[Relevant document: First Report of the Work and Pensions Committee and Fourth Report of the Business, Innovation and Skills Committee, BHS, HC 54.]
I should inform the House that I have selected amendment (a), in the name of Mr Richard Fuller and others. In a moment, I shall ask the right hon. Member for Birkenhead (Frank Field) to move the motion. May I just emphasise that there are 14 Back-Bench Members who wish to contribute to the debate, and so even those who are not subject to a time constraint in any formal sense will doubtless wish to tailor their contributions to take account of the level of interest in the House?
I beg to move,
That this House notes the recent joint Report by the Business, Innovation and Skills and the Work and Pensions Committees on BHS; endorses that Report’s criticisms of the governance of the company and of the holding company, Taveta Investments Limited; believes that the sale of the company to Retail Acquisitions Limited for £1 was clearly not in the interests of British Home Stores’ employees and pensioners; notes the failure of Sir Philip Green over many years to resolve the deficit in the BHS pension fund; and calls on him to fulfil his promise to do so forthwith.
May I thank the Backbench Business Committee for giving us the opportunity to have this debate? I do so on behalf of both the Work and Pensions Committee and the Business, Innovation and Skills Committee, because we are debating a two-Committee report.
In light of what you have just said, Mr Speaker, may I say that I know there will be lots of people wanting to intervene and, more importantly, wanting to contribute to the debate? While I am, of course, more than happy to take interventions, if those interventions could be ones that are genuinely inquiring or critical of me, I would be really happy for them to be fielded—no pun intended; sorry. On behalf of the two Committees, may I also thank our advisers and staff, including Adam Mellows-Facer and Chris Shaw, who were the two key people who guided our work?
I am mindful of your comments, Mr Speaker, and anxious that everyone can get in during this three-hour debate. I have four themes to touch on. First, what do I see as the main findings of our joint report, which was agreed unanimously? Secondly, from the base of a successful BHS in the initial stages, what was Sir Philip Green able to achieve? Thirdly, I want to comment on what I see as this sad, slowly unfolding Greek tragedy. Fourthly, because the work of this House is never done, what lessons might we draw from the report for our future agenda? In saying that, I do not wish to say anything—I am sure that this is true of other Members who wish to contribute—that will draw attention away from the central concern of this debate: the 11,000 workers who cruelly lost their jobs; the 20,000-plus pensioners who are now in real doubt about what size pension they will get, even though they contributed to a set promised pension; and how the public’s mind is affected by these operations, if they are an accurate representation of how we earn our wealth.
On the first theme, what do I see as the main findings of the report? Members will have their own views, and it will be great if they do as that will help us to build up a more comprehensive picture for the people who are following this debate. My first view, which was never knocked in any of our Committee proceedings, including our meeting with Sir Philip Green, is that literally nothing happened in BHS or Arcadia, and perhaps in much else besides, without Sir Philip Green deciding directly, or without people knowing what his mind was and that they would get his approval. Obviously I never knew Napoleon—given my age, Members might think that I could have touched the hem of the garment of Napoleon—but in my mind’s eye, this was a character most like the Napoleon whom I read about in history books when I was at school. As there is always pressure for history to be rewritten, particularly from those who think it treats them unfairly, it is important to remember that when Sir Philip acquired BHS, it was a relatively prosperous business that had a pension scheme in surplus. The idea that somebody, out of the goodness of their heart, was charging to the rescue of some mega-failing of British industry is not borne out by the facts in our report or those that anybody else has published.
In light of the fact that the pension fund was left at the end with a £571 million deficit and the conduct of Sir Philip Green that my right hon. Friend has described, must we also look more broadly at corporate governance to determine how an individual was able to behave in such a way in this country?
That is a wonderful point to which I shall draw attention. I hope my hon. Friend and others will catch your eye, Mr Speaker, to develop that point.
I pay tribute to the right hon. Gentleman for how he conducted the inquiry on a cross-party basis. Given his depiction of Mr Green as a Napoleonic figure, does the right hon. Gentleman share my concern that although Mr Green came to the Committee in June and asserted that he would fix the problem, several months later that does not appear to have taken place? Mr Green is reported in the media as saying that he will do so in the next couple of days, but the situation is very irregular, given the authority that he seems to have.
Again, that is an incredibly relevant point, and it links to the previous one. We were certainly left with the impression that the problem would be sorted shortly. There is no concrete proposal on the table to bring justice to the pensioners, and a question of corporate governance is raised about how someone can take over a company with its pension fund in surplus and a good order book. An interesting aspect of Sir Philip’s evidence to us was that he said he could have annuitised all the pension liabilities when he took over BHS, but decided not to do so. Had he done so, we would not be in this position today.
Only a small point: this Napoleon thing has reared its head. I had always thought that Sir Philip Green was more of a Maxwell. He had the money and he had the yachts. He had the workers and he robbed them of their pensions. It is almost a parallel.
Sir Philip has threatened to sue me over my comments about that. I am still waiting for the writ to arrive. I long to be in court to have a trial by jury, but that will be for another day.
I return to what I see as the main findings. There was some pretty important engineering going on from the early years in respect of the profitability of the company. We were much amused in Committee when Sir Philip said that his business prowess extended to halving the cost of coat hangers. It would have been more interesting, of course, for him to have told us about his secret share dealing with one main supplier who during those early years, because they were party to BHS decisions, knew the costs of other orders for which tenders were coming in and was therefore able to bid accordingly.
I maintain that thanks to that measure, Sir Philip was able to get perhaps artificially low supply costs, boosting BHS profits during that period, so it looked even more profitable than it was. That individual shareholder, as I say, was involved in a secret share deal. When he came to sell his shares, he managed to sell them for £90 million. Going on from there, we know that this played a key part in allowing £400 million in dividends to be taken from BHS, which most observers would not necessarily have seen as anything extraordinary.
The next stage of this sorry saga—my second theme—is, what was Sir Philip able to achieve from that BHS base? Gaining ownership—control—of BHS allowed him to acquire the group of companies known as Arcadia. From Arcadia, he managed to sponsor a huge gearing operation. Was it £2.6 billion? Was it £2.9 billion? However, the key thing about the ownership of Arcadia, which came only from what appeared to be the adequate —or more than adequate—running of BHS, was that there were huge sums of money sloshing around Arcadia. All too soon, £1.3 billion of money geared—loans acquired—on Arcadia through a number of companies found its way up to Lady Green.
I thank the right hon. Gentleman for giving way on this important point. Is that not the heart of the issue? The ability of corporate bandits to asset-strip in this way, leaving employees, pensioners and deferred pensioners in the lurch, is one of the key things that needs reform. It is one of the key reasons why people feel this country works for the Philip Greens of this world, rather than the working-class kids of Dover, Deal, Doncaster and Darlington.
Not for the first time, the hon. Gentleman reads my mind, because I wish to go on to that issue. Despite all the razzmatazz and so on, there was nothing that the Committee could find—no evidence of this was presented to the Committee—that showed that Sir Philip Green was king of the high street. He was, and is, a very successful traditional asset stripper, and I think that many people will want to develop that aspect of the debate.
Many of the workers in Arcadia must feel that they may stand ready to be pushed into the same hole as the BHS pensioners and workers. However, I think that a check has been put in place, and how that has happened is rather interesting. There was one of those wonderful moments during our hearings when one thinks, “Why is somebody telling me that?” Dominic Chappell—this triple bankrupt who was largely a creation of Sir Philip Green—told us that he had first refusal should the Arcadia group come up for sale, but that the only restraint was that Topshop would not be sold as part of that next sell-off. Of course, Topshop remains the crown jewels of Arcadia. It is the part of the Arcadia group that Sir Philip Green tried to take into America, and he succeeded. However, we now know that Sir Philip has had to sell part of his stake in Topshop to a company called Leonard Green—no relation whatsoever. It is inconceivable that that American financier would have agreed to buy into Arcadia without having the power to lock the tills, so the idea that the Arcadia companies, and particularly Topshop, will see moneys moving from them to the Green family has clearly been stopped.
Why, the House might ask, if that is the only part of Sir Philip’s empire that is making money, did he sell? It comes back to those mega-loans of between £2 billion and £3 billion. Recently, they have had to be refinanced. Given what our Select Committees have brought out, I think that Sir Philip had real difficulty finding a refinancing champion and had to give access to the crown jewels—Topshop—to refinance those loans, half of which probably went very quickly through a network of companies up to Lady Green and the Green family.
Let me move on to my third theme: the Greek tragedy that has unfolded before us. Sir Philip has many times made the criticism of me that I am biased and that in the very first interview that I gave on this issue on the “Today” programme, when I was asked the straight question of whether I thought he should lose his knighthood, I said yes. Now, perhaps I should not have been a politician—maybe I should have dissembled—but I actually answered based on what I then thought the evidence was, although I much wanted evidence to overthrow that original view. However, whether I had held that view either publicly or privately, as to the idea that the two Select Committees that this House selected to represent it on business and on work and pensions matters could somehow be manipulated by me—fine chance.
My right hon. Friend should consider the criticism of him made by Green as a badge of honour. He and I differ on a whole host of subjects, but he and my hon. Friend the Member for Hartlepool (Mr Wright), who chairs the other Committee, have carried out their duties with distinction, and that should be recognised by the House.
I do not have time to go down that road, but I am really grateful to my hon. Friend. He always emphasises how much we disagree when he is agreeing with me, but I hope that does not mean that we both have re-selection problems coming down the tracks.
However, let me get back to this theme of Greek tragedy. We are dealing with a man who has tremendous wealth—it is difficult to comprehend what wealth he has. Yet, we know that he could have paid up—paid a modest amount, compared with that wealth base of £3.5 billion or whatever it is—and walked away smelling of roses. Not only that, but he would have helped the House, through our Committee system, to begin to set the debate about how we face the whole challenge of pension deficits—that new era into which we have come. That would have helped to answer the question raised by my hon. Friend the Member for Torfaen (Nick Thomas-Symonds): what lessons was Sir Philip drawing vis-à-vis corporate governance? In all those things, he could have been setting the debate. On pension deficits, and on the reform of private companies in particular, he has had nothing to say, but he could have helped us to lead the debate.
Is not that the heart of the issue? Philip Green says he is sorry, but it comes across as crocodile tears, because he will not put his money where his mouth is. He ought to make recompense.
Indeed. Whatever the legal issues, there is a mega, mega, mega-moral responsibility.
Let me conclude my third theme of this Greek tragedy. Here we see—we have seen him before us in this place—a man who has everything in life and risks losing everything important in life: his standing and how his friends regard him. He does so because he seems somehow unwilling to surrender a modest part of his mega-fortune, but that modest part would make such a difference to those pensioners who are still awaiting their fate.
I turn to my fourth theme: what is being tested through our report, starting with our debate today? First, Members will have a chance to comment on how two of their Committees have carried out their work. I really hope that Lord Pannick’s rather appropriately named report, which would begin the Americanisation of our Committee system in which we would have no role, because all the lawyers would just take over and we would sit there like puppets, will be strongly resisted. I know other Members will want to talk about this “judgment”, but Lord Pannick’s report has shown that if you pay a lawyer, and they are friends of yours, they will come up with the opinion you want. That report does nothing for the legal profession. It is interesting that within moments of publishing this supposed report, Lord Pannick had to admit that he was very close friends with two of the key players whom we examined in this undertaking.
There are clearly questions about the Pensions Regulator that people will touch on today and the Work and Pensions Committee will look at. Are the organisation’s legal powers up to the increasing challenge that it faces? Does it have the right staff? Is it run with the right culture, and if not, what needs to change? Of course, the latter would be much more difficult to deal with than changing legal powers or getting the right staff.
What are the lessons for the Government? My hon. Friend the Member for Torfaen (Nick Thomas-Symonds) has already mentioned one lesson, which I have now learned—perhaps I should have done so long ago. I had somehow thought that private companies govern the future destinies of only a few employees at a time. Wow, was I wrong about that, considering Sir Philip Green’s empire in BHS, with all those 11,000 jobs destroyed, and the jobs at stake in Arcadia? My hon. Friend’s point about corporate governance is mega. It is a theme that fits in with the Prime Minister’s wish that in trying better to protect the vulnerable, soft underbelly of British society, we must look at how capitalism behaves in this country.
I have two more brief points. First, how do we ensure the independence of the bodies that are put into operation to try to recover the assets of a company that has gone down like BHS? Very important questions have been raised in respect of the recovery operation for BHS. Secondly, if we needed to address the staffing, powers and approach of the Serious Fraud Office, given that we are still waiting to know how it is going to respond, how would the appropriate Committee, and then this House, do so in a non-threatening way?
