Spirit of the law? It means the whim of a bureaucrat
'They haven't actually broken the law, but they haven't acted according to its spirit,' British Treasury minister David Gauke told BBC Radio 4. 'I suspect the bank in question is regretting what it has done. It's not going to do them any reputational good. They will have difficult explanations to some of their customers.'
Bloomberg, SCMP, February 29
Give me the name of that bank, Mr Gauke. I would like to sign up as a customer. It need make no explanations to me. It is obviously a bank that looks after its customers' interests by turning over only as little of their money as it must to bloodsucker governments. That's my kind of bank.
But I don't need Mr Gauke to name it. A government louse ducking behind the usual identity of 'person familiar with the situation' has already identified it as Barclays and termed what it did as 'highly abusive', two words that have echoed their way through the British media.
What Barclays did was propose that it should not have to pay tax on earnings from a buy-back of its own bonds. Its auditors said it should not have to do so and other banks have not done so.
Barclays, however, took the step of providing for that tax in its profit and loss account should the tax authorities disallow its claim and it also drew their attention to what it was doing.
Highly abusive? Not do them any reputational good? May the day come that a government agency will be quite as open with me or take as many precautions before taking a stand against me in a matter where right and wrong is by no means clear.
Note that Mr Gauke accused Barclays only of acting against the spirit of the law although using that weasel word 'actually' when admitting they hadn't broken the law (Well, they didn't, you know, but let's hint that we let them off on a technicality and then we can pretend that they did).
The trouble is that two years ago Barclays and 14 other British banks made the mistake of adopting a government code pledging they would 'follow the spirit of the law in addition to the letter' of tax rules. I can excuse them.
They were under intense popular pressure because of official bank rescues.
But just what is the spirit of the law as distinct from its letter? I can read the letter of the law. I can't read its spirit.
Does anyone have an unused spirit reader that I can borrow, please?
Make it the Apple version if you can. It's still in better odour than Microsoft just now and I gather that we must be politically correct in these matters.
It's a simple question. If the people who drafted the law cannot make clear what they mean in language, the predominant tool of human communication and the only one in which precision is possible, what other way do they have of conveying what they mean? Must we now read the true meaning into a nod or a wink from the responsible minister at the second reading of the bill?
In fact, I know what 'spirit of the law' means in practice. It means that a tax assessor had a fight with his or her spouse over breakfast, and takes it out on the first tax case to cross his or her desk at work that morning.
It means government by whim of bureaucrat rather than government by rule of law.
What has happened to banks in Britain, however, is nothing unusual. There is no such thing as a risk-free investment but governments around the world have attempted to make bank deposits so by guaranteeing them with public funds.
The result is wholly pernicious for banks. Depositors no longer care whether their money is in a sound bank.
They only look for the highest deposit rates. This induces bankers in turn to take greater risks than is prudent. They have little choice. If Bank A won't do it then Bank B will.
Both Bank A and Bank B did so in Britain. Riskless deposits had elevated the biggest risk-takers to the executive office.
The result was a rash of bank crashes in 2008-10. The guarantor has now taken over but has not introduced greater prudence. It has only imposed its interests over those of the depositor.
May we please avoid going down this road in Hong Kong.