Is what Jacob Rees-Mogg did an egregious breach of the rules?

The leader of the House of Commons is adamant he has done nothing wrong, writes Sean O’Grady. As ever, the devil is in the detail and in the way rules are interpreted

‘Loans are not earnings and are not declarable in the register of interests,’ says Mr Rees-Mogg (PA)

It’s unusual, not to say undesirable, for the leader of the House of Commons, of all people, to be investigated by the independent parliamentary commissioner for standards, Kathryn Stone. At the moment, though, Jacob Rees-Mogg seems unfazed by his referral and the questioning that will follow, as well as possible future sanctions. In the worst-case scenario he would face censure, a recall petition and a by-election. He’d also have to schedule parliamentary time for a debate on a standards committee report on his own behaviour. But we are getting far ahead of ourselves.

It all stems from media reports a couple of weeks ago that he has been the beneficiary of loans from a private company, Saliston, which he owns. They amount to some £6m in total – £2.94m in 2018, £2.3m in 2019 and £701,513 in 2020. They were soft loans, with interest charged at about 0.8 per cent, somewhat below market rates even in these days of quantitative easing. They were made by a company registered in the Cayman Islands, a well known tax haven. The money was used by Rees-Mogg to help pay for a nice house near parliament, worth about £7m.

Rees-Mogg’s opposition counterpart, Thangam Debonnaire, regards it as a big deal, and wants a second, parallel inquiry to be conducted by the independent adviser on ministerial conduct, Lord Geidt – through that would require the unlikely approval of the prime minister before Geidt could initiate it. According to Debonnaire it “appears to be yet another egregious breach of the rules … Over the last few weeks, we have seen that Conservative MPs repeatedly act as if they can put their own private business interests ahead of their constituents and the prime minister must put a stop to this.”

Debonnaire might have added that it is also, perhaps, a breach of the Nolan principles of public life – including integrity and openness.

But is what Rees-Mogg did an egregious breach of the rules?

On a strict reading of the MPs’ rules, loans, as such, are mostly not specifically outlawed, that is where they are not connected to parliamentary or campaigning/political activity. Borrowing to buy a house or a car, say, or going overdrawn are regarded as private matters, provided there’s no conflict of interest arising from them, such that would place a member under an obligation. The Rees-Mogg case seems to fall neatly into this category – except that it was evidently not on commercial terms, and while Rees-Mogg did wholly own the company in question there may have been other directors or “stakeholders” (though we do not know this).

Moreover, in such circumstances the code of conduct for MPs requires them to err on the side of caution anyway. The paragraph on gifts and benefits from outside the UK (ie including the Cayman Islands) runs as follows:

“Members should not register…:

a) Benefits which could not reasonably be thought by others to be related to membership of the House or to the Member’s parliamentary or political activities, for example purely personal gifts or benefits from partners or family members, or loans or mortgage arrangements on commercial terms. However, both the possible motive of the giver and the use to which the gift is to be put should be considered. If there is any doubt, the benefit should be register.”

The key phrase there is “commercial terms”. The Saliston-Rees-Mogg arrangement was plainly different to that he’d have had from the Halifax, or Santander, say.

The Ministerial Code – not as yet being applied to Rees-Mogg – also demands that there should not even be the “appearance” of a conflict of interest:

“Ministers must ensure that no conflict arises, or appears to arise, between their public duties and their private interests;

“Ministers should not accept any gift or hospitality which might, or might reasonably appear to, compromise their judgement or place them under an improper obligation”.

Underpinning all of these strictures is the Nolan Principle of Openness: “Holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing.”

Rees-Mogg has put out this statement in his defence:

“Saliston is 100 per cent owned by me and this is declared clearly in the Commons register and to the Cabinet Office. It has no activities that interact with government policy.

“The loans from 2018 were primarily taken out for the purchase and refurbishment of 7 Cowley Street as temporary cashflow measures. All loans have either been repaid with interest in accordance with HMRC rules or paid as dividends and taxed accordingly.

“The register asks for earnings, not loans, which is why I was declared as a non-remunerated director until I resigned on entering government. Loans are not earnings and are not declarable in the register of interests.”

Loans are not, but benefits in certain circumstances are. On a strict interpretation of the rules, Rees-Mogg transgressed it seems, even though he may well have paid tax on the benefit in kind from the soft loan. So he’ll probably be told off, though perhaps not reach the level of scansion that might end up with a by-election (as was going to be the case with Owen Paterson). Even that, though, is difficult to reconcile with his particular position as leader of the house, supposedly a bridge between the Commons and the executive. He’d have to be reshuffled, at least.

On the spirit of the rules, Rees-Mogg could obviously have been more upfront about his unusual financial arrangements, because, as we see, there is a public interest in it.

Politically, Rees-Mogg is extremely vulnerable. It is acutely embarrassing for an administration caught up in “sleaze” stories, which seeks to portray itself as the people’s government and pledging to solve the housing crisis defending things – £7m houses, tax havens, the antique figure of Rees-Mogg himself – so exotically out of touch with the lives of most voters. Rees-Mogg made a hash of the Paterson affair, and disgraced himself with his role in the unlawful prorogation of parliament two years ago. A curious anachronism and a child of the Sixties (ie the 1660s and The Restoration era), he seems a man apart. He may not, for instance, exactly hit it off with the new cohort of working class “red wall” Tory MPs, many of whom speak little, if any, Latin. Unabashed to be seen in top hat and morning suit, and an elegant ornament as he languishes in the chamber in the manner of an Edwardian cartoon, Rees-Mogg may soon find he has more time to spend at his Jacobean home.