Michael Meacher MP

Accountability is a strong theme on this website, and after the 4 current examples I cited yesterday, the Ashcroft scandal immediately presents a 5th today.   The key question is how Ashcroft was allowed to get away for 9 years with giving a ‘clear and unequivocal assurance’ that he would be permanently resident in the UK before the end of 2000 and on that basis was given a peerage in the Lords, yet never paid UK tax on his world wide income because he was actually a non-dom for tax purposes.   Why didn’t the authorities at any time in 9 years not insist he paid full UK tax for which he was liable (a total of probably £127 millions over the period) or, when he broke his assurance, make him forfeit his peerage?

I have today put down several PQs to the Treasury (HMRC):

1  Who were the senior civil servant and the Tory whip who did a deal in March 2000 that Ashcroft need only be a ‘long-term resident’ in the UK which allowed Ashcroft to remain non-domiciled for tax purposes, thus avoiding tens of millions of pounds in UK income tax, and what Minister (if any) sanctioned this deal?

2  What is the precise legal authority for ‘long-term resident’ which indicates that the taxpayer may well leave after an extended period, and how many days per year have to be spent in the UK per year to claim this status?

3  Was Bearwood Corporate Services, the UK company owned by Ashcroft, operating as a fully-fledged company when Ashcroft’s donations of £5 millions were made to the Tory Party, or was it simply and exclusively a  vehicle to enable him to donate?

4  Will the Chancellor in his upcoming Budget end the anomaly of non-domiciliary tax status?

Ensuring that the poorest in our society are fairly taxed, i.e. that their tax is minimalised as far as is feasible, is fundamental to Labour principles, which is why the plight of those worsted by the abolition of the 10p rate is such a sensitive issue. But the long-drawn-out struggle to compensate these 5 million households has been a complex and contorted one. In his last Budget in April 2007 Gordon Brown paid for the 2p reduction in the standard rate of income tax, which cost £9.7bn, by doubling the starting rate of income tax to 20p in the £, which increased Exchequer revenues by £8.6bn. A year later Frank Field MP proposed that the poorest thus disadvantaged should be compensated by an across-the-board increase in personal tax allowances, clawed back in the case of standard and higher rate taxpayers by an increase in national insurance contributions. The poorest families would thus be fully protected while all others on the standard or higher rate would find that their tax position was neutral, i.e. they wsere neither better off nor worse off. But that is not what the Government did, which has led to the crisis vote today.

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Just as yesterday’s announcement on the private and carefully stage-managed inquiry into the Iraq War immediately blew a hole in Gordon Brown’s protestations the week before about a more open and democratic Parliamentary system, so today the revelation that the UK is seeking to promote its much-heralded crackdown on tax havens through an extremely weak double-taxation exchange agreement with the Cayman Islands threatens to do exactly the same on the taxation front. Both these cases generate a very unfortunate impression that worthy and ponderous Ministerial statements and media releases are somehow seen as sufficient in their own right without the need for the follow-through in effective and radical action on the ground. At the G20 Gordon Brown gained much credit for promising a real clampdown on tax havens, but the resultant double-taxation exchange agreements have to be robust, enforceable and capable of raising revenue very substantially. The agreement which the UK Treasury has just signed with the Caymans fails on all these grounds. So what should be done?

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Next Tuesday and Wednesday the Commons will be debating the Committee stage of the Finance Bill on the floor of the House. Since taking action to eradicate tax avoidance and the use of tax havens was a central goal agreed at the G20 summit on 2 April, I checked to see what new anti-tax avoidance measures might be included in the small print of the Bill. There weren’t any. I am therefore tabling a general anti-avoidance clause of the kind that other countries have (notably Australia and, interestingly, Jersey) and which has been needed in this country for a long time. The basic idea is that if a transaction for which the taxpayer is liable has been constructed in such a way that the sole or main purpose, or one of the main purposes, is to reduce or eliminate tax liability, then that will not be taken into account in assessing the liability of the taxpayer. Even that is very moderate. Some would argue that those who indulge in such devices to avoid tax should, along with the accountants and lawyers who assisted or incited them, also be subject to a significant penalty for seeking to avoid their duty to pay fair tax like everyone else.

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When the Finance Bill is put to the House for its second reading next Wednesday, there will be at least on large yawning void. That is how the clear commitments given on tax havens by the G20 in their 2 April communique are actually to be implemented. The text said that the G20 leaders agreed “to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over”. Stirring stuff. But what sanctions do they have in mind? Not a word about in the Finance Bill. And there is another whopping big hole in the G20 implementation plan. It only applies to individuals: they totally ignored corporate tax avoidance. This is a massive gap, which is unlikely to be inadvertent.

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The tax fiddling by many of the biggest companies in Britain on a monumental scale exposed by a lengthy and detailed Guardian investigation must rank as a final denunciation, second only to the credit crunch itself, of the corruption and greed embedded at the heart of the unfettered market fundamentalism of the last 30 years. It reveals that the vast tax gap left by these companies, which then has to be filled by other taxpayers paying far more tax than they otherwise should have to, amounts to a loss between £4bn and £13bn a year, with the likely true figure between £8bn and £12bn. But what is so devastating about this analysis is not just the scale of the tax avoidance which it exposes, but the contrived artificiality of the devices used to achieve the aim of evading tax.

