The government’s decision to pull its financial services bill is revealing about who calls the shots in parliament. In a word: the City. Rather than accept a small step forward for tax fairness, a move backed by a cross-party coalition, ministers dropped one of six key pieces of legislation required to pass by the end of March as part of a no-deal Brexit safety net. It is a sign of Theresa May’s weakness in office that the bill could not pass in the form the government wanted and a clear demonstration that big finance continues to call the tune in the upper reaches of the Conservative party.

Over the last few decades the British tax system and broader economy have been steadily reconfigured to serve the interests of a class of offshore super-rich. The Square Mile sits at the centre of a spider’s web that allows London bankers, accountants and lawyers to create a tax-free way for the richest people on the planet to place their assets under UK management but without UK regulatory oversight. Britain’s archipelago of territories and dependencies account for about a quarter of all global offshore financial services provided to non-residents. Brexit was supposed to be a clarion call to end the political class’s subservience to such interests. Tragically this nation’s departure from the European Union appears to be boosting it.

The government’s bill was far from perfect. But it was supposed to begin a process of reining in Britain’s postcolonial possessions, which have become rich and disruptive through their tax-haven status. It would have forced the overseas territories to reveal company owners by 2020. Ministers could live with that as they reasoned the bill’s intent could be side-stepped. However, the government feared that a toughly worded cross-party parliamentary amendment demanding that the crown dependencies of Jersey, Guernsey and the Isle of Man – inexplicably excluded from the bill – also publish ownership registers would have made such evasions impossible. This is a serious mistake, one highlighted by the “Troika Laundromat” revelations of how companies serviced by UK tax havens are integral to the circulation of millions of dollars of apparently fraudulent funds.

Britain ought to be on the side of the law-keepers not the law-breakers. Crown dependencies and overseas territories trade on their association with the UK without adhering to the standards required of those companies operating within the UK itself. Their appearance at the centre of illicit finance revelations, notably those in the Panama papers data leak in 2016 and in the Paradise papers in 2017, should not be ignored. This paper agrees with the foreign affairs select committee that called on ministers to demonstrate “political leadership in ending the flow of dirty money into the UK”. By withdrawing the bill the government reveals that it still prefers a global regime underpinned not by strong but weak international regulation.

Britain has been cursed by its financial prowess. According to one study, an oversized City inflicted a cumulative £4.5tn hit on the British economy from 1995-2015. Some of this due to the global financial crash of 2008. But academics calculated that there about £2.7tn was lost when the City became rich by siphoning off cash from the economy rather than adopting a useful role such as investing in manufacturing, which would have lifted the incomes of people who live far from the City of London. It is ironic that the government is attempting to buy the votes of Labour MPs representing leave-voting towns left behind by the march of money. Ministers ought to confront in a much deeper way the mainspring of finance that has become an end in itself, disconnected from the economy and from the people and businesses it ought to serve.