Watchdogs bark too late

AMOnG the most impressive aspects of the report by Mps into the BHS scandal is the remarkable speed with which the inquiry was conducted. It may have failed fully to get to grips with the inner workings of the Green empire but that is near impossible given how many of the entities are based in brass plate locations in far-off parts.

Credit for forcing the pace of the process, against one of the most turbulent political backdrops of modern times, must go to two Labour Mps, the veteran Frank Field, chair of Work & pensions and Ian Wright, chair of the Business Committee.

One of the problems of Select Committees is that they lack the support staff and expertise to conduct meaningful inquiries. The BHS probe cut through all of this by deploying the skills of former City Minister and governance expert paul Myners and John Ralfe, a former finance director of Boots and a pensions guru.

Mps had another thing going for them in the shape of parliamentary privilege.

They were able to ask the difficult questions at public hearings and obtain thousands of pages of documents and emails which gave a brilliant insight into the shambolic way the BHS sale was conducted, the shabby approach to the pension fund deficit and the deplorable culture of fee-hungry advisers.

The latter were more concerned with their own billings than the well-being of BHS’s 11,000 workers and 21,000 pensioners. This Alex Brummer CITY EDITOR begs the question as to why official government panels such as the pensions Regulator, the Insolvency Service and Financial Reporting Council are so slug-like in what they do.

The main excuse deployed is that they are held to a higher standard of evidence and always fear that findings will be subject to judicial review and reversed.

Knowing this, the professional firms can be hugely aggressive in their dealings with regulators. The big auditing firms such as pwC, Grant Thornton and KpMG, all of which were involved in some aspect of the BHS affair, are as difficult as possible when giving up information. Lawyers Olswang pointedly are criticised by Mps for hiding behind client privilege.

This is by no means uncommon. The Serious Fraud Office, which is not yet fully engaged in the BHS affair, often finds that the people it wants to get statements from already have been deposed by friendly law firms who then decline to give up the testimony, claiming qualified privilege. On such occasions the SFO has to go to the courts to get the statements. All of this slows down the process of justice.

The FRC has taken a kicking over its slowness in dealing with cases such as the scandal at MG Rover and HBOS and has a new mandate which requires it to deal with a case within two years.

That is better than seven or eight years but still allows time for some of the sting to be drawn. The implosion at BHS was an immediate shock for BHS employees, suppliers, pensioners and other stakeholders.

They deserve to see more rapid justice. Tyrie tirade BY happy coincidence a Treasury Select Committee (TSC) report into the failure of HBOS in the autumn of 2008 is absolutely scathing about the enforcers. The Financial Services Authority (since replaced by the Financial Conduct Authority) is castigated for initially refusing to conduct an inquiry until it had concluded enforcement action.

The Financial Reporting Council is accused of ‘a serious mistake’ and ‘lack of curiosity and diligence’ for failing to thoroughly analyse the role of the accountants at HBOS.

The TSC also is concerned that under new arrangements, designed to make the financial system safer, the Treasury has been gifted the power to appoint an inquiry into banking failures independent of regulators. That too it believes is defective. It could, for instance, allow a future Chancellor to block an inquiry should it be embarrassing to a fellow minister or member of his party or should there be direct government culpability in what happened. Chairman Andrew Tyrie and his panel make a compelling case. Rake’s progress FRESH from his role as leading business voice in the Remain campaign, Sir Mike Rake is opening up a new front.

Recognising that attack is the best form of defence, the ebullient BT chairman concedes it is time to make Openreach, the network at the core of the nation’s broadband services, more transparent.

Governance is to be transformed with an independent chairman and a majority of nonexecutives on the Openreach board but BT’s main critics, such as TalkTalk and Vodafone, will not get a look in for commercial reasons.

He is also promising that Openreach will produce its own annual report, which will look at service levels as well as the financials.

As for fully separating Openreach into a standalone plc, Rake is adamant it cannot happen. The pension fund deficit and the need for BT’s covenant, with its handsome free cash flow of almost £3bn a year, makes separation impossible in Rake’s view.

After the Green affair and the unfunded hole in Tata Steel’s UK pension fund, few people will dare question that.