Recently the UK Treasury launched an inquiry into regional imbalances in the UK economy. In short, it was asking about the nature of the economic imbalances in the UK, the problems these imbalances may pose, and what remedies might be available.
The Tax Justice Network sent the Treasury a submission, which you can download here.
The main purpose of the submission is:
to challenge a widespread view that London is necessarily the ‘engine’ of the British economy, creating jobs and wealth and showering taxes and subsidies on other parts of the country, in a grand one-way flow.
The submission then goes on to make the analytical contrast between productive wealth creating activities (such as making useful widgets or services) and wealth extracting ones (such as using tax havens to escape tax, or using monopoly powers to gouge others). It then shows that while the “losers” of the wealth extraction are a wide range of players who are relatively evenly spread across the country, the “winners” are generally focused in a relatively small, highly affluent section of London and the southeast, and the ‘offshore nexus’.
It does this primarily by looking at a single firm, with an underlying activity producing a real benefit, but an immensely complex corporate tower perched atop it, nearly all of whose beneficiaries are in the London/offshore nexus, extracting wealth away from other players elsewhere.
So while London/offshore nexus” certainly does generate jobs and profits in gross terms, in net terms the picture is completely different, with a large part of London’s success coming at the expense of other parts of the economy.
This article is inspired by our long-standing work on the Finance Curse, which has powerful regional implications in other countries too.
Once again, click here for our full submission.