[email protected]: Nick Clegg – Banks’ business is taxpayers’ business

Yesterday The Guardian ran a piece from Nick Clegg on Barclays and its attempts to keep secret details of how it goes about reducing the amount of tax it pays:

Yesterday Barclays may have won on a point of law. But it cannot run away from the wider point of principle: now our whole banking system relies on the support of British taxpayers, how the banks run their business is our business, too.

So long as these banks are sustained by explicit or implicit Treasury guarantees, they have no right to deprive the Treasury of money by running circles round the taxman. The era of industrial-scale tax avoidance by British banks must now end.

That is the point I made to John Varley, Barclay’s chief executive, in a meeting earlier this week. Varley explained that one of his primary duties is to Barclays’ shareholders – that minimising the tax burden and maximising the returns of a business is what chief executives are expected to do.

This approach assumes that the only banks that have a duty to take instructions from government are those like RBS and Lloyds, in which the government is the majority shareholder.

I disagree. We, as taxpayers, now support all our major banks with explicit and implicit guarantees. All our banking giants, even those in which the government has not taken an ownership stake, depend implicitly on the government’s guarantee that they are “too big to fail”.

The full piece is HERE.

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13 Comments

  • Richard Whelan 20th Mar '09 - 11:15am

    Excellent piece by Nick. Does anyone know the legal reason as to why comments in response to Nick’s article cannot be published on the Guardian’s website?

  • “This approach assumes that the only banks that have a duty to take instructions from government are those like RBS and Lloyds, in which the government is the majority shareholder.

    I disagree. …”

    It’s difficult to believe it’s only a just over a year since Nick Clegg was telling us that the less involvement government had in running even public services like education and health, the better.

    Now the banks “have a duty to take instructions from government” – even the ones that haven’t received a penny from the government.

  • Mark Williams 20th Mar '09 - 3:18pm

    I am afraid Clegg is spouting drivel here. If a bank is effectively owned by the government, then how it conducts its business might be a metter of public interest, but until that happens in the case of Barclays they are as entitled to their privacy as any other person. Barclats tax affairs are a matter between them and HMRC.

    If they are “exploiting loopholes” (a term for simply aligning their affairs in the most convenient manner consistent with tax legislation), then that is simply because legislators such as Clegg have failed to attempt to understand let think through the thousands of pages of tax kegislation that has been put out in the Finance Bills in the last 10 years. It is hardly appropriate for a parliamentarion to criticise others for discovering the inadequacies in the MP’s work.

  • Andrew Duffield 20th Mar '09 - 6:19pm

    Of course under a Liberal tax system avoidance would be impossible and state dictats to private firms unnecessary.

    Change the SYSTEM Nick!

  • David Heigham 20th Mar '09 - 6:54pm

    For Barclays, The UK government is its lender/insurer of last resort (the people who have the power to stop the bank going bust), a large client and potentially a very large client. These documents appear to show Barclays acting in very poor faith towards the government. Barclays management have no duty ot their shareholders or to anyone else to act in bad faith to a body that is so important to their business.

    Clegg is right. Varley is wrong. He shows that he does not understand his duty his shareholders; I make no comment about his view of his duties to anyone else.

  • Richard Whelan 20th Mar '09 - 8:11pm

    Thank you Hywel for this. It is pethic really isn’t it.

  • David

    Sorry, but this idea that the government should find ways to stop people doing things it doesn’t like, even though those things are entirely within the law, is deeply dangerous.

    It suggests to me that as far as Nick Clegg is concerned, commitment to the rule of law is only skin deep, but populism goes to the bone.

  • The rule of law did not dictate that the government had to bail out the banks. The rule of law does not dictate that the government cannot impose conditions on a bail-out.

    That is why Clegg would be quite entitled to call for government to impose such conditions, and to demand that any bail-out funding be made conditional on the good behaviour of the bank in dismantling its tax avoidance division – as RBS has done.

    The language of “duty” is unhelpful. To that relatively minor extent, Clegg is in error here. There is no absolute duty of bankers or anyone else to comply with government requests that have no legal force.

    However, in this case government can reasonably demand good behaviour by bankers, and can reasonably withhold bail-out funds if that is not forthcoming – as seems to be happening in the US.

    If government’s action or inaction is not reasonable, the public will have the opportunity to say so at the next election.

  • With you absolutely David. Vince or Nick should read out the scandalous gagged documents under parliamentary privilege.
    Am I correct that this is possible despite the injunction?

  • David

    The government obviously can’t impose conditions on the bail-out retrospectively. AQnd it can’t impose conditions on the banks that haven’t been bailed out.

    Rather than continually beating this populist anti-bank drum, if Nick Clegg thinks these legal tax-avoidance measures are inappropriate, he should advocate legislation to make them illegal – for all companies, not just for banks.

  • David Allen 21st Mar '09 - 1:13pm

    Anon1,

    The government is giving ongoing guarantees to the banks it has bailed out and (as Clegg comments) negotiating guarantees with banks it has not bailed out. To impose conditions at this stage is therefore not retrospective.

    Mind you – while retrospective legislation is generally bad practice, it is not outlawed. In a case where government is dealing with people who have been doing their best to (as RBS put it) pick their pockets, it could be justified.

    Just legislate tax avoidance out of existence, you say? If only it were that easy! As Clegg says, the Revenue versus the tax avoidance divisions = mouse versus cat.

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