(8 years, 8 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
16:00 - The House divided: - Ayes: 266 / Noes: 300 - Question accordingly negatived.
John McDonnell (Hayes and Harlington) (Lab)
I beg to move,
That this House notes with concern the revelations contained within the Panama Papers and recognises the widespread public view that individuals and companies should pay their fair share of tax; and calls upon the Government to implement Labour’s Tax Transparency Enforcement Programme which includes: an immediate public inquiry into the revelations in the Panama Papers, HMRC being properly resourced to investigate tax avoidance and evasion, greater public sector transparency to ensure foreign companies wanting to tender for public sector contracts publicly list their beneficial owners, consultation on proposals for foreign companies wanting to own UK property to have their beneficial owners listed publicly, working with banks to provide further information over beneficial ownership for all companies and whom they work for, the swift implementation of full public country-by-country reporting with a fair turnover threshold as well as ensuring robust protection for whistle blowers in this area, ensuring stricter minimum standards of transparency of company and trust ownership for Crown Dependencies and Overseas Territories, consideration of the development of the Ramsey Principle by courts, implementation of an immediate review into the registry of trusts, and the strengthening and extension of the General Anti-Avoidance Rule to cover offshore abuses.
I see that the Chancellor is absent again today. Much as I look forward to seeing the various members of his Treasury team, is there a specific reason why he is not here for this important debate? I am happy to give way. [Interruption.] Is it critical? In respect of his attendance at the International Monetary Fund, he might look at yesterday’s IMF report that downgraded the growth expectations for our economy and think again about the policies he is pursuing, which fail to invest in the infrastructure, skills and new technology that our economy needs to compete in the world market. Perhaps we will send him a letter and he can say hello to the Chamber some time when he happens to be passing through.
We need to move the debate about tax avoidance and evasion on to the issue of the fairness and effectiveness of our tax system, and we need to do so as constructively as we can. The leak of documents from Panama lawyers Mossack Fonseca has provoked an extraordinary public discussion, and an entire hidden world has been brought into the light. What it reveals is profoundly unsettling.
We now know that Mossack Fonseca sat at the centre of a vast web of tax evasion and tax avoidance. The world’s super-rich commissioned its services to hide their income and wealth from the public gaze. Some of them had plainly criminal intentions. Money from the Brink’s-Mat robbery was allegedly laundered through a shell company set up by Mossack Fonseca, while the Mexican drug baron Rafael Caro Quintero held his property through a shell company established by Mossack Fonseca.
James Cartlidge (South Suffolk) (Con)
Disturbing points have been raised about Putin and the Russian regime. Will the hon. Gentleman confirm whether the shadow Treasury spokesman, his hon. Friend the Member for Leeds East (Richard Burgon), raised any of those points about the Russian Administration when on “Russia Today”?
John McDonnell
That certainly will happen in future.
Even if they were not criminals, many of Mossack Fonseca’s clients, if not all, had the strong intention of evading or avoiding the taxes that would otherwise have been due from them.
Catherine West (Hornsey and Wood Green) (Lab)
I thank my hon. Friend for his excellent speech and for bringing this debate to the House. Does he agree that this is a real issue for people in London, particularly in respect of the impact that these shady characters have on our London property market? It is a tragedy that Londoners, who want to remain in London, have to move out because these criminal elements are messing up the international finance system.
John McDonnell
That confirms the need for open and public disclosure of beneficiary ownership and beneficiary interests. As my hon. Friend and every London MP knows, speculation on property in this capital city denies many of our constituents a decent roof over their heads.
John McDonnell
Let me press on a little, and I shall give way shortly.
Mossack Fonseca exploited the presence of loopholes and entire jurisdictions that favour secrecy and minimal taxation. We can expect further news over the next few weeks and months, as the investigative work continues. Yesterday the Panama headquarters of Mossack Fonseca was raided, but 10 days on since the initial leak, I believe that its UK offices in Hitchin—not far away—have not been, despite the raising of concerns by the firm’s founder about the lack of due diligence performed by the UK office in relation to a company in its charge, and a clear legal precedent for the UK authorities to intervene.
There may be more revelations to come, set to tarnish individual reputations. I put this mildly: the Prime Minister has done himself no favours over the last 10 days. A lesson for the future is that, when asked a straight question, one should answer straightforwardly and straight away. The Prime Minister could and should have come clean about his relationship with Blairmore Holdings far earlier.
Sammy Wilson (East Antrim) (DUP)
Perhaps the hon. Gentleman will give a straight answer to a straight question. Does he regret the support that he gave to the IRA? They are still laundering money and still avoiding taxes in Northern Ireland, and he supported their activities in the past.
John McDonnell
I have never given the IRA support in relation to money laundering or any other activity. Let me make it absolutely clear that wherever laundering takes place, it is illegal and should be tackled, and I shall welcome the hon. Gentleman’s future contribution to the establishment of procedures to ensure that that happens.
Jo Cox
Having spent 10 years as an aid worker, I am acutely aware of the millions of pounds that are lost to development in poor countries as a result of these tax havens. Does my hon. Friend agree that, before the anti-corruption summit that will take place in London in May, the Prime Minister needs to do far more to reassure the House that he will accelerate his efforts to persuade British overseas territories to mirror the United Kingdom’s welcome move, and establish a transparent public register of beneficial ownership?
John McDonnell
The issue of a public register is critical to any measures that are taken in the future, because such a register will enable these kleptocrats to be held to account—particularly in the developing world, where they have denied development resources to the economies of their countries.
Andrew Gwynne (Denton and Reddish) (Lab)
Transparency throughout the Crown dependencies and the overseas territories is, of course, crucial. Does not the lack of such transparency further reinforce the message to our constituents that there is one tax rule for the rich and powerful, and another for everyone else?
John McDonnell
One of the key things that I think the whole House must do in the coming period is re-establish the credibility and fairness of our taxation system, which has been so badly damaged.
Christopher Pincher (Tamworth) (Con)
The shadow Chancellor has called for greater transparency on the part of the Crown dependencies. Can he explain why this is the first time he has made such a call? Why did he not make such calls during the 13 years of the last Labour Government?
John McDonnell
May I ask the hon. Gentleman—[Hon. Members: “Answer!”] I am. Calm down.
If the hon. Gentleman looks at my parliamentary record over the last 18 years, he will see that I was one of the first MPs to set up the tax justice meetings in the House that brought the Tax Justice Network here, and to do the necessary research. He will also see that, as shadow Chancellor, I have commissioned a review of HMRC’s activities in terms of the tax base, including those relating to avoidance and evasion. However, I understand his concern. I have worked on this issue on a cross-party basis for a number of years, and have criticised successive Governments for not doing enough.
Albert Owen (Ynys Môn) (Lab)
My hon. Friend has spoken of tax fairness. Does he agree that the Panama papers have revealed a channelling of moneys to the very rich while the poor have to pay their taxes, and that that comes on top of a Budget in which capital gains tax was cut for the top 3% through changes in personal independence payments for the disabled? Does that not show that we are not “all in it together”?
John McDonnell
I think that what people found extremely disappointing in the Budget debate was that, as my hon. Friend says, the cut in capital gains tax was being paid for by cuts in benefits for people with disabilities. That did indeed demonstrate very starkly that we were not all in it together. Perhaps these revelations will enable us to take steps towards the establishment of a fair taxation system that will fund our public services effectively.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I thank the shadow Chancellor for being so generous with his time.
Last night, an all-party parliamentary group to which I belong held an excellent meeting with a journalist from The Guardian and the campaigners who exposed the scandal. They informed us that openness and transparency in the overseas territories could be achieved quite simply through an Order in Council from the United Kingdom Government. The achievement of those aims is a matter of will on the UK Government’s part.
John McDonnell
My hon. Friend the shadow Leader of the House made that point last week, giving example after example of cases in which Orders in Council had been issued. They have been used very effectively by successive Governments, and it bewilders me that this Government are not taking that opportunity now.
John McDonnell
May I press on for a little while? I am only on the third page of my speech. This is getting ridiculous. I will give way to the hon. Gentleman later, but I have already given way a fair amount. As you know, Mr Speaker, I am generous, but I do not want to speak for too long.
Even today, we have not seen the Prime Minister’s full tax return or that of the Chancellor, and it is important that that should happen. The Prime Minister established the principle, which I advocated three months ago, that the Prime Minister, the Chancellor, the Leader of the Opposition and the shadow Chancellor should publish their tax returns—not summaries; their full tax returns—but that has not happened.
However, what confronts us today is an issue far bigger than any individual. At the centre of the allegations is a single issue. The fundamental problem is not tax avoidance by this individual or that company; those are symptoms of the disease. The fundamental issue is the corruption of democracy itself. At the core of our parliamentary system is the idea that those who levy taxes on the people are accountable to the people. If those who make decisions about our taxation system are believed to be avoiding paying their own taxes, that undermines the whole credibility of our system.
John McDonnell
I had better give way to the hon. Member for Newark (Robert Jenrick) first; otherwise, he will be disappointed.
Robert Jenrick
I am grateful to the shadow Chancellor. May I hark back to the point about Orders in Council? Was the shadow Chancellor surprised to learn that his friend and leader, the right hon. Member for Islington North (Jeremy Corbyn), once described the use of Orders in Council by the last Labour Government as “extremely undemocratic” and, in fact, “medieval? Does he think that the Leader of the Opposition is a johnny-come-lately on this issue?
John McDonnell
It depends on the issue that is being addressed. Sometimes harking back to the medieval period may be the most effective way of dealing with these problems.
John McDonnell
I must press on. I will give way to the hon. Gentleman later, if that is okay.
The common understanding is also that those who live here and benefit from public services will make a proportionate contribution towards them. The level of taxation may vary—sometimes it is higher, sometimes lower—but because we have a shared sense of fairness, we expect those with the broadest shoulders to carry the greatest burden in taxes. Over the last 30 years, however, we have witnessed the growth of wealth inequality on such a scale that it has undermined that basic principle of democracy. Figures from Oxfam suggest that the richest 1% own more than the rest of the world combined.
John McDonnell
Let me press on for a little while. I will return to the hon. Gentleman, I promise.
Great hoards of assets, in property and in financial wealth, have been built up. According to the best available measures, the levels of income inequality in Britain today are climbing as high as they were at the time of the first world war. The share of income going to the super-rich has risen almost inexorably for three decades. We are returning to the levels of inequality that were experienced before universal suffrage—before women had the vote, and before the development of universal free education and healthcare—in a world that existed before the gains of democracy brought obscene levels of wealth inequality under control, and created a more humane society for the majority.
John McDonnell
Let me press on. I will come back to the hon. Gentleman.
The world of the Rockefellers and the robber barons is the one to which we are returning: a world in which there is immense, almost unimaginable wealth for a gilded elite, but insecurity for growing numbers. Much of that wealth is now held offshore in secretive, unaccountable tax havens. According to the most recent estimate, $21 trillion dollars, equivalent to a third of global GDP, is hidden from taxation systems in global tax havens. It is estimated that, if taxed fairly, that wealth would raise $188 billion a year in extra taxation.
This is not about a few families seeking to “minimise their tax bill”, as was claimed by the hon. Member for Gainsborough (Sir Edward Leigh). It is systematic. An offshore world is operating parallel to the world in which the rest of us live. This is not an accident. The offshore world is being constructed, piece by piece, by multinational corporations and the super-rich, aided by shady offshore operations such as Mossack Fonseca, and—we must be honest about this—supposedly reputable accountancy firms here in London are also playing their part. According to the Public Accounts Committee, PwC has aided tax avoidance “on an industrial scale”. Deloitte has advised big businesses on avoiding tax in African countries. Ernst and Young act as tax advisers to Facebook, Apple and Google, and just last month KPMG had one of its tax-avoidance schemes declared illegal by the High Court. Together, the big four accountancy firms in this country earn at least £2 billion annually from their tax operations.
But it is not just them. Banks headquartered and operating in London have been particularly proficient in directing their funds through Mossack Fonseca shell companies. HSBC and its affiliates created more offshore companies through Mossack Fonseca—over 2,300 in total—than any other bank. Coutts, a subsidiary of RBS, created over 500 offshore companies through its subsidiary in Jersey. Supposedly reputable companies are aiding and abetting the systematic abuse of our tax system.
We should be clear: the City of London is being viewed by many as a tax haven in the middle of a dense network of havens created for the super-rich to avoid the taxes the rest of us must pay.
James Cartlidge
Does the hon. Gentleman accept that in 2010 the richest 1% contributed 25% of all tax, and does he welcome the fact that the Chancellor revealed in the Budget that that has now increased to 28%?
John McDonnell
It is not just a matter of tax, is it? It is not just a matter of income tax, either. Of course I recognise those figures, but distributional analysis has been undertaken independently of the Government. Conservative party policy since 2010 has seen some of the biggest losses for the poorest, not the wealthiest. The Women’s Budget Group put together the tax gains, the tax paid, the services cut and the benefit cuts. The poorest 10% will lose 21% of their income annually as a result of this Government’s policy—five times more than the top 10%. The analysis of the Institute for Fiscal Studies clearly shows that this year’s Budget hits the poorest 80% harder than the richest. Eighty per cent. of those cuts fall on whom? It is on women.
Huw Merriman (Bexhill and Battle) (Con)
I am grateful to the hon. Gentleman for giving way—he is always generous with his time. As well as appreciating the fact that 1% of the highest-income earners pay 28%, would he consider that since 2010 this Government have taken millions out of tax altogether by increasing the tax allowance—it is now £11,500?
John McDonnell
Let me deal with the tax threshold issue. The IFS has said that the biggest gains from the shift in the lower tax thresholds come for the higher earners. They are the ones who get the most and they benefit from the tax threshold moves. It describes the shifting of the tax thresholds as
“very much a giveaway to the better off”.
John McDonnell
I gave way earlier to the hon. Gentleman. I will press on because I know that others want to speak and I am sure he will want to speak himself.
This is a world that the super-rich inhabit. They live by different rules and it is an alien world for the majority of the rest of us.
Maria Caulfield (Lewes) (Con)
Does the hon. Gentleman agree that his party’s opposition to the removal of the family home from the income tax threshold affects those on the lowest incomes in London and the south-east because it will mean that only the wealthy can afford to stay in London when the family home is sold and they have to pay inheritance tax?
John McDonnell
The hon. Lady makes an important point. We have supported the increase in tax thresholds to try to take people out of tax altogether, but the benefits overall have actually accrued to the highest earners rather than the lowest and we need a more sophisticated system than that. With regard to inheritance tax, the cut that was made this time around by the Government benefited the top 5% of the population. There must be a better way of ensuring that people can pass on their wealth to their children, rather than just benefiting the super-rich. We have to look at that again. I am happy to do that and meet her to discuss it.
Maria Caulfield
I thank the hon. Gentleman for being extremely generous in giving way, but there are low-income families in London and the south-east whose home’s value has increased beyond recognition. They are now asset rich but income poor. How will the Labour party help them if it does not take them out of inheritance tax?
John McDonnell
The important thing now, as my hon. Friend the Member for Bolsover (Mr Skinner) has said, is that we build more homes to house those people. That will be an effective way of reducing prices, too. That will give access to home ownership to thousands more in the capital.
