Ian Swales
Main Page: Ian Swales (Liberal Democrat - Redcar)Department Debates - View all Ian Swales's debates with the HM Treasury
(11 years, 3 months ago)
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Mr Gauke
I am grateful to my hon. Friend for putting that point on the record. He will be aware of the efforts made by the Government to strengthen our capacity in that respect, and I am sure his remarks will be noted carefully by my ministerial colleagues in the Department for Business, Innovation and Skills.
I turn to tax avoidance and evasion. Although we believe in a competitive tax landscape, we are not by any means a soft touch on tax. As a Government, we have made very clear our expectations of businesses. We expect businesses to pay tax in accordance with the law, but we also want to ensure that aggressive, artificial tax avoidance is dealt with, which brings me to the second key theme of the Bill.
The vast majority of individuals and businesses pay their fair share of tax, but the Bill takes determined action against those who choose not to do so, by introducing a further package of measures to tackle tax avoidance.
Ian Swales (Redcar) (LD)
When people engage in practices where assets are bought and sold for different prices—for example, film rights were headlined in a recent case—it is actually tax evasion, and prosecution should follow. Does the Minister agree with that analysis?
Mr Gauke
Where there is an element of dishonesty, it is clearly tax evasion, and Her Majesty’s Revenue and Customs has indeed been successful in bringing prosecutions in a number of high-profile cases. Under this Government we have seen the number of prosecutions by HMRC increase fivefold, which is a reflection of how seriously we consider tax evasion and of our determination to assist HMRC in addressing it as much as possible.
Ian Swales (Redcar) (LD)
I welcome most measures in this Bill, particularly the rise in the personal tax threshold to £9,440 this year. That is already cutting in half the tax bill of people on the minimum wage, and next year the threshold will rise to £10,000 and 24 million people will receive a tax cut. That is the No. 1 Liberal Democrat priority, and I am delighted to see that it is being delivered by this Government.
We hear a lot about millionaire tax cuts, but I think that when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) decided to raise taxes in the last month of his failing Government, he knew that it would be the gift that kept on giving in terms of headlines. Unfortunately, however, it was not the gift that kept on giving to Her Majesty’s Revenue and Customs, as figures have shown. Millionaires will pay £381,000 more in income tax and national insurance in five years of this Government than they paid in the last five years of the previous Government.
Julie Hilling (Bolton West) (Lab)
What does the hon. Gentleman think about HMRC saying that the tax would actually have brought in £1 billion? The problem is that we had it only for the first year when people prepaid it, and this year when people will postpone it, but we did not bother to watch what happened in that middle year.
Ian Swales
HMRC is well aware that people with those sorts of income levels have many choices about what they do with their money, and we have seen the effects of that. Once tax gets to 50%, people do other things, and that is what we have seen.
I wish to mention one or two relevant changes to pensions. I welcome the cut in allowances for pension savings. It is incredible that under the previous Government someone was allowed to save £255,000 a year for their pension and receive full tax relief worth £127,000. This Government have cut tax relief to £50,000, which will fall to £40,000, so the taxpayer cost of £127,000 will be £18,000 by next year—a huge change that will bring in, I believe, £4 billion. I also welcome the steps for 1992 Equitable Life annuitants. I have a number of constituents who felt very unfairly treated, and although the £5,000 they will receive does not go all the way to meeting their needs, it at least recognises the trauma they have experienced. I welcome the increase in the allowance for draw-down pensioners. That was also painful for some who took a big cut in their income when the Government Actuary changed the figures.
The Minister mentioned tax avoidance. I will not replay the debate in this Chamber from last January, but it had lots of content and I am pleased to see the Government acting on some of that. However, there is still a lot more to do on the internet and international businesses, and I look forward to seeing further measures. I also feel that the lines between avoidance and evasion are getting more blurred. Cases such as that of the bogus charity that was headlined in The Times only a couple of months ago are not just about avoidance and when HMRC should take people to court to get the tax—people need to end up in jail as a result of such schemes. It is high time that we were clear about schemes that are entirely fictitious, and things such as assets changing hands at different prices at the same time need to be viewed as criminal activity.
