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Analysis
Another threat for Cameron

Another threat for Cameron

Panama papers: the Marconi connection

by Brian Reading in London

Fri 8 Apr 2016

The ‘Panama papers’ affair may not just be embarrassing for David Cameron’s premiership, at a time of challenge over the European Union referendum. It could prove fatal.

There are some fascinating parallels with the story of the Marconi affair in 1912 that rocked the Liberal government of Herbert Asquith, UK prime minister in 1908-16.

The UK prime minister has been hit by revelations that his deceased father Ian Cameron set up an offshore fund in the 1980s with the help of Mossack Fonseca, the Panama law firm that had 11.5m documents leaked to the press. Cameron has suffered significant damage from association with information unveiled by an international consortium of investigative journalists exposing the offshore holdings of 140 politicians and officials, including 12 current and former presidents, monarchs and prime ministers, many with dubious reputations.

After days of obfuscation, Cameron admitted on Thursday night that he and his wife in January 2010, four months before he became prime minister, personally profited from a sale of £31,500 in shares in Blairmore Holdings, a trust operating offshore and unregulated in the Bahamas. The fund was brought back onshore to Ireland in 2012, and Cameron has insisted it was not a tax-avoidance vehicle. Cameron said he had paid income tax on the dividends but that there was no capital gains tax because the profit on the 2010 sale was less than the couple’s tax allowance.

There is no suggestion of illegality in the Cameron family’s dealings, in contrast to the Marconi affair, which involved corruption at the highest level. Both began with leaks, in 1912 by the alternative magazine Eye Witness (renamed New Witness), founded by Anglo-French writer Hilaire Belloc with G K Chesterton as a contributor. Its equivalent today would be Private Eye, the UK satirical magazine renowned for decades of revelations of governmental ill-dealings.

The Asquith government was about to award a lucrative contract to the English Marconi Company, subsidiary to the American Marconi Company, to establish the Imperial Wireless Chain. Sir Rufus Isaacs, attorney general – brother of Godfrey, Marconi’s managing director – was privy to the secret. Rufus bought shares in the American parent, as did David Lloyd George, chancellor of the exchequer, and Lord Murray, Liberal party treasurer.

Insider trading was not then illegal but this was high-level corruption. A parliamentary inquiry, voting on party lines, exonerated the ministers. A criminal libel suit was brought against New Witness, which lost the case but won a moral victory with damage fixed at a derisory £100. The establishment whitewash was back page news compared with the struggle over Irish independence, industrial unrest and the outbreak of the first world war. The scandal became a footnote in history.

The bigger picture today is the EU referendum struggle. If Cameron’s credibility is eroded, ‘Brexit’ becomes more likely. If the UK leaves, his stay in 10 Downing Street will probably end, too. His ally George Osborne, chancellor of the exchequer, would go down with the sinking ship. Boris Johnson, the London mayor and eurosceptic prime minister-in-waiting, may be preparing to move in. But don’t count on it happening.

The lesson of previous removals of Conservative prime ministers in office – Harold Macmillan in 1963, Margaret Thatcher in 1990 – has been that not the leader of the insurrection, but a comparative bystander (Alec Douglas-Home and John Major in these two cases), takes over.

A mugwump, a fence sitter, who keeps out of the fray, has a better chance. If the Panama papers turn sour for Cameron, the next UK prime minster may be a surprise.

Brian Reading was an Economic Adviser to Prime Minister Edward Heath and is a member of OMFIF’s Advisory Board. This is No.29 in the series.

OMFIF’s series on the UK EU referendum presents a wide variety of perspectives from Britain and around the world ahead of the 23 June poll. We are assuring a balance between many different points of view, in line with OMFIF’s overall neutral stance on the issue.

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