City of London - Criticism

Criticism

The City of London has been granted various special privileges since the Norman Conquest, such as the right to run its own affairs, partly due to the power of its financial capital. These are also mentioned by the Statute of William and Mary in 1690.

Since 2002 voting rights for the City of London’s municipal authority were extended to its 32,000 businesses employees in addition to residents which now number fewer than 12,000. This unique patronage system ensures that business interests usually take priority. Despite this multiple attempts to reform the City have been thwarted and maintaining these privileges is the role of an unelected official lobbyist in Parliament called the Remembrancer.

The power and influence of the City based financial institutions over government policy has concerned democratically elected leaders down the ages. For example, the former British Prime Minister Clement Attlee wrote, “Over and over again we have seen that there is in this country another power than that which has its seat at Westminster. The City of London, a convenient term for a collection of financial interests, is able to assert itself against the Government of the country. Those who control money can pursue a policy at home and abroad contrary to that which has been decided by the people." When he became Prime Minister he nationalised the Bank of England.

The City of London was an architect of the international global drug trade, being a clearing house for traders in opium back in the 19th century. More recently soon after the New York September 11th attacks, government agencies became more focussed on combating terrorism, leaving the City of London’s financial institutions with greater responsibilities. It soon became a magnet for a cash rich criminal elite as well as international gangs from Columbia, Russia and China. Its veneer of respectability and sheer volume of trade made it an attractive destination for criminal gangs to launder profits which was regarded as de-facto clean. The City of London’s role in laundering drug money was explicitly exposed by a metropolitan police officer on secondment at a London branch of Wachovia one of America’s largest banks.

English secretive trust laws and strong libel laws are two other factors that make the City an attractive offshore haven for the assets of foreign business. The French Magistrate Eva Joly, who is a member of the Washington-based think-tank Global Financial Integrity, states “The City of London, that 'state within a state,’ has never transmitted even the smallest piece of usable evidence to a foreign magistrate." This provides a lucrative environment for money laundering and assets to be sheltered from tax, free from examination by law enforcement agencies by maintaining plausible deniability. Rich private clients also benefit through the domicile rules. Although the City of London’s headline tax rate is the same as the rest of the UK, by influencing and using the legal system and laws of disclosure it has the means to allow clients to avoid or reputedly evade tax; just as in any other location in the UK. It also has a major role in running an extensive offshore web of tax havens acting as a storage mechanism and money laundering filter. Many authors have accused the City of London of being a tax haven. The Tax Justice Network, goes further and accuses the City of London as being “the biggest tax haven in the world” as well as ‘a state within a state’. Ian Doyle and Jem Bendell, summarise these claims with the following statement: the City “is the most powerful lobby in Britain and possibly the world, and as a result . . . exerts enormous political influence to resist regulation and extract tax exemption. It has fostered criminality by ensuring that the City ranks amongst the least accountable of financial centres on the face of the Earth”. The novel Golden Handcuffs by Polly Courtney draws on the author's experiences of working in investment banking.

More recently, following the financial crises of the late 2000s, the City came in for criticism due to an apparent lack of control and regulation. It is also claimed that many of the recent financial catastrophes which were partly caused by a lack of such controls, can be traced to companies who work in the City, or London based offices.

It should be noted that many criticisms of the 'City of London' may actually apply to the UK financial services industry based there and not its local authority. However, these activities still tend to be centred on London and the City of London in particular. Despite these criticisms, as seen above in the entries on the arts, charitable trusts and public spaces the City does contribute to the quality of life across the entire metropolis.