But the real frenzy isn’t the exposure of the scandal – it’s the scale of corruption, collusion and cover-up between News International, politicians and police that the scandal has revealed. As the cast of hacking victims, blaggers and blackmailers has lengthened, and the details of the incestuous payments and job-swapping between News International, government and Scotland Yard become more complex, it’s easy to lose sight of the bigger picture that is now emerging.

If it were not for the uncovering of this cesspit, the Cameron government would be preparing to nod through the outright takeover of BSkyB by News International, taking its dominance of Britain’s media and political world into Silvio Berlusconi territory. But what has been exposed now goes well beyond the hacking of murder victims and dead soldiers’ families – or even the media itself. The scandal has lifted the lid on how power is really exercised in 21st-century Britain – in which the unreformed City and its bankers play a central part.

What concerns Milne is the moral lassitude that seems to pervade all parts of the systems that are supposed to be edifices of British Life. Read: Barclays Bank The Real Indoor Pirates, or The Problem with Murdoch’s Media.

Is it time to truly Reboot Britain, which is different to playing lip service to it? A far too many people and organisations have done and are doing.  A people will only be free when they can control their own communications. And that fact has been drawn into sharp focus.

Her Majesty’s Revenue & Customs is once again demanding money with menaces. If you haven’t completed your 2009/10 self-assessment tax return, says its latest press release, you must “file online or you could face a £100 penalty”. If you hide your wealth or make an honest mistake, it will hit you with fines, interest payments and, ultimately, a criminal prosecution.

That’s the way it goes. Or, rather, that’s the way it used to go. Under the freewheeling, happy-go-lucky leadership of Dave Hartnett, the Revenue’s head of tax, readers might now think about trying their luck. Suppose you have an outstanding bill of £7,250. You phone Hartnett and arrange to meet him for dinner. It is ridiculous for the Revenue to expect you to pay the full £7,250, you say. You will give him £1,250 instead. Not right away, of course. Times are hard and money is tight. The best you can manage is £800 now and the remaining £450 some time before 2015.

Alas, I regret to inform you that Dave is unlikely to cut you any slack. He may not even return your calls. You, after all, are an ordinary British taxpayer, who must pay on demand or face the consequences. If, however, you were multinational company, Hartnett would be indulgence personified. For Vodafone, HMRC reduced a potential liability not of about £7,000 to a little over £1,000 but of about £7bn to a little over £1bn and left the second-largest company on the stock market with a remarkably light tax bill.

And this is what Private Eye has to say,

HM Revenue & Customs spent nearly a decade arguing in court over the way Vodafone funnels its gargantuan income into a tax-free Luxembourg subsidiary – and heard the court of appeal reject Vodafone’s argument that British anti-tax avoidance laws were neutered by European law. So why did they then cave in?

HMRC accepted a mere fraction of what it was due. The “deal” followed discussions earlier this year between HMRC boss Dave Hartnett, Vodafone finance director Andy Halford (a member of George Osborne’s “business forum for competitiveness and tax”) and David Cruickshank, a tax avoidance guru from Deloitte, brought in bizarrely by Hartnett to act for Vodafone.

Right now as the political temperature rises, everyday people in this country are going to get very pissed off, its a dangerous game to play to say “fair” on the one hand, and then do something completely different. Nick Cohen observes,

I don’t think that HMRC realises it yet, but the Vodafone scandal is as devastating for its reputation as the banking crisis was for the reputation of the financial regulators. It shows that the Revenue is prepared to have one law for the wealthy and another for the rest and undermine the moral basis of the system over which it presides.

When there comes into the world a visceral and common spirit of distrust, things can go wrong very quickly – the 21st Century is over and so is the behaviour that many large companies adopt, and hope they are not caught out. Cohen says, the effect on British attitudes of HMRC’s sweetheart deals for the rich is hard to gauge but it could be severe. Apparently its only the little people that must pay their taxes in full.