Mr David Anderson (Blaydon) (Lab)
Can we put this discussion on thresholds to bed once and for all? The people who are paying 28% income tax will get a small rise. Every one of us standing here will get a 10% pay rise next year and we will get a much bigger tax threshold rise than the ordinary men and women of this country. That is what they cannot understand. We and the super-rich are getting richer. They keep getting poorer. That is what this debate is about—it is about fairness.
John McDonnell
We have to find a better way in our taxation system to benefit those at the lower end of the scale. At the moment, although we are happy with the rise in tax thresholds, there needs to be a way to compensate for that more equitably. Again, it is not us saying this; it is the IFS and many other independent assessors. They are saying that this is not the most effective way of redistributing wealth in this country.
May I go back to my speech? I do not want to try your patience, Mr Speaker.
It is an alien world for the majority of us. It is a world of offshore trusts and legal trickery that would put Byzantium to shame; a world in which it is perfectly normal to buy property in London through a company registered in the British Virgin Islands, managed by lawyers in Panama with offices in Bermuda; a world in which citizenship and attachment to a country are something to pick and to choose depending on price. The scandal of the “non-doms” continues, in which a few super-rich can pay a notional fee instead of the taxes that would otherwise be due from them as residents.
Tucked away in this year’s Budget was an extraordinary clause that wrote off selected non-doms’ entire capital gains tax bill on any gains made before April 2017—a giveaway to the wealthy. This is not the world that most of us live in. Most of us pay our taxes. Contrary to the shocking opinion of the right hon. Member for Rutland and Melton (Sir Alan Duncan), that is not because we live in a country of “low achievers”, as he described them. We do so because we understand that a decent society depends on the contributions all of us make. Without the payment of taxes, we cannot run the public services that are essential to a decent society.
John McDonnell
Let me press on. I have given way to the hon. Gentleman once.
We do not have access to the specialist services that Mossack Fonseca and other companies provide. We cannot negotiate with HMRC when and how much to pay in tax. However, for the global elite, tax avoidance is as much a part of their world as the yachts and the mansions. This world is a corrosive influence on our democracy. The more the super-rich can escape the burden of taxation, the more it falls on the rest of us in society.
It is morally wrong that a billionaire oligarch should be paying proportionately less in taxes than the migrant cleaner of his mansion. It is a disgrace that an immense global corporation such as Google should pay no corporation tax for nearly a decade, while small businesses are chased for tiny amounts. It is an affront to the basic principles of our democracy that large corporations should be able to negotiate sweetheart deals with HMRC. [Interruption.] It is also a corrosion of democracy when a revolving door apparently exists between HMRC, charged with collecting taxes—[Interruption.]
Mr Speaker
Order. It is very unseemly when the shadow Chancellor is addressing the House for there to be a side exchange between a member of the Opposition Front-Bench team and the hon. Member for South Suffolk (James Cartlidge). He must not get into this bad habit. His father-in-law is a distinguished Member. He will tell him how to behave properly, and I will do so as well.
John McDonnell
It is always best to keep the in-laws on-side, Mr Speaker.
It is a disgrace that an immense global corporation such as Google should pay no corporation tax for a decade, while small businesses are chased for tiny amounts. It is an affront to the basic principles of our democracy that large corporations should be able to negotiate sweetheart deals with HMRC. It is also a corrosion of democracy when a revolving door apparently exists between HMRC, which is charged with collecting taxes, and major accountancy firms whose business depends on minimising taxes. HMRC’s last director went to work for Deloitte, and now we find that the executive director appointed by HMRC to oversee its inquiry into the Panama leaks is a former adviser to tax havens who believes that tax is a form of “legalised extortion”. The structures of Government are being bent out of shape by tax avoidance. Decisions are warped around the need to protect the interests and wealth of the super-rich and of giant corporations. Democracy becomes corroded.
On party donations, the Conservatives receive more than half their election campaign funding from hedge funds. In public view, here in London, its party leadership has made loud and repeated noises about tax avoidance, yet its MEPs in Brussels have voted six times, on instructions from the Treasury, to block the EU-wide measures against tax avoidance. As we have heard in evidence this week, the Prime Minister lobbied the EU Commission in 2013 to remove offshore trusts from new tighter EU regulations on avoidance. The Conservatives’ own record reveals that people no longer trust them on this issue. Not only have they impeded efforts to clamp down on tax avoidance, but these schemes directly implicate senior figures in the Conservative party. Several Conservative party donors, three former Conservative MPs and six Members of the House of Lords are among those with connections to companies on the books of the offshore law firm Mossack Fonseca.
As the super-rich flee their obligations to society, the burden of taxation is pushed elsewhere. As I have said, independent assessments of the tax and benefit changes introduced since May 2015 show that the poorest 10% are forecast to see their incomes fall by more than 20% by 2020, with 80% of the burden falling on women. It is the poorest and those least able to carry the burden who will suffer the most under this Government. An economic system that allows tax avoidance on this scale is one in which the inventor and the entrepreneur come second to the owner of wealth, the worker comes second to the plutocrat and the taxpayer come second to the tax dodger. It is a system in which inherited wealth and privilege, rather than talent and effort, are rewarded.
There has been criticism of the last Labour Government, and I was not enamoured of all their economic policies, but they did take measures against avoidance. Their measures on corporation tax avoidance are forecast—not by me, but by the Financial Times—to raise 10 times as much revenue as the present Chancellor’s schemes.
The Panama leaks must act as a spur to decisive action. In response to the leaks, the Government have stepped up their rhetoric on tax evasion but much of what has been announced falls short of what is needed or repeats existing announcements. I remind Ministers that page 223 of the Office for Budget Responsibility report that accompanied this year’s Budget outlined a disclosure scheme for companies operating in Jersey, Guernsey and the Isle of Man. The report said that owing to HMRC’s consistent underfunding, it did not have the resources to follow up on the links of the scheme. I again offer some words of advice to those on the Government Front Bench: fewer press releases and more action. It is time to move on and to close down tax havens and clean up this muck of avoidance.
Let us take this step by step. We need an immediate and full public inquiry into the Panama leaks. The Government’s proposed taskforce will report to members of the Government, the Chancellor and the Home Secretary, who are members of a party funded by donors featured in the Panama papers. To have any credibility, the inquiry must be fully independent. We must shine a light on, and start to prise apart, the corrupt networks that operate through tax havens. Part of that will involve creating a proper register of MPs’ interests. Members of this House should not be able to hide behind spurious claims of privacy. We want HMRC to be properly resourced to chase down the tax avoiders, with a new specialist unit dedicated to the task. Foreign firms bidding for Government contracts here should be required to name their owners. Full, public, country-by-country reporting of earnings and ownership by companies and trusts is a necessity if fair amounts of taxation are to be charged.
The measures announced by the EU this week do not go nearly far enough, requiring only partial reporting by companies. The turnover threshold is far too high, and Labour MEPs in Europe will be pushing to get that figure reduced much more to make it more difficult for large corporations to dodge paying their fair share of tax. Banks need to reveal the beneficial ownership of companies and trusts they work with. That means creating a public register of ownership of companies and trusts, and not only of companies, as the Government are currently enforcing. The Prime Minister has a role to play in this, as it was he who lobbied for the exclusion of trusts from the proposed EU measures. Labour will work alongside leading tax experts to lead a review into publishing a public register of the trusts too often used to avoid paying tax and reduce transparency in our tax system.
We must ensure that Crown dependencies and overseas territories enforce far stricter minimum standards of transparency for company and trust ownership. The Government’s current programme for reform is being laughed at by the tax havens. As my right hon. Friend the Leader of the Opposition said today, it was only this week, after signing a new deal on beneficial ownership, that the Cayman Islands Premier Alden McLaughlin celebrated a victory over the UK, saying:
“This is what we wanted, this is what we have been pushing for three years”.
The truth is that the Government are playing into the hands of those who want to abuse the tax system.
John McDonnell
Let me press on if I can.
We need serious action on enforcement. We need not central registers but, as Christian Aid and others are calling for, full public registers accessible to all, including journalists and other businesses, if we are going to curb the activities exposed in the Panama papers. This package of measures is Labour’s tax transparency and enforcement programme. We believe that it offers a sound basis to take the first necessary steps against avoidance and towards openness and transparency. We are presenting it today as we want to see immediate effective action.
This is a test of leadership. The leadership of the Conservative party could take this opportunity to correct the series of errors that it has made. It could join us today in taking effective steps towards dealing seriously with avoidance. People want to see the Conservatives take these steps. Otherwise, they will rightly stand accused of siding with the wrong people and of being the party of the tax avoiders. Incidentally, it was not long ago that the Chancellor of the Exchequer appeared on television to give advice on the “pretty clever financial products”, as he described them, that would allow the wealthy to dodge inheritance tax.
John McDonnell
Don’t tempt me, Mr Speaker.
Some of the Conservative party’s Back Benchers believe that tax avoidance is a sign of success. The party’s donors are named in the Panama papers, and the Prime Minister himself is a direct beneficiary of a scheme set up in an offshore tax haven through his prior ownership of Blairmore Holdings shares.
The Panama leaks have presented a stark political choice. Do we continue to allow a system of corruption and avoidance, or do we now take the action necessary to restore fairness to our taxation system and to correct the abuse of democracy? That is the challenge, and the choice, ahead of us. I urge the Government and all Members of this House to join us in a serious programme of work to tackle the abuse of our tax system. The Government can make a start by supporting our motion today and adopting Labour’s tax transparency enforcement programme. I commend this motion to the House.
The Financial Secretary to the Treasury (Mr David Gauke)
It is a great pleasure, for the second time this week, for the Government to be able to inform the House of how much more we have done than the previous Government to tackle evasion, avoidance and aggressive tax planning and to become a world leader in tax transparency. In 2010, we inherited a situation in which no one could find out who really owned a company in the UK or find out the details of a London property if it was owned by a foreign company. Not only were the international rules governing multinational companies out of date, allowing the tax base to be eroded and profits to be shifted, but there was no attempt to bring those rules up to date. Nor was there any sign that those matters were going to change. Loopholes, secrecy and concealment are the issues that we are sorting out, not only through what we are doing in the UK but through our firm and decisive action overseas.
John McDonnell
I want to clarify something that the Minister just said. Can he confirm that, under his proposals, members of the public will not have access to the register of beneficial owners of companies and trusts in overseas territories or elsewhere?
Mr Gauke
Let me tell the hon. Gentleman precisely what I just said. In 2010, no one could find out who really owned a company in the United Kingdom. From June, we will be publishing a public register of beneficial ownership. What is more, HMRC could not find out who owned a company based in an overseas territory. As a consequence of the agreements we have reached this week, HMRC will be able to do exactly that. That is evidence of the progress that has been made under this Government, and that was not the case under the previous Government.
Clive Efford (Eltham) (Lab)
As my hon. Friend the Member for Hayes and Harlington (John McDonnell) pointed out, we have had lots of honeyed words from the Government about how they are going to deal with this matter. However, is that not belied by the fact that they appointed someone as the executive chair of HMRC who thinks that taxation is “legalised extortion”? Does that not demonstrate the attitude that exists in this Administration?
Mr Gauke
It is unfortunate that the hon. Gentleman seeks to smear a public servant who has served Governments of—[Interruption.] Let me make this point. This is someone who has served Governments of both colours and with whom I have worked extensively over six years. He has been and is determined to do everything he can to ensure that our tax laws are properly enforced and deal with avoidance and evasion. I suggest to anyone who throws around one line from an article written in 1999 that they look at the entire thing, because his argument is about properly addressing tax avoidance by ensuring that we get the law right. It is unfortunate when accusations are thrown around about dedicated, impartial public servants.
John Glen (Salisbury) (Con)
I pay tribute to my hon. Friend’s work over several years in dealing with some of these issues. Will he comment on the fact that this country now has the smallest gap on record between tax owed and tax paid? That is the real story about this Government’s efficiency in dealing with tax collection and the difficulties in the system.
Mr Gauke
My hon. Friend is right. The reality is that the tax gap, as a percentage of tax revenues, has fallen considerably over the past six years, which is testimony to the effort put in by not only this Government but HMRC. Bringing the tax gap down involves considerable challenges, such as tax evasion, tax avoidance, and inadvertent error on the part of taxpayers, which does happen from time to time as I am sure all hon. Members will recognise. We are determined to do what we can do improve and strengthen our systems. I am grateful for the opportunity today to make progress on that.
Robert Jenrick
Will the Minister emphasise the point about the tax gap? One of the most relevant measures is the tax gap specifically for those paying corporation tax. It was rising when the coalition Government came to power in 2010 and has fallen by almost 50% over the past six years, which is a major achievement.
Mr Gauke
I will give way to the hon. Gentleman, but I stand by the point that he has sought, not for the first time, to attack an impartial, dedicated public servant, who cannot answer back, by selectively quoting an article written in 1999. I have set out to the House the context in which that article was written. It is clear that this is someone who believes that the law should be properly enforced and who has a record over many years of doing precisely that.
Clive Efford
I am grateful to the hon. Gentleman, but he accused me of smearing this individual when I was actually quoting him word for word. He went on to say that tax is legitimised
“only to the extent of the law.”
If the bar is set too low, fewer people will pay tax and more will be able to avoid it. My point—I stick by it—is that this Government’s attitude towards tax avoidance is lax and their words are more honeyed than their actions.
Mr Gauke
This is a Government that closes loopholes year in, year out, whose actions led to the OECD work on base erosion and profit shifting, that have given more powers to HMRC, that have seen a significant fall in the tax gap, particularly in the context of avoidance, and that have a proud record on dealing with tax avoidance, tax evasion and with all abuses in the tax system.
Huw Merriman
This Government, via HMRC, have raised £2 billion since 2010 from offshore tax evasion. Does that not demonstrate that this Government ensure that the tax that should be paid is paid?
Several hon. Members rose—
Mark Durkan (Foyle) (SDLP)
I thank the Financial Secretary for giving way. He referred to the Government’s record, but that record also includes changes to the controlled foreign companies rules, which in effect cost Exchequers here and, more importantly, in developing countries.
Mr Gauke
I do not accept that. The hon. Gentleman and I have debated the issue on several occasions. When we came to office in 2010, the controlled foreign companies regime was outdated and was driving businesses out of this country. Since our reforms, more businesses have located in the United Kingdom and more businesses have located their European headquarters here. The change has added to the UK’s attractiveness as a place to do business. As for developing countries, I have said to the hon. Gentleman before that the UK has been at the forefront of building the capacity of tax authorities in developing countries to ensure that they are able to collect the tax that is due under their laws.
Several hon. Members rose—
Rehman Chishti (Gillingham and Rainham) (Con)
I thank the Minister for giving way. I of course welcome all that the Government have done on tackling tax avoidance and evasion. He says that more could be done on tax avoidance, but does he accept that, following the comments of the former Labour Foreign Secretary and Lord Chancellor, who said that the Labour Government could have taken but did not take action on tax avoidance and the previous Labour Government’s deficit, the Government are playing catch up?
Mr Anderson
In the interests of the people listening to this debate, will the Minister provide, either today or by putting something in the Library, details of companies or schemes identified since 2012 that could be classed as either morally repugnant or morally wrong, terms that were used by the Prime Minister and the Chancellor in 2012 to describe such schemes? Has any work been done on that? Can we get a register so that we know who to look out for in future?