The Labour party has spoken a lot about the growth measures—or lack of them—in the Budget, and both I and the hon. Member for Cities of London and Westminster (Mark Field), who is no longer in his place, would like to see an export-boom recovery. One problem is that under the previous Government manufacturing went from 22% to 11% of our economy. That amazing fall means there are a lot fewer makers in the march—we all want to see the march of the makers. I welcome the steps the Government are taking to do something about that, including the regional growth fund, which has given out large amounts, mostly to manufacturing industry; the fact that the Government will act on the Heseltine review, which made many of the same points, such as the need to support regions such as mine in the Tees valley; and the tenfold increase in capital allowances from £25,000 to £250,000, which will encourage manufacturers to invest, which we badly need. The new employment allowance of £2,000 will help the smallest businesses to make a bit more money and encourage them to take on more people.
There are measures on infrastructure investment. The Budget plans contain a map of the country featuring the different infrastructure projects, so it is wrong to say that infrastructure investment is not happening. I welcome the Government’s targeting of strategic sectors that they have identified for success, such as automobiles and life sciences. A lot of work is being done on that, and along with the investment in supply chains, which seeks to get our supply chains back onshore after so many disappeared, it is already paying dividends—car parts manufacturers are coming back to the UK and so on. I believe that many of those steps are in the right direction.
On carbon taxes, all hon. Members understand the need to take care of climate change, but we must also ensure that our energy-intensive industries remain competitive. The Government are taking steps in that direction, but there is a lot more to do. We have increases in the climate change levy and the carbon price floor, both of which perhaps send the message to our heavier industry that it is not welcome here. We need to take steps to ensure that that is not the case.
The hon. Member for Cities of London and Westminster said that we do not want retrospective changes. One specific example is the climate change levy for combined heat and power organisations such as Sembcorp in my constituency, which invested millions in new equipment on the expectation that the regime would remain until 2027. The regime changed retrospectively and, all of a sudden, its investment case was gone. I have written to the Minister on that, and it needs considering specifically. It is no good expecting people to invest in green technology if we do not make the ground rules clear. If people start to believe that the ground rules will move, they will not invest.
I welcome the announcement in the Budget on the two areas that will benefit from carbon capture and storage. I would liked to have seen Teesside on the list, but I recognise that the decision was based on energy. I welcome the Government’s recent heat strategy, which specifically mentions the need for carbon capture and storage for industry. I hope that future Budgets cater for a project on Teesside to do exactly that. Teesside has an excellent business case for the Government if they take into account enhanced oil recovery and the revenue that will flow from petroleum revenue taxes as a result of the CCS projects. I hope the Treasury considers that carefully in future.
Generally, the Government are taking many steps towards encouraging green investment. I hope only that they can take the one extra step, which is to ensure that a lot of the investment that goes into new energy projects results in UK manufacturing and supply. Too much of the manufacturing has so far been offshore, including for a wind farm going up right outside my house in Redcar.
I have listened carefully to the speeches today, including those from Opposition Members. I understand some of their points but am confused by others. The hon. Member for Islwyn (Chris Evans), in one of his characteristically passionate speeches, mentioned VAT. I believe that this is the wrong time to introduce a measure that gives the most to those who spend the most—the richest get the most out of cuts in VAT. Most people at the lower end of the scale do not spend much on standard rate VAT items, so the measure he proposed would involve borrowing £12 billion to, for example, cut the price of a Ferrari by £4,000. This is the wrong time to do that. There are much better ways to spend £12 billion if that is what he wants to borrow.
Under the previous Government, three gaps widened: the gap between rich and poor, the gap between north and south, and the gap between the north and the south of the region where I live. That is a shameful record. I and the Liberal Democrats want a stronger economy and a fairer society, and I support the Budget.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
I should like to address the comments of the hon. Member for Redcar (Ian Swales) about capital allowances. I, too, welcome the Government’s capital allowance proposals, but they are a U-turn—the Government reduced pre-2010 Labour levels of capital allowances to 25% of what they were, but have since returned them to pre-2010 levels.
