Why Britain is a world leader in financial secrecy

Between $21-32trn of private wealth is kept in tax havens, and Britain is at the very centre of a global financial system that allows the wealthy to avoid tax.

According to the Tax Justice Network, around $21-32 trn of private financial wealth is located in secret tax jurisdictions around the world, where it is either untaxed or lightly taxed. It’s estimated that since the 1970s, this has cost African countries over $1trn, dwarfing the continent’s external debts of $190bn.

Today the Tax Justice Network has published its biannual secrecy index, which ranks countries on indicators like banking secrecy, anti-money laundering regulation, the kinds of company and trust structures permitted and whether their beneficial owners are made public. The three highest ranking countries in terms of financial secrecy are Switzerland, Luxembourg and Hong Kong.

What is noteworthy is how many British island dependencies and overseas territories – where laws must be approved in London and the Queen is the head of state – rank in the top 50 most secret tax jurisdictions. The UK itself comes in as number 21, while the Cayman Islands is in at number 4, Jersey at number 9, Bermuda (14), Guernsey (15), British Virgin Islands (20), Isle of Man (34), Gibraltar (49).

This is all the more interesting when you consider that David Cameron decided to make cracking down on tax avoidance and promoting tax transparency a key issue at G20 this year. In 2011 Nicholas Shaxson, who is a consultant for the Tax Justice Network, wrote the influential book, Treasure Islands, which argued that London is not only the creator of the modern offshore banking system, but is also one of the worst offenders. Lawyers and tax advisers based in the City manage money coming in from the world’s richest and then redirect it to low-cost satellites, from Jersey to Gibraltar.

John Christensen, the director of the Tax Justice Network has written to the Queen, drawing her attention to these findings and arguing that, “the secrecy facilities provided by these jurisdictions stains the good name of Britain in the international arena.”

Clamping down on banking secrecy will make it harder for corrupt world leaders to embezzle public funds, for criminals to launder money and for the world’s wealthiest to avoid taxes – it would however leave a lot of the smart lawyers and tax advisers in the City short of work. Most lawyers would strongly disagree with my conclusion – they are not allowed to help people break the law, and have to carry out special checks on those who are euphemistically referred to as “politically exposed persons”.

But I remember one City lawyer telling me that every year she was flown out to Switzerland by a mystery client, whose identity they didn’t know, to check over her client’s tax affairs. When they arrived in Switzerland, they’d be left in a room with their client’s financial documents. They weren’t allowed to take notes, photocopy documents or remove anything from the room. Operating in these conditions, how can a lawyer possibly be certain that they are not ironing out tax efficiencies for a Middle Eastern despot or a mafia don?

There have been tentative moves towards greater tax transparency – the Liechtenstein Disclosure Facility offers an amnesty of sorts for those who want to come clean on their tax liabilities on their money kept in Liechtenstein, for instance, and Switzerland has made a few concessions on banking secrecy. But these are only tentative moves. As one of the world’s leading financial centres, Britain does have the power to push forward moves towards greater transparency. But this requires real political commitment, and that's still lacking.

Protestors dressed as a businessman do a 'high five' on a protest site named by participants as the 'Isle of Shady Tax Haven' in London on June 14, 2013. Photo:Getty.

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

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How the row over Jackie Walker triggered a full-blown war in Momentum

Jon Lansman, the organisation's founder, is coming under attack. 

The battle for control within Momentum, which has been brewing for some time, has begun in earnest.

In a sign of the growing unrest within the organisation – established as the continuation of Jeremy Corbyn’s first successful leadership bid, and instrumental in delivering in his re-election -  a critical pamphlet by the Alliance for Workers’ Liberty (AWL), a Trotskyite grouping, has made its way into the pages of the Times, with the “unelected” chiefs of Momentum slated for turning the organisation into a “bland blur”.

The issue of contention: between those who see Momentum as an organisation to engage new members of the Labour party, who have been motivated by Jeremy Corbyn but are not yet Corbynites.

One trade unionist from that tendency described what they see the problem as like this: “you have people who have joined to vote for Jeremy, they’re going to meetings, but they’re voting for the Progress candidates in selections, they’re voting for Eddie Izzard [who stood as an independent but Corbynsceptic candidate] in the NEC”.  

