HSBC leaks: Lord Fink admits he took 'vanilla' steps to reduce tax bill – and claims 'everyone' is involved in tax avoidance

The Conservatives are facing embarrassment after Lord Fink, the party’s former treasurer, admitted he had taken “vanilla, bland” steps to reduce his tax bill and claimed that “everyone” was involved in tax avoidance.

His intervention in the HSBC row prompted Ed Miliband to claim that David Cameron’s leadership faced a “defining moment” over whether he would disown the Tory peer.

Lord Fink’s surprise admission came after he threatened the Labour leader with legal action if he repeated his claim in the Commons that he had been involved in “tax avoidance activities”. Mr Miliband went on to denounce Mr Cameron as “a dodgy Prime Minister surrounded by dodgy donors”.

In a tense day of claim and counter-claim, the Conservatives accused the Labour leader of climbing down over his onslaught, which was protected by parliamentary privilege, against Lord Fink’s tax arrangements.

They also seized on accusations, which were strongly denied by Labour, that Mr Miliband views the row over Tory donors as a “Milly Dowler moment” for Labour to stand up for ordinary people against the rich and powerful.

The political storm over accusations of tax-dodging by HSBC’s Swiss bank looks set to continue as two Commons select committees announced they would hold investigations into the disclosures.

In an interview with the London Evening Standard, Lord Fink said his tax planning had been at the “vanilla” or “mild” end of the spectrum and he had rejected advice to take more “aggressive” action to cut his tax bill.

“I chose the mildest end of the spectrum that I was advised on,” he said.

Referring to his threat of legal action, the peer added: “I didn’t object to his use of the word ‘tax avoidance’. Because you are right: tax avoidance, everyone does it.”

He said: “I don’t even want to sue Ed Miliband... If he simply uses the words ‘Lord Fink did ordinary tax avoidance’ then, no, I couldn’t sue him.

“But if he made the statement ‘dodgy’ about my bank account, that was potentially libellous. That was the issue I took exception to.”

In response, Mr Miliband, who was launching Labour’s education policy proposals at his old school in London, said he stood by his comments in the Commons.

“A Conservative donor challenged me to stand by what I said in the House of Commons. I do. And believe it or not, now today he confirmed it as well.”

He added: “David Cameron must explain why he appointed a treasurer of the Conservative Party who boasts about engaging in tax avoidance and thinks it is something that everyone does.”

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However, the Labour leader stopped short of repeating his Commons barb that Mr Cameron was “surrounded by dodgy donors”. And he said the comments were aimed at Tory donors in general – and not Lord Fink.

Moments later, Lord Fink said that Mr Miliband had not repeated the charge that he had used an HSBC bank account to avoid tax and that he was a “dodgy donor”.

He said: “This is a major climb-down by a man who is willing to smear without getting his facts straight.”

The accusation that Labour sees the episode as a “Milly Dowler” moment was prompted by a blog by the BBC’s political editor, Nick Robinson. Later Mr Robinson tweeted: “I did not quote anyone re Ed M & Milly Dowler. Said his aides saw this as moment like that ie to stand up to powerful.”

The Treasury select committee said it was to investigate the allegations about HSBC’s Swiss private bank and will take evidence from both HSBC and HM Revenue and Customs.

The committee’s chairman, Andrew Tyrie, said: “Banks have repeatedly told the committee that, since the crisis, they have put in place reforms to ensure that they operate on the basis of sharply improved standards.

“The committee will need reassurance that they have done so in private banking.”

It follows the announcement that the public accounts committee will also probe HSBC’s Swiss activities.