Business View: We need a master and commander for HMS Pensions

Poor old Andrew Smith. In office, the least visible of secretaries of state. And when he resigned, it was overshadowed by a row about bringing Alan Milburn back into government. Whether the man who once described himself as "the boring one" quit because Tony Blair would not back his plans for reforming incapacity benefit, or because he was piggy in the middle of the Blair-Brown battles, it is still astonishing timing. You hardly want to be changing the Work and Pensions Secretary when there is a Pensions Bill passing through Parliament, do you?

Poor old Andrew Smith. In office, the least visible of secretaries of state. And when he resigned, it was overshadowed by a row about bringing Alan Milburn back into government. Whether the man who once described himself as "the boring one" quit because Tony Blair would not back his plans for reforming incapacity benefit, or because he was piggy in the middle of the Blair-Brown battles, it is still astonishing timing. You hardly want to be changing the Work and Pensions Secretary when there is a Pensions Bill passing through Parliament, do you?

Alan Johnson arrives on the deck of the good ship pensions in rough seas. Never before have occupational pensions seemed so precarious. Scores of schemes are being wound up with deficits that mean the workers who have not yet retired look like losing a large part of their pensions. The DWP and the Inland Revenue are in such a muddle that help for the worst-hit schemes has been held up for nearly two years by administrative incompetence. In the FTSE 100, the aggregate deficit on pension funds is estimated to be in the £50bn to £70bn range, with big names such as British Airways, BAE Systems and ICI virtually swamped by the holes in their retirement schemes.

And it is going to get worse. According to a report by analysts at JP Morgan, some companies are not truly reflecting the cost of shoring up their pension funds in their accounts, and almost all are understating their liabilities by underestimating how long people will live.

With the passing of the Pensions Bill and the adoption of international accounting standards, which include pension deficits as balance sheet liabilities, some companies' accounts will look a whole lot worse. Among those most badly hit by the reform will be Daily Mail & General Trust, Allied Domecq and British Airways.

There will also be a review of actuarial assumptions on pension schemes, which will bring them in line with the assumptions used by major pension providers. JP Morgan estimates this could add £23bn to the FTSE 100's pension fund liabilities, increasing the black hole by two-fifths. Worst hit by the change would be Royal & SunAlliance, ICI and, you've guessed it, British Airways.

The hope that rising equity markets will refloat many of these schemes is becoming more forlorn. And if interest rates have now peaked, the liabilities may starting rising again.

While Mr Smith never seemed blasé about this crisis, he appeared in no rush to act. Indeed, in the six-and-a-half years since Labour rejected the proposals from Frank Field (who was asked to "think the unthinkable", but what he'd thunk was found unpalatable), three successive pensions secretaries have vacillated while the crisis has got worse.

Is Mr Johnson a nettle grasper? He pushed through tuition fees when he was an Education minister, so he can't worry about being unpopular. But also he needs to be bolder than Mr Smith, and a touch more conspicuous.

Eurobanks' home truths

The three banks asked by the European finance ministers to explain why there aren't more cross-border mergers are an interesting mix. ABN Amro is too big for its home market, but fearful that overextending itself will make it vulnerable. BNP Paribas comes from the most protected market in Europe, yet is ambitious to exploit others' more liberal attitudes. And Royal Bank of Scotland has just seen its long-standing European partner, Santander, unravel their relationship so it can pursue its ambition of cementing Europe's first big cross-border takeover. Also, both BNP and RBS have been buying in the US recently, not even bothering to play in Europe.

If the banks want to give an honest answer, they should point out that it is the politicians who want to protect their home turfs, even at the expense of near-insolvencies, notably in Germany. So far, only the UK has shown itself willing to allow European rivals to buy a big chunk of the financial services market.

The outgoing EU president, Romano Prodi, has welcomed Santander's Abbey National bid as promoting European consolidation. But he is at the end of his career as a politician. Show me one with political ambitions who says the same and then we'll have progress.

j.nisse@independent.co.uk