Low and No-Tax Jurisdictions

Baroness Coffey Excerpts

Thursday 30th January 2025 Lords Chamber

[Baroness Coffey (Con) (Maiden Speech)]

My Lords, it is a huge privilege to have been introduced to this House last week, thanks to the recommendation to His Majesty the King by the leader of the Opposition, the right honourable Kemi Badenoch. I want to thank everybody who has made me feel most welcome. That starts with Black Rod and her team of excellent doorkeepers, under the stewardship of Mr Ingram; to the security team who keep us safe; to the Library, who feed our minds; to the catering team, who feed us and keep us going; to the cleaners, who keep this space spotless and sparkling; to all the clerks, who have helped me navigate this familiar, yet new, territory; and indeed everyone who contributes to enable this extraordinary, hallowed atmosphere in which we operate and seek to do our level best in the important constitutional role that we undertake.

I also want to thank my supporters who introduced me last week: first, the noble Baroness, Lady Stedman-Scott, whom I first met when I unexpectedly became Secretary of State for Work and Pensions. She was my absolute rock and I learned so much from her, as I am doing now. As for the noble Baroness, Lady Pidding, I first met her over 20 years ago and we have been friends ever since. She has been a constant source of encouragement to me.

However, I would not be here at all if it were not for my family. It was particularly emotional when I was introduced last Tuesday, as it was precisely six months after my dear mother passed away. She loved Parliament and she loved politics. She loved coming to Westminster, particularly to the River Restaurant, where she would be called “M’Lady”—she loved that. She was a teacher, as was my father, who had passed away some years earlier. I held his Bible in my hand as I swore the oath. My sister was in the Gallery, and she genuinely saved my life seven years ago when, thanks to her tenacity with the NHS, I had an emergency operation for a brain abscess, which thankfully was successful.

As a family, we were all involved at some point in the Conservative Party in Liverpool, where I grew up in Grassendale, leading to its inclusion in my longer title. My political awareness was triggered by Militant Labour’s running of my home city, when, yes, my parents, as teachers, were part of the thousands who received their redundancy notices. That was when I realised that politics—who ran the council or country—mattered.

I certainly enjoyed my time as a Back-Bencher representing the people and businesses of Suffolk, and I reflect my love for Suffolk in my longer title with the town of Saxmundham, where I live. I should alert your Lordships that, when I left government, I became the Back-Bencher who spoke the most in the final six months of the last Parliament. I think it was the ability to speak for the first time on any topic that inspired me to pronounce on a variety of issues, recognising that I had been a Minister continuously for over nine years—two-thirds of my parliamentary career there. But I have that out of my system and I expect to be able to focus on some particular areas—but those will be of my choice in this House. Prime Ministers have made choices for me, on where I specialised and gained most experience and expertise, particularly in three departments—Defra, Health and Social Care, and Work and Pensions—where I had the privilege of being Secretary of State. I will endeavour, to the best of my ability, to really embrace the huge positivity of this House in its key role of scrutinising legislation and the Executive.

I know government is hard. I actually want the Government to do well, for the sake of the great people of our great nation. While I am sure we will disagree on certain aspects of policy or how we can improve the performance of our public services, I am united in wanting a strong NHS, a strong economy and for our country to succeed. I have long admired the tone of this House, with keen and courteous scrutiny at its heart, somewhat in sharp contrast to the other place where, sadly, the focus has become the social media clip rather than the social discourse and debate we used to have.

I hope that I have already accrued some credits in my apprenticeship for this place, by learning from all the Lords Ministers with whom I worked in government. There are several to name. However, I will save that for another day, but I can assure noble Lords that I recognise both how hard Lords Ministers work and the contribution to scrutiny made by this House, with its gentle peer pressure in trying to improve the legislation and performance of government for the greater good, even if, at times, it did not feel quite so gentle.

I am conscious that beyond the Chamber there is a wider community of Parliament in which I seek to play to a role. I have already started attending APPG events on the ocean, nature, trees and energy, and I look forward to the annual tug-of-war for charity. I certainly hope to provide some balance—if not some ballast—to help the Baronesses defeat the Commons for the first time.

[Noble Lords]

Hear, hear!

[Baroness Coffey (Con)]

I know that I am making my maiden speech in this House perhaps much earlier than the norm. I could say it is because I am interested in the topic, as I worked as a finance director for a subsidiary of the multinational company Mars, Incorporated, so I am fully aware of the issue of corporate taxation and transfer pricing—more on that later. But I confess that the real reason for speaking today is that I am really keen to speak in Monday’s Moses Room debate on the statutory instrument about bins—yes, bins. Bins, potholes and pavements are the basics of local political life and, when they are not working well, people notice and get fed-up very quickly. However, I shall save my further remarks until next week.

