invested in five years ago.

Tax efficiency helps - which is why, looking at the average figures, friendly society bonds and managed pension funds are top of the list.

The snag is that, though the percentage returns are high, it would have been hard to become rich out of a friendly society investment. The maximum monthly contribution into a friendly society in 1988 was Pounds 9 a month.

Also, friendly society rules would stop you from realising an investment for another five years - you would only get back your premiums if you surrendered early.

Pension funds also have strong tax advantages and the average figures look good. However, those who are about to retire may find that the recent falls in annuity rates offset their profits. Just because they have a bigger pension fund, they will not necessarily get a bigger pension than they would have a year ago.

Elsewhere, what will strike many savers is that it was possible to get a very good return at minimal risk. Index-linked National Savings offered a healthy 63 per cent return and allowed the investor to sleep at night without any worries about safety. Indeed for top rate taxpayers, index-linked look even better in comparison; since several other of the investments listed reflect the impact of basic rate tax only.

Building society returns were not too far behind index-linked National Savings (at least for larger depositors) and were marginally ahead of unit trusts. The Cheltenham & Gloucester returns are net of basic rate tax and assume the investor switched from the Gold account to the London deposit account at the right time.

In January 1988, the Crash of October 1987 was very fresh in investor's minds. Few investors will have been venturing into equities at that time. Those who did take the plunge will have done moderately well, but not extraordinarily so.

We have included the stock market indices purely as a guide. They reflect capital gains only, and do not include the yield. On the other hand, they do not allow for any costs and what with bid-offer spreads, brokers' commissions and stamp duty, the factors probably balance out. It is likely that many private investors will have struggled to beat the returns from the FT-SE 100 index or the All-Share.

Of the main markets, the best place to have picked in January 1988 was the US. The Dow Jones index more than doubled, in sterling terms, over the past five years, with more than a bit of help from the pound's decline against the dollar. The best way for a UK investor to take advantage was via a North American investment trust (up an average 174.3 per cent over five years) or a unit trust (up 117.5 per cent).

Most UK investors, however, stay close to home, and the average returns for all trusts are less impressive. Investment trusts look better than unit trusts in the table but savers should be aware of two important factors. The first is that investment trust returns are shown on mid-market to mid-market basis (with net income reinvested) and do not reflect the full bid-offer spread or brokers' commission. The unit trust figures (offer-to-bid with net income reinvested) take all charges into account.

The second factor is that the share price performance of many investment trusts will have benefited from a narrowing of the discount over the five-year period. With some trusts now standing at a premium to net assets, this factor is unlikely to recur - and may well work against investment trusts over the next five years, if the discount starts to widen.

Of course, averages are all very well. The actual returns from investing in a unit or investment trust varied very widely from a gain of 306.5 per cent (from investing in the best unit trust - F&C US Smaller Companies) to a loss of 98.5 per cent (from the worst investment trust - Gresham House).

Unit trust sector averages are shown as the easiest way of indicating fixed interest returns - and reveal that, because of the pound's decline, the biggest profits were achieved overseas.

Finally, a word about single premium bonds. The average managed fund lagged behind the average unit trust; even though the bonds are measured on an offer-to-offer basis, giving them an advantage.

Although past performance is useful information, the chances are high, of course, that the comparative returns over the next five years will be completely different.

Figures were taken from Micropal and Finstat, except for the indices (from Datastream) or the building society and National Savings figures (provided by institutions concerned).

----------------------------------------------------------------------- Five year performance ----------------------------------------------------------------------- US market (Dow-Jones Industrial in pounds terms) 111.3% Average friendly society unit-linked policy 69.0% Average managed pension fund 66.9% FT-SE 100 index 66.2% Average investment trust 65.9% Index-linked National Savings 63.0% FT-A All-Share 56.7% C&G Gold Account/London (pounds10,000 deposit) 55.6% Average unit trust 54.8% Average International Fixed Int unit trust 52.5% Fixed Interest National Savings 52.1% Average managed unit-linked bond 49.3% C&G Gold (pounds1,000 deposit) 41.9% Average UK gilt unit trust 38.3% Retail prices index 34.7% Tokyo market (Nikkei-225 in pounds terms) -5.3% -----------------------------------------------------------------------

SOME life companies think they have found a new way to sell executive pension plans.

The Inland Revenue has announced that the rules governing contributions to EPPs - available only to company directors and high-ranking executives - may be too generous. It is considering tightening them.

Several companies have used this as an excuse to push executives and companies towards taking out the schemes. They are acting prematurely. The Inland Revenue this week made it clear that no decisions had been reached; it is not yet clear that any change will be made. There is certainly no timescale.

The Association of British Insurers (ABI), which is in confidential talks with the Revenue on behalf of the pensions industry, has taken a similar attitude. A spokesman said: 'It is quite clear that nothing has been decided. If anyone is putting about that things have been decided, then that's wrong.' Neither side denies that discussions are taking place, prompted by the Revenue's desire to tighten the rules.

The Revenue has been stirred into action by the high benefits that executives are able to earn: pension contributions can be set as a level amount rather than a proportion of current salary, allowing young executives to put away huge proportions of their income. This was allowed because it was assumed executive salaries would rise significantly before retirement.

Under the current rules, a 30-year old starting an executive scheme can make contributions equal to 110 per cent of salary. This could be cut to 35 per cent. Individuals can also walk away from the schemes, taking their entire fund value with them. If they retire early or if the scheme is wound up, directors can take excessive benefits in retirement.

So the Revenue's disquiet is understandable. If, as seems likely, the regulations are tightened, it could pay directors and companies to set up schemes with high contributions sooner rather than later.

It is still unclear, however, what the new regulations would be. They could even be retrospective, making action now pointless.

Regrettably, this has not prevented some life offices from using the change as a chance to sell. For example, advisers Chamberlain De Broe received a mailshot from NPI headed: 'For You: A New Sales Opportunity.'

It goes on: 'As you know, the Inland Revenue is soon to impose dramatic new changes which will affect the method of funding for Executive Pension Plans and possibly Small Self-Administered Schemes too.'

Mark Bolland, of Chamberlain De Broe, said: 'We are getting tired of watching the industry deservedly earning its poor reputation by pushing something which a) might not be appropriate and b) might anyway be vitiated by the Revenue rules.'

In a gloomy economic climate, committing yourself at the age of 30 to regular payments of more than you are earning could be dangerous. Companies are also advocating that people start regular premium contracts to establish an arrangement before the Inland Revenue can change the rules.

However, an inflexible contract that calls for regular premiums, at a rate which is in excess of your current salary, could soon impose an unwieldy strain. And Bolland notes that it is needlessly expensive. For a man earning Pounds 35,000, the maximum contribution could be Pounds 50,000, he says, generating a commission, if on a regular premium basis, of about Pounds 26,000 in the first year.

Insurance companies could charge for a regular contract on a single premium, rather than a regular premium, basis. This would work out much cheaper for the investor.

Bolland admits that the schemes can be very tax-efficient, but only at the expense of flexibility. He says: 'There are, no doubt, many companies that set up this type of scheme on high contributions in good times, before the recession, and have since found that cash flow has prohibited those levels of payments from being maintained. The bottom line is a profoundly detrimental penalty system.'

Making contributions on a single premium basis, for younger directors, or, for those nearing retirement, a regular premium contract on a single premium basis, are sensible actions for those worried about the change in the pipeline.

If any brokers or salesmen try a more robust approach, remember that the Revenue is still not committed to doing anything at all, and that the ABI has said no decisions have been made and rebuked members for using the moves as a sales pitch.

IS WALL Street's earnings engine, which has been firing on all cylinders for the best part of the last two years, running out of fuel?

After a record-breaking 1991, and an even better start to 1992, growth in broking- house earnings appears to have slowed in the final quarter of last year, judging by some of this week's results.

PaineWebber, the fourth biggest brokerage firm in the US, and Bear Stearns, another prominent Wall Street operator, reported earnings that told the same story. Revenues from stockbroking commissions were strong in the October-to-December period, but sizeable declines in revenues from investment banking, and smaller falls in proprietary securities trading earnings, meant that total profits for the quarter were lower than in the same period of 1991.

Although the disappointing final quarter did not completely take the shine off what was a remarkable 1992 for both firms, PaineWebber was sufficiently concerned about the outlook for this year to announce that it had begun a hiring freeze among administrators and support staff in an attempt to restrain costs.

In both companies, the fall in investment banking earnings was primarily the result of a slowdown at the end of last year in the hectic pace at which new equities and bonds have been issued. Extremely strong corporate demand for underwriting services has been one of the key elements of Wall Street's two-year boom, so any sign that this demand my be waning is a cause for concern.

Investors, however, are being warned not to turn away from brokerage stocks just yet. If the first three weeks of 1993 are anything to go by, Wall Street's investment bankers are as busy today as they have ever been.

Keen to take advantage of a strong bond market, which has pushed interest rates to new lows, companies have been issuing debt in record numbers this year. As of January 21, companies had sold Dollars 28.3bn of bonds, making it highly likely that the old monthly record of Dollars 36.8bn, set in January of last year, will soon be eclipsed.

The rate of new issuance shows no sign of slowing down. On Thursday alone, Dean Witter, Discover & Co, the securities broking and credit card operation soon to be sold by retailing giant Sears, Roebuck, announced it intends to sell Dollars 3bn of its debt securities. UAL, parent of United Airlines, filed plans to raise Dollars 1.5bn through the sale of a variety of fixed-income and equity securities.

The fall in underwriting business in the fourth quarter of 1992, therefore, may turn out to have been a brief interruption of an upward trend.

Elsewhere in the financials sector, bank stocks were cheered this week by further evidence that the recovery in the US banking industry is now fully underway.

Citicorp, which came to symbolise the problems of the banking sector, led the way with a profitable final quarter, which helped the group return to the black in 1992 after big losses the previous year. Expense reductions have played a vital part in Citicorp's revival, a point that was mirrored at other banks, such as Chase Manhattan and Chemical Banking, which unveiled strong fourth quarter earnings achieved in part because of effective cost cutting and restructuring measures.

Perhaps the clearest sign that the worst is over for the banking industry, however, came not from the big New York money centres, but from their counterparts on the Pacific coast.

BankAmerica, which recently completed its merger with fellow San Francisco bank Security Pacific, was reported to be close to reaching an agreement to sell as much as Dollars 2bn in bad property loans to Morgan Stanley Realty Fund. Analysts said the transaction indicated that capital is finally returning to the beleaguered California property market, which bodes well for those west-coast banks which have struggled in recent years under the weight of soured commercial property loans.

A few days later, shares in another California bank, Wells Fargo, took off after the group reported that its annual earnings had improved more than tenfold to Dollars 283m. Investors rushed to buy the stock on the news, sending it soaring Dollars 13 to Dollars 99.

This week also included a stark warning to anyone who invests heavily in high-flying biotechnology stocks. The market capitalisation of Centocor plummeted more than 60 per cent in just one day after the company announced it was halting testing of its Centoxin drug, which is used in the treatment of an often-fatal condition called septic shock, because an unexpectedly high number of patients had died while using the drug in trials.

----------------------------------- Monday 3274.91 + 3.79 Tuesday 3255.99 - 18.92 Wednesday 3241.95 - 14.04 Thursday 3253.02 + 11.02 Friday 3256.81 + 3.79 -----------------------------------

SO FAR, it seems to be shareholders rather than airline executives who have paid the price for British Airways' shoddy behaviour towards Richard Branson's Virgin Atlantic.

On Thursday, the BA board exonerated its own members; it remains to be seen whether less senior members of the airline's staff face disciplinary action.

Shareholders' punishment has been swifter. Since late December, when rumours of a settlement in the case with Virgin first began to circulate, British Airways has under-performed the FT-Actuaries All-Share index by 13 per cent.

Perhaps more revealing is a comparison with three publicly traded European airlines, KLM, Swissair and Lufthansa. During 1992, British Airways outperformed all of them by more than 100 per cent; since late December, it has done worse than all of them, underperforming Swissair and and Lufthansa by over 20 per cent.

Had BA shares moved in line with the rest of the UK market since late December, they would today be selling at something like 306p, compared with the closing price of 265p on Thursday, just before the board released its statement of self-exculpation. If that figure is a guide to the damage caused by the scandal, it means that shareholders, collectively, are worse off by around Pounds 300m - a figure that dwarfs the Pounds 2m or so paid to Branson in costs and settlement.

On Friday, as institutional investors digested the fact that BA did not plan to follow their advice to keep separate the roles of chairman and chief executive, the share price rose 4 1/2 p on the week, closing at 275p.

The BA board might be forgiven for feeling that this particular piece of advice has a one-size-fits-all quality. Whenever there is a set-back at a company, regardless of its cause, institutional investors call for a separation of powers.

This week, their advice prevailed in the case of Barclays. Andrew Buxton, who this month became chairman as well as chief executive, sent a letter to the bank's senior managers. 'I have taken notice of what our shareholders think,' he wrote, 'and I will be taking steps to split the responsibilities.' The move will happen 'at a time of our choosing', thought to be later this year.

As if to reward him, Barclays shares rose 39p during the week, closing at 413p. The rise probably stems, however, from a growing belief among analysts that Barclays' dividend is safe. That view was clinched, for Terry Smith of the stockbrokers Collins Stewart, by some of the small print in Andrew Buxton's letter. This year, said the chairman, would be one for recovery rather than prosperity. 'I am completely confident, however, that we will recover well,' and there would be good profits in the future. 'We have a strong capital base that is amply sufficient to absorb the problems we have suffered.'

Short of desperation, companies do not usually trim dividends if earnings recovery can be expected in the foreseeable future. If the Barclays board takes that approach, the wording of the letter is the strongest evidence yet for the view that the dividend is safe.

The letter summed up another theme of the week. 'Even the most optimistic economic forecasters are now predicting only a slow and difficult climb out of the current world-wide recession,' wrote Buxton. As if on cue, poor economic statistics were released.

On Wednesday, retail sales for December fell disappointingly short of expectations fuelled by all those reports of last-minute pre and post-Christmas buying. On Thursday, a fresh batch of gloomy figures appeared. Unemployment, seasonally adjusted, rose by 60,800 in the month to December, nearly twice as fast as City economists had expected. Industrial production figures for November showed a 0.5 per cent drop in manufacturing output, to a level 0.2 per cent lower than a year before.

The markets, which had already been toying with the expectation of an early cut in interest rates, took the numbers as further pressure on the government to act. The futures market's short sterling contract closed the week at a level implying base rates of 6 1/2 per cent or less by March, down from their current 7 per cent.

Sterling weakened sharply on Thursday, and closed the week at DM 2.44, down 6 1/4 pfennigs from the previous Friday. Equities, which had fallen on Monday and Tuesday, recovered strongly as the market absorbed the economic statistics, and the FT-SE 100 index closed the week at 2781.2 up 16.1p.

Shorter- and medium-term gilts followed the same pattern, influenced by base-rate expectations. Long-term gilts, more influenced by Tuesday's announcement that there had been a sharp rise in public-sector borrowing in December, moved the other way, however.

The economists at Goldman Sachs, previously rather bullish on the outlook for gilts, announced themselves more pessimistic, partly as a result of a study of the way budget deficits affect bond yields.

Although it is hard to detect a strong relationship between the two in the chart above, Goldman Sachs's Jeremy Hale calculates that 'a 1 per cent increase in the budget deficit as a percentage of gdp will tend to increase gilt yields by 0.33 per cent . . .'

The Goldman economists forecast public sector borrowing to rise by just over 2 percentage points of gdp by the 1993-4 financial year. That means, they say, that after adjusting for a few offsetting factors, the equilibrium yield on 10-year gilts this year should be between 9 and 9.3 per cent, compared with just under 8 1/2 per cent today. Using this method, they add, 'the gilt market currently appears as one of the least attractive of the world's government bond markets.' A chilly welcome, you might think, for Eddie George, the new governor of the Bank of England.

THE FESTIVE season for retailers lasted little longer than the traditional 12 days of Christmas, if this week's official sales figures are anything to go by, but that does not mean investors should abandon the sector.

The prospect of chancellor Norman Lamont's hoped-for consumer-led recovery - from which retailers, naturally, would be the first to benefit - still seems distant. Most retailers believe consumers will not start spending any extra money they have acquired as a result of lower interest rates until they can be more certain of keeping their jobs, and the value of homes stops falling.

There is further anxiety about the possibility of an increase in VAT or national insurance contributions in the Budget in March. Recovery could also be slowed by an increase in retail prices, which many retailers are warning is imminent. They say they can no longer afford to carry the increased cost of imports after sterling's devaluation.

But while the sector is likely to continue to underperform the stock market by between 12 and 20 per cent, it is unlikely to collapse. The earnings quality of some of the heavyweight stocks tends to support the sector at the bottom of this range.

For the cautious, stocks such as Marks and Spencer and Great Universal Stores offer the prospect of safe, steady growth. Some would include Kingfisher, W H Smith and Boots in this category.

However, analysts say there are other shares which could show greater growth potential, even if the economy does not recover, or picks up only slowly. Investors prepared to take some risks might decide to take profits on stocks like M and S and GUS and invest in some with more exciting prospects.

The stock widely seen as the hottest in the sector is Storehouse, owner of the BhS and Mothercare chains.

'Storehouse has a momentum all of its own in terms of recovery,' says Kimlan Cook, stores analyst at County NatWest.

She adds that the new management, led by the American David Dworkin, has sorted out Storehouse's balance sheet, disposing of the Habitat and Richards chains, and begun to transform the company into a clearly-focused retailer. Moreover, Dworkin's reform process has just started in BhS, and could unlock huge untapped potential in Mothercare.

Feelings are more mixed about Burton, the fashion retailing group, which is also being shaken up by new management. Some believe this is another stock that could blossom whether or not the economy improves - although over a longer period than at Storehouse.

John Hoerner, chief executive, this month announced the loss of 2,000 full-time jobs but the creation of up to 3,000 part-time ones, in a wide-ranging rationalisation and cost-cutting programme. Observers are divided about whether even the experienced and tough-talking Hoerner can turn around a company with 10 different trading formats - some of which are looking distinctly tired. But with about Pounds 2bn turnover and among the lowest margins in the sector, the scope for growth is huge.

Other interesting prospects are offered by the 'quality cyclicals', well-run companies whose fortunes tend to mirror very closely the general state of the economy.

MFI, as a furniture retailer and maker, is heavily dependent on a pick-up in the housing market. But with the highest operating margins in the sector, about 60 per cent, any signs of such a pick-up will have a sharp impact on its profits.

Argos, essentially a consumer durables retailer, also stands to gain strongly from any recovery in spending. Analysts say it is a well-managed company - one of the retailers best- equipped to prosper.

Dixons, the UK's largest electrical retailer, continues to trade well in the UK. White goods could see a big upturn if the housing market improves. Concern over continuing losses at its Silo chain in the US deters some analysts from recommending it.

In the meantime, retailers will continue to pray for that recovery, and that next year's Christmas lasts longer than the last. There are, after all, only 280 shopping days to go.

THESE are difficult times for savers. Interest rates have fallen across the board, and many will be looking for an alternative to building societies.

Gilts are one option, since many issues offer a higher yield than is available from cash. However, shorter dated issues offer yields of only six to seven per cent; and many medium-dated issues are trading above par, which means that investors are locking themselves in to a capital loss.

Investors might also be cautious about buying gilts at a time when the government is being forced to issue so many of them to cover a large, and growing, budget deficit.

What about equities? Many savers will have memories of buying at the top of the market in 1987 and will be cautious about repeating the same mistake, particularly as the FT-SE 100 Index reached an all-time high on January 4.

So, it is worth a look at the fundamental ratios to see what they tell us. First the good news. Although both the Footsie and the FT-A All-Share have recently reached all-time nominal highs, they have not done so in real (adjusted for inflation) terms. On that basis, the All-Share is still below its levels in 1987 and 1989 and indeed, those achieved in the late 1960s and early 1970s.

Secondly, the yield ratio still makes shares look relatively attractive. This measures the relationship of gilt and equity yields - when the ratio is high, gilts are offering considerably greater returns than shares, and this often indicates that share prices are too high. When the ratio is low, shares may be cheap.

Experts argue about the usefulness of the ratio, but two recent examples illustrate its merits. According to Datastream, the ratio reached its low of 1.73 (for the period 1976-93) on July 27 last year. Since then, shares have risen by almost 20 per cent. The ratio's high for the same period was 3.46, achieved two weeks before Black Monday's share price crash. At the moment, the ratio is around 2, well below the 1976-93 average of 2.3.

If one compares the returns on equities and cash, shares also look relatively attractive. Again one can argue about the significance of this ratio, but if one uses three-month Libor to illustrate cash returns, this ratio reached its peak (for the period 1976-93) at the start of 1990. As theory would expect, 1990 proved a very good year to be in cash and a very bad year to invest in shares.

The current ratio is 1.56, well below the 1976-93 average of 2.35. In practice, this means it is now possible for top-rate taxpayers in the right pep to achieve a higher net return than they could achieve at most building societies.

BUT now the bad news. The price-earnings ratio measures the relationship of share prices to corporate profits; the higher the ratio, the more expensive (in theory) share prices are. The ratio reached its 1976-93 peak (21 on the FT-A 500 Index) in the summer of 1987.

The p/e on the FT-A 500 is now 17.3, well above the 1976-93 average of 11.2. On that basis, share prices are expensive, not cheap. Bulls would argue that the UK is coming out of a recession and that profits will soon rise sharply. The historical p/e is thus irrelevant; it is future earnings that matter. However, the UK was also coming out of a recession in the early 1980s; and historic p/es were much lower then than they are now.

The dividend yield on the All-Share has proved quite a good guide to the attractions of shares over the years. On the plus side, it is currently higher than inflation (a rare occurrence over the last 25 years); on the negative side, at 4.4 per cent, it is lower than the historical average of five per cent, which has proved a good benchmark through high inflation eras and low.

So, what is the message of all these statistics? One certainly cannot say 'shares are cheap; fill your boots'. But history has taught Britons that it is unwise to ignore shares altogether. So the first choices for those who want to buy equities should be low-cost unit or investment trust savings schemes (to smooth out the highs and lows); or one of the many types of guaranteed products on the market. The latter can be complicated so read the small print.

I have had considerable response to my article two weeks ago about Michael O'Higgins's stockpicking theory. Let me stress that this is no 'magic' route to profits (no such thing could ever exist); and that, as one reader correctly pointed out, a portfolio of just five stocks must inherently involve more risk.

Just to restate the theory; it involves taking the 10 highest-yielding stocks in the index and, of those, selecting the five with the lowest share prices. The process needs to be repeated once a year, with old stocks discarded.

The FT-30 index which I used to provide a British counterpart to the Dow is less frequently updated than it used to be. A reader with a good database might want to test the theory using the FT-SE 100 Index since launch.

The current constituents of the FT-30 are: Allied Lyons, Asda, BICC, BOC, BTR, Blue Circle, Boots, British Airways, British Gas, BP, BT, Cadbury Schweppes, Courtaulds, Forte, GEC, Glaxo, GrandMet, GKN, Guinness, Hanson, ICI, Lucas, Marks and Spencer, NatWest, P&O, Reuters, Royal Insurance, SmithKline Beecham, Tate & Lyle and Thorn EMI.

A new tax year starts in just over nine weeks, heralding the risk that the government may increase direct taxation or reduce the scope of tax shelters. It is therefore time for savers and investors to take advantage of tax-efficient vehicles still available, and to check that their finances are structured in the most tax-efficient way. The winter issue of the FT Quarterly Review of Personal Finance, to be published with next Friday's paper and repeated with Saturday's, in the UK only, offers a checklist of things to do with April 5 in mind. The review also includes a survey on Personal Equity Plans.

Smaller company shares resumed their rally this week. The County Small Companies Index rose 1.2 per cent, from 973.25 to 985.11, over the seven days to January 21; the Hoare Govett index (capital gains version) increased 0.6 per cent from 1251.67 to 1258.27 over the six days to January 20.

Employees who have paid tax based on more than the marginal or additional cost of their in-house benefits may be eligible for repayments, the Inland Revenue said this week. These benefits include goods sold at a discount, services and facilities provided in-house, or business assets made available for employees' private use.