Something is profoundly wrong with the way we live today. For 30 years we have made a virtue out of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose. We know what things cost but have no idea what they are worth.

The materialistic and selfish quality of contemporary life is not inherent in the human condition. Much of what appears “natural” today dates from the 1980s: the obsession with wealth creation, the cult of privatisation and the private sector, the growing disparities of rich and poor. And above all the rhetoric which accompanies these: uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth.

Indeed, this is a point of view that I share (here) and (here) and (here), in fact I have written a book about it (video) – Judt’s article goes onto examine the role of the state in the context its enthrallment with all things market driven. And yet we are told whoever comes into power in the UK slash and burn of core pubic sector services is inevitable. And of course this will be done in a manner redolent of the industrial age.

Yet – a networked approach to solving problems can help re-frame our world vision – providing new solutions to once seemingly age old and intractable problems.

From an automotive perspective we have the story of Local Motors, from a humanitarian perspective there is Ushahidi, from our own backyard the story of Microfinancing in London, and in terms or orgnisation of labour there is txtEagle. Of Ushahidi, the New York Times writes

Ushahidi, which has become a hero of the Haitian and Chilean earthquakes and which may have something larger to tell us about the future of humanitarianism, innovation and the nature of what we label as truth.

Ushahidi also represents a new frontier of innovation. Silicon Valley has been the reigning paradigm of innovation, with its universities, financiers, mentors, immigrants and robust patents. Ushahidi comes from another world, in which entrepreneurship is born of hardship and innovators focus on doing more with less, rather than on selling you new and improved stuff.

Because Ushahidi originated in crisis, no one tried to patent and monopolize it. Because Kenya is poor, with computers out of reach for many, Ushahidi made its system work on cellphones. Because Ushahidi had no venture-capital backing, it used open-source software and was thus free to let others remix its tool for new projects.

Ushahidi remixes have been used in India to monitor elections; in Africa to report medicine shortages; in the Middle East to collect reports of wartime violence; and in Washington, D.C., where The Washington Post partnered to build a site to map road blockages and the location of available snowplows and blowers.

On top of that I would add, entrepreneurship, regional development and sustainability. Lightweight, flexible and adaptive systems that can work at velocities that are unprecedented, and where sociability is embedded into the very fabric of the process. Where in the case of Local Motors, cars are developed in half the time and 100x less the capital cost. And of the Micro finance scheme,

Nearly 10 years ago, armed with a degree in geography and a credit card, Faisel Rahman, a slight and softly spoken man now 34, had a big idea: he decided he would open his own bank in the East End of London. The idea, he says now, was really a response to a puzzle: why was it that the poorest people in Britain – the people most in need of some financial assistance, most in need of fair rates of interest – were also the people who were denied access to bank accounts?

Closed minds in closed systems of course said what worked in poor countries could not work in the UK – because we were not poor! Well that is not entirely true is it. This is a land where people at the edges of society that banks deem untouchable, can only get finance for loan sharks or money lenders at rates between 600 to 2500%.

Rahman spent a lot of time talking his idea through with people in the financial industry. He was told that microfinance might work in the developing world but it would never work here. That the poor would not save. That bad debtors would never become prompt repayers. That he could never develop the idea at scale. In the face of this scepticism Rahman obtained a grant for a few thousand pounds from the overdraft of a charitable trust and secured it against his credit card. He then opened the doors of Fair Finance to Business.

Not only has Rahman help people get out of debt, he has help entrepreneurs start businesses that otherwise would have been impossible. And in fact is expanding his business to 8 to 10 more sites in London. John Thackara writing In the Bubble: designing for a complex world, describes how we have created a ‘heavy world’, both materially and psychologically. It’s an ideology that is so powerful and all consuming that we fail to see or comprehend it. A little like a recent local government “expert”, that sneered at my hard won knowledge and perspective, because I did not come from his world. I exaggerate, only slightly. So lets see who else we can learn from…

Nathan Eagle who founded txteagle said,

There are over 2 billion literate, mobile phone subscribers in the developing world, many living on less than $5 a day. Corporations pay people to accomplish billions of image, audio and text-based tasks. txteagle enables these tasks to be completed via the mobile phone by people around the globe.

