The purpose of the Conservative Party is simply to be in power. The object of power for them is to make sure that nobody else can use the power of the state to counteract the power of the wealthy and curb their excesses.
You will therefore be amazed by how, whatever the result today, the Tory cabinet will next week be smiling together in a show of unity. Because unity is needed for power. That they were calling each other liars, abusers of government funds, racists, unpatriotic or inciters to murder will be heartily brushed off as the rough and tumble of politics. Cameron will sleep soundly in his bed in Number 10.
Here is a thought. In 2005 Philip Green was paid a £1.2 billion pound dividend. The shareholder was, “officially”, his wife Mrs Tina Green, a resident of Monaco, so no tax was paid.
But the company only made profit of one quarter of the dividend payout. The dividend was paid not from profits, but from the company taking out a loan. How can that be legal? The answer is, in our deregulated society, if a casino banker can be found to make the loan, a company can borrow money to pay massive dividends provided that an accountant certifies that the loan can be repaid by future profits.
That is ludicrously improvident. That you can take over a billion against profit your company has not yet made, landing the company with crippling debt and endangering the livelihood of thousands of employees, is wrong on every level.
It also needs corrupt accountants. The devastating effect of taking a 1.2 billion advance out of cashflow had knock on consequences including the starving of the BHS pension fund. Profits came in large part from asset stripping through leverage on the properties, not from retail sales, and those property deals were one off windfalls.
The £1.2 billion pound dividend was paid with earnings from Arcadia Group, a company Green had bought for just £850 million only three years earlier. That is a fair indication of how out of order it was.
I have been looking through Green’s accounts. The £1.2 billion was paid to Green’s wife, Tina by Taveta Investments ltd, his holding company. The Inland Revenue might have acted on the fact that Ms Tina Green is not even listed as a shareholder or director. Her shares are listed under Mr Philip Green “and immediate family members”. Her “ownership” could not be a more blatant tax avoidance fraud.
Two of Philip Green’s companies owned by Taveta Investments were Arcadia Group Ltd and Arcadia Group Brands Ltd. Arcadia Group owned the shops. Arcadia Group Brands operated the shops and paid rents to Arcadia Group. Total revenue of Taveta’s subsidiaries therefore involved double counting as it was the same money transferred internally between group companies. But the real money actually coming in on the high street in 2005 was £1.2 billion. That is sales income, not profit. To take a dividend equal to your total sales income is ludicrous, no matter how cleverly you leverage internal transfers and bank loans.
In short, the auditors who signed off for Green’s £1.2 billion dividend were corrupt. They were Price Waterhouse Coopers.
Every single financial scandal you can think of – Royal Bank of Scotland, HBOS, Lehmann Bros, BCCI, Bernie Madoff, Robert Maxwell, Enron, Polly Peck, the list goes on an on – had a major accountancy firm signing off as auditor on their immoral and illegal moves right up to the moment they went bust, impacting the livelihoods of in total many millions of decent people. The fundamental feature of the capitalist system whereby the company chooses and pays for its own auditor urgently needs revolutionary reform.
Public anger at bankers is richly deserved. But they could not operate without the institutionally corrupt accountants who support them.
The system needs a fundamental reform. Auditors should be appointed not by the company, but by the government. Auditors already have an obligation to flag up unsafe financial practices, it is just they never exercise it as their mouths are stopped with gold. If their pay does not depend on their dishonesty, the ethics of the profession might change. Finally, there should be a direct link between the amount of tax a company pays and the remuneration of its auditors.
I highly recommend this 2005 paper, Taming the Corporations, by Austin Mitchell and Prem Sikka, which gives a very similar analysis of the problem. Mitchell of course was despised by Blair and Brown, who adore Philip Green. But Mitchell was an MP, and the chance does exist that one day a parliament will seek seriously to check the rampant greed of the bankers and asset strippers.
The purpose of the Conservative Party to make sure that nothing like this ever happens, that there is no bar to the most extreme greed of the super-rich. They need to be able to block serious curbs on banker bonuses, to block genuine curbs on Tina Green style tax-dodging, to block transaction taxes that would calm derivative trading, to block rent controls, or anything else that might tend to social justice. The Conservatives will reform, they have interests to defend. They will reunite to fight for the one thing they truly love. Their money.
There has been a tactical division between them about how best to defend their money. The Boris Johnson wing remember the EU’s heritage of social and economic regulation and wish to escape its residual effect and the potential for future EU social democratic activism. The Cameron wing believe the EU is now fully committed to neo-liberalism and can itself be used to further the laissez-faire agenda. But both come from a judgement call on how the EU is trending, which is why both Cameron and Johnson can and do change their minds on the EU from time to time. It is not a fundamental division.
The unexpected prominence of the SNP, Jeremy Corbyn, Bernie Sanders and numerous movements throughout Europe are merely reflections of a popular mood of discontent with the increasingly remote and increasingly wealthy elite. UKIP is in its way a reflection of the same thing, with the discontent cleverly misdirected at foreigners.
These are, from a Tory point of view, not calm times. The plebs seem a bit restless. They will very quickly come together to put us in our place.