You may recall how I recently wrote about ‘trash day’ – whereby inconvenient official information is released during the Christmas break. Well, it turns out it’s not just governments who bury the bad news at Yuletide.
The City regulator, the Financial Conduct Authority (FCA), chose New Year’s Eve to ‘announce’ that it has shelved plans to look at whether an incentive culture of pay & promotion had contributed to banking scandals in the UK and abroad.
The FCA had previously promised a root and branch review into the risk-prone financial world. Now the official line is that a “traditional thematic review” might not produce the “desired outcome”. Hmmm.
Current speculation is that this highly remarkable bit of backtracking is the work of Chancellor George Osborne although the Treasury denies any involvement in the decision.
Whatever the motivation involved, MPs serving on the Treasury Select Committee are distinctly unimpressed by the move.
This is understandable, given that many politicians are only just processing the disclosure of how five of the largest banks in the UK paid absolutely no corporation tax in 2014, despite making billions of pounds in profits.
Analysis by Reuters showed JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Nomura Holdings and Morgan Stanley managed to avoid paying up by offsetting historical losses against taxable income for 2013-14.
The same research showed Goldman Sachs and UBS used a similar accounting devices to reduce their corporation tax bills.
Such creative measures are entirely legitimate in the UK, unlike several other European countries. In fact, some tax experts reckon our domestic rules don’t just allow corporate avoidance tactics but positively encourage them.
In case you’re wondering, the seven banks paid a combined £20m in corporation tax in 2014 - which is a massive £700m down on what the public exchequer should have received based on reported profits.
What adds a considerable dollop of insult to injury is that the historical losses that banks are using to avoid tax largely happened following the global recession which resulted from mountains of bad debit created by the self-same banks.
Since then we’ve been seen rate-rigging, PPI mis-selling and other activities that in any other industry would amount to outright criminal fraud. Yet the number of people convicted is pitiful.
Abandoning the FCA investigation is another in a set of concessions designed to ensure that the UK - and London in particular - keeps its appeal as a preferred location for global banking.
Mind you, the FCA has a less than top-notch record in keeping abreast of misconduct. Former chief executive, Martin Wheatley, admitted last February that he had only heard of HSBC bank’s Swiss tax-dodging scandal by reading the newspapers.
Mr Wheatley lost his job a few months later and has not been replaced. A government spokesman has since attempted to describe the unfilled vacancy as “a necessary measure prompted by austerity”.
Toothless regulators are nothing new in this country. What’s worrying is that they are becoming the norm.
Dangers of watering down regulations
We’ve seen a succession of government faces at flood scenes in recent weeks. They’re supposedly intended to support the community but they seldom happen without a camera crew present.
There’s been official talk of remedies but only once did the real question get posed when a minister was asked why a new housing estate was allowed to be built on what turned out to be flood-prone land.
The politician’s response was to point the finger at the local council who gave planning consent.
It has transpired since that planning approval was only gained on appeal after the council had twice refused to sign off the scheme.
This was in England where councils and the Environment Agency have repeatedly found themselves pressured into allowing unwise development.
That said, Wales is not without instances where some people think expediency outweighs nature. Sadly however, they’re rarely the people who end up paying the price.
Repackaging enterprise
Someone said to me the other day how there is little new under the sun when it comes to economic development; it’s just the packaging that changes.
We were talking about Enterprise Zones which have made a comeback in Wales in the last few years.
Welsh ministers have put more than £70m into the approach since 2011. Last week they announced that 62 companies are set to benefit from £1.2m in business rate support at five enterprise zones,
Critics argue the measures have had mixed success. They may tend to put cash where no investment has gone before, but there has been comparatively little actual job creation.
My view is that if they can provide the right conditions for businesses to flourish then they should be given a chance to evolve. We’re far too quick to abandon initiatives just because they don’t immediately deliver.
Anyway, there are enough challenges facing business without more repackaging.
