The Collapse of BHS

Sir Philip Green and Richard Graham MP

Sir Philip Green and Richard Graham MP

 

Our new Prime Minister has promised to get ‘tough on irresponsible behaviour in big business’. The report today of our joint Select Committee on the collapse of BHS offers a case study of what can go wrong at a company almost 90 years old and why she is right that government must react.

After over 20 years in international business, I thought little would surprise me. But what emerged from the evidence of the long, and ultimately unhappy, saga of BHS under Sir Philip Green’s stewardship was worse than I expected.

We learnt, above all else, that BHS was run like a medieval fiefdom, with absolute control by the Boss, shaky governance, and only lip service responsibility to its defined benefit (DB) pension fund.

The story of the pension scheme in fact mirrors the business, which lurched from profitability to loss (1999-2006), then financial crisis and now administration. The pension scheme went from (£43m +) surplus to (£350m +) deficit and was then steered to the care home for Defined Benefit schemes – the Pension Protection Fund where benefits are reduced. For almost ten years previously Philip Green had said at various times, and to different people, that he would sort out the pension fund. But when push came to shove he never did so 20,000 pensioners may get less deferred salary as a result. Why?

Green had no need to do anything originally, when the business was enjoying a contribution holiday, and only focused when the scheme went into deficit. He considered insurance buyout solutions, and then a wider solution (Project Thor), which might have worked if he had given enough information to the Pensions Regulator (TPR). But as the Chairman of the Scheme Trustees noted, Sir Philip objected to TPR ‘trawling through ten years of Bullshit’. His proposal for staggered injections over 23 years stretched belief: and he then rushed through the sale of the company to a totally inexperienced retailer, without telling either the Chairman of the Trustees or TPR. The evidence suggests Green was as keen to be shed of the pension scheme as the business, and that Dominic Chappell was steam rollered into agreeing the terms, through greed and naivety.

There is a wider issue here – of what would prevent other owners of businesses with DB schemes from selling their businesses in a hurry, regardless of their obligations. That’s why I strongly recommend it be mandatory for TPR to report on the health of the pension scheme for any potential buyer of a business with a DB scheme, just as a mortgage lender requires a valuation of a property: then everyone knows exactly what the situation is.

As it is, we are left with Philip Green’s word that he will see the pensioners right. After hearing that Green told Dominic Chappell, eventual buyer of BHS, that he would get the company ‘pension free’, I wouldn’t bet the ranch on this happening. Philip Green’s reputation hangs on a thread. I hope he seizes the moment to do the right thing and inject enough capital into the scheme for it to continue outside the PPF, without members taking a haircut. It would be the best result of a long inquiry into one of Britain’s less glorious corporate episodes.

You can read the full report here.

Adjournment Debate Contribution

It is a pleasure to take part in the debate and to have an opportunity to welcome my colleagues on the Front Bench, who are serving—I think for the first time—as Deputy Leader of the House and duty Whip. I congratulate them on their new responsibilities.

In a summer when a decade seems to have passed in the last month—indeed, so much has happened since the ghastly murder of Jo Cox that it seems a long while ago, although in reality it was a very recent tragedy—and at a time when Brexit and the how, when and in what way we leave the European Union seem to be the dominant theme of so much media focus, I want to concentrate on issues over which we have always had complete control in this country. At this time, the emphasis is on the need for us—Government, Members of Parliament, local government and other agencies—to come up with answers and deliver them, so that life in our country and our constituencies, in my case the ancient city of Gloucester, gets better from year to year.

Let me begin with transport, because that is how we Gloucester residents travel to and from our city, how visitors arrive, and how our investors gain their first impressions. Two improvements could be made at Gloucester railway station—in the frequency of the trains and in the infrastructure. It still seems extraordinary to me that Arriva CrossCountry’s inter-city service between Birmingham and Bristol, which runs 63 trains a day, stops only three times at the city of Gloucester. My hon. Friend the Member for Devizes (Claire Perry) worked on that problem diligently when she was the trains Minister. I hope that the new Minister will pursue with the same enthusiasm the business of enabling more CrossCountry trains to stop at Gloucester as the Department for Transport completes its programme for a new franchise in the west of England.

