So how had Mandelson afforded a house that cost more than ten times his pay packet? He got a friend to help out. Geoffrey Robinson was the Labour MP for Coventry and a millionaire businessman. He was also a close political ally of Gordon Brown, with whom Mandelson had horribly fallen out a couple of years earlier – another thing you’d think might have set off some alarm bells. By his own account, the younger MP pretty much threw himself at Robinson’s mercy when they met for dinner at his penthouse flat in Park Lane (at least he could afford his domicile). Robinson recounted that Mandelson
initiated the discussion of his financial circumstances and of his flat. He told me how miserable he felt there. From what he told me it was a dingy place…. What I heard from Peter was a cri de coeur. He dedicated himself to New Labour but the salary was modest. He worked arduous long hours and had nothing to show for it, not even a decent flat where he could relax and entertain his friends. I asked what he had in mind. He replied, ‘Oh, a place in Notting Hill is what I would really like. But it’s too expensive and there is no one to help me!’89
Who wouldn’t take pity at such a sob story? Robinson – who, after the election the next year, would take the ironic government job of paymaster general – promptly agreed to lend his colleague £373,000.90 Take a second to think about that. Three hundred and seventy-three thousand pounds. How heavily would a debt of those proportions hang over your entire existence? Just how obligated would you feel to a friend to whom you owed that much money?
Apparently, it didn’t bother Mandelson, who famously said his party was ‘intensely relaxed about people getting filthy rich’ and obviously included himself in that.91 He didn’t bother to enter the loan in the Register of Members’ Interests, which had recently been beefed up following several Conservative scandals. He also didn’t tell the Britannia Building Society, from whom he obtained a mortgage for most of the rest of the purchase cost. When both he and Robinson were made government ministers after the next year’s election, and he was specifically asked, in writing, by his principal private secretary if he held ‘any outside positions we should be considering and (very important) any major financial interests we should be aware of’, he didn’t declare it then either.92 ‘I regarded the loan as private rather than secret, something that was between us and had nothing to do with our political or public lives,’ he primly writes in his memoirs.93 All the while Tony Blair was boasting about how ‘we will observe the highest standards of propriety in government’ in line with a strict new code of conduct for ministers, which required them to ‘scrupulously avoid any danger of an actual or apparent conflict of interest between their ministerial position and their private financial interests’.94
What should happen next, but an apparent conflict of interest popped up! Long-buried scandals from Robinson’s business career began to re-emerge. They were particularly eye-catching as they involved not only spectacular crook (and former Labour MP) Robert Maxwell, but also a dead Belgian millionaire with the magnificent name of Madame Bourgeois. The government department charged with investigating Robinson’s affairs was the DTI – now led by Peter Mandelson. He did declare that the two of them were friends, which meant his civil servants took steps to insulate him from the inquiries – but he still didn’t think the fact that he owed Robinson (and I’m sorry to go on about this, but really) three hundred and seventy-three thousand pounds was worth mentioning.
The set-up finally came out as a result of the toxic infighting that dominated the top of New Labour. The short version is that someone in Brown’s circle leaked the existence of the loan to a sympathetic journalist, Paul Routledge, though it then took a longer-than-expected route onto the front pages by way of a misdirected set of page proofs of his book, and thus first appeared in the Guardian rather than his own paper, the Mirror. Blair’s reaction when his right-hand man confessed all was to repeatedly ask: ‘How could you do this? What were you thinking?’95 Alastair Campbell’s was apparently more succinct: ‘you stupid cunt.’96
To make everything worse, the news broke just before Christmas 1998. The lack of other news as everyone shut down for the holidays meant this story dominated everything. Mandelson wanted to bluff it out; at first Blair thought he might get away with it, and even Brown offered his support. ‘My sense was that Gordon wanted to damage rather than destroy me,’ reckoned the sacrificial victim.97 But on 23 December journalists started asking questions about exactly what Mandelson had and hadn’t declared on his mortgage form, which pushed the arrangement into the realm of potential criminal offences – and Blair told him he had to go.98 To celebrate, The Sun went with a truly disturbing Christmas Eve photomontage of the former minister and a stuffed – geddit? – turkey.
