A £5bn INSULT TO TAXPAYERS
Foreign-owned firms borrowed hundreds of millions in cheap Government loans to get through the pandemic – then doled out billions in dividends to wealthy investors
GIANT foreign companies have handed billions of pounds to their wealthy investors after taking out cheap Covid loans backed by the British taxpayer, a Mail on Sunday investigation has uncovered.
Our probe found more than £5billion of payments to shareholders by firms that had borrowed vast sums from the Bank of England.
The US owner of Boots gave its billionaire Italian boss, Stefano Pessina, a windfall of almost £50million just days after the high street chemist drew £300 million from the Bank’s emergency Covid loan scheme, which is underwritten by the UK Government. Walgreens Boots Alliance, based in Illinois in the US, has paid about £900million in total to investors since June. Boots chief executive Mr Pessina is the company’s largest shareholder.
Other foreign-owned firms that took taxpayerbacked loans in Britain before paying huge dividends to shareholders abroad include Scottish Power’s Spanish owner Iberdrola, Japanese carmaker Honda and US energy services giant Baker Hughes. Critics last night slammed the ‘flagrant abuse’ of the Bank of England’s £85billion emergency scheme.
The Covid Corporate Financing Facility (CCFF) loans for large companies were launched last March by Chancellor Rishi Sunak and the Bank of England as part of measures to help big firms ride out the pandemic. Large firms ‘that make a material contribution to the UK economy’ were allowed to apply, even if their parent company was based abroad.
The Bank of England charged cheap interest rates – typically 0.5 per cent or less, far below the normal cost of borrowing. Under the loan terms, companies are due to repay the money after 12 months. However, if they go bust – or are unable to repay – the taxpayer is left on the hook for the debts.
Mr Sunak warned in May last year that the scheme was meant as a lifeline for firms, so those using it should not hand rich rewards to staff or investors. He even announced a ‘ban on dividend payments and cash bonuses, except where previously agreed’.
But experts last night said the rules were ‘full of loopholes’, which had been used by firms. None of the Treasury’s restrictions appear to have been breached by the companies identified by The Mail on Sunday. All the firms defended their payouts last night, saying they had acted within the rules.
But Dame Margaret Hodge, former chair of the Public Accounts Committee, said: ‘Whilst everyone wants them to help the economy through this crisis, nobody can support flagrant abuse of these precious resources.’
Darren Jones, chair of Parliament’s influential Business, Energy and Industrial Strategy committee, said: ‘The Treasury should have included conditions on how public funds could be used.’
One Whitehall source said: ‘This may be acceptable [in the scheme rules], but it’s not exactly in the spirit of the scheme.’
The revelations emerge amid mounting controversy over the use of Government subsidies to tackle the economic crisis caused by the Covid lockdowns. Supermarkets including Tesco last month bowed to public pressure to pay back almost £2billion in business rates tax relief. More than £500 million of furlough money has been returned by companies.
When he launched the scheme ten months ago, Mr Sunak said it was intended for companies ‘which are fundamentally strong, but have been affected by a shortterm funding squeeze’.
The rules were revised in May, but new restrictions banning dividends only applied to loans due to be repaid after May 19 this year. That left many firms exempt.
Walgreens Boots Alliance has blamed Boots for a slide in profit
‘The Treasury should have included conditions’
and said keeping stores open has cost money. It said dividends were paid in America ‘using US debt facilities’ and that the move ‘reflects the company’s longterm prospects’.
A spokesman said: ‘Boots met the strict eligibility criteria set out by the Bank of England and took the prudent decision to access a shortterm commercial loan during a challenging time for the industry, which we intend to pay back in May 2021.’
US oil giant Baker Hughes, whose UK arm has links to the tax haven of Bermuda, has drawn a £600million Bank of England loan. It has earmarked around $1billion for dividends to shareholders since the crisis began, worth around £730 million. Baker Hughes said it arranged the Bank of England loan in March ‘to secure liquidity at a time of financial market distress’.
A spokesman added: ‘We believe this was a prudent action ensuring the continued smooth operating of our company.’
Iberdrola borrowed £100million and has earmarked £2.3billion in payments to shareholders in cash and shares since August.
Sources said Iberdrola is investing billions in the UK and is ‘fully compliant with the terms of the [loan] facility’.
Honda said it took the loan in March after UK car production was suspended ‘in line with the Bank of England’s declared purpose... [to] bridge coronavirus disruption to cash flow’.