As for the infrastructure, Great Western Railway is making good progress with a new station car park, which will open up the southern side of the station for the first time in its 150-odd years of existence. However, there is more work to be done. I hope that the new Secretary of State for Communities and Local Government will look favourably on the bid from the Gloucestershire local enterprise partnership, which includes a significant amount of money for a general station infrastructure project that will undoubtedly be one of the drivers of growth in our city in the future.

Of course, it is also important for our bus, road and cycle infrastructure to be in as good a state as possible. Our new bus station is well under way, and I know that the city and county councils will ensure that it is delivered on time and within budget, but the road situation is more complicated. The so-called missing link on the A417 between the M4 and the M5 is a major blockage to growth, not just in Gloucestershire and in the city of Gloucester but more widely, between the south and the north of the country. I hope that my right hon. Friend the new Secretary of State for Transport will take the same interest as his predecessor in ensuring that the first spade goes into the ground for that important new project before April 2020.

As a keen cyclist—only marginally put off by a promising black eye, which those with keener vision will spot, resulting from an incident this morning—I hope very much that the county council’s £3.5 million project for a new cycle lane between Gloucester and Cheltenham will receive approval from Highways England in due course. I am also separately pursuing longer-term improvements on the towpath between the city centre and Quedgeley. I can tell colleagues who have never had a chance to visit Gloucester that that is a wonderful cycle journey. They would be excused for not realising at any stage, even before visiting the Pilot Inn at the end of their journey, that they were cycling in the middle of a city rather than in a particularly glorious bit of the English countryside, because that is, in fact, what they would be doing.

Finally, I want to refer to two education projects which, in the longer term, will make a huge difference. First, there is the bid that we are preparing for a new Gloucestershire Health University Technical College, which will serve the people of our county and, possibly, people from wider afield who could travel by train from Swindon or even from Worcester. It will give 14 to 18-year-olds great opportunities to gain BTEC qualifications in either health or care, and also to gain significant work experience with the three NHS trusts in the county, as well as in the private sector. It is to me quite wrong that we should need 400 new nurses a year and that we are only training about 120 and are having to import them from as far afield as the Philippines. Excellent though our nurses from Portugal, Spain, the Philippines and elsewhere are, we should be training them at home; we should be giving them those opportunities to take up the 12,000 jobs in the health sector in Gloucestershire and training them in our own county. I hope very much that bid goes ahead and is successful.

The other education bid we are doing is for a new RAISE academy, which will be for excluded pupils from our secondary schools. This is also important. Everybody deserves a second chance and the opportunity to get back into learning and get the qualifications and skills they need to get good jobs later on, and I hope very much the Department for Education will look favourably at that.

I should finish my contribution today by drawing attention to two exciting things happening in Gloucester during this great summer period. The first is our summer of music, art and culture, which is already well under way. The world’s longest running and I think longest festival of all, the Three Choirs festival of Gloucester, Hereford and Worcester, starts on Saturday. There will be spectacular concerts for the next couple of weeks around that. We will then come to the Gloucester History Festival, which I created with many other friends and partners some six years ago, and this year is looking to be even bigger and better than usual. That will be in the first two weeks of September, immediately after Gloucester Day, when we celebrate the moment when the City of Gloucester refused to open its gates and surrender to King Charles I, thereby preventing the King from succeeding in his mission in the civil war and ensuring the supremacy of Parliament, which I am sure we all celebrate, as I wish all colleagues a very happy summer recess.

We must be nimble – and seize Brexit’s opportunities

It is a conundrum for all of us involved. Despite huge efforts by David Cameron’s government – large trade missions led by him as PM and other senior ministers, innovations like trade envoys, the hugely successful GREAT campaign, training funding for an enormous increase of apprentices, money invested in hi tech sectors like aerospace, Growth Fund awards locally, reductions in corporate tax and tax breaks for business on R&D and capital allowances – our productivity has not increased and exports aren’t growing fast enough to cover our appetite for foreign goods: and our trade deficit has recently widened again.