‘At the time I was certain Peter had to resign,’ wrote Blair in his memoirs many years later. ‘Now I am not so sure.’ With the arrogance of hindsight he puts the whole thing down to a ‘media frenzy’.99 But it was not until January 1999 that Britannia announced it would not be pursuing the former minister-without-portfolio-butwith-a-really-nice-sitting-room for fraud.
Robinson claimed in his own memoir the following year that ‘Britannia was subsequently inundated by requests from other customers for similar treatment. I am told that extra staff were temporarily required to handle the situation.’100 That’s probably a fanciful story that he used to comfort himself for the fact that he, too, was obliged to resign as a minister. Unlike Mandelson, he never made it back into the cabinet.
‘[Ashcroft] committed to becoming resident by the next financial year in order properly to fulfil his responsibilities in the House of Lords. This decision will cost him (and benefit the Treasury) tens of millions a year in tax, yet he considers it worthwhile.’
William Hague, letter to the prime minister, 23 May 1999
In 1999, something that was still quite rare happened: the Political Honours Scrutiny Committee rejected a billionaire businessman from the list of people being put forward for peerages before it was sent to the Queen. The businessman in question, Michael Ashcroft, was not, they ruled, a ‘fit and proper person’ to serve in the House of Lords.101 It wasn’t because the Conservative Party treasurer had blatantly only been put up for the award by opposition leader William Hague because he was bunging shedloads of cash at the party. The committee could hardly object to that: they had passed Labour’s chief fundraiser Michael Levy for a lordship two years previously without so much as a squeak. The real problem with Ashcroft was that he just wasn’t British enough.
All right, he was born in Sussex, and he had a house in Westminster, which was handy for Tory party HQ, but his main home in Florida was more than four thousand miles away. Most of his companies lived offshore too. He was so strongly identified with the Central American country of Belize that he actually served as its ambassador to the UN, as well as owning the nation’s main bank, half of its shipping register and a significant chunk of its sole telecommunications company. To maintain his tax exile status he could spend only ninety days a year in Britain. Even some of the hereditary peers whom the government were in the process of kicking out of the House of Lords managed to turn up and sit on the red benches more often than that.
These circumstances, and the bad publicity about Ashcroft’s business dealings which ensued as a result of his rejection, made him so manifestly and evidently unsuitable for a peerage that William Hague… waited exactly a year, and then nominated him again. ‘I am deeply indebted to William that he pursued the issue of my peerage so vigorously,’ Ashcroft wrote a few years later.102
The honours committee came back to this second nomination with the same response. ‘Our primary reservations in respect to Mr Ashcroft… were that, though proposed as a Working Peer he would be unable to fulfil that function until he became a permanent resident of the UK – and so, in his case also, a UK tax payer. It seemed to us that without such assurances, the appointment of anyone, and of Mr Ashcroft in particular, to a seat in Parliament would give rise to highly critical and damaging publi
city.’103
Ashcroft agreed to move. He wrote a memo to Hague on 23 March 2000 that appeared to clear the matter up once and for all:
I hereby give you my clear and unequivocal assurance that I have decided to take up permanent residence in the UK again before the end of this calendar year. I have given my advisers instructions to make arrangement to give effect to this decision and I will instruct them forthwith to do so within this calendar year. I hereby firmly agree that I will not seek to be introduced to the House of Lords until I have taken up residency in the United Kingdom…. These are my solemn and binding undertakings to you.104
Pretty emphatic declarations. But if you looked carefully, the memo didn’t actually specify anything about the second half of the committee’s requirements – that bit about ‘also a UK tax payer’.
