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The City

 

The Times noted in 1881,

"The City Corporation is sacred although nothing else is."

Introduction

The City of London is variously known as the City, the Square Mile and the Corporation of London, note, it should not be confused with London, the capital city of the UK. Rather the City should be viewed as an alien body, like a parasite feasting on the flesh of its host.

Missed Time

Tom Simmons, chief executive of the Corporation, told the Lords in 2002:

"The corporation emerged from a 'missed time' and there is no direct evidence of it coming into existence," he said. "There is no charter that constituted the corporation as a corporate body."

Not having a charter has been a useful tool for the City, since no charter means no allegiance. And yet, the City enjoys rights and privileges encountered nowhere else in the UK.

The Corporation's website tells us:

"The right of the City to run its own affairs was gradually won as concessions were gained from the Crown."

History tells us that the City was already a force to be reckoned with when William the Conqueror decided to subdue the rest of Britain but left the City untouched. And if Temple Bar had existed back then, William's Doomsday surveyors would have stopped their prying at the Bar. Today, a thousand or years on, prying is not allowed beyond the Bar.

When the Queen makes a visit to the City, she and her entourage make a ceremonial stop at Temple Bar, to formally be allowed in by the Lord Mayor. And British prime ministers pay homage to the City at Mansion House once a year - be in no doubt, the City is a special place.

The Remembrancer

The Remembrancer is the City's official lobbyist in parliament, sitting opposite the Speaker, and is "charged with maintaining and enhancing the City's status and ensuring that its established rights are safeguarded". His office watches out for political dissent against the City and lobbies on financial matters. (Can you name another local authority with its own lobbyist in the 'home of parliaments'?) The role of Remembrancer is one of the 'concessions' gained in the 'missed time'.

In 1917, Peter Mandelson's grandfather Herbert Morrison, had this to say about the City:

"Is it not time London faced up to the pretentious buffoonery of the City of London Cor­poration and wipe it off the municipal map?" "The City is now a square mile of entrenched reaction, the home of the devilry of modern finance."

Clement Attlee in 1937, was saying:

"Over and over again we have seen that there is in this country another power than that which has its seat at Westminster". "Those who control money can pursue a policy at home and abroad contrary to that which has been decided by the people."

By the time of Blair, the Labour Party lost its appetite to be rid of the City and its buffoonery. Blair decided that a bit of reform would be good enough.

The Court of Common Council

The Court of Common Council is the City's principal decision-making body. It was the elections to this Council that Blair proposed to reform.

Elections in the City are like no other elections anywhere else in Britain. There are no political parties, each ward candidate stands as an independent. Beyond citizen voters, businesses also vote. Before Blair's intervention in 2002, firms had 17,000 votes (twice as many as residents). Blair's master plan was to expand the business vote to 32,000; broadening the franchise to include banks and multinational corporations - like the Peoples' Bank of China. The number of votes each business had was based on the size of their workforce. One critic at the time described the new voting system as like the voting rights of chattel owners in the pre-war American South: the slavery franchise. More simply, voting in the City is undemocratic and thoroughly endorsed by the British state.

There are four layers of elected representatives in the Corporation: common councilmen, aldermen, sheriffs and the Lord Mayor. To qualify for any of these offices, you must be a freeman of the City of London. To become a freeman you must be approved by the aldermen. You're most likely to qualify if you belong to one of the City livery companies: medieval guilds such as the worshipful company of costermongers, cutpurses and safecrackers. To become a sheriff, you must be elected from among the aldermen by the Livery. How do you join a livery company? Don't even ask.

To become Lord Mayor you must first have served as an alderman and sheriff, and you "must command the support of, and have the endorsement of, the Court of Aldermen and the Livery". You should also be stinking rich, as the Lord Mayor is expected to make a "contribution from his/her private resources towards the costs of the mayoral year." This is, in other words, an official old boys' network.

Off-shore or just elsewhere

Off-shore in the popular mind is usually associated with an island somewhere in the West Indies. Actually, the term off-shore means simply somewhere elsewhere to do business that has specific features that assist a companies business activities. The chief distinguishing features are; low relative tax, lax or inadequate regulation, opacity, secrecy, and dubious sovereignty.

The City of London lays at the centre of the spiders web of the off-shore system of tax evasion - let's not quibble over avoidance and evasion - companies are not paying what's due and the City's role is to facilitate the crime.

The inner ring of the web is formed by the Crown dependencies of Jersey, Guernsey and the Isle of Man - these focus mainly on European business. Jersey describes itself as an extension of the City of London in its promotional material. In 2009, Jersey alone provided £135bn in bank deposits upstreamed to the City.

Note, the funds were 'upstreamed' not sent 'off shore', the direction of travel was towards the City, for further upstreaming, perhaps to the Cayman Islands or elsewhere.