Prime minister Theresa May will want to see our exports grow, but we now also have the new challenge of re-negotiating our trade relations with Europe, destination for 44% of our exports. Tough times ahead?

I see the situation like the two Chinese characters for crisis: wéi ji or ‘danger opportunity’. On the one hand we need to protect crucial exports to the EU like our cars, aerospace, whisky and services, which might otherwise suffer: and on the other we need to be nimble and seize the opportunity of no longer outsourcing our trade deals to a third party.

That requires increasing the numbers of our trade negotiators, opening informal dialogue now with close Commonwealth and Growth Market allies on the potential for bilateral deals and adopting a more entrepreneurial approach across business and government.

Ministers can again lead on the trade diplomacy the FCO was once famous for, armed with cyber, fin tech and creative media expertise: more trade envoys could be recruited to support relationships in key markets and our beefed up Prosperity Fund deployed in markets most willing to expand bilateral trade.

Already there are encouraging noises in ASEAN, and this region should be one priority, but there are plenty of others. For those frustrated by our inability as EU members to launch wider Commonwealth trade agreements (I created the APPG for the Commonwealth), a mooted Commonwealth trade ministers meeting in London early next year and the 2018 CHOGM (in the UK) take on an exciting new dimension. We should start by identifying a coalition of the willing to kick start informal talks.

The trade minister Lord Price, with his business background, and BIS are aware of both the dangers and opportunities, but the machinery of government will need to drop some of its institutional caution and enfranchise heads of mission and trade envoys to work even more closely with business and get things moving.

Inevitably the government will have to look at the FCO budget, which is slightly lower than the level of fraud in the DWP. There may also be opportunities for DFID to fund (for example) all of the BBC World Service, freeing up more money.

There is no time to be lost in expanding our trade diplomacy, for business generates almost 75% of taxation directly and indirectly: our public services depend on our business growth.

The good news is that good business is being done. Last week BP signed off on a giant further $8bn investment in Indonesian offshore gas – creating 10,000 jobs there and generating long term earnings that support many pensioners here. Likewise the Malaysian investment in the former Battersea Power Station is the biggest single regeneration project of its kind in Europe.

Big, bold bilateral projects like these – invariably needing government support – show the way forward, and we must focus as much on seizing the opportunities across the seas as managing the risks closer to home.

PRESS RELEASE: Gloucester MP says SMEs will need incentives to hire people with disabilities if we are to hit targets

Richard Graham (MP for Gloucester) has drawn attention to the opportunities for the government in developing incentives for employers (and especially SMEs) taking on employees with disabilities.

“If you look at our experience with SMEs in the last Parliament, when we were trying to quickly expand the number of apprenticeships being offered by businesses, the process was made much simpler by introducing an NI free measure for up to two apprentices,” noted the MP, “and if we want both to meet our target of attracting a million people with disabilities into work between 2015-2020, as well as generate 3 million apprentices – then we need more incentives for those with disabilities.”

Richard’s research revealed that the US, the Netherlands and Ireland had all, in different ways, provided tax credits for employers. So in DWP questions he asked the then-Secretary of State for Work and Pensions, Stephen Crabb, if he would “consider extending the current exemption from employer national insurance contributions for apprentices both to additional apprentices and to full-time employees with disabilities, so that our tax system benefits employers who see the abilities as well as the disabilities of all [his] constituents.”

Stephen Crabb MP responded to the idea saying, “When it comes to closing the disability employment gap, I am absolutely clear that no options have been left off the table. We want to look at the widest possible range of solutions, including financial incentives such as our small employment offer, which will support small businesses to increase local job opportunities for disabled people.”

Richard first mentioned the idea in the Work and Pensions Select Committee during an evidence session on the disability employment gap. Mike Adams OBE, Chief Executive of the Essex Coalition of Disabled People, agreed with the idea.

