Britain's role in the growth of tax havens

Andrew Verity in The BBC


Here's the received wisdom: when the British Empire faded in size and significance after World War Two, a few scattered islands around the globe wanted to keep their imperial ties to London.

The British government had to find a way to reduce the economic dependence of the likes of Bermuda, Montserrat or the British Virgin Islands, so it awarded them special tax-exempt status, creating the conditions for a thriving financial services industry.

Yes, tax evasion and money laundering may have got a little out of hand from time to time, but overall it succeeded in lifting them out of dependence on the UK government.

But there's a deeper story. It wasn't by design that the remnants of a dying British Empire morphed into a world leader in offshore financial services, selling secrecy and tax avoidance to multi-nationals and the wealthiest individuals in the world.

Instead, the crucial moment was more of an accident - which gave rise to advantages no-one had foreseen.

And it began not in Bermuda or Jersey but in another offshore centre - "offshore" not to the UK, but to the US - the City of London.

Incentives to avoid

When the 20th Century began, income tax was in single digits and progressive taxation - charging richer people a higher rate - had barely begun.

In the run-up to World War One, chancellors of the exchequer - from Asquith to Lloyd George - began raising taxes to pay for social reforms, such as the old age pension.

As the war progressed, the state demanded more and more income tax from every citizen and higher rates for the wealthy, leading to a top rate of 30% by 1919.

Accountants to wealthy individuals began to devise ways to avoid tax. Clients could become resident in Jersey, where tax rates were far lighter.

Or, if they wanted to stay in London, they might put their money in a trust registered elsewhere, perhaps on the Isle of Man, where in theory it was no longer theirs - and therefore not visible to the prying eyes of an Inland Revenue inspector.

David Lloyd George served as Chancellor in Herbert Henry Asquith's government, before rising to PM in 1916

But it was in the dying days of the Empire that the offshore financial services industry truly boomed.

Defined by purpose rather than geography, "offshore" means any jurisdiction that seeks to attract investors on the basis of light taxes and looser regulations.

On that basis, the epicentre of the offshore industry is not Nassau in the Bahamas or George Town in the Cayman Islands.

As author Nick Shaxson points out in his fascinating offshore expose, Treasure Islands: "The modern offshore system did not start its explosive growth on scandal-tainted and palm-fringed islands in the Caribbean, or in the Alpine foothills of Zurich. It all began in London, as Britain's formal Empire gave way to something more subtle."

By accident - not design

In 1957, Britain and its imperial remains were trying to recover from a financial crisis. The previous year the UK had joined forces with France and Israel to try to recapture the Suez Canal after it was nationalised by the defiant anti-colonial Egyptian President, Gamal Abdel Nasser.

Viewing the invasion as European imperialism at its worst, the US refused any assistance.

By the end of 1956, a run on the pound was under way. The Bank of England wanted to curb the outflow of pounds by boosting interest rates sharply, but Her Majesty's Treasury had other ideas.

Since the Bretton Woods economic conference of 1944 towards the end of World War Two, countries had agreed to control movements of capital to curb the speculative flows into and out of countries that had worsened the economic crises of the past.

If, say, Tate & Lyle wanted to invest several million pounds in a new sugar production facility in Jamaica, it would need signed approval from Her Majesty's Treasury.

Normally this was a formality. But during the Suez crisis, the Treasury announced that, on a temporary basis, it would no longer approve foreign capital investments.Image copyrightREUTERSImage captionThe Bank of England did not get its way against the Treasury

The City's merchant banks were alarmed. Arranging finance for projects in the former colonies was their lifeblood. How would they avoid ruin?

Digging through the archives, financial academic Gary Burn unearthed what happened next.

Hearing the banks' complaints in a series of meetings, the Bank of England agreed in late 1957 to allow the commercial banks to continue to lend and borrow to foreign clients on two conditions:
the lending had to be in a currency other than sterling, and
both sides of the transaction - the lender and the borrower - had to reside somewhere other than the UK
"The decision was momentous in all respects," says one of the leading experts in offshore finance, Prof Ronen Palan of City, University of London. "They simply deemed certain transactions as not taking place in the UK. Where did the transactions take place for regulatory purposes? Nowhere.

"I think it wasn't at all by design; it was a mistake. They didn't understand the implications. It was seen as an accounting device."

The so-called "Eurodollar" was born - a global offshore financial market, transacting in dollars and allowing unlimited sums to be borrowed and lent, but under the control of no single state. No act of Parliament (or Congress) sanctioned the decision. There was no thoughtful policy-making, no careful debate.

Success of the Eurodollar

The Treasury was at first left in the dark. But within years the implications were obvious - this could revive the City of London's fortunes.

"By the time the Treasury figured it out, they thought, 'this is good business for the City'," said Prof Palan.

Banks from all around the world could borrow and lend in dollars without being subject to US tax or banking regulations - making banking in dollars more profitable out of London than out of Wall Street.

Offshore banks didn't have to hold money in reserve for every dollar they lent (as they would in the US), which would dramatically cut their costs.

While transactions were arranged in London, the lenders and borrowers could be registered anywhere. But the parties to Eurodollar transactions needed addresses.

