The Secret Power Behind the City of London

How a medieval corporation, a network of offshore islands, and the ideology of “market confidence” have quietly become the real government of Britain.

Most people know the City of London as a place — a cluster of glass towers, financial screens, pinstriped suits. Fewer know that it is also a government, complete with its own elections, its own police force, its own diplomatic corps, and its own permanent lobbyist embedded inside the Palace of Westminster. And almost nobody knows that this government operates in ways that no other democratic institution in Britain would ever be permitted to.

That is where the argument of this piece begins. But it does not end at the Square Mile’s boundary. Because the City of London Corporation — the body that runs that one square mile of prime real estate — is also the hub of a global financial network stretching from Jersey to the Cayman Islands, from Bermuda to the British Virgin Islands. Together, these places form an integrated system built on secrecy, designed to insulate wealth from the reach of democratic governments. Understanding that system is not a niche concern for tax campaigners. It is central to understanding why Britain is in the condition it is in today.

A Body Unlike Any Other

Let us start with the basics, because they are genuinely extraordinary.

The City of London Corporation is the local government for the Square Mile — the roughly one square mile of territory at London’s ancient core. It has existed in various forms since the Norman Conquest, predating Parliament itself. Crucially, it was deliberately exempted from the Municipal Corporations Act 1835 that reformed every other local authority in England and Wales. It was exempted again in 1969 when the business franchise was abolished everywhere else in the UK. Its survival in its current form is not an accident of history. It is a choice, renewed by Parliament over centuries, to protect a very specific set of interests.

The most visible symbol of that protection is the Corporation’s electoral system. The Square Mile has around 8,600 permanent residents — but it has roughly 24,000 registered business voters. Under the City of London (Ward Elections) Act 2002, every workplace in the square mile can nominate employees as voters on a sliding scale: firms with fewer than ten workers may appoint one voter; firms with more than 3,500 employees may appoint up to 79. The result is an electorate in which corporate nominees outnumber actual residents by around three to one, depending on the cycle.

Think about what that means for a moment. This is the only place in the United Kingdom where companies vote in local elections. Everywhere else, the principle that only people vote is taken for granted. Here, it is openly reversed. The effect is to guarantee that the Corporation’s 125 elected members — 100 Common Councillors and 25 Aldermen — will always be chosen in a process dominated by the financial sector the Corporation ostensibly merely administers.

That corporate franchise is merely the most visible element of the Corporation’s unusual constitution. There are others.

The Remembrancer. The City of London maintains a permanent officer in Parliament called the City Remembrancer — a post dating to 1571, currently held by barrister Paul Wright. The Remembrancer monitors all draft legislation that could affect City interests, briefs MPs, gives evidence to select committees, liaises with government departments, and promotes the Corporation’s private bills through Parliament. The office had a departmental budget of around £6 million and six in-house lawyers as of 2011. No other local authority in the United Kingdom maintains anything remotely like this — a permanently embedded legislative-scrutiny operation inside Westminster, funded by private corporate endowment, operating year-round. Supporters will correctly point out that the Remembrancer has no formal special privileges — no early sight of legislation, no reserved seating in the chamber. But this misses the point. The privilege lies not in formal rights but in institutional presence: a continuous, well-resourced lobbying operation that no elected council in Birmingham, Manchester, or Leeds could ever match, aimed at shaping the laws that govern the UK’s financial system. The police force. The City of London has had its own police force since 1839, completely separate from the Metropolitan Police. Since 2008 it has also been the National Lead Force for Fraud, running Action Fraud (which handles around 30,000 reports a month), the National Fraud Intelligence Bureau, and the Economic and Cyber Crime Academy. The Corporation has announced a £600 million new headquarters and economic-crime court complex at Salisbury Square, due to open in 2027 — funded not by taxpayers but by the Corporation’s private “City’s Cash” endowment, whose accounts are not subject to standard local-authority transparency rules. The Lord Mayor’s diplomacy. The Lord Mayor of the City of London — not to be confused with the elected Mayor of Greater London — travels abroad with what the Corporation itself describes as “the status of a Cabinet Minister.” The current holder, Dame Susan Langley (the 697th Lord Mayor, 2025–26), typically spends around 90 days a year overseas and makes around 800 speeches annually promoting UK financial services. The 2019–20 schedule included more than 30 countries, including Gulf monarchies where the Lord Mayor met heads of state — coordinated with the Foreign, Commonwealth and Development Office and the Department for Business and Trade, but funded privately by the Corporation. There is no democratic mandate for this foreign policy. There is no parliamentary oversight of it. It simply happens, at scale, on behalf of finance capital.

