British Home Stores, once the flagship enterprise of the then acclaimed ‘retail wizard’ Philip Green, is winding up fast. Eleven thousand employees stand to lose their jobs. 20,000 pensioners face cuts to their pensions – losing up to 77 per cent in the worst case. Contributions to those reduced pensions will potentially have to come from the pension protection fund, which is supported by a levy on 6,000 other pension schemes, many much smaller than BHS. Meanwhile, the Green family received £307m in dividends during the profitable years in the early part of the last decade, while BHS’s assets reduced sharply, from £430m in 2000 to £183m in 2014.
Fresh from an inquiry into scandalous employment practices at Sports Direct, parliament’s cross-party specialist business innovation and skills committee joined up with my select committee, work and pensions, to look at the collapse of BHS. As our recent report states ‘We chose to investigate BHS because it encapsulated many of our ongoing concerns about the regulatory and cultural framework in which business operates, including the ethics of business behaviour, the governance of private companies, the balance between risk and reward, mergers and acquisitions practices, the governance and regulation of workplace pension schemes, and the sustainability of defined benefit pensions’.
We heard from a wide range of the key players, most dramatically from Green himself. His performance will no doubt feature in presentational training videos for many years to come as a model in how not to give evidence – in turns evasive, challenging and provocative. It might have made for some great television, but it gave a disturbing insight into some appalling business practices. For someone with a reputation for close, even micro, management of his business affairs, Green professed an extraordinary lack of awareness of the growing gap in the pension schemes. These had gone from a combined surplus of £43m when he bought BHS in 2000 to a combined deficit in 2006, reaching -£345m in 2015. Concerns raised by the pension fund trustees were apparently ignored.
Yet even though the Green family have enjoyed staggering riches while the company and its pension schemes ran into the ground, they were not the only ones at fault. Dominic Chappell, to whom the company was ultimately sold for £1, took £2.6m from the company, as well as an outstanding £1.5m family loan, which he then described as ‘a drip in the ocean’! Numerous other directors, advisers and others failed in their responsibilities. In signs of a collective ‘group-think’, many advisers seem to have drawn comfort from the presence of others involved, and apparently absolved themselves from the rigorous duties of diligence that we would have expected.
Only the ordinary employees and pensioners, the blameless ones in this debacle, have paid a really heavy price. Our report correctly concluded that ‘This is the unacceptable face of capitalism’. It is in everyone’s interests that business and entrepreneurship thrive, creating jobs and wealth and generating tax revenue. It is also in the interests of responsible business that shocking examples of greed, incompetence and careless risk-taking are judged unacceptable and that lessons be seen to be learnt.
There is already a corrosive cynicism around, rooted in a sense that those most responsible for the global economic crisis of 2008 were punished least. Wages have only begun to creep back to pre-crash levels. Public services are being decimated as the price to be paid for a deficit caused by the crash, not pre-crash spending. Now there are fears that a new crisis looms post Brexit. Now, more than ever, we must ensure that the same standards apply to everyone. The rich and powerful must be held to account for their failings, just as expectations are rightly placed on ordinary employees, claimants and service users. The BHS story is a shameful one. Let it be the last. We must strive to win back the sense that this is a fair country, where the same rules apply to everyone and where we fulfil our obligations, one to another.
Karen Buck is member of parliament for Westminster North and sits on the work and pensions committee. She tweets @KarenPBuckMP
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