22.2.22
Regulation

Economic crime and Russian assets in the UK

Economic sanctions against Russia. As Western nations unveil economic sanctions against Russia following its military incursions into Ukraine, attention has focused on the extent of Russian assets in the UK and the scale of ‘economic crime’ occurring through the UK financial system. The UK government will use legislation tabled earlier this month targeting potential sanctions at anyone ‘being involved in the support of the Russian government’, including businesses of economic or strategic significance to Russia.

  • Russian gold’. There has long been disquiet about the extent to which business people with ties to the Kremlin (often described as ‘oligarchs’) have used the UK economy and UK-based institutions as a safe haven for their assets. In 2018 the Foreign Affairs Select Committee report Moscow’s Gold: Russian Corruption in the UK criticised the Government for its ‘disjointed approach’ to the issue, arguing that ‘President Putin’s allies have been able to exploit gaps in the sanctions and anti-money laundering regimes that allow them to hide and launder assets in London.’ Disturbed at the lack of government action, the Committee decided last month to reopen its enquiry
  • ‘The UK’s kleptocracy problem’. In December Chatham House published detailed research on ‘the laundering of money and reputations’ by elites from Russia and the post-Soviet successor states. Noting that much of the wealth leaving Russia had effectively been stolen from the Russian people after the collapse of the Soviet Union in 1990 and the privatisation of industry which followed, the report argues that ‘failures of enforcement and implementation of the law – plus the exploitation of loopholes by professional enablers – have meant that little has been done in practice to prevent kleptocratic wealth and political agendas from entering Britain.’ Watch this Chatham House webinar on the problem and what can be done about it. 


Russian property in the UK. Last week Transparency International published new research showing that UK property worth £1.5 billion has been bought since 2016 by Russians accused of corruption or links to the Kremlin. Nearly half of these properties are in the City of Westminster and Kensington and Chelsea. Explaining the UK’s role as a ‘laundromat’ for suspicious Russian wealth, the report notes that over half of the property assets by value is held by companies registered in Britain’s Overseas Territories and Crown Dependencies, where secrecy rules enable ownership to be hidden. (See BBC Newsnight’s report.) 


The UK economy and ‘dirty money’. Russian assets in the UK are part of a wider issue of global ‘dirty money’ flowing through the UK. In its major report At Your Service, leading anti-corruption NGO Transparency International has detailed how UK businesses and institutions ‘help corrupt individuals and regimes launder their money and reputations.’ The report is based on data collected from over 400 cases of corruption and money laundering in which UK service providers were involved. These cases involved at least £325 billion worth of funds diverted by rigged procurement, bribery, embezzlement and the unlawful acquisition of state assets in 116 countries across the world. 


The Economic Crime Bill.  The Government has pledged an Economic Crime Bill to tackle money laundering, fraud and corruption in the UK economy. After appearing to drop plans for the Bill the Government has confirmed that it will be brought forward soon. (Twitter thread explainer from the Centre for Public Data here.) Lawyers BCLP explain the Bill’s expected measures


Political donations. Last month, a number of MPs tabled amendments to the Elections Bill to outlaw political donations made from secret offshore locations. The Conservative Party has been accused of accepting major donations from Russian sources in recent years. 


Not just the UK. A Guardian investigation this week reveals details of a leak from one of the world’s largest private banks, Credit Suisse, exposing ‘the hidden wealth of clients involved in torture, drug trafficking, money laundering, corruption and other serious crimes'. The leak raises questions about Swiss banking secrecy laws which prevent the disclosure of client banking information to foreign authorities. 

  • Offshore secrecy. The Guardian’s disclosure of the ‘Pandora Papers’ last year reported the biggest ever leak of offshore data, revealing the secret deals and assets of more than 100 billionaires, 30 world leaders and 300 public officials. 
Weekly Updates

Welfare

Basic income for care leavers. Care leavers in Wales will be offered £1,600 per month as part of a new basic income pilot. It is believed to be the highest amount offered in any basic income trial in the world (see here for a map of global basic income pilots). The pilot will last for two years, with around 500 people expected to be eligible for the scheme. 

