‘In years to come we shall be able to claim that we pioneered in this country the general everyday use of credit instead of cash,’ said an ad for Barclaycard shortly after its launch as the UK’s first mass-market credit card 50 years ago this month. In that first campaign, one million cards were sent out, unsolicited, to Barclays customers and others. ‘In a short time,’ the ad went on, ‘we hope that four million people will show their Barclaycard, sign the bill and pay us at the end of the month.’
Back in June 1966, any public debate that was not about England’s chances in the World Cup was highly likely to be about the merits or dangers of this financial novelty. On the plus side, it signalled the coming of the cashless and chequeless society. On the minus, thousands of unwanted cards might end up in the wrong hands, leading to an epidemic of fraud; some men joked that fraudsters would probably be less extravagant card-users than their own wives — while some wives took offence that their husbands had been sent cards but they had not.
Half a century on, cash, cheques and card fraud are all still with us but we can see that what these plastic rectangles really gave society was a shame-free excuse not to ‘pay us at the end of the month’ but to accumulate as much debt as competing irresponsible lenders could offer. By March this year, total UK credit card debt stood at £64 billion, or £2,381 per household — which at average interest rates and minimum repayment terms could (according to the Money Charity) take 25 years to pay off.
So happy 50th birthday, Barclaycard: essential consumer tool though you swiftly became, you were the first of many financial innovations of your era that turned out to be ticking time-bombs: like the self-certified subprime mortgages that were supposed to help the poor become home-owners, or the derivative instruments that were supposed to help traders hedge excessive risks; or the single currency that was supposed to promote prosperity and economic convergence across the benighted continent of Europe.
Sell the yachts or not?
‘Green urged to sell yachts and help BHS staff’, said one Scottish newspaper last week; but rather than make that gesture, reported another, Sir Philip ‘was set to take delivery of his latest £100 million floating palace’. I’m not sure why the Scots are so cross, given that only 800 BHS jobs out of 11,000 were north of the border, but the billionaire has been attracting hostile comment from all points of the compass in advance of his grilling by a Commons select committee next week. This column, however, likes to give everyone a fair hearing — especially entrepreneurs who are about to be put in the stocks — so here’s my own assessment as to whether he should sell the yachts or not.
It has to be said first that Green’s media persona counts against him: the only pictures in which he doesn’t seem to radiate anger are the ones of him wrapped around supermodels, in which he just looks horribly pleased with himself. Then there’s the story, told by his biographers, of the incident in 2004 when he was bidding for Marks & Spencer but thwarted by the appointment of Stuart Rose as M&S’s chief executive. Green accosted Rose by the lapels on the pavement outside M&S headquarters in a 20-minute harangue that began ‘I want a fucking word with you…’ and explained afterwards: ‘If I’d been serious, he’d have gone through the window.’
But then again, there’s this tribute from another knighted retailer of my acquaintance: ‘There’s so much rubbish written about Philip that does not do justice to the real person… he is a great motivator and people like to work for him… very keen on giving young people the kind of opportunities he did not have for himself… a strong family man, extremely generous [and] loyal to his friends… The thing about Philip, to put it bluntly, is that he has balls.’
A Jekyll-and-Hyde, then, who does himself no favours when he lets rip at perceived enemies. But what of the facts of BHS’s decline, its sale by Green for £1 to the consortium led by former bankrupt Dominic Chappell, and its rapid subsequent collapse?
Green’s detractors have attempted to make a direct connection between the £414 million of dividends paid by BHS to a holding company owned by Green’s Monaco-based wife Tina in 2002–4, and the £571 million deficit in the BHS pension fund today. But sharp-pencilled analysts have pointed out that BHS was profitable enough to justify those dividends at the time, and that its pension fund was in surplus until 2008: like many others, it fell into difficulties thereafter as a result of depressed stock markets and ultra-low interest rates.
On that basis, there is no real link between Mrs Green’s lavish early rewards from BHS and the subsequent black hole in its pension scheme. Though Green companies may recoup £35 million as secured creditors in BHS’s liquidation, that will be offset against write-offs of £200 million-plus in the sale to Chappell’s crew. Nevertheless, the offshore Green fortune is in part derived from BHS, and there is a case to be made that the £1 sale to a buyer without proven retailing skills was a cynical manoeuvre to limit further losses for the gilded couple before BHS sank.
So it would be a welcome gesture — and a moral obligation, arguably, though I’ll be surprised if it’s upheld as a legal one — on the Greens’ part to make a contribution towards a rescue of the BHS pension scheme, which will otherwise fall entirely on the Pension Protection Fund financed by levies on other companies’ pension pots. Indeed Sir Philip is said to have previously contemplated a contribution of up to £80 million, so it’s not as if he has tried to duck the issue. Should he sell those floatingpalaces? No, I don’t think he should — not least because to find that sort of cash he probably doesn’t need to. But for the time being he should avoid being papped looking smug on deck.