So, zero-tax jurisdictions from the Cayman Islands to the Montserrat were used by London's investment banks as the official tax residences of their wealthy customers.

Clients could avoid both tax and undesirable scrutiny - for example from the US tax authorities.

In the British Overseas Territories, local laws were passed to attract more registration business, collecting modest fees that mounted up. No need for a bank branch out there - just a drawer in an offshore lawyer's filing cabinet.

The City of London began its recovery to become the centre of finance it is today

Howls of protest from the US government were ignored. Between 1960 and 1970, the size of the Eurodollar market went from $1bn to $46bn.

In the 1970s, countries rich in petrodollars from soaring oil prices were faced with a dilemma: repatriate the money to New York - where they would be taxed on it - or keep it offshore.

By 1980, the so-called Eurodollar market was worth more than half a trillion.

After the deregulation of the City of London in the 1986 "Big Bang", US banks joined in, setting up in London.

And as the 1990s and 2000s progressed, it became the undisputed global centre for foreign currency trading.

Not for the weather

Banks' wealthy individual and corporate clients didn't incorporate in the Cayman Islands or the British Virgin Islands because they liked the weather there - many never visited.

Offshore centres were attractive to businesses looking to reduce their tax bill, but sometimes, more importantly, to avoid what they regarded as excessive regulation.

Cayman Islands-registered companies were used heavily, for example, by the energy giant Enron as it built its business model based on fraudulent accounts.

Tax-free, light regulation jurisdictions, including the Bahamas, the Cayman Islands and Delaware in the US, became the corporate locations of choice for legitimate hedge funds.

They were also used to incorporate the vehicles at the heart of the global financial crisis - the 'structured investment vehicles' that did not show up on bank's balance sheets and bought billions of mortgage-backed securities, massively increasing the unnoticed risks in the global financial system which led to the crisis of 2008.

Likewise, the British Virgin Islands has been used by many legitimate businesses. It has also become the favourite secrecy jurisdiction for clients of the Panama-based law firm exposed in last year's Panama Papers revelations, Mossack Fonseca.

Since those revelations, governments around the world have pledged to improve transparency with measures such as automatic information sharing and registers of beneficial owners of offshore companies.

Many of those measures are yet to be enacted or tested.

But as the Paradise Papers are now confirming, the secrets of Britain's offshore empire are no longer quite so safe.

All those in developing countries please look away now - Aid in reverse: how poor countries develop rich countries

Jason Hickel In The Guardian


We have long been told a compelling story about the relationship between rich countries and poor countries. The story holds that the rich nations of the OECD give generously of their wealth to the poorer nation cheats of the global south, to help them eradicate poverty and push them up the development ladder. Yes, during colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies – but that’s all in the past. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill.

This story is so widely propagated by the aid industry and the governments of the rich world that we have come to take it for granted. But it may not be as simple as it appears.

The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. They tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows (as previous studies have done) but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later). As far as I am aware, it is the most comprehensive assessment of resource transfers ever undertaken.


The flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction

What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.

In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is roughly the GDP of the United States

What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.

What do these large outflows consist of? Well, some of it is payments on debt. Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.

Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.

Multinational companies also steal money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.

GFI doesn’t include same-invoice faking in its headline figures because it is very difficult to detect, but they estimate that it amounts to another $700bn per year. And these figures only cover theft through trade in goods. If we add theft through trade in services to the mix, it brings total net resource outflows to about $3tn per year.

That’s 24 times more than the aid budget. In other words, for every $1 of aid that developing countries receive, they lose $24 in net outflows. These outflows strip developing countries of an important source of revenue and finance for development. The GFI report finds that increasingly large net outflows have caused economic growth rates in developing countries to decline, and are directly responsible for falling living standards.

Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.

FacebookTwitterPinterest Protest about tax havens in London in 2016, organised by charities Oxfam, ActionAid and Christian Aid. Photograph: Carl Court/Getty Images

Still, illegal capital flight wouldn’t be possible without the tax havens. And when it comes to tax havens, the culprits are not hard to identify: there are more than 60 in the world, and the vast majority of them are controlled by a handful of western countries. There are European tax havens such as Luxembourg and Belgium, and US tax havens like Delaware and Manhattan. But by far the biggest network of tax havens is centered around the City of London, which controls secrecy jurisdictions throughout the British Crown Dependencies and Overseas Territories.

In other words, some of the very countries that so love to tout their foreign aid contributions are the ones enabling mass theft from developing countries.

The aid narrative begins to seem a bit naïve when we take these reverse flows into account. It becomes clear that aid does little but mask the maldistribution of resources around the world. It makes the takers seem like givers, granting them a kind of moral high ground while preventing those of us who care about global poverty from understanding how the system really works.
Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. We could write off the excess debts of poor countries, freeing them up to spend their money on development instead of interest payments on old loans; we could close down the secrecy jurisdictions, and slap penalties on bankers and accountants who facilitate illicit outflows; and we could impose a global minimum tax on corporate income to eliminate the incentive for corporations to secretly shift their money around the world.

We know how to fix the problem. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, do we have the courage?

