ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Now this week the government finally backed down on its controversial work experience programme in part. After losing support from dozens of companies, it dropped the rules which saw young people stripped of their benefits unless they carried out unpaid work. Well Sainsbury’s is one of the businesses that decided not to take part but in a moment I’ll be speaking to their Chief Executive, Justin King. Also watching the discussion are our Twitter commentators, they are David Wooding, associate political editor at the Sun, we’ve got Andrew Woodcock, political editor from the Press Association and Jane Merrick, political editor at the Independent on Sunday. They provide their reactions via Twitter and you can read that on the side panels as we go along and you can also follow if you like on our website, that’s skynews.com/politics and you can join in as well if you use the hashtag #murnaghan on Twitter. Well let’s say a very good morning to the Chief Executive of Sainsbury’s, Justin King, good morning to you Mr King. This issue of work experience, I know you didn’t participate originally in the government’s programme but your company has been doing things like that for quite a long time. On the broad brush, you must think it is a good idea?

JUSTIN KING: Yes, we’re enthusiasts for work experience. It’s a great way for young people, and in fact the not so young, to get a first experience or a new experience of the world of work. Our own scheme, we call them work trials, started back in 2008 and that’s why we never joined the government’s new scheme, because we already had something in place and we’ve learnt three key things. You have to have a willing participant, a willing company and a real prospect of a job at the end of it and that’s what we focus on.

DERMOT MURNAGHAN: Yes and do you need a fair days pay for a fair days work? What’s the remuneration?

JUSTIN KING: Well in our own scheme they last for a maximum of three weeks and in those three weeks the individual will stay on benefit, we don’t pay them. They are supported usually by organisations like Remploy, Mencap, because often these are individuals from groups that are very hard to get back into the world of work, long term unemployed, those with a particular disability, so they don’t want the jeopardy of thinking they might lose their benefits if it turns out the work isn’t right for them so we think it’s a good thing that a short work trial can take place whilst still on benefit because if it’s not right for the company or the individual, the fear that the individual has that they might lose benefit will stop them from taking the trial in the first place.

DERMOT MURNAGHAN: I know but just working without being paid by the company is an issue for some of these activists, that alone is an issue. If your company were targeted, would you as Stuart Rose on this programme last week said, show some backbone and tell them to get offside?

JUSTIN KING: Well I think we have shown backbone. We have employed 11,000 in the last three years through our various work trials and work experience schemes and it works for us, it works for the individuals. Often these individuals become great loyal colleagues, stay with us for a long time. We’re doing it because we get great employees and therefore I think we absolutely are prepared to stand up and be counted. Work experience is a really good thing and all companies that have genuine jobs to offer at the end of it should be involved in these schemes.

DERMOT MURNAGHAN: So your non-involvement in the government’s original scheme was what, because you were doing it already, you didn’t need to join in or because you thought that jeopardy element was a mistake?

JUSTIN KING: Well we thought two elements. We were already doing something so we didn’t need to, if you like, take the government’s money. One might argue that we could have changed our scheme to the government’s scheme and we would have got a government subsidy, we chose not to do that because we felt the government’s scheme was less good than our own. It did have jeopardy, which we think is a mistake but also you didn’t have to have a real prospect of a job at the end of the process and whilst we think that’s right for say young people at the end of their school life, maybe doing their GCSEs or their A Levels, a couple of weeks work experience so they can set their sights on the future and decide what they might want to do, obviously you don’t need a job at the end of that kind of work experience but for people who are on the unemployment register, genuinely looking for work, we think there should be a real prospect of a job.

DERMOT MURNAGHAN: Okay, let me turn now to the retailing picture which I’m sure is one that you are keen to discuss with us. You must have a degree of satisfaction about the retailing figures that have been coming out from Tesco, not doing too well and Sainsbury, thriving it seems in very, very difficult times. What has the recipe for success been?

JUSTIN KING: Well thank you very much, we have been doing well. For a good period of time now we have been keeping our nose ahead of the marketplace, not just Tesco who are the biggest retailer in the marketplace, and we think it is the unique combination that we give our customers, the opportunity to save money whether it be through promotions or prices. We launched our unique coupon at till offer which we call Brand Match which guarantees to our customers if they spend £20 with us they’ll get the same prices on brands as they do with our competitors so they don’t have to shop around but also own label. We focused very heavily on making sure that Sainsbury’s own label is different, is better value for money, because we put more quality into our own label.

DERMOT MURNAGHAN: But the question is, how did you get that message across as we went into recession quite a few years ago now and then bumped along the bottom, how did you at Sainsbury, which had that fairly upmarket image, perhaps a notch below Waitrose, a couple of notches below M&S but certainly above Tesco and Asda and others below that, how did you get the message across that if you come into one of your stores you can shop thriftily?

