The FT has reported today that:
The Pension Protection Fund is in talks with Sir Philip Green and British Home Stores that could see the loss making department store chain offload responsibility for 20,000 pensioners on to the government-backed rescue agency.
Officials are understood to have asked the retail billionaire who owned the store until last year, to contribute to the cost of rescuing the pension scheme, which has a deficit of more than £200m.
Malcolm Weir, head of restructuring and insolvency at the PPF, said: “The pension protection fund is in discussions with BHS with other interested parties regarding the pension schemes. These discussions are ongoing and no decision has been made.”
To put it another way, Sir Philip Green, the man once asked by David Cameron to examine government spending and make recommendations for savings is planning to dump a massive liability that puts the well being of thousands of families in jeopardy on the state. You couldn't make it up.
But it also puts in context a difference of opinion at the British Chambers of Commerce conference last week. In a panel discussion there I introduced the idea of the cappuccino economy, where the espresso is the state and foundation of well being, the private sector is the hot frothy milk and the wholly unnecessary but fun items in the colour supplements that make us think the private sector is the source of all good things are the chocolate on top. Adam Marshall, policy director of the BCC retorted that I had things wrong: it was the private sector that was the espresso.
Oh yes, Dr Marshall? You really think so, when BHS can dump its people and liabilities on the state like that?
Time to think again at the BCC, I suggest. It's a strong state that is the foundation of prosperity. Thinking anything else is just an illusion.
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The BHS pension deficit story is one about the merger of State and Corporate power. There’s a name for that from the 1930s. Business fails but business doesn’t have the solution so a merged Corporate/Business State moves in.
I wouldn’t push the Cappuccino comparison too far, as it only takes a stir of a teaspoon and everything also becomes merged.
These are scary analogies.
This is one of the greatest neoliberal myths, started by Thatcher in her 1983 conference speech, one that she learned from Hayek’s book The “denationalisation of money”. Probably re-inforced with the advice from the finance industry, who were desperate to wean people off of government money and get them borrowing as much as possible. Hence the cuts, the privatisations, the council house sell offs and the student fees.
Thatcher said:
“Let us never forget this fundamental truth: the State has no source of money other than money which people earn themselves. If the State wishes to spend more it can do so only by borrowing your savings or by taxing you more. It is no good thinking that someone else will pay–that “someone else” is you. There is no such thing as public money; there is only taxpayers’ money.”
Tony Blair was equally clueness and heavily lobbied by the finance industry. He was asked by Brian Walden “how are you going to pay for x, y, z?”, and gave no answer. Hence the no change but not quite so terrible years of new Labour.
We desperately need re-educating about the sovereign currency issuing powers of government, and how without it, our continuing private debt will lead to another crisis.
The bailout of the banks, and this pension fund just illustrates the power of government.
Not forgetting the fact that the only way those privatisations, starting with British Telecom in 1984, could take place was a guarantee, by that same State which has no money, to underwrite the pension liabilities should the newly piratised entity ever go under. Otherwise the City would not have touched these legalised thefts of public assets with a barge pole.
Blair and Thatcher-like 90% of MP’s know/knew diddly squat about money and the banking system scam that allows banks to control the direction of economies. Very ironically it was her reading of Hayek that created the road to serfdom.
While I agree with the sentiment, it is important to note that the PPF is not “government backed”. It is funded by a levy on all UK defined benefit schemes and the failure of BHS will lead to additional costs for other UK schemes. If the PPF is underfunded in the future then compensation to members will be cut although it will be interesting to see whether there is political will at the time to allow this or whether it would be bailed out by the tax payer.
It is interesting that the PPF are speaking to Green post-sale – they must be confident that the Pension Regulator has scope to use its enforcement powers against him otherwise it would be rather futile. I also wonder why they aren’t speaking to his wife given her interest in the business …
Accepted
I had forgotten that, I admit
But it remains rent seeking on a state crated scheme nonetheless
The PPF should always be seen as the last resort after exhausting all other avenues of paying the full pension from the assets of the company and/or its directors and shareholders.