The north-east leads the way on exports. Government Members have said that the export recovery has not occurred, but the north-east already had very good exports from industry. Compared with other regions in the country, the north-east leads the way. For example, Cleveland Potash at Boulby in my constituency today announced a £300 million investment, which will create 120 new jobs and secure more than 1,000 existing jobs in the potash pit. That occurs on the one-year anniversary of the recommencement of iron and steel production at the Redcar blast furnace at the Teesside Cast Products site, which is under the joint operation of Sahaviriya Steel Industries and Tata. That is a victory for the campaign of local people on Teesside, of which I was proud to be a part, as was the hon. Member for Redcar. Success is now synonymous with Teesside, and people in Teesside are proud to say that they are a success. We look forward to a future built upon the industrial development and manufacturing legacy of the 13 years under Labour.
Organisations such as the North East of England Process Industry Cluster were created in conjunction with the Labour Government and One North East. NEPIC centred on the north-east’s assets, particularly in the chemical and steel industries, and the heritage of shipbuilding—TAG Energy uses the Haverton Hill site, formerly a shipyard and dock, to produce monopile construction units for the offshore wind turbine market.
By contrast, the words “double dip”, “double debt” and “credit rating downgrade” are synonymous with the Prime Minister, the Chancellor and the Government. Since the autumn statement, growth, which was estimated to be poor, has halved in just over three months from 1.2% to 0.6%. The accrual of debt by this downgraded Chancellor from 2010 to 2015 is more than the total debt accrued by the previous Labour Government in their entire 13 years. Despite that and the overwhelming evidence, the Chancellor affirmed in his Budget that borrowing is falling. Public borrowing shows that the Government books were in the red to the tune of £121 billion last year. They are forecast to improve only marginally to £120.9 billion in 2012-13.
Tax revenues have fallen £5.1 billion short of the predictions in the autumn statement, despite the hailed employment figures. That is largely owing to the fact that, despite increases in nominal employment, productivity has fallen massively. That is matched by a huge fall in tax take. The irony is that we have always been told that the private sector is more efficient. Supposedly, we have 1 million more private sector workers, and gross domestic product is falling, so more people are doing less. That is a re-unbalancing of the economy if I ever saw one.
Similarly, the increase in the number of employed women is largely due to the fact that fewer women between the ages of 60 and 64 have retired. Women are working to a later age because state old age pensions have changed. That has undoubtedly helped employment figures. The Chancellor was able to massage his borrowing down only by persuading the OBR that Government Departments would spend £3.4 billion less than their allocated budgets this year. Only three months after the previous forecast, the budget deficit is expected to be an average £11 billion worse throughout the five-year forecast period. In cash terms, the problem lies with poor tax receipts, which have been hit by disappointing revenues this year, and vastly reduced forecasts for nominal gross domestic product, which is now at one seventh of the original growth expectations set in June 2010.
On the other hand, Robert Chote and the OBR assume the economy has the scope for rapid catch-up growth of 2.3% of national income even after April 2018. But with so much slack in the economy to be assumed for the rest of this decade, it is strange that the OBR does not show inflation falling below its target level of 2% at any time. Are Ministers concerned by that? If the OBR admitted this to be the case, it could no longer live within the Chancellor’s demands and would probably have to admit not £9 billion, but something more in the region of £17 billion a year of tax rises or spending cuts, as a result of earlier Government inaction.
The nation’s debt and the Government’s borrowing are completely dependent upon the Chancellor’s “monetary activism”. However, minutes of the Bank of England’s latest meeting show that the new Governor, Mark Carney, failed to win any support for his case for further quantitative easing. Most of the MPC look worried about the potential damage of a run on sterling, and the effectiveness in any case of further asset purchases as banks and households look to clear debts. However, without further QE, the Chancellor cannot keep his borrowing rates down, as the borrowing at low rates to buy gilts in order to borrow at low rates is the true reason for low interest rates, not the heavily front-ended, growth-strangling cuts we have witnessed to date.
Furthermore, big businesses continual deleveraging will not be turned into sudden investment with further corporation tax cuts. Corporation tax cuts will just aid business to further deleverage debt. It has never been so cheap for the state to borrow, and the Chancellor is neither using this cheap accessible capital to pump-prime the economy nor persuading banks and big business to free up their substantial reserves and corporate funds. The Chancellor’s language and tone set the mood music for the economy, and his constant message of national deleveraging has sent everyone into a deleveraging frenzy. Banks are hoarding excess capital and large corporate companies are simultaneously paying out large dividends to shareholders while sitting on excess capital, with the explicit purpose of holding it in case they need to make future debt clearances rather than investments.
