Economic Growth

Ian Swales Excerpts

Wednesday 15th May 2013 Commons Chamber

[Ian Swales (Redcar) (LD)]

I was pleased to see that the Gracious Speech mentioned tackling tax evasion, and that the Chancellor later added tax avoidance in a G8 conference interview. He often says he is proud of a corporation tax rate that is the most competitive in the G20. Unfortunately, large companies can easily move their profits and operations outside the G20. I want to speak about the effect that this is having on the UK economy and growth.

There is widespread bafflement about how we can have an extra 1.2 million private sector jobs and so little growth. Part of the answer is tax avoidance, because many of those workers are employed by offshore companies. For example, Amazon is growing in this country at more than 20% a year. It employs thousands of people, but its sales of £4 billion do not appear in our economy. They appear in Luxembourg. Microsoft, eBay, Google and others have large businesses in the UK but their figures do not show up either, and the Google chief executive proudly talked about avoiding $2 billion in tax last year.

Now let us turn to the companies that are based here. The tax system encourages them to move manufacturing and other parts of their supply chain overseas. The Government’s change in controlled foreign company legislation makes this even more likely. Companies that do declare large profits here will find that they get a knock on the door from a well-paid tax partner of a large accountancy firm, who will put forward schemes whereby corporation tax can be avoided, the simplest of which is to export the profits to Luxembourg via interest payments. This is a route followed by well-known companies such as Vodafone and Pearson, owner of the Financial Times. In fact, it is done by most of our national newspapers, which might explain why media reporting of this issue is patchy at best.

If a profit-making company fails to succumb to the charm offensive of the tax partner, something more sinister is likely to happen. The next knock on the door could be from the vulture capitalists—representatives targeting an aggressive takeover of the company. Let us take a current example. The outstanding business success and growth of Betfair has led it recently to declare £247 million in profits. Its prospective suitors are CVC Capital. What will it bring to Betfair—better management; outstanding new internet technology? The clue is probably in the description of CVC as a London and Luxembourg-based venture capitalist. I am guessing that it will bring a shameless approach to exporting Betfair’s profits to avoid paying UK corporation tax. Boots and Thames Water are just two of the many companies that have been taken over and had their UK profits stripped out of the country and placed in tax havens.

The Government have themselves facilitated tax avoidance, not just through the tax framework but through their procurement and private finance initiative activity. The Green Book on PFI assessment still contains an assumption that 10% of total PFI payments, not profits, will come back to the Government in tax. This is risible when one examines the facts. The vast bulk of PFI deals now have an offshore element. HMRC’s own offices are owned in Bermuda, the Home Office HQ is owned in Guernsey, PFI schools in my constituency are 50% owned in Jersey, and, most bizarrely of all, junction 1A to junction 3 of the M40 is 50% owned in Guernsey. This is the story throughout the country. It is high time the Green Book was changed.

The leakage of money from our tax system and the incentives for companies to operate in certain ways are bad for the economy, bad for growth and bad for individual taxpayers. I welcome the moves that the Government have already made. Let us remember that nearly all the framework was put in place or left in place by the last Government, and they compounded the problem by sucking up to their friends in the City, stripping high-level resource out of HMRC and telling it to go easy on big companies.

I hope that the Government will consider limiting offshore interest payments and closing the loopholes in Luxembourg and Holland, via our membership of the EU. They should prosecute tax evaders and expose and, where appropriate, prosecute their advisers. They should add advisers to their team who are not from big business or big accountancy firms and can speak up for ordinary taxpayers and small business, and they should increase specialist HMRC resources. Tax evasion and avoidance is a cancer in our society and I hope that the Government will keep on acting aggressively to cut it out.

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[Richard Drax]

After I left the BBC I think it certainly lurched to the left.

We have seen what happens when we peddle the line of fruitcakes and loonies: the electorate, who are disaffected enough with us as it is, vote for the party accused of having fruitcakes and loonies. The votes for UKIP two weeks ago only showed what thousands and millions of voters believe. They do not believe that the amendment is graffiti; they believe that we have a major problem and that we—this is why I was sent to this House—have to deal with our relationship with the EU.

The amendment is not, and we are not, attacking the Prime Minister at all. In fact, if hon. Members listen to what the Prime Minister has said, they will hear that he agrees with the amendment. We have been sent here—all of us—to look after our country’s interests and those of our constituents. It is my view, and that of many learned Members, that a renegotiation with the EU is vital. I suspect that it will not be successful, which will lead, I hope, to a referendum and the inevitable vote of “out”.

How often have I heard—I have heard it again in today’s debate—those who are opposed to leaving the EU say that we should focus instead on the economy and jobs? But that is what the EU debate is all about—it is about the economy and jobs. The hon. Member for Huddersfield turns his eyes to the ground as if to say, “Oh dear, here’s another xenophobic Euro-nutter banging on,” but that is not what I am doing; I am speaking for our country and acknowledging what the vote for UKIP showed. We have to wake up in this place.

[Ian Swales]

Will the hon. Gentleman give way?

[Richard Drax]

I will carry on, if I may.

If we do not wake up, we will lose the respect of the people of this country. I would suggest that repatriating the competences that still go to the EU, despite the treaties that have been agreed and the promises that have been made, would do more than anything else to generate jobs in this country. This is a golden opportunity that we must take if we want to restore the trust in this House and this country that was thrown away as a result of the failed promises over Maastricht and Lisbon.

What more evidence do we need that the EU is dead? It is finished. Look around! Wake up! Greece is a disaster and Spain is potentially on the brink of civil war—53% of youths are unemployed. [Interruption.] Hon. Members say, “Oh, my God!”, but there are riots in the streets and their own police are bashing youngsters over the head. This is the Europe that we now face.

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[Danny Alexander]

I want to make some progress, as I have a few further things to say.

We will not succeed in the 21st century if our businesses are slowed down by an outdated infrastructure. That is why we are increasing capital investment plans by £3 billion a year from 2015-16, meaning public investment will be higher on average over this Parliament than it was under our predecessors. That investment will help to improve our digital networks and our road and rail networks. We want to connect our biggest cities in a manner fit for modern business needs, and our investment in High Speed 2 will be a crucial investment for British jobs and prosperity. The hon. Member for North East Derbyshire (Natascha Engel) spoke against HS2 partly on the basis that there had been a decline in wedding bookings at an important venue in her constituency. I hope very much the progress of the equal marriage Bill will help raise demand at that venue.

In a debate focused on jobs and growth, a lot of Members have talked about the subject of Europe, and I have to say that I do not think contemplating British exit from the EU is helpful in supporting jobs and growth in this country. So I would like to remind the House of some of the economic opportunities that we gain from our membership of the European Union. Our EU membership supports UK jobs, prosperity and growth through increased trade, both inside the single market and outside, through free trade agreements. One in 10 jobs in this country—3.5 million jobs—are linked to that trade with the European Union. If we want to win the global race, we need to be part of a strong team.

[Ian Swales]

Is the Minister aware that the number of jobs in the UK has gone up every single year since we joined the EU, except 2009, and went down in eight of the previous 20 years?

[Danny Alexander]

I was not aware of that fact, but the House will remember what happened in 2009 and who was responsible.

The single market helps the UK to attract inward investment. As part of the largest single market in the world—it has 500 million people and is worth £11 trillion —the UK hosts more headquarters of non-EU businesses than France, Germany and the Netherlands combined. UK consumers benefit from EU regulatory standards, and the collective voice of EU member states helps to advance UK interests and influence throughout the world, as the US President said only this week.