We need the freedom to be honest, not to join in corruption

Tweet

 

In 1984, the then Conservative Government set up six freeports across the UK on an experimental basis. The experiment was not exactly a huge success, and in 2012 the then Conservative Government scrapped them. The current Conservative Government now wants to try again, including overruling any objections from devolved administrations, and taking powers away from those administrations in order to implement their plans.

Contrary to what Brexiteers seem to suggest, scrapping freeports was nothing to do with the EU or the single market – EU rules allow freeports to exist, and indeed there are currently 72 such zones spread across 20 of the remaining member states. They were scrapped in the UK because they just didn’t live up to their promise. It certainly is true that in 2019 the European Parliament called for freeports in the EU to be closed down as a result of tax evasion and money laundering; there is no reason to suppose that freeports set up in the UK will be any more immune to such problems. It’s also true that EU rules on tax breaks and aid to industries in freeport zones were a constraint on what individual governments can do, and that in theory, therefore, outside the EU the UK is able to offer more incentives. That may turn out to be more a theoretical statement than an implementable one, however; there is (and can be) no guarantee that EU countries (and the same is likely to apply to other countries) will accept imports from zones considered to be effectively outside the UK customs area on the same terms as those from the UK itself under the Trade and Co-operation Agreement. And why would they? Why would anyone want to allow companies being unfairly subsidised and given tax breaks which they themselves can’t match to undercut their own businesses?

The government’s own Office for Budget Responsibility told us in no uncertain terms a fortnight ago that “…the main effect of the freeports will be to alter the location rather than the volume of economic activity” – in simple terms, they will move jobs from one place to another rather than create new jobs. And in the process, they will reduce the tax income to the Exchequer, at the same time as demanding extra infrastructure investment. The main beneficiaries from the initiative (according to the thinktank UK in a Changing Europe) will be the businesses and super-rich individuals who take advantage of the tax breaks they offer. And there is good reason to expect that they will provide new opportunities for secrecy, money-laundering, tax evasion, reduced regulatory control, and fraud. Put that way, it’s easy to see the attraction for the current government; freeports will directly aid the Tories’ cronies and funders. It’s also easy to see why the Welsh Secretary would be so keen to seize on another opportunity to roll back devolution.

It’s a lot harder to see why the Welsh Government would want to get involved, and the reticence being shown by Drakeford is wholly understandable. He does face two problems, though: if he refuses, he’ll be overruled and lose any vestige of control, and if freeports set up across the border attract companies to relocate from Wales, Wales will lose jobs and economic activity, for which he will then be blamed. But agreeing to host a freeport in Wales because England is doing so on our doorstep in Liverpool is more like the logic of an arms race than a sound economic plan. The better response to dishonesty and corruption on a grand scale is not to emulate it, but to escape its clutches. And that means more independence, not less.

Cleaning the money

Tweet It seems that not a week goes past without the exposure of another scandal by one or other of the banks.  Over the last week, it was HSBC’s turn to come under the spotlight.  I suppose it was inevitable that Labour politicians in London would go for the personal angle and start attacking Tory minister Lord Green.  He certainly has some questions to answer, and they need to be asked; but Labour’s tactics also succeed in diverting attention from the substance.  It’s become more about who did it than about what was done.

But the what deserves more attention.  The accusations are twofold, in essence.

Firstly, it is suggested that the bank went out of its way to find ways around trade embargos and sanctions in order to continue to make profit from certain regimes, notably Iran.  And secondly, that the bank engaged in money-laundering on a massive scale, assisting various drug barons and gangsters to turn dirty money into clean and untraceable money, even if only by turning a blind eye or having weak systems rather than through active collusion.

In reality, how different, in moral terms, are the bankers from the gangsters and drug barons whose money they have been laundering?  They’re all trying to make money for themselves at the expense of others.  What’s the moral difference between simply ignoring the rules and laws on the one hand and trying to find ways of subverting them on the other?

What some of the various e-mails and statements seem to be suggesting is that the bank wanted to be seen to be abiding by the letter of the rules, without allowing the rules to actually achieve their purpose – and that it was doing that in pursuit of profit.  The pursuit of profit, in short, outweighed any moral responsibility to assist the relevant authorities in achieving their clearly-stated aims.

That subjugation of morality to the pursuit of profit is something of a common factor in a number of the recent scandals, and equally common is the defence that what was done was ‘within the rules’.  From duck houses to money-laundering, the defence is the same one.  It raises the question as to whether, and to what extent, we can or should expect companies or individuals to follow any moral imperatives at all.  Or is life really just about following the rules, and not expecting anyone to make any wider judgements?

There’s a problem either way.  The problem with leaving the rules lax and expecting people to exercise a degree of morality is that there isn’t an agreed definition of what is or is not moral.  What, precisely, is the standard of morality to which we wish them to adhere?  And how do we set it?

On the other hand, ever tighter rules merely encourage people to believe that moral behaviour is anything which is permitted within the rules, and that if something isn’t specifically prohibited, then it’s OK.

On top of that, there is of course the knowledge that ‘if we don’t do it someone else will’, and competition of that sort drives people to push the rules to the limit.  In that sense, the whole of our banking system is a bit like a gigantic game of ‘Prisoners’ Dilemma’, with everyone trying to second-guess what everyone else is going to do.

Expecting those whose primary goal is to make money for themselves or their employers at the expense of others to do any more than abide by whatever rules we set for them is probably unrealistic.  If we want to change the way people behave, we need first to change their perception of what it is that they are trying to achieve.  Pursuit of personal advantage simply doesn’t do it.