Expert confirms PM blameless in offshore investment disclosure

“You need to be able to trust your Prime Minister, and the fact that he couldn’t answer a straight question straightforwardly straight away I think has undermined the trust that we have in him.”

cameron17:22 Friday 8th April 2016
BBC Radio Cambridgeshire

CHRIS MANN: Public trust in the Prime Minister has been undermined by his admission that he owned shares in an offshore fund, according to the Labour Party. Earlier this week the Prime Minister said he’d sold the shares before he entered No.10 six years ago, and that he’d paid all UK taxes due. He also insists that the firm Blairmore Holdings which was set up by his late father had not been set up to avoid tax.
DAVID CAMERON: A lot of the criticisms are based on a fundamental misconception, which is that Blairmore Investment, a unit trust, was set up with the idea of avoiding tax. It wasn’t. It was set up after exchange controls went, so that people who wanted to invest in dollar-denominated shares and companies could so so.
CHRIS MANN: Conservative MP Mark Pritchard doesn’t think the story is damaging to the Prime Minister.
MARK PRITCHARD: I think most of the public will probably find it distasteful that somebody who’s passed away, the Prime Minister’s late father, is being brought into this.
CHRIS MANN: But for Labour it’s serious business, and they want Mr Cameron to disclose details of all of his past investments. The Shadow Treasury Secretary John McDonnell says it’s a matter of trust.
JOHN MCDONNELL: You need to be able to trust your Prime Minister, and the fact that he couldn’t answer a straight question straightforwardly straight away I think has undermined the trust that we have in him. But there are issues to be asked, for example, why did he intervene to prevent the register of those holding trusts, when that was coming before the European Union. Issues like that we need to explore in more detail.
CHRIS MANN: One Labour backbencher John Mann has called on the Commons Standards Commissioner to look into why his stake in Blairmore wasn’t disclosed in the register of MP’s financial interests. No. 10 insists the Prime Minister’s interests have always been recorded in line with the rules as they stood at the time. But the SNP Leader Nicola Surgeon say the PM should have come clean at the beginning of the week.
NICOLA STURGEON: It seems as if this information has had to be dragged out of him over the past few days. What he said just a few days ago appeared to suggest that there was no benefit that he had ever derived from offshore funds like this one. So I think he’s got big questions to answer.
CHRIS MANN: So is it all completely above board, and are the newspaper headlines just a storm in a teacup? A legal tax expert James Quarmby gave me his analysis a little earlier.

JAMES QUARMBY: I gather he’s invested into a hedge fund which is domiciled in Ireland. He invested a modest amount of money, made a modest profit, and paid tax on it. So that seems pretty unexceptional so far. I think what’s made this story run is the fact that the hedge fund in question was set up by his father, and people are putting two and two together and getting ten. He could have handled the disclosures a bit better. I think if I were he I would have just been much more upfront and unapologetic about it, Boris Johnson style, at the beginning, rather than having the information dragged out of him.
CHRIS MANN: Yes. It’s sort of been drip drip drip hasn’t it?
JAMES QUARMBY: Yes. It doesn’t help.
CHRIS MANN: And he needed four or five corrections. Now his late father Ian specifically worked in the offshore sector. Is that right? That’s how he made a lot of money.
JAMES QUARMBY: Well you know I don’t know much about him to be honest. I’ve been learning about him like you have probably in the last twenty four hours. But what he’s done is pretty normal in that industry. The hedge fund industry is predominantly based offshore. There’s something like nine thousand hedge funds in Cayman for instance. The Caymans is the number one jurisdiction for hedge funds. Then you’ve got Bahamas and Ireland and there are various others. So he’s only doing what the hedge fund industry does, and it’s pretty normal really. There’s nothing exceptional about it.
CHRIS MANN: This company that he and Cameron set up was called Blairmore Holdings. It was a fund for investors, which until 2006 used what’s called bearer shares to protect its clients’ privacy. Now how did it do that?
JAMES QUARMBY: Well bearer shares are weird things, because they basically say that whoever holds onto that certificate owns that share. And they were pretty commonplace for Panamanian companies. Panama stopped doing them, and ironically actually until last year it was possible to have bearer shares in UK companies. But that’s really never discussed much on the radio. So they’re not .. you know bearer shares are seen as a money-laundering risk now, and for that reason they’re frowned upon, and probably quite rightly. But I think it would be wrong to judge the conclusion that because bearer shares were used that therefore they were being used in the wrong way, because there’s absolutely no evidence of that having happened.
CHRIS MANN: But obviously a bit of a loophole here to put it mildly. And basically what MP Cameron’s father did, he was one of five directors who flew to board meetings in the Bahamas or Switzerland. Now the companies carried out no business there as I understand it. They just flew to board meetings so they could technically say they were based there.
JAMES QUARMBY: No I don’t agree with that. And I think you’re wrong. As far as I can see from the information available, the fund was actually administered in the Bahamas and had a majority Bahamian board, and it’s quite a beefy board actually. I looked at the prospectus. We’re not talking about straw men. We’re talking about people with years of experience in the fund industry.
CHRIS MANN: So it’s not just a plaque on the door as happens in many places like the Cayman Islands or Jersey or whatever.
JAMES QUARMBY: That’s not allowed with funds. It really isn’t. I have to stress these are highly regulated investment vehicles, and they have to be in order to have the licenses to sell those products to the public.
CHRIS MANN: So what you’re basically saying I think here is that much of this is legal, but it’s the public imagery, the political ideology, which is at the centre of it all, whether people should be taking advantage of this.
JAMES QUARMBY: Yes. It is .. people don’t really understand these things, probably quite rightly, and there is a natural suspicion of things you don’t understand. And because offshore is seen as shady, they’re putting two and two together and getting the wrong sum at the end. So it’s a pretty mundane investment, this one I must say. And it hasn’t actually performed that well.
CHRIS MANN: So, are we going to see now more people get involved in offshore dealings, or is this going to be the end of it all do you think?
JAMES QUARMBY: It certainly won’t be the end of it. It’s a multi-trillion dollar business, and the vast majority of investment funds and collective investment schemes are situated outside the UK. We have to recognise that the UK makes up a very small proportion of the world, and it’s the world that we’re talking about that’s investing in these funds. It’s not just British people. That fund was invested in by European people, people from Asia, people from the Middle East. So we must stop thinking of this as a UK thing that we’ve moved offshore. It’s not. It’s an international thing with a UK footprint.
CHRIS MANN: OK. And after hearing all these tales of people saving fortunes on their house sales and all the rest of it and avoiding tax, if Mr and Mrs Ordinary thought right, let’s go offshore, could they?
JAMES QUARMBY: It’s really hard. You can’t move your money offshore and save tax, and indeed David Cameron is a good demonstration of that. He didn’t save a penny in tax by making this investment. The only way really you can save UK tax is to remove yourself and your family from the country and go and live somewhere else. And of course you know what wherever you live, they’re probably going to tax you as well. Unless you want to go and live in a Caribbean island. And that’s not for everyone.
CHRIS MANN: No it’s not. It sounds quite attractive right now though. Legal tax expert James Quarmy talking about the tax affairs of the Prime Minister.