Membership of Footsie club going cheap

For the companies invited to join the FTSE 100 last week, the price of entry has been slashed - and the value of membership similarly devalued. Two years ago, the smallest company in the top 100 was valued at 3.1bn: now, in a pre-Christmas sale, businesses worth less half that, can renew their membership.

In March 2000, a stock market value of 1bn was not enough even to squeeze a company into the top 200: now that would buy a place well inside the top 150 - a position which then would have cost at least 1.5bn.

The FTSE 100 club still has the same number of members, but it is not as elite as it was. In those days, the big wigs that led it included BT with a bloated value of 82bn: today it languishes at 17bn with its young nephew, MmO2 - now also a member adding just 4bn.

As I noted recently, there are now no grandees worth more than 100bn: Vodafone, BP, GlaxoSmithKline and HSBC have all fallen on hard times. Two years ago, that quartet alone was worth more than the current value of all the other 96 company’s in today’s index.

Some of the old members - long-servers like Marconi and Royal & Sun Alliance, for instance - have been drummed out of the FTSE club because of straitened circumstances. Last week, Corus, Cable & Wireless and Brambles joined them. The flashier element that briefly joined - like Telewest, Logica and Baltimore - have seen their memberships lapse, but a new breed of companies, including the exotically-named Xstrata and Rexam, have taken their places.

There are gainers. ICI, though valued at 3.6bn in 2000 languished at number 90 in the pecking order; even though its value is now under 3bn, despite tapping shareholders for an extra 800m: it is now inside the top 70. Allied Domecq, at the bottom of the top 100 then, is now halfway up, joined by Alliance & Leicester, which was in the bottom 10 and facing expulsion in March 2000. In the smoking room, BAT, outside the top 50 then, is now well up the top 20.

The club is not what it was: no wonder members are switching their allegiances to foreign establishments such as Eurotop and Stoxx where they can rub shoulders with a better class of corporation.

WHEN Britain had a pension crisis a generation ago it was caused by high inflation. People who had retired on a healthy flat sum of 2,000 or so a year saw their purchasing power plummet with no way to increase their income. Now the crisis is caused by low inflation: people have paid into schemes falsely hoping for pensions based on the last generation’s inflation-boosted returns.

The government will this week publish a green paper on solving the pensions crisis, but it has discovered that the answer is neither simple nor pleasant. There are lots of ways of cutting up the cake more equitably - equal contributions relief for the employed and self-employed, equal relief for the rich and poor, lower tax-free lump sums, etc - but there are few ways to make the cake bigger.

The unpleasant pensions solution is to compel people to contribute - but in this bear market that would merely have lumbered the government with claims for compensation.

However, the fall in stock markets has shrunk not only the existing cake, it will shrink tomorrow’s, too. When people receive statements telling them their pension plan is now worth less than the money contributed, they will ask whether it is worth putting more into the pot - and they won’t.

The government’s stakeholder pension scheme could never add more than a few crumbs, but it has been doomed by the markets. It encouraged the poorer to gamble away money they could not afford to lose: when they realise how much they have lost they will stop contributing. It will not matter if markets recover, because people have not been paying into a plan.

The pensions crisis is thus getting worse not better. It is easy to tinker with existing arrangements but hard to make a radical change. This week’s green paper will thus do what all previous reviews have done - leave the problem to the next generation.

WHERE is the clever money now? Not in China, Israel nor New Zealand, whose markets have all just joined Japan in hitting new lows. But while mainstream stock markets slump, Argentina’s stock index reached a new high last week, as did Venezuela’s, Colombia’s and Peru’s. If that continent is too exotic, then nearer to home, Estonia and Slovakia have just climbed to new peaks too - along with the Zimbabwe stock market and Pakistan. There’s still money to be made - if you know which markets to be in.

WHEN the Vikings came asking for Danegeld they never said please. That is the correct relationship between taxman and taxpayers. We do not share a common objective: Britain’s Inland Revenue and the public meet only under duress in an unfair match that gives the tax collector powers to seize 40% of our income.

I am therefore suspicious when the Revenue men and women seek to be cuddly and loved. My current copy of Tax & Taxmen contains adverts for a "Head of People Services" and a claim that "The Inland Revenue deals with the widest customer base in the UK. This makes us to all intends and purposes the UK’s number-one service brand."

Someone should remind them that if we could take out business elsewhere, we would. The Vikings didn’t claim to be a service brand.