Trouble in Paradise

The latest revelations about how the richest protect their wealth and minimise their tax burden tell us little but confirm a great deal. The information in the Paradise Papers show us a truly glittering pageant of celebrities using offshore tax havens, including fine upstanding members of the community, such as Queen Elizabeth II herself, Trump’s Commerce Secretary with shady friends in Russia, Wilbur Ross and, regrettably, the mostly admirable Prime Minister of Canada, Justin Trudeau.

Why, it seems that even Bono, fine humanitarian and protector of the poor in the Third World, may have been benefitting from tax regulations that protect the rich of the Old World. Ironically, I read (in a piece from the Sunday Express, not the most reliable of sources, but this story has the ring of truth), that Bono’s own foundation was set to denounce the tax haven system until it realised that he was a beneficiary.

Still, it isn’t these fine luminaries that interest me here, but just two specific individuals, for what they reveal of how our system works more generally.

(Lord) Michael Ashcroft
Worthy citizen, tax avoider and major contributor to the Tory Party

The first of these is Michael Ashcroft, Lord Ashcroft, former Deputy Chairman of the British Conservative Party and one of its main individual contributors. For many years, he held “non-domiciled” status in the UK, meaning he could live in the country without paying its taxes. When he was raised to the House of Lords, he pledged to give up that status and become a full UK resident, but failed to do so for ten years, when a change in the law would have forced him to give up his peerage otherwise.

It now turns out that he’s a major tax haven investor. That saves a power of tax. Who needs non-dom status when you have tax havens you can take advantage of – and without even giving up your peerage? You might feel, and I’d tend to agree, that the law needs changing again, so that a member of the House of Lords can’t benefit from tax havens any more than from being non-domiciled in the UK.But let s see why that s not likely to happen.

The use of a tax haven saves someone like Ashcroft a great deal of tax. That sets up a fine cycle of mutual benefit. With so much more money to play with, it’s easy for him to make contributions to his favoured political cause, in this case the Conservative Party. For the 2017 election campaign, he stumped up £500,000, which by British standards is a massive contribution to a political party.

Now, isn’t that neat? Serious money for a political party. The party that happens to be in government. In government at least in part thanks to that money.

Now, how much priority would you expect that government to set on changing the law to deal with the abuse of tax havens?

The second person is something of a favourite of mine.

Glencore is one of the world’s major commodities companies. The Paradise Papers reveal that Glencore “loaned” £45m to a shady Israeli businessman, on the basis that it would be repaid if they failed to win a lucrative deal in the blood-soaked, deeply corrupt so-called Democratic Republic of the Congo. Nothing illegal seems to have happened, but that only highlights the weakness of the law. It may have been legal, but there was nothing edifying about this transaction.

So how about this favourite character of mine? He wasn’t with Glencore at the time, but he is now. He’s the company’s non-executive chairman.

His name is Anthony (Tony) Hayward. Not a name to conjure with, you may feel, and I’d agree though I have mentioned him before. If you’ve heard of him at all, it’s likely to have been in the context of the Deepwater Horizon disaster in the Gulf of Mexico, when an oil exploration platform caught fire and the ensuing oil spill polluted vast swaths of the Gulf.

Deepwater Horizon: fitting monument to reign of Tony Hayward

The oil rig belonged to BP. And the Chief Executive of the time? Why, Tony Hayward.

He came to fame with a series of brilliant gaffes. The one I like the best was his apology for the damage and, indeed, loss of life caused:

We're sorry for the massive disruption it's caused their lives. There's no one who wants this over more than I do. I would like my life back.

I’m sure he wanted all that unpleasantness over. As I’m sure that the millions whose lives or livelihoods were affected by the oil spill, to different degrees but seldom positively, couldn’t have given a flying curse for how much he wanted his life back.

Now just as the tax haven issue proves how little consideration of integrity or any kind of principle drives our governments, the Tony Hayward story reveals how little high business office owes to competence or even basic humanity. The colossal remuneration these people receive is often justified as being a reflection of the responsibility they accept. But far from being driven into the outer darkness where there is wailing and gnashing of teeth, Hayward simply stepped from BP into a series of lucrative and comfortable directorships, including at Glencore.