Chase de Vere has produced a new edition of its Pep Guide which gives details of Personal Equity Plans available. The guide gives performance figures for unit, investment trust and single company Peps, but not managed plans. The top performing unit trust Pep over the last three years was the St James's Place PEP Progressive with a rise of 81.2 per cent. The guide is available for Pounds 9.95 form: Pepguide, Chase de Vere Investments, 63 Lincoln's Inn Fields, London WC2A 3JX.

Investment trust savings schemes last year showed their first annual fall since the schemes began in 1984. The total amounted invested through savings schemes for the year was Pounds 115.5m, down from Pounds 119.5m for 1991.

The Association of Investment Trust Companies attributed the fall in the year to poor stock market performance and lack of investor confidence because of the weak economy.

However, the final intake of Pounds 33.49m last quarter was strong. Lump sum investments accounted for most of this rise, totalling Pounds 21.72m, an increase of 87 per cent on the third quarter.

Oil prices shrugged off the air strikes against Iraq. Two years ago, the aftermath of Iraq's invasion of Kuwait pushed oil prices to their highest in years but this time there was little effect on the market.

North Sea Brent crude for March delivery increased by about 30 cents a barrel on January 13, the day of the air strikes but ended the day unchanged at Dollars 17.10 a barrel. The lack of activity underlines the weakness of the market. Prices have been depressed because of overproduction by Opec, with Brent crude falling by Dollars 1 a barrel since the beginning of the year.

'It seems that not one of the natural phenomena which sense experience reveals to us or which are proved to us by the necessary demonstration can be held in any doubt whatsoever, or rejected, because of some passages in the Scriptures which in their literal wording seem to be at variance with it.'

Galileo Galilei; letter to the Grand Duchess Cristina di Lorena, 1614. (trans: Shmuel Sambursky)

ON A MOUNTAIN peak high above the little town of Thatcher, Arizona, Jesuit astronomers from the Vatican have taken up station behind two new telescopes to peer into the atmosphere surrounding the youngest stars in the Milky Way.

'Our purpose is not to look for extraterrestrial life,' said Father George Coyne, director of the Vatican Observatory and a professor at the University of Arizona (which has a quarter share in the telescopes). 'But we might incidentally discover conditions for the birth of new planets.'

The 10,700-ft peak of Mount Graham, home to a rare red squirrel, the pocket gopher and the white-bellied vole, thus becomes the scientific summit of the Specola Vaticana, created by Pope Gregory XIII to help his 1582 reform of the calendar.

That celibates in cassocks should be competing with the world's best astrophysicists may seem quaintly anachronistic, even ludicrous. For do science and religion not give rival accounts of the universe? Is not God simply a device for explaining the parts that science cannot yet reach? To those who believe that every scientific advance entails a theological retreat, the Vatican's formal rehabilitation of Galileo at the end of October came as just one more proof of the archaic cosmogony of the Roman Catholic Church. If it took 360 years to issue that retraction, how can Roman Catholic theology hope to keep up? If the church is still wrestling with the consequences of the two apples - Eve's and Newton's - how can it hope to accommodate quarks, gluons or the Big Bang?

Yet the antagonism of faith and science is a relatively modern invention. Even the furore over Darwin's theory of evolution has been exaggerated. Most of the scientific pioneers were believers, and some were clergymen - Descartes, Newton, Kepler, Galileo, Bishop Berkeley, Locke and, in this century, the Jesuit palaeontologist Teilhard de Chardin. Copernicus, proponent of the heliocentric universe, was canon of Frauenberg cathedral.

As scientific accounts of the sub-atomic and cosmic worlds become ever more incredible - or counter-intuitive in the jargon - physicists are ever more careful to distinguish the 'how' questions of science from the 'why' questions of theology. As theologian Sean P. Kealy has put it: science is like a photograph of the world, faith like an x-ray. But both are 'real'.

This is the distinction which Pope John Paul II insisted upon when he commented on the report of the Vatican's commission of inquiry into the Galileo affair. 'A tragic mutual incomprehension has been interpreted as the reflection of a fundamental opposition between science and faith,' he said. 'This sad misunderstanding now belongs to the past.'

Cardinal Paul Poupard, former rector of the Catholic Institute of Paris, was president of the commission. He said from his office in the Vatican this week: 'This is my very profound conviction too. For the believer, both kinds of knowledge come from the same fount. As Galileo himself said, there are two big books, the book of nature and the book of super-nature, the Bible.' For example, added the cardinal, the Big Bang hypothesis (accepted by the church as consistent with Revelation) did not prove or disprove anything to the theologian. 'As Pascal, my favourite author wrote: it is a question of another order.'

In Galileo's day, questions of two orders were not acknowledged. So, on February 26 1616, the Pisan astronomer was condemned by the Holy Office for reinforcing the heliocentric hypothesis of Copernicus. Only 16 years before, the Dominican philosopher Giordano Bruno had been sent to the stake for a similar Copernican crime.

Galileo's case was more complex. He was in good odour with Rome but was stubborn, provocative - and influential. Writing in language that everyone could understand he had spread his fame throughout Europe. Under pressure from Cardinal Roberto Bellarmino, chief inquisitor and 'hammer of the heretics' - and a student of astronomy himself - Galileo agreed to desist. But in 1632 he published his Dialogo sopra i due massimi sistemi, tolemaico e copernicano, repeating the alleged libel on the Scriptures. The Florentine inquisition ordered the book to be seized - too late.

Although he enjoyed the protection of the Grand Duke of Tuscany, Galileo was summoned to Rome, interrogated and in spite of a vigorous defence in which he insisted that God spoke to mankind equally through nature and revelation, was forced to recant on April 30 1633. A sentence of imprisonment was passed on June 22 but reduced to one of house arrest two days later. He spent the last nine years of his life confined to his villa in Arcetri, his health, his sight and his spirit in decline.

Historians have argued that it was the manner as much as the matter of Galileo's argument that led to his victimisation - that, and the insecurity of the church under Pope Urban VIII. At all events, the great scientist was the victim of a judgment which the Vatican commission has now declared to be wrong, but not aberrant: that is to say, in the then state of knowledge the Holy Office had no choice but to condemn the heresy.

When scientific proof arrived in the following century Galileo's works were given the imprimatur and removed from the Vatican's notorious index of prohibited books. That decision was upheld in the 19th century and reconfirmed by the papal encyclical Providentissimus Deus, in 1893.

But the story did not end there. The present Pope, Karol Wojtyla, is a graduate and former theology professor of Krakow University where the German-Slav Mikolaj Kopernik (to give Copernicus his real name) studied maths, optics and perspective.

Although regarded as a conservative in other respects, the Polish Pope gave an early signal of his wish to repair the Vatican's reputation among scientists by setting up the special commission on the Galileo affair a year after being elected pontiff, on the 100th anniversary of Albert Einstein's birth. There is talk of a forthcoming papal encyclical, to be called Splendor Veritatis, the contents of which are not known but some Vatican insiders say will reflect the Pope's interest in reconciling the two branches of inquiry.

Some see the hand of another priestly Pole at work: Michael Heller, a mathematical physicist and theologian who teaches at Krakow University, is a confidant of Wojtyla's and an 'adjunct' member of staff of the Vatican Observatory. He has been involved in a series of science summits at which non-Catholic, even non-Christian, experts are invited to read papers and debate with the theologians.

'What impressed me was that it was very hard work,' said Prof John Barrow, professor of astronomy at Sussex University in England who attended a seminar last year. 'There were 20 or 30 of us round a big table and we worked from 9 am to 6.30 in the evening with an hour for lunch. The papers were circulated six months in advance and took several hours to read. It was not like the usual science meeting.' This series of meetings, run in conjunction with the Centre for Theology and Natural Sciences at Berkeley, California, is in addition to occasional briefings organised for the benefit of the observatory's ten Jesuit staff.

Prof Stephen Hawking, the cosmologist who holds Newton's chair at Cambridge, was another of those summoned. In his best-selling Brief History of Time, Hawking gave an ironic account of his audience with the Pope: 'He told us that it was all right to study the evolution of the universe after the Big Bang, but we should not inquire into the Big Bang itself because that was the moment of Creation and therefore the work of God.' He was glad, he added, that Pope John Paul had not heard him read the paper in which he had argued that space-time was possibly finite but with no boundary - and therefore there could be no moment of creation. 'I had no desire to share the fate of Galileo.'

There is no 'Galileo cloud', said Fr Coyne, the observatory's director. 'In 30 years I have never had any problem with any colleague concerning the relationship of science and faith.' He did, however, admit to a shortage of scientifically-trained theologians within the Catholic church. 'We have to look in every corner to find a Catholic or even Christian expert'.

But can the message of scripture, however judiciously interpreted, and the hypotheses of modern science, however cautiously advanced, ever be truly reconciled?

No, says the biologist and writer Richard Dawkins. 'There will always be conflict between the two. You cannot get away from the fact that religion is a scientific hypothesis: to say there is a Creator is to make a scientific claim, and science cannot ignore that. Then you have to explain miracles like the virgin birth and the resurrection.

'It makes me cross that religion should have this power over people's lives and education and thought. I think the whole thing is a total illusion. Why doesn't the Vatican learn the lesson? They were not just wrong about Galileo - that bungle was only a detail - but their whole attitude of thinking you can decide things by appealing to authority is wrong.'

Dawkins concedes that some scientist-theologians make a good fist of squaring their beliefs. Asked to explain why so many scientists continue to accept God he suggested the human brain could be infected by something akin to a self-replicating computer virus.

The radical theologian Don Cupitt, dean of Emmanuel College, Cambridge, sees religion as another kind of programme, a developing activity rather like art, which can discover no final or absolute truth.

'For example, to say 'He ascended into Heaven' means nothing to us now,' he said. 'All dogma is entangled in a medieval world view and has to be rethought as a whole - you can't do it piece by piece.'

A more charitable view of the Vatican's programme is taken by the Rev Dr Arthur Peacocke, a physical biochemist and Anglican priest who has also taken part in the conferences at Castelgandolfo, the Pope's summer residence. 'Given their inbuilt reactionary system it's to their credit that they have put the record straight in their own legalistic way,' he said. Science and theology might be addressing different questions but they applied similar criteria.

'People put them together in different ways. I say both are part of truth and reality and you can't put them in separate pigeonholes. Sometimes the interreaction is puzzling, sometimes it is creative.'

Another Anglican scientist-priest who has been to Castelgandolfo is the Rev Dr John Polkinghorne, president of Queens' College, Cambridge. His views carry weight: he is a fellow of the Royal Society and was professor of mathematical physics at the university before his ordination 10 years ago.

He, too, sees a kinship between science and theology: their use of induction, of models and metaphors, their search for simplicity of hypothesis and unified theory. 'But science is asking one sort of question,' he said, 'and religion another. There are connections between the answers - there is an uneasy sort of puzzling boundary between the two. People say one is public, the other private. I don't think that's right - after all, ethics and ideas of beauty are common concepts. It's not expressing an opinion to say that torturing children is wrong. A lot of people in the science world are wistful fellow-travellers who fear that the answers of religion might be a kind of suicide.'

As he takes off for Arizona to begin work in the Mount Graham observatory, Father Coyne is unabashed. 'Any advance in science, correctly heard by the Church, is a help to the Church,' he said. The Pope may have declared a truce with science but it could be a long time before the world is ready to believe in Rome's conversion.

ONCE AGAIN the trade press of the retail investment industry is buzzing with alarm about the renewed threat to that beleaguered group, the providers of independent financial advice. They are the ones who like to put blue IFA logos on their office doors.

The plan to transfer these advisers - of which there are some 6,300 authorised firms - from their tottering regulatory body Fimbra (which is being kept alive only by financial transfusions from insurance companies) to a new body called the Personal Investment Authority is in deep trouble. Andrew Large, chairman of the Securities and Investments Board, says he will not recognise the PIA unless its preliminary prospectus is changed so that a number of conditions are met. One of these is that the PIA must vet all the IFAs thoroughly before accepting them, and must not simply take the view that they can be grandfathered over from Fimbra. The PIA will certainly not now start operations on July 1, as scheduled, and may well be stillborn.

There is a lot of tedious financial industry politics in all this, but the question of independent advice is an important one. The UK is unusual in having a large group of independent intermediaries, who as recently as 20 years ago accounted for the bulk of life insurance and pensions business, and still sell maybe a third. On the Continent most savings products of this kind are sold through banks or by salesmen.

When the UK's new investment regulation framework was being developed in the mid-1980s it was rightly thought vital to protect the tradition of independent advice. Unfortunately a serious mistake was made. The IFAs did not accurately recognise their own function, which was essentially to act as freelance marketing agents who could sell products for a large number of independent life offices, not to mention other providers such as unit trust companies. Because of the existence of this independent distribution channel the UK has been able to sustain a large number of innovative and competitive life companies which have generally offered good value to investors. But the IFAs had bigger ideas. They considered they were investment experts whose job it was to offer best advice to clients.

This was seriously over-optimistic in most cases, because truly professional IFAs would require proper experience and qualifications and would be remunerated by their clients through fees; in fact IFAs are almost always remunerated through commissions from the product providers.

With ideas a long way above their real station in life, the IFAs and their trade associations saw the new Financial Services Act (intended to improve investor protection) as a way of securing a marketing advantage. They insisted that they alone should have the right to multiple representation; other intermediaries could act only for one company. The gloss put on this 'polarisation' was that it protected the public against conflicts of interest. But for the IFAs the point was that it restricted the banks and building societies in their plans to develop the retailing of investment products.

As recently as the beginning of this month we saw one of the belated effects of this National Westminster Bank finally abandoned its attempt to persevere as the last major High Street multi-branch IFA. The entirely superfluous NatWest Life is now in operation, and leading independent offices such as Clerical Medical and Standard Life have lost an important source of business.

But in winning the battle against the banks in the 1980s the IFAs overplayed their hand. The new rules required them to give 'best advice' and to subscribe to a compensation scheme through which good IFAs must pay for the losses inflicted on the public by the rogues and the incompetents. For a truly professional industry this should not have been a problem. Alas, in too many cases the IFAs have failed to match their own image of themselves. Many firms have been closed or gone into liquidation, and there is concern that the courts may make big awards against certain IFAs in favour of victims of home income plans, the packages of mortgages and insurance bonds that have left many pensioners facing repossession of their homes. The financial viability of the IFAs' regulator Fimbra has been undermined. If it collapses the law says that the IFAs must find authorisation elsewhere or cease trading.

Moreover the banks are out for revenge. If the IFAs had not been so keen to drive the banks and building societies out of multi-provider retailing the IFAs might have lost some of their marketing distinctiveness but they would have shared some regulatory interests with the banks. As it is, the banks see the IFAs purely as competitors that would be better eliminated. They are well-placed to kill the PIA - but are negotiating as they would prefer not to be seen with a smoking gun.

If the worst comes to the worst most IFAs will have to sign up as the tied agents of single life companies. A few may be able to gain authorisation from other regulators. There remain accountants, solicitors and other professionals who are authorised to give independent advice by their professional institutes. In due course a professional body of specialist IFAs could be formed to authorise firms in the same way. But these would cater for a limited group of high net worth clients rather than the mass market.

Would the drastic shrinkage of the IFA sector matter? The problem would be not so much that people would get worse advice (this aspect has been exaggerated) as that they would suffer a reduction in choice and in value for money. The retail investment market in the UK would become much like that on the Continent, and many venerable institutions would disappear, while the likes of NatWest Life would thrive.

It would scarcely be the end of the world, but it would be the end of a distinctive British tradition.

PRESIDENT Bill Clinton suffered his first big political defeat in the small hours of yesterday morning, his administration not yet 48 hours old, when Ms Zoe Baird withdrew her nomination as the next US attorney general.

In his letter to Ms Baird and in remarks before his first cabinet meeting later in the morning, Mr Clinton said that he was 'saddened' by her withdrawal but he had not 'agonised' over accepting it. He described her as 'an exceptionally gifted attorney and a person of great decency and integrity'.

Mr Clinton said he took 'full responsibility' for the fact that the extent of the problems she might face was not appreciated. Ms Baird, 40, would have been the first woman to head the justice department.

She ran into severe criticism when it was revealed that she had employed two illegal immigrants for household work.

In her letter to Mr Clinton she wrote that she was 'surprised at the extent of the public reaction' but concluded that the opportunity 'to reinvigorate' the justice department would be lost by the continuing controversy.

In hearings this week, she confessed to breaking the law, for which she had subsequently paid social security taxes and a civil penalty. Mr Clinton promised to begin the search for a replacement immediately but the White House avoided a commitment to finding another woman nominee.

Ms Baird's cause was lost with escalating speed on Thursday evening.

The general reaction on Capitol Hill yesterday was that in the end the president and Ms Baird had little choice but to accept defeat. Senator Patrick Leahy, the Democrat from Vermont, said if Mr Clinton had exerted maximum pressure he might have got her confirmed, 'but this would have sent the wrong signal' about double standards.

Washington's ways, Page 3

Man in the news, Page 6

MR JOHN MacGregor, transport secretary, yesterday appeared to leave the door open to significant changes in the UK government's proposals for the privatisation of British Rail.

Mr MacGregor, unveiling the Railways Bill, emphasised the opportunities for parliament to amend the legislation before it won royal assent.

'The whole point of the parliamentary process of dealing with legislation is to carry out a parliamentary scrutiny,' he said. 'So there will be full parliamentary scrutiny in the months to come, and there may well be changes.'

The plans for British Rail are threatening to turn into the most controversial privatisation yet. They have been criticised by a range of bodies including consumer groups, the public transport lobby, professional institutions, trade unions and MPs.

The aim is to split British Rail into two, with one body operating the trains and the other owning the tracks.

Freight operations would be sold and the passenger train operations would be contracted out to the private sector in up to 40 separate franchises, starting in 1994.

Mr MacGregor has already climbed down on one aspect of the proposals, saying that franchisees will not necessarily have to face on-track competition from other operators trying to poach their customers.

There are criticisms of the practicality of separating track ownership from the operation of trains and the possibility that track charges could price traffic off the railways and on to the roads.

Yesterday, Mr Brian Wilson, a Labour transport spokesman, claimed the bill would mean fewer services, greater safety risks, more bureaucracy, higher fares, more freight on the roads and heavy job losses.

'Above all, one is struck by the Byzantine complexity of what is being proposed,' he said. 'The lawyers will love it. Fragmenting the railways means everyone registering with everyone else, and a vast web of agreements and regulatory procedures.'

Sir Bob Reid, BR chairman, refused either to endorse or criticise the bill.

'It is certainly a legitimate way of broadening the financial base of the railway. Whether it works or not really depends on who comes forward and runs these franchises,' he said.

Mr MacGregor said the plans would bring better railway services for passenger and freight customers and better value for money for the taxpayer.

Fares would rise no more rapidly than they had under British Rail, he predicted, and closure procedures would remain as stringent as they were now.

Mr MacGregor acknowledged that work was still to be done on some of the details of the plans. A document on rolling stock leasing would be issued next week, another on the track charging regime would follow next month, and a third on the sale of freight services would come in March.

Sell-off plan defended, Page 5

Bumpy ride, Page 6

A year after Mr David Rowland's task force report, the problems of the Lloyd's insurance market look as pressing as ever. Underwriting losses show every sign of matching the gloomiest predictions. That will lead to a further erosion of capital. If the losses forecast by Chatset this week prove anything like correct - and rates continue to harden - Lloyd's will be turning away profitable business before the middle of the decade unless new sources of capital are found.

The new quota-share arrangements for attracting corporate investors are already proving their worth. But it is far from clear that the modest investments made by the likes of J P Morgan this year will plug the gap. The current rate of attrition among Names demands something more.

The hurdles to direct corporate membership are formidable. Assuming these can be overcome, though, Lloyd's must find a way to introduce corporate members without alienating individual Names.

Since corporate capital would be subject to limited liability, there is plenty of scope for friction. Names facing unlimited liability - even allowing for the stop-loss arrangements introduced last year - might easily feel disadvantaged. But it can hardly be in the interest of Names to participate in a market starved of capital. Any insurance market worth its salt should be able to reward varieties of capital with appropriate rates of return. If Lloyd's can learn to price its risks correctly, there should be no shortage of capital from either source.

Sterling's sharp fall this week is a measure of the dilemma facing the government. Without a resurgence of growth, the PSBR is likely to deteriorate further when the government is already expected to be raising Pounds 1bn a week gross during the next financial year. Since there can be no fiscal stimulus, the only lever left appears to be interest rates. Yet lower rates threaten to weaken the pound, raising fears of a fresh inflationary push. That is hardly welcome when the underlying rate is already pushing up towards its target ceiling of 4 per cent.

Financial markets were wrong to anticipate that this week's poor economic data would prompt the government to cut rates. With unemployment growth accelerating, though, it may sooner or later have to cast its inflation worries aside. Equally important, a steeper yield curve may be needed to fund next year's PSBR. The question is how much of this has already been discounted by sterling. A market perception that the exchange rate was low enough to allow room for eventual appreciation would encourage foreigners to buy gilts. Next week's auction will provide some clue as to whether this point has been reached.

Anyone waiting for the cancelled 7.25 to Waterloo will agree that British Rail needs to be exposed to commercial pressure. But devising an acceptable system has proved much more difficult than in other privatisations. In part, that reflects the unprofitability of the railways - British Gas runs at a profit, British Rail does not. But there are many similarities between the two. British Gas started as a monopoly competing in a wider energy market; British Rail runs all of the railways but competes with other transport systems. Both too have a basic infrastructure which can be divorced from services offered - gas marketing can be split from the pipes, trains can be split from track.

It may be that the poor state of British Rail's capital stock, its high fixed costs, and need for continuing public subsidy rule out selling the operation as a whole. But that solution offers some advantages. It would expose all of the railways - including the track - to direct market pressure. Other privatisations have shown that many unlikely assets are saleable if they are priced correctly. And efficiency and service improvements combined with premium prices on some routes might justify the capital investment needed. The benefits of an integrated network would be maintained, while management would be motivated to work for the change.

Ideally, internal competition within the railways would provide benefits, but that can be approached in a phased way - as it has been in the gas industry. By opting for a track authority and franchised services, the government has made rail commercialisation complex, when simpler alternatives might have solved the problem.

Since the Bank of England is not going to be independent, it matters rather less who is going to be its governor. The choice of Mr Eddie George, announced with characteristic abruptness last night, is safe but uninspiring. As deputy governor, Mr George has been actively involved in the Bank's affairs during a period when it has been found wanting in two of its most important activities. It failed in its bank supervisory role to deal early enough with the troubles at BCCI. It was also a willing party to the UK's stubborn determination to maintain an unrealistic exchange rate within the ERM even when the damage to the economy was becoming obvious.

Mr George is an intelligent and articulate man with considerable technical central banking skills. That makes him the obvious choice in a field which did not offer any candidate with overwhelming appeal. The other leading contender, Sir David Scholey of SG Warburg, might have been seen as too much of a City spokesman, with no direct experience of monetary policy. Mr George went out of his way last night to stress that his overriding task was to work for price stability.

More startling is the appointment of a journalist as deputy governor. Mr Rupert Pennant-Rea could be seen as an ideas man who will inject some vigour and originality into the policy debate; at The Economist he displayed fervent support for monetary discipline and the ERM exchange rate. But what is needed in Britain is a fresh approach to policy-making. These appointments suggest the prime minister is still hankering after old ideas. After the trauma of September 16 a more open-minded approach to policy-making was promised. That now looks as conveniently forgotten as the original exchange rate pledge.

BANKERS to Canary Wharf, the financially troubled property development, said yesterday there was serious doubt about whether they would provide funds to extend the Jubilee line into east London.

They said there were no firm commitments from them to provide the Pounds 400m towards the cost of extending the underground rail line which the government has said is needed from the private sector. Without this contribution, the extension will not be built.

In November, the administrators to the project said agreement in principle had been reached with 11 banks on the provision of the funds, including an immediate contribution of Pounds 98m. As a result, Mr Norman Lamont, the chancellor, earmarked public funds in the Autumn Statement for the government's share in the project.

But it emerged yesterday that the 11 banks, including Barclays and Lloyds of the UK, have not made a binding agreement to provide the private sector share. They are relying on the European Investment Bank, the European Community lending institution, to provide the bulk of the Pounds 98m.

