Dear Sajid,
I’m sure that you, like me, are deeply concerned by the situation around BHS. 11,000 jobs are at stake and the circumstances surrounding the demise of the retailer are deeply troubling.
First, we need to ensure that we properly investigate the downfall of BHS and ensure that anyone who acted improperly is held to account.
I understand that BHS was bought in 2000 by Sir Philip Green for £200 million. At that point the pensions fund was reportedly in the black. According to reports, from 2002 to 2004, a staggering £422 million was taken out of the business in dividends, with most going to Sir Philip and his family. The business was apparently sold last year for just £1. By that point the pension fund surplus had reportedly turned into a deficit of hundreds of millions of pounds. The Pension Protection Fund (PPF) now looks set to step in to cover the deficit, which will be the largest in the history of the organisation.
I very much welcome the investigation you have ordered by the Insolvency Service into the BHS affair. It is vital that we understand whether the conduct of the Directors – past and present – helped lead to the demise of BHS. If they are found to have acted improperly, we need to ensure that they pay their fair share of the pensions deficit, rather than leaving it to the PPF which of course is backed up by other pension fund. Otherwise, there is a risk that responsible pension funds will end up having to pay for the mismanagement of others.
Sarah Albon the Chief Executive of the Insolvency Service has said that while they rightly cannot provide public updates on the investigation in order to avoid prejudicing future potential criminal prosecutions, she would ‘ensure that you are kept fully informed of progress and findings as the investigation progresses.’ Would you agree with me that in order for the opposition to hold the Government to account in this area, it is important for us also to be kept informed of progress with the investigation?
Second, we need to ensure that we learn any lessons for public policy from the BHS saga.
There are parallels between the BHS situation, and the collapse of Comet. Following the collapse of Comet, the former Secretary of State, Vince Cable, said that the episode ‘reveals wider possible failures in the [insolvency] system’ and said he would try to ensure that the opposition front bench team ‘are properly briefed whenever information becomes available.’ However, following the completion of the report, it was decided that no further action would be taken and that the report would remain secret with no information was shared with the opposition.
Can I ask what the current Government has done to investigate any potential failures or weaknesses in the insolvency system between the collapse of Comet and the demise of BHS? Can you also explain why findings from this report were not shared with the opposition front bench, despite previous promises from the former Secretary of State?
I am deeply concerned that the lack of transparency around the Comet investigation has prevented us from learning the lessons of this case. Given the apparent similarities – with previous owners walking away with millions and leaving a huge pensions deficit behind – will you now re-consider sharing the findings of the Comet report with the opposition?
While it is absolutely essential for the pensions of BHS workers to be protected, there are serious questions about who should be responsible for covering the pension liabilities left by the former owners as this business was run into the ground. The PPF is essential to protect the hard-earned pensions of working people. However, there is the risk of moral hazard, with unscrupulous owners able to take money from a business and leave the PPF to pick up the liabilities. Would you agree with me that a wider review of the functioning of the PPF and our insolvency rules is necessary in order to ensure that our processes are fit for purpose?
Yours sincerely,
Angela
Angela Eagle MP
Shadow First Secretary of State and Shadow Secretary of State for Business, Innovation and Skills