Mike said: “I would fully advocate some of the initiatives that you are talking about as part of a wrap-around support to both employers as well as disabled people.”

Liz Sayce OBE, Chief Executive of Disability Rights UK also spoke to the Committee, saying that employers of people with disabilities and those employees will need additional support for certain aspects of the job, including training. She agreed with Richard that a tax break to support this would be “very, very helpful…particularly with SMEs”.

In the last two years, the number of disabled people in work has increased by 365,000 and the government is committed to ensuring all disabled people have the opportunities and support that they need to get and keep a job.

Richard said, “I understand that the US, Ireland and the Netherlands use similar tax incentives to encourage businesses to employ disabled people. Apprenticeships provide important opportunities for young people so it is right that we encourage employers to hire young disabled apprentices too.”

PRESS RELEASE: Gloucester MP launches All Party Group to promote Marine Energy

“We have the most tumultuous coastline of any country, capable of great force, and we badly need its energy to help keep the lights on as soon as possible,” said Gloucester’s MP Richard Graham as he launched an All-Party Parliamentary Group on Marine Energy and Tidal Lagoons to promote and support the technology, finance, and the right government strike price for energy from waves and tides – whether lagoons or streams alike – with a hundred businessmen and women, Parliamentarians from all parties and energy representatives. “This is a sector,” said Richard, “where British finance, technology and manufacturing could lead the world.”

Tidal Lagoon Power, which is headquartered in Gloucester, co-sponsored the event with Atlantis Resources, who are exploring stream energy at MeyGen in the north of Scotland. TLP Head of Communications Andy Field said, “We are pleased to be involved with the APPG. Tidal Lagoons are massive investments in communities and regions, sustaining thousands of jobs and providing the power which we severely need.”

Former Energy Minister Charles Hendry was the keynote speaker, and explained the focus of his Independent Review on Tidal Lagoons, due to be published this autumn. He confirmed the need for interested parties to provide evidence to support (or challenge) the long term value proposition of Tidal Lagoons for his review.

“We’re going to be asking a lot of questions and need answers from those with concrete evidence. It’s great that Richard has set up this APPG, and I hope that Parliamentarians will support the Review and encourage their local businesses to do the same,” said Charles Hendry.

Labour MP for Newport West Paul Flynn said “Tidal Power is Wales’ sumptuous unused energy bonanza, ready to provide clean, predictable, immense, surges of power eternally.”

DECC Question on Energy Security

Richard Graham (Gloucester) (Con)

19. What steps her Department is taking to ensure security of electricity supply in winter 2016-17 and in future years.

The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)

Our top priority is to make sure that families and businesses have secure energy supplies, and therefore to ensure that National Grid has the right tools in place to manage the system. Our energy security has been strengthened by reforms of the capacity market, including holding an auction this coming winter for delivery in 2017-18.

Richard Graham

Yesterday I launched a new all-party parliamentary group for marine energy, to promote the fantastic potential from our tumultuous seas of energy, whether tidal, stream or wave. Does my hon. Friend agree that when the Hendry review comes out in November this year, the Government should respond as fast and as positively as possible to make us a world leader in what could be one of the great sources of energy in the world?

Andrea Leadsom

We certainly recognise the potential that tidal lagoons could bring to the UK, which is why we have commissioned this independent review. We are absolutely committed to providing clean, affordable and secure energy that we can rely on now and in the future. This review will report in the autumn and will help us to determine what role tidal lagoons could play in that.

What next for British trade and exports?

It is a conundrum for all of us involved.

Despite huge efforts by David Cameron’s government – large trade missions led by him as PM and other senior ministers, innovations like Trade Envoys, the hugely successful GREAT campaign, training funding for an enormous increase of apprentices, money invested in hi tech sectors like aerospace, Growth Fund awards locally, reductions in corporate tax and tax breaks for business on R&D and capital allowances – our productivity has not increased and exports aren’t growing fast enough to cover our appetite for foreign goods: and our trade deficit has recently widened again.

Prime Minister Theresa May will want to see our exports grow, but we now also have the new challenge of re-negotiating our trade relations with Europe, destination for 44% of our exports. Tough times ahead?

