What really happens inside a tax haven?
John Christensen knows because he was there. As Jersey's Head of the Government Economic Service, he witnessed first-hand how political power, financial interests and official secrecy combined to protect wrongdoing. Eventually he decided to expose what he had discovered, beginning a journey that helped shape the global tax justice movement.
In this podcast we discuss whistleblowing, corruption, the culture of secrecy, and why offshore finance has always been about far more than tax. We explain why the City of London remains central to the offshore system, how international institutions enabled it, and why many of the underlying political attitudes remain remarkably unchanged today.
We also discuss the political economy behind offshore finance. Why do secrecy jurisdictions exist? How much responsibility lies with places like Jersey, and how much with the City of London? What role have governments, banks, auditors and international institutions played in sustaining the offshore system? And have things really changed over the last thirty years?
We also reflect on the creation of the Tax Justice Network, the reforms that have been achieved, including automatic information exchange and country-by-country reporting, and the challenges that remain. We also look ahead to our next conversation on The Finance Curse documentary and why Britain's economic model still depends too heavily on financial engineering rather than productive investment.
If you care about tax justice, democracy, financial secrecy and how power really operates, this conversation provides a rare insider's account.
This is the audio version:
There is no Debate Ammunition for this video.
There is no transcript either, but this is my summary:
John Christensen and I go back a long way. He is the man who introduced me to Jersey, the person with whom I co-founded the Tax Justice Network, of which he became director and I became research director, and who, by his own account in a forthcoming book, blew the whistle on an establishment cover-up in offshore finance. In this podcast, we discuss where that story began, what it tells us about where we still are, and where we need to go.
The Jersey Scandal
John's chapter, Diary of a Traitor, appears in Whistleblowers: Voices of Justice, a collection of essays by jurists and lawyers edited by Italian legal scholar Costantino Grasso, due from Springer in September. The book argues that, in an age of captive media, compliant auditors, and docile politicians, whistleblowers have become more essential, not less. John's contribution, which I have read, recounts his own experience as a whistleblower and the costs involved.
In January 1996, John was head of the government economic service in Jersey. A late-evening call from Wall Street Journal journalist Michael Sesit changed everything. Sesit was investigating a fraud involving UBS's Jersey subsidiary, Cantrade Bank, and a currency trader named Robert Young, who had defrauded retired savers of their life savings. At every turn, he said, investigations had been blocked by Colin Powell, Jersey's chief civil servant, and by senior politicians.
John went in early the next morning and checked the files. Everything stacked up. The predecessor to the UK's Financial Services Authority, when John called that morning, told him within two hours that Young was a known fraudster. Despite that, Colin Powell had signed off on Young's licence to operate and his housing consent without the most basic due diligence. Ordinarily, that would have crossed John's desk. It had been kept from him.
The eventual outcome was that Cantrade Bank pleaded guilty to four counts of criminal recklessness, two people went to prison, including a senior auditor, which is almost without precedent. But the establishment never asked the question it should have asked: how had Jersey's much-publicised defences been breached? The answer was that they had been breached by the people at the very top.
John's decision to work with the Wall Street Journal was, in effect, a resignation. He stayed for another eighteen months, during which the authorities tried to search his home and impound his papers. The message to other potential whistleblowers was plain: look what happened to John Christensen.
Colin Powell and the Ideology Behind the Haven
Colin Powell was not simply involved in this affair opportunistically. His commitment to tax havens, or secrecy jurisdictions as John and I prefer to call them, was ideological. He was associated with the Institute of Economic Affairs, a right-wing libertarian think tank, and his view of democracy was that it existed to protect the interests of elites from the majority. It was the majority that he mistrusted.
Powell designed much of offshore Jersey's legal architecture, including company and trust law, and chaired the Offshore Banking Supervisors' Group, which had carved out a separate space for offshore activity outside the Basel regulatory framework. His argument, which he maintained to the end, was that if governments demanded unreasonable amounts of tax from people, assisting them to avoid their obligations was not wrong.
