Leader: The Panama fallout

Since being linked to the so-called Panama Papers, David Cameron has only made his position worse - with potentially worrisome ramifications for the EU referendum.

By New Statesman

After the outrage came the tax returns. As we stated last week, the kind of behaviour revealed in the so-called Panama Papers, the biggest leak of financial documents in history, severely threatens the social contract on which the fairness of our tax system and the legitimacy of states rely. Belatedly realising this after a week of misjudged statements, the Prime Minister released his tax information since 2009 on 10 April and was quickly joined by other senior politicians. It is a development that we welcome.

In so doing, David Cameron will have hoped to draw a line under the row. Yet the consequences of his befuddled initial response to the leak will linger. Had he said early last Monday what it took him until the following Thursday evening to say – that he held shares in his father’s offshore fund until 2010, paying full income tax on the dividends, and then sold them – the Prime Minister would at least have demonstrated that he understood the impetus for the public outrage over his tax affairs.

Instead, Mr Cameron’s five statements over that period, each one only a little less opaque than the last, made it look not only as if he had something to hide but as though he felt entitled to hide it from the people he serves.

In the House of Commons on Monday 11 April, the Prime Minister only made his position worse. Mr Cameron announced long-overdue measures to enhance transparency in British-associated offshore havens, with overseas territories and crown dependencies such as Jersey and the British Virgin Islands agreeing to provide UK Treasury authorities with full access to information about company ownership and control, but he erred when he emphatically defended the conduct and integrity of his father, Ian. From an emotional standpoint, the Prime Minister’s decision was understandable. The extensive press scrutiny of his late father, with whom he had a close relationship and whom he clearly admired, will doubtless have been painful for him. Mr Cameron should not be expected to condemn him.

Yet nor should he be expected to use his prime ministerial pulpit to go out of his way to defend him, and that is precisely what he did. Mr Cameron cannot credibly claim that the Panama Papers have spurred him into action to combat tax avoidance but in the same breath absolve Blairmore Holdings, one of the companies named in the leak, of moral culpability. If Mr Cameron cannot recognise that Blairmore is precisely the kind of tax-minimising vehicle that the public rightly abhors, he will never be trusted to close the loopholes that enable aggressive tax avoidance. For the Conservative Party, this only entrenches its difficulties in appealing across class lines. The problem is not that Mr Cameron is a wealthy man but that he has spent six years governing predominantly in the interests of the wealthy.

In Monday’s statement, the Prime Minister also failed to give an adequate account of why, in 2013, he personally intervened to block a plan by the European Union – the only organisation with the will and power to combat multinational tax avoidance – to subject trusts to the same transparency requirements as companies.

The following day, the European Commission unveiled proposals that would require all large businesses operating in the EU, including subsidiaries of non-EU companies, to disclose how much tax they pay in each of the Union’s 28 member states and also in tax havens outside of it. The proposals, which were drawn up by Lord Hill, a British member of the Commission, demonstrate not only that multinational co-operation is the best way to combat multinational tax avoidance, but also the positive impact of Britain’s influence on the European stage.

Furthermore, the cross-border collaboration between media groups with access to the leaked documents is the reason why the Panama Papers have had such an impact – the flipside of the globalisation and digitisation that enable this sort of tax avoidance and money-laundering.

Among supporters of a vote to leave the EU, the scandal will only have reinforced the idea that the modern world is a dangerous and unruly arena and that the UK’s best response would be to retreat into its own walled island. That isolationist vision is wrong-headed, but the Prime Minister’s woeful response to the Panama Papers has enhanced the prospect that it will win out in June’s referendum.