David Cameron thinks that Nigeria is “fantastically corrupt”. Certainly it has a reputation. But the Panama Papers have shifted the focus of corruption far up the supply chain, to the people who make corruption possible – and those people are often rather closer to home.
The UK, to its credit, has been at the forefront of the movement to make the world more financially transparent. The 2009 G20 Summit, hosted by Gordon Brown in London, created the first blacklist of tax havens that were holding out against sharing information on bank accounts with other countries’ tax authorities.
Under David Cameron’s leadership, the UK also became the first country in the world to require companies to be fully transparent about the people who own and control them. This is the key step towards stopping people squirreling money away behind fake companies they secretly own, out of the reach of the taxman and other authorities.
Other countries have since followed suit, and soon all countries that are part of the EU will have to collect information on who ultimately owns and controls companies and make that available to anyone who can demonstrate a legitimate interest. So we should be proud of our leadership here.
But careful readers of the Panama Papers will notice an important fact that should have given Cameron pause for thought before he made his comments to the Queen. More than half of the companies named in law firm Mossack Fonseca files are incorporated in Britain’s own tax havens. In fact, a full 50 per cent of the companies are from the British Virgin Islands.
The Prime Minister knows this. Look at what he said just a few months ago:
“Some of the British Crown Dependences and Overseas Territories are making progress […]. Others, frankly, are not moving anywhere near fast enough. […] If we want to break the business model of stealing money and hiding it in places where it can’t be seen, transparency is the answer.”
We know the public wants this to happen. In a time of austerity, avoiding taxes – whether legally or illegally – has come to be seen as wrong. If you want to live in a society with decent schools and hospitals, we all – rich and poor, small companies and giant ones – should be contributing to the public purse. A recent poll for anti-corrution organisation, Global Witness, and Oxfam showed that 80 per cent of British adults agreed with the statement that “David Cameron has a moral responsibility to ensure that the UK’s Overseas Territories are as transparent as possible.”
Moreover, there may never be a better opportunity than this. Politics is the art of the possible, and the revelations of the Panama Papers mean the landscape of what is and is not possible has recently undergone a seismic shift. Ten years ago, international cooperation on financial transparency was pretty much unthinkable. Then the financial crisis happened and the landscape changed. Joined up, global solutions came to be seen as both possible and necessary.
Now the Prime Minister is hosting the world’s first global Anti-Corruption Summit. When he convened this event, he noted that the world “has looked the other way for too long.” He’s right: this behaviour hurts the UK’s interests in ways that are not immediately obvious. Corruption robs developing economies of vital funds for schools and hospitals, keeps them dependent on our aid, and fuels the kind of unrest that has ripped apart Ukraine and the Middle East in recent years.
So Britain needs to be ambitious if it wants to keep its reputation for transparency. Measures announced so far, like criminalising tax evasion in UK companies and sharing company ownership information between G5 countries, are positive steps. But they are just sticking plasters unless we tackle the root cause of the problem, which is found in our back yard.
The centrepiece of the Prime Minister’s plan should therefore be to require the UK’s tax havens to stop selling secrecy and set up fully public registries of the real owners of companies, just like we’re getting in the UK. The UK retains the constitutional powers to impose change on the Overseas Territories. It has done so before, for example, by requiring the Caribbean Territories to abolish the death penalty in 1991 and decriminalise homosexuality in 2000. If persuasion doesn’t work – and it looks like it hasn’t – then the UK should force them to do so.
That would be the single best way to build the fairer, safer world we’d all like to see, and we will be pushing hard for the PM to make this happen while the world is watching.
Jo Cox is the Labour MP for Batley and Spen; David Davis is the Conservative MP for Haltemprice and Howden