Budget Resolutions and Economic Situation

Debate between John McDonnell and Emily Thornberry

Friday 20th March 2015 Commons Chamber

[Emily Thornberry]

Does my hon. Friend agree that it would be an improvement in the law if there was corporate liability for the criminal acts of individuals within companies? In other words, if someone behaves dishonestly on behalf of a company, the company itself should be liable. If that law were in place, as it is in the United States, it would help with prosecutions in this country for fraud and dishonesty.

[John McDonnell]

Exactly, and there is some movement on that in this document, but only yet another consultation that does not define whether individuals as well as corporations will be completely liable.

The Government sometimes have good intentions. We all supported on a cross-party basis the idea that if a company is prosecuted for tax avoidance, it should not then get a public contract. We all supported that in this House, but now, two years since it was introduced, not a single tax dodging entity, despite judgments by tax tribunals, has been barred from securing public contracts. What frustrates most of us in all parts of the House is precisely this non-implementation of legislation which we think could be effective and which we have all supported.

Another issue also came up. We supported the Government’s introduction of the general anti-abuse rule. We had been campaigning for years on it, and it came into effect on 1 July 2013. The Chancellor has referred to it on several occasions in various debates. The concept is good, but HMRC cannot go after offenders on its own because the Government have, in effect, put the tax avoiders in charge. HMRC needs permission from a panel, populated by the corporate tax avoiders, before it can implement the GAAR. The panel includes, for example, a partner from Baker Tilly, a firm of accountants associated with a tax-avoidance scheme used by Aberdeen Asset Management to dodge taxes on bonuses to employees, and so far the panel has not looked at a single case. It renders debates and legislative measures in this House totally irrelevant to the real world. The real issue is that no matter how many policy statements, reports and legislation we have, it is all rendered pointless if HMRC does not have the staff and resources to implement them.

I was critical of my own Government; I opposed the staffing cuts at HMRC then. In 2005, there were 92,000 staff at HMRC. By 2015, there were 62,000 and by next year there will be a planned 52,000. That is a 43% cut in the very tax collectors we rely on to chase the evaders and avoiders. For every pound spent on a member of staff at HMRC, £25 is brought back. That is not my figure, but the independent assessment. The Government have now closed all 281 local tax inquiry offices. They have brought in a centralised call system, which is struggling on every measure. HMRC’s management have gained a reputation across the civil service for belligerent incompetence, and that was displayed when the Public Accounts Committee attempted to hold them to account. Morale in HMRC is at an all-time low, which is testified to by the Government’s staff survey showing that it had the lowest level of employee engagement across all Government departments.

We have also seen, as a result of the leaked memos of four weeks ago, the HMRC management’s union-busting strategy. They have not only targeted and victimised PCS reps, but are trying to set up an alternative staff association to break the PCS. In my view, HMRC is not only not fit for purpose, but sinking. It is in need of basic reform if it is to live up to the expectations placed on it even by the report that the Treasury published yesterday. If we are really going to tackle tax avoidance and evasion and have any hope of closing the tax gap, we need a more effective, better staffed and better resourced HMRC. We need greater parliamentary accountability, which means: a specific Minister responsible for HMRC; and a separately established Select Committee to which it is accountable. We also need resources for organisations outside Government that can monitor it and respond to the detailed, complex Government consultations. Above all else, HMRC needs staff resourcing and the reversal of the staffing cuts on this scale that have neutered its operations. If we really want to tackle the tax gap, we need to ensure that it is properly staffed, that Parliament is in control and that there is proper accountability and monitoring throughout. In that way, we can tackle the tax gap, and we can start talking about the fairness of the wealth tax, the financial transaction tax and corporate tax reform. We need not so much a long-term economic plan as a long-term fair tax plan.