My right hon. Friend is making a very good speech. He touched on the professional advice that was given to Sir Philip Green. Part of that issue is the ongoing problem that we have with how the big consultancies operate in our country—Grant Thornton in this case, and in others—and the fact that the Serious Fraud Office increasingly depends on those consultancies.
The quicker I finish, the quicker my hon. Friend the Member for Hartlepool (Mr Wright) will be able to deal with that matter and how his work on it has evolved.
This is the first time that I have stood before the House since I was elected Chairman of one of its Select Committees. I thank the House for electing me to that position. Despite the hard work, it has been a pleasure, particularly in relation to the work in which we, as comrades, have been involved during this inquiry.
I beg to move an amendment, at the end of the Question to add,
‘; and, noting that Philip Green received his knighthood for his services for the retail industry, believes his actions raise the question of whether he should be allowed to continue to be a holder of the honour and calls on the Honours Forfeiture Committee to recommend his knighthood be cancelled and annulled.’
I am fortunate to follow such a gracious speech by the right hon. Member for Birkenhead (Frank Field), and to move the amendment standing in my name and the names of 113 other Members of this House.
I took part in the inquiry into British Home Stores not only as a member of the Business, Innovation and Skills Committee but as someone who believes passionately in the good that business can do. I have seen in my own life, and in countries around the world, that the force of market economies helps everyone. It helps people who want to earn a living and build a future for themselves and their families, and it creates a stable basis for broader freedoms in society to take hold.
However, in the course of our weeks of inquiry it became apparent to me that when we look at British Home Stores in particular, and at corporate governance in this country more generally, we see that all the rules that help set the stage for our market economy presume that with the freedoms given to people who have enormous power over thousands of their fellow citizens, when times are tough, or when push comes to shove, those people will do not just the legal thing but the right thing—the honourable thing. To some people, “honour” may seem an unusual word to use with regard to business, but in an effective business, ultimately, honour is all that one has. A person can amass a great fortune, but in such turbulent times for the market, they can lose it in a day, and all they are left with is their honour. Underpinning the amendment is the need to gauge, from the specifics of our parliamentary inquiry into British Home Stores, not whether Sir Philip Green’s actions were legal but whether they were honourable. That is pertinent because he received his honour for services to retail.
In the course of our inquiry, a core issue was pensions. The right hon. Member for Birkenhead spoke in detail, as will other Members, about the shortcomings that have led to British Home Stores pensioners facing the prospect of lower pensions and the taxpayer facing the prospect of having to pick up the tab for the difference.
Another issue was the role of advisers. It was bizarre that among a fleet of well-paid advisers on a transaction, apparently the only voice that mattered was that of the adviser who said they were not an adviser. That may be okay if a person is dealing with just themselves and their family, but when they are dealing with people who are going to get up on Monday to try to earn a living in a shop, advice is important. We saw many times that the role of advisers was not just in giving advice; it was also in conveying an impression that this person was a person of substance. In an enterprise with £600 million of revenue, 11,000 employees, and responsibility for putting money into the pensions of 20,000 people, surely those running it should be people of substance—people with experience. What goes through the mind of a knight of the realm in saying that those livelihoods and those futures should be consigned to a three-time bankrupt? What goes through the mind of the owner of such a substantial business in thinking that the problems that he has faced, and found quite challenging, can more easily be solved by someone with zero experience of the industry that they are about to take on?
I was contacted by email by a constituent, Irene, who shared the following:
“I have two friends that worked in BHS in Glasgow and they are devastated at what has happened to them and their pensions. They worked there for years and don’t have much chance of getting another job or being able to build up works pension...This has happened to my friends and their colleagues all because he risked his worker’s pensions while he made huge profits. I feel that we most certainly should not be honouring people like that.”
Does the hon. Gentleman agree with Irene, and me, that this man does not deserve his honour after what thousands of hard-working people across the UK have endured?
I am very grateful for the hon. Lady’s intervention, and I absolutely agree. I would say to people who worked for British Home Stores and want to be sure that we are dealing with issues that are tangible for them, and who are perhaps worried that the knighthood is a separate question, that we are debating those tangible issues. We are talking about what happened to their pensions and the fact that many people lost their jobs. Nevertheless, a symbolic, but still quite tangible, step that we can take in this House is to conclude that, as the hon. Lady says, such behaviours do not merit the continuation of an honour.
In their response this week, Lord Pannick and his colleague talked about governance issues. We were shocked to see that the response said that it was technically not the responsibility of the board of a holding company to attend even a meeting that disposed of a subsidiary, with all those livelihoods attached to it. Not doing so may not have been illegal, but for Lord Grabiner not even to have attended the meeting where the business was disposed of to a three-time bankrupt strikes me as calling into question the character of the members of the board. What went through their minds so that they did not think that was the right thing to do? They were not supposed to sign people into the wilderness with the brush of a pen, and for a Lord to do that points again to the fact that honour has to mean something in the behaviour of our businesses.
I want the Government to consider some further points. I do not have an answer on the question of the payment of dividends when there are pension deficits, but we need to look at it. Another issue to consider is transparency in large private companies, compared with that in public companies. Should the role of chairman continue to be precisely the same as that of other directors, or should the chairman have a greater role and responsibilities? What are the responsibilities of advisers?
Colleagues in the House have spoken to me privately and said that they may well agree that Sir Philip Green is no longer deserving of the knighthood, but they are not sure that the House has a role to play in that. Respectfully, I disagree. We are here to assert a view on the opinion of the people, and I think it is perfectly valid that we should consider the issue in the context of our report. It is on our work that we are expressing a view. We do not make the final decision, but it is worthy and honourable for this House to have a view about Sir Philip Green. Over the summer, Sir Philip has had the opportunity to find his moral compass and do the right thing. In the absence of that, the House has no option but to support the amendment and the motion.
It is a genuine pleasure to follow the hon. Member for Bedford (Richard Fuller), who played such an important part not only in the BHS inquiry but in all other inquiries carried out by the Business, Innovation and Skills Committee. I am really proud of the work carried out by the members of my Committee and the Work and Pensions Committee. We came together extremely well to work forensically and diligently on the hundreds of hours of oral evidence and to consider thousands of pages of written evidence. It is significant that the final report was agreed unanimously, without a single vote being required. Such work was made possible only because of the professionalism and hard work not only of the members of the Committees but of their Clerks. I am very proud of the report and stand by every single word.
What came out of the evidence was a story of massive contrasts and of huge inequality—of tens of thousands of low-paid workers, and those trying to get by in retirement on a small pension, losing out because of the greed of a very small number of people who enriched themselves and gorged on BHS to the tune of millions of pounds.
BHS folded this year, a year after Sir Philip Green sold it to Dominic Chappell, but its demise was on the cards a lot earlier than that. In the three-year period between 2002 and 2004, BHS Group paid dividends of £423 million, even though operating profit for that period was significantly less than that amount, at £325 million. In 2004, BHS Group had dividends of £199.5 million, which exceeded the group’s operating profit of £137 million for that year. The dividends of £199.5 million also coincided with a long-term loan of £200 million being taken out that year.
That dividend policy is revealing, and it set the scene for the eventual demise of the company. The payout to shareholders—predominantly the Green family—did not reflect a corporate turnaround and good transformation in business. BHS did not have the cash flow or the profits to fund the dividend. It denuded the company’s reserves and, in the case of that final dividend in 2004, had to be funded by a long-term loan.
Sir Philip could say, quite reasonably, as he did to the Committee, that he received dividends for only a short period of time early on in his period of ownership. It was a long time ago, that is true, but the dividend policy is crucial to understanding the whole sorry business of BHS and the wider lessons that we need to learn.
Green was to enrich himself, his family and his friends at the expense of long-term and sustainable growth for the company. Certainly profits were made, but they were more akin to a short-term sugar boost than a nutritious diet that aided the long-term health and strength of the business. Upon taking over the company, he was able to cut costs—an achievement that should not be easily dismissed—but he was never able to boost turnover throughout his ownership of BHS. So much for the king of retail.
It is true that Sir Philip Green owned the company for a total of nearly 15 years, and that he retained ownership a full decade after taking the last dividends. In that regard, he cannot be described as a short-term corporate raider. But raid the company he did, and his ability to do so meant that he was then in a financial position to obtain the debt to acquire Arcadia and, through the same modus operandi that he operated at BHS, pay his family the biggest corporate dividend in British history. He took the rings from BHS’s fingers, beat it black and blue, starved it of food and water and put it on life support, and then he wanted credit for keeping it alive.
BHS’s balance sheet was made considerably weaker during Sir Philip Green’s tenure of the company. His extraction of value early on in his ownership made the company less able to innovate, to retain a market share or to have a competitive place in the retail market that would allow the firm to generate profits and be in a better position to survive the growing pension deficit. That drip-drip decline provided the backdrop to Sir Philip’s wish to sell the business.
It would be difficult to come up with a more unlikely or incredible knight in shining armour than Dominic Chappell. He was a former bankrupt, with no experience either in retail or in running a company of any sort of comparable size to BHS. He was introduced to the deal by a convicted fraudster for whom he was carrying out driving duties. He boasted that he had senior retail figures on board for key roles in the new business, when that was not the case. He stated that he would be investing his own money in the deal and that he had £120 million of working capital available, when that was not true. His own investment bankers walked away when they discovered that he had lied about the nature of the deal.
Yet the due diligence carried out by the myriad advisers on the transaction did nothing to stop or even pause the deal. There was a remarkable amount of group-think among the supposedly independent advisers. Grant Thornton received four times the fee that it normally receives from similar transactions. Retail Acquisitions Ltd did not have the means to pay advisers for their services unless the deal with BHS went through. The fact that RAL did not have the cash to pay the invoices, let alone to provide the working capital for a loss-making £600 million business with a half-a-billion-pound pension deficit, should have rung alarm bells up and down the City as to whether the engagement should have been taken on. The fact that it did not clearly gives rise to questions about whether impartial advice was provided, or whether blind eyes were turned to ensure that the fees would be paid through a successful transaction, regardless of whether the company toppled over soon after that.
Goldman Sachs provided Sir Philip with “preliminary observations” and was not paid. The lack of any clear letter of engagement showed appalling levels of informality, given that tens of thousands of jobs were at stake. As the hon. Member for Bedford said, the fact that Dominic Chappell was able to say that Goldman Sachs was on board gave his bid credibility. There is a certain irony in the fact that the firm that was not paid, that had an ambiguous role in the transaction and that claimed that it was merely providing preliminary observations was the only one that really expressed concern about the transaction, noting that
“there were risks attached to the proposal in light of the lack of retail experience, the bankruptcy and the highly preliminary nature of the proposals and so on and so forth”.
Goldman Sachs’ attitude to document management seemed to be on a par with that of a dodgy and ramshackle cowboy operation, rather than that of supposedly the world’s premier consulting firm. If that approach was deliberate, in the belief that an informal approach to the transaction would exonerate it of any involvement, it was wrong. Although it was ultimately not responsible for the decisions taken—that was the responsibility of Sir Philip Green—its involvement mattered. It was up to its neck in it, even to the extent of offering a £40 million credit facility.
The risk to their reputation should have made those advisers think again. Much store is placed on the high-quality advice given by such advisers—certainly, in the case of BHS, the use of such prestigious names gave parties credibility and legitimacy when they should have had none.
This was all made possible by weak and incompetent corporate governance. We on the Committee saw opaque structures, overlapping board membership of a complex web of companies and ineffective leadership at board level. Lord Grabiner, chairman of the ultimate selling company, played no effective part. He was not present at, or even invited to, a meeting of the Taveta board that took the ultimate decision to approve the sale of BHS to Chappell. Lord Grabiner showed no curiosity in the deal. He was docile and demonstrated no effective scrutiny, challenge or leadership. That was indicative of a culture, common in corporate governance scandals, in which a domineering, overbearing and bullying individual was able to get away with things with little, if any, challenge.
That is a key reason for the Select Committee’s decision to undertake an inquiry into corporate governance. Given our experience with BHS, we want to look at whether company law is sufficiently clear on the role of executive and non-executive directors and whether their duties are the right ones. We are examining how the interests of shareholders and other stakeholders are balanced, and how decisions of boards could be better scrutinised and open to challenge. Given BHS’s status as a private, non-listed company, how should we align the corporate governance arrangements and requirements between listed and private companies more clearly, so that it is not in the interests of chief executives or directors to take firms private to hide them from effective scrutiny and transparency?
