At Prime Minister’s Questions on 9 September, Kemi Badenoch accused the government of having lost £330m a year in tax revenue by driving the hedge-fund billionaire Chris Rokos, whom she described as “Britain’s third biggest taxpayer”, to leave the country. “That is £330 million of taxes walking out the door because of this Labour government”, Badenoch claimed, before repeating: “Every year, £330 million”. The £330m-a-year claim was repeated across the media. The Sun claimed that Rokos’s departure meant the Treasury had lost enough to pay the salaries of 9,400 nurses.
The problem with this claim is that it is, in the technical sense, bullshit. As defined by the Princeton philosopher Harry Frankfurt in his 1986 essay On Bullshit, this means a statement made without any interest in validation. A liar knows the truth, or at least knows that what they are saying is untrue. The bullshitter doesn’t care; they just say something confidently without caring if it’s true or not. This is what Kemi Badenoch was doing.
This is a fair accusation because even the most cursory investigation would have shown Badenoch that Rokos does not pay £330 million in tax per year. An individual’s tax bill is a private matter; only Chris Rokos, his accountant and HMRC know the real number. Badenoch’s claim seems to be based on the Sunday Times Tax List. If she or her team had spent three minutes checking previous Tax Lists, they would have seen that he has only appeared twice since the list began in 2020. This is because hedge fund income (and the profits partners take from them) varies a lot from year to year. It means that even in the most basic analysis, the “every year, £330 million” claim overstates Rokos’s estimated contribution to the exchequer by about £225 million a year.
But this is a crude mischaracterisation of how much tax Chris Rokos actually pays. To find that out, you’d have to ask him (I have, and we’ll get to that). But assuming you can’t persuade a notoriously private billionaire to hand over his tax returns, you’ll need to see what you can infer from public records.
What we can say from public filings is that the hedge fund with which Rokos makes money as a fund manger is a limited partnership incorporated in Jersey. This pays management fees to a partnership in the UK, Rokos Capital Management LLP. The partners are a mix of individuals of individuals and companies, and we don’t know how the profits are allocated between them. The Sunday Times’ claim that Rokos “paid himself £476.8 million” last year appears to refer to a statement in the UK partnership’s accounts that £476.8m in profits were allocated to another offshore company, Rokos Intermediate (Jersey) Limited. This is owned by yet another Jersey-based partnership, which has a general partner and limited partners. The general partner is yet another Jersey-incorporated company, and this is, you’ll be relieved to read, owned by Chris Rokos. But the identity of its limited partners, or how they allocate profits between them, is not on public record.
As if that wasn’t obscure enough, HMRC’s view of this arrangement is also unknown. The tax authority might consider some of the offshore corporate members of these partnerships to be effectively trading in the UK, and therefore liable for tax here. Or it might not. We can say with iron-clad certainty that Kemi Badenoch doesn’t know this either.
Badenoch also seems not to have understood what the Tax List represents, which is a broad estimate of a person’s value to the state, including taxes paid by their companies and their employees. The journalists at the Sunday Times do a careful and revealing job of compiling this from company accounts, but it is an estimate that does not necessarily change much when the person who owns the companies moves house.
This is a key point which makes it clear that Badenoch’s “every year, £330 million” claim is – in the technical parlance of accounting – a steaming pile of bullshit. Chris Rokos runs a business that is headquartered in the UK, and he has given zero indication of any intention to change that.
I asked Mike Lewis, a former financial investigator for the UN and now director of TaxWatch, to take a look at the structure of Rokos Capital Management. “It’s clear that a lot of the fund’s real activities and operations are firmly tied to the UK. That includes an administrative back-end that employs hundreds of people, pays payroll taxes and corporation tax, and services the fund’s operations in the UK, US and Singapore”, Lewis told me.
Rokos has let it be known that he wants to open a new office in Greece and that he personally intends to move there. He has not said that he’s going to take his global centre of operations, and its hundreds of employees, with him. Of the 20 largest hedge funds in Europe, 17 are in London. It would be really surprising, and possibly not great for business, if Rokos Capital Management, as an organisation that needs to employ hundreds of talented people from the financial services sector, quit the financial capital of Europe for a beach on Mykonos.
Lewis also confirmed that even if all of Rokos Capital Management’s partners move overseas, some of the (huge) profits allocated to corporate members of its partnership might still be liable for UK taxes, if HMRC decides that the fund is effectively trading in the UK. So it’s quite possible that we will see Chris Rokos back on the Tax List, wherever he lives. One in nine of the people listed as “the UK’s biggest taxpayers” in the Sunday Times Tax List actually live abroad.
So to recap: we know that a man is leaving the UK (we don’t know when). We don’t know how this will affect the tax implications of the fund he runs, which is, in any case, mostly in Jersey. (We also don’t know what share of the investment returns he gets from that fund.) We don’t know how much income he personally receives from the UK business to which that fund pays management fees, or the (also Jersey-based) partnership to which profits from that partnership are allocated. We don’t know who the other partners in these offshore partnerships are and how profits are shared between them. And of course, no-one can predict how much money the hedge fund itself is going to make in future.
We don’t even know why Chris Rokos is moving house. Is it really because he’s afraid of John Healey? Or is it because he’s from a Greek family and is opening an office in Greece? I asked Rokos Capital Management if they wanted to confirm the figure for the tax paid, or if they’d had any contact with Badenoch’s team to confirm the figure, or if they simply wanted to confirm that the planned move was related to tax policy. I was told: “no comment”.
What we do know is that the Leader of the Opposition made a claim during Prime Minister’s Questions that based either on ignorance or a desire to mislead. Those are the two possibilities. One explanation is that she read a couple of headlines about a billionaire leaving the country, failed to understand the fiscal implications, and made the claim to parliament anyway. The other explanation is that she knew the claim was bullshit, and deliberately misrepresented it to MPs and the public anyway. To put it another way: either she’s a fool, or she thinks you are.
[Further reading: The Big Security future]
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Subscribe here to commentI feel a sense of doom every time I read or hear a media commentator who I still hope might retain some sense explaining how much better she is becoming at the job. There was an FT trio at it full force a couple of weeks ago. She’s becoming more adept at point scoring but that’s not my definition of the job. And the vicious pugnacity she brings to it, alongside her disregard for accuracy and outsized satisfaction with herself should be flashing everyone’s warning signals.
The art of misrepresentation – PMQs should be seen as street theatre. It seems Badenoch is not into the detail so it is a continuing feature of her Tory leadership that she comes out with obvious bloopers. The parrots in the Tory and Reform leaning press as well as the MSM lap it up and regurgitate into our news feeds as proven fact. The answer? Make press, social media and TV regulation a reality with an obligation to fact check every story or pay heavily for misleading us.
Great article and analysis.
Re last point- it’s both. She’s a fool and she thinks we all are.