The spending review is keeping Sir Philip Green in the headlines. He tells Damian Wild why it is not just government that has to make sure it’s efficient
It may sound surprising to say this of a man who so regularly appears at fashionable parties with the likes of Kate Moss on his arm, but Sir Philip Green is looking for a spell out of the spotlight.
Since publishing his review of government efficiency two weeks ago, he’s been touring television studios and enduring questions from journalists who – to his mind at least – often fail to understand his message. “At the moment I’m in recovery,” he says.
The review – just 33 slides of PowerPoint in its published form – has clearly taken its toll. Ask whether he’d like to work on further government-sponsored initiatives and he sighs: “I can’t get into that. I’ve just finished this one on Monday, so let’s see what gets done on that first.”
Many were surprised that the owner of Arcadia Group agreed to lead an external efficiency review into government spending, joining a queue of business leaders beating a path to number 10’s door to deliver pearls of wisdom in the months since the coalition took office. Lord Browne (specialist subject, university funding), and Lloyd’s of London chairman Lord Levene (defence) are the other star signings.
After all, Green has always been different, never an arch establishment figure like Lord Levene, nor a member of the corporate elite like Lord Browne. Hugely wealthy, fabulously well-connected and often-criticised, he was not an obvious appointee. But perhaps an inspired one.
In a retail industry where growth is hard to come by, Green knows better than most the importance of maximising efficiency from every cog in an organisation’s machinery. He has also campaigned loudly – and with some success – for landlord concessions to retailers.
He puts Estates Gazette right on a number of matters, dismisses “clowns and jokers” who don’t bother to listen – especially journalists – and speaks plainly and frankly throughout the interview.
Green appears hardly bothered by the personal criticism he has received while conducting his review, and bats away questions about whether the government should have turned to a man whose family’s tax status has been discussed as often as his company’s clothing lines.
However, he seems far more concerned about those who have misinterpreted one of his key recommendations.
He says reports that he has suggested that the government should take longer to pay suppliers are simply wrong. “I’m not advocating changing the payment terms that are already there,” he snaps.
Instead, the government should stick to its 30-day payment policy and stop paying suppliers after 10 or even five days, a policy brought in to help smaller companies deal with the effects of the credit crunch and one from which larger companies have benefited. “There can’t be a multinational in the world that needs money from the government in five days,” he says. “It would be worrying if it did.”
At the heart of his findings is a demand that government should make better use of both its credit rating and its scale to get a better deal on procurement and property transactions. “The whole public sector should be able to take advantage of better procurement by the centre,” his report concludes.
It prompted one commentator to tell EG: “It’s quite brave to suggest something so brazenly centrist to a government that has localism stamped through it like a stick of rock.”
And that’s not the only contrast that makes you yearn to have been a fly on the wall in some of the meetings between Green’s team and civil servants; The Apprentice meets Yes Minister, perhaps.
He credits the individuals who provided the information, but was shocked at its quality. “Data was very, very poor,” he says. “Getting to the information itself was very, very difficult, and I haven’t really got to the bottom of why they were given the amount they spend on IT. The sheer scale of the departments’ spend made it very difficult to put all the pieces together.”
And nowhere was this piecing together harder than with property. “The bottom line is clearly that the dots don’t get joined up at the department level like everything else. You’ve got two people sitting in the room; they’ve both got offices within a thousand yards of each other and one’s got a lease break and one’s got a building with a £750m rental bill, and they don’t talk to each other. So they end up renewing something they don’t really need.”
He warms to his theme, saying that, if the government makes better use of its scale and the financial security it can offer, it can extract more value from its property dealings.
“Its covenant is used very sparingly,” says Green. “I don’t believe it values the covenant sufficiently to get the best out of it. In the property business, covenant is everything. Covenant was the word I used originally, but we then changed it because we didn’t think people would understand it.”
Green wants to see more property expertise employed in government, a coherent strategy put in place, better data and more benchmarking. In short, he wants to see the public sector behave more like the private sector.
“Everyone keeps telling me ‘government is different’. But if I want to rent a building, please tell me where are they different then? Why should it be different if I’m from the government or I’m from the private sector? Do I not want the best price? Do I not want the landlord to give me some rent-free to help refurbish the building? What’s the difference? I don’t get it.”
In the two months between his appointment and the publication of his findings, the economic temperature has turned chillier. Perhaps that’s why Green is clearly ready to turn his mind full-time back to business.
“I’m not an economist, but on any possible basis with everything we’re seeing and reading around the globe, it can’t be easy can it? Interest rates have to stay low. Whether we like it or not, there’s going to be inflation. Companies and people manage. People have acclimatised to it being tough. We have to soldier on.”
He clearly sees no difference between his day job running Arcadia, his most recent secondment to government and running the Green – or any other – household budget. “The bottom line of it all is to make sure you’re efficient.”
He’s glad of the coalition’s commitment to reduce corporate taxes over the next four years, and is more sanguine than many about other likely fiscal changes.
“Business rates are going to go up,” he acknowledges. “You can’t just keep raising rates because the consumer price index or the retail price index happen to be a particular rate on a particular month.
“At the moment, in the mix of everything, they’re trying to get the deficit down, so it will be tough to change it in the short term, but it does need to be looked at.”
And the property industry should brace itself: his patience with government contrasts with his frustration with some landlords. Generally, small shop rents in a lot of cases did get too high,” he says. “Therefore, finding people to pay these crazy zone A rents remains hard work. You read the occupancy levels everywhere have improved, but the landlords are going to have to work hard in terms of small space because historically, small space has been very different in cost.”
Asked whether he is excited by some of the developments that are coming on stream, he says: “Excited is probably not the right word,” adding somewhat ominously: “We’ve got a lot of shops.”
And with Sir Philip himself a key influencer of the wider economic mood, what is his assessment of the months ahead? “I don’t see a material change in how the market is for a while,” he says.
33 slides Despite its short length, Sir Philip Green’s PowerPoint report has created big waves
30 days Despite reports to the contrary, Green says the government should stick to its payment policy
Sir Philip Green’s property efficiency savings
Sir Philip Green’s report is littered with examples of Whitehall inefficiency – from travel and printing to office catering and IT. In the section on property, he uses no fewer than three examples where property decisions are not joined up. These three alone cost the exchequer more than £50m.
1) A government agency that relocated from London to the Midlands, signing a 20-year lease with no lease break for 15 years. The building was too large, the rent £1.2m pa and the agency abolished after just nine months. At a minimum, the unnecessary rental commitment was £18m.
2) A government agency headquarters in west London that was 30% larger than required and did not comply with “occupancy or energy standards”. The rent cost £1m pa, and the lease expiry was in 2009. An alternative vacant property meeting the agency criteria in terms of size and building standards was found nearby. Nonetheless, the agency went ahead and signed a new 15-year lease with no break clause at its existing home. The alternative office is still vacant. The decision has cost at least £15m.
3) A government department missed an opportunity to exercise a lease break at its offices in central London, costing the taxpayer £20m. The annual rent for its central London property was circa £5m. There was a recent opportunity to break the lease. The department decided not to break the lease despite having the opportunity to accommodate staff at another underused government building in central London. The opportunity was missed to save circa £5m pa, meaning an additional four years of unnecessary rent at a cost to taxpayers of £20m.
damian.wild@estatesgazette.com