No Straight Line thinking is concerned with understanding and comprehending – to be able to better apply that knowledge in real world situations. To me, Local Motors, Ushahidi, Fair Finance to Business and txteagle come from a perspective that is non-linear, and understands through necessity, to seek viable and workable solutions to complex real world problems. For example, Rahman is interested in finding practical solutions. Along with other lobbyists he has recently been in talks with the Treasury about ways in which the “contract between banks and the community can be renewed”, and in which the privations and anxieties of financial exclusion can be avoided. What if we took Nathan’s txteagle capability and used that in the UK – where we have a mobile penetration rate of 120%, where many live on the £39.50 job seekers allowance, locked into a life of poverty, poor physical and mental health. So, these people could be earning maybe a little more, as a distributed workforce in ways previously thought impossible. With the tantalising prospect of a life better lived? As the Boston Globe (smlxl – the future of work) pointed out,

The jobs – short stretches of speech to be transcribed or translated into a local dialect, search engine results to be checked, images to be labeled, short market research surveys to be completed – come in over a worker’s own cellphone and the worker responds either by speaking into the phone or texting back the answer. The workers can be anyone with a cellphone – a secretary waiting for a bus, a Masai tribesman herding cattle, a student between classes, a security guard on a slow day, or one of Kenya’s tens of millions of unemployed.

At the core of every one of these examples is people, how people are, how they work, how trust is built and repaid in loyalty. Not the cold glint of an industrial process or linear thinking. Our tyrannical obsession with efficiency, a false god, over effectiveness is a deep flaw in this heavy world, that weighs us down. Judt writes about the sell off of public utilities in Britain, eviscerating the state’s responsibilities and capacities, as I think the belief was they would perform better,

What we have been watching is the steady shift of public responsibility on to the private sector to no discernible collective advantage. Contrary to economic theory and popular myth, privatisation is inefficient. Most of the things that governments have seen fit to pass into the private sector were operating at a loss: whether they were railway companies, coal mines, postal services, or energy utilities, they cost more to provide and maintain than they could ever hope to attract in revenue. For just this reason, such public goods were inherently unattractive to private buyers unless offered at a steep discount. But when the state sells cheap, the public takes a loss. It has been calculated that, in the course of the Thatcher-era UK privatisations, the deliberately low price at which longstanding public assets were marketed to the private sector resulted in a net transfer of £14bn from the taxpaying public to stockholders and other investors.

So when it comes to planning what to cut, slash and tax to pay our huge debt, at a moment when economically Britain has to be punching above its weight, we could learn from these people, these organisations and companies that have shown us how we can do things better, quicker, smarter and more effectively and more humanely – often without the huge sums required when the industrial machine comes into play.

http://www.flickr.com/photos/85593720@N00/2827812861

Today we challenge the authority of our world, media, organisations and even governments via a whole set of activities that can be networked and grassroots. It is done via co-creation, the forming of a networked communications world, that affects all aspects of society right down to how we teach our kids in school. Defined as, the common spirit of rebellion,

a distrust of all forms of established authority including parents, police, college administrations and government

However, I am fearful of where we go in this wonderland of networks, engagement and a new sense of self, community and possibility, without the correct framework, insight and understanding (here).

Will it be so as the old media infrastructure breaks down more curbs and regulations by vested interests are put in place to coerce and control these self organising networks? In Britain we see actually the reverse of a new an open society perhaps? One more akin to state control than liberty and the rights of the individual. For a 1000 year old democracy this has deep implications.

http://www.flickr.com/photos/peopea/2831300762/in/set-72157602027437863/

In Digital Britain loses the plot, co-written with David Bollier, we expanded a view,

that Great Britain needs a larger, more robust vision for the future delivered by a different set of technological tools.  The dynamics of our culture that are now unfolding need to be better explained to the public, legislators, industry and the press.  The boundless energies and imagination of British citizens do not need to be directed and organized, but rather, unleashed.  If you want to build a ship, it has been said, don’t divide the work and give orders; teach people to yearn for the vast and endless sea.