Over the next few months, in a lengthy and confidential exchange of correspondence between the committee, the official responsible for the admin surrounding new peers (that’s the Clerk of the Crown in Chancery, fact fans), and the Conservative chief whip, James Arbuthnot, it became obvious that Ashcroft had no intention of fulfilling that requirement. The committee suggested that tax forms ‘IR P86 (Arrival in the UK) and IR DOM 1 (Domicile) would seem to be significant in discharging the assurance he gave.’105 The party replied that he was quite happy to hand over the first, but not the second: ‘Mr Ashcroft does not believe that his domicile for tax purposes is relevant to the question of his Peerage, having undertaken to be resident in the UK.’106
At this point we need to take a brief but thrilling excursion into the world of tax law. The first big thing you need to understand is that residence is not the same thing as domicile. And the second big thing is that if – as Ashcroft was and remained – you are non-domiciled in the UK, you are not what most of us would understand as being ‘a UK tax payer’. ‘Non-dom’ status – enjoyed by such other vocal patriots as Viscount Rothermere, owner of the Daily Mail, and Zac Goldsmith (until he decided to run as an MP) – is achieved by pleading either your father’s past residence or your own intended future one as evidence that you don’t really live where you seem to, and it gets you out of paying tax in the UK on any money you make abroad. You do pay tax on profits you make within the UK – but if, as in Ashcroft’s case, the bulk of your businesses are based overseas (or you can arrange things so that they appear to be), you need not trouble the UK taxman at all.
The committee were ‘somewhat concerned’ by the prospect of Ashcroft continuing to enjoy this considerable perk. ‘In their view the undertaking given by Mr Ashcroft did involve domicile as well as residence as defined by the Inland Revenue.’107 The Conservatives, however, were firm on Ashcroft’s behalf: ‘Mr Arbuthnot does not believe that the question of domicile is or can be relevant to the fulfilment of the undertaking.’108
Thus, from the moment that the new Baron Ashcroft, of Chichester in the County of West Sussex – he’d thought better of his first proposed title, Baron Ashcroft, of Belize – took his place on the Conservative benches in October 2000 until the moment in July 2010 that he had to give up his status thanks to a change in the rules, he got to have his say on the laws of Britain whilst shielding most of his income from the exchequer that paid for them. In 2004 he even gave Belize as his ‘location of main residence’ in the Lords’ expenses register, which, frankly, was just taking the piss.109 After years of refusing to answer questions about where he really lived and paid tax (‘Hell is more likely to freeze over,’ his spokesman said in 2007110), and just ahead of the truth being flushed out by a Freedom of Information (FOI) request, he finally admitted being a non-dom in the run-up to the 2010 General Election, which he was once again helping to bankroll for the Tories. He had given the party over £8 million during the previous decade.111 In the same period, it was estimated that he had, quite legally, avoided £127 million in tax thanks to his status.112
Conservative leader David Cameron claimed it had all come as news to him. William Hague – long since deposed as party leader but still on the front bench – claimed he had only recently found out too. ‘Over the last few months I knew about that and of course I was keen to support him then in making his position public.’113 A few weeks later the Cabinet Office released the correspondence regarding the peerage negotiations a decade earlier. It concluded with the following letter from Hague’s chief whip, dated 12 July 2000: ‘I confirm that I agree with your understanding of the position, and that the Leader of the Opposition is satisfied that the action adequately meets the terms of Michael Ashcroft’s undertaking to take up permanent residence in the UK.’114
Incidentally, you might think that one of the biggest lies in politics is the pretence that making donations to political parties is not a sure-fire way to buy yourself a place in House of Lords. But, thanks to the diligent efforts of the Metropolitan Police and Crown Prosecution Service in 2006 and 2007, which involved arresting several senior Number 10 aides and even questioning the prime minister in Downing Street, we know that this is not the case. ‘There is… substantial and reliable evidence that there were proper reasons for the inclusion of all those whose names appeared on the… working peers list,’ the CPS ruled. ‘The available evidence is not sufficient to enable an overwhelming inference to be drawn, such as to afford a realistic prospect of convicting any person for any offence contrary to Section 1 of the 1925 [Honours (Prevention of Abuses)] Act.’115
It is pure coincidence that so many big-league donors, in the decades before the investigation and the years that followed, have ended up taking ermine on behalf of their respective parties. Who would have thought it?
