A key UK Parliament vote that could have seen companies registered in Crown Dependencies forced to unmask their owners has been pulled, averting a potential "constitutional crisis" at the eleventh hour.
The Chief Ministers of Jersey, Guernsey and the Isle of Man were yesterday in Westminster to lobby against an amendment to the Financial Services Bill that aimed to make Crown Dependency registers of company ownership public by the end of 2020.
They feared that, given that each island has its own government, the move led by MPs Andrew Mitchell and Dame Margaret Hodge would have triggered a constitutional crisis. The move would have also had far-reaching implications for Jersey's financial services sector - the island's largest industry.
Government has pulled today’s main business, the financial services bill. There will be up to three ministerial statements. Awaiting details. pic.twitter.com/5V3WE1NdLW— PARLY (@ParlyApp) March 4, 2019
The legislation, which was said to be aimed at enhancing tax transparency and clamping down on money laundering, was backed by former Conservative cabinet ministers Ken Clarke, David Davis and Nicky Morgan, as well as Lib Dem leader Joe Swinson, and former party leaders Ed Miliband MP (Labour) and Vince Cable (Lib Dems).
But now that push has been blocked at the last minute, with the government pulling the whole Financial Services Bill from yesterday's parliamentary agenda.
Shadow Treasury Minister Jonathan Reynolds revealed the U-turn on Twitter yesterday morning.
Since then, insiders have speculated that the vote was being postponed as the Conservative Government feared they did not command a majority.
BREAKING - the Govt have pulled the Financial Services Bill from the business today. There were amendments on preventing a ‘race to the bottom’ on financial deregulation and on transparency for the Overseas Territories and Crown Dependencies that we had hoped to pass pic.twitter.com/zOYVDuQ9C2— Jonathan Reynolds (@jreynoldsMP) March 4, 2019
Financial Secretary to the Treasury Mel Stride MP later made a statement reaffirming the UK government's commitment to tackling illicit cash flows, but this failed to appease his fellow MPs.
Jonathan Reynolds described the decision to withdraw the bill as "woeful and embarrassing", adding: "There is a majority view in Parliament that public registers provide for greater transparency... Public scrutiny would provide for analysis of suspicious patterns of behaviour, and it would disclose inconsistencies in supposedly factual information and reveal wrongdoing by people who might not already be the subject of official law enforcement action. Around the world, such information getting into the public domain has been essential to exposing tax evasion and corruption, from the laundromat scandal to the Panama papers, and the public want to see action."
Dame Hodge, one of the key names behind the amendment, questioned: "I cannot understand why the Minister does not recognise the consensus across this House on the issue… Would it not be better for the Minister to concede gracefully to the will of Parliament, rather than battling limply to a defeat in the future?"
Political journalist Tom Newton Dunn described the news on Twitter as a “Brexit timetabling disaster”, explaining that the Financial Services Bill was one of six key bits of legislation the government needed to pass by March 29 to make a ‘No Deal’ Brexit possible.
He added: “The reality for [Prime Minister Theresa May’s] minority government today is it’s finding it ever harder to pass any legislation at all, as authority continues to seep away from No10. This cannot really go on for much longer."
Three urgent questions in the Commons today:— UK House of Commons (@HouseofCommons) March 4, 2019
1) @LouHaigh - knife crime
2) @RichardBurgon - probation system
3) @AndyMcDonaldMP - Eurotunnel
And two statements:
1) @JBrokenshire - Stronger Towns Fund
2) @MelJStride - tax avoidance, evasion and compliance
John McDonnell, Labour’s Shadow Chancellor, has since hit out at the decision, blasting the government for its lack of decision-making.
“More evidence that this government is incapable of getting its business through Parliament. People have just had enough of the Chancellor dragging his feet on tackling tax avoidance. We are demanding action now and no further delays and excuses,” he said.
“The government has been a friend to tax avoiders for too long.”
It's the second sigh of relief for Jersey's government in under 12 months on the topic of public company registers. Last year, MPs tried to force the change through an amendment on a different bill related to money laundering, but it too was pulled shortly before it was due to be debated.
In the end, Overseas Territories became the subject of an order, but their governments vowed to fight against it, arguing that they were being unfairly targeted and that the move would make them less competitive compared to Crown Dependencies, who avoided it.
Jersey already has a register of beneficial ownership - a list showing the key beneficiaries of companies registered locally - but it is only available to law enforcement authorities when they demand it.
Government officials argue that the island is already well-regulated and that this system works well to tackle any crimes that do arise through island company structures. They said they would only be willing to introduce public registers if it became an international standard.
However, the MPs behind the original proposals - and yesterday's shelved amendment - said they were keen to force them upon the Crown Dependencies if they wouldn't enact the change willingly.
On Friday, a joint statement from the heads of Jersey, Guernsey and the Isle of Man explained their position on what they described as an "inoperable" proposal.
Pictured: Dame Margaret Hodge MP (Labour) and Andrew Mitchell MP (Conservative), who are leading efforts to clamp down on the Crown Dependencies, which they describe as tax havens.
"We are not represented in the UK Parliament, and it is a respected constitutional position that the UK does not legislate for the Crown Dependencies on domestic matters without our consent," they commented.
"The proposed amendments attempt to impose public registers of beneficial ownership for all Crown Dependencies and Overseas Territories. We also consider the legislation to be wholly unnecessary in the context of our robust existing approach to the retention and sharing of beneficial ownership information.
"All Crown Dependencies are committed to the highest standards of financial services regulation and transparency. Our jurisdictions are parties to Exchange of Notes for Beneficial Ownership information with the UK and are committed to the aim of exchanging adequate, accurate and current information on beneficial ownership to help combat tax evasion, money laundering and corruption."
A spokesperson for the UK Treasury said that the government wanted to have time for "proper and thorough consideration" of the proposals, which were tabled on Thursday. "The Government will not move the Bill today but will reschedule it to ensure that there is sufficient time for proper debate."
Alongside @gavinstpier and @HowardQuayleMHK, I welcome the decision of UK Government to withdraw debate of the Financial Services Bill. We now have the opportunity for meaningful engagement with UK Ministers and parliamentarians on public registers of beneficial ownership 1/2 pic.twitter.com/SStcS4oh2i— John Le Fondre (@John_Le_Fondre) March 4, 2019
In a joint statement, the Crown Dependencies said they welcomed the move.
"This deferral provides the opportunity for meaningful engagement with UK Ministers and parliamentarians on the matter of public registers of beneficial ownership, in a way that does not contravene the well-established constitutional relationships between our islands and the Crown," it read.
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