PARLIAMENTARY DEBATES - United Kingdom Parliament

703 Debate on the Address
15 MAY 2013
Debate on the Address
704
[Ian Swales]
corporation tax rate that is the most competitive in the
G20. Unfortunately, large companies can easily move
their profits and operations outside the G20. I want to
speak about the effect that this is having on the UK
economy and growth.
There is widespread bafflement about how we can
have an extra 1.2 million private sector jobs and so little
growth. Part of the answer is tax avoidance, because
many of those workers are employed by offshore companies.
For example, Amazon is growing in this country at
more than 20% a year. It employs thousands of people,
but its sales of £4 billion do not appear in our economy.
They appear in Luxembourg. Microsoft, eBay, Google
and others have large businesses in the UK but their
figures do not show up either, and the Google chief
executive proudly talked about avoiding $2 billion in
tax last year.
Now let us turn to the companies that are based here.
The tax system encourages them to move manufacturing
and other parts of their supply chain overseas. The
Government’s change in controlled foreign company
legislation makes this even more likely. Companies that
do declare large profits here will find that they get a
knock on the door from a well paid tax partner of a
large accountancy firm, who will put forward schemes
whereby corporation tax can be avoided, the simplest of
which is to export the profits to Luxembourg via interest
payments. This is a route followed by well-known companies
such as Vodafone and Pearson, owner of the Financial
Times. In fact, it is done by most of our national
newspapers, which might explain why media reporting
of this issue is patchy at best.
If a profit-making company fails to succumb to the
charm offensive of the tax partner, something more
sinister is likely to happen. The next knock on the door
could be from the vulture capitalists—representatives
targeting an aggressive takeover of the company. Let us
take a current example. The outstanding business success
and growth of Betfair has led it recently to declare £247
million in profits. Its prospective suitors are CVC Capital.
What will it bring to Betfair—better management;
outstanding new internet technology? The clue is probably
in the description of CVC as a London and Luxembourgbased
venture capitalist. I am guessing that it will bring
a shameless approach to exporting Betfair’s profits to
avoid paying UK corporation tax. Boots and Thames
Water are just two of the many companies that have
been taken over and had their UK profits stripped out
of the country and placed in tax havens.
The Government have themselves facilitated tax
avoidance, not just through the tax framework but
through their procurement and private finance initiative
activity. The Green Book on PFI assessment still contains
an assumption that 10% of total PFI payments, not
profits, will come back to the Government in tax. This
is risible when one examines the facts. The vast bulk of
PFI deals now have an offshore element. HMRC’s own
offices are owned in Bermuda, the Home Office HQ is
owned in Guernsey, PFI schools in my constituency are
50% owned in Jersey, and, most bizarrely of all, junction
1A to junction 3 of the M40 is 50% owned in Guernsey.
This is the story throughout the country. It is high time
the Green Book was changed.
The leakage of money from our tax system and the
incentives for companies to operate in certain ways are
bad for the economy, bad for growth and bad for
individual taxpayers. I welcome the moves that the
Government have already made. Let us remember that
nearly all the framework was put in place or left in place
by the last Government, and they compounded the
problem by sucking up to their friends in the City,
stripping high-level resource out of HMRC and telling
it to go easy on big companies.
I hope that the Government will consider limiting
offshore interest payments and closing the loopholes in
Luxembourg and Holland, via our membership of the
EU. They should prosecute tax evaders and expose and,
where appropriate, prosecute their advisers. They should
add advisers to their team who are not from big business
or big accountancy firms and can speak up for ordinary
taxpayers and small business, and they should increase
specialist HMRC resources. Tax evasion and avoidance
is a cancer in our society and I hope that the Government
will keep on acting aggressively to cut it out.
4.27 pm
Mr Barry Sheerman (Huddersfield) (Lab/Co-op): The
debates on the Queen’s Speech are a good time to look
again at the relationship between us as elected Members
and those who sent us here. I always feel that the one
thing that I should be doing for my constituents in
Huddersfield is to try to ensure that they have a good
life, and most of us know what that entails. One of the
things that make me feel that the good life is achievable
is that over the years we have come closer to being a
high-skilled, high-paid economy. However, in recent
years we have faltered, and we must look closely at the
challenges that we face, globally and internationally,
that might lead to us being a low-skills, low-pay economy.
There is already great competition around the world
from people with high skills who are low paid, and I
think of India in particular. Any Queen’s Speech debate
on the economy must think thoroughly about the policies
that we pursue in order to obtain the good life for our
constituents, with high pay in a high skills economy.
I quite liked some measures in the Queen’s Speech,
including those relating to capital allowances and the
employment allowance. It is not all bad; it is just all a bit
vapid. There are some big gaps; big opportunities. We
have just spent about 18 months with almost nothing to
debate in the House, so there is plenty of room for a
vigorous programme to get this country moving and
working again.
I would have loved to see more vision, leadership and
courage in the Queen’s Speech. There are so many
things that we could be doing. Everyone will know of
my interest in skills. I think that any Queen’s Speech at
this time, when nearly 1 million young people are
unemployed, should have introduced a Bill to abolish
unemployment before the age of 25. It would cost only
between £4.5 billion and £5 billion a year, but it would
have stopped politicians condemning young people to
live in the shadows of society on a bit of unemployment
benefit here and a bit of housing benefit there. We could
have ensured that every young person in this country
was in education, training or work experience of some
kind. That would have broken, and can still break, the
curse of intergenerational worklessness. That is what we
should have had in the Queen’s Speech.