What John found in those files in 1996 was not a failure of regulation. It was regulation perverted by the people responsible for it. Jersey had marketed itself as a clean jurisdiction with robust defences. Those defences had been dismantled from within by Powell and the politicians who shared his worldview. John lost his naivety about Jersey that morning. Eventually, Powell lost his too. When John and Naomi Fowler interviewed him shortly before his death, he had become disillusioned with the libertarian ideas he had once championed.
Thirty Years On: What Has and Has Not Changed
Has it changed? John's answer is that it has and it has not.
On transparency, the short answer is that almost nothing has changed. Jersey still discloses no accounting information on companies registered there, no data on beneficial ownership, and nothing about trusts. It has improved slightly on the Financial Secrecy Index, but it remains substantially secretive. John is currently involved in an investigation in which the island's authorities are again refusing to cooperate, creating substantial barriers to the inquiry.
What did change, particularly after the 2008 financial crisis, was the international political context. The Tax Justice Network's work on automatic information exchange and country-by-country reporting gained traction at G20 and OECD level. The European Union began moving forward with measures that would have put real pressure on the tax avoidance industry. The result was, as John argues, and I think he is right, that Brexit was partly a response to precisely that. The City of London's chancers, grifters, and tax avoidance advisers, not to mention their tens of thousands of wealthy and politically connected clients, were not going to allow those EU reforms to proceed. The rise of nationalist populism across Britain and beyond is, in part, the political economy of a class fighting to protect its extraction model, which lies at the heart of global capitalism.
The City of London Is the Problem
The most important part of our conversation, and the point that I think we did not emphasise enough in the early years of the Tax Justice Network, is that the offshore architecture is not really about Jersey. It is about London.
The secrecy jurisdictions, including Jersey, Guernsey, the Isle of Man, Cayman, the British Virgin Islands, and the rest, could not operate without the active support of the UK government. Nor could they function without a small number of international banks and the four major audit firms, all major London operators, who put their rubber stamps on the whole structure and declare it legitimate.
The aim of all this is the extraction of value. If Manchester is poor, it is because London is rich and extracting value from it. In that context, foreign direct investment in Manchester real estate over recent decades has created a few construction jobs and then, for decades afterwards, channelled rents offshore. That is a model based on extraction. It is not a development strategy.
John made the point directly: if this is the case, we need to persuade political leaders, including Andy Burnham, that what was done to Manchester is not a model to be copied. Britain has built an economy on financial engineering rather than product engineering. The consequences of that are visible everywhere outside London.
New Threats and the Finance Curse
John also raised an issue that we were not fully grappling with in 2003: cryptocurrencies and the offshore holding of assets through digital means. It is now clear that these are being used as vehicles for political funding, as recent revelations about the Reform Party illustrate. The enabling class is fighting hard to protect their power and privilege.
We also agreed that the Tax Justice Network, after both of us had moved on, did not find its next role. While we were involved, it identified policy measures and, in many cases, pursued them successfully. It did not, however, make the transition to tackling the bigger structural questions about what financial capitalism has done to Britain and to other countries that have embraced it at the expense of productive activity. That is the issue that John's forthcoming film, The Finance Curse, addresses. It is now in post-production, the lawyers have cleared it, and John is aiming for a September release. We will discuss it in our next podcast and use it as the basis for a conversation about where people who share these concerns should now direct their energy.
NB: For reasons that baffle me, some comments relating to another post appear here. I apologise, and cannot explain why.
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I think that the smoking ban has some part to play as it discouraged socialising which is linked to lower dementia risk. Keeping pubs going as places where smoking is permitted in a room with the pub landlord’s consent also means that non-smokers also get to have a viable pub to go to at the margins.
Ultra-processed food has been over-rated as a contributor to needing care years as a paper out yesterday showed. It’s the overall nutrient profile that matters to our diets not whether the food was made in a factory and packaged to last longer.
So, to cure illness you would encourage a health threatening habit that is deeply exploitative?
Please do not be crass.
but as Sir Humphrey says -think of the savings on pensions.
https://www.youtube.com/watch?v=MGlrE6oQ39o&t=22s
Still relevant.
