Anyone who looks at how the City of London operates will see that it financialises productive sectors of society so that it can suck wealth and life out of the world. Rather than giving anything to society, the City of London just takes and then uses some of the wealth it siphons off to lobby for neo-liberal under-regulated economic policies, so that it might further funnel the world’s resources away from those who need them for the benefit of a super-rich elite who already have way too much. If the City of London were to cease operations today, the UK economy and the world would be hugely improved. In an effort to obscure this fact the City keeps telling porky pies to make it look like it pays more tax than it does (and even it paid the inflated figures it pumps out this would not be nearly enough), then getting those it is in bed with to repeat these fibs. Today there has been hysteria in certain media outlets about blockchain posing a threat to the City and somehow because of this to the NHS. Of course, blockchain poses a far greater threat to unicorns than the NHS because unicorns don’t exist! Here’s just one example of the City of London lie machine type bilge that swilled around today:
Blockchain technologies such as Ethereum could render much of the financial services industry irrelevant, destroying the City of London and the NHS at a stroke.
That’s the warning of Business 5.0 expert John Straw, speaking also an advisor to McKinsey and IBM, at Computing’s recent Cloud and Infrastructure Live event on Business 5.0.
“Let’s say that somebody actually does produce a working blockchain peer-to-peer [financial] system. It’ll be a lending system that actually scales, we won’t need banks any more. So, at that point that we won’t need banks.
“That means we’ll have no central clearing houses, which means that they don’t exist, and they don’t therefore pay tax. So who’s going to pay for the NHS?”
Taxes from the UK’s financial services sector, which is overwhelmingly based in London, raised about £75 billion in 2017-18, according to accountants PwC [PDF]. That equates to just under 60 per cent of the £130 billion budget for health and social care in the same financial year.
And the loss of the City of London would also tip the UK into an even larger trade deficit, with financial services generating a large surplus for the UK in trade with the rest of the world.
Furthermore, added Straw, the tax generated by financial services would not simply be shifted to blockchain-based alternatives. “Blockchain makes transactions invisible to the taxman. That’s why France and Germany have basically banned [Facebook’s proposed cryptocurrency] Libra, and quite rightly so,” added Straw. “Blockchain is a ‘democracy killer’, in many regards.”
The key to blockchain technologies like Ethereum, which makes them potentially very powerful, believes Straw, is their capability for independent parties to be able to create binding ‘smart contracts’.
“I believe that this is the fundamental basis of Business 5.0… transaction capabilities within minutes, automatic remittances, no escrow and the fact of the [low] cost of doing it manually, a virtual presence in the cloud – and no lawyers necessary, which is obviously a bit of a joy,” said Straw.
“That I think is the foundation of Business 5.0 together with APIs.”
Blockchain could kill off the City of London and the taxes that pay for the NHS. Blockchain will render the City of London irrelevant, taking with it the personal and corporate taxes that effectively fund the NHS, warns Business 5.0 expert John Straw by Graeme Burton, Computing.co.uk, 24 October 2019: https://www.computing.co.uk/ctg/news/3082996/blockchain-nhs-mckinsey
Rather than leading tech journalists into the cloud, Straw is taking them straight to cloud cuckoo land. The City wants to lead the world in fintech and the current salvo against blockchain is no doubt a PR move intended to buttress the entrenched interests of the financial industry. When we checked there was a broken link to the false claim made in the piece that: “Taxes from the UK’s financial services sector, which is overwhelmingly based in London, raised about £75 billion in 2017-18, according to accountants PwC..” This seems to be a rounding up of an estimated figure published at the end of last year. We reblogged the Prem Sikka piece Unpicking the City of London’s new finance sector propaganda from Left Foot Forward shortly after it appeared:
Last week, the City of London Corporation published its annual report claiming that for the year to 31 March 2017, the UK financial services industry paid taxes of £72.1bn. But the data is not what it seems.
The sector claims to have contributed 11% of the UK tax revenues compared to 13.9% in 2007. The report was prepared by PricewaterhouseCoopers (PwC), the firm that audited BHS and was also carpeted by the Public Accounts Committee for promoting tax avoidance “on an industrial scale”.
The £72.1bn is an estimate rather than the actual amount of taxes paid, with the figures extrapolated from a sample of 50 companies. That means the headline amounts may or may not actually represent the amount actually paid by companies.