Mr Gauke
I think the hon. Gentleman is actually being helpful—not that I ever doubted that he would be. When there is artificial, contrived behaviour and when schemes are clearly contrary to the intentions of Parliament, we need to take strong action. We are also entitled to be critical of those involved in promoting such schemes. Indeed, we brought in a regime whereby we can name and shame the promoters of tax avoidance schemes that are clearly contrary to our intentions.
Maria Caulfield
I thank the Minister for giving way. If Opposition Members want to be helpful, they could speak to the unions. Unison paid no corporation tax in 2011 or 2012, despite owning £51.6 million of stocks and shares and generating an income of over £5 million.
Mr Gauke
It would be fair to say that I try to make it a rule not to comment on the individual tax affairs of taxpayers, but perhaps those who are happy to wade in on such debates should answer such questions.
HMRC is committed to exposing and acting on financial wrongdoing. Its specialist offshore unit is currently investigating more than 1,100 cases of offshore evasion around the world, with more than 90 individuals subject to current criminal investigation. The motion calls for greater HMRC resourcing. This shows precisely why at the summer Budget of 2015 we confirmed an extra £800 million to fund additional work to tackle evasion and non-compliance by 2020-21.
We have already heard quite a lot today about HMRC resources and headcount. I have to concede that there was a period when the numbers working in compliance and enforcement fell—that period was up to 2010. If we look at where the numbers were in 2010 compared with where they are today, we see that the enforcement and compliance numbers are higher than they were when the Prime Minister, the Chancellor and I took our respective positions—there has been an increase. I accept that much more of HMRC’s work on processing self-assessment forms, for example, has been automated and the number of staff working in that area has fallen. However, the number of people working in compliance and enforcement has increased over the past six years.
Several hon. Members rose—
Mr Gauke
I want to make a few more points. Even before last week, HMRC had already received a great deal of information on offshore companies, including those in Panama and including Mossack Fonseca. This information comes from a wide range of sources and is currently the subject of intensive investigation. HMRC has asked the International Consortium of Investigative Journalists, the BBC and The Guardian to share the data they have received from last week’s leaks. Clearly, it is important to examine the data very closely, which is why we are providing new funding of up to £10 million for an operationally independent cross-agency taskforce to analyse the Panama papers and take action on any wrongdoing and regulatory breaches. The taskforce will include analysts, compliance specialists and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. Between them, those agencies will have some of the most sophisticated technology, experts and resources to tackle money laundering and tax evasion anywhere in the world. The taskforce will report to my right hon. Friends the Chancellor of the Exchequer and the Home Secretary on the strategy for taking action, and we will update Parliament later this year. I stress that the taskforce will have total operational independence. If it finds people to prosecute, it will prosecute them. If it finds information about illegality, it can act on it. In addition, the independent FCA has written to financial firms asking them to declare their links to Mossack Fonseca. If the FCA were to find any evidence that firms have been breaking the rules, it, too, has strong powers to take punitive action.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Minister mentioned last year’s Budget and the £800 million for non-compliance issues. However, I understand from his answer to a written question that only £266 million of that has been allocated specifically to address tax fraud. How much of that will be spent on dealing with tax evasion?
Mr Gauke
The vast majority of the additional money we have put into compliance, both the £800 million announced last year and the £1 billion announced in the last Parliament, is going to dealing with tax evasion. All of it is going into compliance, which is in the areas of dealing with tax evasion and tax avoidance, at its broadest points. I am happy to let the hon. Lady have details of the precise numbers and to write to her on that subject, but this money is going into compliance exactly to deal with these areas. We have taken this very seriously, substantial sums will be raised for us over the course of this Parliament and we are proud of our record on this.
Chris Stephens (Glasgow South West) (SNP)
First, on headcount, will the Financial Secretary confirm that there are 14,000 fewer staff in HMRC now than there were in 2010? Secondly, will he inform the House whether any HMRC staff currently have a compulsory redundancy notice?
Mr Gauke
I make no secret of the fact that HMRC is a smaller organisation than it was in 2010 in its headcount. That is because efficiency savings are capable of being found in an organisation that devotes a number of staff to processing pieces of paper when we are moving to a more digital world and we can make greater use of technology. On the area that is relevant to today’s discussion and is the concern of the House, the concern is to ensure that HMRC has the resources to deal with tax evasion and tax avoidance. In that area, headcount is not the be-all and end-all; it is about what we get out, not what we put in. As it happens, however, the numbers of people dealing with enforcement and compliance have gone up under this Government. That point sometimes seems to be missed from this debate.
In a globalised world, international action is clearly vital to stop cross-border tax avoidance, evasion and aggressive planning. The UK Government can be proud of having done more than any other country to stamp out these practices. On avoidance, we have already implemented the OECD recommendations for country-by-country reporting to improve transparency between business and tax authorities, and have advocated public country-by-country reporting on a multilateral basis. The Commission’s proposals for public country-by-country reporting are a step in the right direction towards new international rules for greater public transparency. However, we need to consider carefully the details of the Commission’s proposal, including how the reporting is done and how the information is broken down.
On transparency in the context of tax evasion, which is a key point, the UK will be the first major country to publish a register of company beneficial ownership, free for anyone to access, allowing everyone to see who owns what company. My right hon. Friend the Prime Minister made it a personal priority to use our G8 presidency to set a new global standard of tax transparency. As a result of our G8 presidency, 129 jurisdictions have committed to implementing the international standard for exchange of tax information on request, and more than 95 jurisdictions have committed to implementing the new global common reporting standard on tax transparency. This is a huge breakthrough. I recall that six years ago no one believed that we would get to that position, and I am delighted that we have done so. This is a step change in transparency.
Robert Jenrick
To emphasise that point, none of our major international economic competitors has agreed so far to have a public register of beneficial ownership. In fact, the state of Delaware, in which 90% of United States public companies are listed, has said that it has no intention of implementing this. We really are leading the world and leading our major competitors.
Mr Gauke
My hon. Friend is absolutely right to raise that point, and I will address the subject of the public register in a moment. It is considerable progress to have got central registers at all. We have pressed for that, and I am pleased that overseas territories and Crown dependencies have agreed to sign up to it.
Callum McCaig (Aberdeen South) (SNP)
The Prime Minister has stated that the registers that the overseas territories will provide will be available to tax authorities here. However, as this debate has clearly highlighted, this is a global problem, so will those registers be shared with other tax enforcement agencies globally so that they can ensure that tax is not being avoided from other countries?
Mr Gauke
The hon. Gentleman raises an important point, and I think there is scope for going further on it. What we have agreed is to ensure that we have access to those central registers. That is clearly very helpful but I think more progress can be made in that area and it is something to return to in the future.
Panama is one of the very few financial centres that has not yet fully committed to these international standards. We are clear that it should do so, and we continue to press for Panama to join the club of responsible nations. Of course, there is more international work to be done, particularly on tackling money laundering. That is why we are hosting an anti-corruption summit in May, with the aim of encouraging consensus not just on exchanging information, but on publishing such information and putting it into the public domain, as we are doing in the UK. Once again, Britain is leading the world on transparency, accountability and responsibility.
Mr Gauke
There are a few more points that I want to make, if the hon. Gentleman will forgive me.
Let me address the subject of the UK’s Crown dependencies and overseas territories. Reform of the regimes of the overseas territories and Crown dependencies has been a key objective for the UK, and the reforms that we have secured have been considerable. All the UK Crown dependencies and overseas territories with financial centres are signed up as early adopters of the common reporting standard, reporting annually from 2017 in respect of data that have already been collected. The Crown dependencies and overseas territories will share information with the UK from this year, one year earlier than the rest of the world. All the UK Crown dependencies and overseas territories with a financial centre have committed to transparency on company ownership.
Last Monday the Prime Minister announced that our overseas territories and Crown dependencies have agreed that they will provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies. For the first time, UK police and law enforcement agencies will be able to see exactly who owns and controls every company incorporated in those territories. This is a major step forward in transparency, the result of the Government’s sustained work in this area.
It is right that we expect the overseas territories and Crown dependencies to meet international standards, and indeed they do. Yes, we want them to move towards a public central register. That is not yet the international standard. If, as the Leader of the Opposition suggests, every former colony that does not have a public register should be recolonised, where would we begin? Is he proposing that we invade Delaware? [Interruption.] Now we come to mention it, says the hon. Member for Wolverhampton South West (Rob Marris).
The reality is—and this is the point that my hon. Friend the Member for Newark (Robert Jenrick) was right to raise—that the UK is in favour of a public register. We are implementing a public register in June for the first time. We have never had one before. We want other countries to do it, but very few of our European Union colleagues do so. It is not the case that the US does it. We want to ensure that it becomes the new international standard, but Orders in Council condemning overseas territories for failing to do what most of our EU colleagues do not do would not be fair or effective. The approach that we have taken has brought the overseas territories and Crown dependencies a long way. I fear that the approach advocated by the Labour party would fail to work.
Mr Gauke
I will make some more progress. The hon. Gentleman has just arrived.
As well as leading international action, we have ensured that domestically our regime is both tough and transparent. We have invested more than £1.8 billion in HMRC since 2010 to tackle evasion, avoidance and non-compliance. The £800 million extra funding that we announced in the summer Budget 2015 will enable HMRC to recover a cumulative £7.2 billion in tax over the next five years, and to triple the number of criminal investigations it can undertake into serious and complex tax crime. In the last Parliament, we made more than 40 changes to tax law, closing down existing loopholes and introducing major reforms to the UK taxation system, raising £12 billion.
Penalties increased, new offences created, loopholes closed, new measures introduced, more money raised—it does not stop there. In this Parliament, we have already announced a further 25 measures for legislation to tackle avoidance, evasion and aggressive tax planning. These measures are forecast to raise £16 billion by 2020-21. This week, we announced that we will bring before the House this year legislation to make it a crime for corporations to fail to prevent their representatives from criminally facilitating tax evasion. This new corporate offence goes further than any other country has gone in holding corporations to account for criminal wrongdoing. It will apply to both UK and overseas corporations, and will set a new standard for corporate responsibility and accountability. I am sure that Members on all sides of the House will support any measures as they go through.
What a contrast to the 13 years of the Labour Government. This week, the Opposition ramp up the rhetoric, but it was not on our watch that private equity managers had a lower rate of tax than their cleaners. It was not on our watch that the wealthy could sidestep stamp duty. It was not on our watch that high earners could disguise their remuneration as loans that were never repaid. Those are just some of the loopholes left open by Labour—loopholes that we have been busy closing ever since.
Let me make one further point about the approach of the Labour party over the past week. Yes, taxes should be paid in accordance with the law and the intentions of Parliament, and we should take action against those who fail to do so. Those of us on the Government Benches certainly hold that view. But too often in the past week, Labour has appeared to be motivated by something else. That something else is hostility to the wealthy—not for dodging taxes, but just for being wealthy, for being successful, for earning money and for wanting to pass it on to their children. Those are things which millions of people aspire to do.
Thanks to the actions that this Conservative Government have taken domestically and overseas, we are revolutionising tax transparency and putting an end to offshore tax evasion. This is strong and firm action from a Government committed to ensuring that every penny of tax that is owed is paid. I urge the House to reject the motion.
Stewart Hosie (Dundee East) (SNP)
May I make a number of small observations on what we have heard so far and gently say to the Minister, whom I like, that success is not measured merely in monetary terms? There are many, many successful people who will forgo stashing cash in the attic, the bank or the offshore tax haven.
On HMRC, we have no problem with efficiency or with organisations being fit for purpose. We have no qualms about genuine waste being eroded, but we look askance at 17 out of 18 tax offices being closed and only one being reopened, and the argument that somehow that will deliver more for substantially less.
The shadow Chancellor spoke about wealth inequality now rising to a level that we have not seen since the days of the Rockefellers or, as he said, the robber barons. I would not put the Prime Minister in the category of the super-rich, such as the Rockefellers. We know, however—the Prime Minister has been very open about this—that he bought shares, as he described it, in a trust or a fund as part of Blairmore Holdings. He sold them some years later. He did nothing illegal at all. That episode shone a very bright light in a very murky corner of offshore tax havens. One thing that struck me was that he bought the stock in 1997 and sold it in 2010. Those dates were familiar to me. It was the entire duration of Blair, Brown and new Labour. On the underlying issue, which I know the shadow Chancellor is genuinely concerned about, and on many of the points that the Minister made at the end of his speech, the Labour party did nothing for 13 years. I am glad that this is now on the agenda in a proper and cogent way.
My hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin) made a number of telling points on this subject in his speech on the Second Reading of the Finance Bill on Monday. He said:
“you cannot build economic success on the back of social injustice.”—[Official Report, 11 April 2016; Vol. 608, c. 115.]
He also said, quoting Adam Smith:
“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”
He argued that creating such division does not bring progress, and he went on to describe how much of this division is characterised today by people in certain quarters being able to park large sums of money offshore, and the rest—the vast majority—being unable to do that.
My hon. Friend suggested that, according to Jason Hickel of the London School of Economics, tax havens hide one sixth of the world’s total private wealth—in excess of $20 trillion. Some estimates put that as high as $32 trillion, and CNN described it on Monday evening as about 6% of total global GDP. There are higher estimates. We can probably all agree that it is around $20 trillion, or 15 times UK GDP, parked offshore in tax havens—money and assets which very wealthy people and criminals can hide from the relevant tax authorities.
The revelations in the millions of documents in the Panama papers from Mossack Fonseca are but the tip of the iceberg. I am told that it is the fourth biggest law firm in Panama providing these services, which means there are three larger firms, and I presume that there are dozens, scores or hundreds of smaller firms doing the same. And it is not simply in Panama. Indeed, Panama does not even make it into the top 10 tax havens. Taken together—I do not think this situation has changed yet, notwithstanding the measures that the Government have announced—the UK and the overseas territories collectively are No. 1, outstripping even Switzerland by some margin, it is argued.
It is worth reminding ourselves that at a single address in the Cayman Islands, Ugland House, there are 19,000 registered businesses. I am certain that some of them will be legal, but many will not be. Many will be companies whose beneficial owners remain hidden from the tax authorities there, here or elsewhere. That means that income that should be the subject of taxation will go untaxed, to the detriment of public services here and elsewhere.
We have, in essence, an international system of finance that enables tax avoidance on an industrial scale, a system that hides from scrutiny the owners of vast wealth while the ordinary man, woman or business in the street does not have, and does not want, that luxury. They pay their fair share, and they simply want others to do the same. What makes it most unfair—I think this is why people are so angry—is that when assets or income are hidden and go untaxed, we all suffer as the resources we need for vital public services are reduced and squeezed.
It is also the case that much of the tax stashed in tax havens is looted from developing countries, so this is not simply an issue for the west. It is a matter of fundamental importance to those developing economies, which frankly are in even more need of the tax receipts that are effectively stolen from and then parked in tax havens around the world. That is why part of the solution must involve a global agreement on country-by-country reporting to ensure that tax authorities and others can follow the money.
The question from my hon. Friend the Member for Aberdeen South (Callum McCaig) was absolutely right. We are moving to having data shared between the Crown dependencies and overseas territories and the law enforcement and tax authorities here. We think that should be public—there is absolutely no doubt about that—but it should also be shared elsewhere. If miscreants are identified by the Revenue or the police here, I hope that there will be a very swift phone call to the appropriate authorities elsewhere so that they, too, can follow the money.
