The Globe and Mail - 09.03.2020

MONDAY,MARCH9,2020| THEGLOBEANDMAILO REPORTONBUSINESS| B

W

hen Conrad Black’s Holl-
inger newspaper group
sold London’s Daily Tel-
egraph for US$1.3-billion in 2004,
few people knew much about the
buyers – reclusive twin brothers
from Britain who lived in a castle
in the Channel Islands.
Sir Frederick and Sir David
Barclay have long avoided the
limelight as they built their busi-
ness empire that stretches across
media, retail and luxury hotels.
The eccentric billionaires, who
are 85 years old, have relied on
their island retreat and the priva-
cy of offshore tax havens as shel-
ters from public glare.
But their private world has
now been shattered by public
revelations of a family feud that
threatens the future of their two
main assets: the Telegraph and
London’s iconic Ritz Hotel. The
dispute broke open in a London
courtroom last month, which
heard allegations that Sir David’s
sons had secretly bugged a con-
servatory at the Ritz where Sir
Frederick enjoyed smoking ci-
gars and talking strategy with his
daughter. The one-day hearing
also revealed that the families
have been at each other’s throats
for years, with no resolution in
sight.
“We all remember Tolstoy say-
ing ‘each unhappy family is un-
happy in its own way,’ ” Sir Fre-
derick’s lawyer Desmond Browne
told the court. “Here, children of
Sir Frederick and Sir David have
been at odds concerning the
family trusts – and cousin, sadly,
has been pitched against cousin.”
In a rare public statement last
week, Sir Frederick said he was
“deeply shocked and saddened
about recent events involving
unethical conduct and intrusion
into my privacy.” He added: “I
hope we can get these family
matters resolved so that we can
all move on.”
The feud comes at a critical
time for the Barclays. Two of
their biggest holdings – online
retailer Very and a delivery ser-
vice called Yodel – lost nearly
£300-million combined, or $523-
million, in the latest fiscal year
and profits at the Telegraph and
the Ritz have been shrinking.
The family has been at logger-
heads over how to ease the finan-
cial pressure, and disputes have
broken out over whether to sell
the Ritz and the Telegraph. Sir
David’s family appears ready to
sell the Ritz to a Saudi group for
£750-million, but Sir Frederick
has threatened legal action if the
sale goes ahead.
“There is no place for any sale
at less than full value,” he said
last week. “A sale below the prop-
er value would give rise to fur-
ther litigation. This would be re-
grettable. There have been a
number of competing offers for
this first-class hotel in excess of
£1 billion.”
There have also been moves to
push Sir Frederick’s daughter,

Amanda, his only child, out of

the business. She’d managed the

hotel’s jewellery operation and a

family trust for years, but joined

the Ritz Hotel’s board last June

when talk of a sale heated up. A

few months later, Sir David’s son

Alastair planted a listening de-

vice in the hotel’s conservatory

to record conversations between

Amanda and Sir Frederick, court

filings allege.

Sir Frederick discovered the

bug on Jan. 13, 2020, when a secu-

rity camera caught Alastair ex-

amining the device. Two weeks

later, Amanda and a colleague

were kicked off the Ritz board

and replaced by two of Sir Da-

vid’s sons. Sir Frederick then

headed to court to seek an in-

junction preventing his nephews

from disclosing the recordings.

They agreed to keep the material

confidential but everyone is ex-

pected back in court again.

Just how the family can re-

solve their differences remains

unclear. The situation has been

compounded by Sir Frederick’s

pending divorce from his wife of

40 years, Hiroko Asada, which

could create more financial un-

certainty depending on how as-

sets are divided, and the gradual

move by Sir David’s eldest son,

Aidan, to take over more daily

operations.

It’s a far cry from the brothers’

early days in business when they

quit school at the age of 16 and

launched a series of ventures in

London that eventually led them

to flipping distressed buildings

and owning a majority stake in

some of the city’s finest hotels:

Claridge’s, the Connaught and

the Berkeley. From there, they

branched out into newspapers,

buying and selling the Scotsman

and then snapping up the Tele-

graph as Lord Black’s newspaper

business became mired in con-

troversy.

The twins were once so close

that they bought the tiny island

of Brecqhou, one of the Channel

Islands, for £3.5-million in 1993

and built a 92-room castle. They

even drank from cups and glass-

es engraved with the initials D&F.

But now, the brothers rarely

speak and spend their time sep-

arately in mansions in London

and Monaco.

Mr. Black has been following

the dispute from afar and he has

nothing but fond memories of

the Barclays. He knew Sir David

and Aidan best, but he also met

“Freddy a few times,” he said in

an e-mail. He found them “a

pleasure to deal with” and add-

ed: “I regret they are having in-

ternecine problems and hope

they work everything out.”

BillionairetwinbrothersSirDavidBarclay,left,andSirFrederickBarclay
areseenafterreceivingtheirknighthoodsfromtheQueenat
BuckinghamPalace.STEPHENSMICHAELSTEPHENS/PA

FamilyfeudthreatensBarclay

brothers’businessempire

PAULWALDIE
EUROPECORRESPONDENT

Thetwinswereonceso

closethattheybought

thetinyislandof

Brecqhou,oneofthe

ChannelIslands,for

£3.5-millionin1993and

builta92-roomcastle.

