'The unacceptable face of capitalism'? What the collapse of BHS shows us about the UK economy

In a deregulated financial market, Sir Philip Green's plundering of BHS is the rule, not the exception.

Steve Tombs
26 July 2016
 Nick Ansell / PA Wire/Press Association Images

BHS staff carry discounted goods from the company's head office. Picture by: Nick Ansell / PA Wire/Press Association ImagesIn the wake of revelations about his role in the collapse of BHS, Sir Phillip Green has been condemned as “the unacceptable face of capitalism”. Trotting out this phrase as part of the “damning” House of Commons Work and Pensions and Business, Innovation and Skills Committees report on the collapse may make for good headlines. But it does nothing to further reforms towards any more effective system for controlling the behemoths of corporate capitalism.  

While the headline versions of the report make much of Sir Philip Green’s “systematic plunder” of the company, a closer reading reveals a systematically flawed system of regulation. This system remains untouched by the financial crisis of 2007, still under attack as a burden on business, and likely to be further weakened as the realities of post-Brexit become increasingly apparent.

The report – or at least its popular reception – is a classic instance of individualising corporate offending. Sir Phillip Green, and to a lesser extent Dominic Chappell, are the contemporary equivalents of the ‘Scumbag Millionaires’ of the 2007 financial crisis.  The Sun ran this moniker as a headline across a front page showing Fred Goodwin, Stephen Hester, Andy Hornby and Tom McKillop as they sat before the UK Treasury Select Committee hearings of 2009 into the banking crisis.

A key aspect of the debate surrounding the demise of BHS and the systematic plundering of its finances - including its pension fund - is whether Green will be stripped of his knighthood. This question is intimately linked to whether or not he will fulfil what the report calls his “moral duty” and make a large cash payment to the pension fund. In this latter call, the resort to the language of 'moral duty' is an indictment of the state of law and regulation of corporate activity, both in terms of the corporate person (by definition an a-moral, legally constructed entity) and its directors, senior managers and shareholders. Indeed, the report is less than sanguine about the abilities of the pension regulator to secure restitution for the 22,000 pension holders who have been the victims of what is no more nor less than theft and fraud – an all too typical scenario in deregulated, neo-liberal version of capitalism that has long dominated the UK political consensus.

In fact, the incident sheds light on other perfectly routine ways of doing business in the UK. 

The committee’s report and the ensuing media response seems somehow to represent the whole affair as aberrant and a-typical; hence the epithet "the unacceptable face of capitalism". In fact, the incident sheds light on other perfectly routine ways of doing business in the UK. One of these is the normal practice of squirreling funds offshore into tax havens – something Green achieved through his wife’s ownership of Taveta Ltd. The Panama Papers revealed, as if such revelations were necessary, that this kind of practise is simply one element of industrial scale personal and corporate tax avoidance. And in this business of ‘aggressive tax planning’ -- an anaesthetising term if ever there were one -- the UK is a world leader, with Cameron and Osborne having long sought to protect its financial sevices industry from over-burdening EU legislation.

This affair also tells us something about the craven attitude of UK media and political elites to leading business figures. Until very recently, Sir Philip Green had been lauded as an archetypal entrepreneur, the turnaround kind, the businessman who could not only speak for the best that is competitive capitalism but in fact was fit to advise government: this is the same Phillip Green who was called upon by the coalition government in 2010 to advise on cost savings at it prepared for its ‘emergency budget’. At the time, minister Francis Maude said of Green that "He's shown how he can turn around big complex businesses. Government is a huge complex organisation, and while it's not the same as a business, a lot of the same disciplines are needed."

This is simply one instance of the craven attitude that successive governments, since the days of New Labour at least, have displayed towards entrepreneurs. It was Gordon Brown who, on becoming Prime Minister in 2007, called for a "government of all the talents', inviting a series of unlikely characters to take up non-elected, advisory posts. One notable such appointment was (Lord) Digby-Jones, former head of the Confederation of British Industry,  an employers' organisation. On resigning his post as trade minister in 2009  Digby-Jones argued that “top businessmen” – and not  “incompetent politicians” - should run major Government departments: “Health, education, business, transport, defence and security are too important to be left any longer to enthusiastic amateurs and their honest and hard-working but risk-averse civil servants.”

This whole shabby episode reveals much about the systematic and ongoing failings of a patchwork regulatory system

Finally, this whole shabby episode reveals much about the systematic and ongoing failings of a patchwork regulatory system. None of the regulators involved - Her Majesty’s Revenue and Customs, the Financial Reporting Council, the Pensions Regulator, the Insolvency Service and the Serious Fraud Office – come out of this tale with their already-hardly-stellar reputations enhanced. And for all the talk of regulatory reform, improved systems of corporate governance, greater transparency for private business – all of which grace the pages of this 60 page report – little is likely to transpire in any of these areas. We’ve been here before, many times, not least in the series of Governmental inquiries which followed the 2007 financial crisis, which in sum resulted to virtually no meaningful regulatory reform. Perhaps the most lauded were the proposals in the Vickers Report, that a ring-fence to be erected between investment and retail banking.

Subsequently even Andrew Tyrie -- the Conservative chairman of the Treasury Select Committee -- said of the proposed UK fencing that it is “so weak as to be virtually useless”. A handy catch-all verdict on the state of business regulation in the UK. This is the story of BHS, of 11,000 jobs lost, of 22,000 pension holders impoverished. It’s a story not of rogue, vilified, condemned individuals. It’s the story of an economic system based on structural irresponsibility, a supine political and media elite, and a regulatory system unable to mitigate capitalism’s inherently destructive effects.

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