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PAC to examine tax affairs of IT firms

Firms used several methods to keep taxes low.

The UK Parliament's public accounts committee (PAC) is considering examining the tax affairs of information technology firms that supply the public sector.

In its investigation of nine public sector suppliers from 2007 to 2011, the Financial Times (FT) found that the firms paid only £527m in corporation tax against their UK sales of £62bn.

The IT firms used several methods to keep taxes low, including recording UK sales in low-tax jurisdictions.

The PAC inquiry would be part of a wider probe into how much tax is paid by Whitehall’s larger contractors.

Danny Alexander, chief secretary of The Treasury, is looking options whether the government can bar companies from securing government contracts in the event if they are paying less tax.

The FT also found that Microsoft and Dell are directing hundreds of millions of pounds worth of UK sales through Ireland to minimise their tax burden. Symantec’s UK arm paid no net corporation tax over the past four years, according to accounts filed at Companies House.

The companies concerned, however, explain that they made only £3.16bn in pre-tax profits, a margin of just 5 per cent, and argue that the methods they used for paying tax are in accordance with UK tax laws.

Conservative MP, Charlie Elphicke, who has raised concerns in parliament, said: “If the margins are anything like that low, then why are they even doing business in the UK, given how much higher their global operating margins are?. To me it is unacceptable, unethical and irresponsible.”

Margaret Hodge, who chairs the PAC, told the Financial Times: “We are definitely going to look at government procurement. While I welcome the PM’s commitment to using the leadership of the G8 to pursue the issue, he can still take short-term action to protect the UK taxpayer. That includes refusing to give business, funded by taxpayers, to people who refuse to contribute properly.”

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.