London
‘We know no spectacle so ridiculous,” Thomas Babington Macaulay wrote in 1830, “as the British public in one of its periodical fits of morality.” The release in April of the “Panama Papers,” hacked from the servers of the world’s fourth-largest offshore law firm, Mossack Fonseca, has triggered one of those moral fits in Britain. The trigger is not whether Prime Minister David Cameron has benefited directly from the rococo tax arrangements of Blairmore Holdings, the offshore investment fund managed by his late father, Ian. Rather, it is the evidence that the opportunity to dodge taxes is, like many other kinds of opportunity in our socially immobile times, not distributed equally; and that the privilege of dodging is often obtained not by merit, but by hereditary right.
Blairmore Holdings was created in 1982 by Ian Cameron and four British colleagues. By 1988, Blairmore was managing $20 million. The company was incorporated in Panama, but it operated in the Bahamas. Until 2006, Blairmore used “bearer shares,” which do not carry the name of an owner, but are held to belong to their bearer—hence their popularity with criminals and their illegality in some jurisdictions.
To establish Blairmore as a non-British company, dozens of Caribbean residents signed Blairmore’s paperwork and served on its board. One of Blairmore’s Bahamian vice presidents was Solomon Humes, a lay bishop in the Church of God of Prophecy and a board member of 25 obscure businesses with sporting names like Capricord Games Inc., Race Promo Consultant Inc., W. A. Casinos Inc., and Wheel Spin Inc. Truly, the Lord works in mysterious ways.
Blairmore’s arrangements allowed the company, whose founders remained in Britain and met there to discuss Blairmore’s business, to avoid paying a penny in British tax and their investors to minimize their tax too. There is no suggestion that Blairmore or Mossack Fonseca broke the law. The problem, as Bishop Humes might have put it, lies not in the letter of the law, but in the spirit—and in that Ian Cameron was the father of David Cameron.
When the Blairmore story broke, Cameron protested that his family’s tax history was a private matter. But these days, there is no privacy for those in public office, even if they conduct government business from a private server. When the press reminded Cameron that the people have a right to know whatever they feel like knowing, Cameron published his tax returns from the last six years. As that is how long he has been Britain’s prime minister, this represents the closure of the stable door after the horse has bolted for the Bahamas.
Cameron’s returns show that when he became prime minister in 2010, he owned Blairmore shares worth ¢19,000. He sold them and paid income tax on the profits. While squatting at 10 Downing Street, he has earned extra income by renting out his house in an expensive area of west London. He has paid tax on every penny of his income, and on time too. Compared with Winston Churchill, a habitual debtor who used personal influence to reduce his tax bills, or William Gladstone, who made a losing gamble on Egyptian shares, then saw them shoot up in value after he had invaded Egypt, Cameron is a paragon of “transparency.” Why, then, the “fit of morality”?
The taxes of most voters in the Western democracies are withheld at the time of payment. The ordinary worker is taxed to the gills and has no way to dodge the payments. But, as we learned in 2012 when Mitt Romney’s fondness for the Cayman Islands emerged, the rich are different, in taxes as in much else. This spectacle is a blatant example of the undemocratic privileges of wealth. It is the financial equivalent of draft dodging. It breeds envy of those who, born or called to greatness in wealth, can hide their money offshore—especially when the economy is slow.
In Austerity Britain as in Obama’s America, there are votes to be won by populist appeals to resentment. Hence, the ridiculous spectacle of Donald Trump and the moralizing fits of Bernie Sanders. Hence too the degrading images of Hillary Clinton, fumbling with a ticket to the New York subway, and the Trotskyite hack Jeremy Corbyn, fumbling to lead Britain’s Labour party. Cameron seems to be a decent man, a “One Nation” conservative who believes in opportunity and social cohesion. He knows that the British public resent the growing gap between the few who hold offshore assets and rentable London properties and the many who do not. Elected to narrow that gap, he has tried to do so. But to get elected, he had to make a populist pitch.
In 2012, Cameron mocked the comedian Jimmy Carr when Carr’s Romney-style offshore arrangements came to light. In 2015, speaking in Singapore, Cameron denounced the offshore and anonymous arrangements of “the corrupt, criminals, and money launderers.” He promised that from this June he would publish the names of investors in British companies (as Blairmore has done of its financiers since 2006). Now, we learn that Cameron has benefited from the offshore finance industry—if only for the blameless reason that he is Ian Cameron’s son.
Throughout his tenure, Cameron has suffered from an authenticity problem. For trying to minimize his demonstrably posh background, he has been ridiculed as “Call Me Dave.” Now he looks hypocritical, for masquerading as a man of the people. This masquerade has always been a requisite indignity for anyone running for major political office. Yet who would want to run in an age that denies privacy to those in public life? No wonder our leaders are such a disappointing bunch. We have made them that way.
It is unfair that there is one tax law for the rich and another for everyone else. If the rich are able to cheat the IRS, then the rest deserve the same opportunity; otherwise, the cohesion of democratic society is undone. That cohesion is also undone, however, by the erosion of the right to privacy, for the rich as for the rest. As Macaulay also said, “We are free, we are civilized, to little purpose if we grudge to any portion of the human race an equal measure of freedom and civilization.”
Dominic Green, the author of Three Empires on the Nile, teaches politics at Boston College.
