BHS

Karen Buck Excerpts

Thursday 20th October 2016 Commons Chamber

[Ms Karen Buck (Westminster North) (Lab)]

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.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

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.

[Ms Buck]

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.