The British overseas territories form the middle ring of the web (23 in all), such as the Cayman Islands and Bermuda. Like the Crown dependencies, they have governors appointed by the Queen and are controlled by Britain, but with enough distance, when problems occur to make sovereignty dubious.

The outer ring of the web includes places like Mauritius, Hong Kong and the Bahamas, with no connection to Britain but still channelling billions through the City every year.

Also, the wizards of finance can turn anywhere into an off-shore opportunity when the features are favourable, anywhere from the US state of Delaware to a fishing port in North Korea.

Subsidiaries

The key to the success of City's off-shore system, apart from the global lobbying on the part of the Lord Mayor and his team, is the company subsidiary. Multinationals have hundreds of subsidiaries. The banks are the biggest users of subsidiaries. According to the Financial Mail, Barclays, RBS and Lloyds have 550 subsidiaries between them. Bob Diamond, boss of Barclays, is on record as saying he doesn't know how many subsidiaries his company has. (You can bet, however, that he does know what their function is.)

These subsidiaries play a central role in the transfer pricing scam, by which products and services are charged at top dollar by a subsidiary located in a tax-haven elsewhere and the profits of the parent are substantially reduced by these outlays, as is the tax burden of the parent in the host country. However, the fictional costs overspend will be routed through the web back to the parent, facilitated by the City.

Beyond tax scams

The City has many of the qualifying features of an off-shore island, most worrying its alien relationship with the rest of Britain, its secrecy, and its influence over the policy makers.

The idea that bankers would ever leave their web in the City, as we often here they might, if we don't treat them nicely, is fanciful. The City is at the heart of moving funds around to maximize profits.

Some may say what's wrong with that, despite their tax avoidance/evasion they still contribute much to the exchequer, employ 10's of thousands of people and maintain Britain's place as preeminent in the world of finance.

Others may say, maybe so, but the City is facilitating what the Adam Smith Institute called 'theft' plain and simple. Their facilitating scams are depriving rich and poor countries alike of what they are due from business activity. In essence, tax evasion, transfer pricing and the rest steal much needed resources from those most in need.

However, the crimes of the City and its web go beyond stealing from the poor across the globe, they are also providing a laundry for stolen and other illegal gains.

Kleptocrat, Kim jong-il, the late and unlamented leader of North Korea, stole £4 billion from his countrymen during his reign of terror. This stolen money was shipped abroad. Do we imagine that it was placed in a safe deposit box gathering no interest, no, it's being moved around through the web. And where do we imagine all the drug money from Colombia, Afghanistan and the Golden Triangle ends up - it's no good up the jungle; to work, it needs to be circulating around the off-shore web.

Beyond kleptocrats and gangsters, the City's spider's web of off-shore trading is also used by News International and Virgin Atlantic and other household names. These companies are side stepping their responsibilities, they want the educated workforce, they want the infrastructure, they want the stable law abiding environment but they don't want to pay their fair share.

What's to be done?

The City is the best resourced financial lobbying group anywhere in the world. The City runs its own show, untroubled by the affairs of state. Where the City doesn't wheel and deal, it hosts the wheelers the dealers - AIG, who went recklessly mad in the New York market was doing its damage from the City, when companies like Lehman Brothers had their wheeling and dealing restricted by US regulation, they did their business out of the City.

The City, which hosts the International Accounting Standards Board, a private company registered in Delaware, funded by the top four accountancy firms and multinations to write their own disclosure rules. Rules that make it difficult to track or trace cross border flows of capital, particularly for resource rich underdeveloped countries.

The City pleases itself and the politicians appear not to have any desire to interfere with business. However, that doesn't mean that things will not change because the world beyond the City is changing. Soon the rising poor countries of the world are going to be reviewing the way they engage with the City boys, checking the books, reviewing the ways global finance works.

In the EU not a few eurocrats are turning their gaze upon the activities of the City, as are the IMF and the OECD; early days but at least they are debating issues in public that in the past were not said.

Also, due to the activities of various protest groups like UK Uncut, the Tax Justice Network and Occupy the media have found it impossible to ignore the tax dodgers and the role of the tax man. The protests, if nothing else have moved the social role of finance to the front page - perhaps in time the politicians may take notice as well.

There are many suggestions one could make to end the abuses taking place in the City but without the political will to act, it would be pointless.

However, it might be a good start for one of the political parties to ask if it's not time to end the City's privileges in a divided London, take a bulldozer to Temple Bar and introduce properly democratic voting rights for the citizens. Dave has no plans in this regard.

Knowledge is power....

..... finding anything out about how the City operates is priceless. Sources of information about the way the City operates are hard to come by. The Internet will not yield much. If you want to know what the City boys are up to you'll have to read a book or two.

David Kynaston's book 'City of London, The history is worth a look. Kynaston is hard work but his book does provide insight into the psychi of the City.

However, if you want some hard facts about how the City operates, without having to read between the lines, try 'Treasure Islands' by Nicholas Shaxson.

 


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