Developing Countries: Impact of Multinational Companies’ Financial Practices and UK Tax Policies

Lord Haskel Excerpts

Tuesday 11th December 2012 Lords Chamber

[Lord Haskel]

My Lords, I also congratulate the right reverend Prelate the Bishop of Derby on this debate. He really has caught the spirit of the times; the spirit that, nowadays, business plans have to stand up to scrutiny socially and ethically as well as commercially and financially. Be good corporate citizens, as he put it. Not only is it reasonable to pay tax where people work, where the infrastructure and facilities are provided and the business is done; but also, avoiding the tax puts the local firms who pay their fair share of tax at a disadvantage.

It is fair to ask, “What is it to do with us?” All this happens an awfully long way away, over the water somewhere. However, it does concern us because London is the place where a lot of these tax-avoidance schemes are thought out and prepared. The right reverend Prelate the Bishop of Hereford just reminded us that there is often no relationship between the consolidated accounts and the tax accounts prepared by firms here in London. Committees in both your Lordships’ House and another place have drawn this to our attention, and so did my noble friend Lord Browne. In addition, some firms that use these procedures are controlled here in London. Your Lordships’ Select Committee has also told us that many of these tax schemes are prepared and sold by the big four accountancy firms based in London—the very firms employed by the Government as consultants. Will this form part of the Chancellor’s consultation about honest tax payment being a condition of getting a government contract? For overseas companies, London is quite often a tax haven, alongside the better known ones in Alpine meadows or on islands tropical or not so tropical.

Incidentally, many of these islands are controlled by the UK. Why can we not close down these activities, which deny the Chancellor legitimate tax? Today we are getting the draft Finance Bill. I am sure that the Minister is familiar with its hundreds of pages. Can he tell us, therefore, whether the promised general anti-avoidance rule will draw a line under this activity? Will the Finance Bill have an effect, or are more up-to-date international rules needed to put a stop to this, such as the unitary tax system described by the noble Lord, Lord Brooke?

It would be a big step to get the G8 to agree to this. Meanwhile, as the right reverend Prelate said, we have to rely on morals and society; on good corporate citizenship. However, there are glad tidings. The good news is that the right reverend Prelate has an important ally, perhaps even better placed than the Prime Minister, who has referred to these activities as immoral. I speak of the Mayor of the City of London. What caught my attention when Roger Gifford became the 685th Lord Mayor of the City of London was that he went to my old school—no, Minister, it was not Eton. So I was interested to hear that he has chosen “the City in society” as the theme for his year in office. I quote him:

“Unbridled capitalism is something none of us believe in but it’s how to bridle it and yet leave room for growth, entrepreneurship and job creation”,

was how he described his task, and that is what he set out to do. I found that pretty inspiring and brave so, when he was interviewed on the “Today” programme on the day of the Lord Mayor’s show, I listened with interest. He spoke about how his efforts are to be directed towards the City reaching a newer and healthier capitalism. Truly, I wish him every success, and may part of that success be shared with the right reverend Prelate, working on his important campaign. As I have tried to point out, the Government can do a lot to help, and I hope that they will.