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The ruling class at Chequers
Of the many educational details revealed so far during the News Corp scandal, spotlighting the criminality and corrupting influence of a single giant corporation, one rather significant piece of information has so far attracted little attention- perhaps, because what is shows is such a normal facet of our social system that it is hardly considered worthy of notice. Excluding other politicians, among the guests (accompanied in most cases by their wives or partners) invited to meet Prime Minister Cameron at his Chequers residence since the general election, the largest group by far is that of the super-rich owners, chairmen, directors, and chief executives of big capitalist companies.
An analysis of the official list of 67 personal meetings at Chequers, released on 15th July, shows that 46% of the engagements were with government ministers, Conservative MPs and other politicians of the ruling Tory-Liberal coalition, reflecting the inevitable importance of such internal relationships for a prime minister and party leader. Of the remaining 36 guest engagements, the majority (twenty) were with top corporate figures, five were with serving diplomats and representatives of foreign governments, seven were with senior military officers- as befits the leader of a country which is continually involved in invading, occupying or bombing other nations; and four were with media editors and writers.
The business figures who can be identified as having had personal engagements with David Cameron at Chequers since May 2010 are as follows:
Sir Christopher Charles Gent, chairman of GlaxoSmithKline, the world's second largest pharmaceutical, biological, and healthcare company, and former chief executive officer of Vodafone. GlaxoSmithKline’s latest annual profits, announced in April 2011, were £2.46 billion.
Lord Stanley Fink, hedge fund manager, former CEO and deputy chairman of the Man Group plc. Fink, who is also co-treasurer of the Conservative Party, has been described as the ‘godfather’ of the UK hedge fund industry. His personal fortune is estimated as £118 million.
Lucian Grainge CBE, chairman and CEO of Universal Music Group, the largest of the ‘big four’ record companies. Universal Music Group is a subsidiary of French media conglomerate Vivendi, whose most recent annual net profits were 2.7 billion euros.
David Joseph, chairman and CEO of Universal Music UK, the British division of Universal Music / Vivendi. The labels owned by Universal Music UK include Island, Mercury, Polydor, Universal Classics & Jazz (UCJ) and UMTV.
Justin Matthew King CBE, CEO of J Sainsbury plc, parent company of the UK supermarket chain Sainsbury's.
Sir Terry Leahy, former CEO of Tesco, the largest British supermarket chain. Leahy’s annual salary and bonus for his last year at the company (2009-2010) was £5.2 million.
Sir Stuart Alan Ransom Rose, former executive chairman of the British retailer Marks & Spencer.
Ian Cheshire, chief executive of Kingfisher, which owns 830 retail stores in eight countries including the B&Q chain in the UK and Castorama in France.
Between them, the four retail companies Sainsbury, Tesco, Marks & Spencer and Kingfisher accrued profits of £5.26 billion in 2010.
John Silvester Varley, former (until 31st March 2011) Group Chief Executive of Barclays Bank. Varley is Chairman of the Remuneration Committee, and non-executive director, at UK-based transnational pharma company AstraZeneca.
Brian Williamson, former chairman of HSBC bank, Electra Private Equity plc, Gerrard Group plc, and the London International Financial Futures and Options Exchange. He is director of Climate Exchange plc and NYSE Euronext, Inc., and a non-executive director of HSBC, Resolution plc, the Financial Services Authority, and the Court of The Bank of Ireland.
Peter Sands, chief executive of Standard Chartered bank. His total annual ‘reward package’ is reported as $4,142,000, consisting of $1,516,000 salary and a bonus of up to $2,626,000.
Standard Chartered Plc has its headquarters in London and operates in in more than seventy countries; the bulk of its profits (which were $6.12 billion in 2010) come from Asia, Africa and the Middle East.
Lord Terence Burns, Chairman of Santander UK, Chairman of Channel 4 Television Corporation, and Non-Executive Director of Pearson Group plc; former Chairman of Marks and Spencer and Glas Cymru (Welsh Water). Burns is also President of The National Institute of Economic and Social Research, and President of the Society of Business Economists. Terence Burns was Chief Economic Advisor to the Treasury under Margaret Thatcher, and subsequently held the post of Permanent Secretary to HM Treasury.