Paul Flynn
Does the hon. Gentleman think it is significant that China has £44 billion invested in the Cayman Islands and £49 billion in the British Virgin Islands? Is not one of the reasons why the Government might not want to act against these tax havens that they are ingratiating themselves with the Chinese, who are busy destroying our steel industry?
Stewart Hosie
I suspect that the Chinese authorities are interested in that £93 billion just as much as we are, because I suspect that much of it is not there—how can I put this gently?—officially. They have as big a problem with money being fleeced from their system as we and other countries have with ours.
Another issue raised by my hon. Friend the Member for Kirkcaldy and Cowdenbeath, and by my hon. Friend the Member for East Lothian (George Kerevan), is the question of where the money actually is and how it is set to work for its beneficiaries. As we know, cash funds do not actually sit in the Cayman Islands or the Bahamas. One of the biggest centres for the cash is London, and we can see where some of that money is spent. For example, hundreds, if not thousands, of rather expensive properties in London have been bought by persons unknown. We have therefore called for radical reform to address tax avoidance, outright evasion and criminality and to deliver fairness across the board so that the very wealthy pay the tax that is due in precisely the same way as those on more modest earnings.
The starting point for paying tax in this country is the Revenue knowing precisely who owns what assets and what income is derived from them. In short, that means a public register of beneficial ownership of companies, and not just in the UK, but for the Crown dependencies and the overseas territories as well, precisely so that nobody can hide assets or incomes through an opaque structure of a company registered in an overseas territory, registered by a Panamanian lawyer while the money comes swiftly to a bank account in London and is parked in a multi-million pound mansion in Mayfair through an anonymous shell company.
That also means taking serious action on trusts. The argument that the Prime Minister used was that he would not have got the agreement had trusts been included. He argued—possibly correctly historically—that those trusts were set up in order to allow sophisticated investors to invest in dollar-denominated stock. But times have changed. I took a cursory look at the stock exchange website this morning. On its “frequently asked questions” page, I saw the following question: “Can a company have its securities traded in currencies other than sterling, for example euros and dollars?” The answer was, “Yes, your shares can be denominated and traded in any freely available currency you choose.” Indeed, the stock exchange launched a Masala rupee-denominated bond last week. The old arguments that these structures are required for non-sterling trades or investment are now simply wrong. As my hon. Friend the Member for Kirkcaldy and Cowdenbeath put it, even if the Prime Minister was right some years ago, he is wrong now and public opinion has changed dramatically.
That brings me to what else the Prime Minister said on Monday. He said that he has published all the information on his tax returns for the past six years. He has provided details about money inherited from and given to him by his family. He has published other sources of income and his salary. He dealt specifically with the shares that he and his wife held in a unit trust called Blairmore Holdings, set up by his late father. That, from our point of view, was precisely the right thing to do. However, in a sense, all of that is irrelevant because it did not actually address the fundamental issue of individuals holding assets through overseas shell companies and being able to hide them and their income from the tax man.
Also, in describing the actions that the Government are taking to deal with tax evasion, aggressive tax avoidance and international corruption more broadly, the Prime Minister said that they have put an end to rich homeowners getting away without paying stamp duty because their houses are enveloped within companies. He said that they had made 40 changes to close loopholes, and they have sought agreement on global standards for the automatic exchange of information, and in June this year, as the Minister has pointed out, the UK will become the first country in the G20 to have a public register of beneficial ownership so that everyone can see who really owns and controls each company. We recognise that there has also been work on base erosion and profit shifting.
All of that is to be welcomed. What we are saying is that we need to go further. It will simply not be enough for the police and the tax authorities to see beneficial ownership of companies registered in Crown dependencies; it must be public, so that the citizens of those countries and ours can see who precisely owns and benefits from what. Also, while we welcome the publication of beneficial ownership of companies in the UK, I ask the Government to ensure that sufficient resources are now dedicated to HMRC so that it can forensically scrutinise the sources of income to ensure that they are legal and that the tax due is paid. Of course, as I said earlier, the Government must also pass on to other authorities the details of any miscreants suspected of looting cash from other countries.
I am delighted that this subject is now under real scrutiny. I am also delighted that we have gone wider than the parochial. Oxfam has pointed out how significant this is in its report “Ending the Era of Tax Havens”. It gives encouragement to the Government, stating:
“The UK is especially well placed to show leadership here because it controls or directly influences by far the largest network of tax havens in the world. This network, encompassing the UK’s Crown Dependencies and Overseas Territories and centred on the City of London, is estimated to account for nearly a quarter of global financial services provided to nonresidents within a jurisdiction. Taken together, this UK entity would sit at the top of the ranking in the Tax Justice Network’s Financial Secrecy Index”.
That is not something we should be proud of. However, Oxfam goes on to talk about the opportunity the Government have, saying that success in tackling corruption and tax evasion could be transformative not just in terms of our revenue, but in terms of the fight against global poverty and inequality, which, for the SNP, is just as important.
I will end by saying one thing to the Government: the cat is out of the bag. This is not just about Mossack Fonseca; this is the tip of the iceberg. The public will not allow this matter to be quietly swept under the carpet again.
Kevin Foster (Torbay) (Con)
It is a pleasure to follow the hon. Member for Dundee East (Stewart Hosie). Although there are probably some things we would disagree on, there are a couple of issues on which we do agree. One is that it is welcome that we are having this debate on the Floor of the House today. The other is the fear that the next tax haven to be listed—this time it would affect ordinary working people—might be England if the Scottish Labour party gets its way after the elections this May and makes tax rates for working people higher there than they are south of the border.
It is always good, as a member of the Public Accounts Committee, to be discussing on the Floor of the House how we get in the tax that is owed. During Prime Minister’s Question Time, I think I heard the Leader of the Opposition refer to tax as partly a donation. I can understand why he said that, but let us be clear: a donation is something people voluntarily give to a charity, as I do out of my salary; a tax is a legal requirement to pay something—it is not a donation or an act of charity.
As a member of the Committee, I sat on our recent inquiry into Google, which is perhaps one of the cases that has helped to prompt the debate on this issue over the last few months. We focused a lot on some of the offshore locations, but we also had references to things such as the “double Irish” and the “Dutch sandwich”, which helped to reduce the company’s tax liability. Neither of those relates to offshore territories; they both involve jurisdictions that are members of the EU. It is therefore important that, as we work across the world to try to deal with tax evasion and avoidance, we make sure that other nation states give these issues the attention they deserve. [Interruption.]
Madam Deputy Speaker (Natascha Engel)
Order. I am sorry to disturb the hon. Gentleman, but there is quite a lot of chattering going on, and I am finding it quite difficult to hear him.
Kevin Foster
Thank you, Madam Deputy Speaker.
In its report, the Committee was clear that HMRC should try to lead a debate about openness and tax rules. In that instance, the issue was revenues and the discussion of information with HMRC. It is easy to grandstand in such debates, but it is important to have not a knee-jerk reaction, but a considered debate about what information is available publicly, because there cannot just be specific rules for individual companies. If we change our general principle of not discussing individual taxpayer data, there are obviously some pitfalls to that, as well as some potential benefits, as we see when we look at deals such as the one with Google. However, the Committee felt that HMRC could lead a debate on that.
The report summarises some of the issues involved in judging whether the Google deal was the best deal that could have been done. It is worth noting, however, that the debate was based on previous tax rules, not today’s tax rules; effectively, we were having a debate about things as they existed some years ago—in some cases, 11 years back, when many Members sitting here today were not actually in the House—and about laws that have, in many cases, changed.
What came out of the Committee’s discussion is that HMRC’s performance is being looked at more widely, and the Committee regularly looks at it. It is encouraging to see some of the figures that have been published on the reduction of the tax gap—not least the corporation tax gap, which has gone from 14% to 7%. That is welcome. Yes, there is more we can do to drive down that 7%, but it is far better to be talking about 7% than 14%.
As has been referred to in the debate, the tax haven where a hedge fund manager could pay as low a tax rate as the person who cleaned their office was the UK six years ago. I have always felt that tackling that was one of the best things done under the coalition Government, because it seemed innately unfair that someone sitting within a few miles of this building could use capital gains tax rules to pay a low rate on a substantial income—indeed, a lower rate than a person earning the minimum wage for cleaning their office.
Having had discussions with Anguilla’s Public Accounts Committee recently, I welcome a number of things about HMRC’s having the ability to get information from, and share information with, the Crown dependencies. I agree with the hon. Member for Dundee East that we should be as diligent in handing information to tax authorities in developing countries via such information-sharing arrangements as we are in using information to enforce our own tax system. I suspect there will always be a debate about exactly what information we share with countries with more repressive regimes, but where the line is purely about avoiding taxation, we should be prepared to co-operate, provided that there are assurances about the standards that will be applied afterwards as part of investigations under the relevant nation’s criminal justice system.
In terms of how the Government and the UK engage with these authorities, it is worth bearing in mind that some of the regulations involved are very complex. There is perhaps a debate to be had about the fact that we currently appoint governors, who effectively act as the Head of State, for three years, with their term being extendable to four. There is perhaps a debate to be had with Foreign Office colleagues about whether it would make more sense to have a longer appointment, to allow governors to build a relationship with the authorities in a country; to build a knowledge of the system there; and to be able to engage more, and to give difficult messages, on behalf of the UK, in a way that a three-year term perhaps does not allow.
We should be clear that being a governor is not about going round in a feathered hat being saluted by everyone; it should be about being part of building a strong and lasting bond between the UK and territories that look to us for support, particularly in the realm of defence and overseas development. We should have people who engage with territories very strongly and who build up their governance systems, but who also have a deep knowledge of those territories and a deep relationship with them. We can then have the tougher discussions we need to have about areas where those territories are sovereign, but where their decisions have a clear impact on us as the home nation.
That said, I welcome the agreements we have managed to sign. I recognise that this is a global problem. Panama is one of the few countries not to have signed up to some of the international agreements, and one of the key issues is what further steps we take against nations that do not do that. Again, however, that should be part of a proper global debate, and we should not pick off individual jurisdictions. If we do that, people will simply find the next jurisdiction that is not honouring transparency. This needs to be a slightly wider debate than just picking on individual circumstances or an individual issue.
Likewise, we need a debate so that there is clarity, for example, about which types of investment many people use—perfectly legitimately and perfectly lawfully—in this country. We have heard of trade unions, pension funds and councils that use unit trusts and that pay their taxes here. At the same time, however, we have to open the envelope on shell companies that are basically just being used to hide who actually owns something, so that we can have that information and ensure that HMRC can get the tax it is due.
I was slightly disappointed that the opening of the debate seemed to focus more on a party political attack than on a measured discussion of how we ensure that the taxes legislated for by this Parliament are collected so that they can be spent by this Parliament. In reading the motion, I thought it was strange that there was no reference to the recent Public Accounts Committee report on the Google taxation deal. Likewise, I was disappointed that there was no reference to the tax transparency Bill—to give it a rather snappier title than its official one—introduced by a former Cabinet Minister, who is now a Labour Back Bencher. Instead, the motion seems like a party political policy document, which means it is not something I feel inclined to support.
This debate is welcome. It is safe to say that all of us recognise that there is more work to be done to capture those revenues that escape all taxation in all jurisdictions, and the UK can also play a role in building the capability of developing nations to crack down on tax avoidance that costs them even more than it costs us. This is ultimately about ensuring that those tax rates that are set here and that we believe are fair are paid. That is the nub of this debate and it must be the focus of future work.
Several hon. Members rose—
Madam Deputy Speaker (Natascha Engel)
Order. Before I call the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), I should say that 11 Members wish to speak and I want to start the wind-ups at about 3.30 pm. If speakers take about eight minutes or less, everybody will get in.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
As the co-founder and chair of the all-party parliamentary group on anti-corruption, I am pleased to have the opportunity to contribute to today’s debate.
The issues under discussion are, rightly, very high on the public agenda, and a great number of my constituents have contacted me to share their concerns. They, like many others, have a strong sense of both the real and the perceived injustice in our system, whereby the vast majority of people in this country play by the same rules and have very little choice about the contribution they make to the public purse. This is not about envy or anger at wealth, whether it be earned or inherited; it is about the fact that those at the top end of the income scale seem to play by an entirely different set of rules. That, understandably, makes people angry, and the Government must take genuine steps to level the playing field and regain the public’s trust.
One of the assertions that has been made in representations to me is that the solutions to the problem are easy. Although I do not necessarily subscribe to that view, I do think that there are a few relatively simple steps that the Government could take to make a significant difference. Those steps would bring about much greater transparency about the ownership of individual and company assets and wealth, and enable a very clear view of who the beneficiaries are of investments and funds, whether they are held here in the UK or in offshore trusts and accounts. It is essential to deal properly not only with aggressive tax avoidance that Parliament never intended to be pursued, but with tax evasion and other criminal activity, such as fraud and corruption. Too often, both issues go hand in hand.
In his statement on the Panama papers on Monday, the Prime Minister acknowledged:
“Under current legislation it is difficult to prosecute a company that assists with tax evasion”.—[Official Report, 11 April 2016; Vol. 608, c. 26.]
He is absolutely correct. In fact, the challenge is understated, and I will briefly explain why. At present, under UK law, in order to hold a company criminally liable, prosecutors must identify an individual sufficiently senior within the organisation—usually at board level—as its “controlling mind” with knowledge of the offence. In an increasingly globalised world where multinational organisations, which have very complicated structures and management arrangements, are the norm, that sets an extremely high bar for prosecutors to cross. By contrast, in the US a company can be held vicariously liable in criminal law for the actions of its employees undertaken in the course of their employment.
The Government seemed to acknowledge that inadequacy in UK law and included proposals in their 2015 manifesto to introduce corporate criminal liability for economic offences. Yet by September 2015 those proposals were quietly dropped, a fact that came to light only in response to a written parliamentary answer. The grounds stated by the Minister who gave that answer were that
“there is little evidence of economic crime going unpunished.”
That was, frankly, a ridiculous assertion, and I hope that the Panama papers have finally put that notion to bed.
It is clearly unacceptable that, here in the UK, prosecutors of economic crime—tax evasion, corruption and fraud—are effectively operating with one hand tied behind their backs. Indeed, David Green, the director of the Serious Fraud Office—the law enforcement agency tasked with prosecuting the most serious and complex economic crimes—has been clear for some time about the inadequacy of our law. As he pointed out in an interview with the Evening Standard in January, the identification principle
“is difficult because inevitably the email trail tends to dry up at middle management and evidentially it is hard to prove.”
I put that point to the Prime Minister on Monday, and I was glad to hear him commit to going away and looking at the proposals. I hope that Ministers are listening carefully to this debate and that those at the Ministry of Justice in particular will report back to him as a matter of urgency. The proposal is to extend the application of the section 7 offence—which I will explain—not only to tax evasion, but to all economic crime.
This is the nub of the issue. As the Prime Minister announced on Monday—indeed, he had announced it previously, but no follow-up action has been taken as yet—the Government intend to legislate so that corporates can be held criminally liable for failing to prevent the facilitation of tax evasion. That is an acceptance that the current corporate liability framework, which applies to all economic crimes, does not work.
The Government propose to do that by creating an offence modelled on section 7 of the Bribery Act 2010, introduced by the last Labour Government, that holds a company liable if it fails to take “adequate steps” to prevent bribery by its employees. In other words, it puts the onus on companies to ensure that proper compliance procedures are in place and holds them criminally liable if they do not do so. That model, which already applies to the offence of bribery, will apply to tax evasion under the Government’s proposals.
