Burgess COMMENTARY

Peter Burgess

No 10 forced to defend PM's appointment of former HSBC boss as trade minister Stephen Green was either asleep at the wheel or involved in dodgy tax practices, says head of public accounts committee

Banks were “aggressive protagonists”, advising wealthy customers how to avoid and evade paying tax, says Margaret Hodge, chair of the public accounts committee.

Downing Street was forced to defend David Cameron’s appointment of a former HSBC chairman as trade minister in 2011, after revelations that the bank’s Swiss subsidiary helped wealthy customers avoid paying millions of dollars in tax and claims that the British tax authorities knew about it.

Cameron’s spokesman said Stephen Green, who served as trade minister from January 2011 to December 2013, had been an excellent appointment and that the prime minister had never discussed with him the allegations against HSBC.

The spokesman said he did not know whether any other minister was aware of the allegations, after files were sent to Britain’s tax authority, Her Majesty’s Revenue & Customs (HMRC), in 2010. The Treasury minister, David Gauke, has been ordered by the Speaker to make a statement to the Commons on Monday afternoon on what the government knew about the HSBC affair.

Cash pilgrims and bricks of money: HSBC Swiss bank operated like cash machine for rich clients

Cache of leaked data show how throughout 2005, scores of account holders arrived in Geneva, often emerging with currency foreign to Switzerland

The government was under pressure after a huge cache of leaked secret bank account files revealed that HSBC’s Swiss banking arm helped wealthy customers conceal millions of dollars of assets, doling out bundles of untraceable cash and advising clients on how to circumvent domestic tax authorities.

The files – obtained through an international collaboration of news outlets, including the Guardian, the French newspaper Le Monde, BBC Panorama and the Washington-based International Consortium of Investigative Journalists – reveal that HSBC’s Swiss private bank:

• Routinely allowed clients to withdraw bricks of cash, often in foreign currencies of little use in Switzerland

• Aggressively marketed schemes likely to enable wealthy clients to avoid European taxes

• Colluded with some clients to conceal undeclared “black” accounts from their domestic tax authorities

• Provided accounts to international criminals, corrupt businessmen and other high-risk individuals.

Approached by the Guardian, HSBC, the world’s second largest bank, has now admitted wrongdoing by its Swiss subsidiary. “We acknowledge and are accountable for past compliance and control failures,” the bank said in a statement.

The Swiss arm, the statement said, had not been fully integrated into HSBC after its purchase in 1999, allowing “significantly lower” standards of compliance and due diligence to persist.

Lord Green, who was chief executive and then chairman of HSBC from May 2006 until December 2010, has so far refused to comment on the revelations by the Guardian and a consortium of other news organisartions about what occurred at the Swiss bank under his tenure.

“Either he didn’t know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices,” said Margaret Hodge, the opposition Labour MP and chair of the UK parliament’s influential public accounts committee.

“Either way he was the man in charge and I think he has got really important questions to answer,” she said.

HSBC files: how secret Swiss account data detailing misconduct came to light

The HMRC boss, Lin Homer, and Indra Morris, the director general for tax and welfare at the Treasury, will appear before Hodge’s committee on Wednesday. They are expected to be questioned about why the tax authorities have launched only one prosecution despite holding a copy of the HSBC files since 2010.

“You are left wondering, as you see the enormity of what has been going on, what it actually takes to bring a tax cheat to court,” Hodge told BBC Radio 4’s Today programme. “If it had been a benefit cheat it would have been up for court years ago. Now we have had only one tax cheat taken before the British courts.”

The Labour leader, Ed Miliband, called on the government to explain why Britain’s tax authority did not appear to have taken tougher action, and questioned the appointment of Green as trade minister.

“We need to know why HMRC apparently did not act, apart from at the margins, on the information that they seem to have been given about what was going on,” Miliband told Sky News. “We need to know from the government why they appointed Stephen Green of HSBC as a trade minister well after this information was passed to HMRC. I would like to see the government explain what they did.

“We cannot have a country where tax avoidance is allowed to carry on and where government just turns a blind eye.”

