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A Successful Year at GMPF

Friday, December 23rd, 2016

pension

Some of you might know that as well as serving as the Executive Leader of Tameside Council I am also the Chair of the Greater Manchester Pension Fund. I’ve written a little bit about pensions in this blog in the past, but as we come to the end of the year I want to take the chance to put a little more focus on what has been a truly momentous year in the world of local government pensions.

With 352,292 members and over £20 billion in assets the Greater Manchester Pension Fund is by far the largest local government pension fund in the country. Though as a fund with even higher ambitions, at the start of the year we reached an agreement to team up with fellow pension funds in Merseyside, Lancashire and West Yorkshire to create a £40 billion combined pension pool.

All well and good, you might say, but what does that actually mean? I’ve written a lot this year about some of the problems Tameside and Britain faces, the most relevant ones here being our productivity crisis and the fact that a small minority of businesses are still getting away with not meeting their obligations to their employees and society. Getting pension funds, in Greater Manchester and elsewhere, to combine their resources is the way we are starting to create our own solutions to these big national issues.

The way we’re going to do that is quite simple. £40 billion is a lot of money, and we can use that money to invest in projects that are good for the pension fund and good for our society and economy as well. Pension funds are uniquely placed to make this happen. We’re embedded in our local communities, we have the sheer financial muscle needed and we’re an investor for the long term. Governments and private companies will often not touch an investment that will only start providing a return years or decades from now, but that project is perfect for a pension fund which needs to find ways to pay out to members years and decades from now. We’re already doing this to a certain extent, but the plans that we have started to put in place this year will allow us to do this quicker, better and on a larger scale.

Investing in infrastructure is not the only thing we can do, we can also invest in businesses as well. That gives us the opportunity to influence their board of directors and management by exercising our rights as shareholders. If we think a company executive is being paid too much for the job they are doing, we can do something about it. If we’re unhappy with a business using zero-hour contracts and tax havens, we can do something about it. This is something that is already happening. To give just one example, companies that had to backtrack over pay increases for executives due to shareholder opposition in the last year alone include betting company Paddy Power, online gambling firm PlayTech and the Foxtons estate agency. Next year we’ll be working together on ways to make sure that the voices of pension funds are heard further in all the places in which we hold assets.

There’s no doubt in my mind that 2016 will go down as a milestone year in pensions. If you’re a member of the Greater Manchester Pension Fund, rest assured that your retirement is safe in our hands. If you’re a resident of Tameside, rest assured that we all supporting investment that will make the borough is better place to live, work and do business in. If you’re concerned with how some businesses run things, rest assured that those concerns are shared by us as well. Roll on 2017, and the next step.

On the Side of Good Business

Friday, July 29th, 2016

One of the paradoxes of the current debate about good business is that, for all we talk about it and support it, there is not a great deal of agreement as to what it actually means. In particular, the law has little or nothing to say once you go beyond the fundamentals such as the minimum wage and health and safety. For the vast majority of businesses and business owners, a basic sense of morality and an eye on the long term keeps them on the straight and narrow. Unfortunately, every so often a more unscrupulous character will go to the absolute edge of that legal void and commit acts that, while not illegal, would be considered by most to be utterly immoral.

In that vein, some of you may remember a month or so ago Sir Philip Green appeared in front of two Parliamentary committees to answer questions regarding the collapse of BHS. Their final report was released this week, and to say that it is damning does not begin to do it justice.

The highlights are as follows. After buying BHS in 2000, Sir Philip Green and his family took almost £580 million out of the company in dividends, rental payments and loans. The company’s pension funds went from holding a substantial surplus to a deficit that eventually reached hundreds of millions of pounds. Sir Philip Green and the BHS investors refused to address this, going so far as to sell the company for £1 rather than allow The Pensions Regulator access to the company’s financial records. The business was sold in a manner that ignored concerns about takeover regulations and the ability of the buyer, Mr Dominic Chappell (a man who no prior retail experience), to maintain BHS as a going concern. BHS went into administration at the end of the April, by which point Mr Chappell had also taken £2.6 million out of the business in fees and loans.

It should be noted that the payment of large dividends, which can be justified if the business is thriving, and the existence of a pension fund deficit, which can be caused by low interest rates and tough trading conditions, are not by themselves signs of negligence. The key difference in the BHS case is that Sir Philip Green took out dividends at the expense of investment and growth in the company, and did nothing to address a large and growing pension deficit when he had the personal wealth and capability to do so.

There is a very real human cost to this as well. BHS employs over 11,000 people across the country, many of whom now face an uncertain future through no fault of their own. The 20,000 current and future holders of BHS pensions could also face cuts to pay-outs that they worked for decades to earn. Almost without exception, it has been the innocent who have suffered while the guilty have walked away even richer than before.

I am proudly pro-business, and I am also the chairman of a pension fund. It is for these reasons that I consider what has happened to BHS to be nothing less than a national scandal. We need businesses that thrive and prosper for the benefit of all, not businesses that exist only to enrich a select few at the expense of their workers and the taxpayer.

As she entered Downing Street, our new Prime Minister promised a more responsible capitalism. She could make a start by using the power of her office to define, in black and white, what a good business is. If necessary, this should be backed up by law. That is only way to make sure that another Sir Philip Green never gets his hands on another BHS.

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