As far as I know the PPF does not guarantee all pension holders the full amount they expected, so again it is the innocent pensioner who suffers from corporate abuse or failure.
http://www.pensionprotectionfund.org.uk/Pages/Compensation.aspx
The private pension industry is corrupt and the state pension administrators are not much better.
When an employee enters into an employment contract which includes elements of pay, benefits and pensions the employer is liable for what has been agreed. Full stop, non-negotiable.
To try to retrospectively renegotiate or renege on the original contract is immoral and should be illegal. If the pension is no longer affordable that is the company and its shareholders problem – instead they use the law to make it the the employees problem or the state.
That is immoral, the funds for the pension that was agreed in the contract should always be found from the company’s own funds or its shareholders (past or present) assets. Philip Green certainly has plenty stashed away tax free in his wife’s name in Monaco!
The law needs to be correctly set to put the pension liability where it is rightly due, with sufficient contingency funding put in place by the private shareholders before they have any right to draw dividends.
Perhaps Philip Green can use all of the money that he has saved by avoiding paying UK tax to fund some of the gap. An extremely arrogant and odious individual who certainly provides a good example of why honours are given to the undeserving.
I was once talking to a parent at my son’s school as we watched a rugby match-it turned out he was an Ayn Rand fan ans seemed to despise public services yet he seemed happy that his children were at a state funded school. There was no sense of irony at all! I think this is known as ‘compartmentalised thinking.’
Or stupidity?
Complete nonsense that anything is to be dumped on the state.
Sir Philip Green’s British Home Stores has a £200 million private problem being handled by a £22.6 billion private, though state backed, fund. See page 13 of their most recent annual report at http://www.pensionprotectionfund.org.uk/DocumentLibrary/Documents/ARA_1415.pdf
Essentially there is mandatory failure insurance which is easily large enough to handle this non-problem.
This is an example of the system working perfectly and entirely without taxpayer money.
Respectfully, if this scheme fails who pays the pensioners?
Stop pretending what is not true
Richard, I would like to urge you to use a, for you (trust me, I’ve just searched and you never have!), new word in your blogs, and that’s ‘diddled’.
It would be wholly wrong, and indeed libellous, to describe this man as a crook. In the far and fair North of my childhood we didn’t call the grocer in the market a crook when he had a nice display of cherries at the front of the stall but weighed you up a bagfull of the half old, brown and mouldy ones from the back. We said we’d been diddled.
Tax avoidance – we’ve been diddled. Phillip Green shifting a significant financial burden onto ‘someone’ – we’ve been diddled…and rest assured it will be ‘we’.
Now of course if he’s not a crook it wouldn’t be at all fair to suggest that the appropriate stance is not to ‘sit down’ with him but to tell him that if he sets foot in the country he’ll be arrested and in the mean time his Top Shop etc assets will be seized and sold to make up the £200 million shortfall in the pension fund for which he failed to make appropriate provisions when he sold up, and indeed when he was trading!
But of course he’s not a crook! He just diddles people. ‘Diddle’…a word for your lexicon!
Crony capitalism at work here..
Profits are privatised
Losses are socialised
The only good thing that might come out of this is that there will be no more of those dreadful toga parties Green used to host.
But the fact that Green has probably squeezed every drop of cash out of BHS for himself and his shareholders before going for help for the pension fund sticks in one’s throat somewhat.
Meanwhile the local authority pension fund I am in is apparently £6 billion in the red. A recent FOI request revealed that whilst ran by a Labour administration, the Council took advantage of a pension contribution break for employers organised by the Tory central government.
I mean – you couldn’t make it up could you? When are we going to get serious about sustainable pension provision?
What a mess.
The mess could well get worse: a staple of many pension funds is fossil fuel companies – many are tanking – taking one example: RWE in Germany – suspension of dividend & zero prospect of dividends in the near future. I’d question if many of the pensions being enjoyed/about to be enjoyed by my contemporaries will be sustainable.
Martin – to what “Tribe” are you referring?
We all know who we’re talking about here. The ones whose name we can’t mention without causing a row.