He wasn’t with Glencore at the time of the Congo deal. But still, it’s interesting that it was a company with as savoury a reputation as Glencore that offered him its non-executive chairmanship. And that a man with his track record accepted it.

Might that be just a coincidence? Speaking for myself, I doubt it.

Who'd be a democratic socialist? Depends on what you mean by it

On 21 October 1966, 40,000 cubic metres of stones and mud slid down a hillside in Wales. In their track stood the village of Aberfan and Pantglas Junior School. 116 children and 28 adults died.

Aberfan: aftermath of disaster

The heap that slid was slurry from the nearby coalmine. It had been dumped for years on top of known springs. The constant flow of water made it unstable and many voices had been raised in concern.

The slagheap was the responsibility by the National Coal Board. It had taken control of the coal industry when it was nationalised by Attlee’s iconic Labour government. It was headed by Alf Robens, a former Labour MP who had held the position of Minister for Power in that same government.

Robens falsely claimed that the disaster could not have been foreseen. He strove to minimise the Coal Board’s contribution to reconstruction, which only proceeded when a new Labour government under Harold Wilson came up with some money, though that didn’t stop £150,000 being taken from the charitable fund for the disaster (ultimately paid back by yet another Labour government, under Tony Blair).

Why do I recall that story now?

Because just recently some friends on the left accused me of not being a “democratic socialist”. I don’t take offence at such attacks: they merely balance charges of being a “raving socialist” levelled at me from the right (the centre-right: I don’t knowingly have friends in the hard right). Still, it’s a criticism that deserves consideration.

I’ve always thought that central to socialism is the slogan, “from each according to their ability, to each according to their needs”. There are huge difficulties with this principle, not least that no one can really say what anyone’s needs are.

Generally, many socialists accept as an intermediate step the slogan, “from each according to their ability, to each according to their contribution”. Achieving even that would be a huge step forward. And we’re a long way from doing so.

A recent report reveals that chief executives of top UK companies are, on average, paid in a year what someone on a median income would take 160 years to earn.

Major company chief executives may be doing an important job. But their claims to take responsibility are empty. When companies go wrong, Chief Executives generally just move on. Tony Hayward, Chief Executive of BP at the time of the Deepwater Horizon oil disaster in the Gulf of Mexico, has taken up lucrative new positions with Glencore Xstrata and Corus. As his history shows, these top executives aren’t always as competent as one might hope: the link between ther contribution and reward is hard to see. Certainly, it isn’t established at 160 times median pay.

Tackling this kind of problem strikes me as central to democratic socialism.

Sadly, however, those who most loudly proclaim their socialism take what to me seems a far more reductionist view of socialism. They equate it with nationalisation of industry which they conflate with people’s control. That sounds democratic. Indeed, with people’s control it would seem likely that a more socialistic approach, linking remuneration to contribution might be adopted.

Sadly, the real experience of nationalisation is that it produces not people’s control but state control. The bureaucrats who run nationalised industries don’t act in the interests of the people, but generally in the interests of the self-proclaimed elite that includes men of Tony Hayward’s ilk.

Aberfan shows how such bureaucrats can be sucked into the game and ignore the legitimate claims of ordinary people. I sympathise with the Aberfan father who wanted the cause of his son’s death to be recorded as “buried alive by the National Coal Board”. The same coal board would do Thatcher’s bidding and bury the entire British coal industry less than twenty years later.

It also saddens me that many friends on the left line up with the Brexit camp in the great debate that dominates British politics. In a pamphlet on the subject, an MP for whom I have great admiration expressed his surprise at the fact that the far right shares his desire to leave the European Union. Only his surprise surprises me. The driving force for Brexit is fear of immigration and a nationalistic loss of local state power – a fundamental concern of the far right.

On the other hand, one of the few forces to have resisted the hegemony of the Tony Haywards has been the EU. It has ensured the adoption of employment laws that are anathema to the top executives. It represents a bulwark against the kind of behaviour of employers that marked the National Coal Board and Lord Robens at Aberfan. It guarantees freedoms, including the freedom of movement, that give wage earners the right to pursue the best opportunities for themselves anywhere across the world’s largest trading bloc.

