Will Cameron and Osborne remain silent over Goldman Sachs's tax ploy?

Having denounced "aggressive tax avoidance", Osborne is under pressure to respond to the bank's plan to avoid the 50p rate tax by delaying bonus payments.

Update: It appears that the adverse publicity has prompted a rethink at Goldman. The bank has dropped plans to delay bonus payments and, consequently, will pay the 50p rate. Before the announcement, the Treasury said simply: "We do not comment on the tax affairs of individual companies, but we are clear that everyone must pay the tax they owe."

As Alex reported yesterday, mega-bank Goldman Sachs is considering deferring bonus payments for its UK employees until April in order to benefit from the reduction of the 50p tax rate to 45p. The proposed tax dodge has already drawn criticism from Labour, with shadow Treasury minister Chris Leslie declaring that "banks need to think carefully about their own reputations if they seek to avoid tax in this way" and the redoubtable Margaret Hodge accusing Goldmans of not giving "a toss about collective responsibility".

This morning, Bank of England governor Mervyn King added his voice to the protests. During his appearance before the Treasury select committee, he commented:

I find it a bit depressing that people who earn so much find it would be even more exciting to adjust their payouts to benefit from the tax rate, knowing that this must have an impact of the rest of society, which is suffering most from the consequences of the financial crisis. I think it would be a rather clumsy and lacking in care and attention to how other people might react. And in the long run, financial institutions do depend on goodwill from society.

King's intervention prompts the question of whether David Cameron and George Osborne will have anything to say about the matter. In last year's Budget, Osborne memorably denounced "aggressive tax avoidance" as "morally repugnant". And if Cameron is prepared to take the time to attack Jimmy Carr for tax avoidance, one might expect him to comment when one of the world's largest investment banks deploys similar chicanery. The numbers involved are not insignificant. Goldman paid out £8bn in bonuses last year and a similar stunt by the bank and others in 2010 (when they brought forward income in order to avoid the rise from 40p to 50p) cost the Treasury £16bn.

Labour is keen to take every opportunity to remind the public that the government is choosing to cut taxes for the top 1.5 per cent of earners this April. With the additional chance to protest at "aggressive tax avoidance", don't be surprised if Ed Miliband raises this issue at PMQs tomorrow.

Lloyd Blankfein, Chairman and CEO of Goldman Sachs. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Richmond is a wake-up call for Labour's Brexit strategy

No one made Labour stand in Richmond Park. 

Oh, Labour Party. There was a way through.

No one made you stand in Richmond Park. You could have "struck a blow against the government", you could have shared the Lib Dem success. Instead, you lost both your dignity and your deposit. And to cap it all (Christian Wolmar, take a bow) you self-nominated for a Nobel Prize for Mansplaining.

It’s like the party strategist is locked in the bowels of HQ, endlessly looping in reverse Olivia Newton John’s "Making a Good Thing Better".

And no one can think that today marks the end of the party’s problems on Brexit.

But the thing is: there’s no need to Labour on. You can fix it.

Set the government some tests. Table some amendments: “The government shall negotiate having regard to…”

  • What would be good for our economy (boost investment, trade and jobs).
  • What would enhance fairness (help individuals and communities who have missed out over the last decades).
  • What would deliver sovereignty (magnify our democratic control over our destiny).
  • What would improve finances (what Brexit makes us better off, individually and collectively). 

And say that, if the government does not meet those tests, the Labour party will not support the Article 50 deal. You’ll take some pain today – but no matter, the general election is not for years. And if the tests are well crafted they will be easy to defend.

Then wait for the negotiations to conclude. If in 2019, Boris Johnson returns bearing cake for all, if the tests are achieved, Labour will, and rightly, support the government’s Brexit deal. There will be no second referendum. And MPs in Leave voting constituencies will bear no Brexit penalty at the polls.

But if he returns with thin gruel? If the economy has tanked, if inflation is rising and living standards have slumped, and the deficit has ballooned – what then? The only winners will be door manufacturers. Across the country they will be hard at work replacing those kicked down at constituency offices by voters demanding a fix. Labour will be joined in rejecting the deal from all across the floor: Labour will have shown the way.

Because the party reads the electorate today as wanting Brexit, it concludes it must deliver it. But, even for those who think a politician’s job is to channel the electorate, this thinking discloses an error in logic. The task is not to read the political dynamic of today. It is to position itself for the dynamic when it matters - at the next general election

And by setting some economic tests for a good Brexit, Labour can buy an option on that for free.

An earlier version of this argument appeared on Jolyon Maugham's blog Waiting For Tax.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.