The MPs who rightly denounced Sir Philip Green’s grubby sale of BHS to a thrice-bankrupt chancer missed a trick: they never pinned down what the tycoon meant when he said he would “sort” the deficit in the pension schemes.
Their report was well researched, well argued and commendably concise – a fine advertisement for the power of select committees to cut through financial fog. A mistake, however, was made when Green gave his testimony on 15 June and proclaimed: “I want to give an assurance to the 20,000 pensioners – I am there to sort this in the correct way.”
That sounded definitive. But what did the “correct” way mean? To most observers, the answer should be easy: it means ensuring that every BHS pensioner receives the pension he or she was expecting.
But note Green’s response when Iain Wright, the chair of the business select committee, asked for clarification in those terms. Green replied: “Sir, they [Green’s advisers] are working up a plan. When they have got the plan together they are going to present it. I haven’t seen – I basically, this time, am going to get presented the plan, hopefully to find a way how we solve it.”
That was far from clear. Green’s answer did not commit him to any precise outcome. Disastrously, the exchanges then fizzled out inconclusively. Indeed, in later answers, Green suggested “sorting” involved reheating a pension restructuring plan from 2014, entitled Project Thor, that would have involved Green and his family finding an up-front payment of £80m.
But £80m no longer seems remotely enough. At the point of BHS’s collapse the combined deficit in the two schemes was £571m on one accounting measure. It may be even bigger today because long-term gilt yields have fallen, which has the effect of increasing the size of future liabilities in a defined-benefit scheme. More important, BHS has failed and thus can’t make future contributions. The bill, on some estimates, could be reduced to £400m by making cash offers to scheme members with small pots. But there is no indication Green is contemplating an offer of that size.
Indeed, the mood music suggests Green is still fixated by the idea that long-term gilt yields will rise one day, allowing the deficits to evaporate.
If Lesley Titcomb, chief executive of the Pension Regulator, has even half a mind to accept a settlement on these terms, she should think again. Green had many opportunities over many years to address BHS’s deficit. He failed to do so, even after paying himself dividends far in excess of BHS’s profits in the early years of ownership.
Yet another exercise in procrastination, or date-stamped IOUs backed by Green family vehicles, would be -disgraceful. This time, “sorting” should mean a structure that gives BHS -pensioners proper confidence. If Green won’t pay, the Pensions Regulator should chase him for the cash – that’s what its powers are there for.
BT Openreach: decision time
Over at the select committee for culture, media and sport, the MPs have also scored a result of sorts. A week after they complained that BT was “significantly underinvesting” in its broadband network, company chairman Sir Mike Rake is firing off promises. Openreach, the infrastructure division, can have an independent chairman and a majority of independent directors, says Rake, plus more control over how the cash is spent.
Will that be enough to silence the calls for Openreach to be liberated from BT via a formal breakup? We’ll find out on Tuesday when regulator Ofcom publishes its final thoughts on the matter. A breakup, we assume, is off the cards, but Ofcom also said in February it wanted Openreach to have more autonomy than BT had proposed.
Rake’s eleventh-hour offer was thus timed curiously. It was, perhaps, a case of volunteering concessions Ofcom would demand anyway. Alternatively, BT was drawing a line in the sand: this much, and no more.
One thing seems clear, however: the MPs’ report illustrated how little goodwill BT enjoys in Westminster. One prod from the MPs and BT is on the back foot.
Gambling problem
The gambling industry is obsessed by deals, or so it seems. But here’s an offer William Hill can surely afford to decline. Rank and 888 Holdings want the chain of bookies to join a three-way mashup to pursue benefits of scale.
That, at least, is what it says on the invitation. In practice, it sounds like a plea for William Hill, the biggest of the trio, to fix the others’ lack of size. Just say “No”. William Hill, without a permanent chief executive since last week’s ousting of James Henderson, has enough headaches of its own.
