Blind trust
Encyclopedia
A blind trust is a trust
in which the fiduciaries, namely the trustee
s or those who have been given power of attorney
, have full discretion over the assets, and the trust beneficiaries
have no knowledge of the holdings of the trust and no right to intervene in their handling. Blind trusts are generally used when a settlor
(sometimes called a trustor
or donor) wishes to keep the beneficiary unaware of the specific assets in the trust, such as to avoid conflict of interest
between the beneficiary and the investments. Politician
s or others in sensitive positions often place their personal assets (including investment income) into blind trusts, to avoid public scrutiny and accusations of conflicts of interest when they direct government funds to the private sector.
, while the Labour Party
was in opposition
in 1992–97, its front bench
received funding from blind trusts. One set up to fund its campaign in the 1997 general election
received donations from wealthy supporters, some of whose names leaked out, and some of whom received life peerages into the House of Lords
after Labour won the election. The Neill Committee's report in 1998 found the use of blind trusts to be "inconsistent with the principles of openness
and accountability
" and recommended that such trusts be "prohibited as a mechanism for funding political parties, party leaders or their offices, Members of Parliament or parliamentary candidates"
This was incorporated into the Political Parties, Elections and Referendums Act 2000
as section 57 "Return of donations where donor unidentifiable".
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
in which the fiduciaries, namely the trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
s or those who have been given power of attorney
Power of attorney
A power of attorney or letter of attorney is a written authorization to represent or act on another's behalf in private affairs, business, or some other legal matter...
, have full discretion over the assets, and the trust beneficiaries
Beneficiary (trust)
In trust law, a beneficiary or cestui que use, a.k.a. cestui que trust, is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often...
have no knowledge of the holdings of the trust and no right to intervene in their handling. Blind trusts are generally used when a settlor
Settlor
In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator...
(sometimes called a trustor
Trustor
* In law a trustor is a person who settles property on express trust for the benefit of beneficiaries. See settlor.* In social sciences and in information technology, trustor is an entity that trusts the other entity...
or donor) wishes to keep the beneficiary unaware of the specific assets in the trust, such as to avoid conflict of interest
Conflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
between the beneficiary and the investments. Politician
Politician
A politician, political leader, or political figure is an individual who is involved in influencing public policy and decision making...
s or others in sensitive positions often place their personal assets (including investment income) into blind trusts, to avoid public scrutiny and accusations of conflicts of interest when they direct government funds to the private sector.
British party funding
In the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, while the Labour Party
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...
was in opposition
Opposition (parliamentary)
Parliamentary opposition is a form of political opposition to a designated government, particularly in a Westminster-based parliamentary system. Note that this article uses the term government as it is used in Parliamentary systems, i.e. meaning the administration or the cabinet rather than the state...
in 1992–97, its front bench
Official opposition frontbench (UK)
The frontbench of Her Majesty's Loyal Opposition in the Parliament of the United Kingdom consists of the Shadow Cabinet and other official shadow ministers of the political party currently serving as the Official Opposition. Her Majesty's Loyal Opposition is currently the Labour Party, and the...
received funding from blind trusts. One set up to fund its campaign in the 1997 general election
United Kingdom general election, 1997
The United Kingdom general election, 1997 was held on 1 May 1997, more than five years after the previous election on 9 April 1992, to elect 659 members to the British House of Commons. The Labour Party ended its 18 years in opposition under the leadership of Tony Blair, and won the general...
received donations from wealthy supporters, some of whose names leaked out, and some of whom received life peerages into the House of Lords
House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
after Labour won the election. The Neill Committee's report in 1998 found the use of blind trusts to be "inconsistent with the principles of openness
Openness
Openness is the quality of being open. It sometimes refers to a very general philosophical position from which some individuals and organizations operate, often highlighted by a decision-making process recognizing communal management by distributed stakeholders rather than a centralized authority...
and accountability
Accountability
Accountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving...
" and recommended that such trusts be "prohibited as a mechanism for funding political parties, party leaders or their offices, Members of Parliament or parliamentary candidates"
This was incorporated into the Political Parties, Elections and Referendums Act 2000
Political Parties, Elections and Referendums Act 2000
The Political Parties, Elections and Referendums Act 2000 is an Act of the Parliament of the United Kingdom that sets out how political parties, elections and referendums are to be regulated in the United Kingdom...
as section 57 "Return of donations where donor unidentifiable".