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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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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