Lord Blencathra at a press conference in the Cayman Islands (Cayman 27)
I’ve been appointed because I have 27 years experience as a Member of Parliament, ten to twelve years experience in a British Government. I’m still a Parliamentarian in a different colour of the corridor in Westminster.
Lord Blencathra
The following extracts are taken from the transcript of a question-and-answer session during a press conference in the Cayman Islands on 5 April 2012 with Lord Blencathra and MPs Graham Brady and Brian Donohoe, who are respectively chairman and vice-chairman of the All Party Parliamentary Group (APPG) for the Cayman Islands.
Q: I would like to ask Lord Blencathra – can you tell us a little bit about your job?
Lord Blencathra: In the past, before the financial crisis struck, I think the role of the London office could, of necessity, be slightly different. It did consular service, did work with the APPG. But because the financial crisis has put all banks, the whole financial sector into the spotlight as never before, they have to justify their existence, the City of England [sic] has to justify its existence to what is largely a hostile media, sometimes hostile regulatory authorities.
Cayman, the financial industry here has to justify its existence, which it didn’t really have to do before in political circles. I’ve been appointed because I have 27 years experience as a Member of Parliament, ten to twelve years experience in a British Government. I’m still a Parliamentarian in a different colour of the corridor in Westminster.
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And the Government feels that because of the knowledge I have of how Whitehall works, Westminster works, that I can be a good representative to feed in to the correct authorities in the Government the views of the Cayman Islands and help defend our interests.
You may say, what do I know about Cayman? A lot more than I did a couple of weeks ago. I don’t pretend to be an expert on Cayman but I’ve not been employed to do that job – there are hundreds of experts here who can advise me. My role is to make sure I can feed that advice in to Government ministers, to the Civil Service, the Governor does it as his level, I do it at mine on behalf of the Cayman Islands Government.
Q: Lord Blencathra who pays your salary is it the Cayman Government or the UK government for your work in the London office?
Lord Blencathra: The Cayman Islands Government – I work for the Cayman Islands government in London not for the UK Government in Cayman: Very clear about that.
Q: You mentioned some issues that may come up in European legislation, can you brief us on that.
Lord Blencathra: It’s everything you read about it in the financial press. For example the detailed regulations coming out now on the Directive on AIFMD 2, on fund management, could, if interpreted strictly, limit severely the ability of the financial centres such as Cayman and other Overseas Territories to compete and to sell the product in Brussels. If the Financial Transaction Tax were to go ahead that could be beneficial to Cayman if it closed down the City of London.
Q: You mentioned the financial transaction tax just for example, you mentioned that it could be helpful if it closed down the City of London. There’s been a lot of commentary on the new relationship between the UK Overseas Territories and the UK, that we are actually competing jurisdictions now. How do you all view that, how do you look at that.
Lord Blencathra: Let me clarify my earlier remarks in case an off-hand remark is misconstrued. A financial transaction tax, if imposed only in Europe, would be damaging to the City of London, it would be very damaging. That business would go elsewhere. It could go to Singapore, it could go to Europe and some would say it could come to Cayman – it certainly could do. But then Cayman would have a problem of 50,000 people from London wanting to move to Cayman and that would cause other difficult problems so the best solution is not to have a financial transaction tax, let Cayman expand its financial services and let London expand and work in synergy.
I work for the Cayman Islands government in London not for the UK Government in Cayman: Very clear about that.
Lord Blencathra
Competition between jurisdictions is a good thing, I passionately believe in low tax competition between jurisdictions, both ones which are called offshore, which I think is the wrong term, I detest the term offshore jurisdictions because that in itself is derogatory.
Cayman along with the BVI, and the Jerseys and the Guernseys of this world and Bermuda are international financial centres and are becoming international business centres.
If China deals with London for the Renminbi, London will be, quote, an offshore financial centre so it just shows how nonsensical that derogatory terminology is.
I passionately believe in low tax competition between jurisdictions.
Lord Blencathra
The synergies between London and Cayman are very strong, the financial flows are strong. I wish we could, and I’m sure all my colleagues would say the same thing, I wish we could identify, that there are guys who are working in a Jaguar factory in Birmingham in England, working for Mr Tata, for an Indian company, and the money that is going to them has come from the City of London, which has come from Cayman which has flowed in from funds in the States and all around.
We know that happens but you just can’t prove it and as politicians we’d all like a nice little soundbite, just to show how important Cayman is in helping the United Kingdom and the United Kingdom is in doing business with Cayman. We know it happens but if you can find as a journalist a simple way of proving it you’ll make a fortune. Politicians will queue at your door to get that soundbite.
A film of other parts of the press conference can be viewed on Cayman 27′s website.
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April 17th, 2012 at 10:18 am (#)
I’m assuming that “City of England” is just a mildly revealing freudian slip.
April 19th, 2012 at 4:48 pm (#)
If the EU were to impose a Financial Transactions Tax (FTT), there is no suggestion that business’ would leave the city of London. Relocation would be very difficult and very unlikely, especially due to the various factors that make the City of London a desirable financial centre such as: lack of corruption, ancillary servies and specialists. Many cannot afford to ignore London’s pool of highly skilled workers, who in turn are attracted by the culture, language, world class education and variety of things to spend their money on.
Beyond all this, there is a multi-billion pound reason why banks would be mad to move away: an implicit subsidy from taxpayers to governments that dwarfs anything the banks pay in tax. Credit rating agencies such as Standard & Poor know the UK government will not let the big banks fail because that would bring the rest of the economy down with them. As a result they provide two credit ratings for the major banks, a practical one used by the markets, which takes this guarantee into account, and a theoretical one which illustrates the ‘stand-alone’ strength of the banks. The difference between the two shows how much more cheaply banks can borrow because of taxpayers’ guarantee. According to Andrew Haldane, Executive Director of financial stability at the Bank of England, this was worth £100bn at the height of the crisis, and over £50bn on average between 2007 and 2009.
Nobody turns down a £48bn freebie, and that’s what the banks would be doing if they moved operations overseas. Most countries are simply not capable of offering this kind of support. Those who are capable may not be willing to risk having to fund a bail-out.