It may be argued that the Green family, as ultimate shareholders, could do whatever they wanted with BHS, and they did. But a company with tens of thousands of workers and former employees dependent on its long-term viability cannot be run as a personal fiefdom or a massive piggybank—even though BHS was run in that way—and corporate governance rules and regulations should, no doubt, be adapted to reflect that.
The duties of directors are somewhat vaguely defined. Section 172 of the Companies Act 2006 states that a director of a company must promote the success of that company in such a way as to have regard for
“the likely consequences of any decision in the long term…the interests of the company’s employees…the need to foster the company’s business relationships with suppliers, customers and others”
“the desirability of the company maintaining a reputation for high standards of business conduct”.
The BHS employees who lost their jobs in towns such as Huddersfield say to me, “Why is it that the advisers, consultants and auditors who did not do their job in the banking crisis are, all this time later, still not doing their job as auditors and professional people?”
As the hon. Member for Bedford mentioned, we need to look at more than just reputational risk. A lot of deals go through simply because such advisers are involved. Is that good enough?
To return to my point about directors, can anybody look at BHS and say that the spirit and the intention of section 172 of the 2006 Act were being enforced? In companies legislation, directors are equal in status, but in the corporate governance code, chairs and leadership are given much more priority. Given the shocking absence of leadership or challenge from Lord Grabiner, who was truly hopeless, and the weak and impotent corporate governance operating here, there is a strong case for enshrining the requirements of the code in legislation.
As the hon. Member for Bedford said, Sir Philip received his knighthood for services to retail. During our inquiry, however, it became increasingly evident that he was not particularly good at retail at all. True, he was able, in the early days, to sniff out a corporate bargain and cut costs to boost profit. There is nothing wrong with that; that is not a criticism. But during his ownership, he did not boost BHS’s turnover, he lost market share to more nimble and even to not-so-nimble competitors and he failed to anticipate the online retail revolution. By failing to innovate and invest in the brand, he made BHS—an important anchor in the high street—look like a remnant of the 1970s and 1980s in a cut-throat, competitive sector, where grabbing the customer’s attention and retaining their loyalty are paramount.
Sir Philip lacked the success, the ingenuity and the business acumen of the likes of Charlie Mayfield, whose John Lewis group responded well to the internet and whose employee ownership model genuinely motivates staff. He could not match the virtues of Zara, which has increased market share through its superfast turnaround from design to manufacture and shop, which is based on the use of customer data and local suppliers, the rapid turnover of stock and an innovative online platform. Based on company performance, people such as Charlie Mayfield and the founder of Zara, Amancio Ortega, should, it seems to me, be classed as the true kings of modern retail—not Sir Philip Green.
BHS is one of the biggest corporate scandals of modern times. I am sure that the whole House has sympathy for the thousands of workers and pensioners who have lost their jobs and seen their pension benefits reduced as a result of greed, incompetence and hubris. The reputation of business has been tarnished as a result of that greed. The vast majority of businesses are not run and managed in such a way. It would be wrong to tar all businesses with the same brush, but it is vital that this mess is sorted.
I am grateful to my hon. Friend for the cogent way in which he has presented his argument. I have no difficulty in supporting the motion, which is in his name and the name of my right hon. Friend the Member for Birkenhead (Frank Field) and others. In principle, I agree with the amendment in the name of the hon. Member for Bedford (Richard Fuller) and others. My only question—my hon. Friend may be able to help me with this—is whether now is the right time to accept the amendment, or whether it should be left in abeyance until some of the other issues have been sorted out.
Parliament will have its view on the knighthood. There is an urgent need to make sure that the pension problem is sorted. Sir Philip Green appeared before us on 15 June and said that he would sort it, but we are now four months beyond that. He is meant to be the consummate deal maker, who can buy and sell companies worth billions of pounds in a couple of days. If he is intent on sorting this, why has it not been done already? Regardless of what Parliament decides today, and regardless of the route taken by the honours forfeiture committee in respect of the knighthood, he has got a duty to sort this. Even at this late stage, Sir Philip should make amends for this whole sorry story and put right the wrongs that he engineered.
Order. Before we proceed with the debate, it is obvious to the House that we have a short time this afternoon. I expect this debate to finish at about half-past 2. I do not want to put a time limit on such an earnest, decent and well-mannered debate, and I hope that Members will restrict themselves to some seven minutes. If everyone who has indicated that they wish to speak does so for about seven minutes, everyone will get a fair and equal chance. If not, I will impose a time limit.
It is a pleasure to follow the wise words of the hon. Member for Hartlepool (Mr Wright), and it was a pleasure to serve with him on the joint Committees. May I associate myself with the remarks that he and the right hon. Member for Birkenhead (Frank Field) have made about our hard-working Committee Clerks throughout the process?
When the news of BHS broke, I felt bad about the loss of a high street icon, desperate for the employees affected—including those in my constituency—and very concerned about the pensioners involved. I have a confession to make to the House, however. My gut reaction was that a Committee inquiry would simply rake over the ashes of a sad event, with little to be gained. I was initially not convinced that the inquiry would be productive, but I was persuaded to take part. I am glad that I did, and I am glad that this inquiry has taken place, because we can lay concerns before the House.
The largest concerns, for me, are not particularly about the trading circumstances leading to the demise of BHS—although it seems, as the hon. Member for Hartlepool has said, as though there was little magic around the revitalisation of BHS’s margins in the early years of its ownership by Sir Philip Green. Dividend payments, generous as they were and exceeding profits as they did, may or may not have undermined BHS through underinvestment. That would be hard to prove, but it is a perfectly sensible question to pose.
Should we not be raising questions if any company pays out dividends in excess of its free cash flow? That should ring alarm bells, and perhaps there should be a test that companies need to meet if they behave in such a way.
The hon. Gentleman, as so often, reads my mind. If he is a little patient, he will hear me make a similar point later in my speech.
On the period during which very generous dividends were paid, directors cannot be expected to have the gift of prophecy, but they can be expected to understand the fundamental trends driving the underlying profitability and sustainability of their business. I am far from convinced that that was the case in this situation. The most serious questions, as raised by the hon. Members for Hartlepool and for Torfaen (Nick Thomas-Symonds), are about the corporate governance of large private companies with millions of employees and pensioners.
Unlike my feisty friend, my hon. Friend the Member for Bedford (Richard Fuller), I intended not to refer to the individuals directly concerned in the sad demise of BHS, but to focus on the more general lessons to be learned. I am afraid that I have been drawn back to the circumstances of BHS after reading the joint legal opinion produced for Taveta Investments Ltd by learned counsel last night. As the right hon. Member for Birkenhead said, the two lead QCs make a point of saying that they are friends of the chairman of TIL. I hope that their report, which is considerably longer than the report of the joint Committees that it analyses, was not unduly costly. The report basically starts by saying, “Let’s pretend this is not a parliamentary inquiry, but some other kind of inquiry. Would that type of inquiry be set aside by the courts?” Having set up an irrelevant question, the opinion produces an irrelevant answer.
Does the hon. Gentleman agree that it is somewhat ironic for Sir Philip, who has complained bitterly about an outcome with which he does not agree, to be able to pay handsomely for an 81-page report from two eminent QCs, given that I imagine the pensioners and employees are not, unfortunately, able to resort to such a tactic?
I suppose the answer depends on the quality of the report. Frankly, having read it, I find that it contains a series of straw men that have been set up for demolition. In my view, it does not help Members, the pensioners or anyone to understand the circumstances of the demise of BHS.
To put at rest the minds of learned counsel, the joint Committees did not object to a dowry being provided on the sale of BHS, and certainly did not question its legality. However, we questioned the sufficiency of the cash and the choice of partner in the circumstances that BHS faced. We did not question the concept of a company being sold for £1. Clearly, that is a matter for Taveta Investments (No. 2) Ltd, the selling company, which received the £1. It is unfortunate that TIL2, which is ultimately controlled by Lady Green, is still paying back to Lady Green the £200 million consideration for its acquisition of BHS in 2009. This consideration was satisfied by £200 million of loan stock provided to three overseas companies controlled by Lady Green, with a coupon of 8%.
We would need a much longer debate—I am very mindful that other Members wish to participate—to draw out all the straw men contained in the joint opinion of learned counsel, but several others are produced in the context of corporate governance. A rare point on which the joint Committees’ perspective seems to be shared by learned counsel is on the—in our view, lax—governance of the sale, as was so eloquently described by my hon. Friend the Member for Bedford. However, learned counsel state that that is an irrelevance, because the shareholders in TIL could in any event provide a direction, so the directors were in no position to prevent the sale of BHS to any party. That may be true legally, but it should raise questions for this House. Learned counsel tell us that TIL is 88%-owned by Taveta Ltd, a company registered in Jersey, and 12% by six minority shareholders. We are informed that the ultimate beneficial owner of the Jersey company is Lady Green, and that under the articles, Lady Green, acting with any one of the minority shareholders, could have directed the sale of BHS at any time and on any terms.
The right to own and dispose of property under English law is absolutely fundamental, and Parliament would be wise to tread very softly, but I am concerned in this context about checks and balances—not only on the sale, but more generally. What is the value of a section 172 provision, telling directors to have regard to other stakeholders, in these circumstances? What is the role and purpose of non-executive directors, especially when the 88% shareholder is not present around the boardroom table?
To my mind, it is not appropriate for directors serving private companies to decide that they can take an approach different from what is good corporate governance, purely because they can ultimately be directed. That would make it more important, especially on major or related transactions and on honouring commitments to pensioners, that they should bend over backwards to adhere to strong and demanding codes and be prepared to call out owners if they feel actions are taken that do not have sufficient regard to other stakeholders. There are thousands of very successful large and medium-sized private companies employing millions, and for those millions, ownership should be as transparent as good corporate governance.
There are other issues, from which I fear I have been sidetracked by the legal opinion, that the House should consider. As the hon. Member for Hartlepool mentioned, corporate governance codes should be applied not only to listed companies, but to those owned privately. On related party transactions, independent valuations or independent opinions are important when such transactions exceed de minimis levels. There is the issue of the utility of the requirement to have regard to other stakeholders in section 172 and how directors can be expected to do so when they owe responsibility elsewhere. There is the question of the appropriateness of dividend payments above certain thresholds, particularly if a pension scheme is in serious deficit. I was challenged on that point by the hon. Member for Ross, Skye and Lochaber (Ian Blackford).
There is the issue of the requirement for courts to be cognisant of pension deficits, as well as of creditors, when considering applications for corporate restructurings and capital reductions. In private mergers and acquisitions, where pension problems may be less transparent than in the listed market, consideration should be given to compulsory engagement with the Pensions Regulator and with the trustees. For both directors and advisers engaged in sale processes in respect of a company in which the Pensions Regulator has already expressed concern and a sale is not being pre-cleared by the Pensions Regulator, all parties should be very aware of the actuality of the counterparty to whom they are selling. English law requires no due diligence to be done on the buyer—nor, in my mind, should it do so—but common sense suggests a certain wariness to be wise.
In conclusion, there are lessons to be learned from this sad story. Above all, however, we are all focused on the loss of a well-loved icon, the employees who have been made redundant and the pensioners who are rightly worried, but whose plight may yet be mitigated by Sir Philip. Such an act would, indeed, be honourable and very welcome. I understand from the radio this morning that he is, not for the first time, planning to meet the regulators in the next few days. Time will tell whether pensioners have been waiting for a result or have been made to endure a particularly poorly directed “Waiting for Godot”.
This is, indeed, a miserable business that we are discussing. We should not forget for one moment those who have been adversely affected—the 11,000 employees and the 22,000 pensioners, who do not know whether they will receive the sort of pension that they had the right to expect. One of the BHS stores was in the Walsall borough and, like the others, it has of course closed. The least that can be done is for Philip Green to act along the lines stated in the conclusion of this report—a satisfactory resolution to the problems of the BHS pension fund. As the report makes clear, there is no doubt that his massive private wealth should not in any way make that difficult for him.
I have risen to speak because I am very keen to support the amendment, which has been selected for debate by the Speaker. It is of course true that taking away Green’s knighthood, should it be recommended by the appropriate committee, will not make any financial difference to those adversely affected—they will not receive a penny more because the knighthood has been taken away—so why, if there is a vote, should we vote in its favour? I argue that for that honour to be taken away from Green would be a form of censure on him and, moreover, one that he would intensely dislike. As far as he is concerned, the removal of his knighthood would be far more of an indictment than all the words in the report we are discussing.