Don’t blame foreign investors – the roots of the housing crisis lie closer to home

David Madden in The Guardian

In a city where super-prime properties and tenant evictions are both on the rise, the housing system is broken and many residents are looking for someone to blame. For Londoners, rent consumes nearly two-thirds of the typical tenant’s income, and it will take 46 years for the average single person to save for a deposit on their first home. With overseas buyers acquiring as much as three-quarters of all new-build housing in London in recent years, it is understandable that foreigners would be cast as the villains behind the housing crisis. As a result, the London mayor Sadiq Khan last week launched an inquiry into foreign investment in the city’s housing market.

Londoners are not alone in questioning the impact of global investors in local housing markets. The issue is being politicised in cities throughout the world. In Vancouver, Canada, where single-family homes cost around 21 times the region’s median income, the city introduced a 15% tax on non-resident foreign property owners this August. Australian states that encompass Sydney, Melbourne, and other cities have also introduced or raised taxes on house purchases by foreigners.

It’s important to understand how overseas investment shapes residential opportunities and neighbourhood life. Khan is right to draw attention to the ways that housing in London is intertwined with global financial flows.

But foreign ownership is only part of a complex story – one that involves many actors and institutions located much closer to home. Searching for meddling non-natives to blame is ultimately a distraction. The idea that the housing crisis can be pinned on foreigners is a politically convenient simplification that risks letting other culprits off the hook, while doing little to change the status quo.

Focusing on overseas investors allows British policymakers to obscure their own role in producing the housing crisis. Over the decades, politicians at all levels of government have played an active part in creating this situation. Ministers promoted market-centric reforms such as the right to buy and more flexible tenancies, welcomed institutional investors into the housing market, and pushed through budget cuts in the name of austerity. These changes undermined council housing and weakened tenants’ security while making housing a more liquid commodity. Councillors across greater London have given the green light to estate demolition and gentrification, and allowed developers to build expensive new projects without significant numbers of affordable housing units.

Without these actions, we wouldn’t even be talking about Russian or Chinese investors. National and local political elites in Canada, Australia, the US, and elsewhere likewise bear responsibility for promoting the financialisation of housing.


Pointing at foreigners is a way to pretend to address the housing problem while ignoring the demands of activists

Blaming overseas investors similarly ignores domestic ones. Foreign owners may be particularly disconnected from local knowledge and conditions, but if they were simply replaced by their native counterparts who pursue the same strategies, the housing crisis would remain.

Pointing the finger at foreigners is also a way to pretend to address the housing problem while ignoring the demands of activists. The movements that have been mobilising in opposition to developers, councils and national government are fighting against displacement and in favour of establishing housing as a universal right. Whether exploitative landlords and serial collectors of luxury flats are British or foreign is beside the point. No housing activist has ever carried a sign demanding “British mansions for British oligarchs.”

None of this is to say that foreign ownership doesn’t matter. But the real issue is the political-economic condition that makes it possible: the commodification of housing. This term describes the process by which housing comes increasingly to function as a financial instrument rather than as shelter. Foreign ownership only matters because it is fuelling this broader process.

Rather than lashing out at foreigners, who are an easy target, city-dwellers and politicians such as Sadiq Khan need to ask tougher questions. Whose interests are served by urban regeneration in its current form? Why are collective resources such as public housing being dismantled and sold off? What alternatives to deepening housing inequalities are possible?

The biggest benefit of Brexit might be the economic hit we take

If the City of London were to take a hit and the economy were to suffer as a result – which, as a Remainer and a Europhile, I tend to think it will – there is an argument to be made that the UK would actually be all the healthier for it.

Mary Dejevsky in The Independent

One of the messages declaimed most loudly by the Remain campaign before the UK referendum was a warning that Brexit would spell disaster for the City of London and the financial services that were now this country’s economic lifeblood. That message was also one of the most ill-judged of any during the whole campaign. Yet it seems that neither side has still quite got the point.

After denouncing what they branded “Project Fear”, victorious Brexiteers are now exulting in figures that supposedly show everything in the economic garden to be lovely. There you are, they say, the Remainers were just scaremongering, as we said all along. There is nothing to worry about in going it alone; indeed, if anything, the UK will benefit. They cite an upturn in consumer spending, no serious fall in house prices, no flight of the brightest and best, and no real uptick in inflation.

The Remainers for their part insist that the shocks are already creeping up on us and the worst is yet to come. The de facto devaluation in sterling may be helping exports and bolstering share prices, but it has already increased the cost of most foreign holidays, and higher prices of most imports will start to come through just as winter sets in. Any impression of economic strength, they go on, is mainly illusory, reflecting the effect of devaluation on the stock market and the Bank of England’s pre-emptive cut in interest rates. Only when the Government finally gets around to invoking Article 50, they maintain, so triggering the withdrawal process irrevocably, will the economic fallout really start to be felt.

This bickering over the economy, however – its talking up by one side and talking down by the other – is not only premature in the extreme, but misses one simple point. When the former Chancellor, George Osborne, and his friends in the City spread doom and gloom about the future of the city should Leave prevail, the response in many quarters was not entirely as they had scripted. Yes, there were some howls of empathetic anguish, but there were also shouts of hooray – some articulated, many not.