  • Poverty elimination. A report by Autonomy found that a basic income could reduce poverty in Wales by 50%, child poverty by 64% and pensioner poverty by 61%. Wales Online’s Will Hayward explores other potential benefits of basic income in Wales, such as increased entrepreneurship and a safety net in the face of rising automation. 
  • The debate. BBC Wales’ Peter Gillibrand explains the case for and against basic income, including the criticism that the money could be spent more effectively elsewhere. Basic Income blogger Cleo Goodman looks at the detail of the pilot and the key arguments.
  • Why care leavers? In explaining the scheme’s focus on care leavers, the Welsh government states that ‘too many young people leaving care continue to face significant barriers to achieving a successful transition into adulthood’. It is estimated that one in three care leavers become homeless within the first two years of leaving care and 25% of all homeless people are care-experienced. 

Work and ownership

Collective bargaining and inequality. A report by UNI Europa finds that the weakening of collective bargaining is a key driver behind increasing income inequality in Europe. Countries that have implemented policies to restrain collective bargaining in recent decades (including the UK) have experienced increasing inequality. (Twitter thread summary of key graphs.)


Worker co-op buyouts to combat business failures. Commenting on the latest ONS data showing business liquidations at 34% above pre-pandemic levels, Cooperatives UK’s James Wright outlines the case for cooperative buyouts to rescue struggling firms

Climate change and international cooperation

Reparations for climate loss and damage? The first major meeting of the Commission of Small Island States on Climate Change and International Law took place last week. The group was formed to help small island developing states (SIDS) bring legal action against major carbon-emitting countries. It is examining the legal options to require or encourage rich nations to provide financial reparation for the ‘loss and damage’ caused by climate change. 


Climate migration. A report from the Mayors Migration Council explored several countries in Central America as case studies to illustrate the scale of climate emergency-related migration across the world. 30 million people had already been displaced due to the climate crisis in 2020 and the World Bank estimates that 216 million people could be forcibly displaced by 2050 without significant action.

Measuring the appropriation of resources from the Global South. A peer-reviewed study by anthropologist Jason Hickel and others on unequal exchange between the Global North and South attempts to quantify the North’s ‘net appropriation’ of resources and labour over the period 1990 to 2015. The authors estimate that in energy terms this transfer was ‘enough to cover… the infrastructure to ensure that all 6.5 billion people in the global South have access to decent housing, public transport, healthcare, education, sanitation, communication, etc.’ (Twitter thread summary of key stats by ​​Timothée Parrique.)

Public services and housing

A universal social care system. A new report from the Women’s Budget Group and NEF calls for a universal social care system which is free at the point of need, improves the quality of care, and ensures good pay and conditions for care workers. Their analysis shows that an additional £31.9bn annual investment could improve access to care for over 1.9 million people and create almost a million new jobs. (Twitter thread summary.)


Bristol rent control trial? Bristol City Council is co-hosting a ‘Renters Summit’ with ACORN and Shelter to discuss piloting rent caps and other rent control systems in the city. Bristol’s Mayor, Marvin Rees, has said he wants Bristol to be the first city in the country to pilot rent controls and raise the issue nationally.

Industrial strategy and local economies

Break up the Treasury? Looking back over the history of Britain’s government economic departments, IPPR’s George Dibb argues that the Treasury should be broken up into finance and economic ministries. “The fiscal, budgetary and economic powers of No 11’s super department have acted as a blockage on sorely needed investment for too long”.


The green economy stagnates. The Office for National Statistics (ONS) has found ‘no significant change’ in the size of the UK’s low-carbon and renewable energy sectors since 2014, the Guardian’s Richard Partington reports.


Net zero places. IPPR North organised deliberative workshops in Liverpool and Anglesey to generate a community-powered response to the climate crisis. Their report explores locally-led and community inspired visions for a net zero future.


Reflections on levelling up. Commentary continues on the Government’s Levelling Up plans. The Institute for Global Prosperity’s Henrietta Moore argued that the levelling up agenda ‘needs to be far more attentive to social infrastructure’, especially at local level. Will Hutton praised the White Paper’s vision and analysis but forecast that the government will be unable to deliver its pledges as ‘the suffocating veto of Rishi Sunak’s Treasury is all too obvious’. The Henry Jackson Society’s Sam Ashworth-Hayes noted that we are living in a ‘Boomerocracy’ in which ’policies that create growth are frequently vetoed by older voters… whether that’s investments in things like education, railways, and roads that will only pay out in decades to come, raising immigration levels or boosting construction.’

Fiscal policy

New borrowing figures. The ONS reports that government borrowing went into surplus last month, while interest payments are now at a ‘record January high’. But, explains NEF’s Frank van Lerven, this should not be taken at face value. The meaningful indicator is interest payments as a proportion of GDP or tax revenue. On these measures the cost of servicing Government debt remains historically very low.