'I am confident that the EIB will come up with the money,' said one banker. However, a banker with close links to the EIB said it had not made any promise to provide the money and there was considerable doubt whether it would do so.

The EIB has already lent Pounds 100m to the project. Another Pounds 600m has been provided in a main lending facility provided by 11 banks. Four Canadian banks have provided a separate Pounds 450m loan.

Canary Wharf is in administration under UK insolvency procedures. Bankers said the project would probably go into liquidation if there was no agreement on funding for the Jubilee line.

Discussions on the funds are closely linked to separate talks on how to provide an additional Pounds 200m needed to complete Canary Wharf's building in London's docklands and provide incentives to prospective tenants.

A banker said that without agreement on how to finance the completion of Canary Wharf, no money would be provided for the Jubilee line.

The current uncertainty about the funding of the Jubilee line was caused in part by the unexpected reversal of an offer from Credit Suisse, the leading Swiss bank, to provide a large portion of the Pounds 98m. A banker said Credit Suisse's board overturned a proposal to provide the funds made by more junior executives.

STERLING came under renewed pressure against the D-Mark yesterday, falling another 1 1/2 pfennigs, amid increasing gloom about the prospects for an economic recovery in the UK.

The pound fell to a low of DM2.437 in London, as currency dealers speculated that the government might cut base rates in the near future, following the release of poorer-than-expected economic data on Thursday.

The Bank of England left interest rates unchanged, but the pound still closed at DM2.44, 1 1/4 pfennigs down on the day and more than 6 pfennigs below its closing level last Friday. In New York it fell back again, trading at DM2.435 at the close. Against a generally weak dollar, sterling firmed in London to Dollars 1.5345, up more than 1 1/2 cents, although it eased to Dollars 1.5312 in New York.

On the London stock market, hopes of an early interest rate cut had helped lift share prices to within 6 points of 2,800 on the FT-SE 100 index. It closed at 2,781.2, up 7.9 on the day, for a gain of 16.1 on the week.

Sterling has on several occasions in the past three months, dropped to the levels seen yesterday, only to rally to around DM2.50, but there were signs yesterday that the currency was under more serious pressure.

One of the leading banks in the London foreign exchange market said it had received no requests to buy sterling from its UK corporate customers on Thursday and that there had been barely any improvement in the situation.

Editorial Comment, Page 6 Mixed signs of recovery, Page 7 Currencies, Page 11 London stocks, Page 13

SIR COLIN MARSHALL, British Airways' chief executive and deputy chairman, will meet Mr Richard Branson, the head of Virgin Atlantic, next week in a final attempt to end the conflict triggered by BA's 'dirty tricks' campaign.

The meeting is expected to take place as early as Monday amid growing indications that both sides are anxious to improve relations which have continued to be strained despite BA's two public apologies and a Pounds 610,000 libel settlement.

Virgin indicated last night it wanted the issue resolved by the middle of next week, although it still threatens to take further legal action against BA in the US courts. 'No one wants this affair to drag on,' the airline said last night. BA is also keen to settle the damaging affair without further delay. But the airline is uncertain over Virgin's likely demands, which could prove too much for BA to swallow.

Mr Branson is expected to insist on cash compensation for lost revenue arising out of its rival's campaign as well as a legally binding agreement preventing any future abuse of Virgin's computer reservation information. Virgin also wants access to BA's maintenance facilities for its aircraft. Access was withdrawn five years ago.

Sir Colin emphasised this week that he was anxious to establish better relations with Virgin, while Mr Branson has indicated he would like to avoid taking any further legal action.

Although BA's executive management is continuing its investigation into its marketing, public affairs and legal departments in the aftermath of the 'dirty tricks' campaign, no sackings or resignations have so far emerged.

In an effort to restore staff morale and publicly demonstrate its commitment to best business practice, BA yesterday published its new code of conduct for its 50,000 employees.

'The best way to put the past behind us is to make it plain how we intend to go forward in the future,' Sir Colin says in an introduction to the document.

The code sets down general standards of behaviour covering issues ranging from 'fairness' and 'integrity' to 'honesty' and 'fair competition'. It urges employees: 'Be prepared to challenge if you believe others are acting in an unethical way . . .'

However, BA's attempts to restore an air of normality remain under a cloud as institutional investors continue to express concern over the com-pany's failure to split the roles of chairman and chief executive.

Despite recent events, there has so far been no change in the plan for Sir Colin to add the post of chairman to his existing responsibilities when Lord King steps aside as chairman in July.

The issue of the future shape of the company's board has not been raised in the immediate aftermath of the 'dirty tricks' revelations. Sir Colin said this week there was 'ample time' for the board to consider the issue.

Some institutional shareholders yesterday claimed that Sir Michael Angus, a BA non-executive deputy chairman, had told them that Sir Colin 'would not hang around' if he was unable to hold both posts.

Details, Page 5

STERLING came under renewed pressure against the D-Mark yesterday, falling another 1 1/2 pfennigs, amid increasing gloom about the prospects for an economic recovery in the UK.

The pound fell to a low of DM2.437 in the morning, as currency dealers speculated that the government might cut base rates in the near future, following the release of poorer-than-expected economic data on Thursday.

The Bank of England left interest rates unchanged, but the pound still closed at DM2.44, 1 1/4 pfennigs down on the day and more than 6 pfennigs below the level at which it closed last Friday.

Sterling firmed against a generally weak dollar, closing at Dollars 1.5345, up more than 1 1/2 cents.

On the London stock market, hopes of an early interest rate cut had helped lift share prices to within 6 points of 2,800 on the FT-SE 100 index of leading shares. It closed at 2,781.2, up 7.9 on the day.

Sterling has on several occasions in the past three months, dropped to the levels at which it was trading yesterday, only to rally again to around DM2.5.

But there were signs yesterday that the currency was under more serious pressure.

One of the leading banks in the London foreign exchange market said it had received no requests to buy the pound from its UK corporate customers on Thursday and that there had been barely any improvement in the situation.

Mr Neil MacKinnon, an economist at Citibank in London, said Thursday's economic data, which showed a rise in seasonally adjusted unemployment by 60,800 in December to 2.97m, had significantly changed the currency market's mood towards sterling.

However, Mr Steven Hannah, head of research at IBJ International in London, said the money markets were now virtually discounting a full percentage point cut in base rates before the March Budget, so that the UK authorities could ease policy without affecting the pound any further.

'The only thing that might put pressure on the currency is if the rate cut comes too soon,' he said.

Editorial Comment, Page 6 Mixed signs of recovery, Page 7 Currencies, Page 11 Lex, Page 22

BRAZILIAN equities rose strongly, to close up 9.3 per cent on the Sao Paulo stock exchange, as brokers said that foreigners were rushing to take advantage of bargain prices. The Bovespa index gained 8,010 points on the day to close at 93,866

Wall Street

US STOCK markets struggled to stay in positive territory yesterday in the face of computer program selling and some bad news on the jobs market, writes Patrick Harverson in New York.

At the close, the Dow Jones Industrial Average was up 3.79 at 3,256.81. The more broadly based Standard & Poor's 500 was up 0.60 at 436.09, while the Amex composite was 0.78 higher at 406.36.

The Nasdaq composite faltered after a strong morning session, and ended only 0.87 higher at 701.64, another record close. Trading volume on the New York SE was 294m shares.

The day's economic news was, however, distinctly mixed. Jobless claims rose 17,000 in the first full week of January, a bigger increase than expected. It was the second big jump in claims in consecutive weeks, and an indication that the economic recovery is not feeding through into the still depressed labour market.

On a brighter note, December housing starts rose 5.5 per cent. Analysts had forecast a much smaller rise. It was the largest monthly increase in housing starts in more than a year, and contributed to the market's early gains.

Prices soon fell back, partly under pressure from mid-morning sell programs.

The political background was gloomy. The news that President Clinton's choice for attorney general had been forced to withdraw her nomination meant that the new president's term had got off to a rocky start.

Among individual stocks, steel companies were in strong demand on the news of industry-wide steel price rises. LTV was the most active stock, rising Dollars 7/16 to Dollars 1 1/8 in volume of 9m shares, followed by Bethlehem Steel, up Dollars 1 5/8 at Dollars 19 1/8 , Inland Steel, up Dollars 7/8 at Dollars 24 1/8 , USX, up Dollars 2 7/8 at Dollars 37 7/8 , and General Steel, Dollars 1 3/8 firmer at Dollars 13 3/4 .

Motor stocks posted solid gains on active buying. Chrysler, the star performer of the sector in recent months, jumped another Dollars 1 3/8 to Dollars 39 5/8 , Ford added Dollars 3/4 at Dollars 48 and General Motors firmed Dollars 3/8 to Dollars 37 7/8 .

Ralston Purina climbed Dollars 4 3/8 to Dollars 49 5/8 after the company reported fiscal first quarter operating income of Dollars 1.26 a share, up from Dollars 1.14 a share a year earlier. Investors were also cheered by the news that the company plans to spin-off its Continental Baking unit.

On the Nasdaq market, Software Publishing jumped Dollars 3 7/8 to Dollars 12 7/8 in volume of 3.4m shares after the company reported quarterly profits well in excess of market forecasts.

Canada

TORONTO stock prices ended mixed. The composite index was up 0.22 points, or 0.01 per cent, to 3275.97, declines topping advances 339 to 291. Volume climbed to 44,816,000 shares compared with Thursday's 41,707,000 shares. The index fell 30.6 points or 0.9 per cent on the week.

SENIOR bourses were stronger yesterday, writes our markets staff.

FRANKFURT saw gains in the pre-bourse accelerate throughout the session on good overseas interest. The DAX index closed 13.97 higher at 1,587.64, a gain of 2.8 per cent on the week. Turnover was DM5.7bn after DM5.2bn.

Some analysts believe that, while the prospect of a cut in interest rates continues to lift sentiment, hopes that the government's solidarity pact will gain the agreement of employers and trade unions is currently supporting the market.

Individual features included Lufthansa, up DM6.60 or 6 per cent at DM110.00, on reports that it will show good earnings results next week.

Deutsche Babcock rose DM5.80 to DM159.80, after announcing that it was to resume dividend payments of DM3 after a two year suspension and pay the same amount retrospectively for 1991 and 1990.

Elsewhere good performances were seen by Siemens, up DM7.00 at DM604.80 and Daimler, DM11.50 higher at DM576.50.

PARIS was positive on the last day of the account with the CAC-40 index finishing 8.24 higher at 1,820.42 for a 0.4 per cent gain on the week. Turnover was good at FFr3.1bn.

St Gobain gained FFr14.90 to FFr495.90 as investors took stock of its 1992 figures, released after Thursday's close, which suggested that the group has been more resistant to the economic downturn than other cyclicals.

Lyonnaise-Dumez, which has lost 11.6 per cent on the week after forecasting disappointing 1992 earnings on Wednesday, closed 50 centimes lower at FFr409.50.

Elf put on FFr6.00 to FFr340.80 after the group said that its 1992 results, due out early next week, would meet expectations. Moulinex was another gainer, rising FFr5.40 to FFr82.90, ahead of results due out after the close.

Peugeot shed FFr20 or 3 per cent to FFr578 as a number of brokers downgraded the stock.

ZURICH turned broadly firmer after a lively afternoon. Shares rose in the morning, dipped at midsession on profit-taking, but climbed again in the afternoon as investors were attracted by lower prices.

The SMI index, little changed on the week, ended up 15.3 at 2,102.7, the level at which it had hit resistance in the morning.

Chemicals were in demand. Ciba registered shares rose SFr14 to SFr656. Roche certificates dipped to a day's low of SFr4,050 in response to overnight news of a 50 per cent drop in profits at Genentech, its US biotechnology unit. But the shares later picked up to close unchanged at SFr4,120.

AMSTERDAM featured a 5.5 per cent rise in Hoogovens, up Fl 1.30 to Fl 24.80, while a late session rumour that the state was to place its 8 per cent stake in ING sent its shares down 80 cents to Fl 58.00. The CBS Tendency index closed 0.3 lower at 98.9, up 1.2 per cent on the week.

MILAN suffered a bout of profit-taking after recent gains but the market closed mostly off the day's lows. The Comit index was 5.98 lower at 481.62, 0.6 per cent higher on the week.

However, Italcementi and its parent, Italmobiliare, were among the few issues to rise after news that the government was to free around L50 trillion for public works spending. Italcementi rose L388 to L9,338 and Italmobiliare fixed L150 up at L37,000 before surging to L38,500 after hours.

STOCKHOLM ended lower after profit-taking ahead of the February results reporting season and a fall by pharmaceutical group Astra. Astra's A-shares closed down SKr12 at SKr694, and the B-shares fell SKr10 to SKr679.

The Affarsvarlden index ended 14.3 lower at 912.9, for a weekly decline of 1.5 per cent.

Asea's B-share rose SKr1 to SKr383 on news of a large contract from Swedish railways.

Among banking stocks, Handelsbanken A-shares climbed SKr2.50 to SK5r44.50 supported by hopes of a maintained dividend. In contrast, S-E-Banken's A-share were unchanged at SKr14 after news of a widespread group overhaul.

BRUSSELS closed higher in busy trade which took the Bel-20 index 7.91 higher at 1,172.32, for a weekly rise of 2.4 per cent.

Belgium's biggest retailer, GIB, was the most active share following recommendations from London brokers. It advanced BFr24 to BFr1,234 on very high volume of 186,800 shares.

MADRID took little encouragement from a cut in domestic interest rates and the general index lost 1.19 to 232.18, down 1.5 per cent on the week. Banco Santander, whose results on Thursday disappointed the market, shed Pta235 to Pta4,640.

VIENNA, held up against expectations in the wake of news of a 1992 operating loss dividend cut at OMV. The ATX index eased 1.43 to 338.34.

OMV shares slid Sch15 to Sch599 after the company said it expected to post a 1992 loss of Sch300m and that the dividend would be cut.

------------------------------------------------------------------------ FT-SE Actuaries Share Indices ------------------------------------------------------------------------ January 22 THE EUROPEAN SERIES Hourly changes Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1094.45 1094.75 1092.36 1090.64 FT-SE Eurotrack 200 1158.36 1157.72 1155.93 1157.92 ------------------------------------------------------------------------ Jan 21 Jan 20 Jan 19 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1091.44 1091.84 1090.81 FT-SE Eurotrack 200 1154.96 1153.29 1155.89 ------------------------------------------------------------------------ Hourly changes 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1090.57 1091.76 1091.92 1091.64 FT-SE Eurotrack 200 1159.26 1157.69 1157.61 1156.91 ------------------------------------------------------------------------ Jan 18 Jan 15 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1097.15 1089.58 FT-SE Eurotrack 200 1166.50 1160.32 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1094.96 ; 200 - 1159.76 Low/day: 100 - 1090.13 200 - 1155.58 . ------------------------------------------------------------------------

Just as the collapse last August in De Beers' share price was an important factor in driving down the Johannesburg Stock Exchange, so its recent recovery has helped get the market off to a buoyant start in 1993.

The overall index has risen by about 4 per cent in the first three weeks, having closed 1992 down 5.3 per cent on the year. The index closed yesterday up 22 at 3,404.

Much of this year's rise can be attributed to De Beers, which accounts for some 10 per cent of total volume and 5 per cent of market capitalisation.

The shares have risen by 16 per cent since the start of the year, closing yesterday at R68.25, after finishing 1992 at R57.50. This improvement is mainly attributable to better than expected rough diamond sales by the Central Selling Organisation during 1992, and indications that the problem of excess supply from Angola and Russia has eased.

The industrial index has also started the year strongly, up 4 per cent, after a 4.6 per cent gain in the whole of 1992, which followed a strong 39 per cent rise the previous year.

Mr Richard Jesse, an analyst at brokers Martin & Co partly attributes this good start to the, by now, 'tedious litany' of the market's scrip shortage.

Nevertheless, most observers believe that 1993 will be a better year on the JSE than 1992. To some extent, this view is supported by improved political and economic fundamentals. While the speed of political negotiation is rather slow all those involved are aware that the country cannot afford a repeat of the damaging political hiatus which followed the failure of the Codesa 2 talks in May and the Boipatong massacre in June.

Economic expectations, however, are muted: the weather pattern in recent weeks has led to renewed fears that the El Nino phenomenon, associated with the severe drought of 1991-92, has reappeared. Last year, for instance, the drought shaved nearly 2 percentage points off GDP growth.

The expectation remains, however, of positive growth in 1993 of around 1.5 per cent (GDP shrunk by about 2 per cent in 1992), on hopes of a better agricultural season and improved commodity exports as world growth improves.

The earnings prospects of industrial companies remains gloomy. Most companies that have reported recently have predicted a drop in profits and there is little expectation of improved corporate profits before 1994.

In spite of these rather pale fundamentals, Mr Jesse is predicting a rerating of the market. He believes that the Financial and Industrial index, currently on a price/earnings ratio of 14.9 times, down from a peak of some 15.5 in 1992, could rise to more than 16 this year.

He gives two main reasons for this forecast, apart from the improved political prospects. First, the absence of alternatives: property returns are expected to fall in 1993, while money market rates which are in line with inflation, and likely to fall with interest rates, are hardly attractive.

Capital markets are also a difficult route because, while the probable short-term decline in inflation, which currently stands at about 11 per cent, is positive, this is counterbalanced by concerns about the size of the government's budget deficit and prospects of a relaxation in fiscal policy under an interim government.

Second, Mr Jesse argues that South African fund managers will be increasing the equity portion of their portfolios: many of them are underweight, holding less than 60 per cent in equities when the limit is as much as 75 per cent.

One unfashionable area which could receive some of these institutional funds is gold shares which have been sharply downrated over the past three years as the gold index declined from a peak of 2,250 to current levels of about 800, with a 30 per cent fall in 1992 alone.

Mr Mike Wuth, mining analyst at brokers Rice Rinaldi says that this correction has largely removed the speculative angle from gold. Now, he says, gold has to offer decent returns and compete more directly with industrial shares.

However few analysts hold out much hope for a higher gold price in the short term and a weakening rand is only likely to offer limited benefit.

But one way that profits can be improved is through further cost cutting measures and the December gold quarterly results of mining houses confirm the impressive progress that has been made in this direction. With the dividend yield of the gold index having risen to 6.6 per cent from 3.4 per cent three years ago, gold shares are now offering better value than for a number of years.

Mr Wuth forecasts that foreigners are more likely to be buyers of good shares than local institutions. Many of the latter, he argues, are historically overweight in gold and so are looking for opportunities to lighten their holdings.

Overseas institutions, of course, will be wary of the vagaries of the financial rand investment unit, which started 1992 at a discount of 14 per cent to the commercial rand and ended at a discount of 37 per cent.

But the political outlook and recent steps taken to bolster the currency, make any further weakening from current levels unlikely.

SHARE PRICES lost ground in small-lot selling by investment trusts, and the Nikkei average closed below the psychologically important 16,500 level for the first time since November 17 last year, writes Emiko Terazono in Tokyo.

The 225-issue index closed down 201.87 at 16,336.81, a 1 per cent decline on the week. The index rose to the day's high of 16,540.88 in the morning session and fell to a low of 16,333.81 before the close at anxiety about a possible collapse in share prices next month.

Volume fell to 180m shares from 199m. Declines led advances by 656 to 216 with 202 issues remaining unchanged. The Topix index of all first section stocks fell 7.96 to 1,256.70, and in London the ISE/Nikkei 50 index rose 0.10 to 1,025.62.

Caution has been mounting among market participants regarding a 'February crash' due to liquidation of specified money trusts by corporations ahead of March book closing, margin selling and arbitrage trading. Comments by Mr Yoshiro Hayashi, the finance minister, who yesterday ruled out the need for imminent stock market support measures, also unnerved market participants.

Sentiment was further depressed after Mr Gaishi Hiraiwa, chairman of the Keidanren - the Federation of Economic Organisations - announced that a stock purchasing company, proposed by some economists, was unnecessary.

Retail issues held by Shuwa, the stock and property speculator, continued to fall after Thursday's reports that the company was looking to sell its holdings. Isetan fell Y120 to Y1,860 and Matsuzakaya lost Y61 to Y959. Ito-Yokado, a supermarket chain, which last year held negotiations to buy Isetan shares from Shuwa, lost Y100 to Y3,400.

Isuzu Motors, the most active issue of the day, fell Y12 to Y348 on profit-taking by dealers. Pioneer Electronic fell Y150 to Y2,370 on reports that the research division of Nikko Securities had lowered its earnings projection.

In Osaka, the OSE average fell 120.59 to 17,891.38, down 0.9 per cent on the week, in volume of 30.9m shares.

Roundup

In the Pacific Rim, Hong Kong, Kuala Lumpur and Seoul were closed for the Lunar Year long weekend holiday.

SINGAPORE moved ahead at the end of the half-day session, lifting the Straits Times Industrial index 2.91 to 1,596.78, 1.5 per cent down on the week. Volume was limited to 28.19m shares. Many investors and brokers had left for the weekend holiday.

Acma was the most actively traded issue gaining 4 cents to SDollars 2.69.

Fraser & Neave was steady at SDollars 11.40 as it proposed a five- for-25 rights issue which will accompany a bond with warrants issue of SDollars 100m to help finance an expansion.

MANILA climbed for the third day, fuelled by speculation about oil drilling tests in the Malampaya well off south-western Palawan island.

The composite index rose 10.23 to 1,341.47 for a three-day increase of 58.47 and 2.1 per cent higher on the week.

AUSTRALIAN shares turned higher, taking heart from Mr Kerry Packer's decision to roll over his Westpac Banking January call options to April calls. Westpac added 30 cents to ADollars 2.91, having traded as high as ADollars 3.00.

The All Ordinaries index benefited, closing up 3.9 at 1523.0, virtually unchanged on the week.

Other banks moved higher with ANZ 2 cents up at ADollars 3.04 in turnover of 2.26m shares, and CBS rose 5 cents to ADollars 5.90. NAB slid 3 cents to ADollars 7.49. Pioneer, with its exposure to Westpac, rose 10 cents to ADollars 2.30. News Corp was strong throughout the session, closing 20 cents higher at ADollars 29.20. Fairfax ended steady at ADollars .63 after its forecast increased profits for 1992-93.

NEW ZEALAND was generally firmer but trading was light in the absence of foreign investors. The NZSE-40 index gained 3.06 to 1498.43.

GROWING speculation that J. Sainsbury is looking to make a substantial acquisition in the UK is likely to prove wide of the mark, according to London analysts. The supermarket group is now believed to be targeting a large US food store business. Such a purchase, which could cost Sainsbury about Pounds 400m, would complement its Shaw's supermarkets division of 75 stores based in New England. It could also cause Sainsbury to seek further funds from its shareholders. The shares gained a penny to 559p.

Names touted nearer home yesterday included the loss-making Do It All chain owned by WH Smith and Boots. Analysts said there would be some synergy with Sainsbury's Homebase DIY business, with suggestions also that patience is wearing thin among Do It All's present owners. WH Smith 'A' shares advanced 8 to 453p, helped by a Nomura buy note. Boots edged forward to 518p.

Another candidate under scrutiny was Asda. Yesterday saw 22m shares traded and the equivalent of another 10m in the options market. The shares added 2 at 68 1/2 p. However, analysts were dismissive of a bid for Asda, arguing that the financial and strategic advantages were not compelling.

ICI sold

Shares in ICI fell 12 to 1,111p with several traders pinpointing US investment bank Goldman Sachs. Dealers said Goldman had finally managed to offload in New York the 10m shares still on its books after Hanson sold its 2.8 per cent stake in May last year.

Goldman would not comment but informed sources said there had been heavy selling to US institutional clients. The shares were also weak following press comment pointing out the relatively small positive impact of the business swap with BASF of Germany, announced on Thursday compared with the subsequent sharp rise in the share price.

C & W active

A late flurry of selling caused by broker downgrades, drove Cable & Wireless shares sharply lower in the last hour of trading.

The stock ended the session down 18 at 703p with turnover expanding rapidly to a hefty 5.5m. The profit downgrades were initiated, specialists said, by Cazenove, Cable's own broker, which reduced its profits forecast for the year to end-March 1994 to around Pounds 900m. Other brokers were said to have followed in cutting their numbers. Previous estimates were around Pounds 970m-80m.