To forecast, as Osborne and others did, that the sky would fall in on London and the City’s hugely profitable financial services was also to hold out the promise of a time when there could be a return to a real economy made up of real things, rather than a virtual economy derived from onscreen speculation in funny money. To add, as some Remain frontpeople did, that there would also be a flight of foreign banks from the City and that house prices in London could fall only compounded the rebel calls to “bring it on”.

In trying to defend the city from what they saw as the Brexit threat, its advocates were – unwittingly, it must be assumed – making a compelling case for the opposition. One person’s high-paying City job is another person’s precarious gig existence. One person’s security from high and ever-higher house prices is another person’s exclusion from home ownership. You could hardly find a better illustration of the clash of interests and cultures exposed by the referendum.

And here I must admit that I have a lot more sympathy for the rebels than a London-based home-owning Remainer should. It also strikes me that, in insisting that the economy will continue to flourish, the Brexiteers risk giving a hostage to fortune and perhaps missing a trick. Because if the City of London were to take a hit and the economy were to suffer as a result – which, as a Remainer and a Europhile, I tend to think it will – there is an argument to be made that the UK would actually be all the healthier for it.

Now it may be that the city will not shrink. It may be that all the foreign banks and finance houses with a presence there will continue to regard London as a necessary base for their global operations, whether or not it remains a gateway to the European Union. We know all the arguments about the time zone, the language, the quality of life, the schools and the shopping, and perhaps they will prevail.

But if – as appears likely – London banks post-Brexit lose the “passporting” system that gives them direct access to the EU single market – a threat much bandied about during the campaign – and if foreign companies start to transfer their operations across the Channel; if the number of people able and willing to pay high-end London property prices falls (and the pool of such people seems to have been vastly overestimated by construction companies anyway); and if – just if – as a result the high tide of cash flooding the capital starts to recede, what then?

The Remain campaign predicted that the UK as a whole could be drastically poorer. Another possibility, though, is that London starts to dominate the national picture less than it does now. The “great sucking sound”, complained of by pro-independence Scots during their referendum, would quieten down, and the enormous disparity in wealth both within the south-east and between London and most of the rest of the country would be reduced.

Of course, nothing will change the fact that political and financial power are centred in one city in the UK, unlike, say, in the US or in Germany. But the outsized contribution that London currently makes to national GDP - 22 per cent for 12 per cent of the population - is disproportionate, and leaves most other parts of the country far behind. Even George Osborne conceded that the economic dominance of London had its downside and is one reason why he championed the “northern powerhouse” - that, and perhaps his Cheshire constituency.

At a time (2014) when he was riding high as leader of Ukip and the referendum was barely a glint in David Cameron’s eye, Nigel Farage told an interviewer that if a decline in GDP were the price to be paid for greater social cohesion, he would accept the trade-off. I suspected then, and believe still more firmly now, that many – and not only Brexiteers – would agree with him.

Given that recent increases in national GDP have been shared more inequitably in the UK than in almost any other developed country; given, too, the extent of London’s economic dominance, some evening out of the disparities is surely overdue. Could it even be that a necessary internal economic and social rebalancing is eventually judged – even by reluctant Remainers – to be an actual benefit of Brexit?

A yes vote in Scotland would unleash the most dangerous thing of all - hope

Independence would carry the potential to galvanise progressive movements across the rest of the UK

• 
• • George Monbiot
  • The Guardian, Tuesday 9 September 2014 18.58 BST

"It’s no surprise that the more the Scots see of their former Labour ministers, the more inclined they are to vote for independence." Photograph: Mike Finn-Kelcey/Reuters

Of all the bad arguments urging the Scots to vote no – and there are plenty – perhaps the worst is the demand that Scotland should remain in the union to save England from itself. Responses to my column last week suggest this wretched apron-strings argument has some traction among people who claim to belong to the left.

Consider what it entails: it asks a nation of 5.3 million to forgo independence to exempt a nation of 54 million from having to fight its own battles. In return for this self-denial, the five million must remain yoked to the dismal politics of cowardice and triangulation that cause the problems from which we ask them to save us.

“A UK without Scotland would be much less likely to elect any government of a progressive hue,” former Labour minister Brian Wilson claimed in the Guardian last week. We must combine against the “forces of privilege and reaction” (as he lines up with the Conservatives, Ukip, the Lib Dems, the banks, the corporations, almost all the rightwing columnists in Britain, and every UK newspaper except the Sunday Herald) – in the cause of “solidarity”.

There’s another New Labour weasel word to add to its lexicon (other examples include reform, which now means privatisation; and partnership, which means selling out to big business). Once solidarity meant making common cause with the exploited, the underpaid, the excluded. Now, to these cyborgs in suits, it means keeping faith with the banks, the corporate press, cuts, a tollbooth economy and market fundamentalism.

Here, to Wilson and his fellow flinchers, is what solidarity meant while they were in office. It meant voting for the Iraq war, for Trident, for identity cards, for 3,500 new criminal offences, including the criminalisation of most forms of peaceful protest. It meant being drafted in as political mercenaries to impose on the English policies to which the Scots were not subject, such as university top-up fees and foundation hospitals. It meant supporting every destructive and unjust proposition advanced by their leaders: the brood parasites who hatched in the Labour nest then flicked its dearest principles over the edge. It’s no surprise that the more the Scots see of their former Labour ministers, the more inclined they are to vote for independence.

