The issue of the legitimacy or otherwise of lobbying government has arisen once more with Cameron’s championing of Greensill Capital. As the ‘crisis’ unfolds, new information is forthcoming daily, so this blog will inevitably be somewhat time-bound. But the issue is indeed critical in that it reflects what C W Mills called the ‘higher immorality’ of the power elite. It is a perfect fit for this ongoing series on ‘greedy bastards’ (those who facilitate capital’s purchase of sufficient power to make policy to enable additional capital accumulation, all the while showing a complete and callous indifference to the welfare on ‘the many’).
Greensill Capital, which was founded in 2011 by Australian financier Lex Greensill and entered administration in March of 2021, provided payment services, including ‘factoring’ and ‘supply chain financing’. Supply chain financing (or ‘reverse-factoring’) is designed to solve a common payment problem. Firms conventionally supply goods or services to a customer, then issue an invoice for payment. While it may be in the supplier’s interest for the invoice to be settled quickly, the customer might prefer to delay payment. When the customer is large and influential they might insist on a delay. With reverse-factoring, a financial institution offers to intervene to pay the supplier, accepting a small fee for doing so. The supplier then settles with the financial institution by an agreed date.
In recent years more ‘creative’ (how often we hear this word) procedures have been adopted. Specifically, accounting has shifted towards the evaluation of future cash flows rather than the valuation of past transactions. This enabled Carillion, for example, to use reverse-factoring to hold on to its cash for longer and report higher net operating cash flows: it appeared to be healthier than it in fact was. Carillion, like other large firms, became a kind of portal, capable of moving income and costs around in time and space based on projections of future economic fortunes.
Greensill was not involved with Carillion but had factoring arrangements with other large firms. Whereas reverse-factoring offers early payments to a customer’s suppliers, straight factoring is when a business sells its invoices to a third party at a discount. As Greensill pushed hard for growth the collateral underlying the transactions with some of these companies appeared to be speculative. Greensill lent against transactions that had not yet occurred (and in fact might never occur).
Greensill was carrying considerable risk when it entered negotiations over payment systems in the NHS. If that deal could have been secured it would have provided Greensill with a very large, relatively risk-free income stream because of the state’s creditworthiness. If it had become an intrinsic part of the public sector payment machinery, however, it could have created ‘too-big-to-fail problems’ (would the state have needed to support or bail it out if its risky private ventures led to solvency issues that threatened to disrupt wage payments to nurses and doctors?). In the event, Greensill Capital was sustainable enough for long enough for its owner, and perhaps some of its clients, to become considerably richer.
Now to David Cameron’s involvement. He has noted that it was in 2011 that Lex Greensill was brought in to work with the government by the then cabinet secretary, Jeremy Heywood. In 2012 Greensill offered advice to the Cameron government on a supply-chain initiative, with commitments from companies including the construction group Carillion. In 2014 the cabinet office recruited Greensill as one of six new ‘crown representatives’ to help tackle wasteful contracts and ensure that suppliers provided the best value for money. In 2016 Cameron resigned as PM after losing the EU referendum. In 2018 he became an adviser to Greensill Capital and was given stock options in the company. It is not known how much Cameron was paid by Greensill Capital, aside from his shares (and he has denied reports that he told friends he was set to earn as much as £60 million from them).
In March of 2021 Greensill Capital sought insolvency protection in Australia and a rescue deal with new and existing backers, after two Swiss banks announced they were closing funds linked to the business concerns about its true value. Germany’s financial watchdog took direct control of operations at the local subsidiary of the London-based lender. On 8 March Greensill Capital filed for administration. On 12 March Liberty, the UK’s third-largest steelmaker, was forced to pause production at some of its UK plants to conserve cash as a result of Greensill’s collapse. Its parent company, GFG Alliance, employed about 5,000 people in the UK and was one of Greensill’s largest borrowers. Cameron had by this time several times declined to respond to questions put to him by the mainstream media (ie The FT & The Guardian). On 16 March it emerged that Cameron had met an Australian insurance company employee who was dismissed over alleged involvement in underwriting the controversial lending model at Greensill Capital. On 19 March it was reported that Cameron had lobbied senior government officials to give Greensill Capital special access to the largest tranche of emergency COVID loans just months before the lender collapsed. On 21 March the Sunday Times reported that Cameron had sent multiple texts to Rishi Sunak in April 2020 in the hope of gaining access to cheap, 100% government-backed loans through the COVID corporate financing facility . On 22 March the Conservative-dominated Treasury select committee declined to launch an investigation into Cameron’s efforts to lobby government officials. On 25 March it was reported that Cameron was facing an investigation by the registrar of consultant lobbyists into a possible breach of lobbying law. On 26 March the British Business Bank launched an investigation into Greensill Capital and loans it extended to Sanjeev Gupta’s steel empire months before its collapse; and the lobbying registrar cleared Cameron, concluding that his activities had not breached the criteria that required registration. On 30 March a business card emerged that appeared to confirm that Lex Greensill had a role at the heart of Downing Street. On 8 April the Treasury released messages sent by Sunak to Cameron and said that Cameron had phoned junior ministers. In these messages Sunak told Cameron that he had ‘pushed the team’ to find a way for Greensill to gain access to emergency COVID loans. On 10 April it transpired that Cameron had lobbied a senior Downing Street aide and Matt Hancock, the health secretary, on behalf of the company, and that he had arranged a private drink to bring together Hancock and Greensill. On 12 April No 10 launched an inquiry into Cameron’s lobbying for Greensill to be led by Nigel Boardman. Boardman’s independence has been queried
A few points of elaboration and questions suggest themselves. It has emerged that the government’s chief commercial officer, Bill Crothers, started working as an adviser to Greensill Capital in 2015, while still a civil service employee. Why was this given official approval? How and why did Greensill become so intimate with government, and why did Jeremy Haywood go on to nominate him for a CBE? Why would the government, which has no cash flow problems, need to use supply chain finance?
Most importantly, to what extent is there a ‘revolving – or indeed ‘open’ – door’ between Whitehall and private companies that then benefit from government contracts? Governments’ repeated failures to tackle the revolving door have long been striking (as Private Eye has regularly shown and commented on). Cameron’s own efforts in office required consultant lobbyists to register but left those in-house conveniently untouched.
It is not that Cameron is especially hard up. He owns three homes that are known about. He can earn more than £100,000 for a speech. He has several well-remunerated roles with other firms. And this was the PM who presided over the decade of welfare and NHS cuts and austerity for the many!
This ‘crisis’ is several orders of magnitude more serious than the ‘Tory sleaze’ during the death throes of John Major’s government. As Rawnsley puts it ‘this Augean stable needs mucking out, but it is unlikely that Mr Johnson will be a vigorous shovel.’ As Prem Sikka has often observed, Greensill is only the tip of the iceberg. For all that attention is currently focused on Greensill; and the corrosive links between politicians, regulators and corporations, the underlying issues are much broader and relate to the colonisation of the entire political system. There are huge gaps between ‘regulation on the books’ and ‘regulation in practice’.
Watch out! There are ‘greedy bastards’ about (ie a tiny minority intent on lining pockets already bulging with capital whilst – coolly and knowingly – tolerating/deepening the exploitation and oppression of the many)!
This blog draws on the work of investigative journalists in the Guardian, Sunday Times and Private Eye in particular.