Why would any democratic socialist want to give any of that up?

Brexit: "bringing back control" to hand it to Washington?
Thanks for sharing, @AnnEnglishRose

So, friends who doubt my democratic socialist credentials, here’s my answer: if democratic socialism is reduced to state control of industry and a nationalistic refusal of merged sovereignty with our neighbours, then certainly I want no part of it. If, on the other hand, democratic socialism means battling against the injustice and regressive effect of inequity, revealed in individuals being paid 160 times more than others for delivering not even a fraction of 160 times as much; if it means working with other nations to defend our rights and extend our prosperity; why, then democratic socialism is precisely what I believe in.

And isn’t that precisely what the Labour Party should be about?

They deserve every penny they receive: the case of Glencore and Tony Hayward

Spare a thought for that poor fellow, Tony Hayward.

I use the word “poor” in the moral sense, of course, rather than the financial. He’s reported to have made about £2.3 million in 2013, and rather more last year, so I don’t think he’s likely to fall victim any time soon to, say, any cuts in benefits support the UK government will be pushing through in the next few months.

However, £2.3 million is terrible cut from his maximum remuneration, o £3.2 million back in 2009, his last full year as Chief Executive of BP.

Ah, yes, it’s all falling into place now, isn’t it? You remember. Hayward was the man who revealed his diplomatic skills when, a few weeks after the Deepwater Horizon oil spill in the Gulf of Mexico, he announced to the press that “I would like my life back.” Since he was at the head of the company ultimately responsible for the drilling rig which caused the disaster, that was a sentiment that was received with less enthusiasm than he might have been hoping for.

It was like the acclaim that greeted Jeb Bush recently when he commented on the latest school shooting in the US, that left nine dead, that “stuff happens.”

The awkwardness at Deepwater Horizon
It caused some discomfort to that unfortunate Mr Hayward

Hayward quite soon got his life back, when BP decided that it might be better all round, taking everything into account and weighing one thing against another, if their ways parted.

He then faced all the problems that those of us who lose our jobs know and dread. He was forced eventually to settle for a much less well-paid job. You can no doubt imagine the feeling of despair: going from £3.2 million to £2.3 million represents a drastic pay cut, not far off 30%. It must have felt like virtual pauperisation.

In fact, things were so bad that poor Mr Hayward, like so many inhabitants of US trailer parks, say, was forced to take not just one job, but two. As well as the interim chairmanship of Glencore, he also took charge of energy company Genel. He had a number of other charitable appointments around the City of London to make sure he could keep the wolf from the door, but you can no doubt picture the stress he had to undergo, with all those jobs.

Fortunately, Genel was able to increase its remuneration package to him last year, by 41.5%, taking him to £2.5 million. And since he’s moved from interim chair of Glencore to take the post definitively, his salary went up to £685,000. With other payments – bonuses, etc. – there’s every chance that he’ll have moved beyond where he was with BP.

All this goes to prove that you can’t keep a good man down. You deliver the goods, and you’ll be paid a reasonable, proportionate return.

For instance, the generous increase in Hayward’s salary from Genel came in a year in which he presided over the company making a loss of £213 million.

Meanwhile, and this is why I’m talking about this at all, Glencore is back in the news these days. It’s the world’s tenth largest company, but what’s most important about it is that it’s massively dependent on the trade in metals – it controls 60% of the world's trade in zinc, apparently, and 50% of the world’s trade in copper. So it’s a barometer of the problems building up for the world right now. The economies, notably China’s, on which we’ve all been relying on for growth in recent years, are slowing; they want less metal; the prices fall; Glencore’s taking a hit. 

On a single day at the end of September, Glencore shares collapsed so badly that Chief Executive Ivan Glasenberg lost $500 million of his personal fortune. That left him in relative penury, with just $1.4 billion, down from $7.3 billion in July 2014. It seems Glencore has recovered most of its most recent share price fall, but taking a longer view, shares that were trading at £5 in 2011 are now down to £1.