So now Better Together has brought in Gordon Brown, scattering bribes in a desperate, last-ditch effort at containment. They must hope the Scots have forgotten that he boasted of setting “the lowest rate in the history of British corporation tax, the lowest rate of any major country in Europe and the lowest rate of any major industrialised country anywhere”. That he pledged to the City of London “in budget after budget, I want us to do even more to encourage the risk takers”. That, after 13 years of Labour government, the UK had higher levels of inequality than after 18 years of Tory government. That his government colluded in kidnapping and torture. That he helped cause the deaths of hundreds of thousands through his support for the illegal war on Iraq.

He roams through Scotland, still badged with blood, promising what he never delivered when he had the chance, this man who helped unravel the social safety net his predecessors wove; who marketised and dismembered public services; who enriched the wealthy and shafted the poor; who pledged money for Trident but failed to reverse the loss of social housing; whose private finance initiative planted a series of timebombs now exploding throughout the NHS and other public services; who greased and wheedled and slavered his way into the company of bankers and oligarchs while trampling over the working people he was elected to represent. This is the progressive Prester John who will ride to the rescue of the no campaign?

Where, in Scotland’s Labour party, are the Keir Hardies and Jimmy Reids of our time? Where is the vision, the inspiration, the hope? The shuffling, spineless little men who replaced these titans offer nothing but fear. Through fear, they seek to shove Scotland back into its box, as its people rebel against the dreary, closed future mapped out for them – and the rest of us – by the three main Westminster parties.

Sure, if Scotland becomes independent, all else being equal, Labour would lose 41 seats at Westminster and Tory majorities would become more likely. But all else need not be equal. Scottish independence can galvanise progressive movements across the rest of the UK. We’ll watch as the Scots engage in the transformative process of writing a constitution. We’ll see that a nation of these islands can live and – I hope – flourish with a fully elected legislature (no House of Lords), with a fair electoral system (proportional representation), and with a parliament in which only representatives of that nation can vote (no cross-border mercenaries).

Already, the myth of political apathy has been scotched by the tumultuous movement north of the border. As soon as something is worth voting for, people will queue into the night to add their names to the register. The low voter turnouts in Westminster elections reflect not an absence of interest but an absence of hope.

If Scotland becomes independent, it will be despite the efforts of almost the entire UK establishment. It will be because social media has defeated the corporate media. It will be a victory for citizens over the Westminster machine, for shoes over helicopters. It will show that a sufficiently inspiring idea can cut through bribes and blackmail, through threats and fear-mongering. That hope, marginalised at first, can spread across a nation, defying all attempts to suppress it. That you can be hated by the Daily Mail and still have a chance of winning.

If Labour has any political nous, any remaining flicker of courage, it will understand what this moment means. Instead of suppressing the forces of hope and inspiration, it would mobilise them. It would, for instance, pledge, in its manifesto, a referendum on drafting a written constitution for the rest of the UK.

It would understand that hope is the most dangerous of all political reagents. It can transform what appears to be a fixed polity, a fixed outcome, into something entirely different. It can summon up passion and purpose we never knew we possessed. If Scotland becomes independent, England – if only the potential were recognised – could also be transformed.

Mark Simmonds’ story is not about him, but a broken housing market

We need to find a radical solution to this inflated market, in which even the top 1% can’t afford to house their children in the capital

• 
• • Zoe Williams
  • The Guardian, Wednesday 13 August 2014

'In central London, the only viable markets are the ones that are subsidised by the government – either by housing benefit or MPs’ expenses – or the ones for the super-rich.' Illustration: Belle Mellor

All in it together? Mark Simmonds, conservative MP for Boston and Skegness, has resigned, citing the intolerable pressure of trying to live in London on an MP’s expenses. He wants his family to live in London, which is understandable. For this, a rental allowance of £20,600 plus £2,425 for each child (he has three) is insufficient. “Of course if MPs want to get into the business of travelling extensively from Westminster to the outer reaches of London to rent a flat then that’s up to them,” he told BBC Radio 4’s World at One programme on Monday. “But that’s not the lifestyle I want and it’s not the lifestyle I have chosen for myself or I want for my family.”

Here, he starts to become less sympathetic as a character. He earns almost £90,000, and pays his wife up to £25,000 from his parliamentary office. He is on record as the most expensive MP in Lincolnshire, having claimed £173,000 in expenses in 2013.

He is also a vocal proponent of the benefit cap, finding it disgusting that some families can claim more in benefits than the average person earns, even while he finds it intolerable that he can only claim in accommodation expenses £2,000 more than the cap. Every time some new detail emerges, his obnoxiousness swells like a mudbath, ready to break its banks. To wallow in it would be fun but sullying, and also obscures the fact that Simmonds has done us a favour.

To qualify to be a member of the top 1% in the UK, you need a total household income before tax of £160,000 a year. Simmonds, let’s not forget, fell foul of the transparency rules in 2012 when he failed to declare his £50,000 salary from Circle Healthcare before he weighed into health debates in favour of privatisation.

So without even venturing into the territory of whether or not he’s a disgrace to public life, we can assume that by a combination of “freelance” work and the benefits in kind that must surely accrue from his expenses, his household income probably puts him in the top 1%.

