Monday, May 13, 2013

The City of London and the Offshore sector - The Enemy Within



The City of London, the world's biggest tax evasion facilitator and money laundry has just been given some more good news, courtesy of George Osborne and the Coalition Government. The Chancellor of the Exchequer has just sent them a lightly coded message that their offshore revenue stream is guaranteed for the foreseeable future!

George Osborne has just chaired a G7 ministers' meeting at which the question of tax evasion and aggressive tax avoidance was on the agenda!

The Huffington Post reports that "...Osborne G7 Talks Sees Chancellor Criticised After Dodging Details On Tax Avoidance..."

Regular readers of this blog will recall my observations last week ("Lies, Damned Lies, and Civil Service Misinformation") about the likelihood of the UK Government doing anything too aggressively to challenge the offshore-sector and its control of the tax evasion/aggroidance (my shorthand for aggressive tax avoidance schemes) industry ! 

And so it has proved

George Osborne has now been criticised for failing to set out any concrete steps to promote economic growth or tackle tax avoidance during G7 talks, despite his insistence that the meeting with finance ministers and central bank chiefs was "successful and constructive."

Using such weasel words, and playing up the meeting for all it's worth, Osborne sought to make a great deal of how the meeting had made real steps in the debate on fiscal evasion issues. 

However, when pressed on the substance of these discussions, the Chancellor declined to give any details of the talks, which were held on an informal basis in a country hotel in Buckinghamshire, but suggested there was more agreement between the rich nations making up the group on how to nurture the recovery.

With bromides like that, we are all the more informed! 

He had the sense to say that he recognised that the larger G20 group - which includes emerging economic powers such as China, India and Brazil (3 of the world's leading tax evasion and funny money practitioners) - was now the "primary economic forum for setting the global rules of the game", which was another way of saying that the G7 nations, which generally represent the old, and moribund economies, were irrelevant, despite his insistence that they - the United States, Germany, Japan, the UK, Italy, France and Canada - still wielded "major economic firepower" as they represented around half the global economy between them.

Admitting that while there were "...still many challenges...", he said, "...this meeting confirmed that there are more areas of agreement between us on fiscal policy than is commonly assumed..."

Quite what that means in real terms is anyone's guess, but what it does not mean is that the British Government is going to be cracking down on the offshore sector any time soon.
How can I say that with such confidence? Well listen to Osborne's deliberately feeble use of language.

Mr Osborne said British overseas territories "need to do more" to end tax evasion. 

Well, that's like saying the Taliban needs to do more to encourage greater female emancipation in Afghanistan!  Ambitious, possibly; desirable, certainly; but ultimately futile and illusory!

Asked about the future of tax havens such as Jersey or the Cayman Islands, he said he had already been "very tough" in his message to them but wanted to see more action.

"...Of course we would like these jurisdictions to do more..," he said.

"...We want them to commit to some of the existing agreements that are in place on tax information and transparency and we have these initiatives which we are pursuing in the G8, for example around beneficial ownership, which we would also expect all jurisdictions to be able to sign up to..."

None of these comments amount to a row of beans in reality. He can send all the tough messages he likes, he can want them to do more, and sign up to vague initiatives about beneficial ownership, but this isn't going to change the reality of the situation that the offshore sector survives and thrives because wealthy people put their money there secure in the knowledge that it will be secure and kept in complete confidence

I have already discussed the futility of these plans at some length in a previous blog and nothing I read here from Osborne is going to change my views one iota. Because then comes the reality interlude, when the real world politique creeps in! He says;

"...Of course you have to respect that many of these territories have important industries and we don't want to unnecessarily damage them..."

Well, I should think not, and that is the underlying hidden message he has to send them, because these offshore areas generate a huge amount of money which the City of London, the enemy within, is waiting to receive. But at the same time, Osborne has to play the Perfidious Albion games! So he reverts to the default mode and trots out the shibboleths again.

"...But it is necessary to collect tax that is owed and it is necessary to reduce tax avoidance and the crown dependencies and the overseas territories need to play their part in that drive and they need to do more..."

"... We all agreed on the importance of collective action to tackle tax avoidance and evasion..," he said.

Well, no doubt they did, as they peeled their Plovers' eggs, and shovelled down the Boeuf a la Bordelaise! It's not difficult to agree to an assertion as bland as that, after all, ask yourself, what was being agreed to?

"It is incredibly important that companies and individuals pay the tax that is due and this is important not just for Britain and for British taxpayers but also for many developing nations as well."

You will note that the emphasis here is on the "...tax that is owed..." but expecting the crown dependencies and the overseas territories to do anything about it, has the same element of successful expectation as being the voting returning officer at the turkey farm when the Christmas vote is announced!

It is this kind of state-sponsored double-speak that makes the UK look positively mendacious. It is the kind of statement that is drafted by some clever young Treasury policy wonk who knows full well there isn't the slightest intention by anyone in Government to do the least thing about it

And why?

Because the UK Government is a hostage to the City of London and the City now ultimately determines all financial policies, and that is why I term them 'the enemy within'. The Government has quietly surrendered the lead role in defining the UK's future to the City of London, a non-elected, non-transparent, undemocratic group of elites, and the Government will dance to their tune.

This is why the Government's threats to break up the 'too big to fail, too big to jail' banks into small regional hubs is met by two fingers from Threadneedle Street! This is why the proposal to ring-fence the retail banks is met be a resounding raspberry from Throgmorton Avenue!

