Tax: what's a fair share?

The Public Accounts Committee is back on the tax trail.

And so the Public Accounts Committee (PAC) is back on the tax trail. Although did it ever really stop? Certainly, despite the upbeat assessments of the economy made by outgoing Bank of England governor Sir Mervyn King, the pressures on public and private purses haven’t eased. This explains the strength of public feeling that everyone should contribute a fair share of income in taxation. The tricky bit, as the PAC is discovering, is that working out exactly what constitutes a fair share isn’t as straightforward as it might seem.

Having previously called in the tax partners of the Big Four accountancy firms and the heads of companies already publicly called out for not coughing up as much to Treasury coffers as they might (step forward the apparently unholy trinity of Google, Amazon and Starbucks), this round of committee sessions will see some of the same faces hauled back in to answer many of the same questions.

Earlier this week I was at an event where one senior member of the committee was less than positive about the current direction the committee is taking.

He didn’t seem to agree that this fixation on the effective corporation tax rates of firms who decide to base their head quarters overseas was the best use of the committee’s time and resources.

Elsewhere this week tax campaigners UK Uncut Legal Challenge failed in their bid to bring HMRC to book for what UK Uncut claimed was an unlawful deal struck between HMRC and Goldman Sachs.

In dismissing the case the judge agreed that the deal had not been HMRC’s finest hour but he found nothing unlawful about it. To some extent UK Uncut has achieved some of its objectives by bringing the issue of the way big business deals with HMRC into the spotlight and raising the profile of the Goldman’s case in particular. For its part, HMRC continues to deny claims that it is soft on big business.

But getting money out of most large organisations and wealthy individuals is tougher than it should be. And it is certainly tougher than chasing small business owners. In reality, striking a deal with wealthy corporations or individuals might end up being the quickest, simplest and most cost-effective approach to collecting revenues. Ideally this agreement would be one that displeases the entity paying tax more than it does HMRC (although one that displeases both sides a little is probably the most likely outcome). While such an approach may well be cost effective, without the disinfectant of greater transparency such deals will always stink a bit.

Two phrases that have been bandied around so much in the last 18 months that they are rapidly becoming cliché are that we need greater transparency, and that we need a simpler tax system.

Whether Google, Amazon, Goldman Sachs or anyone else with tax affairs complex enough to involve a potential settlement with HMRC has anything to hide or not, the mere fact that details are kept out of the public eye raises suspicions.

The tax affairs of individuals and corporates are between them and HMRC, but if they opt out of the system that the small business owner or the proverbial hard-working family has to settle for then they should do so in the knowledge that the details of the settlement will be made public.

This article first appeared on economia

Photograph: Getty Images

Richard Cree is the Editor of Economia.

Photo: Getty
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Ken Livingstone says publicly what many are saying privately: tomorrow belongs to John McDonnell

The Shadow Chancellor has emerged as a frontrunner should another Labour leadership election happen. 

“It would be John.” Ken Livingstone, one of Jeremy Corbyn’s most vocal allies in the media, has said publicly what many are saying privately: if something does happen to Corbyn, or should he choose to step down, place your bets on John McDonnell. Livingstone, speaking to Russia Today, said that if Corbyn were "pushed under a bus", John McDonnell, the shadow chancellor, would be the preferred candidate to replace him.

Even among the Labour leader’s allies, speculation is rife as to if the Islington North MP will lead the party into the 2020 election. Corbyn would be 71 in 2020 – the oldest candidate for Prime Minister since Clement Attlee lost the 1955 election aged 72.

While Corbyn is said to be enjoying the role at present, he still resents the intrusion of much of the press and dislikes many of the duties of the party leader. McDonnell, however, has impressed even some critics with his increasingly polished TV performances and has wowed a few sceptical donors. One big donor, who was thinking of pulling their money, confided that a one-on-one chat with the shadow chancellor had left them feeling much happier than a similar chat with Ed Miliband.

