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BRITISH experts are convinced the Mercedes carrying Diana, Princess of Wales did collide with a white Fiat Uno in the tunnel in which it crashed, her inquest heard yesterday.

Scotland Yard’s senior collision investigator, PC Anthony Read, and two other experts concluded that fragments of the smashed rear light of a 1980s Fiat Uno found at the scene and traces of white paint on the wreck of the Mercedes showed evidence of a collision.

Diana, her lover, Dodi Fayed, and their driver, Henri Paul, were all killed when their car hit a pillar of the Pont de l’Alma underpass in Paris on the morning of 31 August, 1997.

PC Read handed the jury four bags of debris retrieved from the tunnel within a few hours of the crash.

One bag contained 55 pieces of clear plastic from the headlamp of the Mercedes itself, while three other bags had a total of 21 red fragments from the rear light of a Fiat Uno made between May 1983 and September 1989.

The car has never been conclusively traced.

But PC Read, who assisted former Metropolitan Police chief Lord Stevens’s investigation into the princess’s death, said it would have been “virtually impossible” for someone trying to cause such a crash deliberately to be sure of success.

Dodi’s father, the Harrods owner Mohamed al-Fayed, is convinced the Fiat played a key role in a plot to murder the princess by staging a car crash.

But PC Read, who produced a joint report with two other experts, said anyone doing so would have risked being killed themselves in a crash with a car twice the weight of the Fiat.

He also told the jury that he believed the crash would have been “survivable” for Diana and Dodi had they been wearing seat belts - a possibility which would have been increased if Mr Paul had not been travelling at twice the speed limit for the stretch of road they were on.

Earlier, Souad Mouffakir, who was travelling in a car just in front of the Mercedes, told the inquest that she saw a white Fiat Uno driving dangerously moments before the collision.

It was also confirmed yesterday that the paparazzi who pursued the Mercedes would not give evidence as the French authorities had refused to force them to appear.

The paparazzi had refused to take part. Their lawyers argued they had nothing to add.

INCOME tax reform should be tackled in the federal budget.

View this through the prism of election-year politics if you must, but it also happens to be an economic reform that can help keep the long expansion going by adding to productive capacity.

A country’s income tax structure says a lot about its commitment to personal economic freedom and to keeping the excesses of government in check.

Ronald Reagan and Margaret Thatcher understood this when they started a counter-revolution against absurdly high income tax rates. The results largely survived changes of government and spread around the world, eventually reaching Australia. But there is more to be done.

“Timid” is the word that comes to mind in describing Australian personal income tax reform since the 1980s. The Government has substantially lifted the thresholds at which progressively higher tax rates apply, without doing much to cut those rates.

Lifting thresholds is not a substitute for rate cuts. As long as high and steeply progressive rates remain, government can feast on the proceeds of bracket creep while occasionally pretending to reduce the burden by adjusting thresholds.

Over the past 10 years the income tax rate structure has been lowered, in stages, from 21.5/35.5/44.5/48.5 per cent to 16.5/31.5/41.5/46.5 per cent.

The cut has been significant at the bottom but less so further up the scale. There was no movement in the top rate until last year, when the calls for action became too strong to ignore, and the Government made a small cut in the top two rates.

Was the case for cutting rates so feeble as to be so easily satisfied?

Treasurer Peter Costello defended the timidity of last year’s reductions by arguing they brought Australia’s top rate into line with the average for OECD countries.

This misses the point. The case for reform rests on the need to improve incentives for individual effort, acquiring skills and taking risks. It also rests on reducing the resources wasted on tax minimisation strategies.

For these reasons, there remains a strong case for a lower and flatter tax scale. The aim should be a top rate in the 30s and a middle rate in the 20s.

Concerns about inflation and interest rates should not be a stumbling block. Reform is compatible with a continued budget surplus.

The revenue cost of cutting marginal rates can be paid for by a combination of base-broadening measures (curbing deductions and concessions), the growth of revenue generated by a strong economy, phasing in the cuts over time and restraining government spending.

The reality is that the Government will aim for a more modest surplus and adopt expenditure-increasing and/or tax-reducing policy changes consistent with it.

It is time to pay more attention to the taxpayers’ interests.

Robert Carling is a visiting fellow at the Centre for Independent Studies, and a former Commonwealth and state Treasury official.

FRANKFURT: Ronald Reagans catchphrase when it came to arms control, “Trust, but verify,” may be the slogan finally adopted by a Europe that is attracted to, but unnerved by, the vast pools of capital amassed by governments in the Middle East, Russia and China.

The sudden rise of these sovereign wealth funds, which have as much as $3 trillion in assets on hand, touched a raw nerve on the Continent last summer.

Politicians as senior as Chancellor Angela Merkel of Germany warned against being “naпve” about the intentions of foreign governments. The sovereign funds, which combine the power of rising states with the secretive behavior of hedge funds or private equity investors, looked sure to bring tough rules limiting their activity.