Sir Martin Sorrell, chief executive officer of WPP Group. WPP is one of the world’s largest communications, media and advertising companies, with offices in 107 countries; it owns ad agencies Young & Rubicam and JWT, and media agencies MediaCom and Mindshare.
WPP is valued at around £5 billion, and Sorrell’s own shares in the company are reportedly worth approximately £70 million.
Paul S. Walsh, Chief Executive Officer and Executive Director of Diageo Plc, the alcoholic drinks firm whose brands include Guinness, Smirnoff, and Johnny Walker; Diageo’s most recently announced annual profits (2010) were £2.574 billion. Walsh, whose salary at Diageo is £3,178,000 per annum, is also a director of Unilever NV, Unilever Plc, and FedEx Corporation.
Sir Sherard Louis Cowper-Coles, international business development director at Britain's leading arms manufacturer BAE Systems, and former career diplomat. While UK ambassador to Saudi Arabia, Cowper-Coles had a key role in blocking an investigation by the Serious Fraud Office into BAE bribery accusations; after his retirement he was appointed to the post at BAE.
Michael Philip Green, owner and director of Tangent Industries, and former chairman of Carlton Television and ITV Plc. Green’s current net worth is reportedly £88 million.
Harold Jonathan Esmond Vere Harmsworth, the 4th Viscount Rothermere, Chairman of Associated Newspapers and the Daily Mail Group. Lord Rothermere’s personal and family wealth was estimated at £730 million by the Sunday Times Rich List 2011, including ownership of £547 million of the value of the Daily Mail Group.
And, of course, News Corp CEO James Murdoch, and (former) News International Chief Executive Rebekah Wade; the latter had meetings with the PM at Chequers on two separate occasions.
It should however be noted that the names of others, whose visits were paid for by David Cameron’s own (rather considerable) private resources, have not been released. The list issued by the prime minister’s office includes only ‘official’ guests at Chequers, ie those whose visits were funded by the taxpayer.
Tax dodgers unanimous
In respect of the corporate sectors embodied by these prosperous invitees, ‘communications’ (ie, media, advertising and entertainment) is prominently placed, as is banking and finance, and also the retail sector. The production of material goods, while less strongly represented, appears in the form of drink, drugs and weapons manufacture.
Several of the invitees are distinguished by their ingenuity, having led their corporations (or made arrangements for themselves) in finding creative ways of not paying tax. For example:-
Vodaphone, while Christopher Gent was CEO, bought German company Mannesman, routing the transaction via Luxembourg in order to escape paying £4.8 billion in UK taxation.
Viscount Rothermere, classed as non-domiciled in Britain, although he lives in a huge mansion on his 224 acre estate in Wiltshire. By channeling his share income from the Daily Mail Group through a Bermuda-registered company, the Viscount makes use of his non-dom status to avoid paying UK taxes.
WPP, under the helm of “the much-admired British businessman Sir Martin Sorrell”, paid an average of a mere £5 million annually in UK corporation tax during the six years to 2009, despite annual profits averaging £500 million. These minimal tax payments were achieved by elaborate schemes involving transferring funds between Britain, Ireland, Luxembourg and the Netherlands.
In 2009, when one of the loopholes used by WPP for tax non-payment was closed, the company moved its head office from London to Dublin to enable it to carry on avoiding UK corporation tax.
Barclays, with John Varley as chief executive, used its Structured Capital Markets division to construct several complex tax avoidance schemes (one, known as Project Valiha, routed funds through a Swiss bank, and via the Cayman Islands and Luxembourg) to avoid paying hundreds of millions of pounds in UK tax.
In 2009, Barclays paid £113m in UK corporation tax- less than 1% of its profits for that year of 11.6 billion.
Diageo, headed by Paul Walsh, has been paying an annual average of only £43 million in UK corporation tax, despite average profits of £2 billion. The means by which this has been achieved include setting up subsidiary companies in Holland to which ownership of the Johhny Walker and J&B brand names- and thus, for tax accounting purposes, the profit from them- was transferred, even though the production of the drinks remained in Scotland (as is required for Scotch Whiskies).
