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MPs blast Thomas Cook bosses' rewards for failures, and demand bonus clawbacks – business live
MPs blast Thomas Cook bosses' rewards for failures, and demand bonus clawbacks – business live
(about 3 hours later)
Rachel Reeves has spoken to Sky’s Paul Kelso outside Portcullis House, and repeated her call for Thomas Cook’s board to hand back some of their pay.
The Guardian’s reporting that the UK has made a key concession, that in principle that there will be a customs border down the Irish Sea after Brexit.
Fresh from the Committee hearing @RachelReevesMP tells @pkelso that #ThomasCook’s board “have got to take some responsibility... hold their hands up and give some of their money back”. pic.twitter.com/EDAFOFuQVA
Boris Johnson 'on brink of Brexit deal' after border concessions
Peter Fankhauser faced fresh questions about his bonuses as he left today’s hearing, from journalists waiting outside Portcullis House in Westminster.
EU officials are now downplaying talk of a Brexit breakthrough......
Thomas Cook’s former CEO didn’t say much new, beyond repeating that he won’t make any decision today on whether to hand back some of his pay, before being pursued into a waiting taxi in a flurry of microphones, TV cameras and snappers.
BREXIT: SENIOR EU OFFICIAL SAYS REPORT OF IMMINENT BREXIT DEAL "WAY TOO PREMATURE", SENIOR EU DIPLOMAT CALLS IT "SPIN"
NEW: I tried to ask former Thomas Cook CEO Peter Fankhauser if he would give back the £500,000 bonus he didn't deserve.Mr Fankhauser said he will "consider what's right but "won't decide today."He says this in front of furious Thomas Cook ex-employees.#ThomasCookcollapse pic.twitter.com/9LNLifTIvA
Shares in banks and house-builders are rising very sharply too in late trading.
BALPA, the pilots’ union, has criticised Peter Fankhauser and crew for their performance before the BEIS committee today.
Bloomberg’s claim that negotiators are ‘closing in’ on a draft deal has sent Royal Bank of Scotland and Lloyds Banking Group up by at least 6.5%.
BALPA General Secretary, Brian Strutton, says:
Construction firms are also benefitting, with Barratt Development up 7% and Persimmon gaining 5.9%.
“It is right that those at the top of Thomas Cook are held to account for the company’s collapse. Sadly, today, in response to excellent questioning by the committee, we heard lots of obfuscation, and precious little remorse from executives.
This sudden burst of Brexit optimism has also lifting shares in UK-focused companies.
“We also place significant blame with the UK Government who could have backed a temporary bridging facility to keep this company going, saving the thousands of jobs which have been lost.
The FTSE 250 index has surged by 1.8%, to a one-year high.
“We continue to support Thomas Cook pilots in finding new work but the scars of this collapse will no doubt run deep with them for many years to come.”
Back in the markets, the pound has suddenly jumped to its highest level in nearly four months.
It is right that those at the top of Thomas Cook are held to account for the company’s collapse. Sadly, today, in response to excellent questioning by @CommonsBEIS , we heard lots of obfuscation, and precious little remorse from executives.https://t.co/41XMBJUuPH
Sterling has gained one and a half cents to $1.275 for the first time since 25 June, after Bloomberg reported that the UK and the EU were close to a last-minute draft Brexit deal.
Here’s The Times’ take on the Thomas Cook hearing:
Sterling has spiked on a headline that EU and UK negotiators are closing in on a draft Brexit deal pic.twitter.com/JzHqwdAa0m
Bosses of Thomas Cook were “rewarded for failure” after attempting to hide the true scale of the company’s losses as it teetered on the brink of collapse, MPs said today.
Bloomberg says:
Members of the tour giant’s board were strongly criticised today as they were hauled before MPs for the first time since the 178-year-old firm was placed in compulsory liquidation last month.
U.K. and European Union negotiators in Brussels are closing in on a draft Brexit deal with optimism that there will be a breakthrough before the end of Tuesday, according to two EU officials, Bloomberg News reports.
The cross-party business committee accused managers of attempting to effectively massage the books over eight years by withholding £1.8 billion-worth of spending from its headline financial results.
Any draft legal text will hinge on whether Prime Minister Boris Johnson believes he has the support of the U.K. Parliament, with the backing of the Northern Irish Democratic Unionist Party crucial.