A sound post. One issue you have identified is the silo approach to policy issues. People look at an issue in isolation rather than the broader picture which is short-sighted and invariably does not result in appropriate solutions. We also have the typical response of commentators which is to make the same old assumptions and dredge up the failed policy prescriptions of the past. Soundbites, instant responses and a lack of critical thinking are the enemy of good policy discussion and formulation.
I think your arguments about the reasons for the level of social care are very persuasive, and that they are also the arguments for a great deal that is wrong with this country at he moment. Long term goals have to be to fix poor housing, inappropriate (and therefore poor) education, poor diet, poor employment opportunities, poor mental and physical health and healthcare, inequalities. But, may I paraphrase one of your recent posts about discussing tax reform, it must be based on reality and on what works.
Those people currently in need of social care that they are not receiving will still need it while the work on the causes of poor healthspans are tackled (if they ever are), and the immediate biggest issue is funding. Social care needs re-nationalising as much as the utilities, trains and other things need it. Local authorities need funding to even be able to assess those with social care needs within an acceptable timeframe. Social care workers need to be paid appropriately for their roles.
So, absolutely yes, there is an urgent need to improve all the issues you mention, but even if that is started immediately it will not take effect overnight. So a change in funding and attitudes towards the providers of social are needed at the same time.
I accept your point. Short term we need care, of course. But we also have to solve the problem as well.
I wanted to make this point too; thank you Cyndy. If we want our 70-year-olds and on up to be healthier, the theory is that they should have started when they were in their 30’s or 40’s. We didn’t. And I cannot see how a mother of small children, with a full-time job, can be expected to find an extra hour a day for exercise, etc, without reducing already insufficient sleep. And while it seems reasonable to claim that exercise and good food in middle age help with healthy lifespans, I don’t think this is proved.
My immediate group of friends are all in their mid-80s. We all have something wrong in theory – diabetes, digestive problems, mobility problems, had cataract surgery and some new hips — but we all feel healthy-ish and live happily. Could the wartime diet with which we were raised have something to do with this? We know so little, though many claim to know more.
Hear hear Cyndy. I worked in the private sector, now in public. Much good work in both, but adding profit-taking into the mix is not detrimental. People who have run out of money are being moved into ‘cheaper’ homes, losing friends, sometimes too far for family to easily visit. It all links to health services too – people are stuck in hospital, as care not in place, people wait weeks to see OT as not enough of them, one guy now servicing /repairing wheelchairs in our county I am told. Very good video Richard.
I agree with what you say, but I felt that Andy Burnham didn’t make funding his key issue. I felt he started with the quality of care available and the poor conditions for care givers. He also rightly stated that poor social care impacts the NHS in terms of people coming in sicker and staying a long time. Bed blocking due to lack of social care was an issue when I was nursing forty years ago in the Thatcher era, but we never had corridor care as exists now. I think that he wants to start for looking at how our care system should look first. Other failed attempts have focused on how to pay for it ignoring the fact that our current fragmented private care system often delivers poor care. As a single person I don’t mind selling my house to fund my care, but I do worry with the current system that I won’t get the care I might need.
One elephant in the room is that my generation are retiring later and having to continue to work with poor health. Those in their 70s/80s often retired younger and had better access to healthcare when needed. Many now wait several weeks for a GP appointment before going on any hospital waiting list.
Poverty is a much bigger issue and the right wing can complain all they like about the number of young people on benefits due to mental ill health, but this austerity and Covid generation are not going to age well.
“I agree with what you say, but I felt that Andy Burnham didn’t make funding his key issue.”
Problem per Andy Burnham: “The NHS will collapse if Social care is not reformed.”
First, you have to figure out what is causing the problem and specific factors contributing to the problem.
Second, you come up with a solution to eliminate or solve the problem. (Eliminate and solve are not the same thing in this discussion)
Third, you devise a a funding mechanism to finance your solution.
Andy Burnham has yet to come up with a solution as he has only identified one aspect of the social care problem.
One of the aspects is like dentistry at the moment – insufficient provision and funding means costs put on the person needing access, with the result that they defer seeking assistance until long after they needed the service. This results in worsening health and potentially a longer period of greater need.
