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The chancellor is under pressure to reveal where his personal multi-million dollar fortune is invested after suggestions that some of his wealth, which is managed by a so-called blind trust, could be held in offshore tax havens.
Opposition MPs and transparency activists on Monday called on Rishi Sunak to be “completely transparent” about where his wealth, gained during a long career at US investment bank Goldman Sachs and hedge funds, is invested, to avoid potential conflicts of interest with your role in running the UK economy.
What is a blind trust?
A blind trust arrangement allows one person to hand over control of stock, property, and other assets to an independent trustee who is employed to manage their contents. Although the beneficiary remains the owner and benefits from the investments, they no longer participate in their day-to-day management.
In theory, blind trusts allow people in public office to remain owners of investments in companies, while avoiding the accusation that there is a potential conflict of interest.
Who are more likely to use them?
While politicians primarily use blind trusts, other people in sensitive positions such as journalists, charity workers, and even religious leaders have placed their personal assets in blind trusts. In the United States, President Lyndon Johnson was one of the first to adopt a blind trust, as he did not want to sell the Texas television station he owned before entering the White House. Donald Trump and Theresa May created trusts when they became president and prime minister, respectively.
The campaign group, Spotlight on Corruption, says seven incumbent government ministers currently have blind trust agreements, according to the latest record.
Why are they controversial?
Because they can abuse. While they allow politicians to appear to be making decisions free from the charge of personal gain, blind trusts allow politicians to own substantial investments free from any public scrutiny, as their contents are private.
While an actively managed portfolio of stocks, held in a blind trust for several years, would allow the beneficiary to argue that there is no conflict of interest, activists say a newly appointed minister who has recently transferred his assets to a blind trust would still be in the position. So much of where your money was invested.
While the beneficiary and trustee are required not to discuss the trust’s investments and the former should have no influence over the latter, there is little to prevent this from happening informally, and it is not controlled in any way.
Some politicians will sell anything that could be construed as a conflict of interest: Barack Obama sold all of his shares shortly after he became a senator.
In 1998, a parliamentary report by Lord Neill found that the use of blind trusts was “incompatible with the principles of openness and accountability” and recommended that such trusts be “prohibited as a mechanism to finance political parties, party leaders, members of the parliament or parliamentary candidates ”.
Are government ministers required to use them?
No. The ministerial code says that it is the personal responsibility of each minister to decide if and what action is necessary to avoid a conflict or the perception of a conflict.
When Theresa May became Prime Minister, she created a blind trust, but decided against doing so when she was appointed Secretary of the Interior. David Cameron did not use a blind trust, while Tony Blair created one after he became prime minister. It later emerged that his wife, Cherie, had ordered the trustees to buy two flats in Bristol, the beginning of what became a £ 27 million property empire.
What happens at the end of the process?
The trust is simply dissolved and the assets are returned to the original owner, along with any accumulated gains or losses while the investments were held in the trust. Politicians who create a blind trust for their assets when elected will generally terminate it once they leave office and conflict of interest questions are removed.
Sir Ed Davey, the Liberal Democrat leader, said: “The truth with this confidence is that the only people who are blind are the public. The chancellor established the trust only 18 months ago, but the public has no idea where the money is or if there is a conflict of interest. With public trust in this government plummeting, greater transparency in all its dealings is essential and the chancellor must show an advantage. “
Sunak registered a blind trust in July 2019 after being appointed Chief Secretary of the Treasury under the previous Chancellor Sajid Javid. Under a standard blind trust arrangement, people can still receive income from their investments, but cannot make decisions about how the money is invested.
Activists and MPs are concerned that Sunak knows where his money was invested before depositing it into the blind trust, raising concerns that his decisions as chancellor may be influenced by his personal interests.
Advocates of financial transparency have also asked the chancellor to be categorical on the question of whether some of his wealth is protected in offshore tax havens.
Abena Oppong-Asare, Treasury’s shadow finance secretary, said: “Rishi Sunak must be completely transparent with the public about whether any of the funds he invested in a blind trust are held in offshore tax havens. Taxpayers who pay their fair share expect no less. “
Sunak is the only chancellor to have used a blind trust since details of the interests of ministers began to be published in 2009. Seven serving ministers have a blind trust, compared to 13 in 2015.
Richard Murphy, a visiting professor of accounting at the University of Sheffield’s school of management who describes himself as a “tax justice activist,” said: “The problem with this arrangement is that the blindness is for the public. We literally don’t know anything. “
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Daniel Beizsley of the financial transparency campaigns group Spotlight on Corruption said: “The problem I see with Sunak is that unless the trustee receives specific instructions to diversify the portfolio, Sunak is fully aware of its content. It’s hard to see how this could absolve you of conflict of interest claims. Additionally, by placing assets in the blind trust agreement, the public’s ability to judge potential conflicts is reduced as their ministerial statement is now empty. “
Sunak’s spokesman declined to comment, but a Treasury source said: “Blind trusts / blind management arrangements are long-standing mechanisms to protect ministers in managing their interests. They guarantee that ministers do not participate in any decision on the management, acquisition or disposition of the elements of the agreement.
“Politicians of all stripes have used blind trusts / blind management arrangements to make sure they avoid any conflicts of interest, including the last Labor government.”