The financial services sector has been a serial offender for the last fifty years. The UK economy is yet to recover from the 2007-08 banking crash. The sector has been involved in tax avoidance, money laundering, abuse of customers and fraud. It has rigged interest rates, foreign exchange rates, engaged in sanctions busting, mis-selling of mortgages, investments and payment protection insurance, just to name a few. There is little sign that it is putting its house in order. But, as we’ve seen, it excels at propaganda.
The purpose of the propaganda exercise is to rehabilitate the financial sector and deflect attention away from its predatory practices. That affects how numbers are presented.
The PwC report includes £41.1bn of taxes which are borne by employees and customers rather than by companies. Good examples are income tax and national insurance contributions paid by employees. They are legally responsible for making such payments and the amounts are deducted from their wages.
Insurance premium tax and VAT is borne by the ultimate customers, but is included in the headline amount. The taxes that companies collect from employees or customers are always remitted to HMRC in arrears. This collection provides an interest-free boost to corporate cash flows. Of course, the benefit of this is not acknowledged in the PwC report.
The financial sector bears £10.5bn of corporation tax, £1.1bn bank surcharge and £3bn through the bank levy. Another £16.4bn covers a variety of other taxes, such as business rates, employers’ national insurance contributions, fuel duty, air passenger duty and vehicle excise duty. Of course, other businesses and many individuals pay these too.
The headline amounts can’t be corroborated from the accounts of companies. PwC says that it “has not verified, validated, or audited the data and cannot therefore give any undertaking as to the accuracy of the study results”.
That’s a pretty clear sign the numbers are just part of a propaganda war. The PwC report could have provided a list of the financial sector companies and the actual taxes that each paid. But it does not do so.
Nor does it say anything about the taxes that the financial services sector should actually have paid. It does not contain any information about avoidance schemes exposed by the Paradise Papers.
Titled “Total tax contribution”, the report does not show the total effect of the finance industry’s predatory practices on people or the rest of the economy. UK taxpayers provided £1,162bn to support and rescue distressed banks, including £532 billion to recapitalise Lloyds and RBS, and £106bn to nationalise Northern Rock and Bradford and Bingley.
The social cost of the support has been austerity, wage freezes, lower economic growth, decline in living standards and economic stagnations, and that does not include untold misery inflicted on thousands of innocent people.
In February 2018, the Treasury Committee released a report into RBS’ treatment of small business customers in its Global Restructuring Group (GRG) and said: “The findings in the report are disgraceful. The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property”.
And in June 2018, the All Party Parliamentary Group on Fair Business Banking released the draft Project Lord Turnbull report, which makes serious allegations of fraud, malpractice and a subsequent cover up at Lloyds and HBoS.
Not only the human cost, the economic cost of the finance sector is also missing from the PwC report. A study estimated that between 1995 and 2015, the UK finance sector actually cost the UK economy around £4,500bn in lost economic output. Of the £4,500bn loss in economic output, £2,700bn is accounted for by the misallocation of resources when diverted away from more productive, non-financial activities into the finance sector. The other £1,800bn arises from the 2008 banking crisis and its aftermath.
The fee collected by PwC is not known, but the report reads as part of a blatant impression management exercise.
The finance industry bears responsibility for considerable social misery and economic stagnation. But you won’t find that addressed by the industry’s spin.
The way in which the City damages society rather than contributes to it is also evident in another story that appeared in some media outlets today. The following report from The Guardian based on Transparency International research shows how the financial industry centred on the square mile – and its tax haven partners in crown dependencies and British overseas territories – facilitate corruption:
The multimillion pound spending habits of corrupt members of the global super-rich – including 421 luxury homes, three superyachts, seven private jets as well as elite private school fees and even hovercraft – have been revealed in a groundbreaking analysis of more than 400 money laundering and corruption cases.
Research by Transparency International, an anti-corruption campaign group, found more than £300bn of suspect funds have been funnelled through the UK banks, law firms and accountants before being spent on a £1m Cartier diamond ring, masterpiece art works from Sotheby’s, and a £50,000 Tom Ford crocodile-skin jacket with matching crocodile-skin handbag from Harrods.