The question is, will Britain help co-create and develop the new paradigms of business, learning, creativity, culture and citizenship?  Or will it recommit itself to backward-looking models while other nations capitalize on the novel, emergent dynamics of digital networks, tools and technologies?

It is important for British leaders to come to terms with some inexorable realities:  New gatekeepers will arise in the information distribution wars.  Grassroots collaborations will compete with conventional hierarchies.  For example, socially based innovation is already challenging corporate R&D models.

The new tools and technologies of cooperation are empowering individuals as never before.  They are challenging the centralized institutions of the 20th Century to be more responsive and transparent.  They are enabling value to be generated more efficiently, with broader participation and new types of collaboration, than in the past.  They are empowering individuals and self-organized communities in ways that many institutions prefer to ignore.

http://www.flickr.com/photos/61871847@N00/2329551886

Which then begs the question – who is in the best position to decide policy, centralised government or a network of organised and motivated communities, who understand the needs of its communities better than any government could? The end game is far from clear however. Yochai Benkler argues in his book The Wealth of Networks that individuals in a interconnected and network society can and do play a more significant role in culture, society and the economy. And I believe him. But, at what point does that movement end when the incumbent authority realises all this openess, sharing etc., mitigates and dilutes its own purpose and power? Or because of the huge financial pickle we are in, not created by the vast majority but in fact a minority (for example), any government is going cut, and hack at anything and everything using community empowerment, without having the faintest idea of how to deliver that. Recent excursions into that space have left me feeling a little, shall we say, underwhelmed. But here’s the rub, as Barbara Ehrenrich explains

Nor can the growing size of human societies explain the long hostiity of elites to their peoples festivals and estatic rituals a hostility that goes back at least to the city states of ancient Greece, which contained only a few tens of thousands of people.

It was not a concern about crowd size that lead to Pentheus’s crackdown on the maenads or Romes massacre of its Dionysian cult. The repression of Festivities and estatic rituals over the centuries was the conscious work of mean and occasionally women too, who saw in the a real and urgent threat. The aspect of “civilization” that is more hostile to festivity is not capitalism or industrialism? both of which are fairly recent innovations ? But social hierarchy, which is far more ancient.

Modern life is rubbish

On September 11, 2009, a French woman who worked for France Telecom sent an email to her father, in that email she wrote,

I can’t take the new reorganization. I prefer to die.

Then she threw herself out of a fourth story office window. This employee had worked at France Telecom for nine years. After constant re-organisations this woman found it too much to cope, her suicide was the 23^rd at France Telecom in 18 months. It caused a national outcry in France, but in fact the story traveled far and wide – why? Because the spate of work related suicides had touched a raw nerve and a very real modern day issue – the corrosive nature of work in the early 21^st Century. Workers broken not by hard manual labour but by the relentless demands of the modern day company, and the crucifying effects of management and office culture. Prior to that another worker from France Telecom killed himself on Bastille Day – 14^th July.

According to the Guardian, he had left a note stating that work was the “only reason” he killed himself. He described a living hell of “management by terror”, and constant stress. “I have become a wreck,” he wrote. Imagine this scenario, workers on call-centre floors having to ask permission to go to the toilet or file a written explanation because they were 60 seconds late from lunch. Senior staff bullied and being repeatedly forced to move job.

Simon Caulkin, writing his last ever post for the Observer, due to cutbacks indicted what is called ‘management,’

Across both public and private sectors what readers experienced as “management” was pervasively problematic. It just wasn’t what it said on the tin. Wherever they looked, readers found a glaring discrepancy between “official” and “unofficial” versions, between talk and walk. The talk was empowerment, shared destiny, pulling together: the walk was increasing work intensity, tight performance management, risk offloaded on to the individual. The talk was flat organisations: the reality, centralisation and a yawning divide between other ranks, required to minimise their demands for the greater good, and a remote officer class whose rewards had to soar to motivate them to do their job. Employees were the most valuable asset – until costs had to be cut. Repeated mis-selling and other scandals demonstrated it certainly wasn’t the customer who was king.

