Virtual Lancaster

There are two advantages for a development company registered in an offshore tax haven when securing a development deal. The first obviously, is that they contribute little in the way of tax to the society that enables them to trade safely and make profit. So they have an unfair competitive advantage over decent UK-registered companies that pay their dues – and they have extra cash to commission favourable ‘consultancy reports’ and spin-doctoring. 

The second advantage is that a tax-haven base is handy for setting up secret no-name offshore bank accounts (where a  cosy nest-egg can be quietly stashed), for any new best friends one happens to make. Not that I am suggesting that anyone we know would be complicit in such a thing. 

If I were a hacker, these account transactions would be my holy grail.  One day, if someone cracks them and survives to go public, the fallout will be one of the defining events of the 21st century. Between now and then though, in the absence of hard evidence, how can you tell if a development scheme is potentially rotten or not?

Here’s my draft 10-point guide, based on long years of observation of deals and their outcomes, on how to run a rotten scheme.  It’s just my opinion. Your comments and suggestions for improvement are welcome:

1. The development company is part of a paper corporation with a complex structure to protect it from its creditors, one of these being the taxman.
2. There is only one development option presented. This option has been prepared secretly by a closed team of council officers and the developer’s agents and brokers. How exciting! And bonding.  An army of pet consultants is lined up to offer reassurance and rosy supporting documents all the way.
3. Selected councillors whose discretion and sympathy can be relied on are approached and a period of horse trading takes place behind the scenes to build a supportive political coalition with a majority.
4. During this period local ‘surveys’ or ‘vision statements’ may be publically released which suggest that something along the lines of the secret proposal would be just what the doctor ordered for the local economy. Any previous research suggesting the opposite is binned.
5. The developer and a vague outline of their proposals are then revealed in a fanfare of positive press releases to local newspapers  (which may also be linked through a complex corporate structure to the developer). The developer is quickly awarded ‘preferred developer’ status by the political majority on the city council so that no potential alternative options or competitors may be considered.
6. The developer finances a ‘public consultation’, in which people are essentially asked ‘Do you want the the city to be left to rot?’ Any ‘no’ answer is interpreted as approval for the proposal and the developer. Critics are labelled as non-representative, deluded and vexatious. They are repeatedly smeared throughout as ‘wanting to leave the city to rot.’
7. The process is inexorably kept going at public expense, in the face of all public or legal opposition, in the expectation that opposing resources will eventually become exhausted.  The closed meetings continue. No hard financial details or projections are released to the public, who are simply and repeatedly assured that the proposal will provide free lunches for all and is the only alternative to leaving the city to rot.
8. And repeat, cycling through the various stages until an inappropriate and ‘unexpectedly’ expensive development is renegotiated, restructured, refinanced, reorganised, refinanced, reconditioned, refinanced and bled dry by further cohorts of tax-dodging contractors and consultants.
9. The project is too big to fail and too much has already been invested to be written off.  The city council finds itself liable for heavy expense and criticism for the unforseeable future.  Creditors and local stakeholders are massing at the doors.  The individuals responsible for shackling a dead white elephant around the city’s neck have mostly moved on and are never held to account. The extent of the damage and waste is incomprehensibly huge and never fully revealed.
   A bunch of half-assed rescue measures are tossed around by desperate councillors, who commission more consultants. Eventually a ‘public consultation’ may be offered (its results will later be binned when Stage 4 recurs).
10. Somewhere in an offshore tax-haven, a shark smells the carnage. And repeat, through stages 1-10.