THE government shelved a Bill hours before MPs were to vote on it today because of the likelihood that it would have been defeated in favour of imposing transparency on British tax havens.

A cross-party amendment to the Financial Services Bill would have forced Jersey, Guernsey, the Isle of Man and other British Overseas Territories to be open about who owns companies registered there.

It would have required the islands to have public registers to reveal the anonymous owners of the firms.

Jonathan Reynolds, Labour’s shadow economic secretary to the Treasury, said the Bill “has nakedly been pulled to prevent the government being defeated” as more than a dozen Tory MPs were in favour of the amendment.

Naomi Hirst, senior anti-corruption campaigner at Global Witness, said the withdrawal of the vote was “outrageous.”

She added: “We cannot wait for the rest of the world to get on board before we open up our tax havens.

“Anonymously owned companies, many of them formed in the UK’s Crown Dependencies, can act as getaway cars for terrorists, dictators, money launderers and tax evaders all over the world.

“The government should be fighting to introduce public registers, not thwarting the will of Parliament.”

Shadow chancellor John McDonnell suggested that the government’s fear of being outnumbered on the Bill showed that ministers were in office but not in power.

Mr McDonnell said: “More evidence that this government is incapable of getting its business through Parliament.

“People have just had enough of the Chancellor dragging his feet on tackling tax avoidance. We are demanding action now and no further delays and excuses.

“The government has been a friend to tax avoiders for too long.”

Jersey, Guernsey and Isle of Man leaders have warned of a constitutional clash if MPs backed the amendment to increase transparency.

They argued that their relationship with the mainland goes through the Queen and that Parliament should only legislate in “the most serious of circumstances” to avoid a “breakdown of good governance.”

The prospect of them launching a petition was suggested by Nikki da Costa, the ex-director of legislative affairs at Downing Street, according to the Guernsey Press.

Tax justice campaigner and economist Richard Murphy said: “What the crown dependencies are doing is deliberately undermining the good governance of the corporate world.

“The idea that the petition to the Queen might be relevant in this case is laughable.

“The Queen has no right whatsoever to intervene in the affairs of the crown dependencies, even if they are notionally linked to the UK through her office.

“The entire political function of that office is maintained by the Privy Council, which is in effect the government, but of which there are, of course, many other members. And the government is bound by Parliament.

“The crown dependencies really need to get their basic constitutional facts right. Just as they need to appreciate that in the 21st century their refusal to comply with new norms on corporate transparency do represent a significant failure on their part.

“[Their failure] creates risk for the UK as a whole and a more than justifiable reason for the UK government to intervene in their affairs.”