Revealed: Conservative peer Lord Blencathra’s lobbying contract for tax haven Cayman Islands

A senior Conservative peer, who denied that he ever lobbied MPs and peers on behalf of a Caribbean tax haven, had signed a £12,000-a-month contract that stated he would do so, an investigation for The Independent has revealed.

Lord Blencathra has previously been investigated by the Lords Commissioner for Standards for his work on behalf of the Cayman Islands government and insisted in written evidence that none of his work involved lobbying Parliament. The peer told the commissioner, Paul Kernaghan, that he would not have agreed to do this. Yet a copy of a contract signed by the former Conservative Party Chief Whip and passed to the Bureau of Investigative Journalism reveals that the services stipulated included “making representations to … members of Parliament” in the Commons and Lords.

Lord Blencathra insisted that the lobbying clause was one of several which were never acted upon, that he had not carried out any lobbying on behalf of the government, and that what he told the commissioner was correct.

“My compliance with the law or Lords Rules takes precedence over anything which was in my contract,” he said. “I made clear that I would not be lobbying Parliament or MPs. Indeed, even that initial contract made no mention of lobbying. That was firmly understood between us.”

Lord Blencathra also said he had the contract amended in 2012 “to remove all reference to lobbying UK MPs and Parliament”. But the Labour MP Paul Flynn, who raised the original allegations with the Lords standards authorities, said he did not see how Lord Blencathra could “reconcile his defence against that complaint with this contract”.

“I will be contacting the Lords authorities and asking them to look again at this. It is intolerable that he is acting as both a legislator and lobbying on behalf of a country that makes income from the tax avoidance industry.”

MPs and peers are prevented from using their positions to lobby the Government and fellow parliamentarians on behalf of paying clients. However, despite a string of recent lobbying controversies, the Government has been widely criticised for failing to tackle wider problems in the industry. Critics have warned that the recent lobbying Bill will make very little difference in increasing transparency.

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The Independent reported in April 2012 that Lord Blencathra’s work for the Cayman Islands government included lobbying and that he had written to the Chancellor, George Osborne, to complain about air passenger taxes on flights to the Caymans as well as approaching MPs who had criticised the islands.

Lord Blencathra told the commissioner he did not lobby Parliament and would not do so. “None of my work involves lobbying Parliament or seeking to influence either House. I made that clear when I took on the role,” he said.

He also told the Bureau in an email, which was part of evidence sent to Mr Kernaghan: “You have confused lobbying Parliament, which I do not do, with lobbying the Government which I do.”

The commissioner subsequently concluded in November 2012 that there was “no evidence that Lord Blencathra exercised parliamentary influence on behalf of the Cayman Islands Government Office in the UK”. He added: “Equally, no evidence has been presented that he provided parliamentary advice.”

But a copy of the contract between Lord Blencathra’s company, Two Lions Consultancy Ltd, and the Finance Ministry of the Cayman Islands government, signed in November 2011, shows that lobbying Parliament was part of the job description.

The contract says the company’s responsibilities include: “Promoting the Cayman Islands’ interests in the UK and Europe by liaising with and making representations to UK ministers, the FCO [Foreign and Commonwealth Office], members of Parliament and members of the House of Lords.”

Lord Blencathra said his contract required him to provide 14 services but several of them were never acted upon. “This was the first time a contract of this nature was drawn up and the [then] Premier wanted every possible item included. I made clear that I would not be lobbying Parliament or MPs – that was firmly understood between us,”

Following the standards commissioner’s decision, his contract was amended. “I had it amended back to 2012 to remove all reference to lobbying,” he explained.

He was still responsible for “promoting the Cayman Islands” interests by liaising with and making representations to key governmental stakeholders.

Other duties common to both contracts include:

* “Supervision of the advance arrangements for representatives of the CIG [Cayman Islands government] and various departments of CIG on official visits to the UK and arranging meetings with important persons in the UK Government.”

* Presenting the Premier of the Caymans and other ministers to the UK Government “in the best possible light”.

* “Assisting in enhancing relations” between Cayman’s ministers and the FCO.

* “Provision to the CIG of information and advice which will enable them to formulate policy approaches to the UK Government.”

Lord Blencathra also told Mr Kernaghan in 2012 that his “ambassadorial” role involved liaising with ministers and passing messages. But he stressed: “The Premier can write or contact UK ministers at any time and does not need me to act as interlocutor or get him access to ministers.” The Bureau has also obtained copies of private emails sent by Lord Blencathra about his contract prior to its signing. They include discussion of how he might “guarantee access” to the FCO.

In one message to Dax Basdeo, chief officer in the Cayman Ministry of Finance, Lord Blencathra said: “The only way I can guarantee access to all the key people in the FCO is to be designated ‘official’ Cayman Islands government ‘Political Director’. No matter how good I may be and even with the title ‘Lord’, I need that endorsement.”

Following the standards commissioner’s report on Lord Blencathra, the sub-committee on Lords conduct noted that part of the Lords Code of Conduct might need clarifying. The sub-committee pointed out the Code “does not say in terms whether members may lobby ministers or officials in return for payment or other incentive”.

This year, the Committee for Privileges and Conduct recommended the rules be changed to stop peers from lobbying for gain.

Last night a spokesman for the commissioner said: “[These] documents have not previously been received by the commissioner at the time of or since his investigation into Lord Blencathra. If a complaint is received with new evidence... the commissioner will consider whether to open a new investigation.”

The Bureau of Investigative Journalism

Despite having a population of just 56,700 – slightly more than Macclesfield in Cheshire – the Cayman Islands is the registered home of in excess of 93,000 companies. The attraction for all these corporations – hundreds of banks and insurers and thousands of mutual funds – is that the islands’ government does not impose direct taxation on companies or individuals.

Instead, heavy taxes are imposed on imported goods and companies operating there have to pay a licence fee, while foreign workers must buy a permit. The mainstay of the economy is luxury tourism, mainly catering for wealthy North Americans. According to the CIA Factbook, the islanders do pretty well. “The Caymanians enjoy a standard of living comparable to that of Switzerland,” it says.

The islands’ status as a tax haven has turned it into one of the most controversial of Britain’s 14 overseas territories.

Multinational corporations can use the Caymans, and other places like it, to avoid paying tax in other countries. They do this by registering intellectual property at their subsidiary based there, then charging their subsidiary in a country with a big market, such as the UK, a massive fee to use the drug patent, search engine algorithm or other clever invention. This means the UK company pays little tax as its profits are wiped out by the fee, but the subsidiary in the Caymans makes a fortune.

Ian Johnston