There is broad agreement now, whether you love equality or hate it, that the top 1% isn’t really the story; the story is the top 0.1%. Nevertheless, when a man in the top 1% who has his rent paid still can’t afford to house his children in the capital, it is no longer a story about what kind of a person he is: this is a story about a broken system.

In central London, the only viable markets are the ones that are subsidised by the government – either by housing benefit or MPs’ expenses – or the ones for the super-rich. In Westminster, where Simmonds wants to live, the average house price was £1.3m in June last year (prices have gone up by 6% since then). Two things are striking when you look for rental properties for a family with three children at Simmonds’ cap of around £2,300 per month – as newspapers everywhere will spend this week doing.

What hits you first is how few properties are available, only a handful on any website, even if two of his children would be prepared to share a room (as children are required to do, incidentally, by the government’s bedroom tax, which Simmonds voted for). This is commensurate with the fact that central London has been largely bought up by investors who, at the higher price points, are just looking for a currency haven and leave their properties empty, having little interest in rental income (75% of new developments in central London are not open to the UK market).

The second striking thing is the outlandishness of central London prices: penthouses available for £50,000 a week. Poor Simmonds doesn’t have a hope.

Two main trends dominate the housing debate (though not noticeably in the Conservative party – they still think the answer to this madly inflated market is to keep it buoyed up with government money, via the Help to Buy scheme). There is broad agreement that this is a London problem and only bleating metropolitan elites are troubled by it. In fact, the disparity between earnings and property prices spreads from Bristol in the west to Cambridge in the east; ultimately, the only places immune from a property boom will be those with no jobs, and that doesn’t help anybody.

There is also the sudden unison that all we need to do is build more houses. If this just means throwing more money at private developers, for private buyers, with the proviso of a few social units that can be accessed through a pauper’s entrance, that’s not going to help.

The country needs houses that are owned by the government, not just so that it can stop the frivolity of housing benefit, but because a contractor isn’t going to build the houses we need.

We have the technology to do something radical with housing. We could build flats that are not just carbon-neutral, but energy-neutral through solar power, and with their own food growing up the walls that everybody would bite your hand off to live in. The ghettoisation of social housing would be a thing of the past. These places may embody so much ambition and possibility that we could get over our obsession with whether or not we owned or part-owned or rented them (look at the vision of the Green Cities Foundation or the Future Cities Catapult).

We don’t have to be stuck in this broken system, battling a faceless and impossible market with pleas for one that is fractionally better and marginally more accessible. We could be on the brink of building something together and, ironically, it could be Simmonds, featherer of no nests but his own, who drove us to it.

More banking scandals to come, admits Treasury Minister Andrea Leadsom

Andrew Grice in The Independent

More scandals in the financial sector are in the pipeline, the Treasury Minister responsible for the City of London has admitted.

Andrea Leadsom, who previously worked in banking and finance for 25 years, warned that there were more "cringeworthy announcements" to come and that there was "still a lot of baggage" in the financial industry.

Ms Leadsom, who held senior roles at Barclays and Invesco Perpetual before becoming an MP, told the parliamentary magazine The House there was still a long way to go change the City’s culture. Asked whether it is learning the lessons of the financial crisis, she replied: "I would say that at the top echelons of the banks, absolutely. But I think there's quite a long way to go to really change the culture. I think it did become very transaction-oriented and I think it will take time to recover that. I think we are still going to see a lot of cringeworthy announcements."

She admitted that when she heard about the Libor interbank lending rate scandal, she thought: “Well, if Libor is rigged, then what wasn’t rigged?”

Mrs Leadsom said: "We've had a number of issues over bank wrongdoing. There are inquiries going on, there are some pretty serious allegations out there, we've still got PPI going on. There are still things happening and redress under way. So it's quite difficult to just forget about that and move on. There's still a lot of baggage.”

Shortly after she was appointed Treasury Economic Secretary in April, The Independent revealed that she had previously used trusts to reduce her potential tax bill and offshore banking arrangements for her buy-to-let property company.

In the interview, Ms Leadsom declined to say whether she would vote in favour of the HS2 project - even though it is championed by her Treasury boss George Osborne. It would affect her South Northamptonshire constituency and while she is a backbencher, she opposed the Bill paving the way for the scheme. “I’m absolutely firmly committed to getting decent compensation and mitigation for my constituents and I think there’s a long way to go yet,” she said.

She also departed slightly from the party line on Europe, saying that there might be case for leaving the EU. The founder of the Conservative Fresh Start project aimed at getting a better deal for the UK, she said: "Obviously [if there's] a nonsense reform that doesn't achieve anything, then it might be. But at the moment I've spent four years working extremely hard trying to find things that would make it worth staying in."

Ms Leadsom dismissed calls by Tory Eurosceptics for David Cameron to set out his shopping list of demands for the renegotiation of Britain’s membership terms.

Defending the controversial Help to Buy mortgage guarantee scheme, she said: “Overwhelmingly, it's achieving its aspiration of helping people to get their first home. I get many more letters from people saying 'I'm desperate to get a mortgage, why have you done this mortgage market review?' rather than people saying 'oh, you know, property prices are ridiculously high".