Ian Swales
The hon. Gentleman is making a powerful case. Does he not welcome the Infrastructure (Financial Assistance) Act 2012, which uses low Government interest rates to underwrite £50 billion of infrastructure spending?
Tom Blenkinsop
As the hon. Gentleman knows, certain programmes, such as the Government’s rebuilding schools programme—which has been delayed for a year in one school in Guisborough in my constituency—are dependent on PFI arrangements, which raise capital from the bond market. We had a slightly different arrangement for the Building Schools for the Future project. We now have the sudden realisation that the cancellation of such capital projects, in the first two years of this Government, has sent the economy into a spiral.
The real issue for me, especially in the north-east, is connectivity. We want to develop our economic base, but rail electrification will go only as far as York. What we want is access to capital funds to get electrification done as soon as possible. I hope that that will yield some results, but it is already too late. We have already had nigh on three years with little investment, and now the situation is desperate. Capital is still very slow in coming from Whitehall, exacerbated by the lack of agencies in the region to assist businesses, even given the regional growth fund. How we solve that, given that those agencies have been dismantled, I do not know, but we need to do more.
Added to the Chancellor’s mood music and the deleveraging frenzy, we have a Government delaying the payment of bills to hide borrowing. The delaying of these payments—largely to big businesses—leads to deleveraging big businesses, with vast sums under the corporate mattress, using smaller businesses as an extra line of credit. Current unpaid bills to small and medium-sized enterprises total £36.4 billion, with some small businesses writing off bills to the tune of £10,000. An illustration of this is the 7% year-on-year contraction in construction, which has its lowest growth rate since 1987.
The Chancellor is aware of this issue. In the north-east, according to the regional Federation of Small Businesses, banks cannot apparently give a regional figure for the take-up of the funding for lending scheme for business. We need to hold banks to account for that. The north-east has 134,000 businesses—I mentioned two of the larger ones earlier. A thousand employ more than 50 people, while 96,000 are sole traders, who by and large do not pay corporation tax. This April, real-time information will be introduced, but apparently only 25% of FSB members know what RTI is. I suggest to Ministers that small businesses should be given a proper period of slack on the introduction of RTI. The Government have allowed six months, but extending this to 12 months might be necessary so that businesses can adapt properly. However, the closure of local HMRC tax inquiry offices in the north-east—a region with a large sole trader community—means that we will be far more exposed to transitional difficulties.
The sole traders, market town traders and small businesses on our high streets will not only have RTI to contend with. The national minimum wage is lower now, in real terms, than it was in 2004. It was raised by 1.9% today, but the consumer prices index is at 2.8%, so it is a real-terms cut. Small businesses and their customers in the north-east will see working tax credit freezes from this April, meaning those working under 30 hours will lose between £303 and £428. That is £303 to £428 less to spend. Benefits being capped at 1% rather than CPI will mean that small businesses’ customers lose up to £150. That is £150 less to spend. The bedroom tax—a housing benefit cut of between 14% and 24%—will mean they lose between £624 and £1,144. That is £624 to £1,144 less to spend. The benefit cap, to be rolled out nationally from September, will mean small businesses’ customers will lose on average £4,836, which is an average of £93 a week. That is £93 less per week for their customers to spend. The council tax benefit cut—the Tories’ new poll tax—will mean that 700,000 people in employment will lose between £250 to £600 each, meaning small businesses’ regular customers will have between £250 and £600 less to spend. This will no doubt compound an already obvious demand crisis.
