On Sunday July 22nd this was the Observer‘s front page:
The newspaper drew on a report by James Henry for the Tax Justice Network called The Price of Offshore Revisited. In it Henry estimated that the rich have hidden between $21 and $32 trillion offshore. This is only financial wealth. It does not include property. Some of the money has come from resource-rich countries with inadequate capital controls, some of it comes from the proceeds of criminal endeavour, some of it from tax avoidance.
(You can find the full report, and some background information here.)
On Sunday the BBC featured Henry’s report and interviewed its author. The interview is here. The presenter suggested that ‘this money could really turn things round … for the world economy’. He’s right. $21 trillion is quite a lot of money, however you look at it. He then went on to ask what share of it came from the UK. Henry explained that ‘oddly enough, it is easier to tell you how much is going out of countries like Brazil and Mexico than it is Britain’. This is what you would expect if Britain was the centre for a network of financiers, accountants and lawyers that provide much of the back office for global capitalism. Which it is.
(In the online write-up a tax expert and government adviser called John Whiting cast doubt on the figures. If it was that much, he said ‘you would expect the havens to be more conspicuously wealthy than they are’. This level of argument is standard in attempts to minimise the significance of offshore. They really don’t want a debate if one can be avoided.)
James Henry’s report looked set to dominate the news cycle for at least a day or so, before the Olympics coverage kicked in. It might have informed reporting of Mitt Romney’s London visit, tangled itself up in news that Britain’s economy contracted by an estimated 0.7% in the second quarter, and cast a shadow over Cameron’s drive to attract foreign investment in the UK.
What did Romney think of the $21 trillion figure, given his own detailed understanding of the offshore economy?
Do we need to make further cuts in public expenditure, given how much money is stashed away, untaxed, offshore?
Do we need foreign investment all that much, given how rich our own investors are?
After all, if UK citizens own offshore funds proportionate to the size of the UK economy, then there is $714 billion sitting offshore, about £454 billion, that should be of interest to the tax authorities. Given that London is one of the capitals of offshore, and its banks are heavily involved in all kinds of commission-generating activity, this is likely to be a conservative figure. British companies are also well represented in mining, arms trading and other sectors not known for the stringent financial controls and high moral tone. And Britain provides a notably permissive environment for multinational companies, like News Corporation, to an extent that is difficult to square with any notion of the public interest.
So, the stage is set for a thorough airing of these issues. Then David Gauke enters stage right. On Monday 23rd July the Exchequer Secretary to the Treasury gave a speech on tax avoidance at a think tank called Policy Exchange. In it he assured his audience that ‘contrary to some claims, the vast majority of UK taxpayers do not aggressively avoid tax; and yes, that includes the vast majority of wealthy individuals and multinational corporations, as well as the vast majority of ordinary working people and small businesses’.
Some time later on the same day, talking to the Telegraph, Gauke decided that cash payments to plumbers and builders were ‘a big cost to the revenue’ which was ‘morally wrong’. Though the ‘vast majority’ of people and businesses don’t ‘aggressively avoid’ tax, according to Gauke, significant numbers of us are evading tax, a more serious matter altogether. On Tuesday 24th, in an interview on Newsnight, the minister warmed to his theme:
When a tradesman says ‘here’s a 10%, 20% discount on your bill if you pay me cash in hand’ that is facilitating the hidden economy, that is as big a problem in terms of loss to the Exchequer as tax avoidance that is meaning that revenue isn’t being paid that should be paid.
The political media seized on the minister’s remarks. Was it really morally wrong to pay tradesmen in cash? Cue quotes from the great and the good – David Cameron, Boris Johnson and Nick Clegg all admitted that they had paid cash to tradesmen! Silly old Gauke had been caught out saying that the Prime Minister, his Deputy and the Mayor of London were ‘immoral’! Gotcha! What larks!
The agenda shifted – away from offshore with its troubling abstractions and deep, deep significance – and onto the dry land of Westminster’s politics-as-chit-chat.
The Prime Minister, whose father made his fortune as an offshore fixer, was spared questions about the missing trillions and was able to bat away questions about plumbers, just as though he was one of those ordinary, decent, hard-working, ordinary people we keep hearing about,
and not a plutocrat whose family wealth is likely to be considerably more than the current estimate of around £20 million.