The Met's problem isn't bad apples, it's the whole barrel. Abolish it

After Stephen Lawrence, Ian Tomlinson and countless other scandals, it's clear the Metropolitan police is institutionally rotten. London deserves better

• 
• • Owen Jones
  • The Guardian, Sunday 9 March 2014 18.29 GMT

'It's all over for the Met.' Illustration by Andrzej Krauze

If hacking someone's voicemail is a gross invasion of privacy, what words are left to describe agents of the state with fake identities having sex with women they're spying on? One activist who had a child with the undercover police officer Bob Lambert has offered four words: "raped by the state". She is among a group of women activists currently fighting attempts by the Met to sabotage their quest for truth and justice. If phone hacking provoked anger, the use of police spies should chill.

But police spies stealing the identities of dead children and duplicitously sharing the homes, beds and lives of women is only the latest in a string of damning scandals about the Metropolitan police: Stephen Lawrence, and the Macpherson report's subsequent conclusion that the Met is institutionally racist; a stop-and-search policy that discriminates against black people; deaths in police custody; the shooting of Jean Charles de Menezes; the unlawful killing of Ian Tomlinson; the treatment of protesters as social problems to be contained; the stitching up of a Tory heavyweight.

Each scandal is examined in isolation, treated as the action of rogue officers. But together they suggest an institutionally rotten system. Londoners need a force devoted to protecting their security, which treats all sections of the community equally, and which enjoys the consent and trust of everyone. Currently they do not have one, and so it must be built on new foundations.

This is a suggestion that will infuriate some, not least Met officers. Easy for a columnist, issuing grand proclamations behind the safety of his desk. Met officers, on the other hand, are taking rapists and killers off the streets, putting their lives in danger as they do so. More than 3,000 British police officers are injured a year; about 800 seriously. But this is not about individuals: it's the system that is the problem, and it traps good and bad officers alike.

The government has finally announced an inquiry into police spies, driven on by the revelation that a police force supposed to be solving the murder of Stephen Lawrence was actually spying on his grieving family. But Doreen Lawrence is right to state that police failings go to "the highest level", and the Macpherson report's damning conclusion – that the Met is "institutionally racist" – is as true as ever.

 Doreen Lawrence, the mother of Stephen Lawrence, 'is right to state that police failings go to the highest level'. Photograph: Andy Rain/EPA

I've never been randomly stopped and searched by a police officer, but I've met plenty of young black men who have. The experience varies: sometimes officers are almost apologetic, other times full of intimidation and aggression. The evidence shows that black people are significantly less likely to use drugs, and yet black Londoners are six times more likely to be stopped on suspicion of possession. It is difficult to conclude that this is anything but racism.

It is not just black Londoners who have described the Met as "the biggest gang around here": senior officers have self-described as such. "You might have 100 people in your gang," publicly declared Chief Inspector Ian Kibblewhite, of Enfield police, in 2012. "We have 32,000 people in our gang. It's called the Metropolitan police." But a "gang" does not serve a community: it has a turf, a demand for prestige and status, a desire to smash enemies.

When Andrew Mitchell was stitched up by Met officers, the lesson was frightening and instructive. The number of officers involved – including PC Keith Wallis, jailed for falsely claiming to have witnessed the infamous bicycle incident – must give pause to those who think it is a story of "bad apples". If an upper-middle-class Conservative cabinet minister can be stitched up, what hope for the rest of us? It is a point he has passionately and rightly made himself.

A story of conspiracy and cover-up is all too familiar, although other victims do not enjoy anything approaching the power and influence of a Conservative chief whip. There have been 82 black and minority ethnic deaths following contact with the Metropolitan police since 1990, and not a single successful prosecution. Among them is Sean Rigg, a black musician who died in Brixton police station in 2008; four years later, an inquest jury found that police had used unnecessary force against him. It was in stark contrast to initial police claims, and – after a prolonged fight by Rigg's family – three officers were arrested on suspicion of perjury.

When the newspaper vendor Ian Tomlinson died after being thrown to the ground in 2009 at the G20 protests by PC Simon Harwood, the initial police narrative – faithfully repeated by so many news outlets – blamed protesters, claiming that officers coming to his help were bombarded with "bricks, bottles and planks of wood". It was all lies, and symptomatic of a force that saw protest as something that had to be contained, not facilitated. Young people had been patronised as the apathetic "X Factor generation": when they mobilised on the streets, they were met with batons and kettles.

What would a new police force look like? That should be left to a royal commission – headed by an independent figure, not an establishment patsy – which calls evidence from all sections of the community. Structures, training, forms of accountability: all need to be designed from scratch. It needs to be a body stripped of prejudice and bigotry, that defends hard-won democratic freedoms, as well as protecting people's security. It is all over for the Met, and time to debate the police force that London deserves.

Rudeness is off the menu at WONG KEI's - Will it then retain its authentic dining experience?

If you Google "rudest restaurant in London" every result on the first page directs you to the same venue – the notorious Wong Kei. But now the Chinatown eatery that has earned cult status for its snarling waiters is under new ownership – and is pledging to improve the quality of its service.

