asked Her Majesty’s Government:
Whether they have recently reviewed the extent to which offshore financial centres under United Kingdom sovereignty provide more benefits than costs to the British economy.
My Lords, the Government have not conducted a review on the costs and benefits of offshore financial centres under United Kingdom sovereignty.
My Lords, I am sure the Minister will recall that when the Labour Government came into office in 1997 they conducted a review of the role of offshore centres under British sovereignty, particularly focusing on the three Crown dependencies in Europe: the Isle of Man, the Channel Islands and Gibraltar. In the 10 years which have passed since then the size of bank deposits held in Jersey alone has more than doubled and the whole question of tax evasion at the international level has become a much more acute issue, as we see with a number of issues in the European Union, in the OECD and elsewhere. Is it not time for the Government to revisit this issue?
My Lords, some progress has been made, particularly in the European savings directive which was concluded in 2006 and which we are using to bring as much pressure as we are able to bear on the Crown dependencies and overseas territories to comply. The issue is overwhelmingly to do with transparency. Although they are not as strong as we would like in terms of total compliance, there are signs that the Crown dependencies are making progress. We welcome that development.
My Lords, how many serious offshore financial centres are there? And if my noble friend were going to do anything, how would he propose to evaluate the costs and benefits?
My Lords, the latter question is very difficult—with the absence of information, it is actually impossible to answer at this stage. We look forward to the fact that the Channel Islands and the Isle of Man—the Crown dependencies—recognise the value of complying with the OECD requirements and that the Virgin Islands, the Turks and Caicos and others—the overseas territories—agree with the development of taxation information exchange agreements. Although the agreements are limited, there is some progress and some agreements are being signed, though not all of them with the United Kingdom. The OECD is a powerful assist in these terms and wants to see these tax havens sign international agreements on openness and transparency.
My Lords, I was going to ask my noble friend about the OECD. My understanding—he will correct me if I am wrong—is that the OECD entered into an agreement with the Channel Islands and the Isle of Man in about 2001 or 2002 and that that agreement placed certain requirements on the Channel Islands. Has my noble friend been in touch with the OECD to see whether the Channel Islands has been living up to that agreement? It is the combination of the OECD and the international agreements that will bring about change in the Channel Islands on this issue. Although the constitutional issues are quite delicate, that is not to say that we should not be applying pressure through the OECD and others. But the issue is constitutional as well as financial.
Indeed it is, my Lords; and the United Kingdom does not interfere with the internal affairs of the Crown dependencies, which are responsible for their own decisions. However, we are using the international structures to bring as much pressure to bear as we can in order that the Crown dependencies and, as I said, the overseas territories engage with openness on tax issues. Until we get to that stage, the kind of question that my noble friend Lord Barnett has addressed is a long way off in the future. However, we want to see openness and the information made available.
My Lords, last November the National Audit Office issued a report entitled Managing Risk in the Overseas Territories which made a number of recommendations for the Government to bolster those territories’ legislative capacity and enforcement capacity. Since then there has been silence. Why?
My Lords, there has been silence because effective pressure has been brought to bear which would not be advanced by much public declamation on what was going on in the relationship between Her Majesty’s Government and the Crown dependencies. As my noble friend Lord Soley indicated, we are in that delicate position where we observe the constitutional proprieties by not interfering with their internal matters while wanting them to shape up and respond to the necessary international agreements which are being developed. We are making progress. The progress is not as rapid as we would want—we would have liked earlier and total compliance, which we have not got—but we are making progress.
My Lords, what discussions have the Government had with the Government of France, which is in a not altogether dissimilar position so far as Monaco is concerned?
My Lords, just how similar France’s position on Monaco is to ours on the British Crown dependencies is a moot point; as the noble Lord will recognise, the French constitution has been somewhat different from the British one since probably 1789. The French are exercised about Monaco, but on the whole Monaco presents a problem that is overwhelmingly to do with individual rather than company and corporate taxation. Although the British Government are concerned about individuals’ obligations to meet proper taxation we also have anxieties about companies and corporations so far as some of our Crown dependencies and overseas territories are concerned.
My Lords, does the noble Lord accept that one of the major costs that ends up with the British Government is in tax forgone where British companies are evading tax by establishing activities in some of the territories over which we have effective control? Given the increasing pressure on the Government’s finances, should this not be a reason for the Government to inject a new sense of urgency into looking at how British companies and those tax havens are interacting to the disbenefit of the Exchequer?
My Lords, there is no shortage of urgency. The Treasury is always keen to ensure that the proper resources are directed to it from those who owe it tax.