Remember the outcry when Ken Clarke suggested doing deals with criminals to save money? If the criminals came clean, said Clarke, they would get lighter sentences. They would do less time and, in return, the state would save the costs of lengthy court cases and prison terms. His plan didn’t even get off the starting blocks. It was quickly scrapped in the face of public outrage.
But now George Osborne has offered a similar amnesty to tax criminals. He has struck a deal with Swiss banks which allows British tax evaders with Swiss accounts to remain anonymous provided they cough up some of the tax they owe. HMRC will get a lower rate of tax on this cash than that which would have been paid in the UK. In return, the tax evaders get to keep the rest of the tax they owe and their anonymity. Any further payments can, therefore, only be extracted with the agreement of the Swiss authorities. The tax will be collected and enforced by the Swiss, not by HMRC.
The agreement is essentially the same as that proposed by Clarke – help the government out of its fiscal hole and you get off with a lighter punishment.
Of course, there will be less of an outcry because the tax evaders are rich criminals and those most likely to be covered by Clarke’s deal were poor ones. It may even be that some MPs, media bosses and senior journalists have their own little stashes in Swiss bank accounts. We’ll never know because now their secrecy is guaranteed.
Worse still, though, this shoddy deal demonstrates the enfeeblement of the 21st century state. The deals that both Germany and the UK did with the Swiss are tacit acknowledgements of defeat. Both governments accepted that they could not chase down the tax evaders and so agreed to a compromise. They could have threatened to withdraw the Swiss banks’ licences in the UK and Germany but, no doubt, the Gnomes of Zürich threatened to move their operations from the City and Frankfurt to Singapore and Hong Kong, with the resulting loss of tax revenues, blah blah blah… Woooo, scary stuff! Better roll over and die.
Concerted international action by the EU and the USA could have avoided this. Swiss banks could call one government’s bluff but they couldn’t face down an entire continent. The threat of being shut out of all business in the EU would have concentrated their minds. They would have offered up the tax criminals eventually. But nothing of the sort was even tried. The EU, it seems, can act as one when it comes to implementing silly regulations or imposing contradictory employment rights on member states, yet it is incapable of taking on the really powerful vested interests.
If you want to understand the limits of the UK’s sovereignty, look no further. Swiss banks can toss our government a few scraps with one hand and give it the finger with the other. And our government is either unwilling, or unable, to fight back.
Back in the days when governments still had power, and leaders who were prepared to use it, President De Gaulle showed the world how to deal with tax havens. He forced Monaco to comply with French tax law and stop sheltering French tax evaders, by closing its borders and cutting off its water supply. Switzerland is totally encircled by EU countries whose citizens stash their money illegally and anonymously in Swiss banks. Why don’t we close their airspace and starve them out until they give us the criminals and their cash?
It would never happen, of course, because our leaders are far too timid these days. And, perhaps, many of them have too much to lose if the details of Swiss bank account holders became public.
So, a couple of weeks after its promise to crack down on poor criminals, the government has done a deal to let rich ones off the hook. Ken Clarke may have climbed down on his proposal but there will be no U-turn on this one.