Cameron’s spokesman said the prime minister stood by the appointment: “He [Cameron] was of the view that he [Green] would and did make an excellent trade minister.”

The spokesman said tax evasion was wrong and the HMRC has been clamping down on any instances that could be prosecuted, but added the task of government ministers was to set the legal framework and it was for the Crown Prosecution Service to make decisions on whether court action should be taken.

Labour demanded the government be called to account to account for the the revelations in the Commons. The shadow chancellor, Ed Balls, said: “There are very serious questions for [the chancellor] George Osborne and David Cameron to answer today.

“Why, in the five years since this government was first given information about how HSBC helped people evade tax, has there only been one prosecution out of 1,100 individuals identified?

“And why did they appoint the chairman of HSBC as a Tory minister eight months after the government was told about the bank’s activities?”

Cameron’s spokesman said the government had increased the maximum penalties for prosecutions, as well as taken a lead on the international stage to tighten the law and increase tax information exchange between jurisdictions.

He added the government had raised an additional £30bn from large corporations in tax and nearly £850m from individuals.

Richard Brooks, a former HMRC tax inspector and a BBC reporter, has said the Treasury and HMRC “knew that there was a mass of evidence of tax evasion at the heart of HSBC” in 2011, but that the government “simply washed their hands of it”.

The Australian Tax Office confirmed for the first time that it received the HSBC files in 2010, and that it has used them to recover £15m from tax avoiders. The authority said on Sunday night it had uncovered “a number of discrepancies” among hundreds of Swiss HSBC accounts held by Australians over the last five years.

In the US, the behaviour of HSBC’s Swiss bank could be regarded as a felony, a report by the CBS programme 60 Minutes claimed on Sunday night.

In Switzerland, a former government minister called for an investigation. Micheline Calmy-Rey, who served as foreign minister between 2003 and 2011, said opening an investigation “would be the least that could be done”.

Speaking on Swiss radio, she said the case had seriously damaged Switzerland’s image. “I am angry. Switzerland has a good reputation for its efforts towards peace, for its economy. But then we learn there are slick individuals who do things.”

The French prime minister, Manuel Valls, told Europe 1 radio that the “government is very determined to fight against fiscal fraud and against tax havens and will continue to act in that direction where it concerns us and on a European level”.

Authorities in France have launched 2,300 audits since they came into possession of the leaked HSBC documents some years ago, Valls said.

Speaking outside a meeting of G20 finance ministers in Istanbul on Monday, French finance minister Michel Sapin said much progress had been made in recent years. “We now have the tools that are extremely efficient particularly regarding the automatic exchange of information, and improving the exchange of information with other countries including Switzerland.”

Gauke, the Tory Treasury minister, said primary responsibility for the scandal lay with HSBC, but he also hit out at Labour.

Balls was economic secretary to the Treasury during the period covered by the HSBC files, which are a snapshot of behaviour at the bank between 2005 and early 2007.

“The primary responsibility here lies with HSBC but this evidence shines a light on what was happening when banks were not behaving as they should have been, and tax avoidance and tax evasion was much too prevalent, and it would be very interesting to know what the City minister at the time was doing. Ed Balls has got questions to answer, frankly.”

The deputy prime minister, Nick Clegg, said the revelations showed “what a sophisticated industry it was to allow the wealthiest in society to avoid paying the tax which they should pay”.

Asked on Sky News whether Balls should explain what he knew about the Swiss accounts, Clegg said: “I think it would be great if Ed Balls, or indeed Ed Miliband, for once were just to get up and admit that they let the banks run riot on their watch.

“Ed Balls went on a prawn cocktail charm offensive to suck up to the banks and they now have the brass neck to somehow constantly accuse this government of not doing enough when we’ve done considerably more to straighten out the banks than Labour ever did.”

A source close to Balls said: “The information was first given to the government in 2010, so of course he was not aware of it. This is transparent and desperate stuff by the Tories to distract attention from this government’s appointment of the chairman of HSBC as a Tory minister eight months after they were given this information and the fact just one of 1,100 individuals has since been prosecuted.”