But that was then.

“Since the credit crunch began, you can sense a different mood,” said Philip Whyte, a senior researcher at the Center for European Reform, a private research group based in London. “All of a sudden sovereign wealth funds have become the knights that ride to the rescue, and that has probably defused the potentially protectionist edge to the issue.”

Recently, the investments made by the funds in European and U.S. banks hit by ripples from the collapsing U.S. mortgage market have led many to conclude that the funds can be useful, at least in time of crisis. Suspicion that European banks might still be hiding additional losses amid a much darker outlook for the sector, though mild by comparison with the United States, reinforces that sentiment.

“The current financial turmoil has clearly demonstrated that financial liquidity is vital for our economies,” said Charlie McCreevy, the European Unions commissioner in charge of enforcing the rules for its internal market. “We must not allow the discussion on sovereign wealth funds to be used as an excuse to raise unjustified barriers to investment and the free movement of capital,” McCreevy said last week.

The European Commission has just begun drafting nonbinding guidelines on how the 27-nation bloc should deal with the funds, although details have yet to emerge.

The rise of sovereign funds still raises some hackles, especially in dirigiste France, where President Nicolas Sarkozy just last week promised to defend French companies. So far, though, there has been no action - probably because no such investor has yet jumped into France.

The response has been much more open across the Channel in Britain, where officials are publicly welcoming them.

Germany - where hedge and private equity funds were denounced by a senior politician as “locusts” just a couple years ago - touched off a debate last summer with its plans for a law reviewing sovereign fund investments. Yet in recent weeks, Berlin has scaled back the plans scope so that it is likely to resemble a similar interagency mechanism used in Washington to determine whether investments represent a security threat.

The law will give Germany options for blocking such funds if they appear to be pursuing political, rather than purely business, aims, and yet will preserve a basically open investment framework.

The bulk of the money recently invested has gone to troubled American banks, including Citigroup, Merrill Lynch and Morgan Stanley. But in September, Barclays of Britain invited the Government of Singapore Investment Corp. and China Development Bank to become shareholders, in exchange for a $11.5 billion cash infusion that Barclays needed to improve an offer, ultimately unsuccessful, for the Dutch bank ABN AMRO.

In December, the Swiss giant UBS got a lifeline totaling 13 billion Swiss francs, or $11.9 billion, from Singapore and an unidentified Middle Eastern investor.

Volatile markets will probably reduce the profit outlook for European banks. But most analysts doubt that the losses would be large enough to force their chief executives to go, hat in hand, to foreign governments for capital.

“We dont see a trend across the wider banking sector,” said Simon Adamson, a banking analyst with CreditSights in London. “It is a problem for the big investment banks that have gotten themselves into trouble.

Still, uncertainty about the intentions of Russia, which officially opens its fund on Feb. 1, is bound to temper any laissez-faire approach, European officials said. Rightly or wrongly, the intentions of Europes neighbor to the East have been colored by President Vladimir Putins muscular, energy-financed foreign policy.

With no investment decisions behind it, the Russian sovereign wealth fund, known as the Future Generations Fund, is already raising fears that its behavior may follow the pattern of Gazprom, the energy giant with close ties to the Kremlin that cut off supplies to Ukraine at the beginning of 2006 in a bald political dispute with that countrys new leadership.

December 8, 2007 — Investors didn’t take too kindly to Macrovision’s $2.8 billion deal to acquire Gemstar-TV Guide International, sending shares of both companies swooning yesterday on the news.

The stock of piracy-protection maker Macrovision took a pounding, dropping 21 percent, or $5.55, to close trading at $20.44.

While it is common for the stock of an acquiring company to fall on deal news, the fact that Gemstar’s shares also shed 16 percent, or 99 cents, to close trading at $4.99 suggests that the deal might have a hard time obtaining shareholder approval.

A majority of Macrovision shareholders and two-thirds of Gemstar shareholders need to vote for deal for it to close. News Corp., which owns The Post, has already agreed to vote its 41 percent stake in Gemstar in favor. The boards of both companies also unanimously approved the deal.

Several sources confirmed that at various points during the five-month long sale process Liberty Media, EchoStar, TiVo, Comcast, Microsoft, Google, Motorola, Qwest, Verizon, and Cisco, as well as private equity firms, all looked at Gemstar.

To be sure, perhaps sensing that market reaction might be negative, on announcing the deal both companies reminded investors that Gemstar’s “extensive review” of strategic alternatives included a “broad solicitation of interest.”

Sources said a deal for Gemstar would have been completed sooner had it not been for a surge in the company’s stock price over the last two months.

The shares, which had traded in the $4-$5 per share range for most of the year, hovered above $6 for much of the fall, hitting a high of $7.15 on Oct. 26 and scaring off potential buyers.

Much of Gemstar’s value is tied to the annuity revenue generated by the portfolio of patents amassed under former CEO Henry Yuen related to its interactive television programming guides.