I see the situation like the two Chinese characters for crisis: wei ji or ‘danger opportunity’. On the one hand we need to protect crucial exports to the EU like our cars, aerospace, whisky and services, which might otherwise suffer: and on the other we need to be nimble and seize the opportunity of no longer outsourcing our trade deals to a third party.

That requires increasing the numbers of our trade negotiators, opening informal dialogue now with close Commonwealth and Growth Market allies on the potential for bilateral deals and adopting a more entrepreneurial approach across business and government. Ministers can again lead on the trade diplomacy the FCO was once famous for, armed with cyber, fin tech and creative media expertise: more Trade Envoys could be recruited to support relationships in key markets and our beefed up Prosperity Fund deployed in markets most willing to expand bilateral trade.

Already there are encouraging noises in ASEAN, and this region should be one priority, but there are plenty of others. For those frustrated by our inability as EU members to launch wider Commonwealth trade agreements (I created the APPG for the Commonwealth), a mooted Commonwealth Trade Ministers meeting in London early next year and the 2018 CHOGM (in the UK) take on an exciting new dimension. We should start by identifying a coalition of the willing to kick start informal talks.

BIS Secretary Sajid Javid and Trade Minister Mark (Lord) Price, with their business backgrounds, are aware of both the dangers and opportunities, but the machinery of government will need to drop some of its institutional caution and enfranchise Heads of Mission and Trade Envoys to work even more closely with business and get things moving.

Inevitably the government will have to look at the FCO budget, which is slightly lower than the level of fraud in the DWP. There may also be opportunities for DFID to fund (for example) all of the BBC World Service, freeing up more money. I feel there is no time to be lost in expanding our trade diplomacy, for business generates almost 75% of taxation directly and indirectly: our public services depend on our business growth.

The good news is that good business is being done. Last week BP signed off on a giant further $8 billion investment in Indonesian offshore gas – creating 10,000 jobs there and generating long term earnings that support many pensioners here. Likewise the Malaysian investment in the former Battersea Power Station is the biggest single regeneration project of its kind in Europe. Big, bold bilateral projects like these – invariably needing government support – show the way forward, and we must focus as much on seizing the opportunities across the seas as managing the risks closer to home.

DEFRA Question about EU Protections for Gloucester Foods

Richard Graham

The Secretary of State will be delighted to learn that, since she visited Gloucester Services in February, it has been given both a sustainability award and the first Royal Institute of British Architects award ever given to a motorway services station. Famously, while she was there she enjoyed a Gloucester Old Spot sausage for breakfast. I hope that she will now confirm that, during our renegotiations with the European Union, she will seek to extend the protections given to Gloucester Old Spot meat, Single Gloucester cheese, and other great British foods.

Elizabeth Truss

I thank my hon. Friend for a very enjoyable visit to Gloucester Services. I am delighted that its chief executive, Sarah Dunning, has agreed to be one of our food pioneers, promoting Great British food around Britain and around the world. I look forward to talking to my hon. Friend about how we can protect these great products when they are not just a matter for the European Union, but are more widely known around the world.

Chilcot Report – BBC Summary

Sir John Chilcot has outlined his findings on the UK’s involvement in the 2003 Iraq War and the lessons to be learned from it.

The report spans almost a decade of UK government policy decisions between 2001 and 2009.

It covers the background to the decision to go to war, whether troops were properly prepared, how the conflict was conducted and what planning there was for its aftermath, a period in which there was intense sectarian violence. You can read the 150 page Executive Summary here.

The main points are:

Military Action

The UK chose to join the invasion of Iraq before all peaceful options for disarmament had been exhausted. Military action at that time was not a last resort.

Military action might have been necessary later, but in March 2003, it said, there was no imminent threat from the then Iraq leader Saddam Hussein, the strategy of containment could have been adapted and continued for some time and the majority of the Security Council supported continuing UN inspections and monitoring.