Rachel Reeves, the committee’s Labour chairman, said the company’s debts were an “awful lot worse than the figures you were trying to present to the market”, adding that this “all caught up with you in the end”.
This has lifted the pound by around one and a half cents today, a substantial move. It means it’s gained five cents in less than a week.
More here:
My colleague Andy Sparrow is tracking all the Brexit action, as we head towards a crunch EU summit on Thursday and Friday;
Thomas Cook managers have been accused by MPs of attempting to effectively massage the books over eight years by withholding £1.8 billion-worth of spending from its underlying balance sheet https://t.co/fRpaHmdQnC
Brexit: Rees-Mogg tells MPs he cannot confirm if Saturday sitting going ahead as EU talks still unresolved - live news
Mark Carney added that that some people in the financial markets will make money whichever direction Brexit takes.
Q: Thomas Cook’s CEO spoke to five government ministers in the run-up to its collapse, but none of them were from the British government. Shouldn’t you or Grant Shapps have met the company?
The governor told the Treasury committee (on a busy morning for committees) that:
Andrea Leadsom says that transport secretary Shapps did speak to the company in September. He also had to build an airline ‘from the ground up’ to bring holidaymakers home, she adds.
“On no-deal some people will become wealthier as a consequence of that, yes. Others will become poorer - they [winners] will be outnumbered by the number who become poorer.”
Leadsom adds that she’s “very proud” of the government’s operation, despite the committee’s attempts to find problems in it.
And on Facebook’s Libra, Carney said the cryptocurrency is either going to be regulated properly globally “or it’s not going to happen” - and he says he’s confident that will be the view of the G7 and G20 financial stability board.
Alex Chisholm then suggests that foreign ministers were scrambling to catch up at the last minute, unlike the well-prepared UK; I’m not sure Reeves is 100% convinced by that one!
“This will not be like social media. This will not be a case where something gets up and starts running and then the system tries to figure out after the fact how it’s going to regulate it.
Q: Did any officials from the business department meet with Thomas Cook in the run-up to its collapse?
“It’s either going to be regulated properly, overseen properly, or it’s not going to happen.”
Leadsom says there was “significant engagement”, yes, looking at what needed to be done in the event of its failure.
While the BEIS committee was eviscerating Thomas Cook’s failures, Bank of England governor Mark Carney was being quizzed about climate change.
She then adds that the collapse of Thomas Cook was a “truly devastating experience for all those people who lost their jobs, and very worrying for those who were on holiday.”
This continued from his comments in our exclusive interview at the weekend.
I was in frequent contact with Grant Shapps during the company’s last weekend, Leadsom adds, and also in contact with the insolvency service, and asking banks to show forbearance to Thomas Cook staff.
In stark analysis of the world’s financing of carbon-intensive assets, he says the global capital markets - where companies sell their bonds and shares to investors to fund their activities - are on a track to lift the temperature of the planet by more than 4 degrees C above pre-industrial levels.
Q: Were the plans submitted by Thomas Cook to government on 17th September (a week before it collapsed) compliant with state aid rules?
That’s double the target of the Paris climate agreement is to keep temperature rises well below 2c to avert catastrophe.
All government decisions are compliant with state aid rules, replies Leadsom smoothly.
Carney says he based the assessment on fund management firms that have analysed the climate-linked assets in their portfolios, including the massive $1.6tn Japan Pension Fund, which he says holds assets consistent with a 3.7 degrees rise. The fund is attempting to manage that down, he says.
Reeves won’t be put off that easily.
Axa, another investment manager, prices US government debt at “5.4C”, he says, reflecting the carbon intensive nature of the US economy. The UK is much lower, he says.
Q: Were the plans submitted by Thomas Cook compliant?
Some companies are ahead of the game, Carney says, but many others are waiting for policies to change:
Leadsom says she isn’t sure.
“Policy is not yet consistent with stabilising temperatures below 2c. There are some companies out ahead, either because of their stakeholders, or because they’re anticipating that that will change. But there are others that are waiting for the policies to adjust”
Permanent secretary Alex Chisholm says the issue didn’t arise, as the government didn’t believe the proposal was feasible in the first place.
Here’s a snap summary of the key points from today’s blistering inquiry:
Andrea Leadsom’s top civil servant, permanent secretary Alex Chisholm, takes the controls.
Takeaways from first hearing of MPs' Thomas Cook inquiry:-- Directors say they proposed a rescue plan costing taxpayers less than the collapse. No10 knew of it. Govt refused.- MPs savage execs for failures including unrealistic accounting.- CEO won't commit to repay bonus.
