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A mutual reliance between the UK and its offshore financial centres will be one of the main focuses of Michael Foot's review, he has told the Treasury.
The chairman of the UK office of the Promontory Financial Group of consultants was last year tasked by the department with leading an independent evaluation of nine British crown dependencies and overseas territories with significant financial sectors: Jersey, Guernsey, Isle of Man, Bermuda, Cayman Islands, Gibraltar, Turks and Caicos Islands, British Virgin Islands and Anguilla.
The review is working with the locations to identify opportunities and current and future risks (and mitigation strategies) to their long-term financial services sector, including:
- Financial supervision and transparency.
- Taxation, in relation to financial stability, sustainability and future competitiveness.
- Financial crisis management and resolution arrangements.
- International cooperation.
Mr Foot, a former MD of the Financial Services Authority, has published his progress report, in which he highlights 'the inter-dependence between the UK and the financial centres'.
This, he writes, is manifest in such areas as ‘the substantial flows of business from the UK to many of [the centres] and vice versa. Defining and understanding the implications of these mutual dependencies and any related contingent liabilities will be a key theme of my review.’
Mr Foot goes on to note that the most immediate issue facing the financial centres is 'how they can best deal with the current downturn in financial services business, particularly if it becomes prolonged.
'In some cases, the financial services industry is the largest employer and generator of GDP in the jurisdiction. In every case, the financial services industry represents a significant proportion of GDP and, in most cases, employment.'
His appraisal hopes to provide insights into
- the quantum and nature of funds that flow between the financial centres and the UK;
- what factors, other than tax, affect the choice of financial firms to use the financial centres; and
- the track record of the centres in meeting international minimum standards in areas such as financial regulation, anti-money laundering, sharing of financial and tax information.
A final report is scheduled for the fourth quarter of 2009.
TUC general secretary Brendan Barber said Michael Foot's latest document was 'deeply disappointing'.
He added: 'The PM and Chancellor have made it clear that they want to "outlaw" tax havens and the evasion and avoidance they promote - but the progress report suggests that this leisurely review is more focused on helping tax havens through their current financial difficulty than addressing the serious threat they pose to the global economy.
'The Treasury needs to get a grip of this review and decide whether it is flowing with or against the grain of world opinion, which has turned so decisively against tax havens since the G20.'