Yuen was removed as CEO and ordered to pay $22 million to settle civil charges related to accusations of accounting irregularities at Gemstar while he was in charge.

Sources said many of the companies that looked at Gemstar felt that TV Guide magazine’s value was low and that growth prospects for its similarly-named cable network had hit a wall. They therefore based their bids on the value of Gemstar’s intellectual property alone.

Terms of the deal call for Gemstar shareholders to receive either $6.35 in cash or 0.2548 of a share of common stock in a new company for each Gemstar share held.

That’s a 29 percent premium to Gemstar’s stock price prior to the beginning of its strategic review in July.

The cash portion of the deal won’t exceed $1.55 billion and Macrovision said it would raise $800 million of new debt to fund the purchase.

Macrovision shareholders will get one share in the new company for each share owned.

plauria@nypost.com

Call it the Lasik indicator. With the weak economy prompting U.S. consumers to cut back on discretionary spending, laser vision-correction surgeries have been falling, as they did during the last recession.

More than 800,000 Americans underwent Lasik surgery in 2007, a slight increase from 2006. But the numbers started slumping along with the economy in the second half of last year. And industry analysts are now predicting a Lasik recession.

“Were forecasting a 17 percent drop for 2008,” said David Harmon, president of Market Scope, an eye surgery market research company.

Harmon said that when first-quarter data became available next month, he expected the numbers to show an even sharper decline in Lasik surgeries than in 2001. That time around, the sour economy triggered a three-year slump in the laser procedures, which are typically not covered by insurance.

Lasik - for laser-assisted in situ keratomileusis - typically costs $800 to $3,000 or more per eye.

Earlier this year, two main companies in the Lasik business - Advanced Medical Optics, a leading maker of laser surgery equipment, and LCA-Vision, which owns a chain of laser surgery centers - warned of a market slowdown.

Besides the economic challenge, the industry is contending with a small but growing number of complaints about the results of Lasik procedures - an issue to be discussed at a federal regulatory hearing on Friday.

Harmons forecast is based on the relatively strong correlation in recent years between Lasik procedures and the Conference Boards index of consumer confidence in the economy.

Doctors and analysts said a wide range of elective medical procedures, including breast implants and skin treatments like Botox injections, are also being affected.

“People are just being a little more conservative about their finances,” said Dr. Robert Cykiert, a New York ophthalmologist who does both eye surgery and Botox injections.

In the case of Botox, for example, Cykierts existing patients are not spacing out their periodic treatments, he said, but some who are interested in Botox have been hesitant to start treatments.

So far, though, Lasik procedures are the most measurably affected.

Advanced Medical Optics, which gets more than one-third of its revenue from laser surgery systems and related gear, cut sales and earnings forecasts for the year in February, saying then that it expected a 10 percent drop in procedures in 2008. Its stock, which closed on Wednesday at $20.16, is down more than 13 percent since the February warning.

The same month, LCA-Vision, the surgery center owner, said it had cut its work force by 16 percent in anticipation of slowing business. Shares of LCA-Vision closed on Wednesday at $12.28, down more than 75 percent since last July. The stock of a competitor, TLC Vision, closed at $1.26, down more than 79 percent from a peak of $6.10 last May.

Lawrence Biegelsen, a medical device analyst for Wachovia Capital Markets, said that Advanced Medical Optics stock could be hit again as complaints by Lasik patients are voiced at the Friday hearing by the Food and Drug Administrations advisory panel on ophthalmic devices.

Federal regulators have received reports about Lasik patients with dry eyes, double vision and distorted night vision, among other problems.

And various Web sites like www.lasik-flap.com and www.lasermyeye.org/forums/index.php carry sobering tales of more serious eye damage or cases where vision improvements seemed to disappear within a few years.

The FDA is asking the panel for advice on ways to get more doctors, patients and hospitals to report problems stemming from laser surgery or lens implants. One goal cited in documents the agency released on Wednesday is to gather more Lasik data through SightNet, an online network of ophthalmologists who are voluntarily linked to the agencys Medical Product Safety Network.

Lasik involves cutting a flap in the surface of the cornea to gain access to the central portion of the eyes natural lens, which is then reshaped by the laser. Lasik can reduce or in many cases eliminate nearsightedness, far-sightedness and astigmatism.

Lasik practitioners say a recent analysis of past studies showed 95 percent satisfaction rates. But with 12 million patients having undergone the procedure in the United States since it was approved in 1995, the sheer number of individuals with unhappy outcomes is growing steadily. And more of their stories are gaining public attention.

“My eyes are damaged beyond repair,” Pamela Barncastle, 62, of Albuquerque, New Mexico, said in a telephone interview. Barncastle said she underwent the surgery in 2001 but now suffers double vision, as well as seeing halos and bursts of blurred light at night that prevent her from driving after sundown.