For example, struggling to do things when mobility is declining results in falls, hospital admissions, rehabilitation needs, and all that goes with that.
Going to something like the NHS Confed Expo, you could see most of the focus was on hospitals and doctors’ surgeries, with very limited discussion of care homes or domiciliary care. Meanwhile, hospital beds are occupied longer than necessary because the resources aren’t there for a safe discharge of patients needing ongoing care. Unnecessary admissions occur because insufficient support led to injury. Lack of funding is harming patient outcomes and preventing the rest of the NHS operating at its best, with a massive reliance on unpaid carers.
Better health is an unequivocal blessing for the individual, but a more nuanced one for healthcare provision. Support to avoid accidental injury or decline may maintain reasonable health to defer or prevent some long-term care needs. However, there are other scenarios where a quicker death or injury is avoided and long-term conditions like dementia ultimately cost more to treat. We therefore need to plan for spending more on care regardless of efforts to encourage people to live healthier lifestyles.
This is partly to improve health outcomes for unpaid carers. They get minimal support, and demands keep rising, often until breaking point. Even attempted suicide is insufficient to trigger additional support in the current system. It is shockingly complacent about the demands it makes of people who are not trained, not paid, and not prepared for that burden.
Thank you
Wouldn’t money spent on the welfare state be a form of redistribution and go entirely back into the economy? People provide care, so their wages, less some savings and pensions, would be entirely spent back into the economy. One person’s spending is anothers wage. Then there is the benefit of freeing up healthy workers. For example, the welfare state didn’t just provide care for my brother; it also freed up two productive adults to continue to contribute to the economy. My family was lucky enough to benefit from the old welfare state, before the drawbridge was pulled up by decades of neoliberal “economic savings”. My brother does occasionally have to prove he is still disabled and not miraculously cured of an incurable condition, but other families today have to jump through hoops to receive a fraction of the support my family did decades ago. Today, a disability can wipe out the economic outlook of the entire family. My point is, framing it as purely a cost to the state is incorrect and immoral. We can all afford to chip in, a problem shared is a problem halved. What happened to that sort of thinking?
Neiliberalism killed it.
I see that this recent Lancet report gives information on this important issue on a global scale:-
https://www.thelancet.com/journals/lanpub/article/PIIS2468-2667(26)00098-8/fulltext
Thank you
‘In 1999, around one in six people were 65 years and over (15.8%), this increased to one in every five people in 2019 (18.5%) and is projected to reach around one in every four people (23.9%) by 2039…by 2069 there are projected to be an additional 7.5 million people aged 65 years and over in the UK, compared with 2019 figures…This would take the UK’s 65 years and over age group to 19.8 million people, accounting for 26.2% of the projected population.’ https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/january2021#the-uk-s-population-is-ageing
Richard, I would suggest that your analysis is half right in that just as many of the problems facing the NHS arise from its concentration on treating ill-health rather than prevention, the issue for the care sector is fundamentally ill-health. Addressing that will not in both cases lead a resolution to the current problems, which means that until then the answer lies in addressing funding issues. In the case of the care sector the difficulty in finding a solution to how it should be funded is essentially one of greed. Whereas in past generations the norm was that care was provided by family members, changes in society makes that less acceptable or practical now and that raises the question of who pays. For both the wealthy and the poor that presents little problem, albeit the level of care extended to the poor is often far less than what it should be. For the vast majority in the middle, however, it’s clear that the prospect of the cost of care being met from what would otherwise be an inheritance is seen as an affront. In effect the desire is that the inheritance should be safeguarded with the cost of care being met from public funds. The rider to this is that there should be no tax rises to meet that expenditure and in the world where the household myth applies that means cuts elsewhere in government expenditure and as every fool knows these should fall on the welfare spend because who other than the already struggling should meet the cost of ensuring that the inheritance of the Nigels of this world remains intact? I can’t see Burnham addressing this matter in any way that upsets the already comfortable.
There is a video coming on this. The middle class are resisting taxes on wealth. What a surprise!
