Maurice Glasman ~ Overview and history of the City of London
John Christensen ~ The Bank of England
Nick Mathiason ~ Mansion House
Robert Palmer ~ HSBC Corporate Banking Centre
Tom Pursey ~ Goldman Sachs and HMRC
Maurice Glasman ~ Guildhall
John Hilary ~ TheCityUK
made by Lin Ho-Chih
photographed and transcribed by Isabelle Chaize
is an academic, social thinker and Labour life peer. He lectures in Political Theory at London Metropolitan University, and is Director of its Faith and Citizenship Programme.
Overview and history of the City of London
This is the Bank of England, that’s the Mansion House where the Lord Mayor lives, with fantastic stained glass windows, double stained glass windows on the Mansion House that tell the whole story. On the one side are the old barons of the Corporation of the City of London holding the knife to King John’s throat at Magna Carta because he was trying to destroy the ancient constitution, and on the other window are the very same barons cutting off Wat Tyler’s head when he tried to challenge their power, and I think you’ve got the whole ambivalence of the history there.
Round the corner, we’ll go to it, is the old City Square. As you know London was founded by the Romans and for round about 1000 years or so it followed the same pattern as other European cities, it was self-governing, it had a guildhall, and guilds were workers organisations, and that sort of thing. But really the story I want to talk about is the relationship between invisible earnings, which is I think the issue at hand, which is the tax system and the money finance capital, and the way that works outside of national jurisdiction, the invisible earnings, and the invisible power of the City.
So the really important story to tell is that round about coming up to the Middle Ages, London went its own way, the City of London went its own way. Now you’ve got to remember that the City of London has got its Common Council, which exists before Parliament, it’s got its Aldermen, the Parliament was based on the City and succeeds the City. So there’s a concept called time immemorial, so in English Law if something is from time immemorial it cannot be changed. And the date of time immemorial is 1191, September 1191, which is the coronation of King Richard I.
Now the really brilliant thing is that the city of London was established in 1189, so they got in there. So they claim that Parliament cannot legislate over the City of London, the City of London precedes Parliament and is not subordinate to Parliament, and what effectively happened, to cut a very long story short, is that the City of London had its ancient laws, and then what it did was it just started kicking out the workers, kicking out the people, and so the most ancient continuous democratic city in Europe, became the actual representative of finance capital. It began to represent Britain’s imperial network. ‘Britons never never never shall be slaves’, that was the maritime economy.
So there was a territorial city, which was Westminster, which governed Britain, and then there was the City of London, which effectively governed the rest of the world according to finance rules. So the East India Company for example didn’t answer to Parliament for the first 150 years of its existence, it answered to the City of London, it was a chartered company from the City of London. That’s a very important part of the story.
So, roughly speaking, how did it happen that the city evaded all political control? Well there were attempts, one important attempt was Charles I tried to enter the city, and to subordinate the city, and said… because the story of what happened in the rest of the world happened in London, there were enclosures, peasants lost their land, they were forced off their land, they also lost their status, through the abolition of the apprenticeship laws, so there were huge refugees coming to London, Whitechapel, Southwark is interesting, Southwark is the first colony, Southwark was ruled by the City of London. People from South London I think still carry the scars of being a colonial people. I say that as someone from Stoke Newington. You meet them and they have that powerlessness and resentment that you always associate with that. Mel absolutely represents that in physical form, and it’s hard to build a common good with that, but we try.
And then Westminster, what the idea was, London should be expanded to become a city, like every other single city in Europe it would expand. The City of London said no, Charles said yes, it’s called the Great Refusal. And then what happened was, Charles went into the city and that was the beginning of the English Civil War. The idea that the monarch could not enter the city armed because the city was a self-governing city, and the city backed Parliament, chopped the king’s head off, chopped Archbishop Lord’s head off, sorted that one out. Then when the king came back, King Charles II, he tried to do it again and asked Quo Warranto?, under whose authority do you rule in the City? And the City resisted that and then, as you know, when he died they invited William and Mary down. So the Glorious Revolution, as it’s known, the fundamental thing about the Glorious Revolution was it said to the City of London, you can have all your rights, all your money, all your hereditaments, all your liberties, in this place, in perpetuity for ever. So that was the settlement. And from then on the City really didn’t look back and the City came to dominate this huge global economy.
Who else other than the British could have an empire that was characterised by free trade imperialism? That was the concept, also known as gentlemanly capitalism; that was the score. And the big issue for us is that the City has effectively stood outside of all legislation, has always promoted the financial interest. For example the Remembrancer, it’s a fantastic concept, the Remembrancer is not the physically oldest lobbyist in the world because I think he’s only in his early 60s, but the Remembrancer was founded in the early 1500s to represent the City’s interests, and to remembrance, to remind Parliament of the rights of the City. Now he’s got very unusual privileges, for example he’s the only person who’s not an MP or Lord who can enter the chamber, and he can brief members on the City’s interest, and he also has a chair directly behind the speaker so he can intervene.
Now the important story moving forward is that the empire grew, the City grew, and finance in Britain was never subordinated to political control. So the story that we’ve got now is a very very old story as well as a very new one.