Somewhere along the line the edifice of management had been turned upside down – it was shareholders who had become monarch, their courtiers lavishly rewarded managers whose MBA courses had taught them to manage deals and numbers, not things or people. Management had suffered a reverse takeover. Finance annexed reality, cost ousted value, the means became the end.

For many, our industrial society brutalises its work force, according to BUPA we lose 10.5 million work-days in the UK every year due to stress in the workplace, and 17% of the workforce find their jobs extremely stressful. A woman working for a regional newspaper group in the UK as an editor was informed that she would become editor of 3 newspapers, and was then told she now had to manage 5 newspapers. Feeling overwhelmed she visited her GP, who told her that she was so stressed (read stuck to the ceiling) she was proscribed to take at least 4 weeks sick leave. Her boss on learning of her GP’s advice warned her that anytime taken off would be a career changing decision – read don’t bother coming back. Nice.

In an interview conducted by the Financial Times, published on 18^th September, Christophe Dejours, professor at the Conservatoire des Arts and Métiers and author of a book on suicide at work, says workplace suicides were largely limited to the agricultural sector until the 1990s. Today they occur across “very different social sectors from hospitals to school, construction, the electronics industry, banking”. In, The Corrosion of Character: The personal consequences of work in the new capitalism. Richard Sennett describes how the sense of hopelessness, and isolation, deconstructs our character in the workplace, with ultimate tragic consequences. For Sennett, “character” is defined as the capacity to construct and keep commitments – not just in marriage, but also in friendships, communities, and workplaces – and the ability to provide continuous, coherent narratives of personal experience. And whether we call it Extreme Capitalism, or, Supercapitalism, in Sennett’s view, the “unfettered capitalism” that describes our recent history in labour markets, work schedules, institutions, and technology – renders “character” impossible. Contemporary capitalism demolishes the social and cultural foundations of “character,” and upholds instead the punishing ideal of incessant change.

Sadly, in reading Simon Caulkin’s last post for Observer management, one realises how far management and business is from the ideal of an Open society, Caulkin writes,

Across both public and private sectors what readers experienced as “management” was pervasively problematic. It just wasn’t what it said on the tin. Wherever they looked, readers found a glaring discrepancy between “official” and “unofficial” versions, between talk and walk.

The talk was empowerment, shared destiny, pulling together: the walk was increasing work intensity, tight performance management, risk offloaded on to the individual. The talk was flat organisations: the reality, centralisation and a yawning divide between other ranks, required to minimise their demands for the greater good, and a remote officer class whose rewards had to soar to motivate them to do their job. Employees were the most valuable asset – until costs had to be cut. Repeated mis-selling and other scandals demonstrated it certainly wasn’t the customer who was king.

Somewhere along the line the edifice of management had been turned upside down – it was shareholders who had become monarch, their courtiers lavishly rewarded managers whose MBA courses had taught them to manage deals and numbers, not things or people. Management had suffered a reverse takeover. Finance annexed reality, cost ousted value, the means became the end.

Speaking at Rebboot Britain tomorrow – in my speech I make the point that, contrary to popular opinion – business is in fact a social science. and that I believe John Thackara when he argues that the promise of this Open Society cannot come about until education/business /politics etc.,adjusts to human need not the other way around by connecting people with common interests, unlocking creative talent among groups that have a passionate interest or an desire to exchange information globally, and as a consequence new content and solutions will emerge.

And, as my friend Euan Semple argues that there are no such things as conscripts – there are only volunteers, Euan says young people are coming into traditional organizations having spent the entirety of their young lives: collaborating, networking and getting stuff done in very different ways. They are confronted with an alien world of: linearity, silos, hierarchies and the ego of title. The friction is palpable because the old organizational models cannot cope with or take full advantage of this new potential. What is being unleashed is a profound transformation in the way of doing things, of getting stuff done.

