Andrew Rosindell
Main Page: Andrew Rosindell (Conservative - Romford)Department Debates - View all Andrew Rosindell's debates with the HM Treasury
(14 years, 1 month ago)
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I agree, and that is greatly to the credit of the British Virgin Islands and other overseas dependencies, as well as some of the Crown dependencies to which I have referred. They have played an important role and led the way in the transparency agenda.
One of the great myths to have grown up is that small offshore centres do not benefit developing countries. Small IFCs have been accused of supporting capital flight out of developing countries, but the Commonwealth secretariat is publishing a new report this month to illustrate the importance of the role played by IFCs in helping developing countries, by enabling them to rent financial expertise from other countries while they develop their own financial centres. Crucially, they also offer investors greater protection of their property rights against domestic political uncertainty.
It is no exaggeration to say that without smaller offshore financial centres many developing countries would not secure key funding for project finance, which makes a substantial improvement to the lives of some of the most vulnerable global citizens. Furthermore, the financial action task force gives many IFCs a positive assessment in meeting its 49 rigorous recommendations on anti-money laundering and terrorism finance. Centres such as the Channel Islands perform better in fighting financial crime compared even with bigger countries such as France, Italy, the US or—dare I say it?— the United Kingdom.
Finally, the UK’s Crown dependencies are often accused of being fiscally unsustainable. Again, nothing could be further from the truth. The debate within the UK Government has, naturally, been framed by events surrounding the collapse of Iceland’s banking system. When the Icelandic banks imploded in September 2008, it quickly became apparent that the contagion would spread to British savers and ultimately to British taxpayers. Furthermore, the role of the Isle of Man as a core financial intermediary between British savers and Icelandic borrowers illustrated the UK’s exposure to offshore centres.
However, the subsequent Treasury review went some way towards allaying the two main concerns. In particular, the worries over the fiscal sustainability of UK Crown dependencies proved to be massively overstated. Throughout the years, IFCs such as Gibraltar, the Isle of Man, Guernsey and Jersey, have amassed large budget surpluses while actively diversifying their tax base, as Foot recommended. Indeed, the Foot report commented on the fact that none of Britain’s Crown dependencies has taken on significant levels of borrowing.
It is important that the G20 summit in Korea later this year is made aware of the beneficial role that small IFCs play in the global economy. Above all, we must stand up to misinformed or narrow views of the valuable contributions that small IFCs can offer to the world economy in terms of liquidity, efficiency, investment and economic growth. Let us make no mistake: ensuring that the voices of small IFCs are heard in Korea is very much in our national interest. If we look at the example of Jersey and its positive effect on the wider UK economy, we see that the island provides a conduit through which mobile capital from around the world can be aggregated and invested, primarily here in London.
My hon. Friend’s speech is very welcome. People from overseas territories and Crown dependencies will thank him for raising these important matters. Does he agree that one issue that is always ignored, and which is linked to what he is saying, is that we, unlike other countries with overseas territories and dependencies, do not allow the Governments or people of those territories any say in this place? They have no way of being represented or of speaking up for themselves. They depend on Members of Parliament to raise issues. Does he also believe that, as with other countries with overseas territories and dependencies, there should be some way for those people to be able to speak and to raise their concerns here, in the Parliament that makes laws on their behalf?
I have some sympathy with my hon. Friend’s view. This debate is an example of the way in which we are to do that. If he is suggesting that we have a constituency, similar to the French system, that takes in Gibraltar, Jersey and Guernsey, I am sure that he would be only too happy to be a Member. Most people in Gibraltar already believe that my hon. Friend is the Member who looks after their interests. He makes a serious point, and the tremendous contribution that our Crown dependencies and overseas territories make to this country should not be understated. I hope that this debate plays a small part in addressing some of the myths that have arisen.
I want to speak about Jersey, which is a significant provider of administrative and legal services to international businesses that are active in the City of London and help to make it a more attractive place to do business. For example, Vallar plc successfully raised more than £700 million in an initial public offering in London earlier this month, and used a Jersey structure. That showed the respect that investors, professional advisers and companies have for Jersey as a jurisdiction. It also provides banking services to a large number of UK expatriates who are unable to access the UK banking system because they do not have a UK address.
