There were moments last week when I was ready to give up journalism and retrain in a less unsavoury profession — chiropody, perhaps. It might have been Jon Snow’s bushwhacking of arts minister Ed Vaizey on the subject of the prime minister’s tax affairs, or Snow’s colleague Cathy Newman shrieking questions about offshore companies at Boris Johnson as she chased him in the street. Or one of dozens of reports and articles oozing malice, self–righteousness, hypocrisy and wilful ignorance of the distinction between tax planning as practised by anyone with a sense of obligation to provide for their family and the dirty business of hiding ill-gotten gains.
This being open season on long-dead churchmen (see Charles Moore passim), shouldn’t we know whether the late Bishop George Snow of Whitby, father of Jon, benefited from a pension fund that contained investments whose domiciles were offshore? Anyone — columnist, broadcaster, lawyer turned Labour MP — who has a nest egg or modest inheritance held in a standard managed portfolio will find at least a quarter of it is in fund products registered in Luxembourg, Dublin or other places offering nifty tax breaks.
And it’s no sin; for people who pay all taxes legitimately demanded, it’s a way of making what’s left of their money work a little harder in a world of miserable investment returns. So, inky brethren, let us re-focus the Panama story on dictators’ loot and untraceable bearer shares and other bad stuff that matters, and suppress the urge to damage ‘Dodgy Dave’ just because we can.
Come clean, Wayne
But while we’re on the subject, what about footballers? That’s a question often put up by bankers accused of being overpaid, but the comparison works as well with politicians. Cameron’s tenure at the top has coincided with that of Wayne Rooney, a role model for millions who is said to earn more in a week than the Prime Minister earns in a year: Cameron’s tax rate turns out to be 38 per cent, but what’s Wayne’s?
More broadly, the annual wage bill for the Premier League is £1.9 billion. Two thirds of the players, including most of the highest paid, are foreign. A survey for 2013–14 found players earning an average of £2.3 million, a five-fold rise over 15 years — grotesque, you might think, but no scandal if clubs sustained by broadcasting rights can afford it and tax is being collected. At 38 per cent, that would be £720 million a year, or a couple of new hospitals.
But if there’s a single Premiership player who doesn’t employ a smart tax accountant to minimise his HMRC liabilities by every available device, I’d like to shake his hand. As for the 400 or so foreigners — like the sad Senegalese prodigy Freddy Kamo in John Lanchester’s novel Capital — a seasoned wealth manager tells me that most of them ‘hold offshore accounts to which their wages are paid, so they only pay UK tax on what’s remitted into the UK to cover the rent on their monstrous mansions’. What would you guess the average player’s effective tax rate to be: maybe a third of David Cameron’s? That would be robbing the nation of half a billion a year. There’s one for Jon and Cathy to get on their high horses about.
Care home crisis?
And here’s another: care-home companies owned by private equity. They have been complaining that the Living Wage, combined with a squeeze on fees paid by local authorities, is driving them towards ‘existential crisis’ — to quote Ian Smith, chairman of Four Seasons Health Care, which, with homes for more than 23,000 elderly residents, is the biggest operator. It’s true that the Living Wage applies to as much as 90 per cent of the (typically low-paid and over-25) care workforce. But the other side of the coin is that companies in this sector are notorious — the archetype being Southern Cross, which collapsed in 2011 — for their debt-laden financial complexities, designed to produce high returns for equity investors while minimising tax and shifting risk to lending banks.
Now here (from Where Does The Money Go? published by the Centre for Research on Socio-Cultural Change) is a brief description of Four Seasons, which has changed hands between private-equity firms several times, is currently in the portfolio of Terra Firma, and was reported to be clocking up hefty losses last year: ‘As of December 2015, Four Seasons is a complex group of more than 185 companies in 15 tiers, registered in multiple jurisdictions including the UK and many tax havens.’
So impenetrable is this structure that it’s impossible to say whether the real problem is wage costs, or promises to investors that can’t realistically be met. As I said of Southern Cross: ‘Even if you believe at heart that no form of service provision is wholly unsuitable for private enterprise … the record of raw capitalism in the care-home sector may prove hard to defend.’
I’ll miss the IMF meeting in Washington this week (there’s too much to be done in the garden at this time of year) but I hope delegates have a real ding-dong on the dangerous fashion for negative interest rates. IMF director José Viñals has just issued a paper in praise of their regenerative potential, while German finance minister Wolfgang Schäuble has accused ECB chief Mario Draghi (one of half a dozen exponents of negative official rates so far) of fuelling the rise of the extreme right by destroying returns on savings. My own view is that negative rates are not just an ‘unconventional’ monetary device but an abnormal and desperate one: witness their failure to stimulate the Japanese economy and the worsening debt crisis there, of which there were also warnings this week. Had I gone to Washington, I’d have held up a banner that said ‘What would normal look like, and what are you doing to get us there?’