Corporate Tax Avoidance

John McDonnell Excerpts

Monday 7th January 2013 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

The hon. Member for Redcar (Ian Swales) set the scene exceptionally well and went through all the points that have been reiterated by others.

I want to take up one point. I chair the cross- party parliamentary group of the Public and Commercial Services Union, which represents 50,000 of the 54,000 members of staff in HMRC—in other words, tax inspectors. I echo the simple point made by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and the hon. Member for South Norfolk (Mr Bacon): if we want to collect the taxes, we need the staff to do it. If HMRC is to do that efficiently, it also needs those staff to have the appropriate skills and resources. I have raised that matter consistently on behalf of the PCS parliamentary group over the past decade, and particularly over the past seven years, as have other Members.

When HMRC was created by the merger of Customs and Excise and the Revenue, we had a debate in the House for which I think there were little more than half a dozen Members in the Chamber. However, there were staff cuts of 3,000 overnight, and a further 12,000 within six months. A process called the lean system was introduced, producing the first industrial action in the Inland Revenue’s existence, so there was an element of demoralisation.

In 2005 there were 97,000 staff in HMRC, and by 2015 there will be 55,000. The Government have recognised that further investment is needed, for which I am grateful. They have provided £900 million for reinvesting in tax collection and recently pledged another £77 million over the next two years on top of that, but that does not make up for the £3 billion of cuts in the October 2010 statement. That means that there will be another 10,000 jobs cut from HMRC by 2015, which is ludicrous and completely counter-productive.

My right hon. Friend the Member for Oldham West and Royton made the point about how much each tax inspector brings in in proportion to their salary. The cuts and tax office closures seem to be undermining the very system that we want to make effective in delivering the tax that we need and tackling the scandals that have occurred. There is also real anxiety about the use of private companies in the tax collection system, which the Government have developed. I urge the Government to rethink the whole process of investment in HMRC for the long-term future. It has lost staff and is losing skills, which is undermining its ability to undertake the work that we ask it to do.

The hon. Member for Redcar mentioned the awarding of contracts to companies that we then discover avoid their taxes. I raised that matter under the previous Government. I found it bizarre when the private finance initiative scheme was introduced and the Inland Revenue offices were sold off to Mapeley, and then leased back from that company, only for us to discover that it was using a tax haven and not paying tax itself.

The hon. Gentleman also mentioned Capgemini. Let us get on the record what has happened in that case. Capgemini and Accenture are the two IT companies with which HMRC has contracts, and both were recently identified as avoiding tax themselves. Capgemini, the lead contractor on the £8 billion Aspire contract, paid only £308,000 of corporation tax last year on £38 million of profits—less than 1%. That company is employed by HMRC but avoids the tax that HMRC seeks to use it to collect. It is extraordinary. Accenture, which has a £9.6 million contract with HMRC to supply technical support, managed to reduce its tax bill to 3.5%, paying only £2.8 million in tax on nearly £82 million of profits in Britain last year. It was employed by HMRC and awarded a massive contract, and then used those resources to avoid paying tax. You couldn’t make it up, but it is happening regularly. As the hon. Gentleman said, the Government should introduce some principle to ensure that when we award contracts to such companies, we are at least confident that they are not in the tax avoidance business.

We need to ensure that the staff of HMRC have the tools to collect tax effectively. As the hon. Member for Lincoln (Karl MᶜCartney) said, we cannot criticise others if the House itself does not fulfil its own responsibility of ensuring that we have effective legislation that the staff can use to collect tax. That is why we should listen to the experts—the HMRC tax inspectors—when they advise that the Government’s proposed general anti-abuse rule will not be effective and instead advise support for the Bill tabled by my right hon. Friend the Member for Oldham West and Royton to introduce a general anti-avoidance principle. Their view is that we need to return at least partly to the Ramsay principle, which was a decision of the Lords in 1982, overturned in 2001, that at least led to some commitment to the anti-avoidance principle in law. It laid a duty upon directors to abide by that principle.

The hon. Member for Cities of London and Westminster (Mark Field) said that we should not drag this into being a moral issue, but it is a moral issue. When my constituents pay their taxes in the pay-as-you-earn system, they expect others to make their fair contribution as well, yet the Public Accounts Committee has effectively exposed scandal after scandal. I understand why UK Uncut is occupying premises and taking direct action. That is the only way to publicise what companies are doing.

We have been at this for a number of years in the House. I hosted what I think was the first meeting in the House with Richard Murphy and John Christensen of the Tax Justice Network, when the issue was not particularly popular. It became popular and had resonance when UK Uncut took direct action. We have a responsibility to our constituents to ensure that the balance is redressed, by providing resources for HMRC and putting in place appropriate legislation so that it becomes effective as a tax collector once again.