David Cameron’s Panama nightmare cuts to the core of his image problem – as EU referendum looms

Under pressure. Stefan Rousseau/PA

What a long week it was for David Cameron, the British prime minister. And, as with so many political crises, when this one began it apparently had little to do with him at all.

While the super-rich have long been criticised for creatively minimising their tax burdens, the actual details of these arrangements have usually been hidden. But then the German newspaper Süddeutsche Zeitung obtained a huge glut of paperwork from Mossack Fonseca, an off-shore law firm based in Panama, and shared that data with an international group of investigative journalists.

It has been the journalistic equivalent of striking oil: a massive data haul revealing off-shore financial details about a global political, business and celebrity elite.

First in the firing line were several world leaders. Vladimir Putin and his aides knew they would immediately come in for criticism, and quickly moved to head off the inevitable wave of revelations. The prime minister of Iceland, Sigmundur Davio Gunnlaugsson, was identified in the papers, a fact made more controversial considering Iceland’s economic collapse during the banking crisis. While the Icelandic people were struggling to recover from the economic meltdown, the argument was that Gunnlaugsson was protecting his money overseas. Illegal, no; hypocritical, yes. Before the week was out, Gunnlaugsson had resigned.

Also in for trouble were Nawaz Sharif, prime minister of Pakistan, three of whose four children were associated with Mossack Fonseca, and Xi Jinping, president of China, whose brother-in-law was caught up in the data release. Ukrainian President Petro Poroshenko, Argentinian President Mauricio Macri, and other lesser-known political names were also put under the spotlight.

One of those lesser known names was Ian Cameron, a name which does not perhaps stand out among the others, but one which is of significance in Britain. Ian Cameron is the late father of David Cameron and his inclusion in the data files leak has caused his son quite a headache – and perhaps some heartache.

Ian Cameron was a UK director for Blairmore holdings prior to his death. The financial details are complicated but it appears that Blairmore was a fund for investors to move money overseas, with individuals purchasing shares in the company which were then perhaps subject to lower tax liability. Upon Ian Cameron’s death, his son David appears to have inherited approximately £30,000 worth of shares. Importantly, these were sold in the run-up to the 2010 election, and Cameron argues that all UK tax due was paid on this lump sum.

Not a good look

So where’s the scandal? On the face of it, this is a simple (if perhaps unedifying) financial transaction regarding the inheritance of a leading politician. While Cameron currently faces no accusations about the legality of his actions, it has brought several other factors into sharp focus.

Since coming to power in 2010, Cameron’s Conservatives have made a signature issue of zealously cracking down on benefit fraud. Combined with the massive public spending cuts introduced under George Osborne, the government has struggled against the perception that the poorest are its primary target. Even its longtime work and pensions secretary, Iain Duncan Smith, eventually broke ranks and resigned after a budget that proposed still further cuts to disabled people’s benefits.

Happier times. PA

Critical observers have queried why HMRC spends such a high proportion of its funding on combating benefit fraud rather than fighting tax avoidance or improving its own systems, which might avoid costly mistakes being made which cause misery for millions.

Cameron himself has often been criticised as being out of touch with the public, a rich old Etonian with little knowledge of the realities of normal life in Britain. And while he’s argued that he has done nothing wrong, his association with off-shore accounts only flatters the idea that the government has deliberately ignored tax avoidance to shield the very arrangements that they and their friends and families use to preserve their financial well-being.

The odour of hypocrisy is impossible to disperse. The Financial Times reported that in 2013, Cameron personally intervened to stop the EU from revealing the beneficiaries of trusts. Damningly, when several celebrities were accused of using similar legal financial arrangements to reduce their tax burdens, Cameron himself spoke out to criticise them. Jimmy Carr, who Cameron pilloried for his own tax strategy, must be rubbing his hands with glee at the juicy new material he’s been handed.

Assuming that there are no new revelations lurking in the Panama bonanza, David Cameron will survive to fight another day. However, it does a leader no favours to be viewed by many as being out of touch with the electorate. Cameron has crucial local elections coming up in May, and more ominously still, the EU membership referendum in June. Will this dent his argument that Britain is economically better off in the EU? How can the electorate trust a man who has links, no matter how tenuous or legal they may be, with Panamanian offshore accounts?

As always, only time will tell. He might be assisted by the complexity of the issues involved, and it hardly counts as a surprise that a Conservative prime minister turns out to be fairly wealthy. But Britain’s politicians are as unpopular as they’ve ever been, and their financial arrangements are viewed with contempt and suspicion. Perhaps the Panama Papers bombshell will trigger more investigation of tax avoidance, and lead to tighter rules on MPs’ finances – or perhaps it’ll remain just another stain on Cameron’s already tainted image.