Laws and policies are crafted to give the appearance of sternness and fairness, but are rarely fully enforced on corporations and the rich.
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
The UK is a two-tier society where money wields power. People can vote for whomever they want but corporations and their controllers always win as they fund political parties, hand consultancies to legislators, control the media and means of production.
Laws and policies are crafted to give the appearance of sternness and fairness, but are rarely fully enforced on corporations and the rich. Here are a few examples.
Research has shown that the UK has prosecuted 23 times more people for benefits offences than tax offences. This is despite the value of tax fraud being nine times higher than benefits fraud. With the Public Authorities (Fraud, Error and Recovery) Bill the government is taking power to snoop on the bank accounts of benefit claimants, without any court order or right to appeal. It can remove money from their bank accounts. It is not taking equivalent powers to deal with tax fraud.
HMRC is currently failing to collect around £40bn of taxes a year due to avoidance, evasion and errors. Little is known about taxes dodged by wealthy individuals stashing wealth away in opaque offshore tax havens. The National Audit Office has stated that tax dodging by wealthy individuals is greater than HMRC’s estimates. HMRC’s estimates do not include taxes lost due to profit shifting by corporations. Big accounting and law firms, banks and financial experts are the masterminds behind tax dodge schemes but rarely face prosecutions. Despite numerous court cases brought by HMRC, no big accounting firm has been investigated, fined or prosecuted. They are rewarded with government contracts and advise government departments. Prosecutions of the enablers of tax evasion have plummeted by at least 75% in the past five years, with fewer than five criminal cases in 2023-2024. There were 16 in 2018-2019.
Lesser souls struggle to get through HMRC phone lines, but big corporations are known to have secured ‘sweetheart deals’ with HMRC i.e. they negotiate the amount of tax they will pay. The National Audit Office can report on such deals but parliamentary committees can’t scrutinise them for fairness, consistency and proper application of law as everyone’s tax affairs are covered by confidentiality. Public availability of the tax returns of large companies can empower parliamentary committees, press and people to check tax abuse but transparency is not pushed by political parties reliant upon corporations for political funding.
Global estimates of annual money laundering range from 2% to 5% of global GDP, which is between $2 trillion and $5.5 trillion. The City of London and its satellites in the UK Crown Dependencies and Overseas Territories launder around 40% of the world’s dirty money emanating from tax dodges, drugs trafficking, fraud, people/organ smuggling, corruption, sanctions busting and other practices. Following the Criminal Finance Act 2017, UK regulators can seek unexplained wealth orders (UWO) and prosecute. Only 7 UWOs have been issued since 2017 and no one has been prosecuted. When pressed, the Minister for Justice said: “How difficult it is to track down the money when criminals are hiding it. It takes hugely intensive work … The issue is one of resourcing to a certain extent …”
UK governments excel at covering-up illicit practices of the finance industry. The Bank of Credit and Commerce International (BCCI) was the biggest banking fraud of the twentieth-century. It was central to money laundering, frauds, terrorist financing and arms smuggling. In July 1991, the Bank of England closed the bank. To this day, there has been no investigation and even 34 years later Ministers refuse to answer questions.
In 2012 HSBC, a bank supervised by UK regulators, was fined $1.9bn in the US after admitting “criminal wrongdoing” and enabling money laundering at an industrial scale. It subsequently came to light that the then UK Chancellor George Osborne and regulators secretly urged the US authorities to go easy on the bank. There has been no UK inquiry and despite requests no statement has been made to parliament.
Frauds at HBOS, now owned by Lloyds Bank, go back nearly twenty years and the Financial Conduct Authority, the Serious Fraud Office, the Police and the Treasury have all refused to investigate. Instead the buck has been passed to Lloyds Bank, which funds the City of London Police, to investigate. A report on frauds over £1bn was promised by 2018. To date, nothing has been published and Ministers continue to elide any responsibility.
