Vickie Cooper, The Open University
UK Property Registered Offshore
Over the last 18 months, Private Eye and, more recently, the Panama Papers published by the ICIJ, have exposed the scale of property owned by people using the offshore trading route. In the midst of this growing public concern, the Conservative government vowed to turn a ‘torchlight’ on corruption and provide greater transparency in land and housing ownership in the UK.
There is nothing illegal about purchasing UK property using ‘shell companies’ registered offshore: tax havens have provided legal facilities for tax evasion since they were formed. International criminals benefit immensely from the offshore trading route where arms smugglers, dictators, corrupt government officials and oligarchs, are all now lawful and respectable owners of UK property – while falling under the radar of public scrutiny.
So lucrative is the UK property market to the anonymously wealthy, Global Witness estimate that £122 billion worth of property is now registered offshore. According to The Guardian, 2,800 properties in London are registered under Panama firm, Mossack Fonseca. Shrouded in the complex web of offshore trading, it is difficult to say what portion of this property has been bought using illegal money. The Metropolitan Police estimate that £180 million worth of UK property is used for money laundering, but it too concedes that this is ‘just the tip of the iceberg’.
Despite a growing public awareness and increasing politicisation of offshore wealth, rarely do we see the pervasive effects of offshore property trading coming home, and how it directly impacts on people and communities.
Trading Sweets Way Estate: The Story of Privatisation, Global Investment Banking and Offshore Establishment
In 2015, the impact of this pattern of offshore trading became crystal clear to the residents in Sweets Way estate in Barnet, North London who began to fight back against elite financiers that set out to evict them from their estate. This conflict captured a rare moment in which we were able to see how companies registered in offshore tax havens directly impact upon local communities and residents at the bottom of the housing market. Annington Homes, one of the largest private owners of residential properties, owned Sweets Way estate for 15 years. Exactly, how it came to acquire the estate tells us a great deal about the relationship between privatisation, private equity investment and offshore tax havens. Sweets Way was originally owned by the Ministry of Defence (MoD) as part of its Married Quarters Estate. In 1996, as part of the former Conservative government’s privatisation programme, the MoD sold 57,000 properties to the Japanese investment bank Nomura, for £1.7 billion – only £30,000 each. This deal made Nomura the largest owner of residential property in the UK. Annington Homes was set up as the subsidiary company of Nomura. Guy Hands, hailed by Private Equity Magazine as the ‘20th most influential figure’ in the investment world, formed Nomura Principle Finance Group (PFG) as a subgroup of Nomura. Hands then made a string of private equity investments which mainly involved purchasing failing companies and selling them on for profit. This role extended to the purchase of MoD properties and setting up Annington Homes as a subsidiary of Nomura.
While the success of Annington is well publicised, understanding its ownership structure is tricky. In 2002, Nomura PFG split and Terra Firma was set up as the spin- off company under the ownership of Guy Hands.
Hands’ wealth continued to grow as Terra Firma expanded and in 2009 he moved to Guernsey, an offshore tax haven, to avoid paying the (then) 50% tax rate on his sizeable profits. Gradually, Terra Firma purchased back those investments originally brokered under Nomura PFG – including Annington Homes, which Terra Firma purchased from Nomura in 2012, for £3.2bn.
When Terra Firma bought Annington Homes, residents of Sweets Way quickly learned about the plans to evict and demolish 140 homes, to make way for a new development. For the best part of 2015, members of ‘Sweets Ways Resist’ mobilised support against the eviction and demolition, and began exposing the relationship between offshore property trading and the British state.
Adding insult to injury, when Sweets Way residents approached their local authority about their rehousing ‘options’, Barnet council told them that they had to make a formal homeless application – to be eligible for priority rehousing. Like all homeless applicants, residents were forced to accept the first housing offer, otherwise they would be classified as ‘intentionally homeless’. This warped duty of care stripped residents of their freedom to choose and make key decisions about their housing futures, and effectively forced them to move out of the estate, afraid they might miss their one-offer window of opportunity.
As residents moved out, activists ramped up the resistance, occupying empty homes and continuing to rally support for the last remaining tenant, Mostafa Aliverdipour. The resistance ended as High Court enforcement officers, supported by a major police operation, evicted Mostafa and activists from the estate. 15 activists were subsequently charged with obstructing those enforcement officers.
Sweets Way Estate, London, September 2015. Photograph by Vickie Cooper
What happened on Sweets Way estate demonstrates the direct relationship between offshore property trading and housing poverty, and further exposes the role of the British state as the guarantor of this relationship. Established on the back of a lucrative privatisation programme,Annington Homes has profited from purchasing cheap MoD properties and renting them to low to mid-income families. Now at the peak of the property market,Terra Firma has been granted planning permission – authorised by the former Mayor of London, Boris Johnson– to clear out Sweets Way estate, charge higher rents and sell profitable housing to first-time buyers. Given the harmful impacts that this trading has had on Sweets Way residents, it is hard to believe that, in 2014,Terra Firma won two awards for ‘responsible investment’ from the British Private Equity and Venture Capital Association.
Smoke and Mirrors
Terra Firma is not an unusual case, and the impact of offshore on UK housing is pervasive. Offshore funds drive up housing prices and have created what looks like a dangerous bubble in London in particular. But no one has felt the impact of this type of transnational trading more than Sweets Way residents, and no individual has benefitted more than Guy Hands. Even the return to the government is minimal. Richard Brooks commenting on the tax status of Annington in The Great Tax Robbery, noted that the ample income that the company receives in rent,‘produces almost nothing in the way of tax payments’, because it is registered offshore.
While David Cameron claims that he wants to turn a ‘torchlight’ on corruption in the UK property market, George Osborne is trying to privatise the Land Registry. Now on his second attempt, Osborne revealed plans in the Spending Review and Autumn Statement, to shake up public ownership of the Land Registry and ‘create a new company, to which responsibility for the performance of the service delivery functions would be transferred’. While this move is stirring some serious concern about job losses, it will also create even more opacity in the UK housing market. The privatisation of the Land Registry will effectively restrict public access to important details concerning land ownership – casting yet another veil over wealth, power and corruption. The government’s pledges of transparency appear like smoke and mirrors as they continue to encourage predatory capital – at a dangerous social and economic cost to us all.
This article was originally published on www.taxjustice.net