A State Within the State

Taken together, these features — the corporate franchise, the Remembrancer, the private police force, the diplomatic operation — describe not a quirky historical relic but something that functions as a shadow state within the British state. The Corporation describes itself as a civic body. But it is, in practice, the world’s most institutionally embedded financial lobby group, operating inside the constitution of a democracy that is supposed to rest on the principle of one person, one vote.

It is worth being honest about why this matters. The Corporation is not primarily corrupt in the conventional sense. Most of the people who serve on it are not personally doing anything illegal. The problem is structural. A body whose electorate is dominated by corporate nominees, whose parliamentary representative operates outside the normal lobbying register, whose finances are opaque, and whose diplomatic operation promotes finance abroad without democratic oversight will, regardless of the intentions of its individual members, systematically prioritise the interests of capital over the interests of citizens. That is not an accusation. It is a description of how incentives work.

The Offshore Empire

The City of London Corporation does not operate in isolation. It sits at the centre of a network of jurisdictions that together form what campaigners have called Britain’s “second empire” — the Crown Dependencies and British Overseas Territories that are connected to the UK by constitutional ties but maintain their own tax and regulatory regimes.

The Crown Dependencies — Jersey, Guernsey and the Isle of Man — are not part of the United Kingdom but are possessions of the Crown, for whose foreign affairs and defence Westminster is responsible. They have their own parliaments, their own tax systems, and their own financial regulators. They function as Europe-facing satellites of the City: centres for trusts, banking, fund management, and asset-holding structures that operate under English common law but without UK tax obligations.

The British Overseas Territories — the Cayman Islands, the British Virgin Islands, Bermuda, Gibraltar, and others including Anguilla and Turks and Caicos — are a step further removed. They are formally dependent territories of the Crown, but again maintain autonomy over taxation and financial regulation. They function as the global-facing layer of the network.

The scale here is genuinely difficult to comprehend. The Cayman Islands — a territory with a population of around 72,000 people — had more than US$8 trillion in investment fund assets under management by the end of 2023. It hosts approximately 27,000 regulated funds and around 60% of the world’s offshore hedge funds are legally domiciled there. Its share of global tax-revenue loss from offshore structures, on Tax Justice Network calculations, is 25.6% — the largest of any single jurisdiction in the world, larger even than Switzerland. Foreign assets in Cayman exceed 1,500 times its GDP. That number is worth sitting with: a British Overseas Territory, for whose foreign affairs Westminster is responsible, is the single largest contributor to offshore tax avoidance on earth.

The British Virgin Islands, with a GDP of around US$1.7 billion, has approximately 400,000 registered companies holding assets estimated at US$1.5 trillion. More than 113,000 of the roughly 214,000 entities exposed in the Panama Papers were registered there.

These are not coincidences. They are the architecture of a system. London provides the legal expertise, the financial engineering, the accounting, and the management. The Crown Dependencies and Overseas Territories provide the secrecy, the favourable tax treatment, and the regulatory flexibility. Together they form what economists at Tax Justice Network have called an integrated offshore system responsible for an estimated 35% of all tax revenue lost to havens globally — the single largest national network of tax avoidance in the world.