At least Hayward managed a small increase in salary last year despite these problems.

Aditya Chakrabortty has given us a fine piece in The Guardian, predicting the difficulties George Osborne will face in 2017, as UK Chancellor of the Exchequer, in accounting for the economic crash that’s coming. Where copper goes, he points out, the world follows, and copper’s on the way down. So Glencore’s troubles are a warning of global troubles to come.

Isn’t it sad that Mr Hayward seems again to have got himself involved in a company that’s facing a degree of unpleasantness? Why, he may be called on to dazzle us once more with his fabled communication skills, perhaps a little honed since Deepwater Horizon. This time, the disaster he fails to avert will be far more far-reaching, affecting the globe and not just the Gulf of Mexico.

In any case, we must surely be left with a sense of the general rightness of things, in a world where top executives of the companies that determine our destinies, deserve and receive the remuneration their skills command.

Who'd be a teacher? At least, in a nation of shopkeepers?

It was Napoleon who said that England was a nation of shopkeepers.

He wasn’t being complimentary. It seems unfair to hardworking shopkeepers, but a nation made up of them? Nah. An idea we’d treat with scorn. 

That even includes many of the English. Which is odd, because when it comes down to it, it isn’t commerce that attracts most contempt from a large part of the English public. It's the public sector.

Take teachers, for instance. Those long holidays – they’re clearly underworked. And at the end of their career, the most valued teachers may be on nearly two and half times median earnings, so they’re clearly overpaid. And they’re all infected with a sad, sixties-hippy radicalism, that somehow contrives to be ineffective but also dangerous – don’t they teach arithmetic by phonetics, and leave all the important battles out of geography?

On the other hand, you can go a long way if you stick to commerce. Consider Tony Hayward. He was Chief Executive of BP and being paid a little over a million a year (only a little over: £45,000 over the million mark, not even two median salaries).

Tony Hayward. Role model of the leader who steps up,
accepts the buck and takes the bullet 

Of course, he couldn’t possibly have got by on that amount, so shares and bonuses eked out his basic to a more comfortable £4 million. It’s not a bad salary; I’m sure teachers would regard it as reasonably generous. 

It’s not just handed out to any old guy, though: you have to be supremely competent and prepared to take responsibility if things go wrong. So when the BP Gulf oil spill took place in 2010, it fell to him to describe the incident as ‘relatively tiny’, an inspired choice of words for what turned out to be the worst ever man-made marine oil disaster.

Faced with a lot of ill-spirited criticism from the States, Hayward followed up with the heartfelt, ‘I want my life back.’ Well, who wouldn’t?

Still, responsibility is a demanding master. Hayward had to give up his job and lower his sights. Like a teacher who has been disciplined, his career was shot. These days, he holds a couple of corporate directorships (Corus Group and Tata Steel), has merged a company into Turkish oil firm Gemel Energy to pursue opportunities in Northern Iraq, and is interim chairman at Glencore International, the world’s twelfth largest company. The rumours have it that the position may become permanent.

You can imagine that he may well be struggling to get his income anywhere seriously into the seven-figure range. What teacher would want to face that fate?

And Hayward isn’t alone in showing how we value most highly those who serve the public most gladly. As long as they do it the world of commerce.

Sam Laidlaw is the Chief Executive of the energy conglomerate Centrica. He takes, or to use the courteous if misleading term, earns, well under £5m a year.

Well, not that far under.

It’s only reasonable to expect some pretty remarkable stuff from the guy, and boy did he deliver this week: 10% increases in energy prices from the old British Gas, now a Centrica subsidiary. That’s just over three times the rate of inflation.

Sam Laidlaw.
Also understands that high rewards come with an obligation to serve

To be able to pull off that kind of stunt and keep a straight face takes the kind of talent you just can’t buy. Well, actually, you can buy it and Centrica have. And it clearly doesn’t come cheap.

You have to remember that Laidlaw achieved this stunning success in a highly competitive environment. Six companies control 98% of the market. Imagine just how difficult it is, with six suppliers, to rig things so as to allow all the companies to make the same excessive price increases and pull in the same obscene levels of profits.