Analysts said Mercury, C & W's 80 per cent-owned telecoms business, has been hit by the recession while Hong Kong Telecom, where C & W has a 58 per cent stake, could be facing reductions in call charges. C & W's preliminary figures for the year are expected in May.

Strong demand for British Airways (BA) saw turnover rise to 15m, and the shares close 8 up at 273p, as the market took on board Thursday's announcement of a strategic alliance with USAir.

That news came shortly after Thursday's market close so yesterday was the UK stock market's first reaction to the US deal which came at the end of a week of bad publicity for BA over its dispute with Virgin Atlantic. US houses were particularly keen buyers with Salomon International on the bid for most of the morning, and Lehman Brothers a strong buyer during the afternoon.

Messages from a US trade union to UK institutional shareholders of Tate & Lyle highlighting an industrial dispute unsettled the shares which retreated 4 to 395p. While specialists downplayed the financial significance of the dispute, which involves negotiations over labour contracts at a large US refinery, it struck a nerve with investors ahead of the group's agm next week.

A modest rally in crude oil prices helped the exploration and production sub-sector register further good gains. Enterprise Oil rose 8 more to 419p on relatively keen turnover of 1.5m shares after some strong demand said to have been generated by Lehman Brothers, the US broker.

Mr Peter Hitchens, oil analyst at Lehman said the company 'still has the potential for good growth and remains the quality play in the exploration stocks.'

Banks maintained their strong showing, renewed buying driven by recovery hopes and takeover speculation. Standard Chartered capped a week of big gains by a further 17 gain to 653p, having touched a 1992/3 high of 655p, after profits upgrades and renewed takeover speculation. During the week Standard shares have risen 68.

NatWest gained 9 to 435p, on 9.1m traded, but Lloyds, widely regarded as a potential bidder for one of the UK banks, closed unchanged at 499p,with 4.9m traded.

Volatility continued in Glaxo on the two-way view about imminent economic recovery. An announcement by Glaxo's Japanese arm of a co-development deal to sell Zantac, the prescription ulcer treatment, as an over-the-counter drug was interpreted by one analyst as highlighting the company's concern about its concentration on prescription drugs. The shares closed 5 lower at 712p.

Gases group BOC rose 3 to 746p following a buy note from Kleinwort Benson.

Vague bid talk, coupled with a buy note from James Capel, the UK institutional broker, helped Cadbury-Schweppes, up 10 at 482p.

Reuters Holdings failed to benefit from the market's recovery as the stock drifted a further 20 to 1310p ahead of results in February. BZW has voiced caution over the rating and James Capel has reinforced its negative stance.

Shares in Midlands Radio were suspended at 112p pending announcement of a recommended offer by Capital Radio. Capital bid 130p a share, valuing Midland at Pounds 17.7m.

Profit-taking prompted London television franchise holder Carlton to fall 8 to 798p.

Anglia Television was held down at 202p as NatWest Securities moved the stock to a hold from a buy,arguing that the shares were fairly valued at present levels.

Reports that aircraft leasing company GPA was to cancel a large number of aircraft orders hurt several suppliers to the aircraft manufacturers Among those to suffer were TI, 5 lower at 296p, and Smiths Industries which also gave up 5 to 367p. British Aerospace moved 5 ahead to 215p, on talk that the long awaited Al-Yamamah 2 defence order was about to be announced.

Regional broker Wise Speke placed 25 per cent of shoe sellers Stylo at around 96p. The shares fell 4 to 108p.

NEW HIGHS AND LOWS

FOR 1992/93

NEW HIGHS (140).

AMERICANS (15) American T & T, Ameritech, BankAmerica, Bellsouth, Bethlehem, Chrysler, Citicorp, Dana, Echlin, FPL, Ford Motor, Ingersoll-Rand, Merrill Lynch, Rockwell, Sears Roebuck, BANKS (6) Allied Irish, Bk. Scotland, Barclays, NatWest, Standard Chartd., TSB, BREWERS (1) Burtonwood, BLDG MATLS (1) Anglian, BUSINESS SERVS (2) BPP, Rentokil, CHEMS (2) Hoechst, Porvair, CONGLOMERATES (1) Bodycote, ELECTRICALS (2) Menvier-Swain, Motorola, ELECTRICITY (2) Natl. Power, PowerGen, ELECTRONICS (9) Admiral, Control Techs., Cray, Electron Hse., Eurotherm, Gresham, Macro 4, Siemens, Telemetrix, ENG AERO (1) Br. Aerospace 7 3/4 pc Pf., ENG GEN (2) Powerscreen, Weir, FOOD RETAILING (3) ASDA, Farepak, Park, HEALTH & HSEHOLD (5) Amersham, Assoc. Nursing, Br. Bio-Tech., Seton, Takare, HOTELS & LEIS (2) Brent Walker, Kunick 8 1/4 pc Pf., INSCE BROKERS (1) Lowndes Lambert, INSCE COMPOSITE (1) Allianz, INSCE LIFE (3) Transatlantic, Do 6pc Pf., Utd. Friendly, TRUSTS (45) MEDIA (5) Central ITV, Elsevier, GWR, Harrington Kilbride, Scot. TV, MERCHANT BANKS (5) Hambros 7 1/2 pc Pf., Joseph (L), Rea Bros., Schroders N/V, Singer & Friedlander, MTL & MTL FORMING (1) Billiam (J), MISC (3) Office & Elect., Photo-Me, Sthn. Business, OIL & GAS (2) Ohio, Pittencrieff, OTHER FINCL (4) FNFC 6.3pc Cv. Pf., Investment Co., Lon. Scottish, Secure Tst., OTHER INDLS (4) Charter Cons., Morgan Crucible 7 1/2 pc Pf., Optometrics, Vinten, PACKG, PAPER & PRINTG (3) Bemrose, Carnaud Metalbox, Microfilm Reprographics, STORES (3) Betterware, QS, Tie Rack, TELE NETWORKS (2) Cable & Wireless, Do 7pc Cv. '08, TEXTS (1) Yorklyde, TRANSPORT (3) Dawsongroup, Natl. Express, Tibbett & Britten.

NEW LOWS (11).

CANADIANS (1) Nth. American Tire, BUSINESS SERVS (1) Prime People, ELECTRONICS (1) EIT, ENG GEN (2) Mining & Allied, Wheway, FOOD MANUF (1) Sheldon Jones, HEALTH & HSEHOLD (1) Specialeyes, INV TRUSTS (1) German Smllr. Cos Wts., MISC (1) Roxspur, PROP (1) Warnford, TRANSPORT (1) LOF's.

REKINDLED hopes for an early cut in UK interest rates continued to flourish in the London stock market yesterday but shares lost heart towards the close as government bonds shaded lower.

At the high point of the day, the FT-SE Index came within six points of regaining the 2,800 mark. By the close, however, the gain had been cut to 7.9 for a final reading of 2,781.2. The final hour of trading saw sharp reversals in some share prices on what some analysts regarded as uncertain investment grounds.

The underlying tone of the stock market remained relatively confident, underpinned by good turnover volume. A return of investor attention towards the second line issues was reflected in a gain of 9.8 on the FT-SE Mid 250 Index for a close of 2,909.0.

Retail, or customer, interest in equities has remained high this week; Thursday's retail business touched recent daily average highs at a total of Pounds 1.49bn. The week has seen share prices moving nervously against a troubled background of Middle East hostilities and domestic economic uncertainties.

The stock market turned higher at the end of the week as the announcement that UK unemployment had risen to nearly 3m, together with doubts on Christmas retail sales and falling industrial output, alarmed the City and inspired hopes that base rates may be cut in the near future, rather than in the March budget.

Share price gains on Thursday and yesterday have left the FT-SE Index 16.1 points up on the week. Equity strategists were in two minds yesterday. A cut in base rates would be good for equities and also strengthen hopes for an economic revival.

But an early reduction would smack of economic desperation, as well as storing up trouble in terms of inflation, as well as for the impending funding in government bonds.

UK gilts were down by about one quarter of a point throughout yesterday's session, with trading fairly subdued as traders weighed the outlook for sterling as it extended the loss of the previous session.

Sharelink, the execution-only broker which claims the lion's share of UK private investor business, said yesterday that its clients had remained buyers of UK equities this week, as they have been since December.

Store and retail issues remained subdued yesterday as sector strategists assessed the implications of this week's news on Christmas sales. Banks conventionally immediate beneficiaries from interest rate cuts, moved ahead.

FURTHER hopes of a cut in UK interest rates continued in the derivates, again helping to drive Footsie futures forward, writes Joel Kibazo.

The March contract on the FT-SE opened at 2,785, and, but for a brief early retreat, moved steadily forward on speculation of a cut in base rates.

It was also boosted by the firm trading in gilts and short sterling.

The contract reached the day's high of 2,813 around 1pm. In the afternoon, March came off the top due to the poor trading in the bonds market but remained above the 2,800 level and closed at 2,803, with turnover reaching 8,735 lots.

In traded options, Asda was the most actively dealt stock option as talk of a bid circulated. It traded 9,390 contracts with the July 70 puts the busiest series.

British Airways was a poor second at 1,993 lots and TSB followed at 1,957 contracts. The closing total for the traded options was 37,685 lots, with the FT-SE 100 option recording 10,290 contracts.

STERLING continued to perform weakly against the D-Mark yesterday, falling as low as DM2.4370, following the release of poor economic data in the UK this week, writes James Blitz.

The pound came under strong pressure in the morning as dealers speculated on the possibility of the Bank of England cutting base rates in the wake of Thursday's very poor unemployment figure for December.

The currency recovered up to DM2.45 in the early afternoon, but later fell back to close in London at DM2.44, 1 1/4 pfennigs down on the day. It closed more than 1 1/2 cents higher against the dollar, at Dollars 1.5345.

There were disturbing indications yesterday that the pound could go down to DM2.40, which many dealers see as the next important support level.

One of the leading banking counterparties in the London market said that it had seen almost no interest in buying the pound from UK corporates on Thursday, and that there was barely any improvement yesterday.

Mr Neil MacKinnon, chief economist at Citibank in London, is among those who believe that the mood of the market towards sterling has changed significantly.

He says that sterling could see DM2.37 within a month, but that it will rise up to the DM2.45 level afterwards. In his view, the January money supply figures, due out on February 3, will be crucial to the decision on whether to cut rates. A meeting of the 'seven wise men' who advise the UK Treasury, on February 9th, will also be important. 'They will come out in favour of a cut in base rates,' he said.

However, Mr Steven Hannah, head of research at IBJ International in London, said that the money markets were now virtually discounting a full percentage point off base rates before the March budget, and that the UK authorities could ease policy without depressing the pound any further. 'The only thing that might put pressure on the currency is if the rate cut comes too soon,' he said.

The dollar also suffered a new bout of weakness against the D-Mark yesterday, dropping below the DM1.60 level against the D-Mark for the first time this year. It closed at DM1.59 in London, down 2 1/2 pfennigs on the day.

The dollar's fall came on the back of a mixed set of economic data. A strong 5.5 per cent rise in December housing starts raised hopes for good GDP growth in the fourth quarter. However, jobless claims rose 17,000 in the week to January 9, fuelling concerns that employment and incomes were growing too slowly.

THE BANK OF ENGLAND signalled no change in UK base rates yesterday, although some money market dealers believe there is now a good chance of policy being eased in the UK in the immediate future, writes James Blitz.

The last two days have seen a remarkable change of sentiment in the sterling cash and futures market. Last Friday week, the feeling in the market was that a base rate cut would not come before the budget on March 16, and 3-month money closed at around 7 1/16 per cent.

Thursday's extremely poor figures for unemployment and manufacturing output have raised expectations in some quarters of an immediate rate cut. Three-month money yesterday closed at 6 13/16 per cent, a 1/4 percentage point down on the week.

The March short sterling contract was yesterday trading some 35 basis points up on the week at 93.73, before falling back to close at 93.62.

At that closing level, it assumes that 3-month money in March will be at 6.38 per cent.

Yesterday's Treasury Bill tender was also seen by one dealer as a sign of how bullish the market has become about rate cuts. The Bank of England offered Pounds 100m of 6 month bills at an average discounted rate of 5.9663 per cent.

The Bank of England's operations will be scrutinised in minute detail next week for any sign they give on interest rate policy.

Yesterday's shortage of Pounds 750m was seen as a conveniently neutral figure behind which the Bank could conceal its innermost thoughts, and there was no need for it to offer an early round.

Most of the early bids for cash were almost certainly at levels below base rate, and only Pounds 10m of bills were bought by the Bank at 12 o'clock. Again, conditions were a little difficult and there was late assistance of Pounds 190m.

One money market dealer yesterday circled February 4th in his diary as a date when the next policy easing could come. That is the day on which the Bundesbank council is meeting, and a cut in rates then might be followed by an easing in the UK.

However, he was bracing himself for a few days of intense speculation next week. 'The trouble with this government,' he said, 'is that - in this sort of situation - they have a tendency to panic.'

SOUTHAM, the Canadian newspaper group in which Mr Conrad Black's Hollinger recently became the largest shareholder, plans to forge closer links with Mr Black's other international publishing investments, The Daily Telegraph in the UK and Australia's Fairfax Holdings.

Mr William Ardell, Southam's chief executive, said yesterday an alluring aspect of Mr Black's business strategy was that 'he sees papers in a global context'. No discussions have taken place on areas of co-operation, but Mr Ardell foresaw opportunities to create products, including improvements to existing papers.

Southam is expected to tap The Telegraph's UK industrial relations experience to deal with labour problems at its loss-making Vancouver offshoot which runs the city's two leading newspapers.

The 200-plus small US newspapers owned by Hollinger relied heavily on The Daily Telegraph for coverage of the Gulf war in 1991.

The North American edition of the Jerusalem Post, which is also controlled by Mr Black, is printed by a Hollinger subsidiary in New Jersey.

Hollinger recently completed a deal to buy 22.6 per cent of Southam, which publishes 18 daily papers and has interests in business information services and trade publications.

In an understanding modelled on last year's Hollinger-Telegraph agreement, Mr Black has agreed to safeguards to prevent a creeping takeover or a proxy fight for control of Southam.

Hollinger will name three representatives to the Southam board, but a majority of board members will be independent of both Southam management and Hollinger.

Any deal worth more than CDollars 100m (USDollars 78.1m) or 10 per cent of Southam's market capitalisation must have the assent of holders of a majority of Southam shares, excluding Hollinger.

John Fairfax Holdings, the Australian newspaper group 15 per cent-owned by Mr Conrad Black's Daily Telegraph group, predicts pre-tax profits of ADollars 105m (USDollars 72.4m) in the year to June, compared to earlier forecasts of ADollars 94m, writes Kevin Brown in Sydney. But revenue was expected to be 3 per cent below an earlier forecast of ADollars 782m.

MOBIL, one of the biggest US oil and natural gas groups, yesterday posted a 29 per cent gain in fourth-quarter net earnings to Dollars 514m compared with Dollars 400m a year earlier.

Earnings per share rose to Dollars 1.25 from 97 cents.

Stripping out special items, Mobil said fourth-quarter earnings rose 50 per cent to Dollars 583m.

Revenues in the last three months stood at Dollars 17.24bn compared with Dollars 17.17bn in the same period of 1991.

For all 1992, net earnings fell 55 per cent to Dollars 863m or Dollars 2.01, from 1991's Dollars 1.92bn, or Dollars 4.65. Revenues rose to Dollars 63.82bn from Dollars 63.22bn.

Mobil took a non-cash charge in 1992 for the adoption of new accounting standards. Excluding special items, Mobil said its earnings fell 21 per cent to Dollars 1.49bn in the year.

Pressures of weak economies and soft industry demand hurt operating earnings from downstream and chemical operations in 1992. Underlying marketing and refining earnings fell to Dollars 354m for the year from Dollars 1.02bn. Those of the chemical business fell to Dollars 76m from Dollars 217m.

Stripping out special items, earnings from exploration and producing rose 20 per cent to Dollars 1.48bn in the year.

Restructuring charges of Dollars 49m in the quarter brought 1992's worldwide restructuring charges to Dollars 203m.

FRANCE provided an important lift for the Ecu bond market yesterday with the announcement that it plans to auction between Ecu500m and Ecu700m of a new 10-year stock on Monday.

The Ecu bond auction will mark the first substantial issue of Ecu bonds since Denmark's rejection of the Maastricht treaty on June 2, which threw the Ecu bond market into confusion and cast doubts over European economic and monetary union.

France, which has been a keen supporter of European economic and monetary union, has traditionally been one of the most significant issuers of Ecu bonds. France last issued Ecu bonds in April 1992, apart from some limited issuance intended for repo purposes.

Mr John Hall, international economist at Swiss Bank Corporation, described the decision as 'very significant and very important for the Ecu bond market as it shows that issuance has come back'.

He pointed out that 10-year Ecu bond yields have fallen from their peak of about 220 basis points over 10-year German government bond yields, to around 107 basis points.

Ten-year Ecu bonds yield 72 basis points more than French government bonds so it is more expensive for the French treasury to fund its borrowing requirement in Ecu than in French francs.

Distress sale notices are being pasted in the front window of corporate Japan. Nippon Steel is close to acquiring a majority stake in NMB Semiconductor, a struggling electronics company, while large stakes bought in six Japanese retailers by Shuwa, a developer and speculator, are on the auction block.

These large deals follow a sudden increase in merger and acquisition activity among smaller distressed companies, most taken over in purely domestic deals arranged by their main bank. The trend offers opportunities to European and US companies, whose acquisitions in Japan more than doubled last year, and are on the rise.

At the same time, Japanese companies' acquisitions abroad fell 60.7 per cent by value last year, according to Daiwa Securities, and a market is emerging for the resale of foreign companies acquired during the heady days of the late 1980s. Recof International, a Japanese M&A boutique, estimates that 70 per cent to 80 per cent of foreign M&A deals by Japanese companies were a failure.

The present patterns of M&A activity contrast strikingly with the rapid international expansion by Japanese companies during the late 1980s, when Tokyo stock prices were rising and capital raised at almost zero cost. Executives, believing that the good times would last, miscalculated badly on the long-term cost of investments both at home and abroad.

Ailing companies, hit by falling profits and higher capital costs, particularly smaller manufacturers and service businesses, are in need of assistance. Meanwhile, Japanese banks, worried about non-performing loans, are keen to find buyers for corporate clients which appear on the verge of collapse.

'Most of the deals you will not hear about,' explained Mr Yukio Rimbara, general manager of the strategic business advisory division of Dai-Ichi Kangyo Bank. 'We don't announce the deals, but every day, we are getting calls and transactions are rising rapidly. We have clients with financial problems, and M&A could be a solution for them.'

Distressed Japanese companies tend to turn to traditional contacts before thinking of a foreign purchaser. Japanese managers are aware that staff are uneasy about a loss of job security under foreign owners, while there are fears that foreigners would face more general difficulties in adapting to the local corporate culture.

As a result, the largest increase in foreign acquisitions, so-called out-in deals, is in strategic purchases by established US and European companies. Purchasers last year included Ciba-Geigy, Atochem, and Philips, with eight of 43 deals in pharmaceuticals, seven in industrial machinery and chemicals, and six in computers, according to a survey by the corporate finance arm of KPMG Peat Marwick.

About 60 per cent of deals last year were acquisitions of distributors or joint venture partners, and Mr Thomas Lynch, a partner at Peat Marwick, said most involved companies with sales of less than Y5bn (Dollars 39.8m) and fewer than 100 employees: 'We haven't seen any really big acquisitions yet by foreign companies in Japan, but you might see them in the future.'

NMB Semiconductor could have set that precedent. Before Nippon Steel's move, reports had circulated in the Japanese electronics industry that Intel of the US would acquire the company. Intel Japan says now that it will not bid against Nippon Steel, which has apparently agreed to pay Y30bn for 60 per cent of the chip maker.

The NMB case is a typical by-product of the hard economic times. Listed on the over-the-counter market in Tokyo, it is still a subsidiary of Minebea, the world's leading maker of miniature bearings, which entered the semiconductor market in 1984 as part of an erratic diversification programme that included a door-to-door cosmetics company and a Canadian pig farm.

Minebea reported a consolidated loss of Y13.6bn in the year ended September and does not have the resources to keep pumping funds into NMB, which lost Y12.4bn last year, expects a Y4bn loss this year, and needs capital investment of about Y100bn over the next five years to stay in the chip race.

Mr Mike Jeremy, electronics specialist at Baring Securities, said NMB was the 'purest play in Japan' for a company with the funds to take advantage of its chip-making facilities. In theory, bidders could include South Korean semiconductor makers such as Samsung, but that deal could prompt outrage in Japan, where Korean companies do not have the prestige of US manufacturers such as Intel.

The other large acquisition move this week involved bids for a 29 per cent stake in Isetan, the department store chain, owned by Shuwa, the troubled developer. Having bought stakes in six retail groups during the late 1980s, Shuwa is conducting a fire-sale to relieve a crippling debt burden estimated at Y1,000bn.

'When people talked about the M&A boom in the late 1980s, this is not really what they had in mind,' an official at a Japanese brokerage said. Instead of expansion abroad, the spate of acquisitions on the negotiating table is an important part of the restructuring of Japanese industry.

The challenge for US or European executives wanting to take advantage of this restructuring is to find a company that fits, but not fatally wounded through speculation in stocks or property during the late 1980s. Ailing Japanese companies offered to US or European companies tend to be those turned down by its natural domestic partners, who may have scented danger.

Mr Masaharu Yonezawa, a director of Recof International, said the ripest opportunities are in the chemicals, pharmaceuticals, food and computer software industries, but foreign executives must be willing to make a quick decision to take advantage of the environment.

'These out-in cases normally take more than a year, but for domestic transactions three months is a normal time frame. Foreign companies have to speed up the decision process,' he said.

Mexican pimento was quoted at Dollars 1,850 a tonne, spot, Dollars 1,725, afloat, and between Dollars 1,715and Dollars 1,775 at origin, reports Man Producten. Jamaican pimento was available at Dollars 2,350 a tonne, spot Rotterdam, Dollars 2,175 cif, for shipment. Cassia was firm for both spot Europe and Indonesian supplies. Va/ka sticks were offered at Dollars 2,250 a tonne, spot, Dollars 2,150, afloat, and Dollars 2,000 cif, shipment. Kb broken/cleaned spot was unavailable but afloat was quited at Dollars 1,450 a tonne and shipment at Dollars 1,350 cif. Seychelles cinnamom was offered at Dollars 1,175 a tonne cif.

SOUTHAM, the Canadian newspaper group in which Mr Conrad Black's Hollinger recently became the largest shareholder, plans to forge closer links with Mr Black's other international publishing investments, The Daily Telegraph in the UK and Australia's Fairfax Holdings.

Mr William Ardell, Southam's chief executive, said yesterday that one alluring aspect of Mr Black's business strategy was that 'he sees papers in a global context'. No discussions have taken place on areas of co-operation between the three groups, but Mr Ardell said that he foresaw opportunities to create products, including improvements to existing papers.

Southam is expected to tap The Telegraph's industrial relations experience in the UK to deal with long-standing labour problems at its loss-making Vancouver subsidiary which runs the city's two leading newspapers.

Such co-operation would mirror the pattern set in Mr Black's other international interests.

The 200-plus small US newspapers owned by Hollinger relied heavily on The Daily Telegraph for coverage of the Gulf war in 1991.

The North American edition of the Jerusalem Post, which is also controlled by Mr Black, is printed by a Hollinger subsidiary in New Jersey.

Hollinger recently completed a deal to buy 22.6 per cent of Southam, which publishes 18 daily papers and has interests in business information services and trade publications.

In an understanding partially modelled on last year's Hollinger-Telegraph agreement, Mr Black has agreed to several safeguards to prevent a creeping takeover or a proxy fight for control of Southam.

Hollinger will name three representatives to the Southam board, but a majority of board members will be independent of both Southam management and Hollinger.

The outside directors must approve any substantial transaction between the two companies.

Any deal worth more than CDollars 100m (USDollars 78.1m) or 10 per cent of Southam's market capitalisation must have the assent of holders of a majority of Southam shares, excluding Hollinger.

