George Osborne under pressure from Vince Cable over HSBC scandal

Vince Cable delivers speech

George Osborne is facing growing pressure over the HSBC scandal after Vince Cable challenged the chancellor to answer a series of questions over whether he has shown proper vigilance towards inquiries into the bank’s Swiss subsidiaries.

The business secretary said that he had written to Osborne to ensure that the “various inquiries” into HMRC have been followed through properly. 

The disclosure came as HSBC took out a series of newspaper advertisements to offer its “sincerest apologies” for the conduct of its Swiss subsidiary. HSBC has faced a torrid week after the Guardian reported that a huge cache of leaked secret bank account files showed that its Swiss subsidiary encouraged massive tax avoidance and allowed clients to withdraw bricks of cash.

In the advertisement, Stuart Gulliver, the group chief executive of HSBC Holdings plc, said that society expected better of its banking industry, though he pointed out that the leaked files related to events eight years ago. But Gulliver suggested that the media had focused on 140 clients because many of them were well known. “We have absolutely no appetite to do business with clients who are evading their taxes or who fail to meet our financial crime compliance standards,” he said.

The chancellor and his team of Tory treasury ministers have adopted an unusually low profile after their initial response to the HSBC leak – pointing out that Labour’s Ed Balls was responsible as city minister between 2006-07 – was widely challenged. The documents were not passed to HMRC until May 2010. In an interview on the BBC’s Andrew Marr show, Balls mocked the usually television-friendly chancellor for his absence from the nation’s screens.

In his letter to the chancellor, in which he posed a series of questions, Cable asked why there had been so few prosecutions when there was clear evidence of illegal tax evasion. The Liberal Democrat also asks what is being done to recuperate lost tax revenue and what lessons are being learned.

Cable told Pienaar’s Politics on BBC Radio 5 Live: “I have written to the chancellor during the week on the back of the HSBC issues asking for satisfaction that the various inquiries that took place around the Swiss subsidiaries have been properly followed through and there has been sufficient level of vigilance.”

The business secretary also criticised the way in which HMRC takes a tough approach to relatively less well off taxpayers while taking a lax approach towards large corporations. He said: “If you are a small company or an ordinary individual, you are often hounded by HMRC often for small sums of money. I’ve got disabled people who’ve had their benefits taken away because there was a suspicion they may have claimed a few pound extra. And yet at the same time, large numbers of people are getting away with millions with apparently rather perfunctory investigations.”

The intervention by Cable came as Danny Alexander, the Liberal Democrat chief secretary to the Treasury, said he had written to HMRC to ask whether they had adequate powers in light of the HSBC scandal.

Alexander told BBC1’s Sunday Politics: “What worries me about this recent case is do we need extra legal powers for HMRC, for example? Is there a need to make sure that there are additional offences for people who are conspiring to enable tax evasion? I’ve asked HMRC for their advice on that and if they come back and say we need extra powers, we need extra resources to tackle this particular problem, as I have at every stage in this parliament I’ll make sure they have what they need.”

The leaked HSBC files placed intense pressure on the Tories after the Guardian disclosed that as many as seven Tory donors legally held bank accounts at HSBC’s Swiss subsidiary. But Labour found itself under pressure on Sunday after the Sunday Times reported that Sir David Garrard, a property tycoon who donated £690,000 to the party last year, placed shares in an offshore trust. Lawyers for Garrard told the Sunday Times that the transactions for the shares in his Minerva property company were fully declared to the UK tax authorities.

Balls downplayed suggestions that the Labour party had itself been involved in tax avoidance after its largest individual donor, John Mills, gave the party £1.65m in shares in shopping channel company JML. Mills described the arrangement as “tax efficient”.

The shadow chancellor told BBC Radio 5 Live: “You can try and say did Labour get involved in the tax efficient donation. I’m afraid it is small beer compared to what the Tories are up to.”

Balls also announced he would carry out a wide-ranging review of tax-planning schemes as chancellor, including deeds of variation on wills which has been used by the Labour leader, Ed Miliband. The shadow chancellor said he would crack down on “systemic practices” although he indicated that the use of deeds of variations on wills was unlikely to be his main target because parents often make prudent plans for their children in their wills.

Powered by article was written by Nicholas Watt, chief political correspondent, for The Guardian on Sunday 15th February 2015 20.43 Europe/London © Guardian News and Media Limited 2010