Comment: Has Merv lost the support of MPC colleagues?

Terry Murden. Picture: TSPL

Terry Murden. Picture: TSPL

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THE decision by the Bank of England’s monetary policy committee (MPC) to take no action on either interest rates or money printing has posed one serious question: has the outgoing governor lost the support of his colleagues?

Sir Mervyn King voted with two others at the January meeting for more asset purchasing through the quantitative easing programming. He needed the support of two more for a majority in favour. The vote means he got only one at most, an outcome that will be revealed in the next minutes published on 20 March.

Previously when King has been outvoted he has achieved a majority at the next meeting. Maybe his voice no longer carries enough clout among the nine members.

To give him the benefit of the doubt, they were also probably wary of allowing the pound to slip too low. The MPC has been happy to see the pound fall in order to encourage exports, but this has also been inflationary as dollar-denominated imports in particular – such as oil – rise in price. A growing concern is that virtual abandonment of an inflation target, together with the flexible monetary policy now being encouraged by Chancellor George Osborne, makes it difficult to judge exactly what remit the Bank of England is following.

Nish sets the Standard for insurance sector

David Nish, chief executive of Standard Life, was in bullish mood yesterday, boasting of a substantial increase in profitability and record assets under administration.

As we predicted at the weekend, Nish was also able to announce a special dividend to shareholders who have received £2 billion since flotation in 2006. The strength of its balance sheet is prompting talk of at least one more one-off payment.

The company is now looking at a generally stronger proposition and the shares have rallied from a period of under-performance.

It prepared well in advance for the change to commissions paid to agents which came into effect this year under the retail distribution review and contributed to its profits tally. Pensions auto-enrolment is providing another growth opportunity.

Nish has put last year’s criticism of the dividend policy well behind him and that baton has passed to Mark Wilson, his newly-appointed counterpart at Aviva, who is grappling with a debt mountain that forced a dividend cut and a plunge in its share price. Aviva chairman John McFarlane continues to restructure the board after the departure of previous chief executive Andrew Moss who left following last year’s shareholder rebellion.

Aviva’s deep dividend cut follows a similar move by RSA and is another blow to pension funds and other investors. It has to be said that Aviva is not the best dividend payer among the life companies. Investor reaction to yesterday’s 27 per cent cut clearly showed they are sceptical about 
Wilson’s prospects for improvement in the short term.

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