Tax Gaps 2019-20

Baroness Bennett of Manor Castle Excerpts

Thursday 7th April 2022 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

It is a pleasure to follow the noble Lord, Lord Davies of Brixton, and to join the small and distinguished pre-Recess group in this debate. I thank the noble Lord, Lord Sikka, for securing our chance to discuss this important issue.

Since it is this time of the Session, I want to be optimistic. I will look at how we can see some optimistic political directions, in the context of the tax gap. I begin by quoting Oliver Bullough’s Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals:

“It will only be by imposing rational regulations and laws across the entire British archipelago, by enforcing them robustly and remorselessly and by investigating and exposing failures to do so that Brits appalled by the country’s butlering industry can force it to seek a different way to earn a living. And they should not be afraid to do so. Thanks to the combined dislocations of COVID and Brexit, Britain is questioning its position in the world in ways that may not be repeated for a generation.”


The noble Lord, Lord Leigh of Hurley, referred to the way in which this report looks very much at trends, rather than hard facts. There is clearly a political trend of great concern about these issues and of calling for action on them.

For those who have not read the book, there is another cause for optimism in it: the situation that we are in now, with the massive inequality, massive tax dodging and massive tax gap, has come forth only in the last few decades—it has not been sitting there through centuries of tradition. There has been big inequality and we had a trend known as the “great levelling” that went in a different direction between the 1950s and early 1970s, but different directions have been taken in the past and can be in the future.

Only by adopting a long-term consensus across the political spectrum to have an economy that meets the needs of people, while acknowledging that we have to live within the resources of our share of this one fragile and much-abused planet and are not competing with other nations to grab a fast buck by putting out the welcome sign to the dodgy, the shady, the straight-out corrupt and those who service them—the “enablers”, in the jargon—can we tackle the official tax gap, as measured by HMRC but highly inadequately, as the noble Lord, Lord Sikka, outlined. As he also said, the enablers have escaped being investigated, let alone prosecuted, for tax dodging and other issues.

It is worth picking up the point of the noble Lord, Lord Davies, that we are talking of subjective things here. We may get all these really tight numbers and percentages but, as HMRC itself says, the tax gap is one between what

“should, in theory, be paid … and what is actually paid”—

so we are talking about theory.

It should be interesting to read this debate alongside that on a Motion of the noble Lord, Lord Browne of Ladyton, agreed in this Room on 3 February, which took note of

“the impact on global democratic norms and values from autocrats, kleptocrats and populists and the case for a coordinated response by the United Kingdom and her allies.”—[Official Report, 3/2/22; col. GC 289.]

One could very easily add “tax dodgers” to that and acknowledge that, again, there is huge public concern about the security implications of this.

That is the dark side of it; there is also the grey side—the shady side, you might say. This is where we come to the theory of who should be paying tax. There is probably an even bigger group: the rootless multinational parasites which suck profits from communities around the globe and—where they are allowed to get away with it, such as in the UK—pay little or nothing back. They rely on the infrastructure paid for by all, such as the roads, policing, schools and hospitals. They rely on the natural resources of these islands, which should be there for the use—or non-use in the case of fossil fuels—of all, and the labour of the workers produced and reproduced by society. Yet they do not pay their way.

You could call this the Shell-Amazon problem for shorthand, given that just this week we learned that for the fourth year in a row Shell has paid no tax on North Sea oil and gas extraction. Picking up the point about international comparisons, I say that in Norway last year Shell paid $4.5 billion in tax, production entitlements and fees in a very set of similar circumstances, and Amazon paid £3.8 million in corporation tax on £1.8 billion in sales. I am sure the Government will say they have a strategy for that. I have just been looking at their report from last year Tackling Profit Diversion by Multi-national Companies, which proudly proclaims that in five years £5 billion has been clawed back. That is less than double what Norway got from Shell in one year.

I have talked “big picture”. What, aside from electing a Green Government who actually want to tackle the official and unofficial tax gaps, could be practically done? Here are a couple of practical suggestions for the Minister. First, we could establish Her Majesty’s Revenue & Customs as an independent agency of government, answerable to Parliament. That would remove the power of politicians to strike secret deals with corporations and individuals, as the noble Lord, Lord Sikka, referred to. Secondly, we could entrench the anti-avoidance principle in UK tax law and oblige banks to provide information about companies automatically to HMRC. We used to hear a lot of talk about the anti-avoidance principle, and we really need to revive that.

What is happening instead? As was highlighted in the Spring Statement, HMRC is investing £161 million to ensure that businesses pay what they owe—although we seem to have a lot of focus on cab drivers and hairdressers, which is not what we are talking about here. The DWP is also spending £510 million—roughly four times as much—to prevent fraud and error in the benefits system and to collect more debt from people on universal credit. The DWP estimates that it can claw back £3.15 billion from benefit claimants. HMRC estimates that it can get £3 billion from putting additional resources into chasing tax dodgers.

Back in 2015, I was saying that we have to stop making the poor, the disabled and the young pay for the greed and fraud of the bankers. Yet, visibly, it is those groups that the Government are continuing to chase for the pennies they have not got, while failing to act against the people who are truly causing massive damage to our society.