I turn now to today’s debate on multinationals and corporate taxation. I congratulate the noble Lord, Lord Sikka, on securing this debate. As a Professor of Accounting at the University of Sheffield, I know he has focused considerably on this issue. I bring my experience from business. I qualified as a chartered management accountant while working for Mars, Incorporated, and I certainly enjoyed the intellectual challenge of taxation. I think it wise at this point that I declare that I have a deferred pension with Mars, which is a multinational corporation.

My curiosity about corporate taxation was triggered when I did a summer placement with Ernst & Young. I had the joy of spending a week with the VAT team just as they were in court helping their client to persuade the judiciary that, yes indeed, a Jaffa cake is a cake, not a biscuit. With that, their product would continue to be zero-rated for VAT and therefore cheaper to the consumer. There is a saying in accountancy that “Profit is vanity, balance is sanity and cash is reality”. The reality for business is that tax is cash and, whether it is cash flow keeping the business afloat, paying salaries and bills, or investing cash in new capital equipment or intellectual capital, every good business will have a focus on tax, tax rates and the rules set out by legislatures around the world on how it manages its operations.

We also know that Governments require steady tax receipts in order to provide good public services. It was my tax training and business experience that gave me the confidence early on in my parliamentary career to point out to the then Chancellor, George Osborne, that several of the banks, particularly RBS, probably would not pay any corporation tax for a very long time as they could roll over all their losses from the financial crash, year after year. I am pleased to say that then led to a change in policy, so tax losses can only be rolled over for six years.

It is important that tax be fair. We should recognise that corporate tax rates and the overall tax burden on companies need to be fair and competitive if we want the economy to grow. We saw how the economy of the Republic of Ireland was massively boosted when it cut its corporation tax rate to12.5% and many companies flocked there, particularly IT companies. That is why the work on transfer pricing, to which the noble Lord, Lord Sikka, referred, has been so important, as ultimately businesses can choose where their headquarters or their science and innovation hubs, or their other key assets, are.

Transfer pricing is a fundamental concept in international taxation and corporate finance. It is the way that profits are shared around the world. It involves the pricings of goods, services and intangible assets when they are exchanged between related entities within a corporate group—inter-company transfers of goods or services. Transfer pricing delivers the necessary compliance on taxation and it can be a valuable tool for companies to become more efficient, to manage risk and to bolster economic development in countries and communities.

Importantly, especially with the OECD guidelines, transfer pricing is designed to ensure fair competition. It was the Conservative-led Government, using their leadership of the G8 back in 2013, who first brought this issue to task on the global stage after the financial crisis of the late noughties. It was agreed at the G8, and then at the G20 later that year, to have the OECD establish guidelines, as the useful Library briefing points out. The OECD completed its guidelines on BEPS—base erosion and profit shifting. A significant element was introducing the arm’s-length principle, which suggests that intercompany prices should align with those charged between unrelated parties in a competitive market. This principle serves as a cornerstone for many countries’ transfer pricing regulations, promoting fairness and transparency.

By appropriately allocating profits and costs among subsidiaries, companies can mitigate the risk of double taxation, which occurs when two or more jurisdictions impose taxes on the same income. Additionally, transfer pricing can help manage operational risks associated with currency fluctuations, and by adjusting transfer prices to account for exchange rate movements companies can stabilise their financial results, providing greater predictability in earnings and cash flows. This stability is crucial for long-term strategic planning and investment decisions.

Another important merit of transfer pricing is its contribution to promoting fair competition. By adhering to the arm’s-length principles, companies are incentivised to price their goods and services fairly. That practice helps prevent anti-competitive behaviour for local businesses which otherwise could be undercut by aggressive tax planning.

Overall, this is all useful in trying to make sure that we keep up to date in having that level playing field around the world. In June 2019, G20 Finance Ministers agreed to update the OECD proposals, known as BEPS 2, with two main interlocking pillars. Pillar 1 re-allocates part of the profits of the largest and most profitable multinationals from where they earn income to where they sell products and services; pillar 2 would impose a 15% minimum tax on global corporate profits based on the residence of the corporation. I understand that the 15% minimum tax has been controversial, as it removes one of the levers of agile, growing economies. I am also aware that the new US Administration have expressed concerns. However, this is a useful mechanism to make sure that there is fairness around the world.

For what it is worth, I think our time would be better focused on making the most of our investment zones and freeports, as well as stabilising tax legislation to give businesses certainty and confidence to invest here and help boost our economy. We should continue to welcome the many corporations that are based here and be mindful of the reasons why some companies are moving their corporate headquarters elsewhere.

Companies and communities need each other. Together, companies and communities can and must profit from each other—something on which I hope all noble Lords would agree.