17 August 2015

Should the Tories be giving Michelle Mone a peerage?


Good luck to Michelle Mone, who reportedly will soon become a Baroness taking the Tory whip. She is already an enterprise “Tsar” for the UK government. She stuck up for the Union during last year’s referendum with gusto. For this she received much abuse, although lots of Britons who stuck up for the Union received similar or worse. Mone is a masterful practitioner of public relations who has wowed the tabloids for years as a provider of pictures of models wearing underwear designed by the bra company – Ultimo – that she and her former husband started.

In self-marketing terms she hits that perfect tabloid sweet spot. She is self-confident; she can talk a good game; she had humble beginnings; she started a business; and she seems to understand that red-top newspapers are strapped for cash these days and hungry for celebrity copy about which not too many hard questions will be asked. Mone mines that rich seam of Strictly Come Dancing contestants, Penny Lancaster, Rachel Hunter, breakfast television, motivational speaking, a fake tan business, confessional memoirs and chirpy social media. Although on the theme of Penny Lancaster, this is not without its perils if one reads the vitriolic things that Rod Stewart had to say about Mone as long ago as 2004, whatever the rights and wrongs of that particular spat.

As I said, good luck to her. Celebrity bra-making sounds like a tough old business.

But none of it – on normal, sensible calculations – appears to be a good reason for Michelle Mone to be given a peerage and sent to legislate in the House of Lords, Britain’s upper chamber.

If the Prime Minister is looking for highly successful Scottish women entrepreneurs, or lawyers, or doctors, or artists, or academics, to appoint to the peerage, he was surely spoilt for choice. There are dozens of people from all manner of backgrounds and experience who spring to mind.

Instead, it is said that the PM has been struck by the claims that Michelle Mone is a wildly successful super-rich Scottish business phenomenon and, having been convinced of this by persons unknown, has decided to make her Baroness Mone. It is said that he telephoned to tell her this. There is some bafflement in Whitehall; I hear the Scottish Tories who were not asked are astonished; and the SNP is raising perfectly legitimate questions about the banana republic state of British democracy.

Why do I care? This site – CapX – is for entrepreneurship, competition, wealth creation, markets and social mobility. But none of that works properly in the end without robust governing institutions and a strong legislature that can test the Executive. That means that if we are not to have an elected second chamber (and even someone like me who is sceptical of that idea thinks the case is becoming stronger by the year) then at the very least those who go to the Lords should transparently have much to bring to the legislative process. If they are ennobled because of their business expertise in starting a company worth many tens of millions that is fine, as long as the business has a proven track record.

This row has nothing whatsoever to do with class or snootiness about trade. It is greatly to the Prime Minister’s credit that he wants to broaden membership of the Lords. It is irrelevant that Mone made bras or sells fake tan. What her business is matters not one bit. In terms of Mone and others being ennobled by the Tories, the real question is whether clever spin has triumphed over business substance.

One reads variously in the tabloids that Mone is worth £20m or even £35m, and that Ultimo is a £50m business. It was claimed that buying out her husband cost her £24m.

Making that much money in business is far from easy. It requires a torrent of income for many years from a big business throwing off cash; or epic leverage from helpful banks cleverly deployed; or the proceeds of a mega deal wisely invested over the course of a decade; or a couple of biggish London property deals done on the right side of a crash. How much did Ultimo make?

BBC Scotland’s Business editor, Douglas Fraser, reports that turnover of Ultimo’s parent company (now sold) peaked at £10m. Profits edged towards the £1m mark, he says, before the business went into the red and was then sold. ‎

The Herald, the Glasgow broadsheet, recently carried a useful primer on the company’s business history that is worth reading.

It appears that Mone co-ran what, in the scheme of things, was a smallish business with a big PR operation. The details in the Herald’s report may not altogether surprise many people in the Scottish media, politics or business. Number 10 and members of the cabinet might find it interesting though and may well look to see her response to the article.

In the latest development, Mone’s husband has spoken out to cast doubt on media reports of figures inflating the entrepreneur’s wealth: “I have never received £24m or anything like it. Such reports were completely untrue.”

The Herald has carried a series of stories about the entrepreneur. Here is how the paper covered her response:

‎The 43-year-old herself… posted a statement on Twitter entitled “You won’t break me.” She said: “All my tax affairs and those of companies and businesses run by me have been handled in full compliance with the law. Any suggestion to the contrary is defamatory and will attract legal action. My legal team is watching and legal letters have gone out today.”

She signed off her message in an apparent sideswipe at her critics, saying: “Typical SNP supporters.” The Herald had only cited unionists questioning her appointment. The Herald has attempted to identify where Ms Mone’s wealth lies and has been unable to do so.

A spokesman for Mone told me the following:

“Michelle sold 80 per cent of Ultimo to MAS (a £1.4 billion company employing 63,000 people) in a multi-million pound deal done in two parts in 2013 and 2014. She remains a shareholder in the company holding a 20 per cent stake.”

I asked what exactly Ultimo had been valued at when it was sold.

“The sale was a private deal and its exact valuation remains confidential – beyond the fact that it was a multi-million deal.”

I asked for a comment on reports estimating Mone’s wealth as being north of £20m.

“As well as her retained share in Ultimo, Michelle has other businesses and investments. She also earns substantial fees as a global speaker. She has never publicly put a figure on her total wealth and intends to keep such matters private.”

Fine. But in the interests of transparency – with Mone presented by the UK government as a paragon of business success – this should surely all be cleared up and the record clarified with precision before Michelle Mone is appointed as a peer by the Prime Minister.

Otherwise, the fear will persist that Number 10 is prone when it is looking for new peers to be over-impressed by bright, shiny PR and doesn’t always do its homework quite as well as it should. One hopes they are more diligent, and attentive to fine detail, on the big questions confronting Britain in terms of national security and negotiations with the European Union.

Iain Martin is Editor of CapX.