On 28 July 2002, the then Prime Minister Tony Blair assured US President George W Bush he would be with him “whatever”. But in the letter, he pointed out that a US coalition for military action would need: Progress on the Middle East peace process, UN authority and a shift in public opinion in the UK, Europe, and among Arab leaders.

Weapons of Mass Destruction

Judgements about the severity of the threat posed by Iraq’s weapons of mass destruction – or WMD – were presented with a certainty that was not justified.

Intelligence had “not established beyond doubt” that Saddam Hussein had continued to produce chemical and biological weapons.

The Joint Intelligence Committee said Iraq has “continued to produce chemical and biological agents” and there had been “recent production”. It said Iraq had the means to deliver chemical and biological weapons. But it did not say that Iraq had continued to produce weapons.

Policy on the Iraq invasion was made on the basis of flawed intelligence assessments. It was not challenged, and should have been.

The Legal Case

The circumstances in which it was decided that there was a legal basis for UK military action were “far from satisfactory”.

The invasion began on 20 March 2003 but not until 13 March did then Attorney General Lord Goldsmith advise there was, on balance, a secure legal basis for military action. Apart from No 10’s response to his letter on 14 March, no formal record was made of that decision and the precise grounds on which it was made remain unclear.

The UK’s actions undermined the authority of the United Nations Security Council: The UN’s Charter puts responsibility for the maintenance of peace and security in the Security Council. The UK government was claiming to act on behalf of the international community “to uphold the authority of the Security Council”. But it knew it did not have a majority supporting its actions.

In Cabinet, there was little questioning of Lord Goldsmith about his advice and no substantive discussion of the legal issues recorded.

Military Preparedness

There was “little time” to properly prepare three military brigades for deployment in Iraq. The risks were neither “properly identified nor fully exposed” to ministers, resulting in “equipment shortfalls”.

Between 2003 and 2009, UK forces in Iraq faced gaps in some key capability areas – including armoured vehicles, reconnaissance and intelligence assets and helicopter support.

It was not sufficiently clear which person in the department within the Ministry of Defence had responsibility for identifying and articulating such gaps.

Delays in providing adequate medium weight protected patrol vehicles and the failure to meet the needs of UK forces for reconnaissance and intelligence equipment and helicopters should not have been tolerated.

Iraq’s Aftermath

Despite explicit warnings, the consequences of the invasion were underestimated. The planning and preparations for Iraq after Saddam Hussein were “wholly inadequate”.

The government failed to achieve the stated objectives it had set itself in Iraq. More than 200 British citizens died as a result of the conflict. Iraqi people suffered greatly. By July 2009, at least 150,000 Iraqis had died, probably many more. More than one million were displaced.

Lessons to Learn

The report found Mr Blair overestimated his ability to influence US decisions on Iraq; and the UK’s relationship with the US does not require unconditional support.

It said ministerial discussion which encourages frank and informed debate and challenge is important. As is ensuring civilian and military arms of government are properly equipped.

In future, all aspects of any intervention need to be calculated, debated and challenged with rigour. Decisions need to be fully implemented.

Gloucester MP congratulates Gloucester Services on RIBA National Award

Richard Graham MP said the award of a prestigious RIBA National Award for Glen Howells Architects’ designs at Gloucester Services was yet another feather in the cap for the best services in the country. The award recognises the building as a significant contribution to architecture.

“This is well-deserved” Richard said “not only are there fantastic Old Spot sausages and local cheeses, the building is memorable too.”

Liz Truss, the Secretary of State for Environment, Food and Rural Affairs who recently visited the Services in February said: “I am very pleased to hear Gloucester Services has received the RIBA award. I enjoyed visiting for breakfast there recently and said then that all Motorway Services should look and feel as good as Gloucester Services.”

 

NOTE TO EDITORS

The recently opened services have previously been awarded the RIBA South West Award as well as the Project Design Category at the 2015 ACE Engineering Excellence Awards.

To find more about the award visit the website here: https://www.architecture.com/Awards/Awards2016/RegionalAwards/SouthWest/GloucesterServices.aspx

 

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