Cameron crackdown on tax havens ‘purely political gesture’, says Tory peer

David Maclean, Baron Blencathra, wrote to Cayman Islands in 2014 that transparency push was to head off G8 pressure and EU’s financial transaction tax

A Conservative peer has described David Cameron’s flagship G8 anti-tax avoidance initiative as a “purely political gesture” designed to head off European attempts to curb the City of London.

Lord Blencathra, the former Tory home office minister David Maclean, who was ennobled by David Cameron in 2011, told the government of the Cayman Islands last year that the prime minister’s bid to increase transparency at offshore tax havens was an attempt to distract the G8 and EU.

The frank statement emerges from a submission made by Maclean to a consultation on tax transparency in the Cayman Islands, written in February 2014. The letter was initially held privately by the Cayman government, but has since been made public.

Maclean started by describing the political context in 2013: “In the early part of last year, the Germans and others were pushing hard for a financial transaction tax, which would have severely hurt the City of London,” he wrote. “It was and is a top UK government priority to head that off. The French were pushing for ‘blacklists’ of jurisdictions with any tax regime lower than theirs. It was also a UK government objective to head that off.”

The peer then described how the prime minister achieved that at the G8 summit in Enniskillen in June 2013, where the issue of offshore tax haven transparency was made a priority.

He wrote: “However the UK government knew, from long experience, that it cannot chair a G8 summit nor negotiate in the EU by simply saying ‘no’ to what other member states are pushing,” he said. “It has to present either a genuine alternative or a false initiative which will divert other MSs [member states] from pursuing their agenda.

“The UK government had to head off the financial transaction tax and blacklists. The NGOs had put the UK government under pressure to make changes on beneficial ownership; the media and public were keen to criticise low tax jurisdictions as operating unfairly, and when Starbucks, Amazon and Apple profit-shifting became headline news, that was the perfect opportunity for the UK to exploit those issues and play down the FTT and blacklists.”

Cameron’s offshore crackdown of 2013 was one of the prime minister’s most visible measures to tackle corporate tax avoidance under mounting public anger. “When taxes are not collected, the poor suffer,” he said at the time.

The prime minister announced at the G8 summit in July 2013 that he had secured a commitment from the UK’s network of crown dependencies and overseas territories to consult on creating registers that would identify company owners. Many of the territories are tax havens often used by multinationals to reduce their tax liabilities or by criminals to hide assets.

At the time of submitting the document, Maclean was acting as a lobbyist on behalf of the Cayman Islands, but said his submission was made in a “personal capacity based on my knowledge of United Kingdom politics”. In his time as a minister, Maclean was known as a rightwing Thatcherite who once said the only thing he would give a beggar “is a piece of my mind”.

Maclean’s contract was terminated after its terms were revealed by the Bureau of Investigative Journalism in March 2014. In July that year, the Lords Standards Commissioner found he had breached the code of conduct for peers by signing an agreement to lobby parliament on behalf of the tax haven.

The Caymans are one of a group of British Overseas territories that are now resisting plans to implement Cameron’s transparency reforms. The islands in the Caribbean have become one of the world’s leading financial centres, and in particular have become a popular jurisdiction for the global hedge fund industry.

A number of the UK’s tax havens subsequently announced consultations on creating centralised registers of company ownership, prompting Cameron to tell parliament that he did not believe it was fair to continue to describe them as “tax havens”.

Most, including the Caymans, have since announced that they have no intention of introducing Cameron’s reforms.

At least eight donors to the Conservative party, who have together contributed more than £5.5m to Tory coffers, are fund managers or directors of hedge funds that have been represented by one of two trade groups that lobbied the Cayman Islands government against Cameron’s proposals.

The Alternative Investment Management Association (AIMA) and the Managed Funds Association (MFA) warned the Cayman Islands government that any reforms to compile a public register of beneficial ownership would damage the hedge fund industry.

AIMA, which states a membership of 1,500 firms that collectively manage $1.5tn in assets, said it was particularly opposed to making any company information available to the public. “If beneficial ownership information is made available to any member of the general public to access then it will be possible for private information on legitimate wealth to be accessed by competitors, family members with adverse interests, criminals and journalists,” it warned.

Aside from imposing no direct taxes of any kind, the Caymans impose no restrictions upon investment strategies, has no requirement for fund managers to locate themselves in the islands in order to carry on business, and lacks any exchange controls or currency restrictions.

The Conservative party dismissed the memo, though did not discuss its contents in any detail.

“This story is nonsense from start to finish,” a Tory spokesman said. “The PM led the world by putting tax and transparency at the top of the global political agenda, and was widely hailed by independent experts and commentators for securing significant progress, after Labour failed to act during its time in office. Our motivation was to secure a fairer deal for hardworking British families – and people around the world.”

Requests for additional comment made directly to Maclean were not returned by the Guardian’s deadline.

The anti-poverty charity Oxfam estimates that £12tn is being hidden in tax havens around the world. It believes that £4.7tn is hidden in the UK’s tax havens.

Some EU states have already pledged to implement a European financial transaction tax. The chancellor, George Osborne, has warned he will mount a legal challenge should it hold any implications for the City of London.

The disclosure about Blencathra came as David Cameron said that the charge that the Tories are the party of the rich makes him angrier than anything else.

In an interview with Evan Davis on BBC1, the prime minister said: “This makes me more angry than almost anything else … I believe there are rich people who should pay their taxes and should make a big contribution in terms of taxes to our country. But what infuriates me so much about this is I think of what we’ve done. We’ve taken three million of the lowest paid people out of tax.”

The prime minister added that people who fail to pay their taxes “damn well should” as he spoke of how the government has cracked down on tax avoidance measures.