Why is Britain a haven for tax havens?

So MPs are finally beginning to dig around in what flowed from the banking system meltdown in the aftermath of the Lehman Brothers collapse.

Of intimate British interest is the Isle of Man’s involvement with the Icelandic bank Kaupthing. The Isle of Man used to be in the news for TT motor cycle racing. These days it’s money that does it.

Inevitably one is drawn to the weird status of this island in the Irish sea. It appears to be British, but not as British in governance terms as we are.

There have always been concerns about Britain’s offshore entities – the Channel Islands (Guernsey, Sark, and Jersey) in particular. They say everything’s above board. But the vast majority of people who bank there have nothing else to do with the place, and that’s bound to raise the possibility of misperformace.

It is strange that Britain seems to preside over more tax havens than any other country in the world. Not only these islands (whose uncertain status Chancellor Alastair Darling has ordered an inquiry into) but places like Gibraltar, the Cayman Islands, Turks and Caicos. And more.

Why? And wouldn’t you think that in a world beset by financial meltdown and the rest, beset by drug cartels from Afghanistan to Colombia, you would actually want to tighten up control of these things in a night?