The issue of the succession is widely discussed on the left. For many, having waited decades to achieve a position of power, pinning their hopes on the health of one man would be unforgivably foolish. One historically-minded trade union official points out that Hugh Gaitskell, at 56, and John Smith, at 55, were 10 and 11 years younger than Corbyn when they died. In 1994, the right was ready and had two natural successors in the shape of Tony Blair and Gordon Brown in place. In 1963, the right was unprepared and lost the leadership to Harold Wilson, from the party's centre. "If something happens, or he just decides to call it a day, [we have to make sure] it will be '94 not '63," they observed.

While McDonnell is just two years younger than Corbyn, his closest ally in politics and a close personal friend, he is seen by some as considerably more vigorous. His increasingly frequent outings on television have seen him emerge as one of the most adept media performers from the Labour left, and he has won internal plaudits for his recent tussles with George Osborne over the tax bill.

The left’s hopes of securing a non-Corbyn candidate on the ballot have been boosted in recent weeks. The parliamentary Labour party’s successful attempt to boot Steve Rotheram off the party’s ruling NEC, while superficially a victory for the party’s Corbynsceptics, revealed that the numbers are still there for a candidate of the left to make the ballot. 30 MPs voted to keep Rotheram in place, with many MPs from the left of the party, including McDonnell, Corbyn, Diane Abbott and John Trickett, abstaining.

The ballot threshold has risen due to a little-noticed rule change, agreed over the summer, to give members of the European Parliament equal rights with members of the Westminster Parliament. However, Labour’s MEPs are more leftwing, on the whole, than the party in Westminster . In addition, party members vote on the order that Labour MEPs appear on the party list, increasing (or decreasing) their chances of being re-elected, making them more likely to be susceptible to an organised campaign to secure a place for a leftwinger on the ballot.

That makes it – in the views of many key players – incredibly likely that the necessary 51 nominations to secure a place on the ballot are well within reach for the left, particularly if by-election selections in Ogmore, where the sitting MP, is standing down to run for the Welsh Assembly, and Sheffield Brightside, where Harry Harpham has died, return candidates from the party’s left.

McDonnell’s rivals on the left of the party are believed to have fallen short for one reason or another. Clive Lewis, who many party activists believe could provide Corbynism without the historical baggage of the man himself, is unlikely to be able to secure the nominations necessary to make the ballot.

Any left candidate’s route to the ballot paper runs through the 2015 intake, who are on the whole more leftwing than their predecessors. But Lewis has alienated many of his potential allies, with his antics in the 2015 intake’s WhatsApp group a sore point for many. “He has brought too much politics into it,” complained one MP who is also on the left of the party. (The group is usually used for blowing off steam and arranging social events.)

Lisa Nandy, who is from the soft left rather than the left of the party, is widely believed to be in the running also, despite her ruling out any leadership ambitions in a recent interview with the New Statesman.However, she would represent a break from the Corbynite approach, albeit a more leftwing one than Dan Jarvis or Hilary Benn.

Local party chairs in no doubt that the shadow chancellor is profiling should another leadership election arise. One constituency chair noted to the New Statesman that: “you could tell who was going for it [last time], because they were desperate to speak [at events]”. Tom Watson, Caroline Flint, Chuka Umunna, Yvette Cooper, Andy Burnham and Liz Kendall all visited local parties across the country in preparation for their election bids in 2015.

Now, speaking to local party activists, four names are mentioned more than any other: Dan Jarvis, currently on the backbenches, but in whom the hopes – and the donations – of many who are disillusioned by the current leadership are invested, Gloria De Piero, who is touring the country as part of the party’s voter registration drive, her close ally Jon Ashworth, and John McDonnell.

Another close ally of Corbyn and McDonnell, who worked closely on the leadership election, is in no doubt that the shadow chancellor is gearing up for a run should the need arise.  “You remember when that nice Mr Watson went touring the country? Well, pay attention to John’s movements.”

As for his chances of success, McDonnell may well be even more popular among members than Corbyn himself. He is regularly at or near the top of LabourList's shadow cabinet rankings, and is frequently praised by members. Should he be able to secure the nominations to get on the ballot, an even bigger victory than that secured by Corbyn in September is not out of the question.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.