In this nation of shopkeepers, Laidlaw’s is the kind of talent that’s really appreciated.

It’s not the same everywhere. In Finland, for instance, teaching is seen as one of the most desirable professions. Only if your degree is among the top 10% will you be considered for appointment to teaching, and even then you need a minimum of a Master’s degree.

Curiously, pay isn’t all that much higher than in England. At the top of the scale, allowing adjusted for purchasing power, Finland’s only about 4% above England. Sounds like the only really substantial difference is in the public perception of teaching and its prestige.

The impact, however, seems significant. Finland comes top of evaluation after evaluation of educational systems. The OECD, as I mentioned recently, finds that England is right down there among the also-rans when it comes to literacy and numeracy levels. 

England’s answer to this kind of difficulty? Under the current Education Secretary, Michael Gove, it is to launch ‘free schools’, free of irritating constraints like having to use qualified staff as teachers. Finland succeeds and demands a Master’s degree as a minimum; England fails and is pioneering unqualified teaching.

You want to understand our admiration for men like Hayward and Laidlaw, our contempt for the profession of teaching? Perhaps you need look no further than the OECD’s findings. I like the American expression, ‘go figure’, but the OECD found levels of numeracy which suggests that those who most need to do the figuring probably can’t. 

Lack of education feeds the undermining of education. And that perpetuates the forelock-tugging to our elite of high-earning mediocrities.

Too many electors cling to their comfort zone, content to live in a nation of shopkeepers. When what they really need is to build a land of talent. For which it would be a good start to learn a lesson from Finland.

Good news story

In tough times, it’s a blessing to find an instance of triumph over misfortune from which we can all draw encouragement.

For months, we’ve been wondering whether Britain was going to experience a ‘double-dip recession’ – back into recession a few months after climbing painfully out of the last one – as the opponents of the present government claim, or avoid that fate, as its supporters hope.

The jury’s still out, but the early signs are ominous. Provisional figures for the last quarter of 2010 show that the economy contracted 0.5%, which is massive as these things go. The definitive numbers may not confirm that gloomy picture, but if they do, and if there’s no upturn this quarter, we’ll be back into the textbook definition of a recession: two successive quarters of contraction.

This would be bad news for a lot of people. Jobs will go, those on the edge will be precipitated into poverty, a lot of hopes and ambitions will die.

So let’s take comfort from the uplifting tale of Tony Hayward. Last summer, he was Chief Executive of BP. You may recall that he was involved in some unpleasantness involving oil in the Gulf of Mexico, when the locals became restive and a number expressed views that can only be called intemperate.

Tony Hayward: poster boy for overcoming adversity

In the end, although he’d faced a crisis which manifestly required steady nerves, his particular brand of quiet calm, cruelly interpreted as indifference, led to his being forced out of his position. To console him for his loss, he left with little more than a few millions, and not many of them at that.

Well, it was announced last week that Glencore, the world’s largest commodities trading group, has approached him about the possibility of joining its board. It seems that Tony hasn’t even decided to take the offer if it’s formally made: he’s building a ‘portfolio’ of top jobs from which he’ll choose the one or ones that best suit him.

It’s a tremendous relief, isn’t it? I mean, it’s awful for these people who’ve grown used to living on eight-figure salaries to have to cope without them, and it looks as though Tony won’t be in that position for much longer.

It’s all very well saying that senior executives are highly paid because they have to take responsibility when things go wrong. It’s a good principle, but do we really want to see it ruthlessly applied in practice even to people this likeable? It was, after all, just unfortunate that during that spot of bother in the Gulf he was perceived as the most hated man in America. There comes a time when we have to move on and put all that behind us.

Perhaps Tony could demonstrate his commitment to our government’s bright new idea of an all-inclusive ‘Big Society’ by going on a speaking tour of the unemployment black spots of this country. His theme could be ‘Bouncing back from Adversity: how I showed that losing a job can be the beginning, not the end, of something worthwhile.’

I’m sure his unemployed audiences would derive great comfort from sharing his experience of dealing with difficulties so similar to their own, and overcoming them.