Standing up to the Bullies

I had the honour of giving an outsider's view at the excellent conference on Offshore in Crisis organised recently by BakerPlatt in Jersey.  I fear my views aren't widely shared among Guardian readers and European politicians, but I regard the campaign against so-called "tax havens" - given a new boost at the G20 London Summit on 2nd April - as a massive diversion from the economic priorities of the day. 

There is no evidence that offshore financial centres created or even amplified the financial crisis.  The retail and investment banks in the US and Europe needed no help in bringing the global financial system crashing down.  Cheap credit created by global imbalances encouraged reckless lending and created a huge bubble that will take years to fully deflate.  Blame New York and London for that - attacking Jersey and other OFCs is pure displacement activity.

That said, the attacks on OFCs will not go away.  The European Union, the OECD and other international bodies are all contemplating further measures to reduce the amount of business going through small jurisdictions.  So what can be done about it?

Here's my four-point plan:  

1. Take the fight to the onshore financial centres that have been found wanting over the last two years, whose regulatory standards often fall far below those of the Crown Dependencies.  This will need more co-operation between OFCs than has been seen so far.

2. Explain the role of OFCs as way-stations in global financial flows that increase trade and interconnectedness.  This would also benefit from more co-operation.

3.  Decide which lines of business are no longer worth the candle, even if not illegal.  Anything that carries major reputational risks for OFCs should be phased out - such as artificial complex financial transactions designed to save tax without creating economic value. 

4.  Lead the world in transparency and information exchange - the OFCs should set new standards before they are imposed by international bodies. The isle of Man has already taken a bold step by announcing its intention to scrap the withholding tax in 2011 and move towards automatic exchange of information with European Union countries.  Measures such as these would do much to weaken the attacks on OFCs.

Sadly, punishing OFCs, hedge funds and private equity was one of the few measures the G20 leaders could agree on.  But the best form of defence is always attack.

John Willman, an Editorial Consultant and City commentator, was until recently an Associate Editor at the Financial Times in London. His 19-year career at the world's leading business newspaper included senior roles as Banking Editor, Chief Leader-Writer and UK Business Editor, - the latter also involving leading the FT's coverage of the UK regions and the Crown Dependencies.  Since leaving the FT, he has been working on assignments for government departments and leading international companies - writing, editing, speaking and chairing conferences and seminars.

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