// Work & Pensions Secretary Therese Coffey won’t “attack” Tesco for £900m dividend pay out
// Tesco under scrutiny for the pay out despite securing a £585m tax break from the government
// Coffey told ITV’s Robert Peston that Tesco deserved credit for its efforts in navigating the pandemic so far
Work and Pensions Secretary Therese Coffey has said she will not “attack” Tesco for its decision to pay huge dividends to shareholders while receiving government support during the coronavirus pandemic.
The supermarket giant has come under scrutiny from politicians and analysts for paying out £900 million in dividends to investors despite securing a £585 million tax break from the government.
The tax break is in the form of a business rates holiday for the current financial year, which the Chancellor announced last month as part of measures to support businesses impacted by the virus.
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However, Coffey told ITV’s Robert Peston last night that Tesco deserved credit for its efforts in navigating the pandemic so far.
“I know other businesses that have chosen not to pay dividends and have made that clear to shareholders,” she said.
“But I’m not going to necessarily attack people like Tesco who have actually been working flat out again to not only keep food on the table for people but also the amount of work they’re doing to support vulnerable people around the country.
“So I think businesses do need to consider carefully what this government is doing, what taxpayers are doing to help them stay afloat.”
Coffey still highlighted that companies should not be seen to abuse the “generosity” of support schemes.
“The furlough scheme is very generous, as you say all the other support schemes that are in place, whether it be loans, rate relief, grants, and I think they’ve got to be careful in making sure taxpayers’ generosity isn’t seen to then be used in a different way,” she said.
Her comments come after Labour MP and Treasury select committee member Rushanara Ali describing Tesco’s tax break as “completely disproportionate”.
“It’s an absolute scandal that the government is providing this tax break to Tesco while millions of self-employed and freelance workers, even those who qualify, cannot get any money until June,” Ali said.
The Share Centre investment research analyst Joe Healey said: “It appears there are no signs of Tesco taking the foot off the pedal on its dividend distributions, something that will please investors.
“In my opinion, this is a somewhat aggressive move by a company who has openly announced a significant uptick in costs associated with the pandemic, defying similar companies such as Morrisons which has deferred dividends in an effort to preserve cash.”
Tesco chief executive Dave Lewis defended the dividend pay out decision, saying it was “reflective of last year’s performance and the strength of the business” and ordinary people with shares stand to benefit.
“We looked at whether the business needs more liquidity even in the most stressed scenario and it was decided we do not,” he said.
“We have a strong balance sheet and we do not need surplus cash.”
Tesco shareholders will receive 9.15p per share in its first shareholder dividend in five years.
The dividend payout was first announced in Tesco’s full year trading update yesterday.
with PA Wires