According to the Tax Justice Network’s State of Tax Justice 2023, the world loses approximately US$480 billion in tax revenue every year to offshore structures — US$311 billion through corporate tax abuse and US$169 billion through offshore evasion by wealthy individuals. The UK and its network account for roughly a third of that total. Projected over the next decade, that is a cumulative loss of US$4.8 trillion — wealth extracted from schools, hospitals, and public infrastructure around the world.

Three Functions of the Offshore System

It is important to be precise about what the offshore system does, because its defenders will sometimes concede one function while denying the others. In reality it serves three distinct purposes, and they are all deeply political.

First, it permits wealth to escape taxation. This is the function most people are vaguely aware of. Multinational corporations route profits through low-tax jurisdictions; wealthy individuals hold assets in offshore trusts or companies that exist nowhere in particular. The Tax Justice Network estimates the annual cost to UK tax revenues alone is substantial — though precise figures are contested — while globally the loss is in the hundreds of billions every year.

Second, it permits wealth to escape regulation through opacity. Shell companies, nominee directors, discretionary trusts, and foundations create layers of anonymity that make it extraordinarily difficult to identify who ultimately owns what. This opacity is not incidental to the offshore system — it is the product being sold. The consequences range from enabling tax avoidance to facilitating corruption, money laundering, and sanctions evasion. Transparency International UK estimates that approximately £170 billion of UK property is held via offshore entities. Most of its owners are unknown.

Third, and most importantly, it functions as a mechanism for undermining democratic governments. This is the function least often discussed openly, and it is the most consequential. When capital is mobile — when it can credibly threaten to relocate to a jurisdiction with lower taxes and less regulation — elected governments face a structural constraint. They cannot tax wealth too aggressively, cannot regulate finance too firmly, cannot pursue policies that threaten the interests of mobile capital, without risking what markets call a “confidence crisis” and what the rest of us might call an investment strike.

Offshore havens are the infrastructure that makes capital mobility credible. They are the destination capital can actually flee to. Without them, threats to relocate would be far less convincing. With them, elected governments in the UK, France, Germany and elsewhere must constantly second-guess their own democratic instincts against what “the markets” will allow.

When the Markets Speak: The Evidence of Constraint

This is not a theoretical argument. We have seen it play out in vivid, recent terms.

In September 2022, Chancellor Kwasi Kwarteng announced £45 billion of unfunded tax cuts in a single fiscal statement — abolishing the 45p additional rate, cutting stamp duty, reversing the National Insurance rise — without asking the Office for Budget Responsibility to produce an independent forecast. Bond markets responded within days. The 30-year gilt yield rose sharply; defined-benefit pension funds faced catastrophic collateral calls on their liability-driven investment strategies; the Bank of England intervened on 28 September with emergency gilt purchases to prevent a self-reinforcing crisis. Kwarteng was sacked within 38 days. Prime Minister Truss resigned within 50. The entire package of tax cuts was reversed by Jeremy Hunt. A democratically elected government with a parliamentary majority had its fiscal programme destroyed not by an election, not by a vote in the Commons, but by bond-market reaction.

The lesson has been absorbed across the political spectrum and it shapes British politics to this day. Rachel Reeves has repeatedly described her fiscal rules — balancing current spending by 2029–30, debt falling as a share of GDP — as “iron-clad.” Bond managers openly discuss in the financial press how market expectations constrain the Chancellor’s choices between tax rises and spending cuts. A Labour government with a 174-seat majority has shaped its economic programme substantially around the question of what bond investors will accept.

This is not a conspiracy. It is a structural feature of an economy in which capital is mobile and in which its potential destinations — including the UK’s own offshore network — are well-developed and credible. Ordinary people are then told that there is no money for public services, no room for social security, no space for investment — and simultaneously an enormous quantity of wealth sits offshore, beyond effective democratic scrutiny. People are noticing that contradiction, even if they do not know the precise mechanisms. They are correct that there are two sets of rules: one for mobile capital and those who own it, and another for everyone else. This structural injustice is one of the most powerful drivers of political anger across the democratic world.

The Economic Consequences: Deindustrialisation, Inequality, and Chronic Under-Investment

The City of London Corporation and its advocates have long promoted the ideology that what is good for finance is good for Britain. The data suggests otherwise.