Mention is made in the report of the arrangements in Monaco concerning the business and tax. I am not entirely a stranger to those matters, because I raised the issue in a debate on taxes in the House in September 2012. I made the point then that although Philip Green undoubtedly pays his taxes in the usual way in this country—that is not in doubt and is not being questioned; he is not one of those who are not domiciled for tax reasons—that does not alter the fact that, in the main, the business is in his wife’s name, and his wife is resident in Monaco. That means that, in effect, the amount of tax paid on the vast business empire that Green is closely involved in—which, in common-sense terms, means he owns those businesses—is minimal. I find it difficult to understand how a person with tax arrangements like that, which are well known, well publicised and no secret at all, should receive a knighthood in the first place. That is a pretty damning indictment of what occurred, in my view.
As for Green’s vast amount of wealth, at that time I pointed out that he had paid himself a modest sum in bonuses that came to £1.2 billion—billion, not million. I do not know what other bonuses he has received since. Hardly a week goes by—some would say, hardly a day—when we do not pick up a newspaper and find details of his lavish lifestyle, which is a billionaire’s lifestyle if ever there was one. Is that not a form of provocation, apart from anything else, to the people who have been adversely affected, namely the employees and pensioners who have lost out and have a future of financial insecurity?
I will keep my remarks brief, and so say this in conclusion: I see Green as a billionaire spiv who should never have received a knighthood and who has shamed British capitalism. The least we can do today is to make our views clear and strong. Moreover, let us apply enough pressure, if that is not an inappropriate word, to try to persuade the appropriate committee that if there is one person who does not deserve a knighthood, it is Philip Green.
This debate has been called in several of our names, and I take particular pleasure in following the speeches of many earlier contributors, but especially those of the Chairman of our Select Committee, the right hon. Member for Birkenhead (Frank Field), and my colleagues on the joint Committees, the hon. Member for Hartlepool (Mr Wright) and my hon. Friends the Members for Bedford (Richard Fuller) and for Horsham (Jeremy Quin).
I will start by saying what the debate is not about. It is not an attempt to suggest that the deficit of any pension scheme in this land is entirely the fault of one individual, or, indeed, the responsibility of the owner of any sponsoring scheme. It is also worth noting that, of the some 6,000 defined-benefit pension schemes in the United Kingdom, about 1,000 are in difficulties of various kinds and very few indeed have surpluses. The situation of the BHS pension scheme is not particularly unique, but the circumstances around it are.
That brings me to my second point. The deficits of pension funds go up and down. They do so particularly quickly at a time when interest rates are moving fast. The value of assets is driven by bond yields; when those are depressed, and that is exacerbated by quantitative easing and monetary policy, pension deficits will clearly rise. All sorts of people are responsible for that, including the scheme’s investment policy makers and investment managers; the costs of all those involved make a significant difference to the scheme deficit as well. I totally accept the argument in the 80-page report by Sir Philip Green’s lawyers that longevity and the macro-economic environment make it difficult for schemes to improve their funding situation.
I agree with every comment that the hon. Gentleman has made, but does he not accept that part of the difficulty we are in with defined-benefit schemes has been the Government’s policy of giving responsibility to the Bank of England in the quantitative easing programme, which is now at £435 billion? If we look at what has happened recently, the 50 basis point reduction in yields means about £120 billion on the defined-benefit pension deficit. The Government have created that by refusing to balance fiscal and monetary policy.
I do not remotely accept the argument in that intervention. This is not a debate about the Bank of England’s monetary policy. The hon. Gentleman would be well advised to read the transcript of the Work and Pensions Committee’s hearing with the Bank of England Deputy Governor three days ago, which I chaired in the absence of the right hon. Member for Birkenhead—[Interruption.] The hon. Member for Ross, Skye and Lochaber (Ian Blackford) is not paying attention, as usual. He would be well advised to read that evidence. Getting rid of quantitative easing will not solve the pension scheme problems, and, in particular, will not solve the problems of the BHS pension scheme. With his approval, I will return to the subject we are discussing.
Before the hon. Gentleman intervened I was remarking that the circumstances of the BHS pension deficit were extraordinary, and that is what I want now to come on to. The BHS scheme went from surplus to large deficit in about 10 years, without any clear plan or any really significant action by the sponsor, without decent relationships between the trustees and the sponsor, with conflicts of interest between some of the trustees appointed by the sponsor that they largely did not recognise during our inquiry, and with contribution holidays in the years when Taveta Investments, the owner of BHS, was taking out large dividends. All that cannot, by any stretch of the imagination, be described as best practice. The plan put forward to resolve the deficit—a staggered series of injections over 23 years—without any evidence of a long-term commitment by the owners to the company, is also not best practice. Our report highlighted that there was an issue with the regulator approving very long-term solutions.
Then we come to the moment of the sale of BHS, when information was withheld both from trustees and from the Pensions Regulator. There was a certain amount of dispute between the seller and the buyer about pressure on the buyer not to communicate with the Pensions Regulator at all, which was reiterated in further evidence submitted to the Select Committee only yesterday by RAL, the buyer. Most significantly, there was no attempt whatever at pre-clearance of the sale with the Pensions Regulator. Most shocking of all to many of us is the concept from both the buyer and the seller that in effect BHS was being sold debt-free, yet it had such an enormous pension deficit. That is at the very least disingenuous. It was naive of the buyer and cynical of the seller.
That brings us to Sir Philip Green himself. He said on 15 June:
“I want to respond to Mr Graham…We want to find a solution for the 20,000 pensioners. We still believe that money into the PPF does not resolve it. Without getting into it…the schemes are quite complex…We will sort it and we will find a solution. I want to give an assurance to the 20,000 pensioners—I am there to sort this in the correct way.”
With that, none of us could disagree. The question, of course—and this is why today’s motion and debate are important—is what has happened in the four months since. There has been some dialogue with the Pensions Regulator. That is absolutely clear. But the public want to know when this is going to be resolved. They are worried that after our report nothing is really going to happen and that an important and powerful man will not be held to account. Today is an opportunity for this House to stress our commitment to holding Sir Philip Green to account.
I had a pension scheme collapse in my constituency about 12 years ago, the Federal-Mogul scheme. Schemes go into the PPF and there are assessments, and all the while that that is going on there is uncertainty. Does my hon. Friend not agree that Philip Green should deal with the situation as he has said he would—well, first of all he should have his knighthood taken away—because all the uncertainty impacts on those poor BHS pensioners?
I am grateful to my hon. Friend, and that is why—I intend to finish my remarks on this note—today’s debate matters. It is not about grandstanding. It is not about Parliament trying to demonstrate moral superiority over the behaviour of individuals. What it is about, I believe, is to say three important things.
First, to Philip Green we are saying, “You made a commitment. We accepted it in good faith and we expect you to fulfil it.” I believe that waiting too long is damaging to his reputation, whereas a quick resolution would be extremely helpful to him. Secondly, the debate is a chance to say to the pensioners and the future pensioners of BHS, “We held this inquiry and we will not let you down.” Finally, it is a chance to say to the employees of other large businesses and the people of Britain in general, “We understand your resentment of businesspeople who run their businesses in cavalier fashion without due regard to your interests.” We have held a complicated inquiry that has held to account the powerful owners of BHS and their advisers. I believe the consequences of our findings will be heard by businesses and echo as cautionary tales for years to come.
It is a privilege to speak in the debate. I thank the Committees for the report and the right hon. Member for Birkenhead (Frank Field) for securing this important debate.
The issue of quantitative easing has come up, and I have to say that the powers of analysis of the hon. Member for Gloucester (Richard Graham) have somewhat deserted him today. He cannot get away from the fact that having had a quantitative easing programme of £435 billion, there is no underlying investment in the real economy. The only conclusion we can logically draw is that business does not have confidence in the economy, and that is why the interrelationship between fiscal and monetary policy is important. We need to get back to a balanced scenario in which interest rates reflect a normal economy. That is what the Government have to take responsibility for and that is what the hon. Gentleman seems to ignore.
The UK Government need to see the work of the Select Committees and the outcome of the debate as a lesson, and to acknowledge that we need to take action now that protects us all from outcomes that we have seen with BHS. The BHS pension scheme, representing 20,000 past and present workers, is in deficit by perhaps more than £500 million, meaning that scheme members face reduced entitlements. That is what should be at the heart of this matter. The reduced pensions of the workers and all those who lost their job should be what concerns us today. Why should pensioners be put at risk and fail to be protected from what is now fully acknowledged as corporate greed? As legislators, we all have to look at ourselves and ask what we could have done differently to have ensured that this situation did not arise in the first place.
This issue highlights the fundamental need to address the regulation of the pensions industry. Approximately 11 million people rely on a final salary pension scheme run by a private sector company. Schemes have come under increasing pressure as funding has become stretched, with about 5,000 private sector defined-benefit schemes now in deficit to the tune of more than £900 billion, according to Hymans Robertson. Despite the view that the hon. Member for Gloucester takes, we cannot escape the impact of quantitative easing and the lack of a balanced response from the Government. It defies logic not to have that.
As I highlighted on Second Reading of the Savings (Government Contributions) Bill, the previous Secretary of State for Work and Pensions, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), said in this House:
“there is a very real systemic issue with DB pension schemes that we need to look at, and my Department will be discussing it further in the months ahead.”—[Official Report, 11 July 2016; Vol. 613, c. 10.]
Since that statement, despite questions from the SNP, there has been silence from the UK Government. Where is the response to the fundamental challenges facing pensions today and what some might argue is a crisis for defined-benefit schemes? When will the Government face up to the challenges and threats to many who are beneficiaries of those schemes? When will the Government respond in detail to what the former Work and Pensions Secretary said was “systemic risk”? That was no throwaway line; a senior Cabinet Minister was admitting what we know to be the case. Does the Minister agree with that assessment given to this House and will she address the point this afternoon? What are the Government doing to deal with their own analysis of systemic risk? Sadly, I suspect the answer is still nothing.
Nothing is being done. The Government have been caught like a rabbit in the headlights—caught doing nothing in the face of systemic risk that threatens the interests of pensioners up and down the country. In the light of the Government sitting on their hands, I welcome the recently announced Select Committee inquiry to examine the adequacy of the Pension Regulator’s powers. That must be welcomed, but why should we be reliant on the Work and Pensions Committee? Why are the Government not doing their job and addressing this issue?
Scottish National party MPs will work to strengthen the powers of the regulator to ensure that the Philip Greens of the world are dealt with effectively when they seek to avoid their pension responsibilities. It is, however, a duty of government to protect citizens from undue pensions risk and the systemic risk to which the Secretary of State referred. Ultimately, defined-benefit pension schemes need to be placed on a sustainable footing and employees must be protected. I look forward to seeing whether the Minister responds to this when she makes her speech, but perhaps I should not hold my breath. More likely, she will have a Government briefing of handwringing, and then she will wait for the debate to end and scurry for cover. After all, we do not expect real answers from this Government.
Brexit means that pension disasters such as BHS and Tata Steel will be much more likely challenges for UK companies. Only when companies are able to afford to keep their promises to employees can pension funds be regarded as safe. Even large and successful companies can fail. The Pension Protection Fund offers help in such cases, but Cass Business School forecasts that up to 1,000 pension schemes could end up in the PPF over the next few years. There are more BHS disasters to come if that is correct. There will be a combined deficit of £45 billion, which would be overwhelming.
Let us try to take this out of politics. The SNP has long called for the establishment of an independent pensions commission to ensure that employees’ savings are protected and a more progressive approach to fairer savings is considered as we move to a period in which defined-benefit schemes are becoming a thing of the past. Why will the Government not do that? Why do we not establish a pensions commission that can consider all these issues in a holistic manner?
Let us come back to BHS—[Hon. Members: “Yes.”] Well, of course Government Members do not want to talk about the Government’s responsibilities, because they have run away from them. They can scoff and laugh, but 20,000 pensioners at BHS are going to suffer and thousands of people have lost their job while the Government looked on from the sidelines. That is the reality of this Tory Government.
Let us come back to BHS, perhaps this time without the laughter from the Government Members. I hope the BHS workers are watching the response of Government Back Benchers. How disgraceful; how contemptuous of people in this country!
Will the hon. Gentleman give way?
Will the hon. Gentleman give way?
Will the hon. Gentleman give way?
I will make some progress and then perhaps I will give way—[Interruption.] I will give way in a second.
Philip Green’s weak apology is a case of too little, too late. He lined his pockets and did not stop to think about his employees. On Tuesday 18 October, Philip Green decided to say he was “sad and very sorry” for the hardship caused by the BHS collapse and that he still wanted to sort out the pension deficit. Green has still tried to defend the indefensible and duck his duties to workers by shifting the blame.