After the mummy tax and the granny tax, the end of the pregnancy grant, and VAT being increased again by a Tory Government, there will be obvious consequences for sole traders and small business in general. How do the Government think these reductions in the disposable income of small businesses’ most frequent and dependable customers will resolve this country’s economic growth problems? In the autumn statement, private consumption was expected to be a crucial driver of Britain’s growth in the years ahead. The OBR expected growth in 2012 to come from private consumption. Indeed, it revised it up to 37.5% of all growth after last year’s omnishambles Budget. Of course, it did not happen. The promised—albeit simultaneously derided—consumer growth was not delivered. Page 100 of the Red Book assumes a jump of 0.7%, from 0.5% this year to 1.2% next year, in household consumption, even though it simultaneously predicts unemployment increasing in 2013-14 and the claimant count increasing from 1.58 million to 1.63 million in the same period. The Chancellor also failed to inform the nation that 400,000 disabled people on severe or enhanced disabled benefits will now have to pay council tax for the first time ever.
In conjunction with what I illustrated earlier, these are demand-sapping policies on a monumental scale. Are they being taken because the Government fear that their other policies will bring about inflation? Are they attacking demand deliberately in order to control inflation? We know that Mark Carney, the new Governor of the Bank of England, will be constrained by a 2% inflation target. However, we also know that inflation crept up to between 2.5% and 3%—around the 2.8% mark between January and February—this year. That inflation rise, at the same time as pay freezes, local real-terms pay cuts and benefits reductions, has seen families subject to an unprecedented cost of living crisis. According to uSwitch, Britons collectively owe £637 million to energy firms— £159 million more than last year’s projections. Some 20% of all energy customers surveyed are in debt, a figure that has risen by 14% since last year.
In conclusion, with falling disposal income levels and increasing household outgoings, the temporary retail or consumer growth we are currently seeing is very small. As well as being derided in the first place by Government Members as the wrong type of growth, given the Government’s other policies, it is unsustainable in the medium and long term. The Budget is fundamentally unfair: it does not address growth, it doubles the debt and it does not deal with the deficit—it actually makes it worse. It fails on all the original criteria set out by the Chancellor in June 2010.
Stewart Hosie
The problem with that question is that it comes straight from the Labour party central office briefing note. The Scottish Government quite rightly re-profiled revenue spending into capital to make up for the capital cuts from the UK Government. We did that because we recognised that—I think there is unanimity on this—direct capital investment had a 1:1 impact multiplier in terms of GDP growth. That is extremely important, because the problem is that we do not have enough economic growth, so the Scottish Government were right to re-profile revenue into capital spending.
As I said earlier, the 4:1 ratio of cuts to tax rises under this Government, plus their smoke-and-mirrors approach to direct capital investment, shows just where their priorities lie, and it is not with people, jobs or growth. We can all probably agree that plan A has failed, and with the UK still teetering on the brink of a triple-dip recession the Chancellor seems to want to continue to do the impossible, which is to cut his way to growth. It has not worked and it will not work; and this Finance Bill will not help.
The Bill does, however, make provision for personal tax changes, and the increase in the basic rate threshold to £9,440 is welcome. The Government are right to try to take as many people as possible on low and modest incomes out of tax, and the savings from that increase, added to the £326 of savings from basic rate taxpayers, whose personal allowance has risen from £6,475 in 2010 to £8,105 last year, makes sense, but that is only part of the personal tax story. As I have said, the Government are also foolishly ploughing on with a tax cut for millionaires, which at their own conservative estimate will cost £500 million.
It is those in the middle who are really being squeezed. The tax relief in terms of the 40% band used to be £37,400, but that was decreased to £34,300 last year, so for every £326 changed up in the Budget, at 20p in the pound, people have had to shell out an extra £560 at the 40p rate, before this year’s changes. So although the change in this year’s basic threshold is welcome, we must recognise that the Chancellor pulled the same trick in the middle again by pre-announcing another cut to the 40% threshold down to £32,010 last year. That means that in three years the Government have taken the proportion of taxpayers paying the 40% rate from 10% to 13% of the total taxpaying public—up 670,000 in three years. Over 25 years, the proportion has doubled to 2.1 million extra people now paying a tax rate that was previously only for the rich. With hundreds of thousands of people now paying a 40p tax rate that was never designed for low and middle incomes, it is safe to say that the middle is not so much being squeezed by the Government as garrotted.
Ian Swales
Does the hon. Gentleman recognise that the first two changes in the 40p band were to ensure that 40% taxpayers only got the same amount out of the threshold increase as a basic rate taxpayer? In other words, it was a measure of fairness across the spectrum.