The news may come as a disappointment to generations of diners who have grown accustomed to the grumpy insults dished out by serving staff to customers who resist being told to share tables or go upstairs.

Wong Kei shut its doors earlier this month, sparking fears among "Wonkees" that it might be closing for good. One loyal diner, archaeologist Brenna Hassett, 33, said: "This is deeply tragic. Wong Kei's is a student favourite of mine and a crew of friends. The order to 'go upstairs' rings for ever in my mind."

But manager Daniel Luc said that the restaurant in Wardour Street would reopen on 10 March after refurbishment, albeit with a slightly different approach. "Maybe there was an issue with rude staff 20 to 30 years ago, but I don't think so any more. I don't know whether that's a good thing or not!" he said.

"But, in my opinion, the things we will be improving are the service and the quality of food. We'll still have the same menu, so customers can look forward to their favourite things."

Police are cracking down on students

Police are cracking down on students – but what threat to law and order is an over-articulate history graduate?

For most of my life student politics has been little more than a joke. Suddenly it's become both serious and admirable

• 
• • Aditya Chakrabortty
  • The Guardian, Monday 18 November 2013 20.00 GMT

A protester against the proposed closure of the ULU student union last week. Photograph: Paul Davey/Demotix/Corbis

Why are some of the most powerful people in Britain so terrified of a bunch of students? If that sounds a ridiculous question, consider a few recent news stories. As reported in this paper last week, Cambridge police are looking for spies to inform on undergraduate protests against spending cuts and other "student-union type stuff". Meanwhile, in London last Thursday, a student union leader, Michael Chessum, was arrested after a small and routine demo. Officers hauled him off to Holborn police station for not informing them of the precise route of the protest – even though it was on campus.

The 24-year-old has since been freed – on the strict condition that he doesn't "engage in protest on any University Campus and not within half a mile boundary of any university". Even with a copy of the bail grant in front of me, I cannot make out whether that applies to any London college, any British university – or just any institute of higher education anywhere in the world. As full-time head of the University of London's student union, Chessum's job is partly to protest: the police are blocking him from doing his work. But I suppose there's no telling just what threat to law and order might be posed by an over-articulate history graduate.

While we're trawling for the ridiculous, let us remember another incident this summer at the University of London, when a 25-year-old woman was arrested for the crime of chalking a slogan on a wall. That's right: dragged off by the police for writing in water-soluble chalk. Presumably, there would have been no bother had she used PowerPoint.

It all sounds farcical – it is farcical – until you delve into the details. Take the London demo that landed Chessum in such bother: university staff were filming their own students from a balcony of Senate House (the building that inspired the Ministry of Truth in Orwell's Nineteen Eighty-Four, appropriately enough). Such surveillance is a recent tradition, the nice man in the University press office explains to me – and if the police wanted the footage that would be no problem.

That link with the police is becoming increasingly important across more and more of our universities. London students allege that officers and university security guards co-ordinate their attempts to rein in demonstrations while staff comment on the increased police presence around campus. At Sussex, student protests against outsourcing services were broken up this April, when the university called in the police – who duly turned up with riot vans and dogs. A similar thing happened at Royal Holloway university, Surrey in 2011: a small number of students occupied one measly corridor to demonstrate against course closures and redundancies; the management barely bothered to negotiate, but cited "health and safety" and called in the police to clear away the young people paying their salaries.

For most of my life, student politics has been little more than a joke – the stuff of Neil off the Young Ones, or apprentice Blairites. But in the past few years it has suddenly become both serious and admirable, most notably with the protests of 2010 against £9,000 tuition fees and the university occupations that followed. And at just that point, both the police and university management have become very jumpy.

For the police, this is part of the age-old work of clamping down on possible sources of civil disobedience. But the motivation for the universities is much more complicated. Their historic role has been to foster intellectual inquiry and host debate. Yet in the brave new market of higher education, when universities are competing with each other to be both conveyor belts to the jobs market and vehicles for private investment, such dissent is not only awkward – it's dangerously uncommercial. As Andrew McGettigan, author of The Great University Gamble, puts it: "Anything too disruptive gets in the way of the business plan."

Last month it appeared that Edinburgh University had forced its student union to sign a gagging clause (now withdrawn). No union officer is allowed to make any public criticism of the university without giving at least 48 hours' notice. University managers reportedly made that a deal-breaker if the student union was to get any funds.

The managers of the University of London want to shut down the student union at the end of this academic year. The plan – which is why Chessum and co were marching last week – is to keep the swimming pool and the various sports clubs, but to quash all university-wide student representation. After all, the students are only the people paying the salary of the university vice-chancellor, Adrian Smith – why should they get a say? The plan, it may not surprise you to learn, was drawn up by a panel that didn't number a single student. What with sky-high fees and rocketing rents in the capital, you might think that the need for a pan-London student body had never been higher. But then, you're not a university manager on a six-figure salary.

Where universities were historically places of free expression, now they are having to sacrifice that role for the sake of the free market. For students, that comes in the form of a crackdown on dissent. Yet the twentysomethings at university now will end up running our politics, our businesses and our media. You might want these future leaders to be questioning and concerned about society. Or you might wonder whether sending in the police to arrest a woman chalking a wall is proportionate. Either way, you should be troubled.