I am grateful for being allowed to intervene on the hon. Gentleman. The point that Government Members are making is simply that we have heard a very long speech about systemic pension risk. That may be an issue, but it could be an issue for another occasion. The Select Committees produced a worthy report of more than 60 pages specifically about BHS. I am relieved that the hon. Gentleman is actually addressing BHS, the employees who have lost their jobs and the pensioners who have been left with less benefits than they should rightly have expected. I am delighted he is finally getting to that part of his speech. We look forward to the rest of it.
I thank the hon. Gentleman. I am aware of the time and I am about to sum up. The point I was making is that we have been put in a situation whereby workers have suffered as a consequence of the actions of Philip Green, but the Government must not think that they can walk away from their responsibilities to regulate business and pension schemes in this country effectively.
I recognise that Sir Philip owes it to the BHS pensioners to find an urgent resolution, but we need to look at corporate governance in the UK to see what can be done to offer protection from the kind of corporate excesses that have taken place with BHS. The Prime Minister has talked about doing that, so she should bring forward the proposals. While Philip Green’s hands are filthy, the Tory Government’s paws are not so clean either. After a lifetime of shying away from an effective crackdown on the corporate irresponsibility of the likes of Green, we are beginning to catch up in the United Kingdom. It is about time that the UK Government took action and the Minister gave us some answers.
I warmly congratulate the right hon. Member for Birkenhead (Frank Field) on securing this afternoon’s very important debate. I thank him, the hon. Member for Hartlepool (Mr Wright) and both Select Committees for their invaluable work in exposing the governance and decision-making issues that have contributed to terrible consequences for so many people formerly of BHS.
Reading the report made me painfully aware of the responsibilities of directors. Under section 172 of the Companies Act 2006, directors must have regard to the long-term consequences for their company of their decision making, and they must consider the interests of employees and customers, and the impact on the community. BHS should have been making plans to mark its 90th anniversary in 2018, instead of which all its stores have now closed, and its employees—some, like Mrs Patel, are mentioned in the report—who had spent most of their working lives building the value of BHS have seen their careers end in redundancy and uncertainty, rather than the secure retirement to which they had been looking forward and had a right to expect.
I simply want to say that it is wonderful to see the Minister in the Chamber today. She is absolutely not scurrying away from anything—I have never seen her scurry away from anything in her life. Does she agree that on a day when we are debating a Back-Bench motion arising from a report by entirely cross-party Committees, the members of which worked incredibly well together, it is really disappointing to hear the SNP spokesman acting like an agitated Humpty-Dumpty talking about monetary policy?
I thank my hon. Friend for his intervention and for his work. Disappointed I may be, but not surprised. My thoughts—and, I know, those of Members of all parties—are with the ex-BHS workers, pensioners and their families.
We have heard about two owners of BHS: Philip Green, who bought the company for £200 million in 2000—it was profitable in the early years—and Dominic Chappell, who even Sir Philip in his ITV interview last week admitted had no retail experience, and was categorically the wrong buyer and the result of a horrid decision. In his powerful speech, my hon. Friend the Member for Bedford (Richard Fuller) laid bare the consequences of the decision to sell to Dominic Chappell.
A key theme in the report is the sharp contrast between the impact of BHS’s demise on workers and pensioners, and the payments received by senior executives in BHS and RAL and their advisers. The report also highlighted serious weaknesses, as has this debate, in the corporate governance of the companies concerned. The Government are very concerned about these issues.
The Prime Minister has already made it clear that we will review corporate governance, including further reforms on executive pay, as part of work to build an economy that works fairly for everybody, not just the privileged few, about whom we have heard so much this afternoon. Strong and transparent corporate governance is vital to provide trust in business and to foster good decision making by companies. The Government intend to consult later this autumn on options to strengthen the existing framework.
The hon. Member for Hartlepool made some salient points about the gap in governance between a public and a large private company. His Select Committee’s inquiry into corporate governance will provide an opportunity—
On a point of order, Madam Deputy Speaker. I thank you for indulging me and hope you will excuse my possible ignorance of the parliamentary process, but I am somewhat confused by the Minister’s responding halfway through the debate, before all Members have had the opportunity to bring forward the concerns of their constituents.
The hon. Lady has herself made clear in asking that question that she has not served for very long in this House, so no one would expect her to have a perfect knowledge of procedure. However, this is a Backbench Business Committee debate, so the Minister and the spokesmen for the two main Opposition parties can choose at what point they wish to enter the debate. The spokesman for the Scottish National party has already entered the debate, and the Minister has come into the debate now. The spokesman for the official Opposition will come in at a later stage. It is entirely up to them and to the occupant of the Chair as to when that happens. I want to ensure that there is enough time for the Minister to take on the points that have been made and those that will be made later in the debate.
I was just coming on to welcome the inquiry into corporate governance announced by the Business, Energy and Industrial Strategy Committee, which I am sure will add to the evidence that we need to take sound decisions on how to strengthen our corporate governance framework for big private companies as well as for public companies.
On the vexed issue of BHS pensions, the fate of the pension scheme and the circumstances leading up to the current problem are of key interest to many, and especially to the ex-BHS employees and its pensioners. Sir Philip has recently been quoted as saying how sad and sorry he is for all the hardship and sadness caused to the people who worked there and the pensioners. He has said, too, that he is in a “very strong dialogue” with the Pensions Regulator to find a solution for the BHS pension deficit. In common with my hon. Friend the Member for Gloucester (Richard Graham), I urge Sir Philip to sort it out quickly so that the workers and pensioners can have greater certainty about their future pensions. Surely they deserve that much.
Alongside any discussions about a potential settlement, the Pensions Regulator has continued to investigate the handling of the BHS schemes. That has involved reviewing almost 100,000 documents, and it remains on course to reach a conclusion soon. As part of that, the regulator is considering whether it can use statutory anti-avoidance powers against a number of parties, and it expects to reach a conclusion in the coming weeks. Nevertheless, I recognise that the BHS case has generated much interest in the regulator’s role and powers and in whether they are sufficient.
Is the Minister aware of any formal proposal that Sir Philip has put forward to the Pensions Regulator?
I am not aware of the specifics, but I thank the hon. Lady for raising that important point. I assure the House that neither the Government nor the regulator is complacent when it comes to the regulation of schemes or the powers needed to tackle and deter this sort of misbehaviour.
Will the Minister give way on that point?
No, I am going to continue.
If we need to bring forward further legislation in light of all the evidence, including that emerging from the BHS investigation, we will do so. In the meantime, we must allow the independent regulator the time it needs to prepare any case and to follow the statutory process wherever it goes.
Will the Minister give way?
I will, but, mindful of the fact that many Back-Bench Members want to enter the debate, only for one last time.
I appreciate that. A great deal has been made of the need to wait for the regulator to come to a conclusion, but this is also about leadership. Will the Government show some leadership and clearly put on the table the view that the actions of Philip Green are not acceptable in a fair society, and condemn him on that basis?
I sympathise with the strength of the hon. Gentleman’s feeling, but certain legal aspects may or may not arise in future, so I must be a little guarded in what I say. I hope that he will forgive me for that.
I assure the House that investigations of the conduct of BHS directors and the management of the pension schemes are well under way. The accelerated Insolvency Service investigation of the activity of former BHS directors is ongoing. It is one of the biggest investigations ever undertaken by the agency, and the Government have made additional resources available to support what we regard as vital work. If evidence is uncovered that indicates that the standards of any of the directors’ conduct fell below what was to be expected, action will be taken. The Financial Reporting Council has announced an investigation of the audit by PricewaterhouseCoopers of BHS’s accounts for the year ending 30 August 2014, and the Serious Fraud Office is continuing to review material and liaise closely with the Pensions Regulator and the Insolvency Service to identify any information that gives rise to a reasonable suspicion of serious or complex fraud.
I understand that Members and the public are keen to see the outcome of the investigations, as indeed are the Government, but it is vital for the investigating bodies to be given time to examine, consider and compile the significant body of evidence. These are very complicated inquiries, given the number of investigations involved and the complexity of the documentation that is being received. I assure the House that, should the evidence support it in the end, there will be enforcement, and action of a tougher nature will be taken.
That is all that I propose to say this afternoon. I look forward to hearing the rest of the debate.
I am proud to be a member of a Select Committee that was part of the joint Select Committee process that led to the reports that have brought us here today. I congratulate both Select Committee Chairs on their leadership over recent months, and on their excellent speeches today. I also commend the superb speeches that Conservative Members have made today. Ably assisted by our excellent staff, the Select Committees have conducted a robust, indeed truly forensic, inquiry into the BHS scandal, and I think that that has been good for the reputation of the House.
I do not have a cynical bone in my body, but even I am slightly taken aback by the fact that it was today’s debate on the Committees’ report that brought Sir Philip Green into the public eye again in the last week or two, most recently when he indicated that he was closer to making a settlement for BHS pensioners. I welcome that, but it does show that a report, and the business of the House of Commons, can have a direct impact on affairs such as those that we are considering.
I do not always agree with the new Prime Minister. However, when she was asked in a recent television interview, “What makes you angry?”, she was absolutely right to reply,
“the powerful abusing their position.”
As we have heard from Members today, that should make us all angry. The sorry tale of British Home Stores is an exemplar: it is a tale of someone who accrued staggering personal wealth but then failed to meet his wider obligations to the company that had enriched him; a tale that ended with 11,000 jobs lost and 20,000 people—including my constituents and those of many other Members who are present—facing cuts amounting to, in extreme cases, up to three quarters of their pensions.
Some of those people were approaching pension age, and, in the last years of their working lives, were unable to take action to remedy the shortfall in their income. They still do not know how much money they will be able to draw on in order to pay their mortgages or rents and live out the rest of their lives. That is absolutely shocking. People deserve security in their retirement, and when they are let down we should be very concerned. As our report makes clear—this is something that I think gets lost—the pension contributions that companies make are not charitable donations; they are the means by which employers meet their deferred pay obligations, and it is those that have been breached.
I know that Sir Philip Green feels much maligned by the Committees’ investigation of the BHS sale, because he made that extremely clear when he was in front of us, but until and unless he provides proper redress for the pensioners, he has absolutely no right to do so. We have heard from many Members today about the scale of the enrichment and the extent to which the company was milked for dividends during its profitable years in the early part of the last decade. It is not for me to talk about how the company’s assets proved to be less robust than had been expected, or how profits taken in the good years left the company more exposed to the subsequent tougher climate, because that has been well done by others. What concerns me is what happened to the pension scheme after it moved from the surplus that it was in when the company was bought in 2000 to a deficit of £345 million in 2015 and £571 million by the time of its collapse.
What we know is that BHS and Sir Philip Green refused to make the employer contributions that were necessary to secure the sustainability of the pension scheme over the year, which caused concern to the board of trustees. Dr Margaret Downes told us that she was sufficiently worried about the declining state of the scheme during the second part of the last decade to seek assurances from the company about its long-term commitment to the scheme, including payment of the requisite contributions. The assurances were not given, and the contributions were not made.
In the summer, Sir Philip Green told our Committees that he had no involvement in the discussions about the pension scheme before 2012. He claimed to be unaware of the problem, and basically blamed the trustees. He suggested that they had made “stupid, stupid, idiotic mistakes”, and had been “asleep at the wheel” of the pension scheme. He indicated that he would have been willing to make much larger contributions had he only been aware of the growing deficit. Our Committees were deeply sceptical about those comments.
During the now infamous summer evidence session—I believe that it was later to become a surprise YouTube hit—we were asked to believe that someone who had a reputation for the micromanagement of BHS had known nothing whatsoever about the state of the pension fund. When he did find out, of course, he became actively involved in trying to do something about it, and at one stage, as we have heard, that led to a proposal for an unprecedented 23-year recovery programme based on a contribution that BHS saw fit to make rather than one driven by the needs of the trustees. That ended in the sale of BHS and its subsequent collapse, and it constituted a lack of due diligence that even those with absolutely no understanding of business will know to be truly shocking.
The hon. Lady mentions due diligence. When I attended the Committee sessions, it seemed as though the blind were leading the blind. This was bigger than just Green; the trustees’ lack of governance was extraordinary.
The entire process of the lead-up to the sale to Retail Acquisitions Ltd, which involved a range of participants, was truly stunning in its lack of robust inquiry and checks. I hope that the lesson will be learned by all the agencies concerned, by Government, and by business. These are issues of judgment and personal responsibility as well as issues of law, all of which were sorely missing from that process.
