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Tory peer’s costly advice off the mark

| 23/04/2015 | 0 Comments
Cayman News Service

Lord Blencathra in the Cayman Islands

(CNS Business): The Conservative peer who was employed by the Cayman Islands Government to advise and lobby for its offshore sector in the UK appears to have been giving some poor advice. David McLean, known as Lord Blencathra, reportedly told CIG last year that the UK Prime Minister’s goal to clamp down on tax havens was a “purely political gesture”. However, it turned out that David Cameron was serious about more transparency. Up until the UK parliament was prorogued last month, he was still pressuring Cayman for a publicly accessible register of beneficial owners.

With the exposure in the British media of a letter Blencathra had written to the CIG, it seemed the Tory peer, who was paid over US$18,000 a month for his advice and influence, told the government in February 2014 that the tough stance by Cameron in relation to the G8 talks was to head off pressure from the European Union for a financial transaction tax that would have hit the City of London hard. He told them they need not worry.

“It was and is a top UK government priority to head that off. The French were pushing for ‘blacklists’ of jurisdictions with any tax regime lower than theirs. It was also a UK government objective to head that off. However the UK government knew, from long experience, that it cannot chair a G8 summit nor negotiate in the EU by simply saying ‘no’ to what other member states are pushing,” he said. “It has to present either a genuine alternative or a false initiative which will divert other MSs [member states] from pursuing their agenda.”

Lord Blencathra claimed that pressure on the government for a financial transaction tax and blacklists from the EU and NGOs resulted in the call for beneficial ownership register.

But it turned out to be more than political rhetoric and up until last month Cameron was putting immense pressure on the Cayman Islands and the UK’s other territories to create a central register that was public, calling into question the peer’s pricey advice.

Lord Blencathra’s contract was terminated in March last year following the changes to the code of conduct for members of the UK’s House of  Lords. This was largely as a result of his  contact with CIG and what was seen as promotion of a tax haven in the UK’s corridors of power. The Cayman government has since continued to battle pressure from the UK to introduce a transparent register, as stakeholders in the financial sector have warned that such a move could destroy Cayman’s most lucrative economic pillar.

The UK’s Tory party continues to have a mixed relationship with the concept of offshore finance and tax havens. On the one hand, it is sending the message that it wants to crack down on the legal and illegal tax avoidance in Britain by the wealthy, but on the other, the party is financed by many corporations and wealthy donors. These donors depend on the international offshore financial services sector to use whatever legal means possible to keep their tax bills down to a bare minimum.

At least eight donors to the Conservative party during the current election campaign, who have together contributed more than £5.5m to the Tory coffers, are fund managers or directors of hedge funds that have lobbied the Cayman government against the open register.

The Alternative Investment Management Association (AIMA) and the Managed Funds Association (MFA) both warned during the consultation on the controversial register that a public register of beneficial ownership would damage the hedge fund industry.

“If beneficial ownership information is made available to any member of the general public to access then it will be possible for private information on legitimate wealth to be accessed by competitors, family members with adverse interests, criminals and journalists,” the AIMA said.

During the campaign, the conservatives have heralded their credentials of clamping down on tax cheats and have dismissed the funding connection to hedge funds. David Cameron “led the world by putting tax and transparency at the top of the global political agenda”, a party spokesperson told the British press last week.

Figures released on Thursday by the Electoral Commission, however, detail donations to the Conservatives Party from 16 of Europe’s 50 most prolific hedge funds based in offshore centres, including twelve in Cayman. The Labour Party said the data is evidence of the Tory’s intimate relationship with wealthy financiers.

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