He tells Rachel Reeves that contingency plans were drawn up across Whitehall with a co-ordinated plan, in case Thomas Cook collapsed.
Also, MPs were incredulous at the lack of engagement from minister with Thomas Cook in the week leading up to its collapse.
Q: But was there any planning to avoid the collapse of the company?!
Finally, Rachel Reeves MP chastises the former Thomas Cook bosses for their failure to run the company properly, or to show dignity at today’s inquiry.
Chisholm says there were various meeting about Thomas Cook’s funding needs, which changed substantially over the months.
A travel company is a simple business at heart, the BEIS committee chair says.
There were talks with the government about what they could do to help.
You send people on holiday, make sure they have a good time, and bring them back. Thomas Cook couldn’t get that right, so it failed - and that failure touched a lot of people a lot harder than it touched the five well-paid executives in front of the committee.
The government decided not to intervene with a financial bailout. It felt it was not a situation that was viable and sustainable....
You’ve all given your apologies, Reeves continues. But frankly, as seen time and time again on this committee, apologies are the easy bit. The hard bit is to resign from other other directorships, and recognised you have a lot to learn.
Q: Who made that decision?
And... to:
“The lead cabinet minister responsible”, Chisholm replies, “in consultation with colleagues”.
Give back some of the huge rewards that you have not earned, Mr Peter Fankhauser, but you have received.
[That appears to put the blame on Grant Shapps.....]
And with a final flourish, she urges Peter Fankhauser, Frank Meysman, Martine Verluyten, Sten Daugaard and Warren Tucker to reflect on the dignity which other Thomas Cook workers have shown, but which the committee has not seen today.
Q: Why would the transport secretary make that decision, rather than the business secretary?
And with that, they’re dismissed...
Leadsom intervenes, and attempts to bat the blame over to the Treasury!
Rachel Reeves rounds the session up, with a scathing, magisterial dismissal of some of the excuses we’ve heard this morning.
The Treasury took a very close look at the situation, the business secretary says, and concluded it would be “throwing good money after bad”. It wouldn’t be possible to restore the company to health, she insists.
She begins by dismissing former chairman Frank Meysman claim that a “tragedy” occurred one Saturday in September, when Thomas Cook went under.
With excellent timing, Business Secretary Andrea Leadsom is in front of the BEIS committee, to discuss her department’s work.
Reeves says:
Thomas Cook isn’t officially on the agenda, but chair Rachel Reeves makes it the first order of business!
A tragedy, though, speaks of something that is out of your hands.
Q: When were you first made aware that Thomas Cook was seeking government help?
I don’t think this was out of the hands of the company. On the contrary, I would say that that the collapse of Thomas Cook was due to the decisions of the board, including you, Mr Meysman.
Leadsom says he was first aware of its significant problems “probably a month before Thomas Cook finally went into liquidation” [so mid-August?].
Reeves says “a series of misjudgements made by management” led to the inevitable collapse of the world’s oldest travel firm, namely:
At that time, she was also being briefed on a huge number of other issues, including other companies in trouble and various policy briefs.
A failure to deal with the debt, not accumulated by Peter Fankhauser, but not dealt with in the five years he was in charge, or under Meysman’s chairmanship
[Leadsom was appointed on 24 July 2019, so this would be early in her tenure].
A failure to write down goodwill. It “can’t be true” that goodwill was worth £2.5bn one minute and £1.5bn the next -- and now worth nothing.
Q: Who told you?
The use of special disclosed items in the financial accounts seem to be “anything but special, as they occurred year after year.”
Leadsom can’t quite remember, but suspects it was a policy update in her ministerial box.
All of the special events -- good weather, terrorism, volcanic ash -- every year there was some special item that helped to hide the underlying problems, rather than reveal the underlying state of the company.
Q: What discussions did you have with transport secretary Grant Shapps?
Failure to sell parts of the business that could have saved other parts; including the failure to sell the airline, failure to sell the travel agencies, the failure to raise the extra £200m needed.
Leadsom says she sees Shapps most days at various committee meetings, so they’d had a number of conversations.
She then dismisses Meysman’s claim that Thomas Cook was “almost there” with its rescue plan.
The week before Thomas Cook went into liquidation, there was a cabinet office meeting on the contingency plans, she adds.