It is little wonder, then, that Simon Walker, director general of the Institute of Directors, which is normally an assiduous defender of the free market, said that the circumstances of the collapse of BHS were
“a blight on the reputation of British business”.
British business has much to be proud of. As we have already heard, we want to have an environment in which business flourishes and risks can be taken. I completely endorse that. Sometimes, there will be failures. Indeed, pension funds have gone into deficit in many cases —BHS was not alone in that regard—but British business needs to ensure, and be part of a process whereby, its reputation as a whole is not sullied by the shocking and cavalier behaviour of some of the outliers, whether in respect of employment law or the handling of pensions.
In the past few years, and particularly since the 2008 financial crash, we have seen shockwaves of anger and alienation throughout our political system. That has been the case in much of the developed world. There is a sense that the game is rigged and that the wealthy and powerful have their own rules and are not held to account, whether for incompetence, greed or, sometimes, worse. The 2008 crisis highlighted that sense, but it did not begin there and it did not end there. There must be consequences for this sort of behaviour, for the sake of the reputation of good business. There must be consequences, otherwise Government cannot look themselves in the face. They cannot be held in high regard if they do not hold people to account. Those consequences must be proportionate and achieved through due process, but they must be there. That has been excellently set out by my colleagues on the Select Committees. They have set out the changes that are necessary in the law, in corporate governance and in the process by which dividends are paid out when pension funds are in deficit.
The House must scrutinise all those measures and consider introducing them. However, there must be individual accountability. What I want to see more than anything—more than further damage to Sir Philip Green’s reputation, more than his humiliation, more than the removal of his knighthood—is the money. I want the damage that has been done to his reputation in the Select Committee process and in this debate finally to bring him to the table to do the right thing, so that he can hold his head up high, the pensioners can get the deal that they deserve, and all of us who have been engaged in the scrutiny of the sorry tale of BHS will know that that work has been vindicated.
As a member of the joint Committees that conducted the inquiry into the collapse of BHS, it is a pleasure to speak in the debate. It is also a pleasure to follow the hon. Member for Westminster North (Ms Buck), a fellow member of the Committee, and my hon. Friend the Minister, whom I welcome to her place. She had a slightly different role beforehand—she was my Whip.
Before being elected to this place, I worked in business. Like my hon. Friend the Member for Bedford (Richard Fuller), I am pro-business and pro-enterprise, but not at any cost. I have been appalled by the catalogue of events that led to the demise of BHS and by what we learnt in the Business, Innovation and Skills Committee about working practices at Sports Direct. Both are bad for business and, I am afraid, both are bad for the reputation of business, to pick up the point made by the hon. Member for Westminster North.
Rightly, reputable businesses have also been appalled by both situations. The irresponsible behaviours of a few endanger the reputations of the majority that operate responsibly. That is why I fully support the position of the Prime Minister and the Government that we need to make our economy work for everyone. As she said on the steps of Downing Street,
“we’re the party of enterprise, but that does not mean we should be prepared to accept that ‘anything goes’”.
That is not, as I see it, an attack on business—far from it. There is a desire to protect the reputation of business. After all, we do not want to see the irresponsible behaviours of a few tarnishing the reputation of good business. We need to look only at the banking crisis and the resulting lack of trust in banks, from which, let us be honest, they are still trying to recover, to see the dangers of reputational damage resulting from such events.
I rise to note something on the banking crisis and to refer to the Minister’s remarks earlier. Does the hon. Lady agree that, with issues such as the banking crisis and how the state deals with the continuing RBS saga concerning the Global Restructuring Group, how quickly and effectively agencies deal with the matters that we call out is pivotal?
The hon. Lady makes an interesting point. She has a lot of personal interest in looking at RBS and the banking industry. From my perspective, the Government have been very quick in responding to the collapse of BHS and in recognising that there is a need to review corporate governance. I will come on to that in a bit more detail shortly.
The devastating events that resulted in the tragic collapse of BHS raise several questions about whether the framework of corporate governance is satisfactory, especially in relation to large private businesses—those with large workforces and large pension liabilities. This is about protecting our economy, protecting the taxpayer from picking up the bill and, most important, our responsibility to do everything we can to protect employees.
Many right hon. and hon. Members have discussed the consequences of the collapse of BHS. They have looked at the employees and the members of the pension scheme. I would like to focus on the employees. Eleven thousand people lost their jobs as a result of the collapse of BHS. But for those people it was not just about losing their job; it was about the impact on their lives and that of their families. Many of those people have mortgages to pay and are worried about whether they can keep a roof over their head and that of their family.
May I echo what my hon. Friend is saying? My right hon. Friend the Minister for Apprenticeships and Skills, who cannot be here today, mentioned to me that the BHS store in his constituency was for many years one of the most profitable BHS stores, but no due regard was given to those employees or pensioners. They were essentially cast aside, as everyone else was. The impact is being felt throughout the country—in town after town, store after store.
I thank my hon. Friend for his intervention. He makes an important point. The stores are across the country. I do not have one in my constituency, but many right hon. and hon. Members do. Hundreds of people were employed at each store.
As I said, this is not just about the employees; it is also about their families. Far more people than the 11,000 employees have been affected by the collapse of BHS. As the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) mentioned, the effect has been devastating. This has been a horrid period for the people who no longer have jobs at BHS and are facing difficulties in finding new employment.
I agree with the case that the hon. Lady is making. Does she agree that not just the people in the stores who were directly employed by BHS, but the catering and cleaning staff and everyone in the supply chain will be adversely affected?
The hon. Lady makes an incredibly valuable point. It is about the supply chain. Recently, Rugeley B power station shut in my constituency. That affected not just the employees but the contractors and the wider supply chain. It had a real knock-on effect.
The joint Committees’ inquiry has highlighted that the events that led to the collapse of BHS suggest the need to review the regulation on corporate governance, particularly with regard to large private businesses. The inquiry has also suggested that there is a need to create a more level playing field between large private and publicly listed companies in terms of transparency and codes of conduct. As the hon. Member for Hartlepool (Mr Wright), the Chair of the BIS Committee, has mentioned, it will be conducting an inquiry to look at corporate governance and the roles and responsibilities of directors, addressing the issues that have been highlighted in the BHS inquiry.
I am pleased that the Government are committed to reforming corporate governance. It is clear that we need to review the practices of large private businesses, the role of directors in decision making and the responsibilities of directors to consider how they protect the interests of their employees and the members of their pension schemes. Therefore, I welcome the Minister’s remarks and I hope that she and the Government will consider the inquiry’s observations and recommendations and the points made by right hon. and hon. Members this afternoon.
To conclude, we have a responsibility as policy and law makers to learn lessons from the collapse of BHS. I look forward to the Government publishing their consultation this autumn.
I thank the right hon. Member for Birkenhead (Frank Field) for introducing this important debate and pay tribute to the cross-party Members involved in the Committee reports, including my hon. Friend the Member for Edinburgh West (Michelle Thomson).
In July of this year, the British Home Stores shop in my constituency closed. The long-standing store was the third largest retail unit in our East Kilbride Plaza mall. The store did avoid the first round of closures, but staff were left with huge uncertainty about what would happen in the interim, and it was eventually closed. That was a very sad day for staff and constituents. I have frequented the store since childhood and walking by the empty unit is still strange and a stark reminder to our community of the injustice that unfolded and the loss of jobs and pensions.
While our local staff oversaw the closure of our BHS, former owner Sir Philip Green reportedly continued his Mediterranean holiday aboard his £100 million superyacht. I understand that he owned BHS for 15 years before selling it to Dominic Chappell for £1 in 2015. Sir Philip Green has rightly come under fire for taking a massive more-than-£400 million in dividends from the department store chain and selling it in such a manner to a man without retail experience. A damning report from the Business, Innovation and Skills and the Work and Pensions Committees found that BHS was subject to systematic plunder by Green and Chappell and labelled Green the “unacceptable face of capitalism”.
These constituents of mine lost their jobs and pensions. The ordinary people are the losers. They gave their service and good faith both locally and to the company. So real questions must be answered by this House on multinational corporate governance structures and pension regulation. The UK Government must take action and not allow such situations to be repeated in the future.
We in this House must tackle asset stripping. The current situation does not protect working people—those who have families to look after, those who have people to care for and those who have done the right thing and have contributed to pensions and to society only to be taken advantage of and be failed. SNP MPs will work to strengthen the powers of the regulator, to ensure that the Philip Greens of the world are dealt with effectively when they seek to avoid pensions responsibilities.
There is a real need to address inequality and to work with businesses and industry to provide appropriate regulation. Many of my affected constituents have contacted me to ask that Sir Philip Green be stripped of his knighthood; his keeping the title adds salt to their wounds and the injustice of this situation.
Does my hon. Friend agree that, although Sir Philip deserves to be stripped of his knighthood, we also need to address the very real issue that exists: that of all the Philip Greens of the world being able to treat workers in this manner? They need to be made an example of by the Government.
I agree. Workplace regulations should be addressed.
A further matter to be addressed in terms of Sir Philip Green’s knighthood is whether his actions were honourable. Both I and my constituents say no.
I conclude by requesting that the House support the amendment and take appropriate action. We should demonstrate to the constituents of East Kilbride, Strathaven and Lesmahagow who have been so badly affected that we hear and heed their voices and fully support them at this devastating time.
I would like to begin my contribution to this important debate by joining others in thanking the Chairs of the combined Select Committees and pointing out that any suggestion that their report was not a robust, detailed, evidence-led inquiry can be rebutted. It ran for months and had many sessions; the session with Sir Philip Green alone lasted for six hours.
I support the view that, from its initial purchase, Sir Philip saw the dash for cash from the business as the Green family’s primary purpose. Even in the early days, there was limited evidence of a successful retailer improving turnover or market share. I am sure other Members will continue to highlight the various ways that money was redeployed to the Green family, often away from the clutches of the UK taxman, such as by the payment of dividends and the treatment of various assets. I have no doubt that they were all entirely legal, but were they irreproachable?
We have heard much already about the nature of corporate governance. Our report describes it as having a variety of roles, including balancing
“the interests of…many different stakeholders”.
We have also heard reference to the UK corporate governance code. It states that
“one of the key roles for the board includes establishing the culture, values and ethics of the company.”
I thank my hon. Friend and all the members of both Committees. I had the pleasure of sitting in and listening to quite a lot of the interrogation and I thought it was first-class.
Despite the problems we have heard about, such as those to do with corporate architecture and regulation, does my hon. Friend agree that Adam Smith was right when he said we cannot divorce business practice from human behaviour, and that the problem here is that the human behaviour of Philip Green has undermined corporate governance and any positive culture?
I thank my hon. Friend for that intervention. The code goes on to say in the sentence I was quoting:
“The directors should lead by example and ensure that good standards of behaviour permeate throughout all levels of the organisation.”
The code applies only to listed companies with a premium listing of equity shares, but that does not absolve a private owner from any responsibility. Time and again opportunities were missed to address the growing pension deficit and it cannot simply be argued that the deficit was a result of the global financial crisis and increased longevity. Sir Philip had accountability for addressing the deficit and could have chosen to do so on a number of occasions, as other schemes managed to do.
The QCs’ report cites many examples of the Green family’s legal rights as the majority shareholder, but says very little about the responsibilities to pensioners and employees that that brings. I am sorry, but Sir Philip cannot have it all his own way. It was a lack of judgment that allowed the pensions situation to continue, and a lack of judgment that progressed a sale to a wholly unsuitable third party.
The non-executive chairman was at pains to point out that the code does not apply to private companies, and the QCs’ report notes that the chair of the board has merely the same duties as the other directors. Legally that is true, but might I inquire as to what exactly the remuneration of £125,000 as chair of the board was for? I support the suggestion of the governing body for governance, the ICSA, which suggests reforming the code to include private companies. We have heard a number of calls for that today.
In terms of the general culture of organisations, there is always a key risk if a level of power is concentrated in just a few key individuals, there is weak leadership which chooses to surround itself with people who are reluctant to disagree for fear of falling out of favour, and there are cultural failings within the organisation that are common knowledge but remain unchallenged. We all have a duty to speak out in these cases, because by remaining silent we become complicit in the contract of the bully and the bullied.
In the case of BHS, the final decision on sale was made without the non-exec chair asking about the credentials of the purchasing company, why it was believed to be the best outcome for the employees and pensioners, or whether the third party had a credible turnaround plan—and, incredibly, they were not invited to the ratification meeting. There was only one non-exec director at the meeting: the son-in-law of Sir Philip Green, whose stated brief was to represent the interests of Lady Green.