The suspect cash – which often comes from corrupt officials’ embezzlement of hundreds of millions of pounds from poor countries’ state coffers – was also found to have been spent on a £200,000 Bentley Bentayga driven by the 22-year-old son of the former prime minister of Moldova. His father, Vlad Filat, had been sentenced to nine years in prison for his role in the “theft of the century”.
In its forensic analysis of more than 400 global bribery, corruption and money laundering cases in 116 countries, Transparency International’s At Your Service report found 582 UK firms or individuals had helped rich people bring suspect funds into the country.
The money was paid through some 17,000 shell companies, 1,455 of which were registered to at the same serviced office above a wine bar in Birmingham.
“We’ve known for a long time that the UK’s world-class services have attracted a range of clients, including those who have money and pasts to hide,” said Duncan Hames, director of policy at Transparency International UK. “Now, for the first time, we have shed light on who these companies are and how they have become entangled in some of the biggest corruption scandals of our time. This should act as a wake-up call for government and regulators, and deliver much-needed reforms to the UK’s defences against dirty money.”
One case revealed that a shell company called Airship Universal was used to buy a corporate box at Chelsea FC’s Stamford Bridge for £126,000. In another case £34,827 was paid to a now-defunct hovercraft company in Kent.
Almost £3m was funnelled to private schools, including Charterhouse, Harrow and Lancing College. In 2010 alone Charterhouse, in Surrey, which describes itself as “one of the great historic schools of England” received £300,000 of funds linked to the Troika Laundromat scheme to move £3.5bn out of Russia, according to the report.
British universities, including the London School of Economics, the University of York, the University of St Andrews and University College London, were paid more than £500,000. The payments all came from shell companies with bank accounts at institutions that have since closed owing to mismanagement and money laundering failings, the report said.
Earlier this year the National Crime Agency (NCA) seized £25,000 of suspect cash from a niece of Syrian ruler Bashar al-Assad, who had been studying design at the University of the Arts London. Several members of her family are subject to international sanctions. Anisseh Chawkat, whose mother is al-Assad’s sister and whose father had been the head of Syria’s military intelligence, was living in a £60,000-a-year rented flat in Knightsbridge.
In another case, Vlad Luca Filat, the son of Vlad Filat, the former prime minister of Moldova, was studying business at City University in London. An NCA investigation found that the son’s extravagant lifestyle in the city, which included a £1,000-per-day Chelsea penthouse and £200,000 Bentley Bentayga, was funded by large deposits from overseas companies, including in the Cayman Islands and Turkey. Large cash sums were paid into three HSBC bank accounts, including £98,000 in one three-day period. Facebook posts showed the 22-year-old drinking Dom Pérignon through a straw at beach parties in St Tropez.
For offspring that may not have been clever enough to get into top schools or universities on their academic merit, the researchers found that more than £300,000 was spent on “educational consultants helping to secure places at the most prestigious institutions”.
Large fees were paid to an educational consultant from funds linked to the Troika Laundromat scheme, which helps parents gain places for their children in top private schools.
Daniel Bruce, chief executive of Transparency International UK, said: “Government and law enforcement agencies have made real progress in recent years to reduce the places for corrupt individuals to hide, yet our findings confirm it is still far too easy for criminals and the corrupt to seek impunity with the assistance of UK businesses.
“Despite the dedication of many committed professionals in the fight against corruption, there remains too much poor practice to be able to assume bad behaviour is confined to a few rotten apples. Businesses and government should redouble their efforts, through resource and will, to remove the helping hand for those who have abused positions of power and stolen from their people.”
Superyachts and private jets: spending of corrupt super-rich revealed. Groundbreaking analysis finds £300bn of suspect funds funnelled through the UK by Rupert Neate, The Guardian, 24 October 2019: https://www.theguardian.com/uk-news/2019/oct/24/superyachts-and-private-jets-spending-of-corrupt-super-rich-revealed
All of which goes to confirm yet again that there is a massive need for political and financial reform in the City of London, and for people to remain vigilant about the propaganda that spews forth from the City of London lie machine.
The header shows a contemporary lie machine in operation, its screen depicts former Lord Mayor ‘Sir’ David Wootton leading the formation of a new masonic lodge for the City and Livery Past Masters on 14 February 2017. This is one of many masonic lodges attached to City Livery Companies; the latter play a role in the virulently undemocratic politics of the City of London and their unelected members get a say at Common Hall on who occupies various City of London offices.