Bob Diamond says Treasury move inflicted ‘unnecessary damage’ on the bank’s reputation
Bob Diamond, chief executive of Barclays, has complained to MPs about the “unnecessary damage” inflicted on the bank’s reputation after the move by the government in February to close two “aggressive” tax avoidance schemes.
In a letter to Andrew Tyrie, the Conservative MP who chairs the Commons Treasury select committee, Diamond claims that the reputation of the UK as a business centre will also be threatened if the government breaches confidential agreements, as he implies was the case with Barclays’ tax affairs.
“The way in which this situation was handled seems to us to have been completely unwarranted,” he said. “Unnecessary damage was placed on Barclays’ reputation just at a time when the focus should be on rebuilding confidence and accelerating growth, not undermining it.”
Exchequer secretary David Gauke took quick action in February to close two tax avoidance schemes that Barclays had disclosed to HM Revenue & Customs and took the highly unusual step of changing the law retrospectively. While Gauke did not name the bank, Barclays’ name emerged.
Tyrie published the letter from Diamond less than a week after the bank held its “citizenship day” to set out commitments on matters such as tax and the letter made reference to this. “Especially in the context of our focus on citizenship, Barclays takes its responsibilities with respect to its tax affairs very seriously,” Diamond said. His personal tax affairs have been highlighted since the action in February as the bank paid £5.7m to the exchequer to avoid him paying a tax bill twice when he relocated back from New York to London to become chief executive at the start of last year. Telling Tyrie that he was grateful for the opportunity to discuss the matter, Diamond said: “I should hasten to add that we have taken away from then lessons and are … carefully reviewing the nature of our business activities here, at the minimum to ensure that we take steps to prevent such an event from occurring again.”
Tyrie has asked the chancellor, George Osborne, for his version of events. “I have forwarded Mr Diamond’s letter to the chancellor. It is important that we find out what happened here,” said Tyrie.
Diamond stressed that Barclays had “voluntarily and proactively disclosed to HRMC” the scheme it had used when buying back its debt in “a tax efficient matter”. The process had been used by other banks but Barclays said that it was “the first and only taxpayer to make a disclosure”. He added: “We were therefore surprised to be singled out in the way that occurred, not only through a retroactive change of law but the effective naming of Barclays by the exchequer secretary in his statement to parliament, accusing the bank of entering into a ‘highly abusive’ scheme.
“We believe that the confidentiality of taxpayers’ affairs is an important principle of UK tax law that has stood for many years … We feel that it is important to the UK’s reputation as a business centre that this principle is not seen to be compromised or watered down simply because the tax authorities do not agree with the material that it disclosed to them.”
He said the bank had had strong legal guidance about the way it was buying back its debt – on the schemes closed by the Treasury – on which it made a profit of £1.1bn in 2011.