The government's "patent box" is the tax avoidance package companies have been begging for

It might incentivise innovation, but it definitely incentivises paying far less tax.

The Conservative party back-benches are seething with rebellion. Not only do ministers deplore David Cameron for an un-Tory like attitude toward gay marriage, in recent weeks he has further upset them with a positively radical spiel directed against those super-corporations the conservative leader suspects of tax avoidance:

Any businesses who think that they can carry on dodging their fair share ... need to wake up and smell the coffee.

However. Refreshing though the rhetoric certainly is, the actions of the Government seem to tell a different story. Corporation tax will have fallen from 28 per cent to 21 per cent toward the end of the Government’s first term in 2014 — and this will translate into a loss of roughly £5 billion in tax revenues each year as those cuts are enacted (according to 2011 estimations by the Treasury).

The buck doesn’t stop there. In order to better facilitate corporate needs, HM Revenue and Customs is set to introduce a new form of tax relief for businesses due to begin in April this year. It’s called the Patent Box. Ostensibly, it means that a company which shows sufficient innovative nous by patenting innovations will be entitled to a tax break of 13 per cent, applied to the value of the product. In theory this should provide impetus for companies to conceive fabulous new technologies, and give a spurt to growth and development thereby. Right?

Well not quite. The first problem is that said companies are not actually required to own the patent themselves in order to attain the tax break. They can simply lease a patent from the original patent owner; consequently there is no real incentive to invent stuff creatively and in-house, so to speak. But the most salient fact about the Patent Box is that it does not apply to the patent in isolation. A company could, for instance, produce a tractor, and if that tractor was possessed of a patented right view mirror, the revenue from the whole vehicle itself — not only the mirror — would be subject to same overall and significantly larger cut in tax.

In other words, a measure which appears to contain a degree of legitimacy, in fact becomes yet another way for big corporations to achieve massive, unwarranted tax slashes on their products. And this is ironic. The Conservatives always pride themselves on encouraging small business development, perhaps because this provides a highly effective propaganda sheen — allowing their PR initiatives to be expressed in terms of hard working individuals and entrepreneurs rather than faceless corporate monoliths. But the Patent Box will only serve the latter. Small businesses do not have the purchasing power to buy in bulk the products which will benefit from the tax cut, nor can they afford to gamble with new technological innovations, nor can they divert money into buying up the patents of others.

Part of the whole problem lies in the way in which the government develops Controlled Foreign Companies (CFCs) regulations. One of the lead advisors who helped the government to devise the Patent Box was one Jonathan Bridges — a tax advisor for KPMG, an accountancy company which has no remit outside ensuring the lowest tax returns for its corporate clientèle; it has, therefore, no commitment to any notional "national interest".

The use of the representatives of corporate power to provide advice on the means by which that power should be channelled in socially effective ways makes about as much sense as employing a local war lord to advise on the committee of Amnesty International. But despite its connotations, the practise of employing huge corporations to help devise precisely the laws which are supposed to regulate them is one which both the current and the previous Government have engaged in. At the time of the transition to the coalition government, Labour had already set up working groups for consultations regarding CFC reforms; panels which included representatives of HSBC, Vodafone and Shell — all major multi-nationals and all involved in controversies regarding tax evasion.

The current Government has an objective rationale for its position which isn’t simply an expression of neo-liberal ideology and partisan politics. These super-companies have genuine power — and the ability to decamp to another country taking thousands of jobs with them. Like petulant, spoiled children, they are always on the verge of tantrum, should their desires not at once be met. In the midst of an economic crisis there is a cogent argument that any single Government must of necessity make their tax rates as favourable as possible in order to attract those companies and secure those jobs.

But the problem with such an argument lies in its generalisation. If every government follows suit, slashing corporate tax over and over in order to remain competitive, and if all governments adhere to the strictures of such competition, we are at once locked into a downward spiral, a race to the bottom in which the benefits gained from corporation tax are increasingly illusory.

And it is important to recognise that this is exactly the type of cycle which got us here in the first place. We were sold on the need to slash regulations in the finance industry, and look what happened. By playing this game the government are not responding pro-actively to the crisis, they are adopting the very logic which led to it.

How can these companies be regulated? By people putting pressure on their governments for sure. But also by directly targeting the companies themselves through grass-roots activity and customer boycotts. Following mass protest, Starbucks was recently "persuaded" to agree to pay £10m in corporation tax in the UK for each of the next two years. A drop in the ocean certainly. But nevertheless an indication that, ultimately, it is the consumer who has the ability to make or break a company.

Innovate on the mirror, profit on the tractor. Photograph: Getty Images
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In her first interview of 2017, I pressed the Prime Minister for Brexit clarity

My week, including running out of cat food, reading Madeleine Thien – oh, and interviewing Theresa May on my show.