I challenged some board members to name a time—any time—when they successfully challenged Sir Philip Green. Their response was muted. I could literally count the seconds ticking by as each respondent looked for an example.
Our report notes that
“absolute power, in business as in politics, is a dangerous thing”.
It was certainly absolute power that enabled Sir Philip and the Green family to run BHS as their personal fiefdom, to exclude independent directors from key decisions and to bully weak senior managers, and this contributed to the ultimate failure of BHS and to its ultimate failure in its duty of care to the pensioners and employees.
I shall finish by making a brief comment about the amendment. This UK legislature is already struggling to demonstrate its relevance to many people. It must be able to give a voice to people on the important issues of the day. The saga of BHS is being played out in the media, and not only recently. We have seen the success story, the “loadsamoney” parties, the knighthood, the record-breaking dividends, the decline and the eventual sale of the business. People watching at home have, with every justification, asked, “How can this be? How can an owner of a company act with such impunity in the matter of 11,000 jobs and 20,000 pensions?” Hindsight is a wonderful thing, and who among us does not recognise circumstances in which we would do things differently? I am sure Sir Philip Green regrets the circumstances now, but we are talking about a knight of the realm, and that position must surely require a higher bar of ethical behaviour.
(Eningburgh South West) (SNP): My hon. Friend is making a powerful speech. Has she, like me, received dozens of emails from constituents who are concerned that Sir Philip Green should be held up as an example? I shall read out just one of the emails I have received.
“As someone in business, who takes pride in the efforts we make for our staff and customers, it’s really hard to understand why someone like Sir Philip would be allowed to retain his knighthood. Surely, we should not be placing such traits as aspirational for the public.”
Does she agree with that sentiment?
I absolutely agree. Many of us will have received hundreds of letters and emails from our constituents on this subject.
It is on this point that the argument turns for me. The corporate governance code is not there to provide a loose set of rules that companies are invited to think about now and again. It is fundamentally a framework for behaviour in business. Business is not just about the bottom line; it is about providing jobs and sustaining communities, and the best businesses are based on partnership. Sir Philip Green knew for many years that BHS was in trouble and he failed to do the right thing. His actions, and his inaction, led directly to the loss of 11,000 jobs and affected the lives of 20,000 pensioners. He seems to believe that BHS being a private company negated any accountability or responsibility for the lives of people who depended on him and, ironically, who made his success.
It is lovely to see you back in the Chair, Mr Deputy Speaker. I can advise you that I will not be as loud as I was last night.
I stand to contribute to this debate in unfortunate circumstances, in that, like many colleagues in the Chamber, I speak on behalf of a number of constituents who have been profoundly affected by the collapse of BHS through loss of employment and uncertainty over their pensions. Before I proceed, however, I would like to put on record my thanks to the Chairs of both Select Committees, particularly the right hon. Member for Birkenhead (Frank Field), who has had to undergo public vitriol from someone who clearly does not deserve a knighthood. He is to be commended and very much thanked. I also thank my hon. Friend the Member for Edinburgh West (Michelle Thomson) for her determination to continue her work on the Select Committee.
My constituency was home to a BHS store in my hometown of Clydebank for nearly 40 years, and the day the store closed for good was the end of an era and a sad day not only for the community but, more critically, for those who had given loyal service to a company that did not value them in return. When the collapse of BHS became public and the announcement was made that stores, including the one in Clydebank, would be closing, I visited the store to offer my support and to hear the staff’s concerns for the future. As I am sure many Members will recognise, such visits are never a pleasant experience, and genuine concern was expressed about what the future held for them.
It was at that time that the true picture began to emerge of the handling of the BHS pension fund and of the existence of a massive deficit of nearly £500 million. For the staff who had contributed to the pension scheme and who had just found out that they were to lose their jobs, the bewilderment and shock that this situation had been allowed to occur was undeniable. This situation has filled me with anger over the injustice to all those who believed they had a secure future in older age, only to have it announced that they could lose up to 10% of their pension when reaching pensionable age.
I was heartened to hear in the House today that there might be some resolution in this regard, and I hope that it comes quickly. Nevertheless, it is completely unacceptable and a downright disgrace that the staff—the majority of whom, critically, are women—have found themselves in this predicament. I would go so far as to say that it has been nothing short of criminal. The professional and dignified manner in which the staff behaved stands in striking contrast to that of Mr Green and his dodgy cohort of warmehrs, including the trustees, who are all culpable in this debacle. They should be ashamed of themselves for the manner in which they have behaved, but sadly I suspect that they are too busy quaffing their champagne and sailing to Monaco on their yachts to give a damn about the mess they have created.
I would like to take this opportunity to praise the store management in Clydebank, local organisations, the local authority—West Dunbartonshire Council—the Department for Work and Pensions and Scottish Government agencies such as Scottish Enterprise, which worked in concert to assist the staff when they found themselves seeking alternative employment. I was informed recently that every member of staff who sought alternative employment was given the support and advice required to be successful in their application, which was a great relief to me and I am sure helped the staff and their families to sleep a little better. This is an example of all levels of government coming together and using whatever levers they had at their disposal to counter the adverse situations that our communities face. I am full of praise for the organisations that helped to deal with the impact and aftermath of the BHS debacle, but serious questions must be asked as to why this situation was allowed to unfold in the first place.
My hon. Friend has encapsulated the human element of this situation fantastically well in his description of the people working for BHS. I commend him for that. I too had a BHS store in my constituency, and many staff members lost their jobs and had their pensions affected. Another aspect of this involves the buildings. Kilmarnock now has another building on its high street with a “To Let” sign on it. That affects the surrounding shops and the footfall to them. The effect on surrounding businesses is another consequence that has not been considered.
I agree with my hon. Friend that that affects constituencies the length and breadth of the UK.
I would like to commend the recent joint report by the Business, Innovation and Skills Committee and the Work and Pensions Committee, which looked into the Pension Protection Fund, pension regulation and the sale and acquisition of BHS. The report should make uncomfortable reading for those involved in the governance of the company. On many occasions, I watched and listened to the Committees’ proceedings from the Public Gallery. The report must be acted upon by the Government, and I ask the Minister to confirm that this will happen as a matter of urgency. The Government must now show real leadership in tackling this problem. The laissez-faire policies of the UK Government must be consigned to the 19th century where they belong—along with Philip Green’s knighthood.
Words are no longer acceptable; action must be taken now or we will be in danger of more companies going the same way as BHS. That would have serious and profound consequences for our economy, which, due to the ongoing uncertainty over Brexit, is already under serious pressure and struggling to cope. Without action, the Philip Greens of this world will continue to undermine public confidence in private business and have a serious impact on private enterprise. Simon Walker, the director of the Institute of Directors, has stated:
“The reputation of corporate Britain has not recovered from the financial crisis and there are important questions that need to be addressed on issues including transparency, executive pay and board diversity.”
We cannot allow business to mess about with the people’s future income, and the UK Government must up their game on pension regulation, and indeed on pensions altogether—but that is for another debate entirely.
I very much welcome the announcement of a further inquiry by the Work and Pensions Committee, which will look at the adequacy of the Pensions Regulator’s power to deal with issues such as these and at how best they can be prevented from happening again. I fully support the strengthening of the regulator’s powers as a means of ensuring that no one is able to avoid their pension responsibilities, and I know that my Scottish National party colleagues and I will be working hard to make that a reality. I therefore await the Work and Pensions Committee report with great interest and hope that it concludes that the regulator should be in a strong position to protect employees from their rogue bosses.
Turning to the amendment calling for the Honours Forfeiture Committee to strip Philip Green of his knighthood, central to my contribution in this debate has been the welfare of those who have been adversely affected by Mr Green’s actions and also that the Government must get to grips with unscrupulous businesspeople to ensure that this does not occur again. I well understand the frustration and anger directed towards Philip Green. Indeed, I have already made my feelings towards this individual known during this debate, and it is right that we should seek to inform those with the authority to do so to strip him of his honour. Following my participation in the debate on the House of Lords debate last night, it should come as no surprise that I am no fan of an honours system.
Finally, we owe it to the British BHS workforce to hold Philip Green to his promise to resolve the deficit in the BHS pension fund. I am making a personal commitment to my constituents that I will not stop fighting for them until the matter has been resolved and they receive what they fully deserve.
Having listened to colleagues and read the conclusions of the report by both the Work and Pensions and the Business, Innovation and Skills Committees, two principles come to mind that cut to the core of the debate. What we have seen from Sir Philip Green and the collapse of BHS is a lack of responsibility and, moreover, a lack of respect. I commend both Committees, their members and their staff for a comprehensive, factual and damning report on the fiasco of the BHS collapse. Mr Green lacked respect for BHS employees and their families when he mismanaged the business to the point that it could only be sold for £1. He then abandoned all responsibility for their pensions and the failed company that fell apart under his leadership. The report makes for grim reading, particularly when it states that
“the total dividends paid by BHS Ltd were £414 million in the 2002–04 period, almost double the after-tax profits of £208 million. BHS Group, the parent company, paid dividends of £423 million in this period… We were told that the Green family received £307 million of this. This effectively removed value from the company, precluding its use for purposes such as investment or pension contributions.”
Our constituents are bearing the brunt of that recklessness and greed. A constituent of mine, Tracey Hurst, reached out just yesterday to share the impact that the BHS collapse has had on her life. Having worked for BHS for 17 years, she remained there until it collapsed and closed completely. She refers to herself as a loyal member of staff who stayed until the very end. She was not bitter, but disappointed and concerned for her colleagues, many of whom have been unable to find new jobs. Another constituent, Laurence Robertson, contacted me to say that he feels strongly about such greed at the expense of the average person. Another constituent reached out to express how he and his family had always loved shopping at BHS but had been disgusted to discover what he called Sir Philip’s absolute greed and complete lack of compassion. Many have asked that Mr Green be stripped of his knighthood, which seems only fair given that many have been stripped of their jobs and pensions under his leadership.
BHS was a much-loved institution on Edinburgh’s Princes Street for many years. I remember visiting it with my mum as a wee girl in the days when there was even a food hall, which was quite a long time ago. Does my hon. Friend agree that this House owes it to the staff of BHS, who served their communities so loyally for many years, to ensure that sanctions are imposed for what occurred and that this cannot happen again?
As ever, my hon. and learned Friend is absolutely spot on. A knighthood for thousands of pensions does not seem unreasonable. The 32 BHS stores that closed across Scotland included branches in Livingston, Hamilton, Kirkcaldy and Leith, and the closure resulted in more than 700 employees losing their jobs and livelihoods, and a place of work to which many, like my constituent Tracey, gave a huge chunk of their working lives.
When employees lose their jobs and pensions, their families are hit by that loss. Sir Philip understood the importance of providing financially for his family—he understood it very well. In fact, the entire Green family hugely benefited from BHS. Reports say that the Green family made around £2.7 billion in total out of BHS and Taveta. Mr Green paid substantial dividends offshore that financially benefited his wife. BHS employees want to be able to provide for their families, but Mr Green is clearly blind to the parallel. Sir Philip has done pretty well out of BHS and other investments. He has a helicopter, a jet and three yachts. I have nothing against someone spending their hard-earned money as they please, but that should not come at the cost of our constituents’ pension pots. If Sir Philip’s responsibilities do not include ensuring that his employees receive what they have earned, they will certainly not be enjoying the same luxuries as he; they will not even have a pension to retire on.
Beyond responsibility and respect, Philip Green’s actions and those of Dominic Chappell and the BHS directors simply fly in the face of good business practice. BHS’s collapse, coming amid trade negotiations for Brexit, reflects the dire need to encourage fair and inclusive business practices across the UK. This debate is about not only placing blame on Sir Philip Green, but doing what is right for BHS employees, who have been cheated out of their jobs and pensions, and other future employees. It is about ensuring that there are fair business models and regulations so that such a collapse can never occur again.
The Work and Pensions Committee’s announcement that it will examine the adequacy of the Pensions Regulator’s power in a further inquiry is a constructive start to the mission. My SNP colleagues and I have called repeatedly for the establishment of an independent pensions commission so that we can create an architecture under which the Philip Greens of this world can no longer run away with people’s hard-earned money. Now that EU workers’ rights will no longer be guaranteed and transferred to UK workers, it is more important than ever that we are proactive and ensure that our constituents are treated fairly by their employers. As the UK Government embark upon Brexit negotiations, there may be no running commentary, but we can be sure that there are running and ongoing concerns. Employees will remain uncertain about their rights, and the Government have a duty of care to all workers, including those put out of a BHS job and pension.
