Philip Green, Public Procurement and BHS Pension Liabilities

Engaged by Francis Maude in one of his poorer decisions, Sir Philip Green produced an unprofessional and superficial report on government procurement back in 2010, a pack of PowerPoint slides with a distinctly cobbled together look and feel. Then it took ages for PC PRO (well done to them) to get Cabinet Office to answer Freedom of Information questions that showed the data on price variation across different government organisations was totally meaningless.

The rumours at the time were that Green was known by civil servants involved in the “study” for castigating them for wasting money from the comfort of his luxury suite at some top hotel. He complained that civil servants were spending £100 a night on their London hotel rooms – which incidentally buys you a 10 x 8 cupboard near Paddington for much of the year, with no air-conditioning and interesting noises from the room next door all night (in our experience).

Green has certainly made a success of Topshop, and earnt billions, with interesting use of tax avoidance schemes (all perfectly legal of course) that drew the attention of various activist groups – his wife is a Monaco resident. But the dowdy department store BHS has not been one of his big success lately and matters have got worse in the last week.

Facing growing losses and a huge pension deficit, he managed to sell the business last year to a top retail business man. No, I’m sorry, make that he sold it to Dominic Chappell, “a former racing driver who has been declared bankrupt twice”. Yes, an unknown gentleman with no track record of making a success of a paper round, let alone a huge retail chain.

Unsurprisingly, the firm has gone into administration this week, leaving 11,000 employees uncertain about their future, and even more ex staff of the firm uncertain about the security of their pension. The state-backed Pension Protection Fund may well have to step in, which means taxpayers’ money of course, as well as a tax on other firms (who don’t screw up or screw their pensioners) which also funds the scheme. As the Guardian says, there are some big questions.

“BHS has been left with a pension deficit of £571m, despite Green and his family collecting £586m in dividends, rental payments and interest on loans during their 15-year ownership of the retailer”.

How very convenient for Green to have off-loaded his liabilities like that. Nothing to do with him that the new owners couldn’t make a go of it. Just fortunate he is not liable for the hundreds of millions he might have been – or the reputational damage if the firm had gone under on his watch. And to be fair, he has offered to put £40 million into the pensions scheme, so we won’t be any more negative about him, whatever our deep innermost feelings …!

But it all leaves a bad taste in the mouth, and again makes us wonder why politicians seem so determined to listen to business people who might have succeeded in other fields but know absolutely nothing about public procurement. Actually, retail is so different to “corporate” procurement, even in the private sector, Greene was never likely to add anything of any use. “Aggregate and buy in bulk” was about his only message – well, BHS was one of the largest retailers in the UK, and it didn’t do them much good, did it? Same goes for Tesco.  But that is taking us into a different discussion really.

Finally, Spend Matters will be holding a ceremonial burning of the Green report, wrapped in a pair of BHS Men’s Y-Fronts (medium), at 8pm tomorrow evening outside Francis Maude’s house. Tickets available for just £150,000 (tax-free) from the usual sources.

First Voice

  1. life:

    Well said, and interesting tales! I went back to your radio interview and excellent, “I’m being very restrained here but it shows” stuff!

    This was always absolutely bonkers, right up there with dragging Heseltine back from his arboretum for his “No Stone Unturned” revelations.

    The real pondering point for me is how these sorts of things happen, are then accepted, and with the press coming along for the ride – it’s almost like anyone with a bit of a name, money (or the appearance of), and a suit can get away with anything – and probably believe it themselves along the way. Why on earth did Green think he should do this? Why did anyone?

    Lessons learned? Doubtful.

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