As the countdown to going live begins in your ear, there’s always a little rush of adrenalin. Especially when you’re about to launch a new Sunday morning political programme. And especially when you’re about to conduct the Prime Minister’s first interview of 2017. When you hear the words, “Cue Sophy,” there’s a split-second intake of breath – a fleeting moment of anticipation – before you start speaking. Once the show is under way, there’s no time to step back and think; you’re focused on what’s happening right now. But for that brief flicker of time before the camera trained on you goes live, you feel the enormity of what’s happening. 

My new show, Sophy Ridge on Sunday, launched on Sky News this month. After five years as a political correspondent for the channel, I have made the leap into presenting. Having the opportunity to present my own political programme is the stuff that dreams are made of. It’s a bit like having your own train set – you can influence what stories you should be following and which people you should be talking to. As with everything in television, however, it’s all about the team, and with Toby Sculthorp, Tom Larkin and Matthew Lavender, I’m lucky enough to have a great one.

 

Mayday, mayday

The show gets off to a fantastic start with an opportunity to interview the Prime Minister. With Theresa May, there are no loose comments – she is a cautious premier who weighs up every word. She doesn’t have the breezy public school confidence of David Cameron and, unlike other politicians I’ve met, you don’t get the sense that she is looking over her shoulder to see if there is someone more important that she should be talking to.

In the interview, she spells out her vision for a “shared society” and talks about her desire to end the stigma around mental health. Despite repeated pressing, she refuses to confirm whether the UK will leave the single market as it leaves the European Union. However, when you consider her commitment to regaining control of immigration and UK borders, it’s very difficult – almost impossible – to see how Britain could remain a member. “Often people talk in terms as if somehow we are leaving the EU but we still want to kind of keep bits of membership of the EU,” she said. “We are leaving. We are coming out. We are not going to be a member of the EU any longer.” Draw your own conclusions.

 

Women on top

This is probably the kind of thing that I should remain demurely quiet about and allow other people to point out on my behalf. Well, screw that. I think it’s fantastic to see the second female prime minister deciding to give her first interview of the New Year to the first woman to front a Sunday morning political show on television. There, I said it.

 

Escaping the bubble

In my view, every journalist should make a New Year’s resolution to get out of London more. The powerful forces that led to the political earthquake of 2016 came from outside the M25. Every week, I’ll be travelling to a different part of the country to listen to people’s concerns so that I can directly put them to the politicians that I interview. This week, it was Boston in Lincolnshire, where the highest proportion of people voted to leave the European Union.

Initially, it was tricky to get people to speak on camera, but in a particularly friendly pub the Bostonians were suddenly much more forthcoming. Remain supporters (a minority, I know) who arrogantly dismiss Leave voters as a bunch of racists should listen to the concerns I heard about a race to the bottom in terms of workers’ rights. Politicians are often blamed for spending too much time in the “Westminster bubble”, but in my experience journalists are often even worse. Unless we escape the London echo chamber, we’ll have no chance of understanding what happened in 2016 – and what the consequences will be in 2017.

 

A room of one’s own

Last December, I signed a book deal to write the story of women in politics. It’s something I’m passionate about, but I’ll admit that when I pitched the idea to Hachette I had no idea that 2016 would turn out to be quite so busy. Fitting in interviews with leading female politicians and finding the time to write the damn thing hasn’t been easy. Panic-stricken after working flat out during the EU campaign and the historic weeks after, I booked myself into a cottage in Hythe, a lovely little market town on the Kent coast. Holed up for two weeks on my own, feeling a million miles away from the tumultuous Westminster, the words (finally) started pouring on to the page. Right now, I’m enjoying that blissful period between sending in the edited draft and waiting for the first proofs to arrive. It’s nice not to have that nagging guilty feeling that there’s something I ought to be doing . . .

 

It’s all over Mao

I read books to switch off and am no literary snob – I have a particular weakness for trashy crime fiction. This week, I’ve been reading a book that I’m not embarrassed to recommend. Do Not Say We Have Nothing, by the Canadian author Madeleine Thien, tells the haunting story of musicians who suffered during the Cultural Revolution in China. It’s also a chilling warning of what happens when anger towards the elite is pushed too far.

 

Political animals

However busy and exhilarating things are at work, my cat, Ned, will always give me a reality check. In the excitement of the first Sophy Ridge on Sunday, I forgot to get him any food. His disappointed look as he sits by his empty bowl brings me crashing back down to earth. A panicked dash to Sainsbury’s follows, the fuel warning light on all the way as I pray I don’t run out of petrol. Suddenly, everything is back to normal.

“Sophy Ridge on Sunday” is on Sky News on Sundays at 10am

Sophy Ridge is a political correspondent for Sky News.

This article first appeared in the 12 January 2017 issue of the New Statesman, Putin's revenge