The Prime Minister claims that she will ensure that workers’ rights continue to be guaranteed in law as long as she is Prime Minister. I say to her and her Government that we require rights to be guaranteed far beyond her term or any of this Government.
My hon. Friend makes an excellent case. Would workers’ rights be enhanced if employees were allowed on company boards?
I absolutely agree with my hon. Friend. The Prime Minister has mooted that idea and I hope that she receives the support of her party.
Returning briefly to Sir Philip, as he is for the time being, he has responded to the criticism that has been waged against him by saying that England
“is a place where you get a lot of jealous, envious, you know, negative people.”
What a shoddy and shameful way to describe anyone, particularly when they are customers and consumers. I hope that Mr Green is listening when I say that my colleagues in the Chamber from England, Scotland and elsewhere in the UK are not jealous or envious of his gross mismanagement of BHS, but I think I am right to say on behalf of hon. Members from all parties that we do feel negative—negative about how hard Mr Green’s former employees, who are our constituents, will be hit by that mismanagement and his failure to make amends.
It all comes back to responsibility and respect. Sir Philip did not respect the hard work, loyalty and livelihoods of his employees, my constituents and the constituents of Members from across the Chamber. Just as a company is responsible for its employees, Parliament is responsible for its citizens. This is about responsible business practices and responsible regulatory practices. This is about holding businesses and individuals to account by any means possible and sending a strong, clear message that we will not accept such shoddy practices from our businesses towards our people.
Strip Philip Green of his knighthood. Take him to task. Maybe get him to sell a few of his superyachts so that my constituents and everyone else’s can get the pensions and retirement that they worked so hard for. We must have a proper, strong regulatory framework so that this dereliction of duty can never happen again.
It is a pleasure to follow so many great speakers. I thank my right hon. Friend the Member for Birkenhead (Frank Field) for his work and chairmanship of the Work and Pensions Committee in producing this joint report, alongside my hon. Friend the Member for Hartlepool (Mr Wright), whom I thank for his chairmanship of the Business, Energy and Industrial Strategy Committee. I also thank those hon. Members who have contributed by serving under their leadership on both Select Committees to help to conduct this investigation of the handling and failing governance of BHS.
It was my privilege to be in the Public Gallery when Sir Philip Green was called to appear before the Committee. It was an education for me to witness at first hand his dismissive and belligerent attitude, variously referring to my hon. Friend the Member for Westminster North (Ms Buck) as “your Lady” and requesting that the hon. Member for Bedford (Richard Fuller) should “stop staring” at him. The title “Sir”, for those who choose to accept it, is bestowed upon those deemed to be deserving of the honour. With the title comes an expectation that a person will conduct themselves with respect and dignity, but that was sadly absent from Sir Philip’s performance on that day.
I would specifically like to concentrate on the BHS pension fund, rather than the possible stripping of Sir Philip Green’s knighthood. If he does lose his honorary title, I guess we will have to accept that it was an “honest mistake” to bestow the title upon him—unfortunately some honest mistakes, such as unloading BHS on to a serial bankrupt, are just bigger than others. Should Sir Philip be stripped of his knighthood, I suggest that, as a symbolic gesture, it is given to one of Sir Philip’s redundant employees. I would like to nominate Mr Grant Atterbury, who has chronicled the demise of BHS and his own experience of the shop floor in a series of very sad, funny, touching and eloquent articles via the pages of The Guardian. Mr Atterbury is still looking for work, and he writes:
“If anyone happens to know of any good jobs going that might suit a deeply cynical 43-year old whose key skills include folding towels and writing slightly bleak yet comical portraits of ramshackle department stores, do please get in touch.”
He lives in Kent, just in case any Member has a job that they might be interested in offering him.
Let me return to pensions. I am pleased to hear that negotiations have started in order to find a solution to the pensions problems faced by those who worked at BHS, but I raise concerns about to the speed of and commitment to the process. Sir Philip has made a vow to “rescue the pension scheme”, but unfortunately, according to the Pensions Regulator, it has yet to receive a “credible” offer to implement a deal. The Pensions Minister said yesterday that neither he nor the Government have received a written offer, which leaves 20,000 pensioners still uncertain about their investment and future, and how they will survive in retirement.
The joint report states:
“Sir Phillip Green systematically extracted hundreds of millions of pounds from BHS, paying very little tax and fantastically enriching himself and his family, leaving the company and its pension fund weakened to the point of the inevitable collapse of both.”
That is clearly unethical, immoral and in breach of section 172 of the Companies Act 2006, which states:
“A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard…to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees”.
I think there is cross-party agreement that Sir Philip failed to meet any of those requirements on any level. We in the House have an obligation to make sure that the regulatory body ensures that that section of legislation is implemented and that law is carried out.
It is imperative that a deal can be done and that Sir Philip makes a credible offer as soon as possible. He is on record as saying he did “everything possible” to stop BHS from going under. He should now be doing everything possible to protect these families from the hardship that his mismanagement may have left them in. As we have heard, he left BHS with a £571 million pension deficit, after taking it over in surplus. He took £400 million in dividends from the company and then sold the department store for a single pound, leading to 11,000 job losses and the final store’s closure last August. He has an obligation to those who worked hard in good faith within the BHS company to secure the settlement that is necessary to ensure the long-term viability of the pension scheme. During his appearance before the Select Committees, Sir Philip promised that he would “sort” the pension scheme. I say to him now: Sir Philip, get it sorted.
First, I thank the Backbench Business Committee for organising this debate on such a timely subject. I also thank the combined Select Committees for their report, as that work has brought us here today. They deserve great credit for having so patiently and thoroughly investigated this whole sordid, shabby affair. I also thank colleagues who have participated in today’s debate, particularly my hon. Friend the Member for Hartlepool (Mr Wright) and my right hon. Friend the Member for Birkenhead (Frank Field), both of whom, through their fantastic chairmanship of their Select Committees, have shone a light on some of the systematic abuses by Sir Philip Green and his accomplices. I should also mention the suggestion made by my hon. Friend the Member for Heywood and Middleton (Liz McInnes) of stripping Sir Philip Green of his knighthood and awarding it to one of his former employees, a self-confessed cynic—how could we blame him for being a cynic after what has happened in the past few years?
I have referred to contributions made by hon. Members today, and it is clear that this issue cuts across party lines. There is a great deal of anger in the House, which reflects the anger that many of those who elected us are feeling. Sir Philip Green treated BHS as his own personal plaything. He failed to invest in the company’s branches, he neglected the brand and he ran down the pension scheme. In effect, he used the company to line his own pockets and then jumped ship like the proverbial rat from a sinking ship. Despite that woeful, even wilful, neglect of this historic company, he still retains his knighthood for “services to retail”.
The House has rightly expressed widespread incredulity at that state of affairs, a view that I share entirely. All human societies have found ways of honouring those who have acted with great distinction. We recognise those who receive such honours as people who have enriched all of our lives—people whose lives challenge us all to try to emulate theirs. Although it is clear that Sir Philip Green has, by his actions, tarnished the honour that we, as a society, have given him, he has tarnished his own good name far more gravely. Stripping him of his knighthood will not create jobs for the 11,000 who lost them. It will not fill the £571 million deficit in the pension fund. It will not fill the hole left on high streets up and down the country. It will not pay back the £6 million owed to Her Majesty’s Revenue and Customs. Nor will it ensure that firms in BHS’s supply chain, many of which are small businesses, the foundation stones of our economy, are paid what they are owed.
Our first priority is to save the pension fund. As far as I am concerned Sir Philip Green can keep his honour, provided he pays back the pension deficit in full from his own ample wealth. He should make good his wrongs with deeds, not just the good intentions that he offered the Select Committee. But if all we do today is posture in condemnation of one man, we are doing little except indulging in competitive scapegoating. I am sure I speak for many people in this country when I say this: the most extraordinary thing about this whole affair is that legally, Sir Philip Green has done nothing wrong. Had he broken the law, and were he just a criminal caught with his hands in the till, it would have been up to the courts to act, but he is not a criminal, and there is no suggestion that he is. This House can rightly condemn the actions of the man, but we cannot escape our own responsibility for this affair. Where are our laws made? Here. Who makes them? We do. Who is responsible when powerful men shamelessly rip off the weak, and yet they have not broken the law? We are.
I am very heartened to hear the hon. Gentleman’s remarks. Does he not share my disgust that the Government have failed to learn lessons from this debacle, and have failed to put any proposals forward so that we ensure that we do not have any other situations such as BHS again?
I will address that point a little later in my speech. I think the Government have said that they intend to change their tune, and that they are now the party of the workers. We shall see whether they genuinely are, but I will not be holding my breath.
There have been a number of occasions when there have been similar incidents. Only about 12 months ago, nearly 1,000 jobs went at City Link on the outskirts of Coventry. I tried to get a ten-minute rule Bill through, and it was defeated. It is about time that we had some really tough legislation on these issues.
I thank my hon. Friend for that comment—it is one that many of us on the Labour Benches agree with. We want to see action, not words. When scandals such as this break, we here cannot have it both ways. We must either shrug our shoulders and say, “Tough luck, guys, that’s the way the game works, you lose,” or say, “We will legislate to make sure that this never happens again.” Will we do that? Will we look at the role of the auditors who signed off on BHS as a “going concern” just a year before it was sold off for a £1 like a second-hand yo-yo? Will we look at the role of the huge city financial advisers who waved through the sale of BHS to Chappell, or at the pillaging of the pension scheme, that, let us remember, is not unique to British Home Stores? This is the story not of one bad apple spoiling everyone’s reputation, but of a system that is bent, and we know in whose favour.
Good businesses are the lifeblood of our economy, but, as honest, responsible, hard-working business people up and down the country know well, the system often allows good businesses to be undercut by bad businesses. When companies are used to extract wealth rather than to create it, it hurts everybody.
In the near future, the shape of the modern economy will be transformed. Let us make sure that that transformation is truly for the benefit of all and that we do not need to come back to the House again and again to express our outrage at yet another scandal and yet another rip-off of the ordinary people of this country. The rules of the game need changing.
I am delighted to see the cross-party condemnation of Sir Philip Green’s conduct. I am also delighted—if not more than a little surprised—to hear the Prime Minister claiming to have thrown out the laissez-faire fanaticism that has dominated her party’s thinking for the past 30 years. We on the Labour Benches welcome any move towards an economy founded on fairness and democracy. It is, after all, what our party has always stood for. It is not what the Conservative party has always stood for. Are we really to believe that the party of billionaires and tax avoiders is the one to transform our economy in the interests of fairness?
Let us take one example: the Prime Minister’s modest proposal to give workers a voice by allowing them representatives on boards. We welcome that suggestion. Giving workers a voice is what our party has always stood for, but I am not convinced that the proposal goes far enough. Are we to believe that an individual worker or two would have been able to stand up to the likes of Sir Philip Green? A voice is useless without teeth. However, even the Prime Minister’s own Cabinet will not support that modest proposal. Members of the Cabinet are, I surmise, more honest than the Prime Minister, more aware of which side their bread is buttered.
I hope that Sir Philip Green is better held to account as a result of today’s debate. I hope even more that it serves as a wake-up call on deeper problems and proves to be a turning point in how our economy is governed. I welcome the Prime Minister’s rhetorical conversion to our party’s values, but the question that she and other Conservative Members must answer is this: they have talked the talk, but can they walk the walk?
I have one message. Today, the House of Commons has illustrated to the country how we work: reports are commissioned, delivered and debated here. The message that we all want to go out is that merely producing a report is not the end of the tale. In many cases, we have to follow up the report. The message to those who have lost their jobs and whose pensions are uncertain is that this place will not give up until we gain the maximum justice that we can. As my hon. Friend the Member for Norwich South (Clive Lewis) has just said, there is a full agenda on how we reform pension law and company law, and we have already started that task.
Amendment agreed to.
Main Question, as amended, put and agreed to.
That this House notes the recent joint Report by the Business, Innovation and Skills and the Work and Pensions Committees on BHS; endorses that Report’s criticisms of the governance of the company and of the holding company, Taveta Investments Limited; believes that the sale of the company to Retail Acquisitions Limited for £1 was clearly not in the interests of British Home Stores’ employees and pensioners; notes the failure of Sir Philip Green over many years to resolve the deficit in the BHS pension fund; and calls on him to fulfil his promise to do so forthwith; and, noting that Philip Green received his knighthood for his services for the retail industry, believes his actions raise the question of whether he should be allowed to continue as a holder of the honour and calls on the Honours Forfeiture Committee to recommend his knighthood be cancelled and annulled.