Sadly that does not help all the day-to-day actors who are not in a comedy but in a real life drama called; The Office.

Caulkin goes on

This is the story that this column has reflected. Shamefully, it reached its explosive climax on the watch of a Labour government that, betraying its entire history, not only encouraged ethics-free market-led management principles in the private sector but imposed them wholesale on the public sector. The credit crunch is man(agement)-made – management, not market, failure. So is the Soviet-style targets and inspection regime, locked in place by lucrative IT contracts with private suppliers, that has made the public sector systemically less capable than it was 12 years ago, despite the billions spent. The emails of rage and despair from public-sector workers at what has been done to their profession have to be read to be believed. And still ministers don’t get it. The elevation of the grisly Alan Sugar to “enterprise tsar” and the timorous, frozen-in-the-headlights approach to City reform in one sense are as risible as MPs’ expenses – but they are also a terrifying denial of reality.

John Seddon, argues that this dynamic is currently endemic in Britain’s public sector leading to valueless activity, meaningless measurement, and ever poorer service, at ever greater cost. You and I as taxpayers are paying heavily for this stupidity. I suspect Simon Caulkin would agree.

The solution, Seddon advocates is a Systems Thinking approach where we think about the whole system in which we seek 3 outcomes:
[1] individuals come first,
[2] waste is reduced
[3] responsibility replaces blame.

It’s an approach that is proven, successful and relatively cheap – and one that governments around the world, and their advisers, need to adopt urgently. It is the difference between effectiveness vs. efficiency. Yet and yet, sometimes being right, is not the right thing to be,

Of course, institutional stupidity and failure to take responsibility are characteristic of all top-down organisations – in fact, they’re two sides of the same coin. Hence the reductio ad absurdum, also charted here, of gleaming hi-tech organisations too witless to stop themselves auto-destructing. What is there about the credit crunch and the environmental one hard on its heels that is not to understand? The management model that has run us for the past 30 years, like the discredited economic theories (rational expectations, efficient markets) to which it cringes, is bust, dead, finished – a mortal danger to us and the planet.

Let us hope this is the last hurrah for the Straight Line thinkers.

Carlota Perez in her book Technological Revolutions and Financial Capital – says that there comes a point in time when;  old institutions are found wanting, and the old frameworks of society insufficient to respond to the needs and demands of society.
At this moment we seek a new language, a new common sense that allows us to remake the world afresh. We are ‘in’ this moment right now;  the toxic tail-end of an industrial, linear, mass-consumer, mass-media, locked down society strips us of what makes us who we are – we have become units of production and consumption, battery farmed, and raised in a world where we feel little personal accountability to each other. We have deconstructed humanity almost to the point of destruction – skeptical !? Ask any practicing psychologist.

We are today, as social philosopher Richard Sennett argues; seeking too recover something of the spirit of the Enlightenment on terms appropriate to our time.  Indeed, Stephen Heppell considers the 21st century to herald the ‘learning age’. In the 20th century, he argues, we built big things (railways, universities) but the focus for the 21st century is ‘helping people to help each other’. In his view, “The old stuff won’t do any more”. And the sooner management wakes up to that fact, the better.

So – we together must explore the true possibilities of the Open Society; its language, its common sense, its systems and philosophy to inspire us to remake our world a-new.

Farewell Simon Caulkin we shall miss you

An international accounting standard that requires companies operating internationally to disclose where they operate, the profits they make and the taxes they pay would enable all countries, rich and poor, to identify where the tax dodgers are at work.

Writes David McNair Taxing times indeed for the real indoor pirates. Sadly however,

The announcement by the Obama administration that it is to clamp down on US companies and individuals dodging tax would seem at first glance to herald the dawn of a new capitalist age. Naked greed is out. From henceforth, mammon must walk hand in hand with morality.

