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Absolute hatchet job from #dispatches on Jacob Rees-Mogg. Financial illiteracy masquerading as journalism, here are the worst of the mistakes filmmaker Antony Barnett made... /1
Barnett claims JRM "may have" earned at least £7m. This is based on Companies House filings freely available online. JRM correctly states this is a "figure you've invented". Here's why... /2 beta.companieshouse.gov.uk/company/062857…
It is impossible to determine the profit allocated to a specific member of a UK LLP by scrutinising the public CH filings in this manner. The 'expert' doing so is @premnsikka... /3
Prem is a curious choice as an impartial expert... he has articles published on LeftFootForward, and was commissioned by John McDonnell and the Labour Party to produce a report on the UK Audit Market. I'm sure he'll give JRM a fair hearing... /4
Prem highlights how Somerset Capital Management (SCM) earned divisible profit of £47m from 1 April 2016 to 31 March 2018. He states JRM as an 15% owner of the business 'might' be entitled to £7m... /5
Firstly, with LLPs ownership percentage and profit entitlement are two wholly distinct concepts. Owning 15% does not necessarily entitle someone to 15% of the profit - this would be determined by the Governing Documents of the LLP - which our expert doesn't review or discuss /6
Secondly, if our 'expert' has turned a whole eight pages further... Note 4 of the accounts *clearly states* the largest entitlement of a single member was £2.4m in 2018, and £1.0m in 2017. /7 
Note, the highest paid in 2018 may not be the same person as in 2017. Indeed it may not be a person at all since seven companies are also noted a being 'corporate members' of the LLP /8
Now, I’m not suggesting this isn’t a huge amount of money. However a trainee accountant could comfortably demonstrate that it is impossible for JRM to have received a discretionary allocation of profit of £7m. Yet Antony Barnett runs with the headline anyway! /9
Our expert then goes on to claim that the returns of Somerset Capital Management ('the firm') will have been bolstered by the fall in Sterling following the #Brexit vote. Can this be true...? /10
Sidenote: both 'expert' and filmmaker conflate the 'firm' (ie. Somerset Capital Management) with its 'funds' throughout the piece. They use the terms interchangeably as only true novices would - to my ears it grates like a chalkboard /11
SCM runs Emerging Market (EM) funds, ie. these funds invest in securities denominated in EM currencies - yet they receive monies from- and pay profits to- investors in Sterling (as well as other currencies such as dollars or euros) /12
Therefore if they invested in a company with a share price of 100 rupees, and it increased to 150 rupees. Investors would expect their investment *in Sterling* to also increase 50%, even if Sterling has plummeted or strengthened. This is achieved through 'hedging' /13
Very simply, if you have 10 million rupees worth of investments, you would also then short/sell 10 millions rupees *versus Sterling*. ie. EM funds such as this would be *buying Sterling* such that their rupee exposure becomes zero. /14
It may be that SCM earns some fees in dollar and euros, which will indeed improve its reported Sterling profit - to claim Emerging Market investments made by the funds would benefit from Brexit and fall in the pound is indeed "cloud cuckoo land"... /15
Finally, Antony mentions that SCM have launched two funds in Ireland. This criticism is akin to criticising Jaguar Land Rover for making left-hand drive cars to sell to Germany, ie. making a product that your customers/investors want!... /16
The fees from these funds will continue to be *paid to the UK LLP*. Meaning JRM and co will likely pay 40-45% of these LLP profits to HMRC as income tax. This is before considering any national insurance due on ‘salaried members’ or indeed on employees in any service entities /17
So this is actually evidence of a British product being consumed abroad, but with the profits flowing to the UK. To mention it in the same breath as Dyson relocating to Singapore is rank sophistry /18
If Dispatches want to look at more dubious tax practices they may wish to look at Ireland’s cupcake deals with big firms such as Google or indeed the industrialisation of dodgy tax practices in Luxembourg during the rule of EU favourite Jean-Claude Juncker... /19
In conclusion:
- The expert is not impartial, and makes some glaring mistakes
- The filmmaker presents these mistakes as headline-worthy but is careful to caveat all claims with "might be"
- Further amateurism of analysis abounds with respect to fund returns and fund location /20
- The expert is not impartial, and makes some glaring mistakes
- The filmmaker presents these mistakes as headline-worthy but is careful to caveat all claims with "might be"
- Further amateurism of analysis abounds with respect to fund returns and fund location /20
International finance is a subject poorly understood by the general public. Dispatches has a proud tradition of investigative journalism, sadly Antony Barnett's current foray does little to uphold these values. /21
If there's a scandal - tell it! But don't pick a tendentious headline then work backwards to corroborate it with inaccurate and unvetted insight from experts whose impartiality is clearly compromised. That's not journalism, it's clickbait... I wonder how many were fooled? /ENDS
