Tax returns in Glasgow, 2009. Photo: Jeff J Mitchell/Getty Images
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Leader: The stench of corruption at HSBC is a reminder tax havens must be closed

Now we've caught wind of the money hidden in Swiss accounts, it's time to turn to other veiled tax affairs.

The tax scandal uncovered at HSBC is one that even the most imaginative conspiracy theorist would struggle to concoct. The Swiss arm of Europe’s largest bank is accused of having colluded with wealthy clients for years to allow them to shield undeclared accounts from their domestic authorities. Detailed information was passed to HMRC in 2010; 1,100 British citizens are thought to have been involved.

Five years later, just one prosecution has resulted. Contrast that with the 1,046,398 sanctions, or financial penalties, imposed on Jobseeker’s Allowance claimants in 2013, or the nearly 200,000 prosecutions of people who failed to buy a television licence. As the tax campaigner Richard Murphy put it: “To the wealthiest criminals and their assistants within the financial system go the rewards and the plaudits. To everyone else goes intimidation and persecution.”

Far from being called to account, Stephen Green, who served as chief executive and then chair of HSBC from 2006 to 2010, was ennobled by David Cameron and appointed as a trade minister in January 2011. He held the position until December 2013. An ordained priest and the author of Serving God? Serving Mammon?, Mr Green is now advising the Church of England on “talent management”.

Both the government and Mr Green must explain how all of the above occurred. But, like many of those on the HSBC list, their response has been one of evasion. “As a matter of principle, I will not comment on the business of HSBC, past or present,” the latter said. This stance is at odds with what he advocated in his book. “For companies, where does this responsibility begin?” he wrote. “With their boards, of course. There is no other task they have which is more important. It is their job ... to promote and nurture a culture of ethical and purposeful business throughout the organisation.” If the HSBC head did know about his bank’s behaviour, he was guilty of collusion. If he didn’t know, he was guilty of incompetence.

Ministers must explain why Mr Green was invited to join their ranks. That he may have been “an excellent trade minister”, as Mr Cameron put it, is irrelevant. The question, as in the case of his former director of communications Andy Coulson, is whether the Prime Minister was “wilfully blind” when he appointed Mr Green.

The laxity of HMRC’s approach to prosecutions suggests a refusal to reckon with the scale of the scandal. Margaret Hodge, the Labour chair of the Commons public accounts committee, observed: “If this had been benefits scroungers, they would have been queuing around the courtrooms.”

Unlike in the US, France, Belgium, Spain and Argentina, where legal proceedings have been launched against HSBC, no action has been taken against the bank by the UK. HMRC asserts: “In most cases, disclosure and civil fines are the most appropriate and effective intervention.” Yet to date just £135m has been recovered, less than France, though British citizens hold twice as much money. When governments fail to pursue those who evade tax, they squander their legitimacy with the great majority who pay it. As long as the penalties for this crime remain negligible, the incentives for others to behave in this way will endure. The feeling will grow, too, that the system is rigged against the honest citizen.

Ed Miliband, to his credit, understands this. Two days before the HSBC exposé, he announced that he had written to the offshore financial centres linked to Britain as Crown dependencies or overseas territories to say that under a Labour government they would have six months to open their books or be placed on a blacklist. The angry responses emanating from Bermuda, Jersey and elsewhere were as predictable as those of the business leaders who have recently warned of doom should Labour win power. They were equally wrong-headed. Tax havens denying that their affairs remain “shrouded in darkness”, as Mr Miliband described it, makes little sense when they still have no publicly accessible registers of beneficial ownership – documents that show who owns an offshore company.

As a result, HMRC cannot check if a UK resident has set up a company in these havens, let alone whether money is being diverted there. Such secrecy encourages tax avoidance and evasion and costs the Treasury billions of pounds in lost revenue. It needs to change – and soon.

 

This article first appeared in the 13 February 2015 issue of the New Statesman, Assad vs Isis

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.