Since the 1986 “Big Bang” deregulation — which transformed the City into a globally competitive wholesale finance centre — UK manufacturing’s share of GDP has fallen from around 16% in 1990 to approximately 9% in 2022. Manufacturing employment has collapsed from 25% of the workforce in 1980 to below 8% by 2023. The UK deindustrialised faster than any comparable Western European economy in the 1980s, with the collapses of employment in the Midlands, Yorkshire, and the North of England matching only what post-communist economies experienced during their transition.

The result is a geography of extraordinary inequality. According to the Office for National Statistics, London’s GDP per capita reached £63,618 in 2023, compared to £26,347 in the North East — a ratio of nearly 2.4 to one. Research from Harvard Kennedy School (Turner et al., 2023) finds that the gap between London and the South East and the rest of the UK — with the rest averaging just 71% of London’s GVA per worker — is wider than the gap between East and West Germany (80%) or between North and South Italy (78%). In the words of economic geographer Philip McCann, the UK is “almost certainly the most interregionally unequal large high-income country” among thirty industrialised OECD economies, by a substantial margin.

Wealth is concentrated not only geographically but socially. ONS data for 2020–22 shows that the wealthiest 10% of households each held more than £1.2 million in total wealth, versus a median of £293,700 and a bottom-tenth average of £16,500 or less. The top 10% of households owned approximately 43% of all wealth; the bottom 50% owned about 9%. The top 1% alone held the same share — 10% — as the entire bottom half of the population combined. The Gini coefficient on wealth, at 0.59, is dramatically higher than on income at 0.36.

Underlying all of this is the investment deficit. According to IPPR’s Rock Bottom report (June 2024), the UK has had the lowest level of total investment in the G7 in 24 of the past 30 years. UK business investment runs at around 11% of GDP, compared to 18.2% in Japan and around 12% in Germany and France. Across the OECD, the UK ranked 28th of 31 countries for business investment — ahead only of Greece, Luxembourg and Poland. UK workers have substantially less plant, machinery and intellectual property per head than their American, German or French counterparts — a “capital gap” of approximately 38% across the whole economy and 47% in manufacturing specifically. Housing, meanwhile, has become a speculative asset class rather than a social good, with property prices in London increasingly detached from the wages of the people who live there.

The financial sector’s champions point, with some justification, to the sector’s real contributions: according to TheCityUK’s 2025 figures, financial and professional services contributed approximately £281 billion in gross value added to the UK economy, employed around 2.5 million people (two-thirds of them outside London), generated a trade surplus of £114 billion in 2023, and contributed £110.2 billion in tax. London accounts for around 38% of global foreign-exchange turnover and around 50% of global over-the-counter interest-rate derivatives trading. These are real numbers and they matter.

But the question is not whether the City contributes. It is whether the terms on which it operates — the secrecy, the regulatory capture, the policy constraint — represent a sustainable or just settlement. The evidence suggests they do not. The tax contribution must be set against the tax revenues lost globally through the structures the same firms enable. The trade surplus has been partly purchased through an overvalued pound that has made UK manufacturing less competitive. The dominance of finance has not crowded investment into the productive economy — it has crowded it out, leaving Britain as the chronic laggard in G7 investment tables.

The Leaks: When Secrecy Failed

The offshore system depends on opacity. When that opacity breaks down, the consequences are revealing.

The Panama Papers, published on 3 April 2016, comprised 11.5 million documents leaked from Panamanian law firm Mossack Fonseca. They exposed the offshore arrangements of 12 current or former heads of state and 128 other public officials worldwide. In the UK, the most prominent disclosure concerned Blairmore Holdings — a fund incorporated in Panama and administered from the Bahamas, established in 1982 by Ian Cameron, father of then-Prime Minister David Cameron. Cameron eventually admitted having owned and sold shares in the fund before entering office. Separately, Land Registry and Transparency International UK data showed that more than 22,800 UK buildings were owned through British Virgin Islands-registered entities at the time of the leak — and the BVI was, in fact, the single largest source of foreign-registered ownership of UK property in the Panama dataset, with more than 113,000 of the roughly 214,000 entities exposed being registered there.

