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Margaret Hodge: Hammond’s threat to turn Britain into a tax haven after Brexit is “fake”

The government shows “naivety” to think that threatening to become “the tax haven of Europe” will result in a better exit deal with the EU, says the former chair of the public accounts committee.

The idea that a post-Brexit Britain could become a tax haven for the rest of Europe is “the latest fake bit of truth from the government”, according to the former chair of Parliament’s public accounts committee, Margaret Hodge.

The Labour MP for Barking and Dagenham, who scrutinised the tax affairs of corporations like Google, Starbucks and Goldman Sachs on behalf of the taxpayer between 2010 and 2015, says that the threat of cutting corporation tax as a “bargaining tool” will achieve nothing.

Speaking to the German newspaper Welt am Sonntag in January, Philip Hammond issued a warning to the other 27 countries in the EU, saying that the UK was prepared to do “whatever we have to” in order to avoid the “economic damage” of losing access to the European market. “I personally hope we will be able to remain in the mainstream of European economic and social thinking,” he said. “But if we are forced to be something different, then we will have to become something different.

“If we have no access to the European market. . . we could be forced to change our economic model and we will have to change our model to regain competitiveness.”

But Hodge says that Hammond and the Conservative government have shown a “combination of arrogance and naivety”.

“If I was negotiating for the EU, I wouldn’t want to give Britain an easy exit, as a deterrent to other countries – we’ll see what happens in the Netherlands.”

There are a number of arguments that disprove Hammond’s tax haven proposal, Hodge explains. The EU's instincts are far more radical on matters of tax transparency and responsibility than the British government's, for instance, and in some cases progress on these matters has been held back by the UK's membership of the bloc.

She points to the reintroduction of the proposal for the Common Consolidated Corporate Tax Base by the European Commission in 2016, which would require companies like Apple that operate in multiple territories to submit consolidated accounts (therefore revealing any strategic use of countries with more favourable tax arrangements). The idea was first floated in 2015, but stalled because of opposition from the UK and Ireland.

Then there is the potential domestic effect of Hammond’s proposed tax haven measures. “We’re not a small real economy like Ireland or Luxembourg – what they can raise by attracting financial services makes a big difference,” she says. “For us, we lose £2bn for every percentage point cut in corporation tax.”

On top of that, Hodge argues that the UK is “already quite tax haveny”, and that what attracts financial services companies to our economy at the moment is our access to the European market. “Companies want financial passporting,” she says.

Along with a cross-party group of 80 MPs, Hodge is currently promoting an amendment that would open up existing tax havens in the UK’s overseas territories to greater transparency.

“If I get that amendment through, I think that will be the most dramatic change in tackling secrecy and therefore impaction on tax avoidance and tax evasion that we will have achieved for decades,” she says. It has backing from high-profile Conservative MPs like Andrew Mitchell as well as a coalition from the Greens, SNP, Liberal Democrats and others, and will be submitted via the House of Lords.

Although it has been 18 months since she stood down as the chair of the public accounts committee, Hodge says that her work there challenging big corporations and “following the taxpayers’ pound” continues to resonate with voters. In her recent book, Called to Account, she writes that “The issues we investigated and the style of our committee hearings may have infuriated those who appeared before us, but they resonated with voters and taxpayers, who felt we were asking the questions they wanted us to ask.”

People are still stopping her on the street and asking her “are you Margaret Hodge?”, she says. “Of everything I’ve done in politics, [the committee] seems to have connected with people the most.”

Caroline Crampton is assistant editor of the New Statesman. She writes a weekly podcast column.

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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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