‘It is all within the claims policy and that’s why I’m angry about this because not only has it been very stressful for me and my family, it gives the incredibly misleading impression that somehow we’ve been dodgy, that we’ve been fraudulent or we’ve been corrupt. Nothing is further from the truth. I’ve done everything by the rules.’
Margaret Moran, BBC Politics, 11 May 2009
The expenses scandal was a long time coming. As far back as 1983, an official report by the Senior Salaries Review Body recommended a 31 per cent pay rise, which would bring MPs’ salaries to a level comparable with that of senior civil servants. A jump from £14,150 to £19,000 a year was completely unacceptable to Mrs Thatcher, who was forcing pay restraint on the rest of the public sector and had made a show of her own parsimony by refusing the £10,000 extra salary on offer to her as prime minister. Instead, Parliament was forced to agree to a fudge: pay went up by 5.5 per cent, which gave MPs only an extra £800 a year, but the various allowances that were available to them to cover accommodation, office costs, travel and the like were all significantly boosted.116 An MP who entered the Commons that same year noted that ‘an unspoken pact arose: pay would not rise… but a regime bordering on total self-assessment was allowed on expenses. The abuses were clear and indefensible, yet also entirely explicable.’117
Unfortunately, when that MP – a youngster by the name of Tony Blair – became prime minister in 1997, he allowed the situation not only to continue but to bloat. Not that it was up to him. Extraordinarily, until 2010 MPs were the only workforce in the country who got to decide on their own rewards: although the government of the day could make its views very firmly known, salaries and allowances were a matter for Parliament itself to decide. The turkeys were very unlikely to vote for Christmas, but they rarely missed a chance to vote for more stuffing.
Even before the epic and blatant abuse, there was no possible justification for some of the rules. Why should MPs with constituencies classed as ‘outer London’, like Brent North, Leyton and Romford – all less than an hour’s commute from Parliament – get subsidized second homes in the centre of town? Why should taxpayers pay £25 on ‘subsistence’, with no receipts required, for every night that MPs spent in the capital – did they not bother to eat when they were at home in the bosom of their families? How many inner tubes would they have to get through to justify claiming
twenty pence per mile when they travelled by bicycle? Why did they need a resettlement grant and a winding-up allowance for when voters kicked them out of office? And why did the so-called ‘John Lewis List’ used by Commons officials allow them to splash out as much as £10,000 on new kitchens for their second homes, and £750 on a TV or stereo?118 The perfectly reasonable proposition that the public should pay for the staff and office equipment that MPs genuinely needed to perform their public service had tipped over into the assumption that MPs should be allowed to claim for almost everything they spent, over and above their quite generous salaries. What on earth did they think the rest of us spent our wages on?
They knew it was indefensible. And so they tried desperately to keep it secret. When campaigners used the Freedom of Information Act – the single piece of legislation that Blair said he most regretted introducing – to try to wrench the details of MPs’ expenses out of them, the Commons authorities went all the way to the High Court to protest that such a move would be ‘unlawfully intrusive’.119 When judges ordered them to release the information anyway, they insisted on removing so much personal data that the information which eventually saw the light of day was practically useless. It was yet another of those cases where politicians, fearing how bad something might make them look, put themselves in a situation that made it look much, much worse. In May 2009 a whistle-blower sold the unredacted information – a disk containing around 1.5 million documents – to the Daily Telegraph, which set a team to going through it with a fine-tooth comb, cross-referencing the documents with public records to uncover exactly what was going on. Even then the politicians did not give up, taking to the airwaves to bluster about ‘stolen information’ and ‘a breach of the Official Secrets Act’.120
The Lies of the Land Page 9