TEXAS INSTRUMENTS, the US semiconductor and electronics manufacturer, reported increased revenues and income for the fourth quarter, lifted by record semiconductor sales and orders for defence equipment to replenish systems used in Operation Desert Storm.

Revenues for the fourth quarter were Dollars 1.99bn, compared with Dollars 1.75bn in the same period last year. Higher revenues in semiconductors and defence electronics more than offset a drop in digital products resulting from the sale of TI's multi-user minicomputer systems and service operations to Hewlett-Packard.

Net income for the quarter was Dollars 78m, or 80 cents a share, compared with a loss of Dollars 85m or Dollars 1.18 in the fourth quarter of 1991, after net charges of Dollars 55m. For the year, revenues grew about 10 per cent to Dollars 7.44bn from Dollars 6.78bn in 1991. Increased semiconductor revenues, across all product lines, were the largest contributor to this rise.

Net income was Dollars 247m, or Dollars 2.50, compared with a net loss of Dollars 409m or Dollars 5.40 in 1991 after net charges of Dollars 240m. Semiconductor revenues rose 16 per cent to Dollars 4.03bn. TI, which is one of the world's leading manufacturers of memory chips, has been moving to diversify its semiconductor operations to include more profitable products.

'The strategy to increase our mix of differentiated products gained momentum in 1992, with these products now making up more than 40 per cent of TI's semiconductor revenues,' said Mr Jerry Junkins, chairman, president and chief executive.

'We believe we will generate more than half of our semiconductor revenues from this class of products well ahead of our original end-of-the-decade timetable.' In the defence sector revenues were Dollars 2bn, an increase of almost 3 per cent.

TI has been taking aggressive steps to adapt to a smaller defence market, Mr Junkins said. However, the sector grew in 1992 when the company received more than Dollars 500m in orders for equipment to replace systems used in the Iraq war. In the company's information technology sector, software revenues grew rapidly last year.

TI said that it would increase capital expenditures to Dollars 625m from Dollars 429m in 1992 as it was anticipating strong growth in the world semiconductor market this year. Research and development spending would be increased.

TODAY: Mr John Major, prime minister, leaves on a visit to India (until Jan 28).

MONDAY: Industrial research and development (1991). Provisional estimates of monetary aggegates (December). Major British banking groups' monthly statement (December). CBI industrial trends survey (January). Building societies monthly figures (December). Mr Michael Heseltine, president of the Board of Trade, launches Business in Europe campaign. Mr Helmut Kohl, German Chancellor, begins two-day visit to the Netherlands.

TUESDAY: US consumer confidence index (January). US Congressional Budget Office releases its budget deficit projections for fiscal years 1993 and beyond. Slovak presidential elections. Russian parliamentary hearings provisionally set to begin on Start-2 treaty.

WEDNESDAY: New construction orders (November - provisional). Bricks and cement production and deliveries (fourth quarter). Start of two-day informal meeting of the social affairs council of the European Community in Copenhagen. Annual consultative conference of the 10-nation Southern African Development Community (SADC) in Harare (until Jan 29). Mr Boris Yeltsin, Russian president, visits India.

THURSDAY: Energy trends (November). Quarterly house purchase finance statistics (fourth quarter). Balance of payments current account and overseas trade figures (December). New vehicle registrations (December). US GDP (final-third quarter). Start of six-day World Economic Forum in Davos, Switzerland, attended by politicians and business leaders (to February 3). ECGD annual report. Mr Major visits Oman on way home from India.

FRIDAY: Engineering sales and orders at current and constant prices (November). US personal income (December); durable goods (December).

This is the text of BA's code of business conduct:

THE success of BA is dependent on the quality of the decisions and the behaviour of individuals at all levels throughout the organisation. The code has been developed to provide guidance and assistance to both managers and staff in their dealings with all those with whom we do business, with our customers and suppliers, and with each other.

Adherence to the principles will help ensure that our reputation and success that has been built up over the years through the dedicated hard work of you and your colleagues will continue to grow. Judgment and discretion will need to be exercised in applying the principles where, at first sight, they appear to be at variance with local custom and practice or commercial common sense. It is not the intent of the code to anticipate and provide a framework of governing values and advice on how to proceed when making difficult decisions, namely to establish the norms of business behaviour throughout BA.

General standards:

Compliance: Comply with all the laws that regulate and apply to the company, its systems and the conduct of its business.

Fairness: Treat all groups and individuals with whom we have a business relationship in a fair, open and respectful manner.

Integrity: Show respect for the individual, treating each in a consistent way and honouring commitments made.

Openness: Share and declare information on personal and corporate conflicts of interest (political, financial, relationship) including the offer or acceptance of gifts or hospitality of significant value. Seek guidance and where appropriate confirmation from a higher authority before acting.

Honesty: This goes beyond simply telling the truth to ensuring that any misrepresentation is quickly corrected. Do not allow people to be misled. Where there are valid reasons for withholding information, be clear about the motives and if possible explain why are doing so.

Fair competition: Ensure comparisons drawn with competitors and working partners are based on fact and avoid innuendo. Competition should be based on the quality value and integrity of British Airways' service and products.

Determination: Demonstrate a sense of purpose and commitment to achieving the optimum outcome even in adversity.

Responsiveness: Recognise changes in the business environment and use a creative flexible style to respond to them.

Enablement: Provide sufficient guidance to enable individuals to act upon their own initiative to solve problems and grow in their role.

Conformity: Promote corporate values and competitive edge through the established performance systems of performance and appraisal.

Through employing these practices and behaviours, staff should:

Use British Airways' stated goals and objectives as guidance, using your values and judgment to interpret against the principles of this code. Treat others as you would like to be treated.

Be prepared to solicit views as to whether something would be appropriate before action, rather than after.

Discuss difficult decisions with those whose values and judgment you respect. Use company process to earn respect.

Ask whether you would feel comfortable explaining your decision or behaviour to your boss, your family or the media.

Be prepared to challenge if you believe others are acting in an unethical way. Create the climate and opportunities for people to voice genuinely held concerns about behaviour or decisions that they perceive to be unprofessional or inappropriate.

Do not tolerate any form of retribution against those who do speak up. Protect individuals' careers and anonymity if necessary. Encourage an environment of learning from mistakes and mutual trust in each others' motives and judgments.

Treat the assets and property of British Airways and its customers and its suppliers with the same respect as you would your own. Apart from tangible assets this would include company information as well as the name, image and reputation of British Airways.

SIR Colin Marshall, British Airways' chief executive and deputy chairman, will meet Mr Richard Branson, head of Virgin Atlantic, next week in a final attempt to end the conflict triggered by BA's 'dirty tricks' campaign.

The meeting is expected to take place as early as Monday, amid growing indications that both sides are anxious to improve relations which have continued strained, in spite of BA's two public apologies and a Pounds 610,000 libel settlement.

Virgin indicated last night that it wanted the issue resolved by the middle of next week, although it still threatens further legal action against BA in the US courts.

BA is also keen to settle the damaging affair without further delay, but it is uncertain about the scale of Virgin's likely demands.

Mr Branson is expected to insist on cash compensation for lost revenue arising out of its rival's campaign, as well as a legally binding agreement preventing any future abuse of Virgin's computer reservation information.

Virgin also wants access again to BA's maintenance facilities for its aircraft. This access was withdrawn five years ago.

Sir Colin emphasised this week he was anxious to establish better relations with Virgin, while Mr Branson has indicated he wants to avoid taking further legal action.

Although BA's executive management is continuing its investigation into its marketing, public affairs and legal departments in the aftermath of the 'dirty tricks' campaign, no sackings or resignations have so far emerged.

Shareholders are concerned that if BA fails to react forcefully and publicly, it could be vulnerable to adverse commercial circumstances.

WHEN British Airways staff at Heathrow airport switched on their computers yesterday, they were greeted with the next twist in the British Airways affair - Lord King's latest statement had been placed on the system and staff were 'advised' to read it, Gillian Tett writes.

In spite of the official apology, desk staff in Heathrow remained defiant, insisting that BA was not alone in its aggressive marketing campaigns.

'It's not just us that have done this sort of thing. Other airlines do it too,' said Ms Karen Granahan, a BA customer service duty manager, citing two other carriers which she claimed had previously tried to poach BA customers at the airport - a claim echoed by other airline staff throughout the terminal.

NEGOTIATORS FROM coffee producing countries gathering in London for a two-week meeting beginning next Monday with their consumer counterparts were given a timely reminder over the past few days of the price of failure in their efforts to secure a price supporting International Coffee Agreement.

As New York investment funds resumed the heavy selling that had pulled prices back sharply from recent 12-month highs London robusta futures fell more more than Dollars 100 a tonne and New York arabica's by more than five cents a lb. London's March position, which three weeks ago stood at Dollars 1,023 a tonne, touched a three-month low of Dollars 867 a tonne yesterday before rallying to Dollars 902 a tonne, down Dollars 73 on the week.

Coffee traders appeared to take little notice of the producers' professions of confidence ahead of the ICA talks, in which they hope for significant progress towards the agreement of supply management measures to be included in a new pact when the present one expires at the end of September. 'There is a lot of determination on our part to get this agreement at least made viable by the end of March,' said Mr Marques Porto, head of the Brazilian delegation, as he outlined the biggest producer's position in informal talks with other leading producers on Thursday. 'We are prepared to bridge the gap with consumers on some very key issues,' said another member of the Brazilian delegation, Mr Valdemar Carneiro Leao.

Among these issues is the consumers' call for 'automaticity' - the rolling over of individual countries' export quotas (which would be subject to periodic adjustment in response to price movements) at the same level from the end of one coffee year to the beginning of the next. Brazil is now prepared to accept this system, but would want it to come into operation only at the end of the second year of a new pact, with that year's quotas being determined at an International Coffee Organisation council meeting at the conclusion of the first year. 'It is much too risky to say that the system will work perfectly from the start, which is why we want a council at the end of the first year,' Mr Porto explained.

Brazil says it is also prepared to consider consumer demands for stock verification by the ICO in exporting countries, but in return it wants consumer commitments on imports from non-member producing countries and re-exports from non-member consuming members.

The other crucial issue is 'selectivity' - allowing consumers the determine the amounts allotted to different types of coffee within the overall quotas. Brazil and Colombia, the second biggest producer, are reported to have reached a common stance on this, but no details have been revealed.

Although coffee traders will clearly be watching the negotiations closely over the coming fortnight they see little prospect of them giving prices a significant boost. 'It will be interesting to see if they can maintain minor progress but it won't really affect the market,' one London dealer told the Reuter news agency. 'Agreements take a long time to implement.'

The most significant price movement at the London Metal Exchange this week was three months lead's dip to an 11-month low of Pounds 286 a tonne on Thursday, in spite of sterling's weakness against the US dollar. The price steadied to Pounds 288.75 at yesterday's close, but that was still Pounds 5 down on the week. The downtrend was fuelled by the publication on Thursday of a report by the International Lead and Zinc Study Group showing that exports of the metal from the former eastern bloc had nearly tripled last year from 49,000 tonnes in 1991 to 120,000 tonnes. That pushed the western world into a supply surplus of 85,000 tonnes, compared with a deficit of 6,000 tonnes in 1991.

'This news is far worse than even pessimistic observers had forecast,' commented Mr Nick Moore, analyst at Ord Minnett, part of the Westpac banking group. He said he had cut his forecast of the 1993 average lead price as a result by 11 per cent from the 24 US cents a lb he predicted at the end of last year.

The study group painted a similarly gloomy picture of the zinc supply/demand balance. It said former eastern bloc exports had more than doubled in 1992, causing the western world surplus to rise from 86,000 to 238,000 tonnes. Mr Moore cut his forecast for this year's average zinc price by 10 per cent to 54 cents as a result.

Aluminium prices remained weak as LME stocks continued to build up and copper was down in dollar terms, although the pound's fall meant that it showed a small sterling rise.

The strongest LME market was tin, which was pushed steadily higher by technically-inspired buying until it ran into overhead resistance on Thursday. The three months price fell back Dollars 72.50 yesterday to Dollars 5,992.50 a tonne, up Dollars 87.50 on the week.

Concern about the Middle Eastern situation helped the gold price to rise early in the week, but with fears of further central bank sales continuing to weigh on market sentiment it failed to break through resistance above Dollars 330 a troy ounce. Yesterday the price fell back 80 cents to end Dollars 1.40 up on the week at Dollars 329,25 an ounce.

Platinum staged a substantial technical rally before running into profit-taking yesterday. The price was fixed in the afternoon at Dollars 360.50 an ounce, down Dollars 4.40 on the day but Dollars 4.10 up on the week.

-------------------------------------- LME WAREHOUSE STOCKS (As at Thursday's close) tonnes -------------------------------------- Aluminium +6,250 to 1,617,275 Copper +3,650 to 314,850 Lead +1,475 to 231,525 Nickel +1,554 to 77,196 Zinc +11,375 to 511,725 Tin -45 to 15,675 --------------------------------------

CONTROL Securities, the brewing, hotels and property company which has been involved in prolonged refinancing talks, yesterday announced the sale of its 26 per cent stake in Stylo, the Bradford-based shoe retailer, for Pounds 4.5m.

The company refused to identify the purchaser. However, traders said the shares had been purchased by institutions at 90p each.

Control acquired 24.6 per cent of Stylo in 1988 for Pounds 16.2m, valuing the shares at 325p. The purchase ended the shoe company's three-year battle to fend off a hostile bid from property group British Land.

Yesterday's sale marks the beginning of Control's 'orderly disposal programme' as cited by chairman Mr Sydney Robin in a letter to shareholders earlier this month. The programme forms part of the business plan required for a successful conclusion to refinancing talks begun in June. The group's shares have been suspended at 16 1/2 p for 15 months.

The company said yesterday it would use the proceeds to pay off some of its Pounds 259m debt.

Since 1988, the investment had been written down to a value of Pounds 4.7m. Gross dividends received from the stake amounted to Pounds 591,198. Dividend payments of Pounds 166,166 received in October 1992 would be included in the year to March 31, the company said.

Control Securities recently reported a pre-tax loss of Pounds 196.2m, against a deficit of Pounds 3.3m last time.

See Market Report

FIRST MARYLAND Bancorp, the US subsidiary of Allied Irish Bank, yesterday announced a 23 per cent rise in pre-tax profits from Dollars 75.1m to Dollars 92.5m (Pounds 60.8m) after a 0.8 per cent rise in fourth quarter earnings to Dollars 24.1m (Dollars 23.9m), writes John Gapper.

The bank said its earnings performance reflected improved net interest margins, higher levels of non-interest income and lower provisions for possible credit losses.

The bank's return on average assets for the fourth quarter fell slightly to 1.04 per cent (1.23 per cent) and its return on average equity fell to 13.95 per cent (16.11 per cent).

Shareholders' funds rose to Dollars 699.4m (Dollars 606.8m). The overall capital ratio is 14 per cent, with Tier 1 capital of 10 per cent.

Following its bid The Ecclesiastical Insurance Office has 52.12 per cent of St Andrew Trust, the smaller companies investment trust. The offer was a technical one, designed to give EIO more than 50 per cent, but less than 75 per cent, of St Andrew's equity

As a result of passing the 50 per ecnt mark those who accept the offer will now receive the higher of 237.65p or 93 per cent of St Andrew's formula asset value.

The offer will remain open until February 5th.

Wescol Group, the USM-quoted structural engineer, fell deeper into the red in the year to July 31 as pre-tax losses rose 60 per cent to Pounds 2.49m (Pounds 1.55m).

Turnover dipped from Pounds 24.7m to Pounds 16.3m reflecting difficult conditions and the group's closure of TMV Aluminium Systemsy.

Losses included an exceptional debit of Pounds 506,000. Per share the deficit was shown as 21.6p against 11.3p, and there is no dividend.

Mr Peter Price was appointed chairman yesterday, taking over from caretaker chairman Mr Barry Anysz who replaced Mr John Hicks when he resigned last May.

Mr Price said the group had strengthened its trading base, by 'refocusing operations, reducing overheads and securing fresh backing from our bankers'. Facilities included a new six-year Pounds 2m loan.

Barings, the privately-controlled UK merchant banking group yesterday pulled out of trading on the floor of the London International Financial Futures and Options Exchange (Liffe), continuing the retrenchment of its operations.

Although Barings will remain a member of Liffe, enabling it to clear futures transactions in its own name and on behalf of its clients, it has decided to stop executing trades on the floor of the exchange in order to cut costs.

Barings has made 19 traders and desk staff redundant. In future it will place orders through other brokers on the floor of the exchange.

In September, Barings announced the decision to shed 108 employees at its securities trading subsidiary, Baring Securities.

Park Food, which sells Christmas hampers through freelance agents, has reported a lower than expected interim loss, incurring Pounds 3.69m pre-tax for the six months ended September 30 1992.

Mr Peter Johnson, the chairman, was confident, however, that full-year pre-tax profits would show a significant improvement over the Pounds 6.89m of 1991-92, after a half-time deficit of Pounds 4.39m.

Analysts are forecasting between Pounds 8m and Pounds 9.2m, increasing to between Pounds 9m and Pounds 11m in 1993-94.

The annual dividend cover of 2.5 times was felt to be excessive and the interim dividend is doubled to 2p.

Sales of continuing businesses came to Pounds 9.1m (Pounds 8.95m), after disposal of the drinks and frozen foods divisions which made Pounds 6.75m last time.

MR KEN SCOBIE, chief executive of Brent Walker, the heavily indebted property and leisure group, and its banks, appear to have fallen out. Mr Scobie resigned yesterday. He is understood to have agreed a compensation package.

Brent Walker is now expected to appoint a new chief executive to replace Mr Scobie.

Sir Keith Bright has been brought in to chair the group, which last March completed a Pounds 1.6bn refinancing. Lord Kindersley, the previous chairman, left after last year's annual meeting and the group has been looking for a new head since. Mr Scobie has been acting as chairman.

Mr Alan Clements, a non-executive director, has also resigned from the group. He indicated last summer that he wanted to leave.

As well as their loans to Brent Walker, the banks own 54 per cent of the group's shares following the refinancing. One banker said, 'the banks call all the shots'. Another said there was a fairly widespread opinion among the banks that Mr Scobie was not the right man for the job, once the restructuring was in place.

Mr Scobie originally joined the group as a non-executive director in May 1991, but became chief executive soon after. He is thought to have been keen to take on the chairmanship, while the banks wanted that role to be kept separate from the chief executiveship.

Mr George Walker, the former head of Brent Walker, had combined the two until the banks brought in Lord Kindersley.

Under the refinancing agreement, Brent Walker was to have made disposals to cut debt. However, there appears to have been concern among the banks at the rate of progress the group was making.

Brent Walker said yesterday 'the restructuring of Brent Walker has reached a stage where Mr Scobie feels that his particular expertise is no longer required.'

Brent Walker shares, which had been in the doldrums, have risen in recent days and yesterday closed up 3p at 16p.

Sir Keith, 61, is also chairman of Electrocomponents.

CAPITAL, Britain's largest independent radio group, yesterday announced a major expansion into regional broadcasting with a Pounds 17.7m agreed takeover of Midlands Radio, writes Tim Burt.

Midlands, which operates BRMB in Birmingham and six smaller stations, said Capital had made a cash offer of 130p per share which had been accepted by shareholders holding 51.7 per cent.

As an alternative, Midlands' shareholders can take shares in Capital on the basis of one new share for 181p cash.

The takeover will give Capital its first wholly-owned station outside London, although it already has stakes in several other radio companies.

Mr John Parkinson, who will remain Midlands' chairman and is expected to become a non-executive director of Capital, said the company would flourish as part of the new group.

Both companies have seen a sharp increase in their share price since takeover discussions began last November. Capital's interest prompted a jump of almost 15 per cent in Midlands' share price, which peaked at 119p before being suspended yesterday at 112p.

Since announcing its results in November, Capital's shares have rose from 132p, peaking at 183p earlier this month, to close at 178p yesterday.

Midlands announced an Pounds 8,000 fall in pre-tax profits to Pounds 679,000 in the year to September 30 1992, while Capital's pre-tax profits declined 9 per cent, from Pounds 9.48m to Pounds 8.84m, in the same period.

CONTROL Securities, the brewing, hotels and property company which has been involved in prolonged refinancing talks, yesterday announced the sale of its 26 per cent stake in Stylo, the Bradford-based shoe retailer, for Pounds 4.5m.

The company refused to identify the purchaser. However, traders said the shares had been purchased by institutions at 90p each.

Control acquired 24.6 per cent of Stylo in 1988 for Pounds 16.2m, valuing the shares at 325p. The purchase ended the shoe company's three-year battle to fend off a hostile bid from property group British Land.

Yesterday's sale marks the beginning of Control's 'orderly disposal programme' as cited by chairman Mr Sydney Robin in a letter to shareholders earlier this month. The programme forms part of the business plan required for a successful conclusion to refinancing talks begun in June. The group's shares have been suspended at 16 1/2 p for 15 months.

The company said yesterday it would use the proceeds to pay off some of its Pounds 259m debt.

Since 1988, the investment had been written down to a value of Pounds 4.7m. Gross dividends received from the stake amounted to Pounds 591,198. Dividend payments of Pounds 166,166 received in October 1992 would be included in the year to March 31, the company said.

Control Securities recently reported a pre-tax loss of Pounds 196.2m, against a deficit of Pounds 3.3m last time.

See Market Report

Net revenue in the nine months to December 31 at Geared Income Investment Trust improved slightly from Pounds 1.3m to Pounds 1.34m. Earnings per share were 6.11p, against 5.93p and the third interim dividend is an unchanged 2p.

Net asset value over the 12 months to the end of December fell to 76.15p (88.46p).

Martin Shelton, the USM-quoted business calendars, diaries and gifts specialist, reported a pre-tax loss of Pounds 144,000 from turnover of Pounds 1.68m for the six months to end-September.

That compares with a deficit of Pounds 122,000 on sales of Pounds 1.63m for the comparable period and with a profit of Pounds 302,000 from turnover of Pounds 4.85m for the year to end March 1992. Losses per share came out at 1.88p (1.58p) and the interim dividend is held at 0.75p.

Mr Paul Martin, chairman, said that late ordering by customers was shifting the emphasis on sales in the latter part of the calendar year.

Stavert Zigomala, the close company which holds quoted investments and sells furniture, upholstery and carpets, lifted pre-tax profits by 64 per cent in the half year ended September 30.

On turnover ahead to Pounds 452,453 (Pounds 384,347) the pre-tax result amounted to Pounds 38,813, against Pounds 23,623. Mr Edward Cooper, chairman, said that on increased turnover the trading company produced a much smaller loss than last time, but movement in stock remained disappointing. In addition, investment income was lower and he did not expect the shortfall to be made good by the year end.

Earnings per share amounted to 9.841p (5.978p).

Reorganisation of the core divisions and specialised activities at Dawson Holdings, the international journal distributor, is bringing the forecast benefits, and pre-tax profits jumped 61 per cent for the year ended September 30 1992.

Turnover rose 22 per cent to Pounds 109.8m (Pounds 89.9m). The UK accounted for Pounds 42.2m (Pounds 34.5m), and other European countries Pounds 51.3m (Pounds 39m), while the contribution from the US was static at Pounds 16.3m (Pounds 16.4m).

The profit worked through at Pounds 3m (Pounds 1.87m), including Pounds 1.5m (Pounds 1.41m) from an associate. Earnings per share were 55p (29.4p) and the dividend is lifted 2p to 24p, with a final of 18p.

A substantial cut in interest charges enabled Rubicon Group to raise pre-tax profits by 26.5 per cent in the half year ended November 30 1992.

Turnover of the group, which makes storage and handling systems for retailers, moved up 13 per cent to Pounds 10.4m (Pounds 9.2m), but operating profit showed only a 3 per cent increase including exceptional credits of Pounds 99,000 (Pounds 77,000).

However, after interest costs of Pounds 45,000 (Pounds 262,000) the pre-tax profit came to Pounds 1.22m (Pounds 963,000).

Earnings per share were 8.2p on nearly 10m shares after reconstruction (55.4p on 1.43m shares), and there is a return to dividends with an interim of 1.5p.

Net asset value per share of 22.44p at Exmoor Dual Investment Trust at the end of the first quarter to November 30 1992, was a climb back from 6.6p at the end of last August but a long way short of 79.2p reported at the end of November 1991.

