A Conservative MP and former minister is listed in shareholder registers as personally owning stakes in companies worth nearly £500,000, raising questions about the effectiveness of the controversial parliamentary “blind trust” system used to buy the shares.
Jonathan Djanogly, the MP for Huntingdon, holds shares in Lloyds Bank worth more than £180,000, has an investment worth £120,000 in the housebuilding company Persimmon and a stake worth almost £80,000 in Sainsbury’s. He has smaller stakes in six other companies including the energy supplier Centrica.
The investments have come to light as part of a Guardian investigation into what are in effect secret shareholdings of MPs.
Djanogly’s current shareholdings have not been publicly declared in parliamentary registers because, he says, they are held in a blind trust, a key mechanism used by ministers to distance themselves from their financial interests.
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What are blind trusts?
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Blind trusts have been used by politicians, predominantly ministers, to allow them to continue to have investments while holding roles that could create a conflict between their private interests and their public duties.
They involve moving investments into the hands of trustees, who independently manage a politician’s assets – without their knowledge. Shares, for example, could be bought and sold without any instruction or knowledge of the politician.
In the case of shares, the standard practice is that the trustees become the legal owners of the investments and will act on behalf of the politician.
Parliamentary guidelines on blind trusts say MPs can give “general directions” about the sort of investments they would like to be made when the trust is set up. MPs may want the trustees to take a cautious approach with investments, or be open to more risk.
Politicians can receive reports on the trust’s overall performance and may also have the investments sold if they require cash from the liquidated assets, so their investments are not locked away while in the blind trust.
Ministers do not always move their shares into a blind trust. Depending on advice from officials, they may keep them or sell them.
Blind trusts are used by nine ministers including by Rishi Sunak and the chancellor, Jeremy Hunt. They involve moving shares owned prior to ministerial office into a trust run by an independent fund manager, who handles the investments on behalf of the beneficiary.
MPs do not have to declare shares held in blind trusts, and Djanogly said he had made “all appropriate declarations”. He said he created the blind trust after he became a justice minister in 2010, and as a result none of the shares identified by the Guardian “were bought by me. Nor was the purchase nor my continued holding of them discussed between me and my managers.”
But the fact that Djanogly’s holdings are listed in shareholder registers under his own name and at an address owned jointly with his father suggests the trust cannot be truly “blind”. Companies regularly correspond with their shareholders to provide information about shareholder meetings, dividend payments and performance updates.
Djanogly did not dispute that the shares were in his name but said he did not pick up post from the property to which information about the shareholdings would have been sent.
The findings raise questions about much-criticised blind trust arrangements and whether they truly protect ministers with personal assets and wealth from real and perceived conflicts of interest.
There are no specific parliamentary or ministerial rules governing how a blind trust is set up and how one should be managed. The lack of clear guidelines means it is left to individual interpretation. Transparency campaigners have pointed out that a key flaw with blind trusts is that the beneficiaries have a degree of awareness about the assets that are in the trusts. At the very least they will be aware of what has gone into the trust at its creation.
When an MP or minister holds shares in a blind trust, they do not need to publicly disclose their existence, even if they are over the £70,000 threshold after which an MP is normally obliged to register them. Campaigners say this creates a transparency black hole.
Richard Murphy, a professor of accounting practice at Sheffield University management school, told the Guardian: “The difficulties with the blind trust is it isn’t publicly registered. We don’t know who created it, who the trustee is, how the accountability works.
“To exist as a blind trust we have to know it is properly functioning with appropriate Chinese walls between the beneficiary/settlor and the manager … But without that full disclosure of who is doing what, for who, how and when, we can’t be sure the blind trust is effective. Knowing these things is critical if blind trusts are to continue to be a part of our political system.”
Djanogly registered shareholdings in FTSE 100 companies in the past including Barclays, Lloyds, Shell and Tesco in 2002. He kept his shares on his register of interests until 2010 when he became a minister and moved them into a blind trust.
Dr Daniel Beizsley, a Spotlight on Corruption policy consultant, said: “Blind trusts can only work if MPs are truly ‘blind’ to their contents. If MPs are able to track the performance of their financial interests from company disclosures then this is clearly not the case.”
Since last October, Djanogly has been on the public accounts committee. Any awareness by Djanogly of his shareholdings could risk a conflict of interest given that the committee scrutinises government expenditure and regularly deals with matters concerning commercial companies.
For example, the committee is currently reviewing progress on the emergency services network, which is using network infrastructure from EE, part of BT Group. Djanogly has questioned officials working on the project. He has shares worth more than £40,000 in the company.
“I maintain that I have made all appropriate declarations to the register of members’ interests and the public accounts committee,” he said.
He added that he was “taking advice on what I do or do not need to declare” now that he had been made aware of the fuller details of his financial interests.
