UK leaders are making all the right noises about cooperation with Cayman’s international financial services industry, but they face a “hostile” media and opposition.
Lord Blencathra [Mr. David MacLean as he was formerly known] is now the director of the Cayman Islands London office.
At first glance, his lordship admitted during last month’s visit to Grand Cayman, that arrangement may sound a bit strange.
“You may say ‘well, what do I know about Cayman’?” Lord Blencathra says, “a lot more than I knew a couple of weeks ago. I’m not an expert on Cayman, but I’ve not been employed to do that job.
“I’ve been appointed because I’ve had 27 years in parliament, 10 to 12 years in the British government. The government feels that because of the knowledge I have of how Whitehall works, Westminster works, that I can be a good representative to feed in to the correct authorities in the government the views of the Cayman Islands and defend our interests.”
Blencathra says prior to the world’s financial meltdown in 2008, the job of the London office for the Cayman Islands may have been more an administrative one; consular services and the like. These days, it’s more a lobbyist that the British Overseas Territories requires, he says.
”Because of the crisis, the whole financial sector is under the spotlight as never before. They have to justify their existence…to what is largely a hostile media. Cayman, the financial industry here, has to justify its existence, which it didn’t really have to do before in political circles.”
The hiring of Blencathra has certainly ruffled the feathers of UK pundits and some Labour Party lawmakers, who have called for his lordship to be censured for taking emoluments as a member of the UK House of Lords while at the same time being paid by the Cayman Islands government for his services.
Lord Blencathra makes no apologies; he is being paid by the Cayman government: “I work for the Cayman Islands government in London.”
Parliamentary standards officials in the UK are expected to begin an inquiry which, if it finds Lord Blencathra broke a code of conduct rule, could lead to a censure. The code of conduct for the House of Lords says members may not accept payment in return for parliamentary services.
The UK Independent reported last month that Lord Blencathra has lobbied Chancellor George Osbourne to reduce UK air passenger transport taxes on Cayman. Lord Blencathra also intervened over a motion the UK House of Commons heard calling for Cayman to be “closed down” as a tax haven.
Cayman Islands North Side MLA Ezzard Miller has recently called upon the local government to terminate any relationship it maintains with the Scottish-born former MP and House of Lords member.
“The Cayman Islands will suffer enough reputational damage with the three ongoing investigations of the Premier [McKeeva Bush] and we have no need to endure what will transpire in the UK media surrounding this issue,” Miller says.
One thing that may have irked UK Labour Party lawmakers about Lord Blencathra is that he doesn’t hold the same views with regard to international finance centres like Cayman.
“I detest the term ‘offshore jurisdictions’, I believe it is derogatory. Cayman, along with BVI and the Jerseys and the Guernseys of this world, and Bermuda, are international financial centres,” he says. “The financial flows are strong [between London and Cayman]. I wish we could identify that there’s guys who are working in say a Jaguar factory in Birmingham…and they’re working with an Indian company, and the money that’s coming to them has come from the City of London, which came from Cayman which came from funds in the States….we know that happens, but you just can’t prove it.
“We’d all like a nice little sound bite in showing how important Cayman is to the United Kingdom and how important the UK is in doing business with Cayman.”
During his recent visit, Lord Blencathra said it was important for international financial centres like Cayman to maintain relationships in the areas where their services can be affected by legislative initiatives; not only the UK, but in Brussels and the United States.
“I congratulate the [Cayman Islands] government, for a small government, to compete internationally in those intense financial negotiations and still keep Cayman, not top, but in the latest review Cayman is just behind Jersey and Guernsey but it is ahead of all the other territories.
There’s a lot to keep track of.
“For example the detailed regulations…on fund management could be, if interpreted strictly could limit severely the ability of international financial centres, Cayman and others of the OTs to compete and sell the product in Brussels. If the financial transaction tax were to go ahead, that could be beneficial to Cayman provided it closes down the City of London.”
Lord Blencathra says the remark about closing the City of London was an “off hand” comment
“A financial transaction tax, if imposed only in Europe, it would be damaging to the City of London and that business would go elsewhere…some might say it could come to Cayman. But then Cayman would have the problem of 50,000 people from London wanting to move to Cayman and that would cause other difficult problems. The best solution is not to have a financial transaction tax, let Cayman expand its business, let London expand and work in synergy.”
“Competition between jurisdictions is a good thing.”
‘Don’t drown us’
While saying he’s been encouraged by some of the recent support the Cayman Islands has received from the United Kingdom coalition government, Premier McKeeva Bush advised Overseas Territories Minister Henry Bellingham last week not to push too hard on further regulatory regimes for the offshore financial sector.
“Minister, don’t drown us,” Mr. Bush said, getting some laughs speaking prior to Minister Henry Bellingham during an event in April at Pedro St. James, when he told the minister he was “most pleased” there had been a change in UK governments during Britain’s last elections.
The premier says despite a prolonged economic downturn in the Cayman Islands during the global recession that the territory remained the highest-ranked Caribbean jurisdiction in terms of its economy and was currently ranked third behind Jersey and Guernsey among small financial centres.
He says the territory’s robust regulatory regimes had, in part, been responsible for its continued success during the world’s troubled economic times. “We are better than the US [in terms of financial regulations],” Mr. Bush said. “And we are just as good as England or better.”
At the Pedro event, Bush said he hoped Minister Bellingham would help Cayman proclaim the good things to “all the ignorant critics of financial centres” and urged the UK not to over-regulate such jurisdictions.
Bellingham, on his first trip to the Cayman Islands since being appointed to his current position, got a chance to take in a bit of Caymanian culture and talent Thursday night at Pedro St. James among an audience of hundreds who turned out to meet the British politician.
Some may have been surprised by what the now-overseer of the British Overseas Territories in the Caribbean had to say.
“Without growth you do not have prosperity,” Bellingham told the assembled crowd at Pedro. “I’m impressed that you’re doing it in a sustainable way.”
Bellingham says the current UK coalition government intended to “engage”, essentially take a more active role in the territories, than the previous Labour Party government had done.
“We believe in self-determination,” he says “[But] if you want to remain British … we will cherish that.
“Unlike other governments, we’re not going to say to territories ‘please go on and try to find your way for independence. We will work with you and we will invest in you.”
The minister says he had been impressed with a financial services industry which was “the envy of most other countries in the world” and that his government wished to encourage more trade between Cayman and the UK.
He says he would encourage more UK companies to do business in Cayman, and improve communications links between those companies, local universities, professional bodies and England.
Bellingham says the soon-to-be-released UK white paper, which will help direct the partnership between Britain and its remaining territories for the next decade, seeks UK governments to “seriously engage” with overseas outposts.
In exchange for additional UK support, Bellingham told Premier Bush and the assembled audience that Britain would want “a few things back”.
“We are keen to see the responsible, fiscal, financial management,” Bellingham said. “I’m delighted you signed the Framework for Fiscal Responsibility last November.”
Bellingham says the agreement was not “nuclear physics”, merely a document to assist government in living within its means. “We must also have in place proper checks and balances on procurement, the world class checks and balances in place when it comes to procuring major projects.”