To push it on, and what we’re going to talk about later, just so you understand where we’re coming from, when I talk about 1945 and the problems of 1945, is that we didn’t do anything about the City, the City remained completely outside of control.
Now they had a couple of bad years when they had to cancel their banquets and, not exactly rations at the Lord Mayor’s banquet but…but that passed, and what happened was the City of London was never given city status, so there’s the LCC, which was established in 1889 to give London some political representation, but notice it was called the London County Council, it was effectively the same governance as applied to a country rather than a city. The City of London retained all of its power. And then came the GLC, the Greater London Council; once again essentially a shanty town representation, of non-city status.
I always say isn’t it weird, Scunthorpe’s a city, Brighton’s a city, London’s not a city. And then the brilliant move came, which coincides with what John’s going to talk about, the Big Bang, which was that then democratic government in the City was abolished, but the City of London remained, so we got the Big Bang. But the important thing that I’m trying to get across to you is that it’s a big block in the understanding, Britain’s called the first national state, the first sovereign state, but it wasn’t, there was always something outside of it, which was the City of London. And also how does capital, how does finance represent its power politically, we’ve got the address, it’s the City of London, it’s the Corporation of the City of London. And they promoted deregulation, they promoted the Eurodollar market, they promoted what’s called the shadow economy, which essentially, you know the old Mafia saying ‘money rolls up shit rolls down’ and that’s essentially the method that the City of London has always used to keep itself going.
The City of London has remained an organised bloc that promotes the interest of capital. What does that mean? That means the maximum return on investment and the minimum possible regulation on its actions. And so what you had and what you have particularly in the last 30 years is the absolute explosion of the power of the City of London, the complete dismantling of any territorial empire but the absolute maintenance of the maritime financial empire in which everything, all the surplus comes back to London where it’s reinvested from this point.
So what I thought would be a really good thing to do today is try to understand that this is not just an economic but a political power, that the political power works through here, so the most ancient democratic…all the guilds, for example, the Guildhall, the Guildhall banquets, no workers are allowed to join the Plumbers’ or the Carpenters’ or the Shoemakers’, they’re all bankers. And capital also needs to have relationships and the relationships are all brokered and built here.
London was the inheritor of the widows’ and orphans’ fund so it’s the richest city authority in the world, and that money is used to promote the financial interest and to lobby. So CityUK was founded by the Corporation of London as a way of spreading that financial lobbying.
So from my side, the political side, I’d like to see a really simple thing, I’d like to see all of London become a City, I’d like to start a campaign that London should be a city, that our Parliament should be in the Guildhall, it doesn’t cause me great pleasure but Boris Johnson, I think he’s got enough room to have affairs in there, enough space for him to do what he does, he’s got enough to feed the needy in that particular venue. So that L reconstitutes itself as a city, a singular city, and through democracy we can limit and control the power of capital.
For further information on the history of City of London, read the speaker’s essay ‘A Tale of Two Cities‘ [PDF].
is an investigating economist. He has advised many government and inter-government agencies as well as NGOs, unions and other civil society organisations. Since 1978 he has specialised in the role of tax havens in the global economy. He is currently executive director of the Tax Justice Network.
Well you just heard from Maurice that the City of London Corporation is no ordinary organisation, and the institution behind me is no ordinary central bank. The Bank of England was founded as a private bank in 1694, it was nationalised in 1946, and in 1997 the incoming Labour government gave it independence on monetary policy. But it has never really been a public institution working for public service. It is, in fact, a private bank that has largely served the interests of the City of London from the outset, and in many respects I would argue that the Bank of England is the author of most of the problems we face.
Click to access john-christensen-bank-of-england-08-jun-2013.pdf
We can trace a line from 1946, from its nationalisation, through to 2008 and the collapse of the banking system in Britain, and say that the Bank of England must claim much of the responsibility for what’s gone wrong. But I want to talk about one thing in particular, that is the Bank of England’s role in promoting Britain’s tax haven empire.
What happened in 1946 with nationalisation was the Bank of England retained all of its key powers, above all its power to appoint its most senior official. We the people have never had any power whatsoever to get rid of the governor, or the deputy governor, and virtually every single senior official from the Bank of England, from the start, from 1946 onwards, has come out of the City of London. So the Bank of England is in fact the bastion of the interests of the City of London. And as you can see here, the dream, was to revert back to those glorious days of the British Empire when the City of London was a totally independent and liberal organisation; in other words no government controls whatsoever. That was the dream.
And importantly, right from the start the Bank of England set itself up as a subversive organisation. It started to fund a very low profile organisation called the Mont Pelerin Society. And its economists, that is economists from the Bank of England and other British economists, right from the start got involved with the Mont Pelerin Society, and the Bank of England was actually funding the Mont Pelerin Society. For those of you not familiar with the Mont Pelerin Society, we know it and love in the form of the Cato Institute, and the Institute of Economic Affairs, and the Heritage Foundation, and a whole raftload of neo-liberal economists who have taken over not only the leading economic institutes, the think-tanks, but who successfully managed to launch the Thatcher government. In other words his project, the project of the Bank of England, was to fund the reversion to liberal thinking – with a difference, because they saw the role of the state and of the central bank as being to promote the interests of private capital.
Now something happened as the formal British Empire came to an end in 1955, 1956, something happened in this institution behind us which no one has paid very much attention to. They did a deal with an institution over there, Midland Bank, what was Midland Bank, now part of HSBC, and that deal was to allow Midland Bank to start issuing bonds denominated in dollars. Sometime between 1955 and 1956 this deal was done. There’s no written record of it whatsoever, we’ve been through the archive. But the purpose of this deal was to allow British banks to start collecting deposits from around the world in dollars and other currencies which sat outside the regulatory framework. So the Bank of England was saying you can collect these deposits, we won’t regulate it, you can collect them wherever you wish, and hold them wherever you wish, and this was the creation of the first real, serious offshore market. Because these dollars weren’t regulated. Needless to say they flooded in from around the world, from all over the world, from the Middle East, petrodollars, from Latin America, from Africa, they flooded into London. And this was the start of the emergence, re-emergence of the City of London as the capital of capital.
Because suddenly, we had a totally unregulated market, and a very profitable market for British banks like Midland. So profitable that they decided that rather than hold these dollars and do these activities here in London, it would be better to do it in Bermuda, or in Jersey, or in the Caymans, because then they wouldn’t have to pay tax on the profits. So this was the start of the re-emergence of London as a gigantic tax haven, the preeminent tax haven.
So for those of us who think that neoliberalism really kicked off in the 1980s with Mrs Thatcher’s Big Bang in 1986, actually I think we need to trace it back to 1955, ‘56, and the re-emergence of this Eurodollar market. And the scale of that market is absolutely enormous. It runs to trillions of dollars being traded every single day of the week, completely unregulated. And it was the Bank of England that chose to allow this unregulated market to emerge in the 1950s; they saw this as almost a second empire project, Britain’s opportunity to reassert its primacy in financial services, in insurance and so on.
When you look through the records, you find that not only did the Bank of England choose to turn a blind eye to the Eurodollar market here, importantly at that time in the 50s, the 60s and right the way through to the end of the 70s, they were responsible for regulation of the banks operating in the offshore tax havens, like Jersey, Guernsey, Cayman Islands, Bermuda and so on. And importantly when you look through the archives, you realise that right from the start they took a decision to not regulate the banks offshore. Now I’ve got personal experience of this, I was economic adviser to the government of Jersey and regularly visited the Bank of England, and it was clear they had no interest whatsoever, as long as it didn’t happen here in London, they didn’t want to know about regulation in places like Jersey or Guernsey, precisely because they knew that served the interests of their clients, that is the banks operating from here. So they turned a blind eye to all the monkey business, and that continues right the way through.
Now this week we’ve heard the outgoing governor of the Bank of England speaking on Desert Island Discs, saying that they had no idea about all the different risks that were building up in the financial markets from the 1990s onwards, ‘don’t blame us’, he said, ‘no one else had any idea’. Well the reason why no one had any serious idea about the scale of the risks, and the nature of the risks, is precisely because way back in the 1950s the Bank of England chose not to regulate the activities of the banks operating in these offshore tax havens.
And worse still, and this is a fascinating memorandum which I found when I began my research in the late 1980s in the archives here underneath this building, it was clear that from the early 1960s onwards colonial officials working in some of the offshore centres in the Bahamas, the British Virgin Islands and so on, were sending signals to the Bank of England: ‘please help us, we know there’s all sorts of financial wizardry happening here, we’re not equipped to handle it, please send advisers’. But memoranda like this one were left totally ignored. The Bank of England chose to do nothing about it. And why did they choose to do nothing about it? Because their clients, that is the big London banks, wanted nothing to happen.
So for those of you who think that the Bank of England has been serving public interest, either for Britain or for the rest of the world, over the last 60 years, the harsh message is not at all. The Bank of England has been serving the interests of its clients, that is City of London, the major banks, the major law firms, all of whom have created this wonderful world of offshore tax havens, which our Prime Minister is now committed to closing down. Good luck!
is Business Correspondent of the Bureau of Investigative Journalism and Associate Communications Director of the Financial Transparency Coalition. Previously, was ten years Business Correspondent at the Guardian and Observer writing on a range of finance, political, business and economic issues.
I also work for something called the Financial Transparency Coalition, which Robert over there is a member of. And we are a bunch of NGOs working for financial transparency, does what it says on the tin.
Now, it’s lunchtime and I don’t know if any of you are hungry? Well inside here is probably the finest banqueting food that you could wish to have actually. The roasted meats and the finest wines are rolled out for international heads of state and politicians and the Lord Mayor, every year, invites the Chancellor to outline his vision for the financial future of our country and the role of Britain in a global financialised world.
And it’s really about trying to keep the City of London preeminent in the global economy. That, essentially, is what the City wants to hear. And that’s what Chancellors, George Osborne, Alistair Darling, Gordon Brown in particular, going back through the post-war period, that’s what the Aldermen and the Councillors all want to hear. And in this atmosphere of adulation and lots of alcohol which greases that idea of intoxicating power, these politicians are complimented. And that is the soft power of the lobby, the financial lobby, it’s such a welcoming, generously spirited atmosphere.
I once was inside there for an Association of London Government banquet, and where Boris actually washed his hair and blow-dried it. It was that important. He wasn’t looking scruffy. He looked very pukka. And he was doing it because he was telling the City what they wanted to hear. And Maurice is right, the idea that the City is a fixed entity. Nothing must change as long as the City is on that track. That’s what it’s all about. And we’ve seen in the financial crisis that nothing actually has changed. And in a sense that’s what the City wants.
It’s very hard to define lobbying, and the size and scale of the financial lobby. So Mel Newman, my colleague, and me, and one other colleague, last year, we wanted to find out the size and scale of the financial lobby. So we looked at lots of legislation. We looked at who was responding to consultation papers, and swept in, loads of organisations. We wanted to find out how many people they employed. How much was their lobbying budget. Some of them told us. We looked at the public affairs agencies and public relations agencies that also offer public affairs services. Some of them told us how much they spent. How many people were employed. Some of them didn’t. We created a methodology for those companies that wouldn’t cooperate as to how much a typical public affairs worker was worth. And we got that peer reviewed by academics. We took a very conservative approach. And we came up with the conclusion that there are about 129 organisations that are actively working to influence financial regulation in the City. And they employ close to 1000 people. And they’ve got a financial war chest of 93 million pounds that’s purely spent on lobbying. When you think about the budgets available to other industrial sectors. Whether it’s the pharmaceuticals, the creative industry, or people who just want to see social progress and economic justice, I think that 93 million pounds puts all of those sectors in the shade. In fact I don’t think if you put all of them together you would get to that budget.
So out of all those organisations we ordered them in rank and there are lot of them like the Association of Financial Markets in Europe which has got a lot of money. It’s around about 9 million pounds, the Bank of England has a public affairs unit, and all sorts of other organisations, lots of industry regulating groups. But the organisation with the deepest pockets and the best resources was…the City of London.
It has a public affairs resource war chest of over 10 million pounds and they employ lots of public affairs officials. And Maurice was talking about the Remembrancer, he is effectively a lawyer, looking at legislation and he has a department of 6 to 8 law firms, and the City of London has a 42 strong media office. And it also has a massive hospitality budget, which is where the politicians get wined and dined and intoxicated. Not just that.
They also have an amazing research unit. And what politicians need if they’re going argue the case for anything is they want firm evidence, they want those bullet points and headlines to be able to grasp hold of like driftwood to be able to make that case. And the City of London’s research unit is fantastic.
And what we’re seeing at the moment, a very large debate at the moment is with the financial transaction tax, the Robin Hood tax. This has been a campaign that’s been running for 30 years and it’s just beginning to come to fruition. In January a few countries in Europe started and said yes, “We’re going to do this. “ And in January, that’s when the research from the City and other organisations went into overdrive so every week there is another research paper saying that the financial transaction tax will decimate European markets. It will close down the European economy at the worst time, and the politicians are buying it now. So from what was a brave and bold move to try and see some redistribution. That would see the sectors that caused the financial crisis actually contribute to fixing it, is now in danger of being very much squeezed down.
And that is where we’re seeing the financial lobby right at the moment actively at work and being successful and it obviously needs neutering quite considerably.
Now the City of London obviously isn’t the only lobby group and it’s not the only way that you can lobby, by hospitality and research. The other fantastic way is by buying political parties. We know that’s the case. We know it instinctively, and two years ago Mel and my organisation, we tried to track exactly how much money the City of London organisations and related entities was contributing to the Conservative party, and we went back to when David Cameron became leader in 2005, and we tracked exactly, on a year by year basis, how much money the City was contributing to the Conservative party donations.
We found that in 2005 the City contributed 25% to the Conservative party and by 2011, one year into office, the City had actually mounted an effective shareholder takeover of that party by, it was 51% of contributions to the Conservative party were from the City of London.
And again, going back to the financial transaction tax, one of the reasons why they bought into that, and it’s very clear in various stings we’ve seen, in the Sunday Times, on spread-bet tycoons, someone called Peter Cruddas. The thing that they were most concerned about was stopping that particular tax and that’s why they’re buying policy positions. Peter Cruddas told the Sunday Times journalist, that David Cameron told him he had nothing to worry about with the FTT. That was recorded. That was completely, blatantly naked. Incidentally he last week won a legal battle against the Sunday Times clearing him of any wrongdoing. There was and is no suggestion Cruddas did anything illegal.
So I suppose the thing to remember is what the City of London is trying to, what Maurice was saying is totally true in terms of what the lobbying agenda is: nothing changes. Nothing changes. We’ve had the financial crisis, the worst crisis for 80 years. After the Wall Street crisis we had the New Deal in America. We had public sector spending on very valuable infrastructure projects. The 30s recession maybe contributed somewhat to the creation of the NHS. That might be a link too far, I don’t know, someone cleverer than me can say that. But in this financial crisis we have actually seen nothing like that. So I think it’s beholden on campaigners and everyone else to try and kick through that and try and create a vision and an alternative agenda so that we actually do see some change and subvert the financial lobby.
is a campaigner for Global Witness, a Nobel prize nominated organisation dedicated to breaking the links between natural resources, conflict and corruption. He is an expert in the global anti-money laundering framework and his work focuses on the role that the financial system can play in facilitating corruption and other crimes.
HSBC Corporate Banking Centre
So my name’s Rob Palmer, and I work for an NGO research advocacy group called Global Witness. And we look at the links between natural resources, so oil, gas, mining, diamonds, timber, and corruption and conflict. So we look at how natural resources that could provide real money for development in some of the poorest countries in the world – Congo, Zimbabwe, Cambodia etc., how all too often that money ends up in the back pocket of politicians and doesn’t end up providing services for the poorest people in that country. So one of the things that I want to talk about today is the role that the City of London and some of the major banks here in the UK play in keeping poor countries poor by allowing corrupt politicians to stash their looted assets in their accounts here in London.
Now there’s a reason why we’re standing outside HSBC. From the ‘90s, 2000s, we’ve had a series of scandals involving HSBC bank funding, fuelling, facilitating conflict, corruption and environmental destruction. So for example, Sani Abacha, dictator of Nigeria in the 1990s, he had huge amounts of cash, almost a billion pounds in cash, in banks in the UK including in HSBC. Several years later, after that had been exposed and, incidentally the banks had gone totally unpunished for taking his money, two other Nigerian state governors are also found to have had money in HSBC. More recently, yet another corrupt Nigerian politician who’s currently serving 13 years in jail in the UK for money laundering, as is his wife, lawyer, sister and mistress, he was also found to have brought money through HSBC.
Now some of you might know that HSBC were last year fined 1.9 billion dollars by the US authorities for huge failures in their anti-money laundering controls in Mexico and the United States; for doing business with drug dealers, dodgy regimes, rogue regimes. For example, HSBC was taking 880 million dollars from drug gangs in Mexico and Colombia. The drug gangs got so used to this that they created boxes to fit through the teller windows that were exactly the right dimensions to speed up the flow of cash into HSBC. During the same period that HSBC was taking this money, 35 thousand people were killed in Mexico due to the conflict around drugs.
More recently Global Witness has exposed how HSBC has been funding huge amounts of forest degradation in the state of Sarawak in Malaysia. Sarawak is pretty small as states go, and yet it exports more timber than the whole of Latin America and Africa. There is just 5% of the rainforest left. According to our estimates, HSBC made 100 million pounds from these deals in Sarawak. There is some good news. We got Bill Oddie to do a nature documentary, Hunting the Banker, looking at the role of HSBC in funding these forest deals in Sarawak. Bill Oddie, William Oddie, is the proud owner of one share of HSBC, and attended HSBC’s AGM the other week. As a response to our work, HSBC have told us that they are going to review all their forest investments. So this is small, positive progress.
But what we really need to make banks like HSBC – and it’s not just HSBC, there are other banks out there, a lot of other banks out there that are willing to do business with these sorts of regimes – what we need is strong regulation, we need strong personal accountability, we need someone on the board of these banks that is personally responsible for making sure that dodgy money, money laundering, corruption, tax evasion, don’t happen through those banks. But corruption and money laundering is not just about the banks that are willing to take the money.
It’s also about the secrecy that allows corrupt politicians, tax evaders, money launderers, to hide what they’re doing. And the classic way of doing this is to create a complicated company structure; it’s like a Russian doll, one company, within another company, within another company, with fake directors, fake shareholders, stretching across different tax havens across the world. This is all entirely legal. It is entirely legal to create a complicated company structure to hide your identity.
If you fake a passport you go to jail for five years if you’re caught. And yet you can create an anonymous shell company for relatively little money, and hide your identity. Global Witness has actually put out an Idiot’s Guide to Money Laundering [PDF] that details exactly how to do this, and I have some copies for any budding money launderers in the audience. The solution that we think, is that we need much more transparency and information available about who is behind companies that are operating in the UK, in the US and in tax havens, all over the world in fact. And again, there is some positive news.
Whatever you think about our government here in the UK, they have made a commitment that they want to open up information about who is behind companies, they have backed the NGO civil society call to have existing company registers collect and publish information on the ultimate owners and controllers of companies. This will be really transformational and make it much harder for corrupt politicians to hide their identity and their dodgy assets behind shell companies, make it much harder for tax evasion to take place, would be much better ensuring we have some corporate accountability. This is at the top of the agenda at the G8 next week in Northern Ireland. However sadly a number of the other G8 countries are not being as progressive and are really blocking these moves.
So one of the things we at Global Witness are doing over the next week, along with Tax Justice Network and civil society around the world, is really trying to put pressure on governments to open up information about who is behind companies. So to finish, I do think we are seeing some positive progress, but there is a lot more that needs to be done, to make it a lot harder to corrupt politicians and tax evaders to use banks like HSBC, and we need much more transparency over who owns these shell companies.
is a grassroots activist for the past 7 years on local, national and international issues. In October 2010, he and two other friends decided to put their experience of civil disobedience protest to the issue of public sector cuts by protesting against tax avoidance. From that conversation UK Uncut was born. To put bread on the table, Tom does his best to make documentary and campaign films.
Goldman Sachs and HMRC
Hello everyone, my name is Tom, and I’m one of the people that started UK Uncut in 2010. For those who don’t know UK Uncut was a street based movement that decided they wanted to talk about austerity, protest against austerity by talking about tax avoidance, and talking about alternatives. We didn’t just want to be positioned on the left, talking about things that we didn’t want, we wanted to talk about things that we did want. And we wanted to talk about tax avoidance, we felt that tax avoidance provided a real alternative to austerity.
The research figures that said the UK was losing up to 25 billion pounds a year from tax avoiding companies and rich individuals. We set about first targeting Vodafone, then Topshop, Boots, and other famous brands on the high street. The reason we went after companies, and not the government, was a) because we wanted it to be a national movement, and the government is primarily based in London, and that companies are on every single high street all across the country, and that that way thousands of people in all their locations can get involved wherever they are. So we had up to 50 different locations, 50 different actions in 50 different Topshop stores.
The second reason that we targeted companies is that we could create a story, we could create good guys and bad guys and in campaigning terms that can work quite well, the media can really run with that, the media really want to see bad people. And Philip Green, the head of Topshop, was that bad guy, and that’s how we drove the campaign forward. But throughout that process we were thinking well really we need to be targeting the government, because they’re the ones that set the rules. And in a way we do agree that avoiding your tax is a moral issue, but at the same time companies aren’t the ones making the rules and that it is up to government to clamp down on them. But, targeting government in a creative way is quite difficult. We couldn’t really come up with any particularly creative ways, other than taking them to court, which isn’t very creative, but… it was really good.
The story of how we took the tax office to court, HMRC, lies with Goldman Sachs behind us, Goldman Sachs being of course one of the world’s most renowned investment banks. In the 1990s Goldman set up a company called Goldman Sachs Services in the British Virgin Islands, where it bought into a structure called employee benefit trusts, in order to avoid tax on the bonuses it was paying to its employees. 21 other companies also bought into that tax avoidance structure. Earlier in the 2000s HMRC investigated this deal and decided that it was actually potentially illegal. In 2005 a court judge ruled that that structure was illegal, and that any company involved in that structure should pay all the tax back. 21 companies involved in the structure said, ok, fair enough, we’ve been caught, here’s all the money; one company decided that it was going to fight HMRC.
That company was Goldman Sachs, and for another five years it fought in the courts to not pay the tax that the court had ruled should be paid. So that was costing again public money in terms of lawyers, I can tell you HMRC lawyers are not cheap. Then in the end of 2010 a man called Mr Dave Hartnett, who is the head of the tax office – the tax office in the UK is the only department that is non-ministerial, so there is no MP that sits at the head of the tax office, it’s a civil servant, and as a civil servant at the head of the tax office he’d lived a fairly quiet life, probably not particularly well known to the public. Anyway his job as head of the tax office was to meet with these companies and create settlements. So a policy that HMRC had was that if in the instance that a company is fighting you for a long period of time it is perhaps in the interests of HMRC and to get more tax out of them, is to simply just meet them and make a deal. So in the end of 2010 Dave Hartnett walked into a meeting with Goldman Sachs and he came out having a deal.
The deal was the Goldman Sachs would pay the tax that they owed, but they would not pay the interest owed. We only found out at the end of 2011 that this occurred, thanks to whistleblowing by a lawyer called Osita Mba; he was later disciplined and suspended for revealing the information to the Public Accounts Committee.
It was thought that about 10-20 million pounds was lost to the British taxpayer, so have a moment to think about what could be done with 10-20 million pounds. So that’s what was lost. So we only found out that this had occurred in November 2011, and we took immediate legal action. Unfortunately public law means that you can only really target government procedure. So we simply took the fact that they’d settled this deal and we had to test whether the way that they settled it was legal or not legal.
The only way we could get the money back was by the lawyers arguing that the way they settled it was illegal, not the fact that they settled was illegal, but the procedure that they went through. And we went to the High Court, unfortunately we lost about two or three weeks ago. But I think what we did win was that Dave Hartnett had to resign, not simply because of our court case, but I think partly we contributed to his resignation, the Public Accounts Committee were hot on his heels and I think this was probably the last straw for him, and he resigned. A new head of HMRC has come in and I hope, and our barrister, she used to be a barrister for HMRC, she said that the court case as well as many other things has really changed opinion in HMRC. We had a lot of whistleblowers in HMRC calling us and giving us advice; generally the lay staff were fully on board with it and the hierarchy within HMRC were, I think she phrased it as being a lot more careful about the way that they operate with big companies.
The issue of tax settlement will probably still continue but I think it really put tax settlement on the agenda. People don’t really know that HMRC actually negotiates with these companies. If you owe tax, you have to pay your tax, you can’t negotiate, you can’t ring them up and have a meeting like these companies who have the ability to negotiate down their tax bill.
The Public Accounts Committee released a report at the end of 2011, beginning of 2012, which said that around 25 billion pounds worth of money is sitting in tax settlements. So HMRC is currently engaged in 25 billion pounds worth of tax settlements. That’s not to say that we might lose all that money but that’s what’s up for grabs. None of us has the ability, no small business has the ability to negotiate their tax settlement, but big companies do have that ability to simply sit in a meeting with an unelected civil servant and reduce their tax bill, just over a cup of tea.
Question about what other action is going on.
At the moment the court case is finished, but UK Uncut is still going, ukuncut.org.uk, we haven’t got anything exactly planned at the minute, but keep posted because we need people…
So very quickly, I’m delighted we’ve got here because so few people who come to London ever come to this place, and this place is the ancient city square of London. When the Romans were here, here was the amphitheatre. And here is the Guildhall, which is where Oliver Cromwell and John Pym escaped from Parliament to avoid capture by the king.
Inside the Guildhall, which I’m sure we won’t be allowed to go into, there’s a really big statue of George Washington because when Britain declared war on the United States when they seceded, the City of London in fact supported the United States army. They sent money, they employed Alexander Hamilton’s son, he worked at the Bank of England.
So in fact the really key to power, the two key things to power are that when you break the law you don’t get into trouble, that’s a very important indicator of when you’re in power. So effectively the City of London committed treason, and life went on. The other really important thing is that if you default on your mortgage, you lose your home; when they defaulted on their mortgage, we gave them all our money. That’s another key indicator of power in the world.
So this Guildhall is the ancient city parliament of London, it was established in 1189. The motto of the city is Domine Dirige Nos, which could be translated as God Is Our Guide, or could be translated as We Dominate You. It all depends on whether you go with the King James Version of the Bible or the modern translation. And so this was in effect the market square, the centre of London, all of these churches that you see…
When William the Conqueror came to London, it’s an important story, he stopped at the gates, he was met by the Bishop and by a guy called the Portreeve, which was the Saxon word essentially for Mayor. Chief porter, head porter, would be probably…because the city used to regulate the docks. And he stopped at the gates of the City and he allowed, the rest of the country was conquered but London wasn’t. So London could keep English language courts, it could keep common law, it became the centre of the place. And hustings, the whole idea of hustings developed in the city for elections.
And each of these churches, this was St Lawrence Jewry, where the old Jews used to live before they were in fact expelled, but that’s a different story that I won’t tell today. Every area of London was divided up into a ward, and every ward had a church. And those churches used to be workers’ churches; they each were associated with a guild. But when they abolished workers the churches remained essentially in each ward.
And that green door over there is a really important one. This was called the Irish Society, so a very important way that the City of London dealt with its unwanted population was it sent them to Ireland, and particularly set up the town of Londonderry. That was a very important part of the story. It was the beginning of the American colonization in a way, a way of getting the excess of population that had come to London out, and a very key part of that initially was under King James, the colonization of Ireland. And that’s why the Ulstermen still walk on their parades with a bowler hat and an umbrella, that’s a direct nod to the City. And what you’ll notice is it’s completely bounded, it’s virtually invisible, so let’s imagine a day when we could all come, have a cup of coffee here and this can be our centre of self-government in London.
is Executive Director of War on Want and author of the forthcoming book ‘The Poverty of Capitalism’.
I’m the director of War on Want, and it’s my pleasure and privilege to round off this beautiful tour in the sunshine, in front of TheCityUK, and in a way this is a nice envelope within which to put the whole of the tour. It picks up exactly where Maurice started us earlier on. Because TheCityUK is the premier lobby group, the premier promoter of financial services, and what the City of London stands for and what it hopes to gain, not just in this country but across the whole world. And TheCityUK is actually a very young body, it’s only three years old, a toddler, but its history for our purposes goes back a little bit earlier.
So I want to take you back in time to the 1960s, a time maybe a little bit before public relations, before the PR industry really got going. And they were trying to find a body which was going to represent the interests of the financial services industry, and the banks, and all of the other bits of the services that Britain was seeing become more and more important in its economy. And so they called this body British Invisibles, which wouldn’t work very well now as a sort of thrusting name, like Executive, or TheCityUK. But in those days it was called British Invisibles. And the idea is that invisibles was the old technical term, again Maurice mentioned this right at the beginning, for financial services, investments, the services industry and particularly those bits coming out of London.
British Invisibles had a twofold role, one was to maximize the accumulation of capital in the City by ensuring that there would be minimum regulation, and the other, which is absolutely critical from the point of view of all forms of capital but especially finance capital, was to expand markets overseas. When you’ve super saturated your own market, you need to be looking for other ones. And capital is like a bicycle, it can’t stand still, it will otherwise fall over so it has to keep expanding.
British Invisibles as a name was a bit 20th century so at the beginning of the 21st century it was rebranded as International Financial Services London, or IFSL for the catchy acronym, and you can see why it’s going to head towards TheCityUK in a minute because of that. And IFSL very much took up the role of promoting the interests of the City in Britain and across the world. And it was in response to the 2007 crash that the City basically said, ‘we have got an image problem’. And anyway, as a result they gave birth to TheCityUK as the new body which was going to promote the interests of the City.
And I want to look at two little bits of it. One is the regulatory strategy group, which again Mel, who everybody has referred to the whole way through as having done all the research on this, and I did say she would actually be better standing here, but I’m going to be speaking as her ventriloquist in this little bit. Basically the regulatory strategy group is a perfect example of where you get a lobby group from the City which links in very, very closely with government, you have the revolving door, people who worked at the Treasury, at UK Trade & Investment, even the Ministry of Defence going round and round and round in its circles. So basically the City and Government gets very blurred together. And they press for a minimal regulatory regime in this country and also across the world. And I think that you should really read the Bureau of Investigative Journalism stuff on this if you want to take it any further; and I also recommend you go to TheCityUK’s own website, which is a very, very interesting place to find out about lots of things which you didn’t know about the City.
But the last bit I want to really focus on to tie us up is another bit of this whole story, which perhaps takes us a little bit further, where lobbying actually becomes something else. And that’s because all the way through from the days of British Invisibles, into IFSL, into TheCityUK, there’s been this group called the LOTIS Committee, which very few people have heard of. LOTIS as in L O T I S, not lotus which you eat and forget things and all that, but LOTIS Committee. And it stands for Liberalization of Trade in Services. And the liberalization of trade in services is the structural way in which finance capital expands into markets across the world, by being able to force open markets which were previously closed to it.
And the very interesting thing about the LOTIS Committee is it wasn’t set up as an informal lobbying meeting between capital and the state; it was set up as a formal meeting of capital and state; an intertwining of capital and state. So that it’s no longer the City as one body lobbying the British government, but actually the two of them together, making UK trade policy in the interests of finance capital. So it’s a very different, a very unique thing; because what that means is that when the City meets around the table with government, it’s not from the outside lobbying in, it’s actually working to create the rules which we all then have to deal with the consequences of.
And for those of you who like the sort of political theory bit of this, you may have read Ralph Miliband, father of Ed and David, his stuff on the state in capitalist society and challenging the whole idea, originally the Marxist idea was that you’d have the state captured by capital, and then there was more nuanced ideas of this, Poulantzas’ theory of the relative autonomy of the state, having its own life and its own interests, and then Ralph Miliband tying it together very nicely at the end of his life with this idea that the state and capital are in partnership, a fluid partnership which changes over time but is basically some form of shared interest.
What the LOTIS Committee says is that actually those interests are identical and they’re set up formally to be identical in the projection of power across the world and the projection of capital’s interests across the world. And one of the ways in which they did this from the 1980s, is that they launched a massive offensive to get services trade included within the global trade rules.
Since the Second World War global trade rules had basically been about trading goods: steel, clothes, computers, cars, whatever you like; trading in goods across the world and what tariff barriers they meet when they go into another country, what taxes you have to pay if you’ve exported a kilogram of beans from Mexico to the United States or from China to the EU. And what the services lobby did was they basically pushed for the next round, the Uruguay round of trade talks between 1986 and 1994, to move on from that, so instead of just being trade in things, it was trade in services as well. And trade in services is, you’re not just talking about things crossing borders like that, you’re talking about how you run your social services, your economy, things like that; health, water, education ,architecture, finance, insurance, all of these things were included. And as a result of that success, from their point of view, when the WTO was set up, the World Trade Organisation in 1995, it included within it services. So instead of just being goods trade, now you’ve got services trade and the whole dictation about how we run our own economies behind the border.
And what was really fascinating was that as people became more and more aware of the threats that are posed by having this liberalization of trade in services across the world, people began to rise up against it. If you were around in 1999, you remember the massive demonstrations in Seattle against the attempt to launch a new round of the WTO, and indeed the services trade within it, the General Agreement on Trade and Services, GATS, many of us in those days were involved in a big campaign against GATS, against the spread of services liberalization.
The LOTIS Committee was beavering away all this time trying to ensure that they could get to grips with the rising tide of anger and at one beautiful moment about 10 years ago now, somebody was spending rather too much time in front of their computer, googling around and trying to find what was inside the website of what was at that time IFSL, and they found out that the LOTIS Committee meeting minutes, which were usually completely secret and behind a security firewall, a whole lot of them had been put on the wrong bit of the IFSL site. And so this person downloaded three years’ worth of the minutes of the LOTIS Committee, and then made them all available for us all to see. And I recommend you do see them, go onto the gatswatch site, and they’re still all there. And they were absolutely fascinating because they showed you the minutes of government and the City working together.
And they were saying, ‘how can we fight against these wretched, pesky, civil society, NGO types who’ve started this battle against GATS, against the WTO?’ And this wonderful bit, where you get the guy who was representing what was then the DTI, the Department of Trade and Industry, now BIS, saying, ‘well we believe that we can come together with you and find clever way to undermine their argument’, and then IFSL said, ‘well we’re going to put out a really good report explaining how important services liberalization is across the world’. And what I really love about that is not the fact they were bringing out this report, but they said, ‘we reckon this is going to cost us between 50 and 70 thousand pounds to write this report’. And you think, ‘my God I’m cheap, I usually do these things for 40p and a cup of coffee!’ So they did this report, and they made all these things.
But what was also fascinating was that part of debate which we never really hear about, and I think there’s still a lot of research and a book to be written about this, was that the Reuters representative in this meeting said, ‘we’re absolutely with you on this and when you’ve provided this research we’ll make sure it gets out through all of our networks and floods into the media’. And this is an untold story about the complicity of the media with capital.
But as I say, this is a really interesting example of when you get finance capital and the state, no longer as two units in some form of competing partnership or changing partnership, but they fuse into one. And again the last thing I wanted to say on this again comes back to Mel and her research, having done an FOI challenge which found out that, as a result of minutes that had been released, liberated, from TheCityUK, that they feel that their reputation over the last three years has been rehabilitated, their role and their presence within government has been revalidated and all is OK with the world. So that folks, I think, is what you call capitalism.
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