Why stop at tax evasion? Why not extend the provision to cover failure to prevent other crimes, such as fraud or money laundering, as promised in the Conservative party’s 2015 manifesto? The director of the Serious Fraud Office has suggested that that is a workable solution. Back in 2013, he highlighted the benefits:
“Such an approach would merely add a criminal sanction to existing obligations; it would assist in the reform of poor corporate culture which contributed to the crash; it would underpin the recovery by encouraging clean and stable markets; it would increase investor confidence, assist in more rapid prosecutions and dovetail well with deferred prosecution agreements.”
Mr Jim Cunningham (Coventry South) (Lab)
My hon. Friend mentioned earlier the situation in America. None of the bankers in this country was held to account for the crash, but a number of those in America were. Does she agree that something should be done about that?
Catherine McKinnell
Absolutely. My hon. Friend raises a very important point. The banks in America have paid significant fines as a result of their behaviour ahead of the crash, but it has been significantly more difficult to ensure that justice is done here. That is the very reason why the issue needs to be addressed. The solution is very simple and workable. The Government already intend to legislate on tax evasion, so it would simply be a case of expanding the number of offences to which the legislation applies.
I strongly urge the Government to look closely at part 2 of schedule 17 to the Crime and Courts Act 2013. It sets out a useful list of offences, covering all manner of fraudulent and corrupt offences—from false accounting and forgery, to fraudulent trading, bribery and money laundering—that the Government’s proposed new offence could equally apply to. The work is all done. The ducks are lined up; the Government just need to implement the change.
The revelations in the Panama papers represent a pivotal moment that the Government must not squander. The Panama papers have not just highlighted issues relating to tax evasion and, indeed, avoidance, but raised even greater questions about illicit financial flows, laundered money and the proceeds of crime, and about how companies exploit tax havens and secretive jurisdictions to facilitate that. Ahead of next month’s anti-corruption summit the Government should send out to the rest of the world the clearest of messages that the UK is serious about tackling economic crime in all of its forms, and its facilitation. I urge the Government to take the opportunity to take this important step to arm our law enforcement agencies and courts with the ability properly to hold companies to account.
James Cartlidge (South Suffolk) (Con)
It is a pleasure to speak in this debate and to follow the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). She made an excellent speech, at the start of which she summarised very well the feeling of public anger about an elite who seem to live by rules different from those that apply to the average member of society. I agree with her.
I want to speak along the same lines as the hon. Member for Dundee East (Stewart Hosie), who has just left the room, and talk about the underlying issues. Why is there such public anger about this issue? Tax avoidance and tax evasion have been going on for hundreds of years. Smuggling was tax evasion. When people filled in their windows to avoid the window tax, that was tax avoidance. Why has there recently been a crescendo of public anger? It cannot be simply because the Panama papers have been in the press. I argue that it is caused by underlying economics and the fissures that emerged in our society after the great credit crunch in 2008.
Mr Anderson
The hon. Gentleman might want to consider the fact that the poor people of the country are lectured constantly by the Government, who keep telling them that we are all in this together. Quite clearly, we are not.
James Cartlidge
We have a record low in the number of workless households. Worklessness is the single biggest cause of poverty. The Government have a very strong record on dealing with poverty, and I will come on to that.
Debbie Abrahams
It is generous of the hon. Gentleman to give way, but I have to challenge him on his last point. There are more people in work who are in poverty than ever before.
James Cartlidge
I simply do not agree with that. I want to start by focusing on the action that has been taken, because I do not think that the anger out there is caused by a lack of action.
James Cartlidge
May I just make one point first, although it is lovely to have so popular a speech and so many interventions? On the action we have taken, as my hon. Friends the Members for Torbay (Kevin Foster) and for Newark (Robert Jenrick) have said, there has been a 50% fall in the corporation tax gap. I am sure that that is the sort of point on which my hon. Friend the Member for Torbay wants to support me.
Kevin Foster
I thank my hon. Friend for giving way. He has already been very generous with interventions. Does he agree that one of the things that really used to anger people was that an office cleaner could be paying a higher rate of tax than a hedge fund manager who worked in the same office? That was happening not in a tax haven, but here in the UK, and it is right that it was tackled.
James Cartlidge
That is an excellent point. It was a fundamental injustice, and we dealt with it. In the latest Budget, we announced a series of measures to tackle tax avoidance on matters such as hybrid mismatch, VAT evasion through online sales and the general anti-abuse rule. We will introduce a new penalty of 60% of tax due in all GAAR cases that are successfully tackled. We have brought in a long list of measures on matters such as serial tax avoidance and offshore avoidance.
On the broader point about the wider economics, I founded a small business in 2004—a mortgage broker specialising in the shared ownership sector—and it was obvious to me in the build-up to 2008 what was coming down the track. I believe that the then Government were trying to tackle inequality through debt. In those days, two potential homebuyers, one of whom was relatively wealthy and well educated, and the other who had less good skills and was less able to command such a salary, could both obtain similar levels of mortgage through the extraordinary measures that existed at the time, such as self-certified and sub-prime mortgages. We all know where that led.
In terms of public debt, the then Government’s main measure to deal with inequality was tax credits, which led to a £30 billion increase in in-work benefits. We paid for that increase in benefit spending on the national overdraft at a time when the country was doing pretty well and the world economy was relatively strong.
Mark Tami (Alyn and Deeside) (Lab)
Will the hon. Gentleman clarify something? He seemed to be saying that less intelligent people should not be allowed to have mortgages. Is that what he was saying?
James Cartlidge
I think that the hon. Gentleman should withdraw that remark. I find that genuinely offensive. What I said was that the rules were very lax, and self-certification meant that someone on a low salary could get a very large mortgage, just like someone who earned a large amount. That is exactly the point that I was making. We all know that that led to a huge crash in 2008.
We have one fundamental question to answer. How, in the current economic context, do we go about trying to deliver a fairer economy, which we all want, where more people share in the growth that we have been able to deliver? We need strong measures to counter tax avoidance. We need the public to feel as though we are all in this together, and that we are all paying our fair share.
Alex Chalk (Cheltenham) (Con)
On the point about everyone paying their way, does my hon. Friend welcome the fact that under this Government, the top 1% of earners are paying 28% of tax, which is a far higher percentage than under the Labour Government? [Interruption.]
James Cartlidge
There are shouts from Labour Members, because I made that point earlier, but it is worth repeating. I am delighted that my hon. Friend made it, because it is so strong.
Callum McCaig
The hon. Gentleman is exceptionally popular today. The point about the richest 1% paying the largest amount of tax has been baffed about a number of times today as though it is some sign of virtue. It is, in fact, a sign of the gross inequality that exists in the country, which needs to be addressed.
James Cartlidge
It is a sign that the rich are paying more tax. How does that make society more unequal?
Let me talk about the measures that we should be pursuing. Yes, we should be cracking down on aggressive tax avoidance, but if we are to help people across society to have a share, we need measures such as the national living wage, which was introduced on 1 April by a Conservative one nation Government. There are those who say that the national living wage is not generous enough. They have obviously not been reading The Guardian, which recently used The Economist’s Big Mac index to prove that the national living wage is more generous than the minimum wage in any other European country except Luxembourg. Only in Luxembourg can someone buy more burgers with the minimum wage than they can with the national living wage in this country. [Interruption.] The hon. Member for Glasgow South (Stewart Malcolm McDonald) asked what this had to do with tax avoidance. The underlying issue is fairness. It is about how we achieve an economy in which there is a widespread sense that everyone has opportunity and the chance to earn a decent wage.
We are delivering that in circumstances far more adverse than those that faced the Government before 2010. We have had a small majority and the first coalition since the second world war. We have had the biggest deficit since the second world war—11.5% of GDP—which we have cut by two thirds. In that context, it is difficult to grow our way out of such a problem and deliver fairness. [Interruption.] The hon. Member for Glasgow South keeps chuntering, but he is not adding a great deal to the debate.
Mr Robin Walker (Worcester) (Con)
My hon. Friend is talking about fairness and about some of the challenges that we faced with the deficit that we inherited. Is he not proud that in those circumstances, not only have we shifted income tax from the lowest paid to the highest paid, but we have helped small businesses? Through the reforms to business rates, we will take many smaller businesses out of business rates altogether while making multinationals pay more.
James Cartlidge
My hon. Friend is absolutely right to mention small businesses. I used to say to people that I ran a small business, but measured by the amount of corporation tax we paid, we were bigger than Google. The fact is that those who run small businesses feel as though they have to comply. They cannot afford expensive lawyers. I agree with the hon. Member for Newcastle upon Tyne North about the sense that there is an elite who live by different rules. We have to deal with that, but we must not run away from the key point—my concluding point—with which my hon. Friend the Financial Secretary also concluded, namely that when we talk about transparency, the transparency that really matters to the public is about our ideals and our beliefs.
What do we really believe? I fundamentally believe in the free market. I believe in capitalism. I believe in individuals getting out there and using their creativity to earn their way in the world. We cannot go back to paying our way through debt and unsustainable public finances. In the circumstances, we need to maximise the tax that we get, but we also need to maximise the investment into the country from companies that we have heard the Labour Front Benchers criticise. Those big professional firms in London are massive employers in this country. We need to expand our exports from the services sector. Basically, we need a positive, free enterprise agenda with a fair sense that companies and individuals are paying their fair share, which does not denigrate the free market but creates sustainable growth to deliver prosperity for all.
Madam Deputy Speaker (Natascha Engel)
Order. I have now to announce the result of a deferred Division on the question relating to employment agencies etc. The Ayes were 307 and the Noes were 241, so the Ayes have it.
[The Division list is published at the end of today’s debates.]
Several hon. Members rose—
Madam Deputy Speaker
Everybody has been speaking for just over 10 minutes, rather than eight minutes, which is the informal guide. We now need to keep to about seven minutes or less, if we want to get everybody in.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
What has been highlighted by the publication of the so-called Panama papers is that we do not have a fair tax system. We are not all in it together, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said so eloquently. Those exposed by this scandal have knowingly exploited tax avoidance measures for their own financial gain. While it is not technically illegal, aggressive tax avoidance has been argued to be against the spirit and intention of the law and of the will of this House. What is really shocking is that Heads of Government are involved, including our own Prime Minister, and that poses fundamental questions about politics and politicians. Once again, it threatens public confidence and trust in politics and politicians. These people are meant to be providing leadership to our citizens, and such involvement calls into question their attitudes and values, as well as their motives for seeking public office.
Dawn Butler (Brent Central) (Lab)
Does my hon. Friend think the comments that have been made—for instance, the right hon. Member for Rutland and Melton (Sir Alan Duncan) said, “If you are not wealthy, you are a low achiever”—have added to the public’s distrust of politicians in this place?
Debbie Abrahams
Such a comment adds to the dissatisfaction with politics and politicians as a whole, as I have said. I thought it was a very insulting statement.
As Members on both sides of the House have already said, the Panama papers provide more evidence of the existence of a powerful and indifferent elite, for whom the accumulation of personal wealth at the expense of their fellow citizens is paramount. The evasion and avoidance of tax means that less money is collected by the Exchequer for our pensioners, disabled people and the vulnerable, as well as for doctors, nurses, teachers and all the other public servants funded by public money. Fundamentally, dodging paying a fair share of tax is contributing to growing inequality in this country and across the world, and tax havens are at the heart of this.
Many Members will have seen Oxfam’s report last month. It says the UK heads the world’s biggest financial secrecy network, which spans its Crown dependencies and overseas territories, and is centred on the City of London. Collectively, it is estimated to account for nearly a quarter of global financial services provided to non-residents within any given jurisdiction. The UK takes prime position out of all jurisdictions across the world in the Tax Justice Network’s financial secrecy index, which is hardly something we should be proud of.
The National Audit Office has estimated that the tax gap is £34 billion a year, which is £1 billion more than in 2009. That is equivalent to a third of the NHS’s national budget. About half of the tax gap is accounted for by tax fraud, which includes tax evasion, criminal activity and the hidden or grey economy. When we consider the cuts proposed in last month’s Budget in relation to the personal independent payment for disabled people, we can see that figure for half of the tax gap would pay the whole annual budget for people on the disability living allowance and PIP.
HMRC’s compliance units, now merged into the fraud investigation service, tackle all aspects of non-compliance. According to the NAO, they do not record how much of the revenue they successfully recover relates to tax evasion, but the NAO estimates that the figure is about 30%. One of the issues that HMRC has to face is the need to balance what it can get in quickly, as low-hanging fruit, from low-risk, low-visibility and lower-gain operations with what it can get in from the high-risk, high-visibility and higher-gain and more complex criminal cases. This is where political leadership comes in. Such leadership has been seriously absent, as I shall mention later.
In spite of the 2013 G8 commitment to a common reporting standard at a global level, the Government have dragged their feet and obfuscated on comprehensive action on such measures. I welcome what the Government have proposed this week, but why—six years later—is that happening now? As I asked in an intervention, I would be grateful to the Financial Secretary if he responded on how much of the £266 million that has been specifically allocated to address tax fraud is to deal with tax evasion.
HMRC now has additional staff, with 670 new staff acting on tax evasion, but why were nearly 6,000 HMRC staff let go between 2013 and 2015? Has the 10% reduction in the number of HMRC staff since 2008 actually affected the collection of the moneys owed because of tax evasion?
As I say, I welcome the additional measures that have been taken, but the absolute outrage at this is clear from my mailbox, which I am sure is the same for other Members. There is palpable public anger. My hon. Friend the Member for Blaydon (Mr Anderson) summed it up perfectly: when people are really struggling, it is shocking to see such absolute abuse by a tiny minority.
We need to look at this in the context of the Government’s other benefits and tax measures. According to the Institute for Fiscal Studies, the regressive Budgets during the past six years have left people on low and middle incomes proportionately worse off. That is a result of the tax and social security measures. Projections for the next five years show that there will be increasing poverty and inequalities. All of that compounds the anger that people are feeling. In such a context, the vast accumulation of wealth by the wealthiest is very shocking. In the past 15 years, those in the top 1% have increased their wealth by 79%, which is £3.7 million per person, while someone in the bottom 10% has seen a rise of just 45%, which is £1,600 per person.
In addition to the Prime Minister’s admission in his statement last week that he had benefited from an investment in an offshore trust based in a tax haven, he intervened in 2013 to oppose the beneficiaries of offshore trusts being named in proposed EU money laundering rules. This is what I mean by the need for political leadership. There has been an absence of political leadership, contrary to what can be deemed fair. I am conscious of the time, so I will not pursue that point. Our proposals will make a real difference, and I hope that Members will look at them.
Dr Phillip Lee (Bracknell) (Con)
Forgive me for not being in the Chamber at the start of the debate, Madam Deputy Speaker. I was not here because I had absolutely no intention of speaking. However, when I listened to the shadow Chancellor’s speech, I found myself understanding his frustrations and understanding the points he made. I guess the problem is that his solution seems to be some sort of socialist utopia, which I do not think will work. I see no example in history of its doing so. I have, however, been forced to consider what a viable solution to this state of affairs might be.
Understandably, as many colleagues have already illustrated ably in their speeches, the general public are angry and frustrated. There is a palpable sense that there has been a breakdown in trust not only in us in this Chamber, but in systems of government, whether it is the tax system or, given the latest dreadful case in Burton, the social work system. Across the board, the public are deeply mistrustful, and increasingly so, as well as deeply cynical. That is understandable, because this is not the only tax scandal. We have had Google and many others, including in relation to corporation tax.
