Tesco chairman John Allan says he will defend ‘to the death’ board’s decision to pay dividend after receiving tax break
Tesco chairman John Allan said he would defend ‘to the death’ the board’s decision to pay a dividend after receiving a massive tax break.
The company declared a £315million six-month dividend on Wednesday following a board meeting to discuss the matter earlier in the week.
Chancellor Rishi Sunak’s business rates holiday for the entire retail sector meant Tesco escaped paying £249million in the period.
Defiant: Tesco chairman John Allan said he would defend ‘to the death’ the board’s decision to pay a dividend
The dividend caused controversy, with critics claiming it was subsidised by hard-pressed taxpayers.
But Allan said the company would more than likely have made the same decision even without the tax break – because it had a ‘strong balance sheet’ and its performance is improving, despite the massive costs of coping with the crisis.
He insisted the rates holiday was a blanket decision and Tesco had not accepted any discretionary help, including the furlough scheme and VAT holiday.
At the same time, it sent 27,000 vulnerable staff home, hired 40,000 temporary staff to handle the rush to stores, increased deliveries and paid a much-deserved Covid-19 bonus to staff.
The operational changes cost around £725million. Profits ‘were not dramatically up’ as a result, he said, increasing 4 per cent to £1.2billion in the six months to the end of August.
Allan added: ‘Our view was that we got some benefit from this but we also had an awful lot of additional costs.’
He accepted the windfall provided the high street giant with some relief, but said: ‘We were told very firmly that the expectation on us was that we would remain open seven days a week through all of this and we did. I would defend to the death that we’ve done the right thing over this.
Allan added: ‘I don’t remotely feel any sort of guilt over it.’
‘The company is solvent, is cash-generating, and lots of individuals are dependent on dividend payments – pensioners and small shareholders, which includes a lot of Tesco staff.
‘It’s not just big institutions, and we felt that, if we were in a position to do so, we should continue to pay it.
‘I do feel very strongly about this, even if it’s going to lead to some temporary unpopularity.’
Being required to pay rates in the period ‘probably wouldn’t have made a difference’, he said, but his view was ‘hypothetical’ because the decision required approval from the entire Tesco board.
But tax campaigner Dame Margaret Hodge took a different line.
She said: ‘Far too much taxpayers’ money has been given out in one form or another to businesses where the company, the shareholders or the directors personally benefit at the expense of the public purse.
‘The idea that we pick up the bill for this sort of support is simply unacceptable.’