Per income share, net assets were 61.1p (62.2p) and per zero coupon preference share 168.35p (149p).

Pre-tax profit came to Pounds 220,779 (Pounds 322,272). The directors have declared an unchanged interim dividend of 2.5p per income share.

Earnings for the period were 1.88p (2.68p) per income share and 0.33p (0.47p) per ordinary share.

Norbain Electronics, USM quoted distributor of closed circuit television and access control equipment for security and surveillance, lifted pre-tax profits from Pounds 33,000 to Pounds 224,000 in the half year ended October 31 1992, aided by acquisitions.

Turnover was Pounds 7.62m (Pounds 5.75m). Earnings per share were 2.16p (0.33p).

Mr John Nicol, chairman, said that sales to Continental Europe were expanding.

After the end of the period the company acquired Baxall and Peca Electronics for Pounds 414,000 cash. Peca was subsequently sold for Pounds 49,000, the price at which it was bought.

Contra-Cyclical Investment Trust saw its net asset value per capital share decline from 38.8p to 35.6p over the 12 months to December 31.

Per income share the figure increased from 1p to 3.7p and for the zero dividend preferred share nav improved to 60.7p, against 54.4p.

Net revenue for the nine months to the end of December fell to Pounds 677,000, compared with Pounds 788,000 for the period from incorporation in February 1991 to December 31 1991.

Earnings per income share came out at 8.46p (9.85p). The third interim dividend is maintained at 2.25p.

Malvern UK Index Trust reported net asset value of 124.33p at December 31 against 108.13p a year earlier.

Net revenue for 1992 was Pounds 1.83m, against Pounds 2.2m for the previous 15 months. Earnings per share were 3.77p (4.54p) and a final dividend of 2.07p makes 3.77p (4.5p) for the year.

Under the trust's articles it can be wound up at the annual meeting but directors will be recommending that the trust continue.

Mr David Tucker, chairman, said that on the basis of the trust's sustained success he was confident shareholders would back the board. He added they would have another opportunity to consider winding up the trust next year.

Europe Energy, the USM-quoted mining company which reversed in to Moray Firth two years ago, announced a pre-tax deficit of Pounds 145,532 for the six months to end-September.

That compared with a loss of Pounds 148,494 last time and came from turnover up by Pounds 245,000 to Pounds 982,633.

The directors pointed out that because of the high overdraft the company was now supporting, the interest charge had risen considerably, from Pounds 11,579 to Pounds 53,089.

However, they added, October and November 1992 were the first two months in which mining activities produced net profits after all financing and depletion costs.

The net asset value per share of Selective Assets Trust, the Ivory & Sime international geared investment trust, stood at 155.95p at the year ended December 31 1992.

That compared with 126.2p six months earlier and with 126.49p at the end of 1991.

Total income for the year increased to Pounds 3.12m (Pounds 2.69m). Earnings per share improved to 2.54p (1.4p) and the annual dividend is being raised from 0.825p to 1.2p.

SHIELD GROUP, estate agency and property company, has returned to profit in the six months ended September 30 1992 having wound down its property development and investment activities. Pre-tax profit came to Pounds 54,000, but this includes Pounds 45,000 of unrealised foreign currency gains. The loss for the comparative period was Pounds 1.34m.

Turnover was Pounds 948,000 (Pounds 5.81m). Losses per share came to 2.7p (17.2p). The directors said that Stickley & Kent (Risk Management Unit) was trading profitably and it was intended to expand this activity this year.

Shield has acquired 1 per cent of the capital of National Home Loans at 1.25p per share and intends to increase its investment should further opportunities arise.

STAKIS, the hotels, nursing home and casino group, is expected to announce both a rights issue and the sale of its nursing home division when it presents its results next Thursday.

The company, where Sir Lewis Robertson took over as rescue chairman in early 1991, is believed to have returned to around break-even before tax in the year to September 30 1992 against a loss of Pounds 47.4m.

However, it still has about Pounds 200m of debt owed to 21 banks. A plan to sell its casinos had to be abandoned when Stakis failed to achieve a suitable price.

Stakis has rationalised the management of its hotel operations and sold peripheral leisure activities under Mr David Michels, its chief executive.

However, it still needs to reduce debt. Ashbourne Homes, its nursing home subsidiary, operates 18 nursing homes profitably, but also has 19 sites for new homes which would cost about Pounds 50m to develop.

Stakis should be able to reveal an agreement to sell Ashbourne Homes next week.

The company is also expected to announce a rights issue under which shareholders would be offered one new share for either three or four existing shares. Stakis's market capitalisation is about Pounds 105m so the rights issue could raise up to Pounds 35m.

GPA's debt restructuring proposals, which were sent to its 130 banks yesterday, envisage that its Dollars 5.5bn (Pounds 3.6bn) debt will be cut by half over the next three years.

The ambitious target is dependent on the Irish aircraft leasing company regaining access to capital markets, so that it can raise off-balance sheet finance to replace bank debt and unsecured traded debt.

It has already instructed Lehman Brothers, the US investment bank, to lead manage an issue of securitised aircraft leases, called Alps.

Mr Maurice Foley, GPA's deputy chairman, said he hoped the Alps issue would take place 'well before end of the year'. However, bankers believe the Alps issue will be impossible until investors are confident that GPA can overcome its financial difficulties and that will take many months.

In addition, GPA is planning to raise about Dollars 200m of equity through a rights issue of convertible securities. The rights document will be sent to shareholders when banks agree to the proposed debt rescheduling.

The detailed documents sent to banks yesterday, which are an inch thick in total, also said that GPA's commitments to buy aircraft from manufacturers has been reduced from Dollars 12bn at the beginning of last year to less than Dollars 4bn.

More importantly, the group believes that it has cut orders for airplanes in 1993 and 1994 from Dollars 5bn to about Dollars 2.5bn.

However, a banker stressed that the group had only reached agreement in principle with manufacturers to cancel or change the contracts. They were not legally binding.

The banker added that the group had yet to reach any sort of agreement with one manufacturer, McDonnell Douglas, though agreements have been reached with Boeing, Fokker and Airbus Industrie. Mr Foley said the failure to reach agreement with McDonnell was not serious.

The deadline for reaching agreement with banks has now slipped from mid-January to the end of February or early March. One banker said the restructuring process was among the most complicated in which he had ever been involved.

The banks are being asked to defer to late 1996 approximately Dollars 1bn of debt repayments due between the end of last year and September 30.

GPA has Dollars 3.5bn of bank debt on its balance sheet plus another Dollars 500m off, some of it in joint ventures which have to be unscrambled.

This debt is divided into more than 20 different facilities, provided by 130 banks. A group of regional Japanese banks, which are said to shocked by GPA's difficulties, provided a 'club loan' of Dollars 150m, all of which was due for repayment in a year.

In addition about Dollars 2bn has been borrowed in the form of unsecured traded debt, of which Dollars 500m is in the form of publicly traded, fully registered bonds. In the next three years Dollars 1.25bn of this falls due for repayment.

Wescol Group, the USM-quoted structural engineer, fell deeper into the red in the year to July 31 as pre-tax losses rose 60 per cent to Pounds 2.49m (Pounds 1.55m).

Turnover dipped from Pounds 24.7m to Pounds 16.3m reflecting the difficult conditions in the construction industry and the group's closure, last May, of TMV Aluminium Systems, its curtain walling subsid-iary.

Its sheeting and cladding business was closed in 1991.

Wescol made a Pounds 506,000 exceptional provision for the closure of TMV while interest charges increased from Pounds 419,000 to Pounds 476,000. Losses per share were shown as 21.6p against 11.3p, and there is no dividend.

Mr Peter Price was appointed chairman yesterday, taking over from caretaker chairman Mr Barry Anysz who replaced Mr John Hicks when he resigned last May.

Mr Price said the group had strengthened its trading base, by 'refocusing operations, reducing overheads and securing fresh backing from our bankers'. He explained that facilities included a new six-year Pounds 2m loan.

FIRST MARYLAND Bancorp, the US subsidiary of Allied Irish Bank, yesterday announced a 23 per cent rise in pre-tax profits from Dollars 75.1m to Dollars 92.5m (Pounds 60.8m) after a 0.8 per cent rise in fourth quarter earnings to Dollars 24.1m (Dollars 23.9m), writes John Gapper.

The bank said its earnings performance reflected improved net interest margins, higher levels of non-interest income, lower provisions for possible credit losses and careful management of non-interest expenses.

The bank's return on average assets for the fourth quarter fell slightly to 1.04 per cent (1.23 per cent) and its return on average equity fell to 13.95 per cent (16.11 per cent).

Mr Brian King, FMB senior vice president, said the low rise in fourth quarter earnings reflected the fact that the bank's loan portfolio had fallen by 8.5 per cent over the year to Dollars 4.97bn from Dollars 5.43bn because of sluggish demand.

Shareholders' funds rose to Dollars 699.4m (Dollars 606.8m). The bank's overall capital ratio is 14 per cent, with Tier 1 capital of 10 per cent.

Park Food, which sells Christmas hampers through freelance agents, has reported a lower than expected interim loss, incurring Pounds 3.69m pre-tax for the six months ended September 30 1992.

Mr Peter Johnson, the chairman, was confident, however, that full-year pre-tax profits would show a significant improvement over the Pounds 6.89m of 1991-92, after a half-time deficit of Pounds 4.39m.

Analysts are forecasting between Pounds 8m and Pounds 9.2m, increasing to between Pounds 9m and Pounds 11m in 1993-94.

The annual dividend cover of 2.5 times was now felt to be excessive; it would be reduced to two times and therefore, the interim dividend is doubled to 2p.

Sales for the half year of continuing businesses came to Pounds 9.1m (Pounds 8.95m), after the disposal of the drinks and frozen foods divisions which made Pounds 6.75m last time. Mr Johnson anticipated continued strong organic growth stemming from the enlarged network of agents (up by some 6 per cent) and an increased average spend by customers of about 10 per cent.

BARINGS, the privately-controlled UK merchant banking group yesterday pulled out of trading on the floor of the London International Financial Futures and Options Exchange (Liffe), continuing the retrenchment of its operations.

Although Barings will remain a member of Liffe, enabling it to clear futures transactions in its own name and on behalf of its clients, it has decided to stop executing trades on the floor of the exchange in order to cut costs.

Barings has made 19 traders and desk staff redundant, saying that in future it will place orders through other brokers on the floor of the exchange. 'This will mean a significant cost saving for us,' said a director at Barings yesterday.

In September, Barings announced the decision to shed 108 employees at its securities trading subsidiary, Baring Securities, in order to stem heavy losses.

Jeremy Cooper had envisaged spending Christmas plucking turkeys in his father's butcher shop in Huddersfield, Yorkshire. Instead, he flew to Paris to represent Britain in the 26th Prix Culinaire Pierre Taittinger, one of the world's most prestigious culinary contests.

At age 24, Cooper, is chef saucier, head of the meat section, at London's Inter-Continental Hotel. For four years he worked at Claridge's under executive chef, Marjan Lesnik, who won the Prix Taittinger in 1981 but was disqualified because of an unauthorised use of parsley leaves as garnish. This year he is one of the 16 international judges.

The Prix Taittinger is the culinary world's equivalent of the Tschaikovsky Piano Competition in Moscow. Although there are similar competitions held around the world, this one attracts the most international interest, with almost 500 entrants this year from America, Germany, Spain, Italy, Belgium, Holland, Britain, Japan, Switzerland, and of course, France. It also offers a rare insight into the highly conservative world of French gastronomy.

Most of those fortunate enough to eat both in and outside France would agree that France's long-held domination of the culinary world is seriously under threat. Today, talented and inspired chefs are to be found all over the world.

French chefs, however, have dominated the competition. Indeed the Prix Taittinger has only been won twice by chefs from outside France - in 1984 by a Japanese and in 1986 by an Indonesian working at the Hilton, Amsterdam.

A strong flavour of French culinary conservatism was evident in the British semi-finals when the eight contestants had to prepare a classic 19th century dish, quenelles of pike with a sauce amoricaine. This dish was well known when rivers were flush with pike and lobsters for the sauce were cheap (the sauce was created in 1860); but today it rarely appears on menus. That may have been one reason that the British favourite, Bruno Loubet, a highly innovative chef from the Inn on the Park, finished behind Jeremy Cooper.

Cooper arrived in Paris with three words - gibier a poil (furred game) - ringing in his ears. Two weeks earlier this, and nothing else, had been divulged as the subject of the four-hour finals.

At 7.30pm on the night before the cook-offs the 12 contestants, of whom three were French, and 16 members of the jury met for cocktails. At the party, the chairman of the judges produced four envelopes and asked Cooper, as the youngest, to pick one. To his and his competitors' consternation he chose the envelope marked 'hare' (the other three were rabbit, wild boar and venison). All the chefs were concerned because hare is a particularly difficult animal to cook well even if time is unlimited. Unlike other game, hare is not hung but requires marinating to soften the flavours; the chefs had to skin the animal, too. The most anxious was Japan's Minoru Sonehara who had never seen a hare before.

Over dinner the chefs were given a list of rather prosaic ingredients: carrots, red cabbage and cauliflower - nothing as exotic as a wild mushroom or a small truffle. At 11pm it was up to bed where, with their telephones unplugged, the chefs spent the night racking their brains for inspiration and sleep.

The next morning, they took a short coach trip to the nearby Ecole Superieure de Cuisine Francaise, where the cooking would take place. The chefs then drew numbers for the sequence in which they would cook and at 7.20 met their commis chefs, their short-term personal assistants. The commis were students who spoke little English, another big advantage for the French competitors.

The competition began at 7.30, which seemed designed to benefit the judges rather than the chefs. To enable them to taste in sequence each chef started to cook at 15 minute intervals and the poor Dutch entrant, who drew number 12, had to sit glumly until 10.15 before he could get to his stove.

Two top professional chefs and two professors of the culinary arts supervised the cooking. In theory, they could deduct points but rather than being quick to criticise they were inclined to help and encourage.

The tasting judges each had a maximum of 50 points in two categories - presentation and taste. From 11.30, and at 15 minute intervals, they were presented with a silver tray, borne by student waiters and waitresses sworn to silence, and placed in the middle of the room for the judges to appreciate its design. The tray was then passed to the foreman of the jury who cut two slices of meat per judge and placed the two garnishes and sauce alongside. Finally, 16 mouths began to open and close.

Inside the kitchen the international character of the contest was obvious. The Spanish chef made a tortilla to enclose his garnish while the extremely calm German produced very classy potato cakes and cabbage dumplings. The Italian, despite a bandaged finger, made ravioli of hare mousse wrapped in cabbage while the Japanese opened a box of wonderful high-tech knives, suitable for sushi, and cooked with chopsticks, too. The Dutch chef made a hare sausage and enthralled the French judges with a Japanese machine for making 'vegetable spaghetti'.

But all this was in vain because of the anachronistic finale to the competition. This stipulated that the chefs' creations must be presented on a huge silver tray, an accessory no longer used in good restaurants. Today, chefs prefer to serve their dishes on a plate designed by themselves.

The winning dish certainly filled the tray. Entitled 'saddle of hare Pojarski' and based on a recipe that was a great favourite with Tsar Nicholas I, it resembled a chess board with pyramid tops of cabbage and 'castles' made of red cabbage filled with a hare mousse. It was too pretty - food to admire, not to eat.

But it impressed the judges. And on a podium filled with some of France's top culinary luminaries (Pierre Troisgros, Emile Jung, Michel GueArard and Jacques Lameloise) Joel Robuchon, president of the jury, announced the winner - France's Michel Izard, who recently became chef des cuisines at the Dodin Bouffant restaurant in Paris. His compatriot, Eric Briffard, was second, and Spain's Jose Arriero Barroso, third.

The experience of being in such company will have done a modest, talented young Yorkshireman nothing but good. Whether French gastronomy will ever benefit from such international gatherings is, however, another matter.

Britain's chancellor of the exchequer has a way with words.

Last Sunday, Mr Norman Lamont popped up on television to announce that there were 'many encouraging signs' of improvement in the UK economy.

By yesterday - after news of falling retail sales in December, declining industrial output in November and the sharp jump in unemployment to just under 3m - it was beginning to look as if accident prone Mr Lamont had fallen back into the trap of seeing green shoots of recovery where none exists.

The truth is, as ever, more complicated. To set against this week's gloomy data, the Treasury could point to strong car sales in December, robust growth in recent months of cash and bank notes in circulation, and a rebound in business confidence since sterling's departure from the European exchange rate mechanism on Black Wednesday.

Whitehall also took comfort from reports of increased house sales in December, although house prices as measured by the Halifax and Nationwide building societies continued to fall last month. Not all mortgage payers have yet benefited from the sharp 3 percentage point fall in bank base rates to 7 per cent since September because some building societies, which adjust their mortgage rates annually, have still to respond to the cut in the cost of borrowing. This could mean that a further stimulus to demand is in the pipeline, holding out the prospect of some future growth.

But no amount of accentuating the positive could alter the fact that the strong hopes of a turnaround - symbolised by the rush of shoppers to the sales immediately after Christmas - had given way to the familiar pattern of mixed and usually depressing signals that has characterised the UK economy for the past two years.

Economic recoveries are typically patchy. That this applies within sectors as well as across the economy was highlighted by Tuesday's distributive trades survey from the Confederation of British Industry, which found that large retailers did well in December while smaller companies employing fewer than 100 did poorly.

But Britain's recession has been so long and so severe that special factors may be making recent trends particularly difficult to interpret.

Many economists have been puzzled about the recent strength of demand for big ticket items such as cars or durable household goods at a time of depressed demand for consumer credit, generally weak consumer confidence and rising unemployment.

One explanation is that people in work have been avoiding new borrowing commitments after the traumas caused by high interest rates in the late 1980s and using their savings to buy carefully selected bargains at a discount.

But Mr Leo Doyle, UK economist at Kleinwort Benson, the City investment bank, suggests that some of the newly unemployed may also be helping to support this spending. His theory is that they are using redundancy payments and running down savings with a view to obtaining means-tested benefits such as the monthly mortgage interest payments.

The Department of Social Security has rules to prevent such behaviour. But that does not mean the practice does not take place. Furthermore, some large purchases such as the replacement of a company car with a new family car would conform with DSS rules.

There are also doubts about how much reliance to place on business confidence indicators. Over the past month, surveys from the Institute of Directors, Dun & Bradstreet and the British Chambers of Commerce have pointed to a recovery in business confidence in the final quarter of last year. Sterling's devaluation and the interest rate cuts have gone some way to offsetting the gloom felt by business during the September currency crisis.

But it is a moot point how far such increases in confidence reflect improved business conditions. Confidence surveys ask about the future, looking ahead a quarter in the case of Dun & Bradstreet and 12 months in the case of the chambers of commerce.

According to Mr Neil Johnson, director-general of the Engineering Employers Federation, businessmen may be anticipating when they respond to surveys. 'People want to think the recovery is here,' he says. 'Many members are receptive to the idea that we may have the fundamentals in place to come out of recession. But they are not yet seeing recovery in terms of orders or cheques in the post.'

If true, such indicators are clearly a fragile base for hopes of recovery, which is one reason why December's sharply higher unemployment caused such concern.

The official government figures came immediately after the British Chambers of Commerce reported that both the manufacturing and service industries expected to continue shedding labour in the first three months of this year, According to Mr Christopher Stewart-Smith, the BCC president, the prospect of rising unemployment constitutes a downside risk for the economy which could adversely influence sentiment more than any optimism deriving from increased exports following sterling's devaluation.

Even before Thursday, economists such as Mr Sudhir Junankar of the CBI, were warning that sentiment was in the balance and that there was no reason to expect the economy to turn up before the spring. The past week's statistics have increased fears that rising unemployment in the months ahead will chill these limited hopes and could trigger a downward spiral of falling confidence, reduced demand and still higher unemployment.

The stage has therefore been set for an intensified debate about the future direction of economic policy in the seven and a half weeks to the Budget on March 16. Already, many City economists and members of the Treasury's recently constituted panel of seven independent economists have been calling for interest rate cuts to boost growth.

One factor that could influence the debate is the obvious disenchantment of Mr John Major, the prime minister, with the ERM. With Britain set to stay outside the ERM for a year at least, some of the government's advisers in the Bank of England and the Treasury may be inclined to cast envious eyes across the Atlantic at the US experience, where sharply lower interest rates appear to have triggered a recovery without sparking inflation.

Advocates of lower UK interest rates argue that there is little risk of activating the traditional spiral of rising costs and wages because higher unemployment is exerting downward pressure on pay. According to UBS Phillips & Drew, the City investment house, pay settlements in the UK are currently averaging 3.25 per cent.

On the other hand, the Bank will be advising the government that Britain cannot risk pushing short-term rates down to US-type levels of about 3 per cent for fear of causing a sharp fall in sterling which would boost inflation through higher imported goods' prices.

There is a growing mood in the City that 5 per cent base rates are needed to boost the economy. But any speculation about an early and substantial cut in rates would seem to be premature.

The government may want to wait for another month's economic data, the Bank of England's first quarterly assessment of UK inflationary pressures, which is due to be published next month, and the budget itself.

Before this week's bad news, Mr Lamont insisted that he had only limited room for manoeuvre if the government was to keep within its target range for underlying inflation of 1 to 4 per cent during the life of this parliament. Having made much of his dogged struggle to bring inflation down from nearly 11 per cent, it is unlikely that the week's developments will have persuaded him to change his mind.

Sir, The FT Lunch for a Fiver is a great idea.

If lunch was 'only for wimps' in the 1980s - then lunch in the 1990s must be only for skimps] However, I do believe that there are deeper social implications to be drawn from the scheme than simply a creative way of filling empty covers after the Christmas 'festivities'.

Why are more than 90 per cent of the restaurants in the 071 and 081 telephone areas? Has the great north/south barrier fallen to such an extent that we now need to subsidise our starving brothers in the south?

Or is it simply a case that restaurants in the provinces have been slow to catch on to a good idea? In which case . . . southern entrepreneurs are still alive and kicking]

Before angry restaurateurs write in claiming to be 'on the ball', I should point out that it is usually possible to obtain a reasonable lunch for under a fiver in most parts of Brit-ain, but . . . come on lads, free publicity is worth something]

I feel that this important social issue needs to be addressed. In the meantime, I shall sweep the crumbs off my desk, having had a working lunch costing Pounds 2.50, and get on with the business] Gordon Gecko, where are you now?

Peter Newman,

managing director,

Advew,

Whitehall,

School Lane,

Hartford,

Nr Northwich,

Cheshire CW8 1PF

Sir, The National Audit Office report published this week (Errors found in sick-pay scheme, January 20) showed the problems employers are having with a complicated scheme. Almost one in three of the cases of statutory maternity pay examined was inaccurate.

Unfortunately, it is going to get more complicated. The Trade Union Reform and Employment Rights Bill introduces 14 weeks maternity leave for all women.

Add this to the existing right to return to work up to 29 weeks after childbirth, 18 weeks pay, six weeks at 90 per cent of income for women fulfilling the service requirement and 18 weeks at a flat rate for the rest, and you can begin to see how excessively complex it is likely to become.

A far better fit with existing provision would be achieved by granting all women 18, not 14, weeks leave. Before you shout 'It'll cost too much', just think about it.

There would be no additional recruitment or training costs if you already have a temporary replacement. Women will be returning when they and their babies are fitter. Contractual rights would be extended for the additional four weeks, but good employers are doing this anyway.

The Maternity Alliance will be working hard as the Bill goes through parliament to convince employers and the organisations representing them that 18 weeks maternity leave makes sense for mothers, babies and employers.

Would you like to help?

Christine Gowdridge,

director,

The Maternity Alliance,

15 Britannia Street,

London WC1X 9JP

The Central Statistical Office does not publish a National Generosity Guide. There is therefore no league table of philanthropy in which to measure this week's donation by David Sainsbury of Pounds 200m-worth of shares to the Gatsby Charitable Foundation.

Not all donations like the Sainsbury shares become public knowledge through their declaration to the Stock Exchange or publication in trust accounts. Some benefactors adhere strictly to the biblical injunction to avoid announcing their good deeds with a flourish of trumpets.

