Conservatives accused of handing peerages to donors and cronies

The Conservatives have been accused of handing peerages to donors and cronies (Getty Images)

David Cameron has been condemned for handing a peerage to a former Facebook executive who presided over the company’s UK operations when it was accused of “disingenuous and immoral” tax avoidance.

Joanna Shields, who is currently the Prime Minister’s digital adviser as well as the chair of Tech City UK, Britain’s tech start-up hub, was in charge of Facebook in the UK between 2009 and 2013.

In October 2012, an analysis of the social media firm’s British operations found that it had paid just £238,000 in corporation tax the previous year despite making an estimated £175m in revenue. It achieved this by diverting most of its sales via Ireland, where tax rates are lower.

Ms Shields, who was born in the United States but lives in Britain, was among 12 new Conservative peers announced today, who included two major party donors, provoking Labour accusations that the Prime Minister was stuffing the Lords with cronies and financial supporters.

Her selection was immediately criticised by Labour’s John Mann, a member of the Treasury Select Committee. “It undermines democracy to put party donors, tax avoiders and defeated politicians into the House of Lords,” he said. “By putting her in the Lords it puts up two fingers to those businesses paying their proper taxes. It gives a green light to tax avoidance.”

Before her time at Facebook, Ms Shields ran Google’s European operations. The company has also been accused of avoiding tax in the UK, although the allegations centred on a period several years after she had left the company.

Richard Murphy, the tax specialist and anti-poverty campaigner, said: “It is surprising that David Cameron, who has made tax and transparency one of his highest priorities when president of the G8, has appointed a person as a peer who has been a director of companies that appear to have made tax avoidance and opacity their highest priority when pursuing their corporate goals.”

The Taxpayers’ Alliance called on Ms Shields to use her influence in the Lords to close tax avoidance loopholes. “Taxpayers are understandably angry when they see companies not paying their fair share, and this appointment won’t sit well with many,” said the group’s Andy Silvester.

“Ironically, the newly ennobled Baroness Shields now has the chance to help restore people’s faith in the tax system. It is, after all, politicians in Westminster who have the power to make the system simpler and fairer by stripping out the loopholes that they’ve allowed to multiply over the years.”

A spokesman for Ms Shields said she was “unavailable for interviews about her appointment to the House of Lords”, but in a prepared statement, she said: “I am most grateful for the opportunity to serve in the House of Lords. It’s a great privilege and an even greater responsibility.”

Seven of the new Tory peers are female, with Mr Cameron seeking to replicate his female-dominated ministerial reshuffle last month. The best known is Karren Brady, the vice-chairman of West Ham United who currently advises the Coalition on small business. Her elevation to the Lords will pitch her in opposition to Lord Sugar, her colleague on The Apprentice, who is a Labour peer.

Other new arrivals include the TalkTalk chief executive Dido Harding, who is married to John Penrose, a Tory minister, and the former head of CBI Scotland, Nosheena Mobarik.

A Downing Street source Mr Cameron was recognising the achievements of successful businesspeople.

The Tory list also included Sir Michael Farmer, the Conservative co-treasurer and hedge fund tycoon who has donated more than £2.3m to the party, and the jewellery boss Ranbir Singh Suri, who has given a total £312,000 personally and through his company. Mr Cameron also elevated the Conservatives’ former director of political operations, Andrew Cooper.

Ed Miliband added three new Labour peers, among them the ex-EastEnders actor Michael Cashman, who has been a Euro MP for the last 15 years. Nick Clegg appointed six new Liberal Democrats, including the party’s former chief executive Chris Fox.