I can understand why the average man and woman in the street is thinking, “If it is good for me, why is it not good for them?” The response should not be hypocrisy and it certainly should not be envy; it should be to ask what we can practically do in the globalised economy we all inhabit. I readily admit that there are failings in our current capitalist model, and I rarely see contributions from people who recognise that or, indeed, who have thought about what might replace it. A notable exception is my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman).
Mr Jim Cunningham
The hon. Gentleman mentioned public anger. Measures against the recession have been going on for about six years. The public are weary of that, just as the public in America are weary of what is happening there. The public feel aggrieved at us because the recession and the measures to deal with it have been too harsh and have gone on for too long. That is one reason why people feel that they bear the biggest part of the burden.
Dr Lee
I thank the hon. Gentleman for his contribution, but the political and philosophical point in it is that he does not believe that reducing the size of the state is necessarily in the interests of the majority. I do, and that is where we diverge, but the hon. Gentleman is right that there is a sense that the middle are carrying the burden and the very rich are not. However, all these things that we have been discussing, about which I have no knowledge—I wish I had money in trusts, offshore or elsewhere—are legal. If something is legal, I believe that it is legitimate. To those who believe that there is a moral component to paying tax, I say, “Get real.”
We probably need to look at the system first. Earlier, I referred to the corporation tax scandal, Google and the like. I know that the Government have made significant progress on reducing corporation tax, but corporation tax is out of date in a globalised economy. Let us just scrap it. We either make a decision not to spend £42 billion, or we move to a form of taxation that is not so easily avoidable, be it employee taxation, a sales tax or a property tax. However, the perpetuation of corporation tax in the world I see is plainly nonsense.
On the point about London property ownership, it is all about avoiding stamp duty. Scrap stamp duty. We should either not spend the £7 billion or find another way of levying the tax. Perhaps people should be taxed for ownership on an ongoing basis. Perhaps council taxes should be increased. I do not know—one can choose. However, corporation tax and stamp duty are clearly not fit for purpose and are easily avoidable.
The other challenge is intergenerational inequity. Significant sums of money are tied up in particular generations. Much has been said about the Prime Minister’s inheritance tax arrangements, which are totally to be expected—anybody with any wealth will mitigate inheritance tax. Who in that position would not? Let us not be hypocrites. The problem is that significant wealth is tied up in a particular generation, who were born post war. How will we facilitate the transfer of that wealth fairly and equitably? Answers on a postcard, please. At the moment, we do not have a system that works, and we need one.
I move on to transparency and the need for simplification. I am attracted to the Scandinavian—Norwegian and Swedish—model of publishing tax and wealth online. I support that; I have absolutely nothing—as far as I am aware—to hide. When I mention that to Conservative colleagues in particular, they worry about privacy. If that is founded—and those arguments are strong—the Prime Minister should not have published his tax returns, and nobody else should do so. It should be all or nothing. Each and every one of us in the Chamber, and indeed those watching in the Public Gallery, has a share in our democracy and in our Government functioning. For that share to be valued, we must all trust that it is legitimate and fair and that everyone is playing by the rules. I am therefore drawn to the Norwegian model, with all the necessary clarifications of legitimate application.
James Cartlidge
Which Norwegian model? There is one to do with the sex trade, there is another to do with negotiations for the referendum—is my hon. Friend talking about the tax one?
Dr Lee
Of course I am talking about the tax system. There have been some concerns about it, to do with extortion and potential for kidnapping the very wealthy. However, if the system is applied with a log in and all the necessary things that need to be put in place, I do not see a problem with it. In the first couple of years, everyone will be interested—twitchy curtains—in what everyone else is earning, but after that, things will settle down.
I have contributed today and I feel strongly about this because if we do not have trust, not just in us but in this establishment and in Government, we cannot achieve much. The challenges that the country faces with the long-term sustainability of health and welfare, particularly pensions, mean that there will be some difficult decisions for whoever is in power. For them to be implemented, we must be trusted. Everything that we do here should be about that. That is why I think that our priorities should be transparency, simplification and scrapping taxes that have long been out of date.
Kwasi Kwarteng (Spelthorne) (Con)
I am grateful to my hon. Friend for his interesting speech. Does he believe that tax transparency will automatically lead to greater trust among the electorate? I feel that the electorate has reached the point where transparency may not necessarily lead to greater trust.
Dr Lee
I agree with my hon. Friend that initially no, it would not. However, in time, once the system beds down, it will. The richest man in Norway, who published all his wealth and income, is now extremely popular because it turns out that he is a great philanthropist. People do not have a problem with others being successful. I certainly do not detect that in the British public. However, I think that there is a suspicion that something underhand is going on in some quarters and, as the Prime Minister says, transparency is the best disinfectant.
We need to act because trust matters. Without trust, we cannot implement what is necessary, whatever the policies are. Anything that the Government can do to encourage the public to trust in the system and in this institution will get my support.
Paul Flynn (Newport West) (Lab)
I am happy to start on a note of consensus with the hon. Member for Bracknell (Dr Lee) and my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) that this is all about trust. The public have reacted so fiercely against recent events because there is a collapse of trust in us. The expenses scandal was a screaming nightmare, and public trust reached rock bottom. It is now subterranean—it has got worse. An examination of our standards in this House is currently taking place, and I urge every hon. Member to contribute to it. Democracy itself—the political system—is under threat.
The country is rightly angry about the unfairness in the system. The other day in the House, we heard the most insulting speech, which will deepen the sense of alienation between the Government and the Opposition. I have been here a long time and I recall an incident in which the person who made that speech revealed to the newspapers how he made some of his money. He bought the council house of an elderly gentleman in London, who I think was a neighbour, on the basis that it would appreciate greatly in value and that the neighbour would not live very long. The agreement that the hon. Member made was that he would give the tenant, who would get a discount for being there for years, the money to buy the house and then the hon. Member would inherit the house. That is Tory morality, and it is morally repugnant. It is not the right to buy, but the right to greed. That man lectured us the other day and tried to castigate those whom he described contemptuously as low achievers.
The difficulty is the gulf between what the Government say and what they do. In March 2010, the Prime Minister made an impassioned speech about how he would clean up lobbying. He knew all about it: he was a lobbyist, and he was going to sort it all out. Where are we today, six years later? The Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 has been passed, life for trade unions and charities is a bit more troublesome, but the big corporate lobbyists do not have to declare who their clients are. No worthwhile reform has happened. The Prime Minister has worried the minnows in the shallows, but the great fat salmon still swim by unhindered.
There is similarly no sincerity in the Government’s determination to tackle the tax havens. I will give the House an interesting example. Lord Blencathra, who sees himself as the spokesman for the Cayman Islands, mocked the Prime Minister, saying that he had no intention of carrying out his threats to deal with tax havens and that they were a “purely political gesture”—those were Lord Blencathra’s words. We have just heard that the First Minister of the Cayman Islands is putting two fingers up to the Prime Minister. They are not going to take any notice.
Let us look at the remarkable history of Lord Blencathra. It is a fascinating story that shows the laxness of our controls in this House. In 2012 I made a complaint about his behaviour. My complaint was taken to a Committee in the other House to examine. It suggested that he was in breach of the parliamentary code of conduct. His activities included lobbying the Chancellor about taxes affecting the Cayman Islands; he also facilitated an all-expenses paid trip to the islands for three prominent Members of this House. The Committee that deals with standards in the Lords held an investigation, and produced a remarkable document. Lord Blencathra explained that he was taking £12,000 a month in payment from the Cayman Islands, but that he was not lobbying Parliament or Government, but Members—or the other way around; he gave some spurious excuse. Quite remarkably, the decision was taken in 2012 that he had not been in breach of any rules of the House.
Two years later, the contract that Lord Blencathra had signed was leaked. It appeared that he had agreed in the contract to
“Promoting the Cayman Islands’ interests in the UK and Europe by liaising with and making representations to UK ministers, the FCO (Foreign and Commonwealth Office), Members of Parliament in the House of Commons and Members of the House of Lords.”
He put up a spirited defence, saying that he may have signed the contract but he had forgotten what he had agreed to, and anyway if he had signed it he had no intention of doing what it said. That is a most egregious breach of the code of conduct of the House—
Madam Deputy Speaker (Natascha Engel)
Order. I have been listening very carefully. The hon. Gentleman knows that he is not to criticise Members of the other House directly or personally. He has been quoting from reports up until now. If he would desist from directly criticising Members of the other House, I would be very grateful.
Paul Flynn
These are not new matters, if I may say so. I have dealt with that matter now.
If the Government fail to act against their own Members, who are not trying to stop the abuses of tax havens but are actually lubricating them, how can we take them seriously? There is some agreement on this, and some pleasure in the House that this situation has happened, because it might expose the corruption that is so endemic and the huge sums disappearing into tax havens. Light has been shone on all that.
I believe that there is a political agenda behind those who have hacked into Mossack Fonseca’s site. We do not know what that agenda is, and it might well be very sinister, but I will repeat my earlier point: one of the curious things here is what is happening with other nations. China has $44 billion in the Cayman Islands and $49 billion in the British Virgin Islands. Those are huge sums of money, but they are only part of the revelations—part is still to come. The reverberations of this pivotal scandal will spread for decades.
I am curious about the Government’s reluctance to act against China in many other ways. We have already done a dreadful and financially disastrous deal over Hinkley Point, which might give us the most expensive electricity in the world, although the deal is now collapsing. The Government seem to want to ingratiate themselves with the Chinese Government. As a result, they are going soft on them in many ways. What is most damaging is that they are not taking sharp action against the undercutting of the steel industry that is affecting so many jobs here.
We have a strange relationship with the Cayman Islands. We provide them with great advantages, by providing their defence for them. The Government’s permissiveness must stop. We will look to the Government to take the tough line that they have promised at the anti-corruption conference. They have not taken it before, so let us see them do it there.
Several hon. Members rose—
Madam Deputy Speaker (Natascha Engel)
Order. I am sorry to have to say that everyone has gone way over my informal speech limit, so I am going to have to impose a formal one, of six minutes per speaker. I hope that people will not take too many interventions.
Maria Caulfield (Lewes) (Con)
I am grateful for the opportunity to speak in this debate. I welcome the measures being taken to tackle tax avoidance, but I feel that the events of the past few days, and this debate in particular, are more about the politics of envy.
As a result of this Government’s measures, the top 1% of earners are paying 28% of income tax, a figure that is likely to grow. In the figures released in the past couple of days by the Leader of the Opposition, the Chancellor and the Prime Minister we can see evidence of the fact that those who earn more, pay more, with the Prime Minister paying nearly £76,000 in income tax—double the amount that I earned as a nurse just months ago. That shows that there is equality in this country—if someone earns more, they pay more.
I accept the point of the hon. Member for Newport West (Paul Flynn) that there is a difference between what is said in this House and what is done here. Opposition Members talk about reducing inequality in taxation but then oppose the measures that have seen 3 million of the lowest paid people in this country taken out of tax altogether. Opposition Members voted against measures, not just in the Budget just gone but in last year’s Budget, that froze fuel duty, VAT and national insurance—which, again, help the lowest paid people in this country. The Labour party introduced the 10p tax rate, which actually hit the lowest paid. We will take no lectures on tax equality.
In the short time that I have, I shall touch on inheritance tax, which seems to be at the front when Opposition Members lead the march of their politics of envy. They assume that inheritance tax is there only to tackle people with high incomes and a lot of assets. My constituency, Lewes, is in the south-east, and I am seeing more and more low-income families whose houses—their family homes—have increased in price, through no fault of their own, so that they now fall into the bracket for inheritance tax, and are having to move out of their family home when that tax is due. They are asset rich but income poor. That means that people who are nurses, like me, or teachers or cleaners, and cannot afford to pay inheritance tax, are having to leave their local areas. That is a particular issue in London and the south-east. For Opposition Members to dismiss that issue and claim that only wealthy people with huge incomes pay inheritance tax is very misleading.
I have a couple of other points to make. The feeling that success is measured only in wealth is absolutely wrong. We do not simply measure success in wealth, but—I think my hon. Friend the Member for South Suffolk (James Cartlidge) made this point earlier—nor should we penalise those who have done well. It would be a sorry day if this country became a place in which, when someone has done well, has set up a successful business, is contributing to their local economy and is employing people, they were penalised, and not only that but frowned upon as well.
This party is trying to help people, whether they are on a low income or have been successful. We are the party of low taxation, whether people are poor or rich. [Interruption.] I see Opposition Members laughing, but I welcome the measures this Government have taken—both the crackdown on illegal tax avoidance and the measures introduced to take the poorest out of taxation altogether. I hope that Opposition Members will desist from the politics of envy and deal with the problem of tax avoidance.
Mr David Anderson (Blaydon) (Lab)
First, let me reply to a few points that have been raised today. I agree that it was utterly wrong that a cleaner was paying more tax than a hedge fund manager—it stank. But thank God that cleaner was getting the national minimum wage, which was resisted by the Conservative party and the Liberal Democrats: £3.60 instead of £1.90—that is the truth. I welcome the fact that low-paid people have been taken out of paying tax, but we must recognise that 1 million people in this country are on zero-hours contracts. That is 2.5% of the workforce who would not have been taxed no matter what the tax threshold was because their pay is so abysmal. Five million public sector workers in this country have seen their tax threshold rise, but they have also had their pay frozen or cut for the last eight years. So we must look at the whole picture, and not just say that the tax threshold has risen and therefore everything is okay. It isn’t true.
The Prime Minister was right to say on Monday that nobody should traduce his dad. That was wrong, and the attack on his mother because she gave him a gift was not right either. It is normal and right that parents want to help their kids—all parents want to do that. In principle, if someone’s dad or mother has expertise in any field, we would expect them to use that knowledge on behalf of their kids. That applies to stockbrokers as much as it does to stockmen, and to bakers as much as to bankers.
The real problem that the leak has exposed is the huge range of opportunities that are open only to the rich, wealthy and powerful in this nation, which proves that we simply are not all in this together. Whichever way this is dressed up, it is clear that those in the know have not only the opportunity or good fortune to make money in the first place, but when they get that money, many more avenues are open to them to allow them to keep their hands on it. That is one reason why eyebrows were raised across the country and in the House when Conservative Members pushed through cuts to income tax from 50% to 45%, and huge rises in the level at which inheritance tax cuts in, because they personally would gain from that. If anyone else did that we would say it was criminal, but those Members stood to gain personally from that measure.
The Prime Minister earns £150,000 a year doing a job that we all understand is really hard. He tops it up with £50,000 a year from renting out his house, and he gets another £40,000 a year from his savings and investments. He then turns round and says to poor people in this country, “I’m sorry, mate, but you’ve got to cough up another £14 a week for your bedroom tax”; or a disabled person who struggles to exist on benefits is told, “You don’t need any more money than a fit person in your position, so you’re going to have to give us back £30 a week.” And what about the anger of 5 million public servants in this country who have been told time and again—this year for the eighth year running—“You must accept a real-terms cut in your living standards”?
Dawn Butler
I had a conversation with a Conservative Member who suggested to me that Members should declare their unearned earnings. Does my hon. Friend know what that means?
