Outlook: An interest rate hawk to the last, King vanquishes critics

P&O Princess; Gent's big fat bonus

According to the old joke, there are only three certainties in life – death, taxes and nurses. To that list must now be added Mervyn King, the Bank of England's deputy governor who yesterday unambiguously buried the suggestion from an MP on the cross-party Treasury Select Committee that he has been deliberately softening his stance on interest rates, the euro and anything else the Government might find offensive so as to secure the Bank's top job when Sir Edward George hangs up his boots in June next year.

As we now know, Mr King was in a minority of one in voting for an interest rate hike at the Monetary Policy Committee's last meeting, so the charge fails utterly, the more so since the meeting took place before the MP made his accusations. Not to be outdone, the MP in question, the Liberal Democrat David Laws, yesterday performed a 180 degree about turn. Actually it is not that Mr King is softening his stance that concerns Mr Law. Rather it is that as the main spokesman for the MPC, Mr King misrepresents its views by letting his own, hawkish opinion colour what he says.

Mr Law's evidence for this seems to be as flimsy as his suggestion that Mr King has been changing his view in order to schmooze his way into the Governorship. In fact Mr King always sticks pretty closely to the script of the Inflation Report, and certainly did so at the last press conference at which he is accused of indicating that the Bank had adopted a bias towards higher interest rates. As is well known, some MPC members don't particularly like the Inflation Report, or its forecasting methodology, but that's a different issue.

In any case, Mr Law really seems to have got it in for Merv the non-Swerv. Is there a history here, or something? Or perhaps Mr Law is in the pay of Sir Howard Davies at the Financial Services Authority, the second favourite for the Governor's job.

There's still plenty of time for the running order to change, but at this stage it is hard to see why it should. Mr King remains the bookies' favourite and, despite a faintly arrogant obstinacy in his approach, easily the best qualified for the job. It is not even certain that Sir Howard wants it anyway.

Gordon Brown, the Chancellor, has been through the hoops on the Governorship once before. Last time around he wanted to appoint his old pal Gavyn Davies but was eventually persuaded that it would be regarded as just too incestuous to be acceptable to markets. Instead the job passed back to "Steady Eddie" by default. More by luck than design, this has turned out to be an inspired choice. Sir Edward has added gravitas and authority to a sometimes divided and chaotic MPC, and he's ensured that in the round the decisions have been the right ones. What's more, the Chancellor has remarkably found himself more and more in agreement with the Governor on the euro and much else besides.

He even wrote a joint article with the Governor in the Financial Times earlier this week on overseas aid. OK, so maybe you fell asleep before reaching the end, but there does seem to be a genuine meeting of minds. The supposedly more pro-euro Prime Minister, Tony Blair, has good cause to worry. When the Bank of England does its own independent assessment of the five economic tests for euro membership, the Chancellor can be pretty certain the Bank will be marching in step. At this stage, fortune seems to favour Mr King. He'll presumably have changed his view on interest rates since the last meeting in any case.

P&O Princess

Royal Caribbean has successfully negotiated another shark-infested reef on its way to a cosy berth with P&O Princess, but there are at least another two to go before the deal can be finally consummated. Indeed, yesterday's Competition Commission report clearing the merger of public interest objections doesn't really advance the outcome much at all. The Commission has conformed with the advisers' analysis of the issues, so that's a plus point, but P&O's ultimate fate still depends crucially on what competition regulators in the US and Europe have to say on the matter.

On this front, the Competition Commission's findings cast little light on the darkness. The Commission is entirely sanguine about a further concentration of market share in cruises, this on the grounds that the market is fast growing and there are lots of new entrants. However, it stops short of justifying this view by adopting a wide market definition, taking in the travel market as a whole.

There's every possibility that both the Federal Trade Commission in the US and the Competition Directorate in Europe will go for the narrower definition. Post the GE/Honeywell débâcle, when the European Commission adopted a completely different view of the competition issues from that of the FTC, these things aren't meant to happen. Competition regulators have said they will try as much as possible to coordinate their approach to policy. However, on the principle that it is better to be safe than sorry, the Competition Commission has chosen to be unspecific in its market definition, so if others adopt a narrow approach, it won't be seen as completely out of line.

The issues and permutations are fiendishly complicated, since it is not just Royal Caribbean vying for the hand of P&O, but the big daddy of the cruise line market as well, Micky Arison's Carnival. Confusingly, his bid is being examined not in Britain, but in Europe, whose approach to mergers has become notoriously maverick and demanding. The Competition Commission's findings might give Mr Arison reason for comfort. If the British authorities are relaxed about it all, he'll figure, then surely Europe and the US will be too, allowing the financial markets to determine who wins. That's assuming he wants anyone to win, for the suspicion remains that the Carnival bid is little more than a spoiling tactic designed to scupper the Royal Caribbean challenge to his market leadership. Mr Arison would probably much prefer the status quo. Confused? That's how the competition lawyers like it. Blip. The meter just added on another million.

Gent's big fat bonus

Whatever the fury shareholders might feel about Sir Christopher Gent's big fat bonus, the time is long past for getting hot under the collar about it all. Investors had their chance to vote on the issue nearly two years ago, when the bonus was first agreed. There was lots of huffing and puffing about it even then, when the market was still riding high, and a few institutions abstained, no less, to register their disapproval. But approve it they did, after securing a few choice concessions.

Since then, the Vodafone share price has collapsed, and one of the justifications used by Lord MacLaurin, head of the remuneration committee, for the bonuses – that they were in recognition of Sir Christopher's enormous contribution to shareholder value – looks positively crass. It is not Sir Christopher's fault that the market has since changed its view of the mobile phones industry, but nor should he be surprised at the anger now felt. This bonus is the second half of a payment agreed after the event for the successful takeover of Mannesmann. The deal certainly expanded Sir Christopher's empire, but so far it's most notable effect has been massive value destruction.

jeremy.warner@independent.co.uk