The Man Group hedge fund, under its then CEO Stanley Fink, made profits of $1.284 billion in 2007 and $3.470 billion in 2008, while paying, for the respective years, $191 million and $362 million in UK corporation tax. That is, the company paid 14.9% and 10.4% of its profits, compared to what the firm’s financial statement refers to as the “theoretical effective UK tax rate” of 30%, and later 28%, in the UK at the time- a very apt way of putting it, as for these big corporations and their bosses, the tax rates set by the state are, for the most part, purely theoretical in their effectiveness.
Providing one can afford the best accountants and lawyers, and providing that the state is presided over by leaders who are closely connected with the chiefs of the corporations, tax avoidance remains of course a perfectly legal activity- indeed, not to engage in it can be considered a dereliction of ones duty to the prosperity of the shareholders (and, of course, to the size of ones own bonus and stock options.)
As for Lord Stanley Fink, were he not to have a history involving massive tax avoidance it would be remarkable, given that he is both a top corporate magnate and a senior official of the Conservative Party. Former Tory treasurer and current deputy party chairman Lord Ashcroft is a notorious tax ‘non-dom’; while Stanley Fink’s fellow co-treasurer of the party, Peter Cruddas (another hedge fund mogul, whose personal wealth is estimated as £750 million) ingeniously reduced his tax payments by asserting that he was a resident of Monaco although his office, and at least one of his houses, was in the UK; he explained that he has an apartment in Monaco, from where he ‘commuted’ to London- presumaby via his private jet.
Theoretically effective democracy
Among the various commentaries on the deeper implications of the News Corp scandal, one of the more thoughtful was published on July 11th, in the online edition of the New Statesman. Anthony Painter reflected on the Marxist concept of the ruling class in capitalist society, as expressed by Ralph Miliband, the late father of our present leader of the Labour Party:
Most students of sociology or politics come across the work of Ralph Miliband. His basic theory is simple: a capitalist society has a capitalist state at its beck and call. They are tied together by a “ruling class”. Nobody needs to pick up the metaphorical phone -- they think the same way so they act to protect each other's interests. When people get restless, the odd concession is granted: a welfare state or free education. By and large though, the capitalists have it their own way.
A few days in to the mega and all-consuming scandal that has resulted from the News of the World's phone-hacking and News International's ability to evade any real consequences for a number of years, who is to say that Ralph Miliband wasn't right?
[...] Of course, in this case, the phone is not metaphorical. It's a hotline. Politicians and News International executives have family get togethers over Christmas, fly across the world to show affectation and loyalty, employ former editors as Directors of Communication -- even discredited ones that other newspaper editors warn them against -- and fawn over leading players in the company at summer parties and the like. This is not an invisible projection of power. It's obvious, visible, and blatant. It is swaggering and self-confident collusion.
Looking specifically at how the Murdoch empire has had it its own way in the UK, Anthony Painter noted:
How does the News International/News Corporation power work? The newspapers provide the political leverage because voters read them, and politicians care what they write as a consequence. That leverage acts as a commercial lever to prevent strong action of politicians against the commercial interests of News Corporation. This is not corruption necessarily. It is simply how Ralph Miliband would describe the state operating in a capitalist society.
While some other parts of Painter’s exposition can be considered naive, three points can nevertheless be made here:-
Firstly, as is amply indicated by the Chequers guest list, the power and influence of big business and the wealthy under capitalist democracy is a strength in depth, by no means limited to one big corporation or one sector (eg the media).
Secondly, precisely as implied by Ralph Miliband’s observations as referenced by Anthony Painter, that control (particularly in such a refined and historically experienced capitalist country as Britain) is usually exercised with rather more subtlety than has been the case with News Corp. The visible swaggering blatancy of the Murdoch power operation can in fact be seen as one of the factors contributing to its current debacle.
Third and not at all leastly, ‘corruption’ and ‘simply how the state operates in a capitalist society’ are not necessarily contradictory concepts. As well as the mutual economic interest and the ideological and social connections which ‘tie the ruling class together’, there is the very nature of the capitalist system- that is, under capitalism, money will always buy anything and everything which it is able to buy and is in some way profitable or otherwise useful to the purchaser. The ‘free market’ is also a market for- to give two examples- the facility to avoid paying tax, and political power and influence.
Thus, for the super-rich and the big corporations, we have- for the most part- a theoretically effective tax system. Also, and for the rest of the population we have- for the most part- a theoretically effective democracy.