G8 Summit

Lord Trimble Excerpts

Thursday 13th June 2013 Lords Chamber

Moved By

[Lord Trimble]

That this House takes note of the Government’s priorities to be pursued at the next meeting of the G8 in Northern Ireland on 17 and 18 June 2013.

[Lord Trimble]

My Lords, I begin by thanking the Prime Minister for selecting Fermanagh as the location for the G8 summit. He had scores, if not hundreds, of possible locations throughout the United Kingdom from which to choose, but I am sure that it was simply the beauty and tranquillity of the surroundings, together with the high quality of communication and security available, that led to the choice. I can recommend that noble Lords go and see just how nice it is. I must also thank the nearly 4,000 policemen from other parts of the United Kingdom who are rendering support to the police in Northern Ireland over the coming days. We hope that they have a pleasant and peaceful time, but I am confident that they can cope if anybody tries to disturb the peace.

The Prime Minister set out the Government’s priorities for the G8 in a speech at Davos in January, and revisited the topic on Monday. I will refer to the former, in which he began by recalling,

“we are in the midst of a long struggle against murderous terrorists and the poisonous ideology that supports them”.

We cannot avoid this struggle, for the ideology that drives terrorism is one that hates our society and the freedoms and opportunities that it provides. That hatred is all the greater because most people in the countries and cultures from which the terrorists come desire the same freedoms and opportunities that we enjoy. David Cameron rightly pointed out that our response must be intelligent and patient, and while military action may be necessary, it must be combined with a political response. My own experience is that good intelligence is absolutely essential, but it is unlikely to be obtained on the scale necessary until we have won the ideological war and convinced the communities from which terrorists come that their ideology is wrong and that in a mature democracy such as ours the only valid option is the use of exclusively peaceful and democratic means.

Turning to the question of how to compete in today’s global economic race, this Government have done much to tackle the problems created by our predecessors: the debt, the bloated welfare system, the underperforming education system. But as David Cameron says,

“competing in the global race is not just about what we do at home, it is about the wider economy we’ll operate in, the rules that shape it, the fairness and the openness”,

it needs. So what we need to see from the G8 is a drive to,

“more free trade … fairer tax systems … more transparency on how governments and … companies operate”.

To turn to tax and transparency, on 21 May a US Senate committee heard a report entitled Offshore Profit Shifting and the US Tax Code—Part 2. The report focused on Apple and how it used,

“a variety of offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent”.

It mentioned the movement of substantial funds to offshore entities in Ireland, while claiming that they were not tax residents of any jurisdiction. The report also mentioned companies such as Apple Operations International and Apple Sales International, which together had received hundreds of millions of dollars, the former paying no corporate income tax to any national Government for five years, and the latter, due in part to its alleged status as a non-tax resident, paying taxes on only a tiny fraction of its income.

The Irish Government immediately issued a denial that a special rate of corporation tax had been negotiated with Apple. On 26 May, the Dublin-based Sunday Business Post reported:

“This newspaper has learnt that Apple was one of about six multinationals that reached an agreement with Charles Haughey’s coalition in 1990 ... The deal did not relate to the corporation tax rate. Instead it centred on the tax base on which profits were calculated.”

The following Sunday, the paper added:

“What was negotiated was a deal that allowed Apple and the other multinationals to reduce their taxable corporate profits. This had the effect of reducing the tax Apple paid on profits to 2% or less for a number of years ... This was the ‘double Irish’ system under which income earned by one Irish Company was transferred to another Company—typically via a royalty payment under which the second company was paid for intellectual property—with the second company being incorporated here”—

in Ireland—

“but tax resident elsewhere”.

Under US law, the second company, despite being controlled from the US, was not regarded as tax resident in the US, and so not liable for US corporation tax. The paper thinks that this double Irish arrangement now applies to nine multinationals. It also says that the Irish are under pressure to end this, and I hope that the Minister in replying can tell us more on that point.

Much of Apple’s UK profits are spirited away in a similar manner and, of course, this is done by other major companies. There has been much comment and anger about this, not least in this House last week, but tax avoidance is lawful and a natural instinct that government use to shape popular choices. Directors considering their duty to their company may even think that it is obligatory. I think that the sensible response is to clarify what is lawful and what unlawful—and maybe, indeed, to extend what is unlawful. This will also need action at international level. At least the senatorial report might result in legislation to negate the double Irish device. My noble friend Lord Newby, replying to last Thursday’s debate, outlined some of the current lines of action and said,

“the Prime Minister will take a lead and will push this very hard at the G8 later this month”.—[Official Report, 6/6/13; col.1312.]

Corruption and money-laundering are similar threats to global and national economic health. This is not just a third world problem. At a reception in this House a few weeks ago to launch his book entitled Fragile Empire, Ben Judah estimated that roughly one-third of public expenditure in Russia is lost through corruption. That is an enormous figure. Global Financial Integrity, in a report published in February, Russia: Illicit Financial Flows, said that the Russian economy had lost hundreds of millions of dollars in illicit financial outflows. These outflows represent the proceeds of crime, corruption and tax evasion. The report estimated the size of Russia’s underground economy, including drug smuggling, arms and human trafficking, at no less than 46% of GDP—another astonishing figure. In the past, much of this was laundered through Cyprus, but I understand that now a lot of it is laundered through the UK and its dependencies. This is the preferred route, because money is considered safer here.