JUSTIN KING: Well to start with we already had 20 million customers a week so we had got the message across to a lot of people but I think the question in a way misunderstands what customers, consumers have been trying to do over the last three or four years with their household budgets under pressure. There hasn’t been some kind of race to the bottom, we’ve seen most of the long term trends whether it be high quality food or fair trade or high animal husbandry, things that we lead on, actually growing during the downturn because as you become more concerned about how you are spending your money, you are more likely to look into these things so we have been able to show to our customers that we lead and we are in the middle of Fair Trade Fortnight at the moment and we are the leading fair trade retailer, not just in the UK, but in the world and that’s something that we are very proud of and of course many customers choose to shop with us because of our leadership position on that.

DERMOT MURNAGHAN: Well have you any thoughts, as you say you are accentuating the positive there and how, is there anything you would put on the Chancellor’s agenda, two and a bit weeks away from the budget, what could he do to make the picture even more rosy, to make those consumers even more confident?

JUSTIN KING: Well I think confidence is the key word and if you look at all the research of consumer sentiment at the moment we are not confident in the future, we are very worried about the here and now but we are not expecting it to get better any time soon. There are one or two positives on the horizon, most notably the Jubilee, Olympics and the Paralympics that I think are going to make all of us feel better about our country, ourselves, the backdrop over the next 12 months, but I don't think we’ve seen yet the government inspiring confidence on the part of the average consumer in the street that things are going to get better and therefore anything that they do in the Budget that touches the most people possible, I think we would encourage and support.

DERMOT MURNAGHAN: Talking about moving on that lower tax threshold, is that something that you would welcome? Is that what you are hinting at there?

JUSTIN KING: Yes, I think if the government has got any money that it thinks it can spend in the tax regime, it should be at the bottom end of the tax regime where it touches the most people possible.

DERMOT MURNAGHAN: But you are kind of best friends with the government at the moment because of course they put Mary Portas in with this taskforce, we’re talking about high streets being devastated almost up and down the country, full of empty stores, charity shops, bargain booths, whatever it is and out of town big retailers like you sucking the life out of the high street.

JUSTIN KING: Well of course that’s not what’s happening. If you read Mary’s report you will see that she says that. In fact there was another report that came out just last week that showed that two and half thousand extra independent retail stores opened in the last 12 months on high streets. Now we know …

DERMOT MURNAGHAN: But you’ve told the high street to get real haven’t you? Use the stores for other things, have schools or whatever it is in the high street. We’ve won the retailing battle, you’ll have to do something else.

JUSTIN KING: Well, no, we’re in high streets. Half of our main supermarkets are in high streets already and of course all the convenience stores that we’re opening which is reflecting the ways consumers are changing their shopping at the moment, they are in high streets as well. What I said a week or two ago in a speech I did though was that we have to recognise that there has been a shift in the shopping that people are doing. If you look at the shops that have gone from the high street, actually it is typically multiple chains, we saw Peacocks just a couple of weeks ago. Independent chains are thriving by focusing on what customers want but I think we have to recognise that some of our high streets are strung out if you like, they would be much better for being a little bit more concentrated, a compelling destination for customers well invested and if that means some of the fringes of the high street need to return to other uses, whether that be housing – and we want people to live in the middle of towns and not just on estates on the edge of towns – or commercial use, that should be a good thing and we shouldn’t fight against that change.

DERMOT MURNAGHAN: And just finally can I ask you absolutely out bonuses, of course much talked about executive bonuses, you are a successful chief executive and presumably you’re in line for some pretty good bonuses, some long term incentive plans. Would you stand up and, to use that phrase again, show some backbone if you get criticism for the size of your bonus and say hey, look at Sainsbury’s performance, look at the share price, I’ve earned it, I’m keeping it?

JUSTIN KING: Yes, absolutely. About three-quarters of what I earn is on bonuses, be they short term or long term. It’s completely in the public domain, voted on by our shareholders every year. 98% of them voted in favour of our pay and bonus schemes. Importantly though we also have bonus schemes that go through the whole company, they obviously don’t pay out as much money the further down the company, but I have the same targets that we share all the way through.

DERMOT MURNAGHAN: But do you feel that there is a bit of a witch hunt going on at the moment that anyone, and it doesn’t matter if the company is successful or not, anyone who gets these seven figure bonuses, people are going to say wow, that’s too much?

JUSTIN KING: I think we have to separate between pay for performance and pay for failure and I don't think you are going to find anybody, be they a business person or indeed of any other description, who is going to support pay which is not related to performance but in our company and in fact in most companies, pay is very linked to performance. It is in the interests of shareholders and customers and we should celebrate successful businesses and successful businesses will have bonuses in them.

DERMOT MURNAGHAN: Justin King, great to see you, thank you very much for coming in on Murnaghan there, the chief executive of Sainsbury’s.