Stewart Hosie
I recognise that an increase in the basic threshold from £6,400 to £9,400, which is a £3,000 rise, implies a saving of about £600, but a fall in the 40% threshold from £37,400 to £32,100, which is £5,000, implies a cost of £2,000. If one was paying 40% before, they still will be, while many hundreds of thousands more who were not, and who ought not to be, now will be. I do not see the fairness that the hon. Gentleman speaks of. I suspect that when we get to the next election, that might be part of the Liberal party’s campaign against their current Tory friends.
I want to turn to one of the most damaging small parts of the Finance Bill, which is the planned increase in air passenger duty. APD has become increasingly unpopular in the aviation industry and is now the most expensive in Europe. We know that standard rates vary from £13 for a short-haul flight to £94 for a long-haul flight. The rates were increased by RPI on 1 April this year, as announced in the 2012 Budget, and will be subject to a further increase by RPI next April, as announced in this Budget. We have consistently made the case for devolution as a means to improve connectivity and to give the aviation sector a competitive edge.
As the Minister will know, the Scottish Government Deputy First Minister wrote to the main airports in 2012 reaffirming our intention to press the UK Government to devolve APD as soon as possible. We do so because it makes economic sense. The study “The economic impact of Air Passenger Duty”, published only this February, confirmed that. It suggested that abolishing APD entirely could boost GDP by 0.46% in the first year, with benefits continuing to 2020, and that the GDP boost to the UK economy would amount to at least £16 billion in the first three years and result in almost 60,000 extra jobs over the longer term. We would argue, therefore, that the time for continually increasing APD has gone and that the time to devolve it is now.
We also welcome the support of Scotland’s four main airports for the devolution of APD. It is safe to say, however, that we have become increasingly frustrated with the UK Government’s continuing prevarication and the impact on Scotland and Wales of the further increases in rates from April this year and April 2014. To be fair, the Government have recognised, in devolving APD to Northern Ireland, that a one-size-fits-all policy might not be appropriate, but increasing APD throughout the rest of the UK and not devolving it demonstrates that the Government do not understand the differences in the UK aviation sector, the connectivity challenges faced by Scotland or the needs of passengers. This is a matter that we hope to return to in the Committee of the whole House.
The Finance Bill is utterly inadequate and ignores the pressing need for investment and growth. I am happy to say that the Scottish National party and Plaid Cymru will oppose it tonight.
Frank Dobson (Holborn and St Pancras) (Lab)
Whatever else can be said, it is quite clear that this Finance Bill will not sort out the public finances. As a result, we have got all sorts of efforts to distract people’s attention.
We have got the Work and Pensions Secretary going on about new punishments for people involved in benefit fraud. I am against benefit fraud, but I am against all fraud. Let us try to get things into perspective. In the last year for which figures are available, benefit fraud cost £1.2 billion. A recent study by Oxfam says that in the last year for which it has figures, tax fraud cost the taxpayer £5 billion. Needless to say, the Treasury said it did not recognise that figure, which is officialese for: “I can’t think what to say; I’ll have to find out what the boss says.” However, the Treasury has to acknowledge—because it produced this figure itself—that in the last year for which official figures are available, £4 billion was lost to tax fraud. It also produced figures for that year showing that tax avoidance—not tax evasion—cost the taxpayer £5 billion. There was a further loss of £4 billion for what is called “non-payment”—in other words, businesses making sure that when something went wrong, it was not the taxpayer who got any of the money. That makes a total of £13 billion lost in one year, mainly as a result of the desire and effective efforts by the rich and big businesses not to pay tax. That means that the taxpayer was swindled out of £13 billion in one year alone.
To be fair, that is partly because this House is notoriously bad at producing tax laws that actually work. That might be partly an effect of the fact that for years the Treasury has been advised on such matters by the very banks and accountancy firms that are doing the swindling in the first place. However, there is little real conviction in the idea that Her Majesty’s Revenue and Customs will do a good job of getting the money that we have voted should be taken. In fairness to HMRC, tax avoidance has become a major British industry. It is not a sideline of the big four banks or the big four firms of accountants; it is a major part of their industrial activity. They are not exactly big taxpayers themselves: in one year, Barclays paid just 1% of its profits in tax.