By all standards, however, the Sainsbury Pounds 200m is breathtaking for a single donation: it is at least four or five times the annual income from all sources of many large household name charities, such as the Imperial Cancer Research Fund, the Royal National Institute for the Blind and the Spastics Society.

The figure is Pounds 11.5m more than the combined expenditure on fund-raising of Britain's 400 biggest charities during 1991. It eclipses the amounts raised by the most high-profile national broadcast appeals - in 1991 the most successful, the BBC's Children in Need campaign, produced Pounds 26.8m.

It even cuts down to size the Pounds 32m given by financier George Soros in December to aid organisations in Bosnia-Hercegovina, believed to be the largest single donation by an individual to a humanitarian cause, and derived from the money he made from currency speculation.

Charitable activity by successful business figures, of course, is not new. Most Victorian industrial cities have libraries, universities, art galleries, housing or hospitals that originated from the contributions of local industrialists.

Philanthropy was closer to the ground in those days, when industrialists lived in the towns and cities they endowed and had their factories there. One of the present difficulties with efforts to generate business support for deprived urban areas is that most companies now have their head offices in London, and senior directors do not have the same strong links with provincial communities as they did a century ago.

But the spirit of philanthropic employers like Joseph Rowntree continues in charitable trusts bearing their names today, while the establishment of trusts by more recent business figures continues. Gatsby is one of several Sainsbury family charitable trusts. It was set up by David Sainsbury in 1967 and, even before his injection of the Pounds 200m worth of shares this week, had become one of Britain's largest grant-making trusts. It supports health and social welfare projects, technical education, industrial and economic programmes, scientific research and development of the third world.

Support by British companies remains modest in relation to the charity sector's Pounds 16bn total annual income. Last year, 48 companies gave more than Pounds 1m each in cash or in kind to charity. Far more of it was in kind - staff secondments, free use of office space and equipment - than in cash, with only 22 companies making financial donations of Pounds 1m or more.

This is no indication of how much individual directors give out of their own pockets. The government's Gift Aid scheme provides tax advantages on one-off donations in excess of Pounds 400, and the average individual gift is just over Pounds 2,000.

There are, however, much bigger gifts than this awaiting collection by charities, if they know how to solicit them. Since Oxford University launched its Campaign for Oxford to strengthen its finances in 1988, it has raised Pounds 237m of its Pounds 340m target. Although the Pounds 237m contains income from sources such as research funds, it also includes 24 donations to the campaign of more than Pounds 1m each.

The university does not simply telephone wealthy people and ask if they can spare Pounds 1m. Researchers work carefully on the business background of potential donors and offer arrangements of mutual interest to their companies and the university - the going rate for the permanent endowment of a professorship is Pounds 1.7m.

As well as providing an example of carefully planned and targeted fund-raising, Oxford's campaign also highlights the issues at the heart of an increasingly anxious debate about the proper function of charity.

Some dons were apprehensive about the campaign, because they believed it implied acceptance of the view that universities need not be adequately supported from public funds. Charity managers are even more apprehensive, as universities, trust hospitals and other public sector institutions increasingly compete with them for limited funds.

Envious outsiders say the Oxford campaign has been helped by the university's ancient, establishment image - corporate donors frequently shy away from unpopular or controversial causes.

A survey by the Charities Aid Foundation, one of the main sources of information on the voluntary sector, shows that educational charities do best from corporate donors - receiving 35 per cent of total cash donations - followed by medicine and health. Civil rights organisations do least well, coming below animal welfare to pick up only 0.08 per cent of corporate financial support - a total of just Pounds 34,000 last year.

There are, however, some interesting attempts to redress the balance. In 1985 J Paul Getty II, the millionaire US citizen who lives in Britain, set up a trust with Pounds 20m, as one of his many charitable activities. The policy of the J Paul Getty Charitable Trust is to support unpopular causes that would otherwise have difficulty finding finance. Drug and alcohol projects, the mentally ill and handicapped, ex-offenders and Aids victims have been among the beneficiaries.

'The trust funds so many interesting things that adjectives to describe them become a bit redundant,' enthuses the Directory of Social Change, the voluntary sector specialist publisher, in its Guide to the Major Trusts, published this week.

'The new thoughts about prisons give more opportunities to encourage imaginative schemes,' says the Getty trust in its annual report. 'Hard-pressed estates with high unemployment and poverty can be revolutionised by dedicated people . . . There is also concern about the number of very young women having babies without support.'

A trust such as Getty's, at a time when public-sector support for voluntary organisation working is such fields is being cut, shows that there are true contemporary successors to the Victorian philanthropists.

----------------------------------------------------- TOP UK FUND-RAISING CHARITIES ----------------------------------------------------- Name Voluntary income total 1991 (poundsm) ----------------------------------------------------- National Trust 63.0 Oxfam 51.5 Royal National Lifeboat Institution 46.6 Imperial Cancer Research Fund 44.1 Cancer Research Campaign 40.2 Save the Children Fund 38.7 Salvation Army 35.2 British Red Cross Soc 32.6 Help the Aged 31.6 Barnados 31.5 ----------------------------------------------------- Source: Charities Aid Foundation -----------------------------------------------------

Sir, The Bank of England's criticism of the structure of English commercial leases is more than welcome, but indeed some decades too late ('Commercial lease provisions criticised by Bank', January 21).

Upward only rent reviews, and the legal jargon in which lengthy leases are couched, have proved to be a blank cheque for both agents and solicitors for many years past, while rents are reviewed and argued and lease addenda are prepared, both nearly always at the expense and pain of the tenant.

Surely the time has come for England to learn very quickly from its younger overseas cousins where commercial leases consist of a four-page preprinted form (blank spaces to be filled in) written in readily understandable plain layman's English. Commercial leases can be for any agreed period but usually three years, with renewals thereafter at agreed market rentals for whatever extension period is agreed between the landlord and tenant. UK developers, landlords, agents and solicitors have had it too good for too long milking the business community. The time is ripe for commercial property tenants to say 'enough is enough']

Peter Cormack,

Cleary Court,

Church Street East,

Woking, Surrey

Sir, David Spanier, in his article 'Britain joins in a game once deemed a sin' (January 9), omits the central point about expanding the availability of gambling. It is, that the more people who gamble, and the greater the frequency, the more casualties occur from this activity. There is unquestioned evidence that the incidence of compulsive gambling is directly related to states and provinces where it is introduced. That a government would promote such an activity is no different from a government promoting the drinking of alcohol or the smoking of cigarettes.

Furthermore, it has also been shown that the people who wager are the ones most vulnerable - single males on the fringe of society, minorities, late adolescents and young adults. And, still further, that gambling is a form of regressive taxation on this group.

It is not responsible journalism for you to have omitted reference to the many epidemiological and sociological studies found in the Journal of Gambling Behavior. It goes without saying that any government which fosters such 'risky' activity without generous provision for researching the human damage and offering treatment, is not a government of the people.

Sirgay Sanger,

president and chairman,

National Council on

Problem Gambling,

69 East 89th Street,

New York,

NY 10028 US

ON THURSDAY this week, Mr Theo Waigel, finance minister of Europe's most powerful country, went as a supplicant to Frankfurt. His purpose was to plead with the high priests of monetary stability in their temple. There, he offered his 'solidarity pact' and begged in return for lower interest rates. But the priests of monetary stability respond to such questions as cryptically as those who once served at Delphi. The millions who also want what Mr Waigel sought can only wait and pray.

Mr Hans Tietmeyer, the Bundesbank's vice-president, has insisted that the Bundesbank will cut interest rates to the extent it thinks this justifiable. Who can doubt him? The Bundesbank is powerful, but it is not arbitrary. The question is when it will believe further interest rates cuts are justified. Will this be as soon and will they then go as far as the German government hopes, not to mention the French, the Irish, the Danish and all the rest?

The questions are urgent, notwithstanding the insistence of European finance ministers at their meeting this week that the crisis in the ERM is past. Immediate pressure for realignment of the currencies that have been most under pressure - the Irish punt, the Danish krone and the French franc - did dwindle, as the D-Mark weakened against the dollar. But ministers are declaring the battle over too soon.

They are over-optimistic because they forget the ever gloomier prospects for EC economic growth. Only this week the European Commission cut its forecast for EC economic growth from 1992 to 1993 to 0.8 per cent. Notwithstanding this reduction in the forecast, which is not likely to be the last, Mr Henning Christopherson, the commissioner in charge of economics, insisted that recent speculation against the ERM had been unwarranted. He was wrong. It is the EC's poor growth prospects which makes the speculation not merely warranted, but inevitable.

Inevitable

The UK has been expected to be among the better performing EC economies this year. So indeed it should be. But none of the news released this week shows it will be. Seasonally adjusted unemployment was up 61,000 in the month to December 1992; manufacturing output was down 1/2 per cent in the three months to November as against the previous three months; and seasonally adjusted retail sales fell in December. Fortunately, since what is now known as White Wednesday, the government is no longer nailed to the Bundesbank's cross. Lower interest rates are inevitable. The government should bow to that reality sooner rather than later.

Meanwhile, the EC's so-called fast lane countries are going into reverse. Even the French economy, the most virtuous of all, is widely forecast to achieve little growth this year. Unless the Bundesbank lowers interest rates not only soon, which seems possible, but by at least 2 percentage points, which seems much less likely, France may experience a fifth successive year of sub- potential economic growth in 1994.

Uncomfortable

French inflation is down to a 36-year annual low of 2 per cent. If policy persists, it could fall below zero, but unemployment would also continue to rise. Fortunately for the French government, both the actual one and the one likely to be in office after the general election, 72 per cent of the French people appears to favour the franc fort policy. That would seem to make continued wearing of the monetary hair shirt conceivable, however uncomfortable.

It is Germany, battling with the aftermath of unification, that is the source of Europe's problems. The German economics ministry now forecasts that the west German economy will shrink 1 per cent this year. It is almost certainly too optimistic, largely because Bundesbank economists do not share the government's concerns.

The answer to all the government's problems is supposed to be the solidarity pact, whose fiscal component has been offered by Mr Waigel on the Bundesbank's altar. Yet economists at the DIW in Berlin argued only this week that the pact would fail to pull the east German economy out of recession. They must be right, when engineering workers are expecting, like lemmings, to rush over the cliff of a 26 per cent wage increase this March.

That Germany is so far failing to cope with the huge challenge of unification is obvious. What is not so obvious is why most of the rest of the EC thinks it wise to be overwhelmed too. Unification is, it turns out, precisely the kind of real economic shock that requires substantial changes in real exchange rates. Since the EC refused - and, for the most part, continues to refuse - to make those changes through the nominal exchange rate, it has had to accept inflation in Germany and deflation everywhere else instead.

Germany may yet make a big success of unification. Most of the EC may yet move smoothly to economic and monetary union. Neither now looks very likely. The EC is paying a high price for its attachment to exchange rate rigidity.

There are not many people who can say of the 42nd president of the United States, as Mack McLarty did on Thursday morning: 'In many ways, Bill Clinton is the same person he was in kindergarten.' Nor be quick enough to realise that he should not give the impression that the Oval Office is now inhabited by a five-year-old. 'That's not to suggest he hasn't matured and grown wiser,' was his next sentence.

Washington this week was filled to the rafters with FOBs (friends of Bill), all members of the extraordinary number of overlapping networks the Clintons have maintained over the years. But Thomas F McLarty, known as Mack, is the only BOF (Bill's oldest friend). Both 46, they go all the way back to Miss Mary's kindergarten in Hope, Arkansas. Now William J Clinton, still called Bill, has turned to Mack to help him in Washington as the White House chief of staff.

There is, potentially, no more sensitive job in the capital. Exactly how it is performed depends on the wishes and needs of the president, and each has had his different requirements. But even a breezy look at recent history shows how much the chief of staff can make or break a president.

Probably the most successful in the past 20 years was James Baker in Ronald Reagan's first term who ran a tight but not leak-proof ship. Above all, he protected his president from situations in which he might be caught off-guard.

Another Baker, Howard, the former senator from Tennessee, also did well as a damage control operator when Mr Reagan's final years turned sour. Dick Cheney, later a congressman from Wyoming and the just-departed defence secretary, was a great help to President Gerald Ford in a difficult period.

Better remembered are the failures: H R Haldeman, who pandered to all Richard Nixon's darker instincts and paid for it with a prison term: Hamilton Jordan, whose contempt for the Washington establishment did no favours to an outsider president, Jimmy Carter: and two of President Bush's chiefs of staff, John Sununu, fiercely ideological and personally abrasive, and Sam Skinner, who never realised until too late that his boss was in deep political doo-doo.

His friendship with his president apart, McLarty comes to Washington probably the least known of the new Clinton team. The son of a successful car dealer and University of Arkansas graduate, he embarked on a political career early and, at 23, became the youngest ever state assemblyman. But his father's failing health brought him to the family firm, where he did well enough developing its leasing business that, still only 30, he was elected to the board of Arkla, the natural gas utility. Seven years later he was its president, replacing Sheffield Nelson, who was to become Mr Clinton's arch political rival, and two years on its chairman and CEO.

He inherited a company in crisis, afflicted by declining oil prices, mild winters, and expensive long-term pipeline contracts. By the mid-80s Arkla's debt far exceeded its net worth. By 1989, its stock price had dropped 70 per cent and its credit rating was dubious. It is still not out of the woods even after an extensive disposal of assets, and McLarty's chairmanship is not without its critics.

One acquisition, of a Houston natural gas company which may still be liable for the debts of a local savings and loan it owned before being taken over, leaves Arkla with a potentially high and still disputed charge. But McLarty gets general credit in the industry for keeping it afloat, and it was still in the charts as the 47th-largest utility in the most recent 1991 rankings of service companies by the Fortune 500.

But his record as a businessman is not why he was the first person named by Mr Clinton to a Washington job.

The explanation lies in Arkansas, which, to repeat the ultimate cliche, really is a small state where everybody who is anybody knows everybody else. Though out of elective state politics for more than 20 years, the chairman of one of its biggest companies is a de facto intimate of every politician, not least its governor. Sometimes this has presented problems for McLarty, as in 1990 when he remained conspicuously neutral in the governor's race between Clinton and Sheffield Nelson. But this never harmed his relationship with the Clintons. He was a discreet intimate throughout last year's campaign and a big fund-raiser.

All the Arkansas references are glowing, from friend and foe alike, though he seems to have few enemies. He is universally described as methodical, intelligent and, above all, gracious. His television performances in the new limelight this week certainly showed his quiet charm. They also disclosed a canny skill at saying nothing in the nicest possible manner.

He has talked a little, however, about his role as chief of staff. He does not see himself as a gatekeeper or high profile operator, which means he may have been seen more on TV in the first two days of this administration than in the next two years.

The key, as he told the Washington Post recently, is: 'I really believe that Bill and I are not going to have any trouble talking straight to each other. We've done that for years and it flows very smoothly. He wants it. That was one of the real elements he felt was needed.'

Mrs Clinton is getting an office in the political west wing of the White House rather than the social east wing, and will be a power in developing healthcare policy. McLarty's view is: 'Hillary's a good friend, too, someone I really greatly admire.' He even discreetly allowed that there were some differences between the approaches of the president and his influential wife. 'The linear style of thinking (reaching a decision and pushing ahead with the next item on the agenda) might be more Hillary's style and my style.'

So Mack McLarty begins his capital odyssey with a clean sheet and the complete trust of the man who is president, but as a relative innocent in a city with many more snakes than ladders - one of which Zoe Baird failed to climb this week. He also has a fear of flying, but, then, there is much to do without leaving the ground in Washington.

It has been a long time coming. For years, on and off, successive Conservative governments have been talking about the possibility of privatising British Rail. Yesterday, at last, the bill that will make this possible appeared. But just what does railway privatisation mean?

The passenger could be forgiven for being confused. The government white paper, New Opportunities for the Railways, that came out last July was subtitled The Privatisation of British Rail. But as we entered the new year, the prime minister described the process as 'semi-privatisation' and Mr John MacGregor, the transport secretary, followed up by developing a predilection for the word 'commercialisation'. Ministers denied gleeful Labour accusations of a U-turn: but amid the complexity of the government's proposals, it is not surprising that the public's understanding of what is really going to happen to its railways is at a low ebb.

One thing that is plain about the privatisation of BR is that it will be like no other Britain has yet seen. Previous privatisations have typically involved the disposal of industries and utilities to the private sector through trade sales or stock market flotations. But this never looked feasible with BR. Loss-making on a big scale - last year it lost nearly Pounds 1bn - it would have been impossible to value, still less to sell. Who would have wanted to buy it?

Having wrestled with a number of options for breaking up BR into smaller units, the government still kept coming up against the same problem. Whichever way you split the railway, there was no getting rid of the losses - not, at least, without big cuts in services, large fare rises, or both. So, instead, it switched tack and looked at ways of involving the private sector through the contracting out of train operations, just as if they were hospital cleaning or rubbish collection services.

And that, in essence, is what this privatisation amounts to. True, BR's freight operations are to be sold off - the government sees no reason to protect loss-making freight, and the profit-making operations can fend for themselves. But that is all that is going to be sold.

So far as the rest of British Rail is concerned, it is to be split into two. One part, to be named Railtrack, will retain the tracks and infrastructure, and start charging for their use. The other will continue to operate the passenger trains, but these services will gradually be contracted out to the private sector on the basis of which company is prepared to pay the highest price for the franchise - or rather, since the majority of services are unprofitable, on the basis of which company requires the smallest subsidy.

There is just one more wrinkle. Obsessed with the idea of maximising competition, and embittered by the experience of privatisations such as British Gas, where competition has been slow to emerge, the government is also requiring open access to the tracks. In other words, any company wanting to introduce a new freight or passenger service in competition with existing ones will theoretically be able to do so - though this is unlikely to take place on any widespread scale, given the shortage of vacant slots on BR's busiest routes.

Put in these terms, privatisation may not sound such a troubling prospect. And yet the government's plans have been attacked from almost every quarter - by politicians, consumer groups, trade unions, professional institutions, the public transport lobby and the very companies the government is hoping will participate.

Roughly speaking, the criticisms fall into two main categories. Those in the first category say that the government's plans just will not work. So do those in the second category; but they go on to suggest that, even if the plans do work, the result will be to passengers' disadvantage.

The criticisms in the first category have been better rehearsed than those in the second. To take a few examples:

The government's insistence on open access will kill off private-sector interest in franchising because franchisees' most profitable services will be vulnerable to attack by cherry-picking marauders.

Dividing the responsibility for track and trains makes no sense because it will leave too high a proportion of the train operator's costs under the control of state-owned Railtrack, which will have no incentive to act efficiently.

The government's insistence that Railtrack must make a positive return on its assets will result in its imposing track charges so high as to price traffic off the railways and on to the roads.

The complex bureaucracy involved in the relationship between the government, the rail regulator, the franchising authority, Railtrack, the BR residuary body, the Health and Safety Commission and the private-sector train operators will prove impossibly unwieldy.

The first two of these have already been answered, at least in part. Earlier this week the government made a significant concession by acknowledging that it would have to deny open access in some franchise areas to persuade the private sector to get involved. It also said it was prepared to franchise the tracks as well as the trains on some routes.

Criticisms of the track-charging regime are more difficult to answer because the government has yet to publish its proposals for track charges. As for the bureaucracy: well, that is just one of the unfortunate side-effects of trying to combine a competitive railway with a safe and reliable one, and it remains to be seen how offputting it proves in practice.

But never mind the danger that privatisation will never happen, BR's passengers could say: the worst that can happen is that BR will simply go on running the trains. What we want to know is what will happen if privatisation does happen. How will we be affected? Will our trains still run? Will fares soar?

Passengers appear to have genuine grounds for concern about the government's plans - many of them centring on the possible consequences of the fragmentation of the national passenger railway into a patchwork of independently operated franchises.

A simple example is the national railway timetable. Admittedly, this is not one of Britain's best-selling publications: most railway passengers travel to and fro on a single route and have no need to know what other services BR offers. Nevertheless, it is useful for the minority of passengers who travel more widely, and looks a probable casualty of the government's privatisation plans.

As for railway services, most should be safe from closure. Franchisees will still be receiving subsidies to operate loss-making services, so companies will not be able to drop them willy-nilly. When awarding franchises, the franchising authority will specify minimum levels and standards of services, and these seem likely to be no worse than those already being operated by BR, at least initially.

Even so, some rural services could come under scrutiny. Take, for example, the line from Inverness to Wick in the far north of Scotland - a 161-mile railway carrying only three trains daily each way. With Railtrack charging the whole of the costs of operating the line to such a small amount of traffic, the subsidies required by the franchisee to run the service would be enormous. That would call into question the case for keeping the service going.

But perhaps the biggest potential hazard from the passenger's point of view is the threat of fare increases. Superficially, this should not be an issue: the government has said that, on subsidised services (the large majority), maximum fare levels will be pegged by the franchising authority when awarding the franchises, and on the few profit-making services - mainly InterCity - tough competition from cars, coaches and aircraft should keep fares down. But again, it is the loss of the so-called network benefits that poses the greatest threat.

By way of illustration, imagine a return trip from Southend-on-Sea in Essex to Glasgow. At present, the traveller can go to Southend station and book a discounted 'saver' return ticket for the complete journey for Pounds 76. But after privatisation, when the London Tilbury & Southend line and the London-Glasgow line are operated by different franchisees, the traveller's cheapest option is likely to be the purchase of two separate tickets: a discounted return from Southend to London and a discounted return from London to Glasgow. At today's fare levels, that would cost Pounds 14.80 for the Southend-London leg and Pounds 69 for the London-Glasgow leg, totalling Pounds 83.80 - about 10 per cent more than the price of a through ticket.

The government's response to this sort of criticism is that it has guaranteed the preservation of through ticketing. And so it has: but it has not guaranteed the preservation of discounted through ticketing, nor has it guaranteed the validity between franchisees of other discount schemes such as the senior citizen's railcard. Since 80 per cent of all tickets sold on BR are discounted in one way or another, the possible consequences for average fare levels could be far-reaching.

Given the scale of the potential pitfalls, it is tempting to ask why the government should bother to take on a privatisation as troublesome as that of British Rail. After all, it can't be for the money: the proceeds will be next to nothing. And it will do nothing to advance the cause of popular capitalism, since no shares are being sold.

Then again, consider the alternative: doing nothing. It is highly unlikely that the government will ever have enough money to provide railway passengers with the investment levels they would like. And even if it could, the railway would continue to be run by a management which seems incapable of delivering a standard of service that the public finds acceptable.

At the end of the day, it all comes down to the government's claim that every privatisation so far has brought substantial benefits to the consumer. To an extent, one would have to acknowledge that to be true. But then again, the privatisation of BR is not like any other. It may yet prove an uncomfortable ride for the government and passengers alike.

RUPERT PENNANT-REA, named the next deputy governor of the Bank of England, has been described as 'a billiard ball inside a velvet glove,' a phrase reflecting both his informal friendly manner and his inner reserves of toughness.

Although the move from editor of The Economist to central banker might seem an un-expected one, Mr Pennant-Rea has worked at the Bank, from 1973 to 1977, on secondment from the research department of the GMWU municipal workers' union.

He left the Bank to join Mrs Sarah Hogg, then economics editor of The Economist, now head of the prime minister's policy unit.

Although he had no background in journalism, Mr Pennant-Rea quickly displayed an ability to write lucid, stylish articles at great speed with no revisions or second thoughts - and the ability to go home promptly, his work done, avoiding the profession's vice of procrastination.

He became the magazine's economics editor on Mrs Hogg's departure in 1981, and became editor in 1986, after Mr Andrew Knight, now chairman of News International. There were several other candidates for the job, including Mr Simon Jenkins, later editor of the Times and a journalist with a considerably wider public reputation. But there was little doubt among the magazine's staff that Mr Pennant-Rea would get the job.

His period as editor has seen a sharp increase in the magazine's circulation, which now stands at more than 500,000, four fifths of it outside the UK. It has also seen a fierce editorial commitment to policies of monetary stringency for the UK and to sterling's parity inside the ERM - an approach that will have endeared Mr Pennant-Rea to Mr Eddie George, the new governor.

