By Mark Langabeer, Hasting and Rye Labour member.
It is well known that the City of London is the centre of a web of international tax-evasion and laundering of dirty money. Some of the details of that have been revealed in an insightful documentary which is available on Netflix, called The Spider’s Web – Britain’s Second Empire.
The programme gives an account of the history of tax evasion by the global elite and the role played by the London, something that began with the disintegration of the British Empire after the Second World War and accelerated after the Suez crises of 1956. Despite the loss of empire, around a dozen or so islands remained as British dependencies in one form or another and many of these have become notorious for funnelling assets of criminal gangs, terrorists and tax-dodgers.
After Suez, the value of the Pound Sterling fell. The Bank of England introduced restrictions on capital flowing abroad. However, this restriction didn’t apply to British dependencies such as the Cayman Island and the British Virgin Islands. Due to strict banking regulations in the US, dollars flowed into the City of London, helping Britain retain its dominance as a financial centre. Today, a quarter of worldwide financial transactions go through the City of London.
The main attraction of the City is secrecy
The programme investigated the Corporation of London, which has its own laws and a permanent representative in Parliament. Clement Attlee, the Labour Prime Minister after 1945, described the financial centre as a body that pursues policies contrary to the wishes of most people. The programme noted that the attraction of the City is secrecy and a strong likelihood of evading any custodial sentence, even if caught out.
The main mechanism for tax evasion is the establishment of a trust, as there are no rules or qualifications required to be a trustee. The Bank of England has no jurisdiction over the British dependencies and assets can be funnelled by banks into offshore accounts. Assets, whether cash or items, can be subdivided into new accounts, called shell companies. The authors of the programme noted that it is difficult to know precisely what is going on, because of the (deliberate) complexity of ownership of these companies.
There were some amusing moments in the programme. A professor, who was critical of the big accountancy companies, said that in a debate with them, their stock argument was that their customers were highly satisfied with their services (ie tax evasion). The university don, wryly commented that this this reply could equally apply to a drug dealer or a pimp. The tax-dodgers might well be “satisfied”, but the loss of revenue to the Exchequer results in reductions to vital services that are shared by all of us.
The programme also highlighted the City’s influence on the state. A former boss of HMRC, decided to do ‘deals’ with large corporations, rather than take legal action against tax avoidance on the grounds that litigation was ‘expensive’. At a Parliamentary Select Committee hearing, he even said that his legal advice was that he was bound by confidentiality and so he could not tell anyone about these deals. The legal advice actually stated that it was down to his discretion on what he could reveal. After his retirement from HMRC, he returned to work in the private sector in the City of London.
Gamekeepers turned poachers
With such rich poachers around, it is easy to recruit former gamekeepers. Meanwhile, current gamekeepers will be soft on rich poachers, knowing that there’s a lucrative job as a poacher when they retire.
A couple of campaigners against tax evasion managed to gain entry to a private function in honour of a former boss. The campaigners presented him with a gift and thanked him for his services to the large corporations, while the audience, not realising that this was a spoof presentation, applauded the protesters’ remarks. Many former MPs, including former Prime Ministers, are given positions in the City. Most have little knowledge in banking or accountancy, but they are given these roles because it is like buying influence on Parliament. Former Prime Minister, David Cameron, working for the disgraced firm, Greensill Capital, is a case in point.
The last section of the programme was devoted to Private Finance Initiatives. PFI was introduced to build major projects such as hospitals and schools, where the state pay companies for building projects, but over an extended period that normally lasts at least thirty years. The cost is usually between three or four times the cost of projects that are directly funded by the state. It is rather like the state taking out a mortgage at ten time the going rate. It is extremely lucrative and not surprisingly, there is a secondary market in PFI deal holdings.
The programme pointed out that even the Head Office of HMRC was built through a PFI project and the annual rate of return on this is a whopping 15%. It is often the same companies given sweetheart deals on tax that are awarded lucrative PFI contracts. As the Essex University Professor said, the financial system is corrupt.
Last but not least, the programme looked at the set-up in Guernsey. Run by the rich, for the rich and another bolt-hole for tax evasion. A state that many authoritarian regimes would admire. A Place where whistle-blowers are imprisoned, denied employment, including their children. A place that is regarded as ‘British’, and not a far off island in the Caribbean. The programme reveals why the establishment hated Corbyn’s Labour…because it vowed to crack down on tax avoidance and evasion that are organised on an industrial scale. Labour must end these offshore tax havens and PFI and use the extra resources to restore and improve public services.
[UK residents hide £850bn offshore, article here]