Then looking to the back of the room, Reeves points out that former Thomas Cook staff have attending the hearing, in their uniforms, showing their commitment to the company.
Q: Peter Fankhauser told us that he was told to only deal with the Department for Transport. Why?
They do your company proud, and you should reflect, Mr Fankhauser, what you can do to put something back and say sorry to the people whose jobs you have taken and whose holidays you have ruined.
Leadsom says there is a ‘lead department’ for all major companies. The DfT is responsible for Thomas Cook, while BEIS officials were working closely with it.
I hope you will go away and reflect on the huge salaries you have earned, and what you can do to put right what you’ve done wrong, she adds.
The Press Association have spoken to some of Thomas Cook’s former staff, and it’s fair to say they’re not impressed by this morning’s performance.
Anna Turley MP turns to pensions.
George, who spent four-and-a-half years as cabin crew for Thomas Cook, said CEO Peter Fankhauser, chairman Frank Meysman sounded “deluded”.
Q: How is it fair that Peter Fankhauser got a pension contribution of 30% of his salary?
“We were consistently told that everything was okay - ‘everything was going to be fine, it’s all going through, everything’s going to be fine’.”
Fankhauser says that’s a matter for the remuneration committee, but adds he faces a “considerable impairment” of his pension accumulated between 2001 and 2013 in Germany, when he was running Thomas Cook’s European operations.
Lynn McKeller, who spent 31 years as Thomas Cook cabin crew, was very disappointed that the company didn’t seek UK government help.
He reiterates that he won’t defend his pay - that’s was set by the company - and adds that he has lost £4m of shares.
“The fact Peter Fankhauser didn’t do anything to contact any government minister, that’s hard.
Warren Tucker confirms that Thomas Cook’s executive pay packets were “large by any standard” and when compared to average pay at the company (a fine statement of the bleedin’ obvious).
Elaine Coxhall, 48, from East Grinstead, West Sussex, who worked for three years as air crew from Gatwick, said:
Turley points out that Thomas Cook’s workers face uncertainty over their own pensions, and the committee needs to keep a close eye on this.
“[Thomas Cook executives] should never be on the board of any company again.”
BEIS committee chair Rachel Reeves circles back to the pay question -- how much of the £20m of board bonuses paid out in the last five years be clawed back?
“Even on the Saturday before it went under we got an email saying ‘It’s going to be fine, business as usual, there’s going to be a little bit of noise in the media but it’s going to be fine’.”
Warren Tucker says that Peter Fankhauser received £1.7m in bonuses. One third has been lost, and the clawback procedures means the rest of the 2017 bonus could be clawed back, if the liquidator decides it is appropriate.
Speaking of Brexit... the pound has been jittery today after Britain was given a midnight deadline to make new concessions to get a deal done.
It could be £558,000.
Our Brussels bureau chief Daniel Boffey explains:
Fankhauser’s £4m of shares has already been lost.
Michel Barnier has set Boris Johnson a midnight deadline to concede to EU demands and agree to a customs border in the Irish Sea or be left with nothing to take to the Commons.
Q: What about other bonuses?
According to sources, the EU’s chief negotiator told ministers that, as it stood, there was little prospect of a deal being signed off by leaders at a summit on Thursday, before a special sitting of the UK parliament on Saturday.
Tucker says the finance director received a £400k bonus in 2017 - and it could also be clawed back.
Legal text had yet to be tabled by the British negotiators, Barnier told ministers in Luxembourg.
Q: So should they be clawed back?
Sterling hit a five-month high against the euro this morning, at €1.151, on hopes that a no-deal can be avoided.
That’s up to the people running the business now, says Tucker.
Barnier sets Johnson a midnight deadline for Brexit concessions
There are four criteria that have to be met -- Statement of the accounts, reputational damage, gross misconduct and financial failure.
Well, the financial failures and reputational damage boxes have been “absolutely ticked” says Reeves triumphantly.
Q: So shouldn’t the bonuses be clawed back, in your view?
Tucker argues that Fankhauser worked “exhaustively” to save the company.....
Reeves (who doesn’t appear very impressed by the witnesses) lets rip again:
Q: What’s the point of clawback policies if you can’t claw back a bonus when a company collapses, taking jobs, taxpayers money and the hopes and dreams of your customers. You put those facilities in place!
Tucker says the bonuses can be clawed back - it’s up to the liquidator.