I choose Russia as an example, although it is not the only one, partly because of its importance and proximity to us, but also because there are important matters on which we are seeking Russia’s diplomatic support. It would be helpful, and perhaps easier to obtain that, if we were doing something which the Russians would regard as very welcome.

On tax transparency, which would help to inhibit laundering, the Prime Minister has written to the leaders of the Crown dependencies and overseas territories. Most of these have agreed to join in an automatic exchange of information scheme based on the US Foreign Account Tax Compliance Act, and 17 EU members have called for a new global standard based on that Act. Equally important is developing accurate registries of who really owns and controls companies, and being clear about the beneficial ownership of companies. This seems to be developing rapidly; there are reports in the press that indicate that some people are reluctant to join in this scheme. I hope that the Minister can bring us up to date on this, and touch on what revisions the United Kingdom is seeking to the EU’s third money-laundering directive.

I turn to two issues where Russia is in a position to make a positive contribution, one of which is Syria. It is often said of Syria that there are no good options left, but it is not unusual for us to have to sift out the worst from the not so bad. Leaving the Sunni majority in Syria to be crushed by Lebanese Hezbollah, Iranian Revolutionary Guards and Shia supporters from Iraq, all of whom are active within Syria in significant numbers as we speak, must be pretty close to the worst option available.

On Iran, it looks as though the regime there will continue to accumulate 20% enriched uranium, which it has in significant quantities. That can be taken to weapons grade in three to four months at the outside, but it does not look as if the regime will try to do this until it suits it to do so. Therefore, the international community needs to ensure that it is in a position to detect such a dash and to do it in sufficient time for action to be taken by the Security Council, so as to avoid the possibility of others taking their own initiatives. Unfortunately, looking back over other cases where countries went nuclear, it is depressing to see how often the international community was taken by surprise.

Let me turn to more cheerful matters. On trade, it is hoped that the G8 summit will see the launch of negotiations on a free trade area between Europe and the United States. The prize here is enormous, but estimates vary. It is said that a US/EU free trade area would add $60 billion or in some cases $80 billion to US GDP, and $50 billion to $100 billion to EU GDP, including at least $10 billion to the United Kingdom economy, with further worldwide gains in excess of $80 billion. The figures are estimates, but they give an indication of the extent of the prize that is available.

The US Government have indicated that they want to achieve an agreement quickly. But before they committed themselves to it, they asked for, and I believe received, an undertaking from the European Commission that on a certain key issue the Commission would follow the science. I pretty much hope that this lead will be followed by the member states on whose behalf the Commission will be negotiating and that the absurd quasi-superstitious fear of genetically modified crops will not be allowed to deprive us of this tremendous opportunity.

In addition, the EU is in or about to commence talks with Singapore, Canada and Japan, and the World Trade Organisation is working on a deal to sweep away trade bureaucracy at a ministerial conference in December at Bali. It is a pity that, in the midst of all these opportunities, our trade and recovery is, and unfortunately will be, held back by the weakness of our largest market, which is likely to persist until those involved come to the painful, but inevitable, conclusion that the euro was a mistake.

None the less, there are some reasons for optimism. We have some economic successes. The business editor of the Times, Ian King, pointed out last week that this year more cars will roll off Britain’s production line than in any year since 1972, and that four out of five of these cars will be exported—a phenomenon not seen since 1976. Since 2010, while public sector employment has fallen by some 420,000, 1.3 million private sector jobs have been created. Some purchasing managers’ indices—PMIs—have been published recently, in which a figure over 50 indicates growth and a figure under 50 indicates contraction. This week, the Financial Times gave a very interesting regional breakdown of the latest figures. Yorkshire and Humber lead the field with 57.6, a 26-month high for the region. Wales is second on 56.7, which is a remarkable 39-month high for Wales. London comes third on 56.4, a 14-month high. All other regions in the UK show growth, except for Northern Ireland, which on a figure of 49.6 is very close but not quite into the positive field. However, for Northern Ireland, that is an 18-month high. We therefore have a remarkable picture of very significant growth shown by these PMI figures. Of course, they are only possible forerunners of actual growth, which still has to come.

There are still other problems: lending to SMEs continues to shrink; productivity, to quote Mr King, remains lousy; we are still running, proportionately, a bigger deficit than Greece; and exports are rather disappointing. But these weaknesses underline how right the Government are to prioritise tax and trade. We do not expect next week’s meeting to solve all problems, but we hope that there will be progress on what are indubitably the priorities for the country and that this progress will contribute to the continuing recovery of the economy. I beg to move.

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[Lord Trimble]

My Lords, it is now my pleasant duty to thank all noble Lords who have taken part in this debate. It has been a very interesting debate to listen to. It has been very interesting to see how various contributions complemented each other while some brought in completely new topics and new thinking. I have very much enjoyed listening to it as I am sure all noble Lords here have. I am tempted almost to comment on each contribution but I will eschew that temptation for two reasons. First, I can see that the noble Baroness, Lady Wheatcroft, is in her position ready to go on her debate and I do not wish to detain her. Secondly, my noble friend Lord Wallace of Saltaire has been so comprehensive in his reply to the debate that he has done that job for me. He has also given us a very good insight into what will happen in the next few days in Fermanagh. Finally, I want to add my thanks to the right reverend Prelate the Bishop of Bath and Wells for his contribution to this House. I am sure all of us here are glad that we have had the opportunity to hear his last contribution in the House.

Motion agreed.