Employees and the taxpayer become collateral damage in the demise of BHS

Wealth inequality is an inevitable corollary of free-market capitalism. But our economic system ought not, as a matter of necessity, impede social conscience

Sale signs in the window of a BHS branch in Leicester (PA)

The fall of BHS into administration last week has brought back grim memories of the financial crash of 2008. Not since the collapse of Woolworths has such a household name on the high street found itself in such a catastrophic position. Back then, with banks in disarray, there was no way out for Woolworths and its failure led ultimately to the loss of 30,000 jobs. Today, around 11,000 employees at BHS fear the same fate.

Unpicking the reasons for BHS’s descent into insolvency is not straightforward. It has had a rather dowdy image for years – decades frankly – and had not done enough to compete in the online marketplace which had become so vital to the prosperity of many rivals. But inevitably, much of the focus this week has been on the role of Sir Philip Green, the tycoon whose ownership of the firm ended last year when he sold it for a pound.

Sir Philip orchestrated a £200m buyout of BHS at the turn of the century, and in the subsequent 15 years he and his family (and, until 2008, a couple of other shareholders too) received well over half a billion pounds between them in dividends and other payments. But as the company’s profitability declined, its pension fund went from a position of relative security to the point of no return, especially in the years after the global crash. Now, a potential deficit in the pension fund of £571m has proved a stumbling block which the current owners, Retail Acquisitions, could not overcome as they searched for an alternative to administration. Sir Philip has yet to comment on the situation.

The developments of the last week will be felt most keenly by those who are at risk of being thrown to the mercy of the dole queue. But there may be a wider impact too because staff pensions will, if the worst comes to the worst, be covered by the state-backed Pension Protection Fund. While the fund isn’t paid for by taxpayers, the other businesses which are obliged to pay into it will rightly feel aggrieved at effectively having to pick up the cost of the BHS disaster.

Green undoubtedly has questions to answer then, both about his own years at the helm and about his sale of BHS to proprietors who may not have expertise in the retail sector. MPs will demand that he appear before the work and pensions select committee, though whether he will comply remains to be seen. There may be considerable pressure on him to stump up more than the £80m he is reported to have offered to help fill the pensions black hole.

In some ways, though, the details of BHS’s fall are only symptoms of a wider malaise. To talk of pension-fund deficits, shareholder dividends and the rest is all very well. But the primary question we should be asking is this: do we want to live in the kind of society in which the ultra-rich appear to see companies as little more than playthings, a means to short- or medium-term gains at the expense of long-term investment and corporate health. The name of the game appears to be get in, extract rewards, then get out – and hang the collateral damage.

The Panama Papers showed us another glimpse of the same kind of world, one in which wealthy people have access to financial mechanisms that most of us don’t even understand, let alone use. Other rich individuals – lawyers, accountants – living in the splendid isolation of the Cayman Islands or British Virgin Islands, help business wheeler-dealers make the most of their dosh, and the least of their tax liabilities.

Wealth inequality is, at least to an extent, an inevitable corollary of free-market capitalism. But our economic system ought not, as a matter of necessity, breed a lack of morals or impede social conscience. Too often in recent times many in Britain are left with the clear impression not only that the rich are getting richer, but that they are doing so deliberately and uncaringly at the expense of the rest.

At the most extreme end of the scale are those corporate crises, whether in the banking sector or on the high street, which appear to result in bosses slipping away without consequence while employees – or the taxpayer – pick up the pieces. But look too at the housing market, in which developers and private landlords take advantage of historic failures to match supply with demand by lining their pockets with the hard-earned salaries of the desperate.

The resulting sense of unfairness has fuelled Jeremy Corbyn’s rise – but the Labour Party is so mired in its own problems that challenging the economic status quo is not exactly top of its agenda.

But neither Labour’s self-destruction nor the coming EU referendum should distract the Government from the need for action. After all, for the last 35 years the Conservative Party has built a political identity around promoting aggressive free markets as the fuel of aspiration. In 2016, capitalism too often seems to do little more than forge fortunes for a very few and burn the hopes of the many. If the Tories are genuinely the party of opportunity they need to find a way to show they stand for the chances of the common people, not the self-entitlement of vulgar tycoons.