Cameron faces "Leveson by the backdoor" after Lords defeat

Surprise defeat over press regulation will force the Tories to overturn Lords amendments in the Commons. But will Labour and the Lib Dems let them?

While everyone's attention was on the equal marriage debate, the Conservatives suffered a significant defeat in the House of Lords over press regulation. Taking ministers by surprise, peers voted by 272 to 141 to introduce a low-cost arbitration system for victims of press defamation, one of the key recommendations of the Leveson report. 

Since those papers that do not join up to the system could be punished by courts awarding greater damages and costs, the proposal represents a form of the state-backed regulation that David Cameron has unambiguously rejected. The rebellion notably included senior Tory peers such as Lord Ashcroft (yes, the billionaire party donor and media mogul), Lord Fowler, Lord Hurd and Lord Astor, Cameron's father-in-law. The economist Robert Skidelsky, a crossbench peer and NS contributor, noted that some peers had described the amendments as "Leveson by the backdoor" and added: "To my mind, that is an important merit of the bill because we are unlikely to get Leveson through the front door". Lord Fowler described the move as a "building block in implementing Leveson - a kind of stalking horse".

If the Conservatives want to avoid "Leveson by the backdoor", they will now need to overturn the amendments in the Commons. With Labour and the Liberal Democats both in favour of state-backed regulation, this could prove a challenge for the government.

For now, the long-stalled cross-party talks on Leveson continue, with the parties next due to meet on Monday. During the debate, Lord McNally, the Liberal Democrat leader in the Lords, promised that the government's proposal of a royal charter to oversee press regulation would finally be published next week. As IPPR's Tim Finch noted on The Staggers on Monday, Labour has not ruled out supporting this compromise. In her speech at the think-tank's recent Oxford Media Convention, Harriet Harman, the shadow media secretary, said she was "unpersuaded" by the idea but actions speak louder than words; Labour failed to follow through on its threat to force a Commons vote on its own draft bill in January if the government failed to bring forward satisfactory proposals by Christmas. Moreover, as Tim wrote, "being unpersuaded is not quite the same as being unpersuadable".

The government is confident that the Lib Dems, and possibly Labour, will unite around the proposal of a royal charter. But last night's Lords defeat means Clegg and Miliband now have a powerful bargaining chip.

A protest group stages a mock burning of the Leveson report outside the Queen Elizabeth II centre in London. Photograph: Getty Images.

George Eaton is 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.