This week, Sir Philip Green, former owner of BHS, is to make his first public appearance before the joint Work & Pensions and Business, Innovation and Skills Committees investigating the collapse.
Green feels he has a compelling case to tell. Even though he sold BHS to a three times bankrupt Dominic Chappell for a mere pound just over a year ago, he claims he went through all the correct steps.
He is highly critical of the BHS pension fund regulators for refusing to negotiate with him on a proper rescue plan for its 21,000 members. He is also concerned his reputation has been eviscerated without any reflection of his good works. In the public sphere is his support for fashion academies set up during the Blair/Brown years. He did unpaid work for the Cameron Cabinet Office on finding efficiencies in government. Much less known is the financial support he has provided to Jewish Care and other causes for British Jewry. Behind the blazing, excoriating headlines, Green believes there is more than a hint of anti-Semitism in the relish with which he has been attacked.
The truth is that BHS’ demise is a devastating event. BHS, in its own way, had a special place in the affections of millions of Britons. Founded in Brixton in 1928, it had earned a place in 164 high streets across the land. It was especially loved for its lighting, homewares, school uniforms, women’s hats and nightwear. The cultural ties, not least from generations of Jewish women who bought their Yom Tov hats there, was special. The real damage is to the 11,000 employees (3,000 on contracts), the 21,000 people in the company’s main pension schemes, the suppliers and the high street itself. When a player of this scale vanishes, it leaves behind dereliction and loss of trade all around. Green’s Select Committee testimony will focus on the advisers. He will contend that Chappell’s advisers, accountants Grant Thornton and law firm Olswang (which between them received £8.1m in fees) should have known better than to act for the Chappell vehicle Retail Acquisitions.
We’ll also learn that Green’s own advisers, prestigious law firm Linklaters, relied on Olswang for due diligence on Chappell and Retail Acquisitions rather than do its own work. Green, through his finance director, did receive a warning from Goldman Sachs’ Anthony Gutman that Chappell was not to be fully trusted (then congratulated Green on the deal in an email!). The affair is also in danger of casting a shadow over the unblemished record of jurist Lord Grabiner who, despite being chair of Green’s private company Taveta, was missing from the boardroom at which the BHS sale was agreed.
The issue of what happens to BHS’ pension funds is the one that has evoked loudest moral indignation. It is alleged Green sold BHS with scant regard to the £572m hole in retirement provision. Documents released by Green and the Pensions Regulator show that is not strictly true. Green did make attempts to secure an agreement to help mend the pension fund, but was coolly received by the regulator. His first offer was to put £40m directly into the fund and provide a further £40 against BHS inventories. Now that most of the stock has been sold off, that part of the offer is moribund.
The fund has, or will be, passed to the Pensions Protection Fund run by Alan Rubenstein. Under the PPF rules, future pensioners will see benefits cut immediately by 10 percent. Those who spent their lifetime saving for a pension that would pay out more than £37,000 will see it capped at that level. I’ve seen a letter from one ex-senior executive of BHS whose pension will automatically reduce from £90,000 to £37,000. Green could eventually be required to provide one-third of the shortfall – some £190m.
The Topshop boss has his own ideas for restructuring the pension fund so that the 21,000 employees would not suffer the PPF required reduction. He claims the Pension Regulator has been unwilling to engage, as it has all along – the regulator denies this. One cannot but think that, in the end, Green will be required to write a big cheque.
The whole affair is an embarrassment for the Jewish community at a moment when anti-Semitism has been such a headline theme. Unfair as it may be, the BHS affair feeds into a narrative of wealthy Jewish entrepreneurs taking advantage of ordinary people. That is why I hope Green will see sense and make a grand financial gesture to the pension fund, which would help to see this scandal wither on the vine.