Budget Resolutions and Economic Situation

Debate between Caroline Flint and Kevin Foster

Wednesday 16th March 2016 Commons Chamber

[Caroline Flint (Don Valley) (Lab)]

What does a Chancellor do when his long-term economic plan is not working? We found out today: he delivers up a spoonful of sugar to help the medicine go down. In reality, growth is down, the debt target has been missed and borrowing is up—and, as for the surplus, who knows? I am not convinced by this Budget that the Chancellor will achieve his £10 billion surplus by 2019-20.

The Chancellor tried to dazzle us with the prospect of more infrastructure projects, when less than 10% of his present list of such developments is being built. It makes me wonder just how many energy projects, roads, rail lines and houses will be built and where the money will come from. It might be a bit innovative, but I would like the Chancellor to come to the House, at least once a year, to take us through the projects on the stocks and report on whether they will be delivered on time and on budget. That would be a worthwhile discussion to have at least once a year, because we all agree, across the House, that infrastructure, if done well, can make a major contribution to the success of our economy, including through the skills that follow on from it.

In January, I asked the Minister of State, Department for Transport, the hon. Member for Scarborough and Whitby (Mr Goodwill), when a decision would be made on the trans-Pennine link—a road tunnel that would create faster east-west travelling between south Yorkshire and Manchester. I am pleased that the Chancellor today announced a feasibility study, but it is fair to question how long that will take. Partners in my region, Doncaster and south Yorkshire, need to know whether there will be a guarantee of funding, a clear timetable and a swift process to confirm the exact route. That will give them the certainty to work together and plan for the future. We all know that confidence is key when private sector investment falls, as it has done—manufacturing and construction are still delivering less today than before the financial crisis. The economy is still out of balance.

I worry, too, that the stealth taxes on people’s insurance policies are just another way in which families doing the right thing are being penalised for the Chancellor’s failure to meet his own targets and economic plan.

I would like to offer the Chancellor one suggestion to improve the country’s tax take. I am talking about the light or no taxes paid by those who manipulate international tax arrangements to their own advantage but to the detriment of the countries in which they trade. Some of his suggestions are interesting—I will look at them in more detail—and could prove helpful in tackling that problem, but we do not know how a company as large as Google, with thousands of UK staff and five offices and global revenues of $74 billion in 2015, paid just £130 million in tax after a six-year investigation into what it should have paid over 10 years. The problem is not confined to Google. There is Facebook, AstraZeneca, Vodafone, British American Tobacco—the list of corporate giants with light UK tax bills goes on and on.

We might not like it, but those companies have not acted illegally. They are planning their taxes to pay less by exploiting different tax rules in different counties. Yesterday, I brought in the Multinational Enterprises (Financial Transparency) Bill—a catchy title—to ensure that important information about large companies’ revenues and tax planning is published. I am delighted to have the support of every member of the Public Accounts Committee, be they SNP, Labour, Conservative or Liberal Democrat. I have the support of more than 50 MPs from across the parties, as well as that of Fair Tax Mark, the Tax Justice Network, Oxfam, CAFOD, Action Aid and Christian Aid.

The problem that every country is struggling with, but which no one country can solve, is profit shifting by multinationals. A company doing a lot of business in the USA or the UK can transfer profits to a low-tax country, such as Ireland, where corporation tax is 12.5%, or Bermuda, where it is zero. In 2010, the total company profits reported as coming from Bermuda were 1,643% of the size of the country’s GDP. If multinationals trading in the UK pay much lower corporation taxes by transferring profits, that gives them an advantage over domestic businesses that pay what is due here. My Bill has been nicknamed the Google Bill, but it is not about Google, and it is not even about online businesses alone, because we know that the problem extends to coffee chains, oil companies, drinks companies and pharmaceuticals. What they all have in common is that they are multinationals.

For many years, development organisations felt that it was an injustice if a firm was mining or producing oil in Africa but paying no tax there. Charities say that developing countries lose more in potential revenue each year owing to corporate tax dodging than the amount given to them annually in overseas aid by all richer countries. That made me stop and think about how much more we could do to enable developing countries to prosper and be more self-sufficient through measures such as my Bill. Aid is vital to poorer nations, but just as important is a hand-up rather than a hand-out. This will not happen unless we force companies to come clean.

I welcome and support the Government’s action in legislating to ensure that reporting on taxes, revenues and employment, including in other countries, is shared with our own Revenue and Customs. That will affect about 400 companies here in the UK. The Chancellor has said that he supports that information being published, which my Bill would provide for, so why wait for everyone in the G20 to do that? The data are not commercially sensitive; we are not asking for companies’ whole tax returns or future business plans. The principle is that publishing means that everyone gets the chance to see the bigger picture. I believe that the tide is turning against secrecy, and organisations such as Fair Tax Mark encourage companies to declare that they have paid their taxes and do not use tax havens. I want every large company to meet that test.

[Kevin Foster (Torbay) (Con)]

As a fellow member of the Public Accounts Committee, I am delighted to support the right hon. Lady’s Bill. Does she agree that there is a role for our Government, given that many tax havens fly the British flag and subscribe to the same “Her Majesty” as Her Majesty’s Revenue and Customs?

[Caroline Flint]

I thank the hon. Gentleman for his intervention and for his support for my Bill as a colleague on the Public Accounts Committee. He is absolutely right; that is shameful and not acceptable. This practice has been going on for too long, and I hope that we can find different ways of attacking it on a cross-party basis. One way is the proposal in my Bill to clamp down on such activity.

I wrote to the Chancellor last week, but clearly he did not see my letter seeking his support for my proposal to go into the Budget. However, he should not worry, as it is not too late. A new Finance Bill will follow the Budget debate, and with cross-party support behind me I will seek to amend it. Alternatively, the Government could adopt the measures that I have outlined. I believe they are in the interests of social justice, fairness and good business. Publication can make a difference and put pressure on companies to play fair and pay up.

Finally, I want to say something about education. I am worried at what I believe is an ill-thought-out plan to force every school to become an academy under the guise of more autonomy for schools. I support tackling failing schools, I supported local community schools in becoming community-run trusts, and I have supported academies in my constituency, but I do not believe this is a policy for local autonomy.

I met parents and teachers at Pennine View School in Conisbrough, a wonderful special school with a good Ofsted rating. It is a community school with committed staff and governors. Why should that school, which does a good job, be forced to become an academy? I do not think the argument is there. What is more sinister is the insistence by regional school inspectors that single academies, often local community schools, must be forced into multi-academy trusts. When academies began, schools in the same pyramid would join as a group and support each other; the model was collaborative. Today, however, academy chains are becoming huge businesses, with headteachers receiving instructions from a head office 100 miles away.

I was recently at Auckley School, where I met a governor, Keith Scott, who has served that school for 14 years. It is a good school; why should it be forced into a chain? It is well run and well regarded. As more data are collected, we find that previously well regarded academy trusts have failed, and in a number of cases, the test of improved standards and outcomes is not being met. Some have suggested that the growth of academy chains has not helped.

I have never shirked from challenging those whose provision of education is not good enough, and I still will not. As an MP, though, I want to know how this new idea will ensure the accountability that there has to be for whoever is providing education for our children, and how it will help children to achieve. It is a dogmatic policy. Just as there were those who refused to acknowledge when local education authorities were not always doing a good job, the same thing applies now. Two wrongs do not make a right. I hope that the Government will look again at this experiment, as it has been called, and ensure that we do not harm the future education of our children.