The Pandora Papers, published on 3 October 2021, were larger still: 11.9 million documents from 14 offshore service providers, the product of a journalism collaboration involving more than 600 reporters across 117 countries. They identified approximately 600 previously anonymous owners holding at least £4 billion of UK property through offshore companies. The Guardian reported that Tony and Cherie Blair avoided £312,000 in stamp duty in 2017 by purchasing Romanstone, a British Virgin Islands-registered company that owned a £6.45 million Marylebone townhouse, rather than buying the property directly — entirely legal, and precisely the loophole the offshore system exists to enable.

These leaks are significant not just for what they revealed but for what they implied. If 14 firms, exposed in a single leak, held interests touching £4 billion of UK property, what does the total universe look like? Transparency International UK estimates the broader figure at approximately £170 billion of UK real estate held via offshore entities. We do not know who owns most of it. We do not know where the money came from. We do not know whether tax has been paid on the income it generates. That is by design.

The Partial Progress: CbCR, CRS, and the Beneficial Ownership Battles

It is important to acknowledge that some progress has been made — because both the achievements and their limitations tell us something important about the scale of the problem.

Country-by-Country Reporting (CbCR) was developed through the OECD’s Base Erosion and Profit Shifting process (Action 13, 2015) and requires multinational corporations with revenues above €750 million to file annual breakdowns of their revenue, profit, employees, and tax paid in each country where they operate, from fiscal years starting 1 January 2016. By 2022, over 100 jurisdictions had implemented this requirement. It has given tax authorities genuine data on profit-shifting — research drawing on CbCR data (Torsløv, Wier and Zucman, 2023) has documented the scale at which corporate profits are reallocated to low-tax jurisdictions. But aggregate CbCR data is published with a two-year lag, firm-level data remains confidential, and the threshold of €750 million covers only the largest multinationals, leaving the vast majority of offshore structures untouched.

The Common Reporting Standard (CRS) — the automatic exchange of financial account information developed by the OECD in 2014 and now adopted by over 120 countries — has been a more significant structural change. Under CRS, financial institutions in participating countries automatically report the account details of foreign taxpayers to their home tax authorities. Academic analysis (Casi, Spengel and Stage, 2020, Journal of Public Economics) found that cross-border deposits in tax havens fell by an average of 11.5% following CRS adoption. That is real progress. But the system has significant gaps: the United States has not adopted CRS and does not reciprocate fully; real estate, art, crypto-assets and certain categories of investment remain outside or only partially within the framework; and the Tax Justice Network’s State of Tax Justice 2024 estimates the world still loses US$145 billion a year to offshore individual tax evasion even after CRS.

Beneficial ownership transparency has been the most politically contested front. The UK introduced the world’s first publicly accessible national register of company beneficial owners in 2016 — a genuine step forward. The Sanctions and Anti-Money Laundering Act 2018 required the Overseas Territories to introduce public beneficial ownership registers, with a backstop giving the UK government power to act if they refused. The territories repeatedly delayed. Then, in November 2022, the European Court of Justice ruled in WM and Sovim SA v Luxembourg Business Registers that unrestricted public access to beneficial ownership registers violated the EU Charter’s privacy protections. The Crown Dependencies and British Overseas Territories seized on this ruling as a justification. On 8 and 13 December 2023 respectively, the BVI, Jersey, Guernsey and the Isle of Man announced they would not introduce fully public registers. By May 2025, only the Cayman Islands had enacted even a “legitimate interest” access regime; Bermuda, BVI, Anguilla and Turks and Caicos had missed their April 2025 targets.

A cross-party letter from 40 MPs demanded Foreign Secretary David Lammy escalate pressure on the territories in November 2024. The government has so far declined to use the order-in-council powers available under the 2018 Act.