If middle class includes people who own a house but have little else, who see how harsh the world is for their children, and are dismayed at the prospect of losing the house to pay for care, then that is a lot of people who are afraid they will not be able to give their children some extra resources in middle age, which may be when they can finally buy a house or flat. Better off people with resources to help their children when they are younger, can do that before they get old and sick, before the care bills. None of us want our children to have less than we did, but there must be a threshold somewhere that makes sense. I think a number would be handy here – because ‘middle class’ (probably a category that quite a few blog followers fit into) is too vague. If the local authority was awaiting the sale of my house to pay for my care I would want it bought by the state to provide housing, not in danger of being snapped up by a speculator, while my children still rented. Fearing for the future, I do not see a country that supports its population, so I selfishly want to do what I can to help my nearest kin, while wanting change that would relieve that worry and help the children of those who have less resources than me. However you define them, we need the middle classe/s on board.
What about the car?
My mother used to walk miles with her friend as a child in the 1930’s to play and then as a teenager several miles across Bristol to the tennis courts at the bottom of the Avon Gorge in Bristol.
The all time corker was someone I know who died in his late 90’s. He went from Newport to Swansea – by bike in the 30’s for a trip to Ilfracombe on the Devonia in the 1930’s then cycled back again – about 60 miles each way. Never owned a car in his life and was active pretty much to the end – still doing whatever shiprepair estimates were needed. Ditto someone else of similar vintage although watching him poke and prod live electrics in his mid 80’s it was more his profession than his lifestyle that was a threat to his continued existence.
Its amazing when I go to see my oldest son in London and we travel around (mostly) by tube how many steps we put in according to my fatbit or whatever its called even when I go ‘en famille’ – if its just the two of us it makes the London Marathon seem tame.
But we have cats and used to keep chickens, you can get books which tell you how to keep them happy and healthy – in the case of the latter maggots from the food waste bin usually helped so why isnt there a manual for politicians, how to keep your population happy & healthy, it isnt difficult.
I remember cycling everywhere – including 25 miles each way to see an aunt once.
I walk whenever possible now. I have a bike, but admit I do not feel very safe on it now – the fault of the tank like cars on our roads.
You are a natural systemic thinker, and politicians are paid not to join the dots, because big pharma and their ilk are coining in on our dysfunctional outcomes.
Excessive welfare and health costs justify privatisation, justify austerity ie a framework of socialism for the rich.
Another big killer is loneliness in an atomised society – economic serfs with no time, network or emotional inclination to cook and eat together is not a recipe for good health.
I am a systems thinker – you are right.
And I know not everyone, and even most people, are not.
I agree with all else you say.
The primary requisite for being a minister, I would argue, is to know how to assess and evaluate the specialist expertise available to them and to have the drive to execute from there.
Makes me further wonder about the short sightedness of this government. It is a case of can down road. So it appears 14 year olds are going to get the opportunity to add a trade to there curriculum. So from the age of 14 to the retirement age proposed of 68, that makes a grand total of 54 years and for those 54 years it is deemed that in order to human you must work. Can anyone work a full time job for even 50 years let alone a trade for 54 without out breaking. I think the government needs to stop seeing us as toys to replace and I can’t help think of a quote I read this week – ‘We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. (Buckminster Fuller)’ so if we don’t have to fight to exist, fight to afford lean decent healthy food, distrust our government, fear our climate, have decent housing, have a clean healthy environment, no chemicals or pesticides or pollution and work if we want and don’t if we don’t, then surely social care would be fixed as if this lot was sorted the amount of mental health, bioligcal damage and need for increased care would also be fixed. It needs holistic approach and it’s mind bending the short sightedness and blindness going on or is this too much common sence, for that I will go wash my mouth with soap
Much to agree with
Excellent post Richard.
The thing is, that our politicians ARE systems thinkers – endorsing and enabling a system of disposal of the states’ liabilities to its citizens that are part and parcel of a democracy. And one of those liabilities is health care, where it can be argued that keeping ill health going is now going is being used to guarantee returns for private investment. Living for 10 years with bad health can give a good return, even better if their are millions of such people. Sick eh? But not beyond belief.
