Brian Monteith: How much more damage can brand Cameron endure?

David Cameron has benefitted from legal tax avoidance planning ' but handled the politics of the situation badly. Picture: Getty
David Cameron has benefitted from legal tax avoidance planning ' but handled the politics of the situation badly. Picture: Getty
Have your say

CAMERON’S personal finances are not so unusual – but his explanation of them has been dire, writes Brian Monteith

How much more damage can brand Cameron endure?

The past week has to be the lowest point so far in David Cameron’s premiership. Revelations about his tax affairs have fuelled public mistrust, his decision to give the pro-European Union campaign a huge financial advantage has shown him to be underhand and undemocratic, while his campaign for the UK to stay in the EU suffered a number of reverses.

It has been a week of political train wrecks, car crashes and banana skins all at once. With David Cameron’s only job outside politics being in public relations, as head of corporate communications for London’s weekday television franchise, you would be forgiven for thinking he would be more polished than Gerald Ratner. Unfortunately for him he has been less than forthcoming, when decisive action offering to be transparent immediately could have moved the focus on to others.

His handling of questions about his personal tax affairs, after it was revealed through a leak that he had in the past benefited from his late father’s establishment of a tax efficient company overseas, was a textbook example of how to make a crisis out of a drama. The initial comment from his office that it was a “private matter” came over as seeking to hide the truth. After the media responded with outrage at being brushed off, his subsequent clarifications only served to generate more questions, leading in turn to more clarifications, leading to more questions. In the end he had to publish his tax returns for the last six years to show he had not done anything illegal.

At the same time the announcement that he is spending £9.3 million of taxpayers’ money on a highly partisan pro-EU brochure (it is not a leaflet, it is a 16-page full colour sales-pitch) together with aggressive social marketing – and the decision of the Dutch to reject by referendum the EU’s Ukraine Association Agreement only added to his difficulties.

There has been a great deal said and written about the financial benefits that Cameron has received from his father’s entirely legal use of tax law and the subsequent gift of £200,000 from his mother once she was widowed so that, in the event that she did not die within seven years, inheritance tax exposure could be reduced. There will, no doubt, be much more said in the next week or so but unfortunately most of it is self-serving from time-served opponents, written in green ink by political advocates of envy – and, ultimately, a danger to the tax affairs of ordinary law-abiding men and women who work for a living.

It needs to be recognised that the tax law that David Cameron’s late father Ian, his mother and indeed that David Cameron himself have operated under were the result of legislation passed not just by past Conservative governments but also by three successive Labour governments in recent times. Indeed, much of our tax law dates back to legislation and rules thought sensible in the years of Labour chancellors such as Jim Callaghan, Roy Jenkins and Denis Healey. How could that be so? The reason is simple, legal tax avoidance schemes are all part of governments directing us about what to do with our money.

Societies generally want more people to save for their retirement, provide for their care, for any misfortunes that might strike them and to help deserving causes so that demands upon public finances are not impossible to meet. Governments of every colour encourage tax reliefs for pensions, for savings, for business start-ups and for charitable giving – and many more such schemes that we mere mortals on ordinary tax rates benefit from. Those of us who are fortunate to become wealthy or super wealthy naturally benefit from these schemes, too, only on a larger scale. The day we start trying to cut down on the schemes for the rich is the same day we cut down on those schemes for ourselves.

Simple investment vehicles that everyday people use, such as unit trusts, often benefit from overseas tax sheltering in British dependencies or small principalities such as Monaco, Andorra or Liechtenstein.

It also needs to be understood that there is a huge difference between tax avoidance – which Ian Cameron practised and David Cameron has benefited from by careful tax planning within the rules of the time – and tax evasion, which is entirely illegal and relies on not declaring income at all and seeking to evade payment.

When party leaders such as Jeremy Corbyn use words like tax “evasion” when they are describing tax “avoidance” they not only exhibit they are wholly ignorant of the law, but are unfit to govern too. By railing against the likes of Cameron and others they actually put at risk the interests of ordinary working people who are encouraged by every government to plan their tax affairs in certain ways that benefit the public good.

There is, of course, another way, and it is one I would heartily recommend, but it is too radical for most people to contemplate. That is to remove all or practically all tax allowances and benefits and simply levy the same relatively low flat tax on everyone, so that it makes it advantageous to declare all income and stop inventing creative tax-avoiding vehicles.

Lawyers and accountants would be significant losers were this to happen but all the evidence suggests our public finances would benefit and economic growth would multiply. What we have at the moment is not capitalism but corporatism and it is the ordinary people that lose at the hands of our political and corporate elite that are in it together.

It is not, however, a philosophical debate about tax systems that has been generated by Cameron’s financial affairs, but a political one about his trustworthiness, and that is down entirely to the way he has handled the matter back in the past and again last week.

By Cameron seeking to exploit for his own political benefit the legitimate tax avoidance of others, such as comedian Jimmy Carr, he may now be judged as a hypocrite unworthy of public trust. That other politicians from Labour, such as Ken Livingstone and Margaret Hodge, have also benefited from tax avoidance matters not a jot. It is Cameron who is in the spotlight and the publishing of his tax returns may be too late to stop the haemorrhaging of the public trust he previously enjoyed.