The Tax Haven System Was Not Created by Weakness — It Was Created by Power

There is a common misconception that the offshore system exists because governments are too weak or disorganised to stop it. The reality is the opposite. The system was created because powerful interests wanted governments to be weak. The City of London Corporation has consistently promoted deregulation, financial liberalisation, and opaque ownership structures. It has lobbied against transparency measures at every stage. It has backed the offshore architecture through its representative function and through the political access that architecture has purchased.

The ideology that has driven this — that what is good for finance is good for Britain — has been shared by governments of both major parties for decades. Finance was treated as untouchable under Thatcher, who initiated the Big Bang. It was treated as untouchable under Blair, who made the City a centrepiece of New Labour’s economic strategy. It was treated as untouchable under Cameron, whose father’s fund was incorporated in Panama. It has remained substantially untouchable under successive governments since.

The result is a state that systematically undermines its own authority. The UK government cannot tax wealth offshore it cannot see. It cannot regulate structures it has agreed to protect. It cannot govern for the people who elected it while simultaneously guaranteeing the interests of mobile capital. This is not a sustainable position. It is a structural contradiction, and it is becoming more visible to ordinary citizens — even those who cannot name the Remembrancer or explain the BVI company register — who can see that there is always money for financial-sector bailouts and never money for their local hospital.

What Would Actually Change Things?

The City of London Corporation should be reformed fundamentally. The principle of corporate votes in democratic elections cannot be justified and must end. The business vote should be abolished, or at minimum capped to a clear minority of the total electorate. The Corporation’s accounts, including City’s Cash, should be subject to the same transparency requirements as any other local authority. The Remembrancer’s activities should be registered under the Lobbying Act with full transparency of meetings and submissions.

The offshore network — because the UK is constitutionally responsible for it — must be subject to the same transparency requirements the UK applies to itself. The government should use the order-in-council powers available under the 2018 Sanctions and Anti-Money Laundering Act to require all British Overseas Territories to introduce publicly accessible beneficial ownership registers for companies and trusts, with criminal sanctions for non-compliance. Offshore jurisdictions that refuse to cooperate with international transparency standards should face meaningful consequences — including withholding taxes on capital flows.

Country-by-country reporting should be made public for all UK-headquartered or UK-listed multinationals, going beyond the minimum OECD standard. The Register of Overseas Entities — introduced in 2022 and covering companies — should be extended to trusts and partnerships. The threshold for beneficial ownership disclosure should be reduced from 25% to 10%.

More broadly, elected governments in the UK must govern for the people who elected them and not for the benefit of mobile capital. That means pursuing the industrial policy that decades of finance-led growth have made necessary: building the public and private investment that would narrow regional inequality, restore manufacturing capacity, and end the UK’s status as the G7’s chronic investment laggard.

None of this requires destroying the financial sector. The sector’s genuine contributions — in employment, in tax, in trade — are real and should be preserved. The goal is not to abolish finance but to subject it to the same democratic accountability that every other industry and every other citizen faces. The question at the heart of this debate is not complicated: should finance govern democracy, or should democracy govern finance?

The answer, in a country that calls itself a democracy, ought to be obvious.

Read more on the latest in Trending Topics — The City Will Never Fund Small Business. The Government Must.

Sources and further reading: Tax Justice Network, State of Tax Justice 2023 (revised August 2023); IPPR, Rock Bottom: Low Investment in the UK Economy (June 2024); ONS, Household Total Wealth in Great Britain April 2020–March 2022; TheCityUK, Key Facts about UK-Based Financial and Related Professional Services (2025); Casi, Spengel & Stage, “Cross-border Tax Evasion after the Common Reporting Standard: Game Over?”, Journal of Public Economics (2020); Turner et al., “Tackling the UK’s Regional Economic Inequality,” Harvard Kennedy School Working Paper 198 (2023); Transparency International UK, Pandora Papers briefings (2021–2025); International Consortium of Investigative Journalists, Panama Papers and Pandora Papers databases.