TJN's Murphy vs. the City of London
We have pointed out for some time how the British Overseas Territories (such as the Cayman Islands) and Crown Dependencies (such as Jersey or the Isle of Man) and other havens linked to the City of London have acted together as a giant global network, hoovering up capital from nearby jurisdictions and passing it, or at least the business of handling it, up to the City of London. There is something of an imperial flavour about this network: something we will reveal more about in due course, and whose history we briefly described here). This network is arguably the biggest contributor to illicit flows out of developing nations, which have been cited by the World Bank and many others, as ranging as high as US$1 trillion per year.
Now back to Bloomberg, quoting Mark Field of Britain's Conservative Party:
"Half of the top 30 offshore financial centers are British dependencies or territories, Field said. Mark Boleat, deputy chairman of policy at the City of London Corporation, agreed that they help the financial district he helps run."
(As for the City of London Corporation, wait for what we have in store on that front, available from mid-January.) TJN's director John Christensen, as it happens, went to the same school in Jersey as Boleat, who was notorious for parading himself as a communist. He later worked briefly as assistant to the island's economic adviser Colin Powell, before Christensen was Economic Adviser, and spent much of his career in the City of London where, among other things, he seems to have been helping set up secondary mortgage markets in Nigeria.
The Bloomberg story continues:
"British banks received a net $257 billion from operations in the nation’s offshore tax havens as of June 30, 2009, according to a government report published last year. The funds are mainly bank deposits collected in offshore centers such as Jersey and the Isle of Man that are sent to mainland headquarters."
We aren't clear which period this $257 billion is referring to, but we do know that the UK received financing worth US$335.2 billion just from its three Crown Dependencies of Jersey, Guernsey and the Isle of Man, just in the second quarter of 2009.
Has the City's tax haven network been good for Britain? Are British people better off as a result? What this network has done, at the end of the day, is to hand tremendous unaccountable (offshore) power to the financial services sector -- so much so that the banks now effectively run the British government, rather than the other way around. The tax havens have helped the banks grow too big to fail, and the tax havens are absolutely central to the City's power, and central to the reasons why Britain's economy is in such a mess today, and facing such drastic cuts.
Not only that, but as we've written recently, Britain is suffering from what we like to call the Jersey Disease - something similar to the Dutch Disease that afflicts mineral-rich economies, whereby large financial inflows from a single sector raise the price of everything, making it harder for alternative economic activities like agriculture or manufacturing to compete, hogging all the most skilled personnel, reducing official attention paid to nurturing more "difficult" sectors and just letting the easy money roll in. In the case of oil-dependent economies, the really bad times then come when oil prices crash; with finance, however, the really bad times come when the financial sector crashes. Take a look at this academic article on the clash between finance and tourism in Jersey, and how finance crowded out tourism.
Britain's tax haven network is bad for Britain, and bad for the rest of the world.