Why the Lib Dems should not threaten to block the boundary changes

It only encourages Tory and Labour MPs to rebel against Lords reform.

Last week, Simon Hughes said that Nick Clegg's outgoing director of strategy, Richard Reeves, was wrong to warn that the Lib Dems could block the boundary changes if the Tories failed to support House of Lords reform. But on the Today programme this morning, the Lib Dem deputy leader made the connection himself. He told John Humphrys:

We're clear you can’t have a deal broken by one side without consequences, there would be consequences if they broke it ... The one thing that is obvious that the Tories desperately want is the Boundary Commission proposals to go through.

The Lib Dems' anger is not unreasonable. One reason that so many (91) Tory MPs rebelled last night is that they were unsure where David Cameron actually stood on the issue. The Prime Minister, in common with William Hague, the man charged with talking the rebels round, has rarely appeared convinced of the need for reform. To many Tory MPs, this lack of conviction was an invitation to rebellion.

But there are two good reasons why Hughes and others should avoid linking Lords reform to the boundary changes. The first is that it is seen as an act of bad faith by Tory MPs. It was the AV referendum that was the quid pro quo for the changes, not Lords reform. The second is that it encourages Labour MPs to rebel in the hope that the boundary reforms, which will disadvantage their party more than any other, could yet be derailed.

If the Lib Dems want to secure Lords reform, as all democrats should, the best thing they can do is to continue to make the principled case for an elected second chamber better able to constrain an overmighty executive.

Nick Clegg sits in the royal box during the men's singles final at Wimbledon. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.