Systems thinking is not always moral or ethical. The Nazis annihilated 6 million Jews and many other cohorts of people deemed to be undesirable by thinking systematically about how to do it and getting better (more lethal) at it as they went along. Systems thinking can be used to destroy as well, and it is being used against the public sector right now.
The problems is that we need the right sort of systems thinking – instead of a race to the bottom, a race to the top mentality is needed based on the heterodox ideas discussed here.
Everywhere there is growing evidence that privatisation has not delivered. And yet STILL they’re trying to do it. The latest trick is to get private equity into funding new housing for supported housing with State sanctioned rent rises guaranteed every year.
The simple point is that these exploiters just will not stop trying to make money out of everything. They’re addicted, inveterate monopolists creating and abusing their leverage whose history goes back to the slave trade believe you me. And the people you vote for are helping them out.
Is this the most corrupt era that has ever existed?
We have top-down systems thinking.
We need bottom-up systems thinking.
That is tomorrow morning’s video.
Having seen the original documentary where a bent Jersey copper puts on his siren outside a police station whilst I think John is being interviewed all I can say is that anyone who exposes this stuff is in for a rough ride and can be considered to be very brave indeed. I look forward to it but have no idea how we will get to see it! A local cinema in Belper, Derbyshire said that they might want to put it on if it was on general release.
The thing is secrecy jurisdictions are all a threat to democracy – its all very well slagging of politics but why are people slagging off politics? If you think that they are ‘all the same’ WHY vote vote for Farage who is one of those who is ‘the same’ too instead of looking into this? The reason why they are ‘all the same’ is that they have been bought by money being hoarded and under taxed off shore.
The comments above seem to be attributed to a post I think you took down? I could not find it anyway.
I am baffled as to what has gone wrong between these posts. I do not think this has happened before.
John was very brave.
I whistle blew whilst with TJN twice – it was a painful experience – but I do not regret it.
I noticed that the post had disappeared but assumed there was a reason. The Gremlins get everywhere.
Can I remind users of this blog of the Spiders Web film ? I think it is still relevant
https://www.youtube.com/watch?v=np_ylvc8Zj8&t=2s
On the Christenson podcast!
The point about Mancheter construction jobs followed by rent extraction to the City (and beyond) is well made.
I fear that recent government capital investments in Hartcliffe (£20m) and Knowle West (£12m) here in S Bristol could have a similar profile. It is a fact that local organisers are aware of.
The temptation for Burnham’s government (Starmer LINO MkII) will be to simply fiddle the fiscal books with a new form of PFI with a Northern accent. That needs calling out, in advance, and loudly.
The fiscal rules need taking out into Whitehall, put in the stocks, and pelted with rotten fruit, then burnt on a bonfire and the ashes interred in the wall of the Treasury behind a large commemorative plaque.
Each Budget day the Finance Minister could be photographed in front of the plaque, waving their red box.
No response required.
What a joy it is to listen to the two of you speak with such clarity and purpose.
As always, thank you.
We have been having these discussions for 24 years now…
On the Tax Havens podcast and particularly on where we are now, how far would you say that what remains of the Scottish Financial Services “industry” is a branch office of all that is most antisocial about the City of London, and is the Scottish Government complicit in this or simply and naively unaware or in denial of theproblem?
Working in the big 4 (audit) in Guernsey cost me a career in accountancy. When I started questioning the things I was finding I was treated like a pariah, performance reviews nose dived, mental health suffered and eventually I was in such a mess I failed an exam and they used it as an excuse to let me go.
That was 20 years ago, but the partner is still there. Another friend (must smarter than me) in a competitor firm identified a very suspect chain of entities flagging likely money laundering, took a day off and the partner signed off the audit.
That was the way it worked
It’s always fascinating to hear you two talking! Thanks to both of you for the update on The Finance Curse film. Still ready to swing into action on holding a screening in Cambridge!
Of all the things you talk about, I think the thought of the £ millions the public loses to tax avoidance upsets me the most. I’m glad you’re still focused on that!
Regards…Bob
It’s the autumn now, Bob. I want to be there!