‘Dear George…’ A letter from Ed Balls about tax avoidance

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Labour really isn’t going to let the Tories off the hook about tax avoidance. Ed Balls wrote a letter to George Osborne today, outlining what he considers to be the main issues. Here’s the text of that letter in full. Feel free to compare and contrast with the interpretations in the mass media.

Dear George,

It has now been over a week since the full story about tax evasion and HSBC became public. There are a number of questions which you have failed to answer over the last eight days and which cannot continue to be brushed under the carpet:

1. Why has there only been one prosecution out of 1,100 names? Was the “selective prosecution policy” a decision made by Ministers?

Detailed information was passed to this government in May 2010 about 1,100 HSBC clients allegedly guilty of tax evasion or avoidance and yet since then there has been just one prosecution.

In November 2012 a senior HMRC official told The Times that the government had adopted “a selective prosecution policy” towards cases related to HSBC. Later that month HMRC told the Public Accounts Committee that “another dozen” criminal prosecutions were to follow. However, there have been none since.

Given the scale of the alleged wrongdoing, can you explain why only one prosecution has been made and what role Ministers played in deciding on “a selective prosecution policy” for those accused of tax evasion? People would expect you to have been either involved in, or at least aware of, a decision of this seriousness.

Why did the Financial Secretary to the Treasury claim in the House of Commons last week that the government was provided this data “under very strict conditions”, when the French Finance Minister has since suggested otherwise?

2. When were you first made aware of these files, what action did you take and did you discuss it with the Prime Minister?

While a Downing Street spokesperson claimed last week that “no government minister” had any knowledge of what happened at HSBC, the Chief Executive of HMRC has since revealed that Ministers were in fact informed about these files after they were received:

“We are confident we will have told Ministers that we were about to receive a big tranche of operational information,” she said. “We will have told people, including Ministers, I suspect some time in the next few months [after the data was received].”
Lin Homer, Chief Executive HMRC, Public Accounts Committee, 11 February 2015

When were you and Treasury Ministers first made aware of these files and did you take any action as a result? If not, what were the reasons for this inaction? Did you ever discuss this with the Prime Minister?

3. Why did you and David Cameron appoint Lord Green as a Conservative peer and Minister months after the government received these files?

Lord Stephen Green was Chairman of HSBC 2006-2010 and was appointed a Conservative Peer in September 2010 and then as Trade Minister by David Cameron in January 2011.

This was several months after the government was given information from the French government in May 2010. There had also been extensive public coverage of this investigation since 2010.

For example, on 26 September 2010, the Sunday Telegraph reported that HMRC is investigating more than 200 “extremely wealthy” British taxpayers suspected of tax evasion totalling “many millions of pounds”.  It adds that they are “believed to have failed to declare huge sums of interest from private deposit accounts with HSBC’s bank in Switzerland.” (Sunday Telegraph, 26 September 2010,http://www.telegraph.co.uk/finance/personalfinance/expat-money/8025527/HMRC-launches-tax-evasion-probe-into-Swiss-account-holders.html).

Why was Lord Green appointed months after the government had this information? Can you provide details of the due diligence carried out by the government in advance of Lord Green’s appointment?

4. Did you and David Cameron discuss tax evasion at HSBC with Lord Green, or did you turn a blind eye? Did you discuss allegations of money laundering at HSBC during Lord Green’s time at HSBC which led to the bank being fined $1.9bn?

Did you or Treasury Ministers ever discuss what happened at HSBC with Lord Green in the almost three years in which he was a Conservative Minister? The Prime Minister failed to answer this question four times in the House of Commons last week.

Did you or Treasury Ministers ever discuss allegations of money laundering at HSBC during Lord Green’s time in charge of the bank, which first became public in July 2012 following an investigation by the US Senate Homeland Security Sub Committee and which led to the bank being fined $1.9bn in December 2012? When were you and Treasury Ministers first made aware of the findings of this inquiry?

If you or your Ministers did not ever raise any of these issues with Lord Green while he was a Minister or before his appointment, would this not be remiss given the scale of wrongdoing which you would have been aware of?

5. Why did you sign a deal with the Swiss authorities in 2012 which prevents the UK from actively obtaining similar information in the future?

The Swiss tax deal, which you heralded in the 2012 Autumn Statement, has not only raised a fraction of the sums promised, it also seems to tie the hands of HMRC and the UK government for the future. The following declaration was made by the Treasury:

Declaration of the United Kingdom concerning the acquisition of customer data stolen from Swiss banks:
The Government of the United Kingdom declares on the occasion of the signing of the Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation on cooperation in the area of taxation that it will not actively seek to acquire customer data stolen from Swiss banks.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/356884/declaration-acquisition.pdf

This deal means that the government may never again be able to get hold of the sort of information it received in 2010 about tax evasion and which is at the centre of this scandal. This deal was also made while Lord Green was a Conservative Minister and years after this government was first given information about tax evasion in May 2010.