Then there is the massive and disgraceful involvement of the British financial sector in tax havens round the world, usually in British dependencies. When the British empire was at its zenith, the slogan was “Trade follows the flag”, and it still does, because the British dependencies, flying the British flag, are the major tax havens all over the world. The mighty British empire has been reduced to a scatter of sordid tax havens, where most of the fiddling is done by British banks and British firms of accountants. They are there helping the tax avoiders and helping the rich freeloaders to avoid the tax they should be paying here and in other countries. Let me give one or two examples. Barclays has just over 1,000 subsidiaries, 36% of which are located in tax havens. HSBC has 1,500 subsidiaries and, again, 36% are in tax havens. The Royal Bank of Scotland is slightly better—only 31% of its 1,300 subsidiaries are located in tax havens—while just 21% of Lloyds’s subsidiaries are located in tax havens.
Ian Swales
The right hon. Gentleman is making a powerful speech, but I am sure he is not suggesting that all this has arisen in the last three years. Can he remind the House of any steps that his Government took in this regard and does he welcome the steps that this Government are taking? They have resulted in, for example, Barclays closing down its structured capital markets department, which was basically about tax avoidance.
Frank Dobson
I never said for a minute that it started recently. It has been going on for donkey’s years. I am not sure about the Lib Dems, but I cannot remember an organisation when Labour was in government called Tories in Favour of Stopping Tax Avoidance. Perhaps the minutes will be produced by someone, but it seems extremely unlikely, because everything the Tories ever said when they were in opposition was about Labour being too nasty to the finance industry and proposing things that might damage it. So we trundled on, until the finance industry damaged the rest of us. It is worth remembering that the banks’ wrongdoing has cost us £700 billion in lost production since the crash. That is what we have all lost.
These British banks and firms of accountants are not just organising tax avoidance in the tax havens for all the swindlers. We now know—from prosecutions and from agreements that they have come to with the American authorities—that they have been organising money laundering from massive drug dealing, gun running, people trafficking and busting sanctions on places such as Burma.
I think the British banks should be doing something a bit different. I think they might possibly have done a bit of investing in this country. In the past, small businesses all over the country could go and see their local bank managers at one of the big banks and talk to them about their problems. They knew one another and knew what their prospects were. People could borrow money that way, and it worked. Then the banks started centralising all the funds, so nothing is left with the local bank manager and local firms now have to be interrogated by an algorithm—that is what it boils down to—in the banks’ headquarters. They have not been investing in this country. We have to ask ourselves why a large proportion of the industries that were privatised are now owned by foreign owners, such as Électricité de France or the Australian outfit that owns Thames Water. Could the British banks not have invested in British businesses? Was there not enough profit for them? Does that mean that the profits in the tax havens and from all sorts of derivatives activities were going to raise them more money? That may be so, but what has happened demonstrates just how awful the performance of the British banks and finance industry has been.
I do not think this Finance Bill, any of the proposals the Government have put forward or even the one or two they have started implementing reflect the scale of wrongdoing that needs to be put right—the swindling that involved British companies and the damage that does to us as a trading nation with, until recently, a reputation for honesty and fair dealing. At its core—I say this with some care—this is a corrupt set-up. We have a banking industry and an accountancy industry that are involved in criminal and semi-criminal activity all over the world, yet we say to countries such as Bangladesh, “There’s too much corruption in your country.” If we are going to start trying to sort out corruption in other places, it is about time we did it here and where British companies are operating. We need transparency, and we certainly do not need tax havens, especially those that fly the British flag. Their objective is not transparency but the complete opposite: it is to be as obscure as is humanly possible in order to keep the tax authorities out.
Another point that is constantly made is that, if we were to change the rules on banking and accountancy, the very clever people in the City would simply get round them. That is unacceptable. Why should such behaviour be acceptable in the finance industry? We would regard it as totally unacceptable if the building industry said, “You can rely on us to get round the building regulations,” if the aviation industry said, “We can get round the safety rules,” or if the pharmaceutical industry said, “We won’t carry out the proper checks that are required. We can get round those rules.” We ought to regard it as totally unacceptable when people representing the finance industry say, “Whatever you do in the House of Commons, we’ll get round your rules.”