The Crown dependencies also provide an important platform from which to learn about and access the British economy. For example, the Isle of Man acts as the No. 1 jurisdiction for the incorporation of Indian businesses listed in London, and has been identified by a Chinese Government economic unit as an important link in China’s “going out” strategy in relation to Chinese businesses setting up in the EU.
The Isle of Man plays an important and symbiotic role in London’s shipping and insurance markets, inter alia by having such a successful white list ship registry, as well as its fast-growing aircraft registry. Similarly, with satellite, space and film business, the Isle of Man brings into a British sphere of influence important strategic global businesses that might otherwise be drawn to a competitor such as Singapore, Hong Kong or the US. The Crown dependencies are keen to continue acting on this hub-and-spoke basis with the UK and adding value to Britain’s international offering in a proper and transparent way.
Small IFCs desire fair recognition for their high regulatory and supervisory standards and therefore wish to make policy makers from all G20 member countries aware of their true operation, as well as allowing them an effective voice at the table. In that regard, it would be helpful if the Minister gave an indication of what measures the Government can take to ensure that the G20 process is more inclusive, and that policy prescriptions that aim to restore financial stability strike the right balance between the onshore and offshore financial communities and recognise the mutual interests that exist between the two. It would also be helpful to have an update on progress in meeting the Foot recommendations and information on the progress being made through EU and OECD efforts to assist the overseas territories in meeting their own international requirements.
In conclusion, too few people who now seek to impose rigorous regulation on offshore jurisdictions truly understand how those jurisdictions operate. They fail to understand their positive rankings of compliance with major regulatory standards or their beneficial role in promoting investment and growth in the widest elements of the global economy.
It is inevitable that Governments will attempt to prevent further financial crises from occurring—and so they should—and I fear that that will result in the development of global standards that may have an unintended impact on all jurisdictions. It is critical that politicians and policy makers should not depart from the need to formulate and implement policy in an informed, consistent and balanced way. When it comes to our naked self-interest, it would be foolish at this juncture if the UK ignored the proven benefits provided by small international financial centres as part of the City of London’s world-class operations.
Indeed. My hon. Friend makes an important point. Adherence to the standards makes the case that offshore financial centres should be part of the global network of financial centres and that they are valued. It is also important to ensure that when people talk about offshore financial centres, the debate is proportionate and evidence based. That is the best basis for debate in the UK, EU and G20. My hon. Friend made important points in that respect in his remarks.
The Foot review recommended that Crown dependencies and overseas territories should have to meet key international standards on tax information exchange, financial regulation, countering the financing of terrorism and anti-money laundering. The review strongly recommended that British Crown dependencies and overseas territories need to diversify their tax bases in a way that helps to secure their long-term economic sustainability. My hon. Friend made the argument that a number of territories had already done that and had withstood the financial crisis.
My hon. Friend the Minister talks about long-term stability. Does he agree that any attempt to undermine the ability of Crown dependencies and overseas territories to be self-sufficient and to look after their own affairs would in the end rebound on the British Government, with the possibility that we would have to finance some of those territories, so it is vital that policies from here, from Brussels or from anywhere else do not undermine the ability of our territories to be self-sufficient for the long term?
My hon. Friend makes an important point, but what he refers to must be done within the context of adhering to the highest possible international standards. We need to ensure that that international framework exists and that the territories comply with it; otherwise they are open to attack by other nations. Yes, it is important that the territories are economically sustainable and are not dependent on the UK, but at the same time they must meet those international standards, and a number of territories have made quite significant progress towards that goal.
With regard to the sustainability of overseas territories, they were encouraged to improve the management of their public finances to ensure that they were well equipped to withstand unexpected economic and financial shocks without external fiscal assistance. We need to recognise the progress that has been made to comply with the standards. I understand that 28 jurisdictions—almost exclusively tax havens and offshore financial centres—have moved into the category of jurisdictions that have substantially implemented international standards on tax transparency. That shows that overseas territories are taking the measures seriously, and we encourage them to continue to do so. Over the next three years, 100 jurisdictions will be peer reviewed, which will be an important part of the process to give confidence in how the standards are being implemented.
I recognise the importance of the role that offshore financial centres can play. They are an important contributor to the City of London. They provide services to UK citizens, whether at home or abroad. However, it is vital that they comply with the highest international standards on tax transparency and dealing with terrorism financing and money laundering. Adhering to those standards would be the best safeguard for their future prosperity.