Could Tory rebels be unleashed on Clegg's Lords reform?

Unglamorous changes to the upper chamber could end up as a chew toy for frustrated Tory backbenchers

Of the many things a government might want to make a priority at a time of economic crisis and international instability, reforming the House of Lords is an eccentric choice.

Most of the public, it is safe to say, is uninterested in how the upper chamber works. Within the minority that understands the Lords, a still smaller number is so affronted by the lack of electoral accountability there as to want immediate constitutional redress. There is no clamour for a reform, which, as the Times reports this morning, will require protracted trench warfare between the government and recalcitrant peers, most of whom would end up at some stage facing eviction from a mostly elected legislature. Not surprisingly, a large number of ennobled turkeys are against a Bill for More Christmas.

The Times reports that a hardcore of 20 Tory peers are threatening to go on strike - sabotaging the whole legislative programme for the next parliamentary session if plans to create elected peers go ahead.

The reform is only being mooted because Nick Clegg needs - or at least feels he needs - a concrete constitutional reform in his legacy, having failed to secure a change to the electoral system. A Lords Reform Bill is planned for the Queen's speech in May to give Lib Dems some badge of institutional modernisation when, in the run-up to the next election, they draw up their balance sheet of manifesto pledges implemented and promises jettisoned in coalition. It would, in any case, be a purely symbolic victory for the party faithful. No-one seriously thinks the creation of an elected second chamber will earn the instant gratitude of tens of millions of citizens.

But from where the Lib Dems are standing, even modest trophies are better than none. Can they even secure that much? The prospect of a fierce rebellion among peers is certainly a problem, not least because it plays to fears among Conservative MPs in the Commons that the whole issue is about to snarl up the legislative works. This objection surfaced just before the parliamentary recess in Deputy Prime Minister's Questions (the mostly unwatched monthly cousin to the headline-grabbing weekly PMQs session). Back bench Tories have been pestering Clegg on the question of why, when the economy is plainly the issue that must take precedence, he seems determined to waste everyone's time (as they see it) with a reform that is, at best, half baked. It isn't yet clear what powers the elected peers would have relative to their unelected bench-fellows and how their relationship with the Commons would change.

One prospect that worries senior Lib Dems is that David Cameron's relations with his own backbenchers will get testier as time goes on. The warm glow of Tory admiration for the PM's European (non) veto in December has already worn off and there is increasing irritation with the number of concessions perceived to be granted to keep Clegg's party happy. At some point, Cameron will have to find some pressure valve to enable his party's rebellious rank and file to express its fury. What better mechanism than a vote on Lords reform? It is an issue on which most people would expect the Conservative party to take a conservative view and that will animate few passions outside Westminster.

Downing Street could never be seen actively to encourage a rebellion against a government Bill, but Cameron could decide how ruthlessly he wants to whip his MPs in favour. As one Lib Dem close to Clegg put it to me recently, Lords reform could be used as "the bit of the garden where it is safe to let them off the leash for a bit." Essentially, Cameron would put on a show of trying to help Clegg get his reform but would not invest too much of his own political capital in forcing it through an unhappy Commons.

Meanwhile, Labour's position is still officially to like the idea of Lords reform in principle but to sneer at Clegg's plan of an 80% elected chamber as not ambitious enough, although in reality this is high-minded cover for wanting to retain the option of making the Lib Dem leader squirm. So a half-decent Tory rebellion could see Lords Reform defeated in the Commons. The whole thing has the makings of a disaster for Clegg - another "miserable compromise" on a constitutional change that no-one can get very excited about, sabotaged by Tories itching to rein in Lib Dem influence and a Labour party disinclined to ride to the rescue.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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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.