Why did you sign this declaration and what advice were you given about how it would impede HMRC and the government’s ability to act in the future?

Did Lord Green have any involvement in the Swiss tax deal while he was a Trade Minister and did he ever give any advice to the Treasury on it?

Given the significant public interest in this matter, I am making this letter public. It is notable that you have not given any live broadcast interviews or given a statement in the House of Commons on this issue. However, these questions cannot continue to be ignored and I look forward to hearing from you.

Yours sincerely,

Ed Balls

Follow me on Twitter: @MidWalesMike

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11 Thoughts to “‘Dear George…’ A letter from Ed Balls about tax avoidance”

  1. M de Mowbray

    Well done Ed Balls, please keep up the pressure!

  2. Thank you for posting this excellent request for information and I hope that the Labour party will now keep up the pressure.

  3. Do we care about a minority of the population of criminals and even fewer super rich using foreign banks to aid tax evasion, even if within the letter of the law but not the spirit?

    A tax barrister has informed of a far bigger, but entirely legal tax loophole, that permits employers to evade National Insurance and PAYE on huge numbers of the low waged, leaving them out of the welfare state and with no state pension in the future.

    This is the return of the Truck System that is now called the salary sacrifice system.

    This is when it can be seen that work does not pay.

    1. Mike Sivier

      I’ll look into this as I’d not heard of it.

      1. This was on the Ipswich Unemployed blog in a comment.

        That spoke of a Channel 4 Dispatches programme called
        Low Pay Britain on 19 January 2015.
        http://www.recruiter.co.uk/news/2015/01/dispatches-investigates-low-paid-workers-and-tax-avoiding-employers/

        Half of UK’s part time staff are falling out of the welfare state as they are below the lower entitlement level to pay NI contributions or get automatic NI credits if between the LEL and the primary threshold for NI.

        And Channel 4 told us that 30 per cent of jobs created since 2008 have been part time.

        These are the people that are within my flat rate state pension petition as now just 1 year NI record gives you a pro rata state pension.

        But the flat rate state pension for those retiring from 2016, gives them nil state pension for less than 10 years NI credits / contribution history.

        But even if in the primary threshold then there is another change that is cutting NI record that also cuts substantially or ends state pension.

        See why under my petition, in my WHY IS THIS IMPORTANT at:
        https://you.38degrees.org.uk/petitions/state-pension-at-60-now

  4. Andy

    The Tories should be held accountable, and every government since 1979. It’s a good old political punch up and it makes good press, but what is anyone in power going to do about it? We are too focused on ‘shutting the stable door after the horse has bolted’. We need to focus on what we need to do now and no one in Westminster is suggesting anything radical.

    http://www.adamsmith.org/blog/tax-spending/what-we-need-to-do-is-obvious/

    https://www.accountancymagazine.com/uk’s-17000-page-tax-code-should-be-burned-–-cbi

    1. Mike Sivier

      You’re seriously suggesting an article from the Adam Smith mob calling for the state to be shrunk, Tory-style, is the answer to Tory-style tax avoidance?

      1. Andy

        I’m just showing the fact, that if writer’s for the Guardian, the CBI, Adam Smith.org and a host of others think it’s an overblown mess then there is a strong case to start again. And not just add to the current mess of loopholes, which may well happen as Ed Balls is taking advice from PWC! Of course if the tax system were simple then lots of over paid accountants would be out of a job. And yes the state is far too big and has been interfering in peoples lives far to much and in the most draconian ways i.e. the bedroom tax for starters! I’m very much a libertarian, having said that I do not agree with very much that is on adamsmith.org, I think Adam Smith would be turning in his grave if he could see what they are writing in his name. If you haven’t read ‘The Wealth of Nations’ you should Mike.

      2. Mike Sivier

        I’m not going to argue about any advice given by PwC, of course.
        The problem with your argument is the same as with all ‘simplification’ arguments. Why not have a flat rate of tax for everyone? Because the rich will benefit and the poor will be harmed.
        Your argument that the state is too large is undermined by your use of the Bedroom Tax as an example – it was created by the Tories, whose aim is – you guessed it – a smaller state.
        I could quote many other arguments against what you’re saying, but I think the point is made.
        Yes, the UK tax code is overcomplicated, but don’t ally yourself with small-staters who have their own personal agendas in mind.

  5. A-brightfuture

    Is there no end to the Tory agenda!

    So now we know why The little people are being brow beaten regarding their own tax concerns..We are paying for the tory glory.

    The tax evasion/avoidance by the rich, have run the pot dry, and its the working poor that has to prop it up. No wonder Osborne wants to shrink the state, and privatise everything that’s not nailed down.

    Leaves a nasty taste.

  6. Michele Witchy Eve

    As they rightly point out in their latest issue, Private Eye have been publishing about the Swiss/HSBC tax question for several years now, not to mention several other HSBC naughty goings-on. As they also point out, Private Eye is read within the walls of Westminster – so how could it *not* be known about until now? Someone is being a bit disingenuous.

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