In 2017, 72 people died in Grenfell fire due to faulty cladding. Despite an inquiry, no one has been charged as profits take priority over lives. Newspaper tycoons and editors boosted profits by hacking into people’s phones and emails to write sensationalist stories. Despite the Leveson Inquiry exposing a culture of disregard for laws and rules, no one has been charged.
Hundreds of innocent postmasters were wrongfully prosecuted and convicted by the Post Office for alleged frauds. The Post Office knew that its Horizon accounting systems was faulty. The faults go back to the early 1990s, but with the complicity of lawyers, accountants and software supplier Fujitsu it prosecuted postmasters and forced them to repay millions of pounds. The 2019, High Court judgment in the case of Alan Bates v Post Office Limited blew the lid off the Horizon scandal. A public inquiry followed. Taxpayer-funded compensation to postmasters is likely to be around £2bn. Despite damning public evidence, no perpetrator of injustices has yet been charged.
Accounting firms have long been mired in scandals. Botched audits only come to attention after a corporate collapse or a scandal. Puny fines are levied and passed on by the firms as business costs to clients. Big firms are never shutdown. The Post Office scandal is another example. Ernst & Young were external auditors of the Post Office from 1986 to 2018. Publicly available evidence shows that auditors were aware of the Horizon failures. The flawed system meant that the Post Office failed to keep proper accounting records. Its directors could not have prepared ‘true and fair’ financial statements. Auditors issued unqualified audit reports.
The Financial Reporting Council (FRC), the accounting regulator, was asleep as usual. It was not persuaded by press coverage or the 2019 High Court judgment to launch an investigation into audits. After pressure from parliament, in April the FRC announced that it will investigate 2015-2018 Ernst & Young audits of the Post Office. All the wrongful prosecutions of postmasters and associated extraction of cash from them occurred before 2015, but that period is excluded from the FRC investigations. The usual whitewash with puny fines is guaranteed.
The UK has tomes of company law, but there is no central enforcer of company law. Thousands of companies flout company law and checks on company formations are rudimentary. For example, I referred the case of a dormant company to the Department of Business and Trade, which boasted net assets of £58,155,255,471. Last year alone, some 49,521 companies did not provide details of any current persons of significant control (PSC) or any PSC statements giving information about their current PSC status. In 2024/25, 13 companies and 13 directors were prosecuted and fined for offences relating to PSC registration requirements.
Whole sectors of the UK economy are under the control of corporations with criminal convictions. Since privatisation in 1989, all of England’s Water and Sewerage companies have been the subject of least 1,135 criminal convictions. United Utilities with 205 and Thames Water with 187 convictions lead the field. Despite that, their licence to operate is not cancelled and companies continue to dump raw sewage into rivers, seas and lakes. Their directors and not prosecuted; and companies are allowed to increase customer bills and pay dividends.
The current headline minimum wage rate of rate for £12.21 an hour for full-time workers over the age of 21 is hardly a king’s ransom. In earlier years, it was even lower. Between 2016 and 2023, over 3m workers were denied the minimum wage. The roll of dishonour includes companies such as Argos, EasyJet, Estee Lauder, Greggs, Lloyds Pharmacy, Marks & Spencer, Mitchells & Butler, Wm Morrison, Moss Bros, Pizza Hut, Rank Group, WH Smith, Superdrug, Tesco, just to mention a few. Thousands of employers have been named and shamed, but non-compliance persists. What of enforcement and prosecutions? The Minister told parliament that “between 2007/08 and 2022/23, 21 employers have been successfully prosecuted for underpaying the minimum wage with an additional case accepting a caution”. The fines are puny (see Table 12 of the supplementary data). Criminal prosecutions are possible but there have not been any. Political corruption is the root cause of the selective design and application of the ‘rule of law’ and associated loss of confidence in institutions of government. Laws are routinely bent to favour corporations and the rich. Criminalising the receiving and giving of political donations, end to consultancies for legislators, a proportional representation system of voting, worker and consumer elected directors on the boards of regulatory bodies and large companies can start the process of cleansing the system, but will be opposed by those benefitting from corrupt practices
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