When sterling was forced to leave the ERM in September last year, The Economist's first reaction was to call for an immediate move to full monetary union. By coincidence, he spent much of the past week negotiating with lawyers a lengthy apology to - among others - the Bank of England over the magazine's allegations that the Bank had obstructed or impeded investigation of the Blue Arrow affair. The apology took up a full page of yesterday's issue. He was not approached about the Bank job until yesterday morning, after the article appeared.

Mr Pennant-Rea grew up in what was then Rhodesia, now Zimbabwe, and went to Trinity College, Dublin and Manchester University - a background that has occasionally set him at odds with the conventional assumptions of the establishment. He is young by the standards of the deputy-governorship - today is his 45th birthday.

One journalist who knows him and the Bank well said yesterday: 'I'd describe him as highly motivated, and an exceedingly imaginative choice for the job. He'll bring vision and vigour to the musty corridors, and he won't be afraid to upset people. He'll undoubtedly have his sights on the governorship itself.'

Whatever his future role, his place in history is secure. He is almost certainly the only deputy governor of the Bank of England to write a thriller. Gold Foil, published in 1978, contains a few mildly erotic love scenes. The book reflects Mr Pennant-Rea's character in a rather different way, however - it is the result of disciplined months of getting up early to write a batch of words every day before breakfast.

CAPABLE, honest, straightforward and very sound. These words appear on the school report of the 11-year-old Eddie George, at the end of his first year at secondary school in south London.

Such descriptions of Mr George's character have stayed with him during his 30-year career at the Bank of England, which culminated yesterday in his appointment to take over at the end of June as the Bank's next governor.

Mr Don Gilbert, an old school friend, said yesterday: 'I am delighted by the news. But to be truthful I was amazed to see how he got on so quickly. He never struck me as a high flyer.'

Largely because of his qualities of determination and reliability, Mr George has been on an upward path at Threadneedle Street almost from the day he arrived. His ruggedness of character has enabled him to overcome the occasional high-profile setback, such as the controversy over bank supervision arising from the BCCI affair, and Black Wednesday last September, when Britain was forced out of the European exchange rate mechanism.

While he is largely known in the financial community as a 'central bankers' banker' - hard on inflation, somewhat introverted and more than a little dour - Mr George has a lighter side to his character. He is known as a highly entertaining after-dinner speaker in small, intimate gatherings.

Sir Geoffrey Littler, a former Treasury official who knew Mr George well during the 1980s, said: 'In private, he can be an absolute delight. He likes a drink, knows how to relax and he's got wit, understanding and depth of character.'

Mr Gavin Laird, general secretary of the Amalgamated Engineering and Electrical Union, who is a member of the Bank's court, or board of directors, said: 'Eddie would never make TV personality of the year. But he has a quiet sense of humour and he's interested in people.'

Like Mr John Major, the man who chose him for the new job at the pinnacle of the British establishment, the 54-year-old Mr George grew up in unfashionable south-west London suburbia. His childhood home was in Carshalton, Surrey, near the Beddington sewage works. His father was a postman.

The young Eddie attended Hackbridge primary school, gaining a scholarship to the more upmarket Dulwich College, a public school in south London. His fees were paid by Surrey County Council.

At Dulwich he was noticed more for his qualities of resolution than for any feeling that he was destined for great things. Mr Terry Walsh, who taught him, remembers him as 'an extremely nifty rugby scrum half. Whatever he did, he was an achiever. He just got on with things.'

During his national service in the army he learned Russian, in which he is still fluent, then studied economics at Emmanuel College, Cambridge, collecting his BA in 1962.

He went straight to the Bank, starting in the economics department. He gained international experience during a three-year stint at the Bank for International Settlements in Basle in the late 1960s, and became assistant director in change of markets in 1980. He was appointed deputy governor nearly three years ago.

Among Bank insiders, Mr George has a reputation for toughness. One former official said: 'He's very good at handling financial markets. That means he has to be a bit devious. But I have never known him to tell an outright lie or to mislead. He doesn't mind people disagreeing with him, unless it turns out they cannot substantiate their views.'

Another former official says: 'Eddie likes to dominate things. He is a very forceful character. If he thinks he's right and you think differently, you're in for a hard time.'

Mr Major, who worked closely with Mr George during his spell as chancellor before becoming prime minister, admires the new governor's grasp of the mood of financial markets and of the complexities of City regulation.

His appointment confirmed that the prime minister did not blame the Bank's technicians for failing to anticipate the tide of speculation which forced sterling's withdrawal from the ERM.

Senior Whitehall officials say that Mr George was among those who advocated an earlier rise in interest rates to defend the pound. But in any event Mr Major's judgment was that it would have been impossible to save the pound.

Their personal relationship has been helped by the new governor's relaxed and down-to-earth style. One Downing Street insider said last night that Mr George's combination of an astute mind and lack of pretension had made him a 'natural choice' for the prime minister.

Mr George, however, will be disappointed by Mr Major's refusal to contemplate granting the Bank independence. The new governor believes that it would be possible to combine Bank control of monetary policy with a new statutory framework to make it accountable to parliament.

For his part Mr George has been impressed by Mr Major's careful and detailed approach to policy-making. After dealing with him at the Treasury he told friends that Mr Major was the 'clearest-thinking politician I have ever met'.

'A BUREAUCRATIC night-mare' is how Mr Brian Wilson, a Labour transport spokesman, described the bill for the privatisation of British Rail, published yesterday.

Department of Transport officials rejected the accusation, pointing out that the bill's 158 pages left it looking relatively flimsy next to the 419-page tome that paved the way for the privatisation of the water industry in 1989.

Even so, there is little doubting the complexity of the government's proposals.

The chosen method of privatisation introduces three new quangos - Railtrack, which will own the tracks; a Rail Regulator to act as a watchdog; and a Franchise Director to franchise out the passenger services - and provides for a network of relationships between these and the private-sector train operators entering the rail market.

As envisaged in the white paper published last July, the effect of the railways bill will be to split British Rail into two.

Railtrack will own the tracks, and the other part will run the trains. The freight operations will be sold and the passenger services will be franchised.

In addition, the railway tracks will in principle be open to any private-sector operators wanting to run new freight or passenger train services in competition with existing ones. However, the government has shown signs of retreating from this commitment in the face of hostility from would-be franchisees.

Some idea of the government's motivation for privatising the railways can be gleaned from the preamble to the bill. It says subsidies will go on being paid to support lossmaking train services even after privatisation, so there will be no significant cuts in public spending in the short term.

But it goes on to say: 'It is, however, anticipated that private-sector operation should, over time, allow railway services to be provided at lower cost to the Exchequer than would otherwise be the case'. The implication is that the private sector will be rather more efficient at operating trains than British Rail.

The preamble also reveals that the rail regulator's office will employ up to 100 staff and cost up to Pounds 5m a year to run, while the franchising director's office will employ up to 175 staff and cost up to Pounds 10m a year to run.

The bill itself provides for the setting-up of the rail regulator, the franchising director and the rail users' consultative committees - the new rail passengers' watchdogs - before going into the detail of how rail operators will be regulated. Companies wanting to run a train, station or maintenance depot will have to apply for a licence, it says, and anyone wanting to object to the application will have the right to do so.

There are also tough rules to make sure that would-be train operators get access to all the tracks, stations and depots they need to operate a service.

Every agreement between train operators and facility owners will have to be notified to the regulator for approval, together with any subsequent changes.

The regulator will be able to force companies to open their facilities to other train operators if they do not do so willingly.

Much of the rest of the bill is concerned with the technicalities of translating the ideas contained in last year's white paper into law, but some new information emerges. For example:

One clause provides for franchisees to take control of the tracks in the franchise area as well as the trains if the franchising authority thinks it appropriate.

The rail regulator and the franchising director will have the power to fine operators who breach the conditions of their licences or of their franchises.

All UK public-sector bodies - including British Rail, London Underground or local authorities - will be excluded from becoming franchisees, but there is no mention in the bill of public-sector bodies from other countries. Consumer protection will be given added force by extending the Fair Trading Act to the railways.

In times of national emergency the secretary of state will be able to re-assume control of the railways, directing the use of railway facilities as he or she wishes.

The bill is expected to get its second reading early next month and to win Royal assent in October.

SIR Colin Marshall, chief executive of British Airways and heir-apparent as chairman, is likely to resign from the company if he is not allowed to hold both posts, institutional British Airways shareholders have been told.

In recent private conversations with non-executive directors, including Sir Michael Angus, big shareholders have emphasised their long-standing unease about boards which allow a single individual to hold both posts, contrary to recommendations of the Cadbury report.

Shareholders have said that in light of the Virgin Airlines 'dirty tricks' affair, that unease has increased.

'We talked to Michael Angus and he told us Colin Marshall wouldn't hang around if he couldn't be chairman as well,' one shareholder said.

Shareholders said that because they had been impressed with Sir Colin's management of British Airways, they were unwilling to press for action which would result in his resignation.

'They have appointed a managing director and that is supposed to reassure us that the proper checks and balances are in place,' one institutional investor noted.

Meanwhile, some shareholders said they are still not satisfied that British Airways had dealt with the matter fully. 'I feel they haven't tried too hard to get to the bottom of this,' said one investor. He noted that BA's solicitors had conducted a previous investigation into dirty tricks allegations a year ago and found nothing.

'What was the quantity of wrongdoing, what was the number of people involved? Was it just in the UK or was it Japan and the US as well?', a shareholder said.

Shareholders said their concern was that if BA failed to react forcefully and publicly, it could be vulnerable to adverse commercial circumstances. 'If any of the competitive US airlines start saying we have anti-competitive practices, it could be trouble,' said one shareholder.

However, institutions said they had no desire to see any resignations among the members of the board. Moreover, confidence has been bolstered by personal assurances from Sir Michael Angus that steps were being taken to tighten management.

IF MR Richard Branson and his Virgin Atlantic airline have won a moral battle against British Airways' 'dirty tricks' campaign, the US flying public and media have taken little notice, Laurie Morse in New York writes.

While the story is a drama of corporate sabotage and discovery, the US popular press has barely noticed the tiff.

US business newspapers reported Virgin's January 11 court victory straight, with no moralising, and barely noted BA's second apology this week.

Travel agents in New York said there was no sign of mass defections from BA in an exhibition of moral outrage.

'My clients all know it (the airline industry) is cut-throat,' said one Manhattan travel broker. 'This doesn't surprise any of them.'

Not only is it not a surprise, other travel agents added, the court battle is largely irrelevant to travellers, who care more about price and service than moral rectitude when choosing an airline.

BRITISH AIRWAYS has decided to 'foreshorten by a few days' certain of its advertising campaigns in the UK, Gary Mead writes. Fifty poster sites in central London - priced on the open market in the region of Pounds 50,000 and booked for BA - have become available for two weeks and Virgin's advertising agency - Woollams Moira Gaskin O'Malley - has snapped them up for about Pounds 5,000. In place of BA's 'The world's favourite airline' poster there are two Virgin posters, one of which is pictured above.

THE DATE of the next Anglo-Irish conference meeting has been fixed for early next month, following 'informal talks' in Dublin yesterday between Sir Patrick Mayhew, the Northern Ireland secretary, and Mr Dick Spring, Ireland's new foreign minister.

Yesterday's meeting was the first between the two governments since November, when it was agreed to suspend further efforts to renew the political talks process in Northern Ireland until after the general elections in the Republic.

Mr Spring and Sir Patrick said their first meeting had been 'very worthwhile and satisfactory' and that they had covered all the main areas necessary 'to get the talks process working well and to bring it to a successful conclusion'. It is expected that at least two Anglo-Irish conference meetings will be necessary to prepare the way for a renewed series of talks involving the Northern Ireland political parties.

The previous 'three-strand' talks ended inconclusively last year, with the two Unionist parties accusing Dublin of having been too inflexible over the Republic's territorial claim to the province.

Sir Patrick said yesterday: 'Informal consultations should be the first stage and then we'll see where that takes us.'

PRESSURE ON the govern-ment to speed up reform of Sunday trading laws in England and Wales intensified yesterday as MPs voted decisively to allow a private member's bill seeking tight restrictions on Sunday opening to progress to line-by-line committee stage scrutiny.

Mr Ray Powell's Shops (Amendment) Bill - backed by the Keep Sunday Special campaign - received its second Commons reading by a majority of 173 (214 votes to 41).

Supporters of the proposals later called on the government to accept their offer to consider constructive amendments to the bill in order to get a law on to the statute book by this summer. But Mr Peter Lloyd, Home Office minister, told MPs the changes deemed necessary by the government were 'more than can be managed' in a private member's bill committee.

He said he would be 'disappointed' if the government's Sunday trading bill, offering MPs a choice between options ranging from full-scale deregulation to a tightening of existing laws, was not ready in the next few weeks. But he admitted he held out little hope of bringing such a bill before the House until autumn.

Mr Michael Schluter, director of the Keep Sunday Special campaign, said the campaign would continue to co-operate with those drafting the government's bill but reserved the right to ask its supporters to oppose the measure if it did not include 'proper employee protection'.

A QUARTER of the companies inspected by Lautro, the life insurance industry's watchdog, in the year to June 1992 did not have procedures adequate to ensure that suitable advice was provided to clients.

Mr Kit Jebens, Lautro's chief executive, said: 'I don't think standards are where we want to get to.' He added that the shortcomings of companies had often come from lack of understanding rather than deliberate neglect, but added that after five years of the self-regulatory regime '25 per cent is too high a failure rate'.

The annual report of Lautro's monitoring committee also shows that complaints increased by 17 per cent from the previous 12 months, from 4,069 to 4,763. The number of 'significant' complaints passed to Lautro members for action increased from 1,332 to 1,999, the report shows.

Lautro's findings are the result of its programme of 136 periodic inspection visits to members during the 12 months covered by the report. Most of the companies inspected were life insurance companies because the regulator's main concern at present is with sales forces.

The total number of sales representatives registered by Lautro to give investment advice has declined in the past year from nearly 200,000 to about 170,000.

Mr Jebens said the figures pointed to a considerable improvement in standards in the industry, and added: 'While it is impossible to guarantee that no salesperson or member will ever put a foot wrong again, we can say with some confidence that the probability is greatly reduced.'

MORE THAN 90 per cent of auditors think the quality of their work has improved following the introduction of the new audit regulation regime, a survey showed yesterday. And more than a third say they have noticed considerable improvement.

Many accountants have had to make changes to their methods, systems, quality controls, staff training and administration in the past year, according to 176 practitioners questioned by Audit Briefing, a monthly newsletter published by Tolley.

Audit regulation was introduced by the 1989 Companies Act and became active in October 1991, with the launch of inspections by self-regulatory monitoring bodies.

The survey showed that substantial changes had been made in preparation for the regime, although only 11 per cent of those questioned had been visited by regulators.

A third believed more audit work was now required for particular types of client, especially small and family businesses and other regulated clients. More than 90 per cent of firms had experienced a rise in chargeable hours required to audit an average client, and a corresponding increase in costs.

In view of the competitive market for audit services, more than half the firms absorbed at least part of the costs. Nearly 90 per cent felt the work required to comply with audit regulation was to some degree superfluous. But three quarters of those visited by the regulators felt their recommendations were reasonable, two thirds that they were of considerable use, and 16 per cent believed they were very useful.

Audit Briefing. Tolley House, 2 Addiscombe Rd, Croydon, Surrey. CR9 5AF. Pounds 5.

LLOYD'S OF LONDON is poised to launch a radical assault on its cost base, Mr Peter Middleton, chief executive, told a meeting of Names yesterday.

Mr Middleton said neither he nor Mr David Rowland, the chairman of Lloyd's, would be prepared to continue in their jobs if the cuts were not implemented by agencies and brokers.

He told a meeting organised by the Society of Names, which acts as a pressure group for lossmaking Names: 'The market must accept them or it will continue to slide. I don't want to be connected with an enterprise that doesn't want to be the best.'

Mr Middleton intends to produce a detailed business plan by the second half of April.

He said: 'The changes are going to be very painful, but they are very necessary. Unless we implement them, we will have no basis on which to attract capital.'

Failure to implement the changes would condemn Lloyd's to 'mediocrity and growing irrelevance in the world of insurance. It is that serious.'

Potentially far-reaching changes to the Lloyd's agency system - which connects the market's individual traders or Names with their underwriting syndicates - are under consideration as part of the business plan.

In particular Mr Middleton will look carefully at the future of members' agencies, which deal directly with the affairs of Names.

He said: 'I think it would be better to centralise everything other than investment advice and recruitment of Names.'

He was bitterly critical of the way the market processes claims. 'A flow-chart of the claims payments system resembled a combination of the New York subway, the London Underground and the Paris Metro, with a map of the European railway network superimposed.'

Lloyd's had managed to 'make a very simple system terribly complicated', he said.

The market needed to revamp the way it collected and analysed data, added Mr Middleton. He said: 'Some of the ways information is collected are 10 times more costly than need be.'

Mr Middleton has already announced a cut in the budget of the corporation, which administers the market, from Pounds 145m to Pounds 117.9m. Mr Middleton intends to tell corporation staff how the cuts will be implemented by the end of February.

Lloyd's has welcomed a US court judgment in a multi-million dollar dispute involving pollution at a site operated by Shell Oil at the Rocky Mountain Arsenal in Denver, Colorado.

The California Court of Appeal ruled that liability for pollution at the site is excluded from the company's insurance policies, where Shell manufactured chemicals from 1952. Underwriters at Lloyd's were among a number of insurers which provided liability coverage to Shell.

Shell was obliged to clean up the site with the cost estimated at more than Dollars 1bn (Pounds 600m). The London market's potential exposure is estimated at several hundred million dollars.

The case is one of dozens involving insurers, including Lloyd's and companies in the London market, and US policyholders.

Shell originally filed suit against its insurers in 1983, seeking to show that its insurance policies made insurers liable. In 1988 insurers won initial judgment in the San Francisco court.

Lloyd's said: 'This is a very welcome decision in important and extremely complex litigation.'

HOOVER'S production plant in Glasgow has been saved from closure as a result of a far-reaching deal reached yesterday between the US consumer group and the Amalgamated Engineering and Electrical Union.

The 1,000-strong workforce at Cambuslang approved the agreement yesterday at a lunchtime meeting. An estimated 700 jobs will be created under the deal - 400 at Cambuslang and the rest at Hoover's factory at Merthyr Tydfil, South Wales.

The agreement - reached after weeks of secret negotiations between the company and the union - involves a 12-month pay freeze and radical changes in working practices, including the introduction of flexible and interchangeable skill working.

Hoover is expected to announce the closure of its French production plant at Dijon next week. The AEEU was told by the company that it would have to agree to the changes proposed or the Cambuslang plant and not the Dijon operation would have had to be closed.

Mr Jimmy Airlie, AEEU national official for Scotland, said yesterday: 'We have saved the future of the plant. It is a tough deal, but we had no alternative but to accept it. It is a good day for Cambuslang.'

The union has had to accept a curb on its power. All shop stewards will have to work normally at their former jobs and not remain full-time working on trade union business.

THE DEPARTMENT of Transport yesterday rejected accusations that the bill paving the way for the privatisation of British Rail, published yesterday, was a 'bureaucratic nightmare', pointing out that the document's 158 pages left it looking relatively flimsy next to the 419-page tome on selling the water industry which appeared in 1989.

Even so, there is little doubting the complexity of the government's proposals.

The chosen method of privatisation introduces three new quangos - a track-owning authority; a rail regulator to act as a watchdog; and a franchise director to franchise out the passenger services - and provides for a network of relationships between these and the private-sector train operators entering the rail market.

As envisaged in the white paper published last July, the effect of the Railways Bill will be to split British Rail into two. Railtrack will own the tracks, and the other part will run the trains. The freight operations will be sold and the passenger services will be franchised.

In addition, tracks will in principle be open to any private-sector operators wanting to run new freight or passenger train services in competition with existing ones. However, the government has shown signs of retreating from this in the face of hostility from would-be franchisees.

The bill says subsidies will go on being paid to support lossmaking train services even after privatisation, so there will be no significant cuts in public spending in the short term.

But it goes on to say: 'It is, however, anticipated that private-sector operation should, over time, allow railway services to be provided at lower cost to the Exchequer than would otherwise be the case'. The implication is that the private sector will be rather more efficient at operating trains than British Rail.

The bill itself provides for the setting up of the regulator, the franchising director and the rail users' consultative committees - the new rail passengers' watchdogs - before going into the detail of how rail operators will be regulated. Companies wanting to run a train, station or maintenance depot will have to apply for a licence it says, and anyone wanting to object to the application will be able to do so.

Every agreement between train operators and facility owners will have to be notified to the regulator for approval, with any subsequent changes.

The regulator will be able to force companies to open their facilities to other train operators if they do not do so willingly.

Some new information also emerges. For example:

One clause provides for franchisees to take control of the tracks in the franchise area as well as the trains if the franchising authority thinks it appropriate.

The rail regulator and the franchising director will have the power to fine operators who breach the conditions of their licences or of their franchises.

All UK public-sector bodies - including British Rail, London Underground or local authorities - will be excluded from becoming franchisees, but there is no mention in the bill of public-sector bodies from other countries.

The bill is expected to get its second reading early next month and to win Royal assent in October.

Railways Bill. HMSO. Pounds 14.65.

In for a bumpy ride, Page 6

SIR Anthony Kenny, Warden of Rhodes House in Oxford and president of the British Academy, has been appointed chairman of the British Library board. He will succeed Commander Michael Saunders Watson.

MR ROY BROMLEY, 71, a former underwriter of Lloyd's syndicate 475, has been found dead of a shotgun wound at his home in London. Police are not treating the death as suspicious.

Mr Bromley's syndicate specialised in catastrophe reinsurance. Knightstone, the agency now managing the syndicate's affairs, recently estimated losses were at least Pounds 50m, double the syndicate's Pounds 25m capacity or capital base.

THE IMPACT of European Community law on business will come under government scrutiny aimed at minimising intrusion.

Mr Michael Heseltine, the trade and industry secretary, is to supervise the exercise which will have a steering group including two representatives from the private sector.

NEWSPAPER editors yesterday signalled they were prepared to respond to criticism of the Press Complaints Commission by changing its composition to guarantee a majority of members from outside the industry.

A statement by the Newspaper Publishers Association said a meeting of 21 editors unanimously rejected the proposal in the Calcutt report on press freedom for statutory regulation. But they agreed that wider membership of the commission should be accompanied by changes to its code of practice to safeguard against eavesdropping and bugging.

The editors agreed also to consider a proposal from some newspapers that appointments to the commission might be made by a body independent of the industry.

JAGUAR, the UK luxury carmaker and a subsidiary of Ford of the US, said yesterday that it plans to invest about Pounds 700m during the next five years to develop new models and modernise its production plants, Kevin Done writes.

The plan includes the development of replacement models for Jaguar's existing XJ6 saloon and XJS coupe and convertible ranges.

Jaguar also aims to produce smaller sporty saloons to compete with models such as the BMW 5-Series and will develop a range of V8 engines to be built at the Ford engine plant at Bridgend, south Wales.

The programme to develop a revamped XJ6 saloon has already been approved by Ford.

A CHARTERED accountant has been reprimanded and fined Pounds 2,000 for auditing a company without being properly appointed its auditor.

Mr Alan William Deighan of Ilford, Essex was also ordered to pay Pounds 1,200 in costs by the disciplinary committee of the Institute of Chartered Accountants in England and Wales.

In a separate appeal, Mr Leslie Neil Eriera of Barkingside, Essex, was stripped of membership of the Institute and ordered to pay Pounds 750 costs after being found guilty in the Crown Court last year of two offences of false accounting.

Mr John Fowler of Bishop Auckland, County Durham, was severely reprimanded and fined Pounds 1,500 plus Pounds 1,200 in costs for failing to deal properly with inquiries from other chartered accountants and failing to provide information requested by investigators.

Mr Ronald Harvey Oddy of Uttoxeter, Staffordshire, and Mr Colin Peacock of Burton on Trent, Staffordshire, were both reprimanded and fined Pounds 1,000 and Pounds 500 in costs for passing client monies through the firm's office account.

Mr Paul Ernest Vincent Scholtke, of High Wycombe, Buckinghamshire, lost his appeal for engaging in public practice without a practising certificate, and was reprimanded and ordered to pay Pounds 500 towards costs.