How Cameron failed developing countries at the G8

From the beginning, the Prime Minister repeatedly failed to show the leadership on tax avoidance and transparency this summit needed.

The G8 meeting was heralded as a unique opportunity to address some of the structural causes of poverty and hunger. It was a chance to both put our own house in order and focus on making a difference to the lives of those in the developing world. Progress was made towards tackling hunger and malnutrition, with substantive funding commitments made by the UK and EU. We also saw a welcome commitment to supporting the UN’s humanitarian appeal for the horrendous crisis in Syria,  which remains staggeringly underfunded. 

David Cameron rightly made tackling tax avoidance and improving transparency a priority. The flawed system of global taxation has a profound impact on not only our revenues but also on the poor in developing countries. The Africa Progress Panel revealed just this week that African countries lose $50bn a year to illicit tax flows. But despite the Prime Minister’s rhetoric, his efforts fell desperately short in achieving the fundamental changes which are necessary.

It was imperative from the beginning that any G8 agreement should not "lock out" developing countries. However, it is unclear how developing countries will benefit from announcements on sharing tax information and whether they will be involved from the start in the Prime Minister’s new deal. This runs the risk of creating a "two-tier" system which allows advanced economies to benefit from transparency but excludes developing nations.

The Prime Minister also said: "Personally, I want to see the whole world moving towards public registries of beneficial ownership." This would allow all countries to benefit from knowing who owns companies and assets and take a step towards to tackling tax avoidance. It was, then, extremely disappointing and a significant U-turn that the agreements only commit the UK to a private registry of British companies and that no G8 country agreed to create a public register. We need far more than secretive lists in the UK of companies' true owners and vague promises of future action if we are to truly make progress towards ending tax secrecy.

The G8 Communique also includes lots of fine words, particularly on introducing country-by-country reporting for multinational companies and reform to rules which allow companies to shift profits out of developing countries, but no concrete action. Labour has repeatedly called for action on these issues which would enable developing countries to collect the taxes they are due and complement measures to build tax revenue collection capacity in these countries.

The Prime Minister could have used the window of opportunity presented by the G8 summit to deliver real action to tackle tax avoidance, not just for the UK, but for countries around the world.

Instead, from the beginning, he repeatedly failed to show the leadership this summit needed. On putting our own house in order, the government has consistently refused to review UK tax rules relating to controlled foreign companies which the evidence show costs developing countries £4bn a year in lost tax revenue. This is unacceptable.  

He has also been repeatedly criticised, as recently as recently as yesterday by the US, for failing to put in the necessary diplomatic and political work in the weeks and months leading up to the summit to secure meaningful deals on tax transparency. In 2005, the UK used the G8 chairmanship at Gleneagles to achieve the historic promise to increase aid by $50bn by 2010 as well as crucial steps on debt relief and climate change. This shows the magnitude of what can be achieved through ambitious hosting of the G8. But this took significant diplomatic effort and political will.

Sadly, this scale of commitment was largely lacking from the Prime Minister's approach this time around. This G8 could have done for tax and transparency what the 2005 G8 did for aid and debt relief. Instead, away from the hype and spin, when history is written, this summit will be seen as a missed opportunity in the fight against global poverty.

Labour wants to see an end to extreme poverty, a reduction in inequality and an end to aid dependency by 2030. A prerequisite to achieving these objectives will be developing countries having access to fair taxes from their citizens, domestic businesses and multinational companies. David Cameron chose the right priorities for the G8 summit but, as on so many other issues, his fine rhetoric and big promises were not matched by the  conviction or hard work necessary to deliver the radical change that we need. It is to be hoped that the G20 later this year will turn rhetoric and the promise of future action into the commitments we had expected to see. 

Ivan Lewis is the shadow international development secretary

David Cameron speaks during a press conference at the conclusion of the G8 summit in the Lough Erne resort near Enniskillen, Northern Ireland. Photograph: Getty Images.
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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump