Whimsy warps too much of journalism. Given the opportunity to pretend that life is imitating an Ealing comedy or Vicar of Dibley script, writers adopt the sing-song style and coo over what they take to be the quaint corners of Britain.
True to form, sentimental smiles preceded the first democratic election on Sark. How charming the little island seemed. No street lamps, no cars, no buses, no roads worthy of the name, just tractors, horse-drawn carriages and muddy paths. The feudal lord was even entitled to claim droit du seigneur when a local woman married – nudge, nudge – although he never exercised his privilege, of course!
‘Little appears to have changed since Hellier de Carteret, a Jersey nobleman, was granted a fiefdom from Queen Elizabeth I in 1565,’ simpered the man from the BBC, as he failed to understand how the island presented thoroughly modern problems.
Supplies of charm on Sark ran out when the Barclay brothers reacted to the ballot by treating the islanders as if they were the wretched journalists on their Telegraph newspapers. The voters did not elect the financiers’ preferred candidates, so the Barclays closed down their local businesses and threw 100 employees – one sixth of the island’s population – out of work.
Whoever sees their money next, it will not be our over-stretched treasury. The Barclays live in a Brobdingnagian palace they built on an isle off its west coast, because, contrary to superficial impressions, much has changed since Hellier de Carteret received his fiefdom. Sark is a tax haven. For years, it acted as a front for tax avoidance outfits playing the ‘Sark lark’: paying Sark’s inhabitants fees for performing the purely nominal role of company director, while they operated beyond the reach of regulators.
Nor is it the only British territory to become the modern version of pirate statelets of the Spanish Main. In a list of 37 ‘suspect jurisdictions’ drawn up by American politicians pushing a ‘Stop Tax Haven Abuse Act’ through Congress, 11 are under British control – Alderney, Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, the Isle of Man, Jersey, Sark and the Turks and Caicos islands.
Since 1997, Labour has not shown the slightest squeamishness about allowing the Barclay brothers and their kind to avoid the taxes that you, dear reader, must pay on pain of imprisonment. Ministers had the sovereign power to stop them, but in the bubble years they would do nothing that threatened the City, which routed so much of its business offshore.
The energy they put into defending rich men and rich companies is shameful to recall. Richard Murphy of Tax Research UK was not exaggerating when he said that, after the departure of George W Bush, Gordon Brown will be ‘the most important supporter of tax havens in the world’. Accountancy Age added: ‘Sarkozy wants to launch attacks on the havens, the Germans want to target Switzerland in particular, and seemingly only one major country, Britain, led by Gordon Brown, who in opposition made his name pledging to crack down on tax avoidance, is standing in the way.’
I could despair about his hypocrisy, but I will leave the polemics for another day, because the world in which politicians regarded tax havens as necessary adjuncts to the all-powerful financial markets has crashed, and overdue reform may be coming.
Barack Obama is among the sponsors of the proposed American assault on tax havens. ‘We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren’t disadvantaged,’ he said in 2007. He will certainly ally with Germany and France against Britain after he becomes President next month.
When he meets Brown at the London G20 economic summit in the spring, the activists demonstrating outside will be with him. In a heartening sign of intellectual progress, development charities are taking the need for good governance seriously.
They understand that tax havens allow multinationals and local kleptomaniacs to siphon off Africa’s wealth to Guernsey, Jersey and their competitors. So widespread has the looting by the African elite become, that a study for the Tax Justice Network concluded that the hell holes of sub-Saharan Africa were a ‘net creditor to the rest of the world’.
The dismantling of offshore finance is a necessary precondition for African development. And for our development, as well. The financial crisis began with the collapse of the structured investment vehicles, which accountants and lawyers working offshore put together. Labour ought to have learnt all it needed to know when it tried to take control of Northern Rock, and found that its managers had transferred billions of pounds of mortgages to a shadowy trust on Jersey – incongrously established as a charity for people with Down’s syndrome.
The new financial system that will emerge from the ruins will require transparency and openness – virtues that the offshore banking industry hates with a passion. If we are to rebuild, we must first let daylight in on its proceedings.
Perhaps I am being over-optimistic, but I sense that ministers realise the need for change. Alistair Darling criticised the Isle of Man last month for asking the British taxpayers whom its banks exist to short-change to bail out its financial system. He also ordered an inquiry into tax havens. Admittedly, a former functionary of the Financial Services Authority, which let Britain down so badly, is leading it, but maybe ministers will ignore his findings, which I think I can safely predict will be timorous in the extreme. Talking to them, I get a sense of renewed radical self-confidence. Ideas that were impossible to contemplate in the bubble seem common sense now.
If they were to decide that Sark and the failed economic model it represents were not so quaint after all, they would be on the side of the honest taxpayers and international progressive opinion, and against African dictators, tax-dodging multinationals, money launderers, organised crime and the Barclay brothers.
Labour is talking a great deal about the need to make ‘tough choices’ at the moment. This is not one of them.