amendment of the law

Jim Sheridan Excerpts

Tuesday 25th March 2014 Commons Chamber

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

The Budget was trailed as being

“for the makers, the doers and the savers.”

I say “trailed” because this Budget was simply a campaign tour for the Tories, telling us about what their core voters want and what they think ordinary working people want. It hid the truth about those whom it really helped. It certainly did not help the makers or the doers and it failed to get to grips with the serious cost-of-living crisis affecting many people and households across the country.

It was disappointing that the Chancellor came to the House last Wednesday gloating about growth. After three years of flatlining, it is about time, even if it is much slower than predicted and slower than that in the United States of America or Germany. Working people are still getting worse off month by month. Real wages will have fallen by 5.6% by the end of this Parliament, and most people are not feeling this modest growth, but this out-of-touch Government certainly do not get that.

The proposals in the Budget to tackle tax avoidance are welcome, although I doubt whether this Tory-led Government have the political will or courage to stand up to the big businesses. After all, they are funded by these tax-avoiding enterprises and any measures they suggest may not be as big or bold as we would like.

Last year I was involved in highlighting the tax avoidance conducted by what I would have thought was an upstanding British company: Alliance Boots. We need to do something to stop these companies taking our country for granted, and I hope the Chancellor’s proposals will go some way towards doing that.

An excellent briefing paper has been produced by Change to Win and War on Want. They say that Alliance Boots allocated the bulk of its debt to UK entities and that otherwise the UK would have been one of its most profitable jurisdictions. The company’s actions would have been suspect under two proposed models in action four of the briefing. A meaningful earnings-stripping rule would have limited the amount of debt interest the company could deduct, and the attribution of interest across the group on a more equitable basis would have resulted in the company deducting less from its UK taxable income. That is how some of these measures could stop companies such as Alliance Boots, and I hope to see this happening.

These methods could work, but are the Government willing to take on the large private equity-backed companies using sophisticated financial engineering? As I said earlier, I think this Government are either weak or in the pockets of these companies. I would like to be proved wrong and see these measures making a difference. We will have to wait and see.

Action three looks to strengthen controlled foreign company rules and encourage more countries to adopt these rules. This is key when it comes to Alliance Boots. The company is based in Switzerland, which has no CFC rules. It has a subsidiary in the Cayman Islands and if Switzerland had a meaningful CFC regime the Cayman profits could be subject to some taxation in Switzerland, but do we have the credibility to push other countries to implement strong rules, given the limitations of our own regime? We have seen company after company revealed as tax avoiders over the last year or so. They have been getting away with it, and we really do not have a leg to stand on. With such a pro-big business party in power, I am sure other countries will doubt our efforts and it will be difficult to find a genuine solution to this issue. We need to build our own credibility and then work tirelessly to encourage others to do the same.

My party is, I think, planning to vote with the Government on the welfare cap. I want to put on the record now that I will not be joining it. Capping benefits is not the solution to unemployment; it will only serve to bring more people into poverty. Out-of-work benefits account for less than a quarter of welfare spending, meaning that a large group of people are in work and on low pay. As transport and child care costs go up, cuts and freezes will have a bigger impact on those in work. The Government have offered no solution to low pay or zero-hours contracts. They will not accept a living wage and they will not make companies treat their employees fairly, yet they will make it even more difficult for these people through capping spending. I did not come into politics to demonise welfare claimants. I do not want to give welfare to those who do not need it, but only 0.7% of the benefits bill was overpaid due to fraud in 2011-12—that is 70 times less than the amount lost through illegal tax evasion.

I wish to make two final points. First, on the continuous freeze of the council tax, I heard the patronising comments about bingo and a penny off beer, but people want decent public services that are properly funded to make sure that they are warm in their house and their kids are looked after. That is what the ordinary working people want. Secondly, on a more positive note, as chair of the all-party group on scotch whisky and spirits, I am delighted that the coalition Government have decided to freeze the tax on whisky, which is a major driver of the economy, not just in Scotland, but throughout the UK. I thank the coalition Government for that measure.