Mr Anderson
I haven’t got a clue what unearned earnings means—I have never been in a position to have unearned any earnings. The Minister might be able to answer that when summing up the debate, and I would be interested to find that out.
The Chancellor of the Exchequer is paid £120,000 a year. He also receives £34,000 a year in rental income from his house, because he lives at No. 11 Downing Street, as well as dividend payments of £44,000 a year. But what does he say to nurses, care workers, prison officers, police officers, and, yes, tax collectors? He says they must work harder and longer—
Mr Anderson
Sit down.
The Chancellor says to those people, “You must work harder, and you must accept that you will have to work for longer before you get your pension.” How can he expect steel workers in this country, who are facing the possibility of a life on the dole, to believe that he really understands what they are going through?
The Mayor of London receives £143,000 for doing his day job, a quarter of a million pounds a year for writing for The Daily Telegraph, another quarter of a million in royalties from his books, and more money from his savings. Ordinary people in this country are fed up with carrying the can for the mistakes of the rich in this country—mistakes that led us into the economic crisis that is blighting the daily life of men and women who will never get the chance to save anything in the first place, let alone squirrel it away in the Caribbean, the Virgin Islands or the Channel Islands, where no questions are asked as long as people know the drill.
In two weeks the Trade Union Bill will come back to this House, and the most tightly regulated body in the country will face even more restrictions under the sad reality of what we have been told is the sunshine of transparency. The hon. Member for Lewes (Maria Caulfield) spoke about trade unions not paying corporation tax, but I dare bet that them not doing that involved fully audited accounts that have been signed off, not hidden away. Why do we not subject financial markets, regulators and dealers to the same tight regulations that this Government intend to impose on trade unions, whose only job is to look after the interests of ordinary men and women in this country? Why do we not put the same effort into chasing tax dodgers as we do into hounding so-called benefit cheats—a process that traduces innocent people and sees their families rubbished? People are sanctioned without money for weeks on end, and at the end of that someone says, “Oh, we made a mistake.” What happened in the meantime? Why on earth do the Government think that people in this country are angry?
A lot has been said about the politics of envy, but this is about the politics of fairness. Make no mistake—this week we are seeing the end of the farce of “We’re all in this together”. Hon. Members should read today’s motion carefully because it is a roadmap, a loophole and a get-out for Conservative Members to say to people in this country, “We’ve heard your anger and frustration. We hear what you say. Let’s work together and find a way out of this.” Instead, they have shut the door and want to carry on the dodgy deals. No matter what they say, yet again there is one law for the rich and one for the poor, and the people of this country will not stand for it.
Robert Jenrick (Newark) (Con)
Like the hon. Member for Newport West (Paul Flynn) I thought that the most important thing to come out of the Panama papers was the revelation of criminality and corruption here and abroad. I hope that HMRC and authorities around the world will take note and bring prosecutions, and that that will lead to further crackdowns on corruption, including in places such as China, where I would not like to be one of the individuals named in the Panama papers. It is right that the authorities should take action.
Like my hon. Friend the Member for Bracknell (Dr Lee), I believe that this issue cuts to a question of trust, but the antidote to mistrust is not moralising or phoney outrage; it is credible, practical action that makes a difference and which the public can believe in. That is what the Government have been doing. Just because some Members of the House or the media have not followed this issue; just because the right hon. Member for Islington North (Jeremy Corbyn) did not say anything about this matter during 13 years of the Labour Government; just because he sat on the British Overseas Territories Bill Committee and did not raise any issues of tax evasion; and just because he referred to the Labour Government taking control of the Turks and Caicos Islands as “medieval” and “extremely undemocratic”; and just because others have taken their eye off the ball, it does not mean that the Prime Minister or Government have done the same.
Let me say a few words about the key things that the Government have done, many of which have already been mentioned. Raising the issue of tax evasion at the G8 summit and creating the world’s first public beneficial register of ownership was a major historic development. Many campaigned against it, actually for perfectly legitimate reasons, such as that it is a massive invasion of the privacy of law-abiding people. However, it is a huge step forward in the campaign against tax avoidance and evasion. It is happening in this country first, and we should be proud of that and not make it seem as if it is something that we take for granted. This Government were the first to do that, and other major economies around the world, like the United States, have not done that.
In one month the all-party group on corporate governance, which I help to run, will bring Chief Justice Leo Strine, who runs the Delaware Supreme Court, to Parliament. If Members care about this issue, and if this is not just phoney outrage, they should come to that event and question him about why Delaware—the state in which 90% of the major corporations of the United States are registered—has not yet followed the lead of this Prime Minister. We should encourage him to do the same.
The general anti-avoidance law was another major and controversial measure taken by the previous coalition Government. It was opposed by the Labour party. At the time, the Labour party spokesman said it was inadvisable to take this action until after the conclusion of the base erosion and profit shifting process, so it would not have happened under a Labour Government. It happened under a Conservative and Liberal Democrat Government.
Mr Robin Walker
My hon. Friend is making a very interesting point. May I add another initiative which, to be fair, was an initiative of the previous Labour Government? The extractive industries transparency initiative was brought in by Labour, but it did not sign the UK up to it. This initiative is very important for raising tax revenue not just in the UK but around the world, and for making sure there is proper transparency as to where the extractive industries pay their money. Many of us, cross-party, campaigned for that. The Business, Innovation and Skills Committee said it was a mistake for the previous Government not to have signed up to it. This Government have, quite rightly, taken us into it.
Robert Jenrick
The point my hon. Friend makes is that practical and credible policies are the way to tackle this issue. We have seen results, contrary to some of the accusations we have heard today. According to the latest HMRC figures, the tax gap was higher in 2009-10 than it is today. The tax gap for corporations, large and small, was 40% to 50% higher. The tax gap for stamp duty was 40% higher under the previous Labour Government than it is today. Loopholes have been closed and practical measures are being brought in. By no means is this the end of the story—of course there is more to do—but I am pleased to say that the UK Government are genuinely leading the world on this issue. I want to see them do a lot more.
Lowering taxes is another important element in encouraging good behaviour, both by individuals and corporations. Corporation tax at 17%, versus 30% in the United States, will be a major step forward. Only the other day, President Obama was forced to take action against Pfizer because of its motivation to move to lower tax jurisdictions because of the 30% corporation tax in the United States.
There is more to do. I do not stand here for one minute claiming that this is mission accomplished, but we have to be clear that a lot of good steps have been taken. It is bad for business to have tax havens operating as they do today. Let me give Members a brief example from a previous career I had working as a managing director of an art business. Many valuable works of art are held in Panama and other such places. One dispute, over the ownership of a painting that had probably been seized by the Nazis, lasted for four years. The likely owners claimed that they did not know anything about the painting or who owned it. That has been revealed, thanks to the Panama papers, to be an outright lie. The Nahmad brothers, global collectors of art, were revealed to be the owners. I suspect that that painting will finally be going back to its legitimate owner in the near future. Tax havens operating as they do today is bad for individuals and bad for business, particularly in such disputes.
I want to close by commenting on tax privacy, an issue raised both in the press, by Polly Toynbee and others, and by my hon. Friend the Member for Bracknell. I think this would be a seriously detrimental step for the privacy of individuals in this country and all over the world. The last major occasion I can think of when this occurred in a large developed economy was during the civil war in the United States. To try to encourage compliance when income tax was introduced, tax returns were posted on the walls of courthouses across the United States. It was one of the most unpopular policies in the history of the United States and it did not increase compliance. The Secretary of the Treasury, Andrew Mellon, said:
“It was utterly useless from a Treasury perspective, just the gratification of idle curiosity and filling of newspaper space.”
Setting aside Prime Ministers and politicians, let us defend the right of individuals in this country to have privacy in their business and financial affairs. The legitimate, law-abiding citizens of this country should not be the losers from some individuals taking part in criminal acts.
Stewart Malcolm McDonald (Glasgow South) (SNP)
Well, it is some scandal, is it not, that has been leaked to us? Criminals, politicians and dictators have been hiding billions and billions of pounds in offshore accounts under the names of companies that do not actually exist. In fact, it is the scale and nature of the scandal that causes me to be so depressed about the nature of the debate we have had both in the Chamber this afternoon and in the run-up to this afternoon. It has taken us almost two weeks to actually start debating the issue. I did not quite buy everything that the hon. Member for Newark (Robert Jenrick) had to say, but I thought he at least gave one of the most incisive speeches among this afternoon’s contributions.
It is obvious that this issue is such a major hot potato for the two main parties in this Chamber: so hot that they seem to prefer to kick it back and forward—“You’re worse than us.” “We’re better than you.” Meanwhile, the public want us to debate the issues raised by the leaks. Forget the Twitter hashtags. Forget what has been written in the newspapers. Forget the sneering snobbery on one side and the braying mobs on the other. Let us actually deal with the issue. The issue is not about class; we can have an academic discussion about class later on. This is about criminality. That is what the motion seeks to address and what I think all of us in the Chamber really want to address.
It strikes me that there are two key ways in which we can tackle the problem: through the resources made available to the public agencies and through changes to legislation. As a lot of Members have mentioned, we can also look at beefing up international co-operation. I genuinely welcome the measures the Prime Minister announced in his statement to the House on Monday. The cross-agency taskforce and the funding that will come with it, and the other measures relating to legislation, are extremely important and to be welcomed. I would like the Minister, in summing up, to say whether Interpol will have a role to play. I have not heard anything about that at all. In fact, no public statement has been made on this issue on Interpol’s website. I would therefore like to know whether Interpol will be invited to the corruption summit the Prime Minister will be hosting.
I am concerned about the pattern that forms when big scandals break, whether it is this one, the Volkswagen scandal or the Google scandal. This is a very British pattern—a pattern of only ever responding to events. I had hoped to hear more about how the Government intend to beef up the resources of HMRC to deal with this, because it is clearly not working. We have had some back and forth about more money, fewer staff and more staff, and fewer centres. It is clearly not working, so somebody really needs to step back and look at the problem within the context that actually exists. I had also hoped to hear more about how we would be trying to recoup some of the tax we are owed. I go back to the point made earlier: this is about criminality. I can only hope that some of this will be getting talked about in the Paris talks today, at which, I understand, the UK Government are represented.
The Government made a lot of their ambition to secure economic security for Britain. They are absolutely right to mention that. The threats we face in terms of financial security are not to be taken lightly. In my view, they should be up there with the threats we face from terrorist organisations. There are different consequences, but both are absolutely serious. Just as the Prime Minister announced the recruitment of additional staff for agencies such as MI5 in the aftermath of attacks on our doorstep in Europe, he should seek to do the exact same thing for the public agencies dealing with criminal finance.
I do not have much time to go into the detail, but I would like the Government to reflect more about what happens in Australia with unexplained wealth orders. I shall not throw my full weight and support behind them, because I am hesitant about what they mean for the presumption of innocence and the right to silence. We should, however, look at the issue. Such orders are also being used successfully in Italy against gangs such as the Mafia.
The public require us to act and to stop the politicking that we have seen in some contributions today. This is a big challenge, and what we need to deal with it are the fine minds of this House—there are some, such as the right hon. Member for Barking (Dame Margaret Hodge), the former Chair of the Public Accounts Committee—coming together on a cross-party or perhaps even a cross-parliamentary basis. We could tap in to some of the devolved Parliaments as well, and start to take the issue seriously. We should ignore all those who operate under a cloud of anonymity, who tell us, “You wouldn’t understand it; it is too difficult”. That just allows them to carry on doing what has got us to this point. Failure to act will keep on feeding the cancerous way in which our politics is conducted. That will be to the detriment of us all.
Sammy Wilson (East Antrim) (DUP)
This debate is important for all the reasons that have been mentioned: public frustration at those who can earn money and not pay tax while the rest of the people have to pay it; the stretching of public finances at a time of austerity and the need to ensure that legitimate taxes are paid; and, of course, the concern that the ability to evade taxes and to hide sources of income leads to all kinds of corruption, including, as we have found in Northern Ireland, the ability to finance terrorism.
Let me put it on the record that however much the Leader of the Opposition and the shadow Chancellor beat their chests about the evasion of taxes, they showed friendship to and favoured the very people who used all kinds of fiscal fraud to finance murder in Northern Ireland for 30 years—and we have never heard an apology from them about it.
As the hon. Member for Glasgow South (Stewart Malcolm McDonald) said, we must approach this matter with a sense of maturity rather than a “politics of envy” approach. I know that some Opposition Members have denied it, but some contributions have demonstrated such an approach. Equally, on the Government side, there must be a willingness to listen to the genuine concerns and deal with the issues raised.
I do not believe that we can deal with this matter simply by demanding that everybody produce and publish their tax returns. Someone who is going to evade tax is hardly going to put that down on their tax return in any case. Where does this stop? If the issue is all about how the creation of policy has been influenced, what about top civil servants, who are involved in policy making? What about the heads of many public sector organisations, who are also involved in it? What of the press? We cannot have the critics of what happens in this House avoiding the publication of their own tax returns. As I say, where does it stop?
In any case, the answer does not lie in publishing tax returns. I believe that three important points have been identified. I shall not go through all of them, but the first one is that we must know who is responsible for the income of a certain business or company and be able to trace it, because the issues of accessibility and transparency are important. How do we achieve that? I think that the Government have already gone some way along the road.
Strangely enough, Labour Members believe that we should use Orders in Council against independent territories—a form of colonialism that I would have thought they would not support. [Interruption.] Opposition Members may say that is nonsense, but either we regard these places as independent territories that make their own laws, and seek to co-operate with and persuade them to do the right thing, or we impose the laws on them, which as far as I am concerned is a form of colonialism. I do not think it would work. I think the Government are right to seek to persuade those territories to come along and see the implications of allowing people to hide their identities in some of the businesses based in them.
The second important point is about tax avoidance. Many Members have talked about it today, but millions of people in the United Kingdom engage in tax avoidance and think nothing of it, because it is within the law. When a tax code can run to 22,000-plus pages, with all the allowances and other provisions in it, of course people are going to find loopholes. Unfortunately, as the hon. Member for Blaydon (Mr Anderson) said, the people best able to do that are people who have huge resources at their disposal. Many taxpayers do not have such resources, so a simpler tax system would help. Adam Smith, whose words have been cited in the Chamber today, laid down the canons of taxation, which he said were fairness, simplicity and the ability to collect taxes economically. Those are some of the principles that we should keep in mind.
Thirdly, there is the issue of enforceability. I have reservations about the direction in which the Government are going. Of course we should find efficiencies in public services, but when I see how many tax offices are closing, especially in border towns in Northern Ireland, where hundreds of years’ worth of experience in dealing with some of the worst money launderers in the United Kingdom is being lost, I ask myself whether we are really serious about taking on the tax evaders. Even when we spot them, they are not always prosecuted. HSBC has been identified as one bank that enabled many people to evade taxes—I believe that there were 7,000, and that more than 1,100 were in the United Kingdom—but there has been only one prosecution so far. It is not just a case of having the resources to enforce. It is a case of making sure that when people are caught, examples are made of them and they are punished accordingly, so that the message that goes out is, “This will not be tolerated.”
I believe that if we do not work to achieve greater transparency, an efficient tax system that does not leave loopholes and a proper method of enforcement, what is happening now will go on and on.