Yet anyone believing that the measures proposed by the US will deliver benefits for all those who suffer at the hands of tax dodgers may yet be disappointed.

McNair sums up

If Obama is to draw a real line under the lack of regulation and lack of transparency that triggered the present crisis, he must champion a truly multilateral agreement on automatic exchange of tax information. That way he can be a friend to the poor as well as protecting America’s interests.

Indeed he must seek true cooperation always a difficult task when you play the prisoners dilemma. He must engage peoples sense that they are all working for the mutual benefit of all society – it has come to that.

We must co-create that future otherwise we leave it up to the indoor pirates.

A friend of mine interviewed the No.4 of a high street bank. This bankers view, was that governments need banks, and so recent circumstances won’t change much. You kind of choke on your cup of tea don’t you? Or find that piece of cake going down “the wrong way”. Especialy when that bank was Barclay’s.

Now are we sitting comfortably? The I shall begin. My title for the post was an ironic poke at the financial and banking system, and reference to a childrens book called The Indoor Pirates. What’s it all about?

A hopelessly silly piratical adventure. Bald Ben, Lumpy Lawson, the quarrelling twins, Polly and Molly, and Captain Blackpatch are a useless bunch. They don’t like boats and they don’t like the sea, so they live in a house. When a big electricity bill lands on the mat it needs paying pretty quickly, so the hunt is on for some treasure. But are these pirates any good at finding treasure? In fact, are they goood for anything at all?!

However, in true English fashion my humour is dark. There is an exchange between captain Blackpatch and a boys mother. Cap’n Blackpatch pretends he is a bank manager not a pirate, and the mother responds,

Well its pretty much the same thing isn’t it!

Indeed, a hopelessly silly piratical adventure. This week just gone, Lord Oakeshott of Seagrove Bay made this statement in the House of Commons

My Lords, I declare my interest as a pension fund manager since I first joined Warburg’s in 1976; these days I manage British commercial property for pension funds, charities and investment trusts. When I buy a warehouse from Sainsbury’s, neither of us pretends that Tamworth is in the Cayman Islands to dodge stamp duty land tax. Tax havens are sunny places for shady people. No one sends their money to Monaco or the Cayman Islands because they are centres of excellence for fund management. I was going to add the British Virgin Islands, but in deference to the noble Baroness, Lady Hooper, I shall leave them out. From Antigua to Belize, you use a tax haven because you have something to hide, be it from the taxman, the authorities where you live or even your family…

Warming to his main theme and referencing the Guardian and the fact that Barclays had been extremely busy trying to gag anyone who might say Barclays and tax abuse, in the same sentence, he proceeded,

Why will the Prime Minister and the Treasury not use their power over the banks to stamp out tax abuse right under their nose in London? You do not have to take a Caribbean cruise; all you have to do is get on a boat down the Thames to Canary Wharf. The superb tax gap series in the Guardian shows how big British businesses, both publicly quoted and private, twist and turn to dodge tax in this country. Their glossy corporate governance reports say nothing about paying your fair share of tax to meet your obligations to the society where you operate. Being a good corporate citizen must mean more than putting on green lipstick and ticking the boxes on diversity.

Nearly nationalised RBS claims to have closed down its tax avoidance operations at head office but still actively promotes its operations in offshore tax havens and its private bank in Switzerland. Barclays has developed tax avoidance into a massive profit centre in its own right, with vast sums of the bank’s money touring tax havens on what in one case amounts almost to a three-day super saver return ticket from Canary Wharf, saving Barclays, not the taxpayer, mountains of tax.

Documents leaked to the Liberal Democrats, which appear to detail systematic tax avoidance on a grand scale by Barclays, were injuncted last week. The Sunday Times and the Guardian had already made them front-page news and these documents are widely available on the internet from sites such as Twitter, wikileaks.org, docstoc.com and gabbr.com. Yet the Guardian had to remove them from its website and cannot tell its readers where to find them. These documents describe deals worth billions of pounds set up by the bank in order to make money out of depriving the UK and foreign exchequers of revenue. Barclays would not last for one minute without the British taxpayer standing behind it, yet it is holding out one hand for taxpayers’ money while it picks taxpayers’ pockets with tax avoidance activities on the other.

