Developing Countries: Impact of Multinational Companies’ Financial Practices and UK Tax Policies

Lord Marland Excerpts

Tuesday 11th December 2012 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)]

My Lords, I, too, extend my thanks to the right reverend Prelate for initiating this debate. As all noble Lords have said, the debate is at a very timely moment where this is very much in public debate. It is important that this whole debate started from the moral standpoint, because that is the key to where we can go. With moral leadership, we can make great progress.

I would just take issue on a couple of points that the right reverend Prelate and the noble Lord, Lord Shipley, raised. We do not recognise the figure of $160 billion; in fact, we are thinking that if it was a man called James Henry who produced that figure, perhaps he should come and help us out in the Treasury. The right reverend Prelate also made the point that some rich and some poor countries are getting poorer, but in fact a lot of poor countries are getting richer. I have seen that first-hand in Mozambique and in Angola—and in Vietnam, which has been getting much richer even if it is getting a bit poorer at the moment. It is not just the picture as he painted it.

We must not forget that multinational companies are nation builders. I look at places such as the Middle East, where great British oil companies have established themselves and helped to create a country—as they have in Nigeria—and helped to create the wealth of that country in an incredibly responsible way. I do not particularly want to be quoted on the statistics, but look at the work of Shell in Nigeria and how few people it employs there from the UK in that entire company, and how it has developed skills in the country. This must not just be a debate where we attack the multinational companies, a great many of which act morally and properly and contribute greatly to the future of a country. Yet I completely recognise, as do this Government, that tax justice is an important issue.

A number of noble Lords raised the IDC report, which was extremely measured and well thought-out. The right reverend Prelate asked about country-by-country transparency and the Global Forum on Transparency and Exchange is one of the vehicles that can be used for that. The improved exchange of tax information across countries would obviously help and will be key to the co-operation required in tackling this substantial issue, which quite rightly takes favour with noble Lords. I shall pick up on a number of his points later. However, on the subject of a Treasury Minister meeting with Members of your Lordships’ House, I am not a Treasury Minister myself so I am delighted to volunteer a Treasury Minister to do that immediately, and I think that it should happen many more times than once. The right reverend Prelate’s final point about global civil society gathering together information is key. It is about corporate citizenship. I am delighted to hear the church speak in that area.

As has already been referenced, my noble friend Lord Brooke of Sutton Mandeville said in two minutes what most of us would take two hours to say. He asked what support DfID has given. DfID has given £20 million a year to support tax regimes throughout the world. The total is about £100 million over a five-year period. For example, it is £11 million in Sierra Leone, £8 million in Tanzania and £8 million in Rwanda. In Rwanda, because of that intervention tax take has gone up by six times, which is a significant issue. Some £21 million has gone into Afghanistan. In 2004 the tax take there was 4% and now it has gone up to 11%. It is working, it is direct action. The report by the IDC said that DfID does not have the capability within its department to understand the tax issues that are going on—many of us do not have the capability for understanding them—but with the support of the Revenue DfID has acknowledged that and is building up its capacity.

The noble Lord, Lord Browne of Ladyton, talks about the G8 and the leadership through that, and he talks about a champion. I think that there is no greater champion than our own Prime Minister, who is championing this cause and profiling it highly, and has made it a major point as the G8 chair. I am grateful that he mentioned the Bribery Act. It is one of the great selling tools for British businesses in the work that I do abroad as the Prime Minister’s trade envoy. British companies are transparent and have to be by law. This is admired by countries across the world as they seek to become transparent. In January I will go to Libya, where transparency is the main focus of everything that they do now. With that law we have shown great international leadership. I give credit to the previous Governments, which I do quite often, for bringing in that law. It has been a bedrock for the way forward for British companies.

The noble Lord, Lord Shipley, knows as much as anyone about this. He was at Procter & Gamble and part of an international business. The right reverend Prelate the Bishop of Hereford echoes many of the words that are spoken by his right reverend colleague. I am delighted to see that they are in unison in showing this moral leadership.

The noble Lord, Lord Haskel, identifies a number of points. He was educated not at Eton but at a northern fee-paying school, Sedbergh, which I thought gave a decent education. Certainly my school did. I was at Shrewsbury. Like most of the country, we did not go to Eton but we could add up. A lot of my schoolmates and no doubt his went into the big four companies. In the days when we were growing up, they were where the money was to be made if you became an accountant. It is important that accountants act within the law, and I am sure that the big four do. There are penalties if they do not. They provide an incredibly important global service and are in an unrivalled position to have a perspective on that and advise government.

I am grateful to the noble Lord, Lord McKenzie of Luton, for his anecdotal comments about Vietnam. These points bring everything into focus and to hear them at first hand is always interesting. What a great pleasure it is to sit opposite the noble Baroness, Lady Royall. Along with the couple of points that she made, we all look with interest to the anti-corruption review that her party is carrying out. I shall make a small political point, as she did, which is that a lot of this stuff went on under the previous Government and that, “We’re all in this together”—this is a nice opportunity to say that. Indeed, this debate shows that. It is a massive global issue.

From the UK’s point of view, we have a lot of things in place. We have the disclosure of tax avoidance schemes and the anti-abuse rules, in relation to which Mr Aaronson QC has come up with a lot of advice. We have taken a very proactive stance against Switzerland, and not before time, as many would say. We announced in the Autumn Statement that we are going very hard for British citizens who have deliberately avoided paying tax in this country. Indeed, our country is leading the way on how the tax take should be made. It is through leadership that Britain has always been so strong. From the global point of view, we announced on 4 November that we are going to co-operate with the Germans, the French and all other G20 members. We are contributing financially to support this global endeavour. The controlled foreign companies reform prevents companies unreasonably moving into lower tax regimes, which should help in this country. As I said earlier, we have the global forum on transparency and exchange of information for tax purposes, and we are very much part of the G8 financial action task force. As chair of that, we will be showing significant leadership.

I want to go back to the fundamental point that the Government are showing leadership. I congratulate my right honourable friends the Prime Minister and the Chancellor for taking up this issue. I am sure we would all do it. This is not a political point because everyone is behind this issue, and I thank noble Lords for their kind remarks about what we are doing. The Government are showing leadership, as they must, but I do not believe it is for the Government to talk about morals. It is for the church and Christian bodies to talk about morals, and I am therefore delighted that this debate was initiated by the bastion of moral guidance in my religion. I congratulate the right reverend Prelate on taking such a lead on this issue and on an excellent and purposeful debate.