Mark Durkan (Foyle) (SDLP)
I want to take up the point made by the hon. Member for East Antrim (Sammy Wilson) about enforcement. He mentioned the closure of tax offices in Northern Ireland. I know that a tax office in my constituency is due to be closed in the next few years, which means the loss of work that it was doing on matters including the recovery of overseas taxes.
However, I do not want to join those who have used the debate to make points about the Government’s general tax policy or taxation record, because I think that the public would expect us to be debating the enormous implications of the Panama papers. I do not wish to conflate questions about the syndicated global grand larceny that is revealed in those papers with questions about personal taxation involving the Prime Minister or, indeed, anyone else. I would prefer us to concentrate—in this and other debates that will take place between now and the global anti-corruption summit that the Prime Minister will host—on the sort of issues that we would have been discussing anyway.
We have heard much from Conservative Members about the Government’s record of changing tax thresholds and about what is happening to the taxes of the wealthier people in the country, and we have heard the views of Opposition Members as well, but let us now address some of the global implications of the Panama papers. When we consider the larceny that is represented in those papers and the people who have avoided or evaded taxes, we should bear it in mind that this is not a victimless duplicity or deceit, because other people have been left to pay those taxes. Other firms are having to pay taxes in order to meet the needs of exchequers worldwide, not least those in developing countries. Other people are missing out on services or salaries, because the tax is not there to maintain services at the levels necessary to improve the development of infrastructure or to pay salaries. People are losing out. These are not the politics of envy, but the politics of reality and social justice. These are the politics that say that, in the 21st century, we should live in a world where we are all in it together. That is why fairness in taxation worldwide is so important.
Mike Kane (Wythenshawe and Sale East) (Lab)
The hon. Gentleman is, as usual, making a powerful speech. Christian Aid noted recently that an oil company in Uganda had approached Mossack Fonseca in an attempt to avoid paying £400 million worth of taxes there. That is equivalent to the budget of the entire Ugandan healthcare service. Does the hon. Gentleman agree that the avoidance of such taxes is not a victimless crime?
Mark Durkan
Absolutely. That example amplifies the point that I was making. I want to acknowledge the work of not just Christian Aid, but Oxfam, ActionAid, Global Witness and Transparency International. Those organisations have worked with many Members of Parliament for years to make us more aware of these issues. Not least, I want to acknowledge the work of the all-party parliamentary group on anti-corruption, including the contributions of the hon. Members for Newcastle upon Tyne North (Catherine McKinnell) and for Amber Valley (Nigel Mills). The hon. Member for Amber Valley cannot be with us today, but he has taken a keen interest in many of the issues that have now surfaced in an even more dramatic form in the Panama papers.
It would have been interesting to hear from the Minister whether the Government were actually shocked by the Panama papers. We know about all the attention and fuss about the Prime Minister, but did the Government regard the other issues as par for the course? Did they know they were going on? Were they therefore informing their various measures against corruption, or did the revelations tell them that the issue was bigger than they were aware of? Given that Mossack Fonseca is not the biggest firm in Panama, what worries have they about what else is going on there?
We heard the Prime Minister say earlier, “The agencies that deal with this are independent and we cannot deal with them.” Someone somewhere should be asking them, “Is this what you knew? Has this shocked you? Are you doing anything more in response?” Journalists are being asked to provide the information. Is anyone else being pursued for the information? Is anyone having their door knocked or collar felt? It seems not. That seems odd.
As the Prime Minister is hosting a global anti-corruption summit, he should be showing himself to be much more active in response to the papers. Now that he has perhaps in his own mind dealt with the issues that arose about himself, he can address the wider issues. Perhaps if he had addressed the wider issues last week, people would have thought that that was misdirection and that he was trying to avoid the issue on his part. However, he needs to address those issues now if the summit is to be worth while.
It is particularly disappointing to hear the Prime Minister being the spin doctor for the Crown territories and their role. I cannot believe they are not a tax haven. He is trying to say that, because they have moved a bit following what he said in 2013 about what he was going to compel and ask them to do, that is enough. There has been progress. There are indications of possible progress, but he should not be lessening the pressure on the Crown dependencies in the lead-up to the summit. He should be ratcheting up the pressure on them and everyone else. He should be doing so by showing a stronger response here in relation to our own agencies.
In the debate, there has been much discussion by Members about the difference between avoidance and evasion. Let us be clear. A syndicated effort has gone into the artifice that is involved in some of these shells, shams, scams and schemes. We know that the architecture of avoidance is fitted with the engineering of evasion, so there is not that much of a difference. We need stronger global action.
That is why I again ask the Government to consider their attitude to some global measures. In the past, when they said they wanted to lead against corruption and were putting taxation central stage at the UN summit and beyond, they also set their face against any notion of a financial transaction tax. If there were a financial transaction tax at a global level, it would at least ensure that there was more marking of what was going on in all these different schemes and moves, where companies appear to trade with shadow versions of themselves and shells are registered in different places. The very existence of a uniform global transaction tax would bring some tracking and tracing to some of those schemes and bring more transparency, which people say is needed.
The Panama papers represent discovering what has been done in terms of the recovery of tax. The Government seem to have a pretty pedestrian attitude to that at this stage. They seem to be more concerned about the media flap last week about the Prime Minister being embroiled in some of this. They think that that is over, but they seem to be taking a fairly pedestrian approach to an issue that is scandalising many still and is burdening people in poor countries.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I thank the many organisations that have been involved in supporting the inquiry on the issue of the Panama papers. They include Oxfam, Tax Justice Network, Global Witness, Transparency International and Christian Aid. They have played an invaluable role. I also thank all Members for their contributions to the debate. They include the hon. Members for Dundee East (Stewart Hosie), for Torbay (Kevin Foster), for South Suffolk (James Cartlidge), for Newark (Robert Jenrick), for East Antrim (Sammy Wilson) and for Glasgow South (Stewart Malcolm McDonald), and my hon. Friends the Members for Blaydon (Mr Anderson), for Newcastle upon Tyne North (Catherine McKinnell) and for Oldham East and Saddleworth (Debbie Abrahams), all of whom have raised important issues.
We have heard about tax being not a donation but a legal requirement, and about the need to take the non-payment of tax incredibly seriously. We have also heard that the work of the Public Accounts Committee is vital in this area. My hon. Friend the Member for Newcastle upon Tyne North said that this was a pivotal moment that the Government must not squander. We have also heard about the challenges relating to prosecutions owing to the complexity of the structures of multinational companies, and about the need to extend the law further to tackle the wider issues of economic crime.
This is a moment that we must seize. The public and the media have not always been engaged with this issue, but they can now see the scale of the injustice not only in the UK but across the world. The Panama papers have lifted the lid, and there is no going back. These revelations have provided concrete examples of what we have all suspected; they have exposed details of the worst excesses of our international financial system.
At the heart of the issue is the matter of public trust and confidence in the fairness of our tax system. People rightly say, “I pay my fair share towards the cost of vital public services. I can’t dodge or negotiate with the tax authorities, so why should wealthy individuals and companies get away with not paying their fair share?” Despite all the claims that we have heard from the Government, people do not think that they have done enough to tackle the problem, either here or in the overseas territories and Crown dependencies for which we have responsibility.
This is a global issue and it needs a global response. Today’s debate reflects the widespread public view that individuals and companies should pay their fair share, and we are calling on the Government to implement Labour’s tax transparency enforcement programme. Labour has a strong record on tax evasion and avoidance. The measures that we introduced while we were in power will still raise 10 times as much over the coming years as those introduced by the Tories in the last Parliament. That is the conclusion of analysis carried out by the Financial Times.
Over the past week, the Government have had the chance to step up and take a strong lead. It is disappointing that they have failed to do so. The Government’s taskforce and other measures represent a missed opportunity to end the secrecy ahead of next month’s anti-corruption summit. In 2013, the Prime Minister wrote to overseas territories and Crown dependencies calling for greater transparency and for fully resourced and properly managed centralised registries. He wrote again on this subject. We have had written questions and oral questions, but we can now see that it is not the Government’s intention to push the issue of public registers further. Instead, the information that has been agreed on will be available only to UK law enforcement and tax authorities.
The beneficial ownership agreement with the Cayman Islands allows only designated Cayman Islands officials directly to obtain and provide to the UK details of beneficial ownership of companies incorporated in the Cayman Islands. Furthermore, the UK’s Swiss tax agreement announced in 2011 has raised just a fraction of the promised £5.3 billion. So the Government are very good at spin, but their record does not stand up to scrutiny. What is particularly stark about the Panama revelations is that more than half the companies named in the papers were registered in UK-governed tax havens. That is something of which we should be ashamed. We believe that the UK should be leading the global campaign to fight against aggressive tax avoidance and evasion; instead, we are lagging behind.
There are a number of other vital issues. We have talked about the need for an independent inquiry. While there have been moves across the world, including an important meeting in Paris today organised by the Joint International Tax Shelter Information & Collaboration network, our officials have not yet managed to make it to Hitchin to undertake their own inquiries into the Panama papers.
The issue is effectively one of theft. Every year, about $200 billion of untaxed income is taken out of poor countries by international corporations that are avoiding paying tax. Speed is another issue, as was highlighted by the chair of the JITSIC network, who emphasised today the need for immediate information exchange. Far from seeing the Government heed that call, they continue to slow down, not accelerate, their action to tackle tax avoidance.
We have a lot more to do. We need greater parliamentary scrutiny, a specialised tax enforcement unit, greater public sector transparency, including having companies that want to bid for public sector contracts make public their beneficial owners. We need greater co-operation with our European partners, country-by-country reporting and protection for whistleblowers. The issue also highlights the importance of our membership of the European Union in tackling complex problems that do not stop at national borders. We have called on the Government to take much more action and fast. We have called for stricter minimum standards for Crown dependencies and overseas territories, but the lack of stronger international standards was cited by the Financial Secretary today as a reason for not pushing for public registers of beneficial owners.
Let me add one more point in conclusion. On Monday, the right hon. Member for Rutland and Melton (Sir Alan Duncan) said that the Opposition should
“snap out of their synthetic indignation”
and that we risk having a House
“stuffed full of low achievers who hate enterprise”.—[Official Report, 11 April 2016; Vol. 608, c. 34.]
Sadly, the Financial Secretary seemed to back him up. This is not about begrudging entrepreneurs and those who succeed in business their success; it is about basic fairness in our society. This is an issue on which the rich and poor who believe in fairness are united. When we shirk our responsibility to crack down on tax havens, we let down our country and our constituents. That is why I urge the House to join us in voting in support of Labour’s proposed measures today.
The Economic Secretary to the Treasury (Harriett Baldwin)
I am again delighted to be given the opportunity to outline the action that the Government are proud to have taken to tackle tax evasion, tax avoidance and aggressive tax planning. No Government have done more to ensure that people and companies pay the taxes they owe and to crack down on those who do not play by the rules. That is why, from day one, we have introduced measure after measure to close the tax loopholes we inherited, to increase the punishment for those who break the law, to drive forward tax transparency and ensure that the UK is at the forefront of new global standards, to ensure that international tax rules are fit for the 21st century, to reform the regimes in overseas territories and Crown dependencies, and to increase HMRC’s powers to collect the money that pays for the public services on which we all depend.
Yes, individuals and companies should pay their fair share of tax, which is exactly what this Government have been ensuring that they do. The activities in Panama are already the subject of intensive HMRC investigation. It is imperative that the leaked data are examined closely, which is why we are setting up and providing funding for an operationally independent, cross-agency taskforce to sift through the millions of pages of data. Where there is evidence of any wrongdoing, rapid action will be taken. The Government also attach great importance to giving HMRC the resources to protect our tax base, which is why at last year’s summer Budget we announced an extra £800 million to fund additional work to tackle evasion and non-compliance by 2020-21. That will enable HMRC to recover a cumulative £7.2 billion in tax over the next five years.
The Opposition motion talks about beneficial ownership. Thanks to this Government’s action, our register of company beneficial ownership will go live in June. We are the first major country to have such a list in place, free for anyone to access. In addition, we are consulting on requiring foreign companies that own property or bid on public contracts in England to provide beneficial ownership information, too.
We heard from a range of speakers today. The hon. Member for Hayes and Harlington (John McDonnell) has a new-found interest in a topic he asked no questions on during 13 years of Labour government, but he has managed over the past week to confirm his party as anti-aspiration and anti-wealth-creation, and as wanting to create an atmosphere of envy. We heard from the hon. Member for Dundee East (Stewart Hosie), who was much more welcoming of the measures the Government have introduced, and he also attacked Labour’s lack of action in 13 years. We heard a very informed speech from my hon. Friend the Member for Torbay (Kevin Foster), a member of the Public Accounts Committee, who shared with us his expertise in that area. We also heard an interesting speech from the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who is chair and founder of the all-party group on anti-corruption. She will be aware of the proposed new offences that we are introducing in terms of prosecuting companies that fail to prevent evasion. She will want to participate in that consultation and in the process of legislation on that offence.
My hon. Friend the Member for South Suffolk (James Cartlidge) brought in his expertise in business, highlighting the steps the Government have taken to help low earners. The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) used some fairly dodgy statistics, but I am pleased to confirm that the amount of £1.8 billion has been made available for compliance and enforcement, which is an increase in resources, over the last two Parliaments. She raised questions about trusts, asking whether the arrangements relating to the beneficial ownership of companies should be extended to trusts. There are many legitimate reasons for creating a trust and the vast majority of trusts across the UK are used for legitimate purposes. Setting up a blanket requirement would distract action from the areas of most concern, such as shell companies.
My hon. Friend the Member for Bracknell (Dr Lee) made an interesting speech, in which he recommended abolishing corporation tax completely. The Government are not ready to do that at this point in time. The hon. Member for Newport West (Paul Flynn) made an angry speech that included rather a lot of personal attacks on individual Conservative politicians. My hon. Friend the Member for Lewes (Maria Caulfield) made an excellent speech highlighting the Labour party’s politics of envy and our steps to make our income tax system even more progressive.
The hon. Member for Blaydon (Mr Anderson) spoke up for the low-paid, but I detected a strong streak of the politics of envy for anyone else in his speech. My hon. Friend the Member for Newark (Robert Jenrick) made a good speech about the credible action against corruption and criminality that this Government have taken. He gave an excellent and incisive summary of what we have done, drawing on his knowledge of the art world. We heard an interesting speech from the hon. Member for Glasgow South (Stewart Malcolm McDonald), and I can confirm that HMRC does work closely with Interpol and is indeed finalising the list for the anti-corruption summit as we speak. We heard helpful contributions from Members from Northern Ireland, who welcomed some of the steps the Government have taken.
In conclusion, this country is leading the way on tackling tax evasion and tax avoidance, bringing in billions from offshore tax evaders since 2010 through the actions we have taken. We have made more than 40 changes to tax law in the last Parliament alone, and in this Parliament more than 25 have already been announced for legislation.
Although Labour has suddenly decided to give lectures on tax, I remind the House that when we came into office there were foreign nationals not paying capital gains tax when selling UK property, private equity managers paying lower rates of tax than their cleaners, and rich homebuyers getting away without paying stamp duty by owning homes through companies. We have taken action to fix that. We have increased the amount paid in income tax by the top 1% from £31 billion 10 years ago to £47 billion now. We have made our taxes more internationally competitive. We have cut income tax for tens of millions of hard-working people, rewarded aspiration and made the tax system better, fairer and more efficient. That is our record. We are proud of it, and I urge the House to vote against today’s Opposition motion.