And

Barclays has a whole department, the structured capital markets division, inside Barclays Capital, dedicated to dodging the taxman, and has been reported as paying Mr Roger Jenkins, who runs it, £40 million a year. Vince Cable and I are now being told of more, even murkier, deals. About a third of a billion pounds has been added to Barclays Bank’s bottom line by the following six “projects”, from what we can see. Barclays’ Project Knight, set up in 2007, with capital of more than $16 billion, involved making loans to American banks which now need federal funding: Wachovia, WaMu, Bank of America and BB&T. This allowed Barclays to benefit from “double-dip” tax credits, as they are called, and made the bank £100 million or more.

Project Faber, also in 2007, involved capital of £1.5 billion and made Barclays £29 million in tax profits. That involved using tax havens in the Isle of Man and the Caymans for subsidiaries to channel loans to Luxembourg banks. Project Brontos in 2007 was a scheme between Barclays and Italian banks to save Italian tax; it made Barclays £15 million in profits at a conservative estimate. Project Valiha, with capital of nearly £400 million, involved an elaborate trade with interest rate swaps that could be transferred to an American counterparty, alleged to be AIG, which gained Barclays £69 million in tax-free profits. Project Brazil, set up in 2005–06, made Barclays £30 million in tax profits from currency trades and, in Project Berry, a Barclays subsidiary buys index-linked gilts and lends them back to Barclays so that it can collect tax reliefs worth £134 million. How many more of those morbid mutants are on the books of Barclays’ structured capital markets group? Before the Treasury takes on any of the toxic assets of Barclays, we must know how much tax it has avoided, how and with whom, and what has passed through or is still hidden in tax havens.

Indoor pirates indeed. So read Barclays board as: Cap’n Blackpatch, Bald Ben, Lumpy Lawson, and the quarrelling twins, Polly and Molly, perhaps we could add Seaman Stains, Master bates, and Jack the cabin boy – we all need one of them.

Richard Murphy writes,

The result has been a deliberate attempt to defraud – by which term I mean seeking to secure a financial advantage by deception, although not (I stress) illegally.

The deception has been on three parties. The first has been tax authorities who despite their brave statements to the contrary did not, I suspect, know the full details of some of these arrangements. It would seem that some may not have been disclosed to them.

Secondly, Barclays have sought to defraud (using the above definition) the taxpayers of the UK and maybe elsewhere who have not received the funds rightfully due to them on profits declared.

Thirdly, I think they have defrauded (using the above definition) their shareholders by declaring profits which were not, in my opinion, sustainable and which were manufactured through preconceived and structured financing deals in which the counterparties played a remarkably small part in exchange for what was, in effect, a fee to allow Barclays to record realised profits by turning the manufactured profits into third-party transactions.

I wonder where the real toxic debt lies?

A commentator to the Financial Times stated:

I was lucky enough to read through the first of the Barclays documents…

I will say it was absolutely breathtaking, extraordinary. The depth of deceit, connivance and deliberate, artificial avoidance stunned me. The intricacy and artificiality of the scheme deeply was absolutely evident, as was the fact that the knew exactly what they were doing and why: to get money from one point in London to another without paying tax, via about 10 offshore companies. Simple, deliberate outcome, clearly stated, with the exact names of who was doing this, and no other purpose.

Until now I have been a supporter of the finance industry – I work with people there regularly and respect many of them, and greatly enjoy the Financial Times and other financial papers. However this has shone a light on something for me, and made me certain that these people belong in jail, and companies like Barclays deserve to be bankrupt. They have robbed everyone of us, every single person who pays tax or who will ever pay tax in this country (and other countries!), through both the bailouts and schemes such as this.