WhenBritishColumbiaFinanceMinisterCarole

James rose to give her 2020 budget speech, she

took a few sentences to sell the benefits of the

impending B.C. Child Opportunity Benefit,

aimed at helping out poor families with chil-

dren.

“Launching this fall, the new B.C. Child Op-

portunity Benefit will help lift up thousands of

kids and give them the opportunities they de-

serve, now and down the road,” she said.

What the Finance Minister didn’t mention is

thataprogramaimedatreducingchildpoverty

will leave some poorer families paying a higher

provincialtaxrateontheirlastdollarofincome

than families with tens of thousands of dollars

moreinhouseholdincome.Thatisareversalof

the bedrock principle of progressive taxation,

where rates rise as income increases.

ButinthecaseofB.C.’snewchildbenefit,the

opposite is true. An analysis of the complex

clawback of payments shows that it creates an

instance of regressive taxation – in which a

poorerhouseholdpaysahigherrate.Underthe

new program, families start losing four cents of

each dollar of benefits once household income

rises above $25,000.

Those benefits rise with the number of chil-

dren, but the regressive effect is most pro-

nouncedforafamilywithjustonechild.Aone-

child household will receive an annual benefit

of $1,600, but once income has hit $47,500, the

4-per-cent clawback has pared the payment to

$700. The clawback resumes only once house-

hold income passes $80,000. So, a family with

income of $47,500 and a family with income of

$80,001 both have about the same $900 reduc-

tion in benefits.

It’sthatpausethatendsupdistortingthetwo

families’ marginal effective tax rates (a figure

that includes not only income tax rates but the

implicit tax represented by reductions in bene-

fits, among other things).

Both families pay a provincial income tax

rate of 7.7 per cent. But once the effect of the

clawback is added into the mix, the rates tilt to

the disadvantage of the poorer family.

Forthepoorerfamily,theclawbackaddsfour

percentage points to its effective marginal rate,

for a total of 11.7 per cent (a figure that does not

include other levies, such as federal income

tax).Butthemorewell-to-dofamilypaysalow-

er effective marginal rate, which drops to just

7.7 per cent once the clawback is paused. Of

course, both households have benefits clawed

back; even on that measure, the poorer family

is at a disadvantage, since the $900 clawback

represents a larger portion of its income.

Bothfamiliesaresignificantlybetteroff,both

indollartermsandcomparedwiththeprevious

program, which was limited to children under

the age of 6, while the new program provides

benefits until a child turns 18, said Iglika Ivano-

va, senior economist with the Canadian Centre

for Policy Alternatives. But she said it would be

better if the clawback did not have a plateau.

Buttheregressiveturnoftaxratesdoesillus-

trate the complexities of programs that target

benefits,ratherthanthenowpasséapproachof

paying the same amount to all households.

“Managing marginal tax rates is the real art in

policy design,” said public policy analyst Ri-

chard August, who helped to expand Saskatch-

ewan’s child support program in the 1990s.

The B.C. Finance Ministry did not agree to an

interview, but in a statement it said that nearly

300,000 families in the province will receive

payments. The cost of the program is budgeted

at $380-million, nearly triple the $132-million

being spent on the current childhood tax bene-

fit. Part of that increase is due to older children

being covered.

The ministry acknowledged in its statement

thatitdidanalyzemarginaleffectivetaxratesas

part of the program’s design, and that such

rates are an important factor, but not the only

one.

Theministrydidnotprovideareasonforthe

clawbackplateau,butsimplearithmeticholdsa

clue. With the plateau, households earning

closeto$97,500withachildreceivesomebene-

fit. But if the clawback were to apply to every

dollar of income above $47,500, benefits would

be eliminated once household income exceed-

ed $65,000. The pause in the clawback spreads

benefitstoamuchlargernumberof(betteroff)

households, without an additional increase in

the overall cost to thegovernment.

BritishColumbia’sMinisterofFinanceCaroleJamesplayswithachildduringtheFamilyArtsFestival

attheCedarHillRecreationCentreinVictoriaonFeb.17.CHADHIPOLITO/THECANADIANPRESS

WithB.C.’snew

childbenefit,poorer

familiesfacean

unexpectedtaxburden

Undertheprogram,households

startlosingfourcentsofeach

dollarofbenefitsoncetheir

incomerisesabove$25,

PATRICKBRETHOUR

TAXANDFISCALPOLICYREPORTER

Liane Kelly

toBoardofDirectors

B2Gold Corp.

Gordon Johnson

toVice-Chair

British Columbia

Securities

Commission (BCSC)

Michelle Sharp

toNorthAmerican

HumanResources

Practice

Spencer Stuart

Julia McGillis

toCanadianData

andAnalyticsand

FintechPractices

Spencer Stuart

Nirvan Nuckchedee

toNorthAmerican

IndustrialPractice

Spencer Stuart

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