Offshore financial centers, also known as tax havens, send “massive capital flows” to London and are unduly criticized in the U.K. for secrecy and helping tax avoidance, Conservative party lawmaker Mark Field said.
Field, defending financial centers including Jersey and Guernsey yesterday at a London debate, said they had “endured political attacks” that demonstrated “a fundamental lack of understanding of their function and the benefits.”
Tax haven critics have included U.K. Business Secretary Vince Cable, a Liberal Democrat lawmaker and government coalition partner of Field. In 2008, before the coalition was formed, Cable said British banks that received taxpayer funds during the financial crisis, such as the Royal Bank of Scotland Group Plc, should close their units in tax havens.
“The U.K. has a truly unique position in relation to tax havens, or offshore financial centers,” Field, 46, said. “As a U.K. legislator, we need to make that case very firmly, that this offshore stuff is not some nefarious outfit but actually has a very important role to play.”
Richard Murphy, a U.K. accountant and director of Tax Research LLP who is critical of tax havens, said Field was “wrong” about their benefits. Tax havens cause the U.K. government to lose revenue, he said at the debate. Tax havens benefit the City of London financial district rather than the nation, he said. Field is the parliamentary representative of the City of London and Westminster.
“He is making a very particular parochial view of the city’s view of what is good for the city,” Murphy said.
Field’s defense of tax havens is part of his campaign to promote financial services after a U.K. election earlier this year in which members of all parties criticized bankers as taxpayer funds were tapped to support banks that borrowed and lent too much.
“There are no votes in defending the financial-services sector,” Field said at the debate organized by the Centre for the Study of Financial Innovation.
British banks received a net $257 billion from operations in the nation’s offshore tax havens as of June 30, 2009, according to a government report published last year. The funds are mainly bank deposits collected in offshore centers such as Jersey and the Isle of Man that are sent to mainland headquarters.
Bankers may face more criticism as bonuses are announced and paid out in coming months, Field said.
“The banks, I fear are making a rod for their own backs,” he said. The timing of the bonus payments will have “an uneasy juxtaposition” with job losses and cuts in the government sector, he said.
Half of the top 30 offshore financial centers are British dependencies or territories, Field said. Mark Boleat, deputy chairman of policy at the City of London Corporation, agreed that they help the financial district he helps run.
“They benefit by bringing business into London that otherwise would not come into London,” Boleat said.
Anne Craine, Treasury minister for the Isle of Man, which sits in the Irish Sea, last night made the same argument at a speech in London’s Canary Wharf. “The existence of offshore centers greatly benefits the City of London and the entire U.K. economy,” Craine said, according to a copy of the speech sent to Bloomberg News.
Field is due to give a speech today in Westminster, where he will argue that the city is the U.K.’s “most valuable economic resource.”