In Britain, people complacently assume that corruption is something that goes on everywhere else and it is a matter of slipping a few quid to greedy officials. In fact corruption is a very British phenomenon, which has increased, is increasing and must be diminished.
Other countries complain of “regulatory capture” when the mafia takes over the cops. In the UK, it’s the norm. Regulation of chaps by chaps has never worked, and certainly doesn’t in an era of multinationals and huge financial institutions. Neoliberalism has given elites an insatiable lust for wealth by almost any means, which produces a drive to loot companies and pick people’s pockets for the self enrichment of few.
Britain has become a Taxhaven-on-Thames, with the City of London welcoming funny money from drug dealers, oligarchs, fiddlers and all those fleeing tighter regulation elsewhere. Britannia no longer rules the waves but it will waive the rules, provide money laundering and expensive London properties and a soft touch regulatory system. Those able to bend the rules for private gain are considered to be entrepreneurs.
The rot begins at the top. No other country sells seats in the legislature in the way UK gives peerages to party donors. Many countries have MPs on the make who fiddle their expenses or can be bought. Few operate our flagrant pantouflage with companies hiring former ministers and top civil servants to guarantee an understanding approach to their needs while the hirelings are in office and useful contacts and inside knowledge once they come over. Wealth and business buy access to ministers to suffocate threatening legislation.
Rich people control much of the media and use it to create a climate of opinion favourable to wealth. Selling household silver at knockdown prices in the guise of privatisation has become a common way of appeasing the wealthy. Royal Mail was undervalued by £180 million and council and social housing was sold at big discounts with much of which it then sold on to buy-to-let landlords who then put up the rents.
Gas, water and electricity have been privatised without effective regulation of what they can screw out of consumers or the scale of subsidy. The railways pay their £4-£5 billion annual subsidy to their shareholders leaving the government to finance HS2, Cross-rail and the railway tracks. The Private Finance Initiative (PFI) has been a bonanza for the private sector, handing 700 projects at a cost of £57 billion for building schools, hospitals, prisons and roads more expensively. The companies will receive £307 billion as well as keeping one in five of the assets. This is a major reason for the crisis in the National Health Service as health authorities have to cut their services to pay the PFI contractors which guarantee the profits of the corporations.
The Tomlinson report said that rather than rescuing distressed businesses, banks are engineering loan defaults so that they can move the client out of local management and into their turnaround divisions, generating higher revenue through fees, increased margins and devalued assets. In fact, the financial sector has been serially corrupt, with banking crises every decade since the 1970s. It has sold worthless pensions, insurance and mortgages and rigged interest and foreign exchange rates. Banking greed caused the recession of 2008 from which banks had to be rescued by huge sums of public money.
Iceland sent 36 bankers to prison; the only punishment here has been the loss of a couple of undeserved knighthoods. The fraud-ridden Bank of Credit and Commerce International (BCCI) was closed in July 1991 and over a million people lost their savings. To this day, there has been no independent inquiry. The government does not want to embarrass Middle Eastern Sheikhs and wealthy intermediaries in case they refuse to buy British weapons. We all remember how Tony Blair refused any inquiry into the allegation that BAE had won Saudi contracts by bribes.
The tax avoidance industry robs the public finances by helping companies dodge taxes. It is bigger, cleverer and better paid than HMRC, whose staff has plunged from 105,000 in 2005 to 58,000 now. Its budget has been cut to ensure that it can’t upset corporate tax avoiders. Since 2010 there have been only eleven prosecutions for offshore tax evasion. The Public Accounts Committee exposed the tax dodges of Google, Microsoft, Shire, Apple, Amazon, Starbucks and others. HMRC failed to bring even one test case.
Even when evidence is handed on a plate, HMRC is unable or unwilling to do anything. In 2010, evidence provided by Hervé Daniel Marcel Falciani showed that HSBC’s Swiss operations turned a blind eye to illegal activities of arms dealers and helped wealthy people evade taxes. Only one person from the list of some 3,600 potential UK tax evaders has been prosecuted. In January 2016, HMRC quietly abandoned its investigation.
In April 2016, a leak relating to Panama law firm Mossack Fonseca, subsequently known as the Panama Papers, showed that UK banks, lawyers and accountants are involved in flight of capital, tax evasion and avoidance. The UK sponsored tax havens, such as Jersey, Guernsey, Caymans, Bermuda and Belize are at the heart of illicit practices. HMRC will follow its usual practice of doing nothing.
PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte are key designers and marketers of tax avoidance schemes. On a number of occasions, courts have declared their tax dodging schemes to be unlawful. They have faced heavy fines in the US and even prison sentences for their partners. The UK does nothing except give them government consultancies and seats on committee writing tax laws.
As for regulation, forget it. The Financial Conduct Authority (FCA) abandoned its investigation into banking culture because banks said they will now be good. The Serious Fraud office with a budget of only £35 million is incapable of cleaning the Augean stables. The police force is mired in corruption. A 2002 internal investigation codenamed Operation Tiberius was hushed up, but leaked to The Independent in 2014. It said organised criminals were able to infiltrate Scotland Yard “at will” by bribing corrupt officers. The same report also found that HMRC, the Crown Prosecution Service, the City of London Police and the Prison Service were also compromised. The Hillsborough enquiry showed the police rigging evidence and shredding crucial statements and any inquiry into Orgreave will probably show the same, while the Serious Crime Squad in the West Midlands had to be disbanded for its ability to arrest and imprison the wrong people.
Corruption has become endemic in Britain, Nowhere is safe from it. Yet the establishment turns a blind eye to it, government allows it so as to keep the money flowing in and the public complacently assumes that the channel protects us from it. All are wrong. Corruption damages jobs, savings, pensions, justice and social cohesiveness. The people get all too little protection and the state, which should be their defender and advocate, is dancing to the tune of wealth played on too many fiddles by too many fiddlers and greedy grabbers.
This government pours out fine words about its intentions to do something, but in practice it has done little to hurt its corrupt friends. That task will fall to Labour, assuming that corruption doesn’t stop it taking power.
Prem Sikka is Professor of Accounting at the University of Essex; Austin Mitchell is a former Labour MP