New trade minister Ian Livingston's £20m of BT shares 'a conflict of interest'
David Cameron criticised over handling of telecom boss’s appointment
James Cusick is political correspondent of The Independent and The Independent on Sunday. As an experienced member of the lobby, he has previously worked at The Sunday Times and the BBC. His career as a journalist has been split between print and television, including senior positions as producer with Sir David Frost and at BBC Newsnight. He is also an award-winning golf and travel writer, working for over a decade as the UK contributing editor for one of the USA’s leading golf magazines. He broadcasts regularly for the BBC and CNN. He lives in London.
Monday 01 July 2013
The outgoing boss of BT who will become a government trade minister later this year is facing questions about “unprecedented” conflicts of interest over his multimillion-pound stake in the British telecoms giant.
Despite David Cameron’s own promises on transparency and accountability, Downing Street has failed to offer “robust” safeguards to deal with issues caused by bringing Ian Livingston directly into the government from BT, according to a former trade minister.
Mr Livingston is expected to hold close to £20m worth of shares in BT when he becomes a minister in the Department of Business, Innovation and Skills (BIS) which oversees the industry where the telecommunications giant competes.
The government’s rules stipulate ministers must “scrupulously avoid any danger of an actual or perceived conflict of interest between the ministerial position and their private financial interests”. However BIS has issued no specific orders to the new minister, and said, in line with “normal practice”, he will be placing his massive BT share holding in a blind trust.
Although the trust is meant to distance Lord Livingston - as he will be known when he enters the House of Lords - from the management of his shares, he will still be entitled to collect dividends and interest on the £20m BT share folio.
This is additional wealth that could potentially be influenced by the policies and actions of the ministerial team of which he will be a member.
City analysts who spoke to The Independent say the investment strategy put in place by Mr Livingston during his five years at the helm of BT, which includes £2.5bn on building a UK fibre-optic network and a further £1bn in the acquisition of television rights designed to challenge BSkyB’s lead role in subscription-TV, should see a substantial rise in BT’s fortunes, provided they are not challenged by any unexpected measures or restrictions designed to encourage new competitors into the telecoms industry.
When Lord Livingston leaves the government he will regain immediate control of his BT shares at their new price level.
Advanced discussions currently taking place in private inside BIS and Downing Street are predicted to lead to a return of the competition and policy issues relating to media, broadcasting and digital telecoms which were transferred to DCMS in 2011 in the wake of the controversy surrounding Vince Cable and Rupert Murdoch’s BSkyB take-over bid.
When completed, expected to be before the 2015 general election, the move increases the importance of the telecoms industry inside BIS.
Former Labour trade ministers who helped bring private sector expertise into the Blair and Brown administrations, such as Lord Mervyn Davies from Standard Chartered bank and Lord Myners from the Guardian Media Group, were reluctant to publicly criticise the appointment of Mr Livingstone.
However the timing, the scale and dominance of Mr Livingston’s BT shareholding in his overall wealth, and the decision to bring him immediately into a government department with clear links to his former company, were acknowledged as a holding an “unprecedented” conflict of interest that has been underplayed by Downing Street.
One former minister, who asked not to be named, said: “As we helped build this glasshouse, it’s difficult for us to start throwing stones, even if that’s exactly what we should be doing now.”
However Anne McKechin, a former minister of state at the DTI in Tony Blair’s government, said: “The scale of Ian Livingston’s share-holding is an issue. He is the CEO of BT and there will be virtually no gap between his leaving BT and joining the government. There is valid concern that the Prime Minister has not done enough to convince the public that a conflict of interest will not be a problem.”
At present the appointment of Mr Livingston does not contravene any rules. However, Ms McKechin, a former lawyer and Labour MP for Glasgow North, said the appointment of Mr Livingston highlighted the need for an urgent examination of the government’s appointment rules. “The two year rule which prevents ministers and former senior civil servants from moving to the private sector and immediately lobbying government departments, does not apply in the reverse direction [industry bosses moving into the government]. Rules need to be tightened and made more robust than they are at the moment.”
Martin Sorrell, the chief executive of WPP, the world’s largest group of advertising, communications and lobbying companies, said: ”It probably makes sense for these rules [the two year gap between leaving the government and lobbying links ] to be symmetrical.”
Iain Anderson, the chief executive of the Association of Professional Political Lobbyists, and a former aide to Ken Clarke during his time in government, said: “The scale of Ian Livingston’s BT shares ownership means there is case to be made for him being barred from making decisions for a specified time. The point here is transparency. And this needs to be looked at as part of the wider reform of the House of Lords.”
Downing St’s effective silence on how the new minister can “scrupulously” avoid questions being asked over his private financial interests and his new appointment, does not rule out future action.
The current ministerial code says “In some cases it may not be possible to devise a mechanism to avoid a conflict of interest. In any such case, the Prime Minister must be consulted and it may be necessary for the Minister to cease to hold the office in question.”
A BT spokesman, speaking on behalf of Mr Livingston, said the full details of what his exact folio of BT shares would be when he left the company in September was still be worked on.
During 11 years at BT the CEO has gathered 3.4m shares worth around £10.5m. Deferred bonus plan payments, further shares from an incentive scheme, and discretionary payments which will be examined by a remuneration committee before Mr Livingston leaves, are expected to be worked on before September. Although some payments do not mature 2015, the spokesman said a “package” was likely to be worked out before Mr Livingston joined the government.
A spokeswoman for BIS said the ministerial code for new appointments would apply. Mr Livingston “will be putting interests into a blind trust” with the permanent secretary at BIS notified of “all relevant interests” thought to “give rise to a conflict.”
Profile: Ian Livingston
Ian Livingston, 48, who spent five years at the top of BT, joins the Department for Business, Innovation and Skills later this year.
After moving to the telecoms giant in 2002 from the computer retailer Dixons – where he became the youngest FTSE 100 finance director at 32 – Mr Livingston became CEO retail, and then group CEO in 2008. He is credited with transforming the company. He oversaw BT’s recovery from falling profits by stripping away 20 per cent of group operating costs, and has been involved in the company’s attempt to rival Sky in live sports broadcasting. Mr Livingston, who was born in Glasgow, is the father of two children. He has spoken about a radical overhaul of the typical 9-5 workday, advocating flexible working hours that he says could revolutionise the UK economy.
Explainer: blind trusts
A blind trust is a legal instrument that involves a group of independent trustees being given the sole responsibility to run and manage assets without the participation or knowledge of the person who owns the assets.
The mechanism of a blind trust is supposed to confer confidence that the owner of the trust has been safely placed at a distance and no conflict of interest exists.
But the owner of a trust may nevertheless be aware of what is happening in the main market the assets operate in.
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