On the other are those who see a fightback by Labour’s right and centre as inevitable, and who are trying to actively create a party within a party for what they see as an inevitable purge. One activist of that opinion wryly described Momentum as “Noah’s Ark”.

For both sides, Momentum, now financially stable thanks to its membership, which now stands at over 20,000, is a great prize. And in the firing line for those who want to turn Momentum into a parallel line is Jon Lansman, the organisation’s founder.

Lansman, who came into politics as an aide to Tony Benn, is a figure of suspicion on parts of the broad left due to his decades-long commitment to the Labour party. His major opposition within Momentum and on its ruling executive comes from the AWL.

The removal of Jackie Walker as a vice-chair of Momentum after she said that Holocaust Memorial Day belittled victims of other genocides has boosted the AWL, although the AWL's Jill Mountford, who sits on Momentum's ruling executive, voted to remove Walker as vice-chair. (Walker remains on the NEC, as she has been elected by members). But despite that, the AWL, who have been critical of the process whereby Walker lost her post, have felt the benefit across the country.

Why? Because that battle has triggered a series of serious splits, not only in Momentum’s executive but its grassroots. A raft of local groups have thrown out the local leadership, mostly veterans of Corbyn’s campaign for the leadership, for what the friend of one defeated representative described as “people who believe the Canary [a pro-Corbyn politics website that is regularly accused of indulging and promoting conspiracy theories]”.

In a further series of reverses for the Lansmanite caucus, the North West, a Momentum stronghold since the organisation was founded just under a year ago, is slipping away from old allies of Lansman and towards the “new” left. As one insider put it, the transition is from longstanding members towards people who had been kicked out in the late 1980s and early 1990s by Neil Kinnock. The constituency party of Wallasey in particular is giving senior figures in Momentum headaches just as it is their opponents on the right of the party, with one lamenting that they have “lost control” of the group.

It now means that planned changes to Momentum’s structure, which the leadership had hoped to be rubberstamped by members, now face a fraught path to passage.

Adding to the organisation’s difficulties is the expected capture of James Schneider by the leader’s office. Schneider, who appears widely on television and radio as the public face of Momentum and is well-liked by journalists, has an offer on the table to join Jeremy Corbyn’s team at Westminster as a junior to Seumas Milne.

The move, while a coup for Corbyn, is one that Momentum – and some of Corbyn’s allies in the trade union movement – are keen to resist. Taking a job in the leader’s office would reduce still further the numbers of TV-friendly loyalists who can go on the airwaves and defend the leadership. There is frustration among the leader’s office that as well as Diane Abbott and John McDonnell, who are both considered to be both polished media performers and loyalists, TV bookers turn to Ken Livingstone, who is retired and unreliable, and Paul Mason, about whom opinions are divided within Momentum. Some regard Mason as a box office performer who needs a bigger role, others as a liability.

But all are agreed that Schneider’s expected departure will weaken the media presence of Corbyn loyalists and also damage Momentum. Schneider has spent much of his time not wrangling journalists but mediating in local branches and is regarded as instrumental in the places “where Momentum is working well” in the words of one trade unionist. (Cornwall is regarded as a particular example of what the organisation should be aiming towards)

It comes at a time when Momentum’s leadership is keen to focus both on its external campaigns but the struggle for control in the Labour party. Although Corbyn has never been stronger within the party, no Corbynite candidate has yet prevailed in a by-election, with the lack of available candidates at a council level regarded as part of the problem. Councilors face mandatory reselection as a matter of course, and the hope is that a bumper crop of pro-Corbyn local politicians will go on to form the bulk of the talent pool for vacant seats in future by-elections and in marginal seats at the general election.

But at present, a draining internal battle is sapping Momentum of much of its vitality. But Lansman retains two trump cards. The first is that as well as being the founder of the organisation, he is its de facto owner: the data from Jeremy Corbyn’s leadership campaigns, without which much of the organisation could not properly run, is owned by a limited company of which he is sole director. But “rolling it up and starting again” is very much the nuclear option, that would further delay the left’s hopes of consolidating its power base in the party.

The second trump card, however, is the tribalism of many of the key players at a local level, who will resist infiltration by groups to Labour’s left just as fiercely as many on the right. As one veteran of both Corbyn’s campaigns reflected: “If those who have spent 20 years attacking our party think they have waiting allies in the left of Labour, they are woefully mistaken”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.