Does he REALLY have the cash to pay pension bill?

AMONG the greatest mysteries surrounding the BHS scandal is why Sir Philip Green and his family did not move heaven and earth to close the gaping gap of £571million in the retailer’s pension fund rather than be exposed to public humiliation, opprobrium or even worse.

On paper at least, Green and his wife Tina are among the richest families in Britain with a worth of £3.22billion according to the Sunday Times Rich List. They are well enough off to spend £100million or so on their new super yacht.

As BHS fell into administration earlier this year Green was said to have informally offered to make a cash payment of £40million to help repair the pension fund and a further £40million of funding secured against the company’s stocks of goods.

Green has always held the view that he would prefer to cut some kind of deal with the Pensions Regulator and the lifeboat vehicle the Pension Protection Fund rather than be legally required, as the former owner of BHS, to stump up all or part of the £571million necessary to secure the position of the 21,000 or so pensioners. What has never been clear is whether his unwillingness to cough up is due to his instincts to bargain or whether he simply doesn’t have the ready cash to end the saga and perhaps save his knighthood.

The most recent accounts of Taveta Investments, the holding company for Topshop owner Arcadia (and BHS until it was sold), show that in the year ending August 29, 2015 the group generated £328million of cash.

But dig down deeper into the figures and one finds that after Green and his family had paid all UK bills the cash SHORTFALL was £10.7million. There was no surplus to pay into the bank.

Moreover, Arcadia also had a pensions fund black hole of £152million which has almost certainly ballooned in the last year as the yield on British government bonds, used to calculate pension shortfalls, fell.

Paying for the Arcadia pension fund would be a big enough challenge without putting the strain of the BHS retirement costs on its books. How then, if they were willing, could Green and his wife now secure the pension rights of the BHS staff and retirees? One possibility is that they could sell off UKbased assets such as some of the vast store portfolio.

This might pose its own problems. As the coruscating MPs’ report into the BHS sale makes clear many of the properties, once owned by BHS, have been transferred over the years into offshore, non-taxpaying entities.

These are controlled by Tina Green through a complex chain of companies that starts in Jersey and ends up as far away as the British Virgin Islands. This means that any sales in Britain may attract huge tax bills. Green could potentially strip out some of the brands from Arcadia – which owns Topshop, Topman, Miss Selfridge, Burton, Wallis and others – and sell them. But that, too, assumes that the ownership of these companies is in the UK. The truth is we don’t really know, such is the complexity of the arrangements.

Alternatively, he could reach into the family’s savings, partly accumulated as a result of dividend payments of £1.2billion to Tina Green’s companies.

In so doing, however, the Greens could again risk attracting the attention of the taxman who could insist that such repatriated funds – even for the purpose of paying off a pension deficit – must be subject to the taxation that was avoided when the dividends were whisked overseas.

With a top rate of income tax of 45 per cent, that potentially could nearly double the cost.

The way in which the Greens and their highly-paid advisers have structured the Taveta empire creates a Catch-22 situation. The family may be among Britain’s wealthiest and be able to afford yachts as long as they are built in Italy, anchored in Malta and eventually moved to Monaco.

But laying their hands on the hundreds of millions of pounds necessary to close the gap in the UKdomiciled BHS pension fund is a far more complicated proposition. It would require the Greens to show a genuine determination to put things right. That, so far, has been scandalously lacking.