5 July 2016.
This post was originally published on the Corruption Watch UK website.
The fight against corruption has just become a whole lot harder. Brexit and its political and economic fallout risks pulling the rug from under many of the gains made in fighting corruption in the UK over the past few years. This is for the following reasons:
- David Cameron had a personal interest in tackling corruption that was unusual for a Conservative politician. This created considerable policy space for anti-corruption work, culminating in the Anti-Corruption Summit in May this year. This interest is unlikely to be shared by any successor who will, additionally, have so many things on their plate that fighting corruption will be way down the agenda.
- Business is likely to hold an unprecedented sway in politics as politicians negotiate Brexit, with politicians guided by the fear of businesses relocating abroad. The government will want to protect both UK exports and inward foreign investment at all costs. Brexit is likely to become the pretext for a heightened deregulation agenda to enable UK business to gain as much competitive advantage as possible. This process has started already with Osborne’s announcement on Monday 4th July that he would lower corporate taxation by 5%, in pursuit of creating what he called a “super-competitive economy.” In the coming years, business is likely to have unparalleled access to government, increasing the risk of regulatory capture.
- As UK exports to the EU face uncertainty and difficulties, there will be pressure on business to increase exports to other areas of the world including those with high risk of corruption. At the same time, the UK will want to encourage inward investment from non-EU countries (Johnson said in his post Brexit speech that he had already had offers of interest in investment from countries such as Malaysia) and is unlikely to want to ask too many questions. The potential result is that UK companies are likely to engage in higher levels of bribery to get business, while more corrupt money is likely to come into the UK.
- At the same time, a serious economic downturn is likely to result in resource pressure on enforcement and regulatory bodies. If UK GDP drops by 2% – as some economists predict – that will seriously eat into the Department for International Development’s (DFID) budget. DFID’s budget is locked as 0.7% of Gross National Income (GNI), the absolute value of which would decline if the GNI dropped. In a period of economic difficulties and in a political context of austerity, it may be that the 0.7% figure could come under challenge. DFID is a significant source of funding for enforcement in the UK and of enforcement initiatives globally. It has also traditionally been one of the key promoters of the anti-corruption agenda in central government.
- The ability of the Serious Fraud Office (SFO) to bring cases against large corporations may be undermined by the risk and/or threat of companies relocating, with an increased likelihood of political pressure to go easy on companies to avoid that outcome. Meanwhile, the SFO’s very existence might be under threat in a new political landscape. If Theresa May becomes leader of the Conservatives and therefore Prime Minister, she may try to finish her agenda of amalgamating the Serious Fraud Office (SFO) with the National Crime Agency (NCA). The Telegraph reported on Friday 30th June in a profile on May that if she wins, May “will be resolute in pursuing her agenda for the Home Office to take control of the SFO.” This would be disastrous for the fight against corruption and put at risk the SFO’s currently heavy and increasing work load of corporate bribery and embezzled public funds
- The considerable effort that civil servants have put in to delivering a cross-Whitehall anti-corruption agenda are at risk of being dissipated as government departments refocus their energies on what Brexit will mean for their work (As one US diplomat put it before the referendum result: “just think of the stationary costs”!). Resource pressure meanwhile may well affect whether some of the commitments made by the UK at the UK Anti-Corruption Summit can be delivered. In particular, less resources and the UK’s new isolationist position may make it difficult for it to establish the new international anti-corruption coordination centre which was proposed at the Summit.
- Several EU instruments that have helped frame the UK’s response to corruption will have to be renegotiated, including the EU Procurement Directive, the EU Anti-Corruption Conventions and the EU Money Laundering Directives. For the most part these commitments are covered by other international instruments, so the UK will need to fulfil these obligations anyway. The exceptions are the EU Procurement and EU Money Laundering Directives which both created mandatory obligations on the UK, whereas the broader international framework is based only on recommendations. The EU Procurement Directive sets out clear requirements for companies convicted of corruption and money laundering to be excluded from public procurement. Although these provisions have largely gone unimplemented across the EU, they have generated the potential for serious consequences of engaging in corruption for companies and are widely feared in the business sector. These provisions have been written into domestic law already but a renegotiation of the UK’s relationship to the EU might put this legislation in doubt.
If the UK opts out of the EU Money Laundering Directives meanwhile, the UK could create a race to the bottom on anti-money laundering compliance, and become an ever more attractive no questions asked location for corrupt capital.
The next few years are likely to see anti-corruption campaigners having to fight tooth and nail to maintain some of the advances we have seen in fighting corruption in the UK and indeed to stop the UK enforcement of its international anti-corruption obligations collapsing altogether. A Donald Trump victory in the US, and any further disintegration of the EU, is likely to shake the international framework for corruption in such a way that could knock the anti-corruption agenda back by decades. The task ahead is to keep corruption doggedly on the agenda and ensure that Brexit does not become an excuse for turning Britain into the very godfather of offshore territories, where business interests reign supreme.