You see, the City of London no longer needs the UK, the boot is on the other foot, the UK needs the City! I used to believe that the Government was Sovereign, that Parliament was the final arbiter, and that confronted with a vague threat to 'take our business elsewhere' if too much pressure was applied to the City institutions to reform their game, was an empty threat, and I have previously urged the Government to call their bluff! 

But I was wrong! The Government dare not call their bluff because the City of London isn't just a bunch of buildings inside four postal codes; it is a concept of enormous power, an exclusive entity, a very private members-only club into which outsiders are not invited to enter; it is a powerful clique which exerts huge influence and pressure; it is a Mafia! Even Her Majesty the Queen requests formal permission to enter the City of London on a special formal occasion (permission is always granted)!

The City doesn't exist to support this country, it exists for its own financial interests and the rest of us can go take a hike! It could, within a relatively short space of time, go offshore itself, indeed, it has already been described as the most powerful off-shore jurisdiction on earth! You don't need to be a palm-fringed island in the Caribbean to be an off-shore centre. The City has its own laws, and it only obeys those ones which Parliament enacts, when it pleases the suits so to do!

The amount of money that the City turns over each year is counted in Trillions of Pounds. As a fee, tribute, (bribe) to the UK Government to allow them to continue, the City contributes about 12% of the nation's GDP, in terms of the tax it agrees to pay on such profits as it sees fit to declare. The rest of its proceeds are very carefully squirreled away and are held in secure and confidential circumstances, and no-one is going to examine them!

The great financial crisis has brought the role of the City and its functions into greater notice and under more scrutiny, but we should not hold our breath hoping that Cameron or Osborne are going to do anything to bring this criminogenic enterprise to heel! They simply do not have the power to do it, and that is the problem.

When the Prime Minister or the Chancellor go down to the City to speak at their tables, you will note the degree of respect which is afforded to the men and women in fancy dress! They have to be respectful, because the City might take their ball away and go and play elsewhere, and they know that would be disastrous for them.

So they pay lip-service to the conventions, and they make sure they protect the City from any attempts that somewhere called 'Brussels' might make to impose their will on the City of London. Transaction taxes! Not on your Nellie, monsieur. Capital adequacy rules! Only if everyone else is signed up to the same calculations, mein herr!  Anti-money laundering regulations! Now you are being fanciful, old boy!

In a time of the worst financial crisis any of us have ever experienced; at a time when we can see no light at the end of the austerity tunnel, the City of London continues to pursue its own path and writes its own pay cheque! Don't expect it to change its ways, because this is how it has always been done, the City of London is another country, and it is immune from the ordinary rules of engagement that attach to those outside the Square Mile.

No Government of the UK will ever dream of challenging its autonomy, they daren't! The men and women of the City will be allowed to carry on as they have done for centuries, and no-one there is going to be subject to the ordinary laws of the land, as long as they are working for the City and its collective owners! It is a sanctuary, a safe-haven from hue and cry, and as long as you play by its rules, you will be protected.

You don't have to take my word for it, just review the last 5 years worth of criminal financial scandals that have come out of the financial sector, and add up the number of players who have spent time at her Majesty's pleasure? 

Not an awful lot!

So, when you read George Osborne's claims that he and his mates in the G7 are taking tax evasion seriously and calling upon the overseas territories to do more to tackle aggressive tax avoidance, you know that these are just empty words designed to give the impression of concern, but in reality, just going through the motions!

Nothing, but nothing is going to be allowed to undermine the hegemony of the offshore sector, it would be naive to think otherwise!

8 comments:

Leesa Daymond said...

Excellent Blog Rowan! I am confused though, Max Keiser reported today that the G-7 were meeting over this Bank Holiday - your post reads as though they have already met? Which is correct? Have they met or are they meeting over this coming Bank Holiday weekend?

AbogadoNZ said...

Another excellent blog Rowan. What to do now?
I keep coming back to my theme of direct action and protest. It's clearly no use having a march or two BUT if the names and addresses of say 200 senior bankers were to be made available it should be possible to mount a campaign that made their lives miserable. We, the community have to hold their feet to the fire; it won't be nice but it has to happen. Hell will freeze over it we wait for action on the political status of Guernsey and Jersey. It could be changed at the stroke of a pen but no politician has the balls to do it. Just as they will never regulate the derivatives markets or those cretins who speculate in commodities resulting in deaths in the 3rd world. So the only recourse is naming and shaming 24/7 until they leave or change course.

Elkapan said...

If the workers united internationally to take overs the mean of production, to print their own money through a democratically controlled workers government; the financial parasites would be paupers, cut-off, without a bowl to piss in - destitute, and socially excluded. Recognized for what he is, a parasite without real function.

Salford Lad said...

@ Elkapan, You are correct. A sovereign Govt does not have to go to the private banking sector to borrow money, It does not need the taxes from the financial sector.
A sovereign country can create money from thin air at the press of a computer buttom.
Money is not wealth. Money is a token, a means of exchange and a tool to assist in wealth creation. Govt only create 3% of the money in circulation in the form of cash, The remaining 97% is created by the private bank system when they make a loan. The problem is that only 8% of bank money is invested in productive ,job creating wealth creating industry ,such as farming,fisheries ,manufacturing etc.
Banks are risk averse and have short term objectives,so most of their investment is in the financial,insurance and real estate sectors. This FIRE sector creates a lot of money but no wealth and is a predator on the Real economy. This is the situation we have today. Lots of token money, but no wealth assets to back it.

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twologix4 said...
This comment has been removed by the author.
twologix4 said...

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Rowan Bosworth-Davies said...

And your point is?