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Extract from my contribution [scroll down to 3.09pm] to the Queen’s Speech debate, 14 November 2007
I believe the Government urgently needs some commanding themes by which its distinctive vision can be clearly understood. I want to propose three.
The first is democratisation which the PM himself adumbrated in his first statement to Parliament. But it has to stretch a great deal further than simply giving Parliament a vote before the country goes to war. Parliament needs real new powers on a much broader front – electing Select Committee members, ratifying (or not) Cabinet nominations made by the PM, approving (or not) the membership and terms of reference of Committees of Inquiry proposed by the PM, and setting up our own Parliamentary Commissions to investigate matters (like extraordinary rendition) when the Government itself refuses to do so.
But it isn’t just in Parliament where there’s a democratic deficit. A far bigger one now exists outside. Power has become so centralised over the last 30 years and the regulatory authorities so enfeebled that so far from regulating corporate power, the biggest businesses have increasingly co-opted the power of the State for themselves for their own commercial ends. The current loosening of controls over major power station, airport and incinerator developments, the failure to regulate unhealthy food advertising because of objections from the food industry despite the epidemic of obesity, the withdrawal of the SFO investigation into corruption allegations against BAE, and the relaxation of the gaming laws to permit a flood of gambling casinos are just a few recent examples.
Accountability today has all but vanished. Perhaps the most telling case is Northern Rock. It is now costing taxpayers £23bn in loans, plus a £2bn interest charge – almost equal to the entire annual defence budget – yet nobody is held responsible. The Bank of England, the Financial Services Authority and the Treasury are all blaming each other. What action is being taken, and by whom, to face up to the fundamental mistakes made that led up to this crisis, including the reckless lending practices of the chief executive of Northern Rock as well as the flawed structure of regulation put in place a decade ago? Why wasn’t Northern Rock temporarily taken into public ownership, as was done in the case of the secondary banking crisis in 1974, in order to avoid a run on the bank and to retain depositors’ confidence without this colossal haemorrhage of public funds? The answer to that of course is that the neo-liberal agenda of privatisation, de-regulation and unfettered markets is still, unaccountably, being imposed above everything else, even at phenomenal cost to the taxpayer so that public ownership, even temporarily, is ruled out.
And what action is the Government going to take over the mania for securitisation, collateralised debt obligations and all the other opaque and dodgy financial derivatives which have so dramatically and comprehensively destabilised the markets? Despite all its de-regulatory instincts, does the Government now acknowledge that stricter regulation of financial markets is now necessary if the frenzy for newfangled financial instruments, which are actually designed to be deceptive over risk and value, is to be curbed?
Equally, at the other end of society, the checks and balances against the arbitrary use of power have all but evaporated. Civil liberties have been drastically eroded, and the introduction of ID cards and 2-months detention without charge, both of which I deplore, are still being mooted. Workers who have been in their jobs less than two years can still be arbitrarily dismissed without any rights, and temporary and agency workers remain an exploited underclass – mainly at the behest of the CBI which this Government should be much stronger in resisting. Accountability, or indeed any redress, against alleged misdemeanours by the police, judges, banks, private utilities or big corporations is almost non-existent. Today powerlessness is widely felt to be endemic throughout society, and it will require an awful lot more than focus groups or citizens’ juries to put it right.

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There’s still time for the Government to turn the tables on the Tories over the inheritance tax debacle, but only if before the Finance Bill is published they take the radical line they should have taken at the outset.
Instead of ignominiously caving in to Osborne’s stunt, they should have used the opportunity to create a newer and fairer inheritance tax, whilst strenuously arguing the case that this is a tax confined to the very rich and that to relax it means that more taxes have to be raised from poorer households. At present only the richest 6% pay it (approx. those with incomes over £70,000 a year) which is less than in most other countries, much less than was paid in Britain even 25 years ago, and (as a matter of interest) much less than was paid in feudal England centuries ago.
A much more attractive alternative than Osborne’s would:

commit the Treasury to raise the threshold regularly so as to ensure that nobody except the richest would ever be liable,

freeze exemption levels above the threshold and close the loopholes, and introduce sharply progressive rates on the most valuable estates,

then hypothecate the proceeds, not to swell the Treasury’s coffers, but to redistribute it to finance long-term care for the elderly.

This would, at one go, resolve a very serious current problem about the funding of long-term care in old age and at the same time achieve a fair and generous redistribution from rich to poor which would prove extremely popular.
If that were then combined with a proper tax on the so-called non-domiciled rich – not Osborne’s footling £25,000 which would be a fleabite to billionaire tycoons like Philip Green – Labour might begin to regain its reputation for social justice and tackling inequality, which has spiralled out of control to grotesque levels in the last ten years and is now the no.1 domestic issue in Britain today.

(This article originally appeared in the Independent on Sunday.)
The fact that Gordon Brown has agreed to “review” his plan to raise fuel duty by 2p per litre in September – and the consequent calling off of all but one of the planned fuel protests yesterday – has been greeted with sighs of relief all round. Thank heavens for that. We’d all prefer an issue ducked to an embarrassing row, wouldn’t we? But now Elliot Morley has popped up and, according to one newspaper, “shattered Labour’s fragile truce with the fuel protesters”. He says “A simplistic knee-jerk reaction to short-term petrol supply problems is not the answer.”
Well, good for him. The whole debate is taking place on the wrong basis. The issue is not merely the price to the car or truck driver (after all, the real cost of motoring has actually fallen in the past two decades), but whether petrol price policy should be driven by Middle East oil markets or by a looming global warming catastrophe.
There is now abundant evidence that global warming is proceeding fasterthan scientists had previously predicted. If we carry on down our present path, we shall treble the amount of carbon dioxide that we emit by 2100, to a level of 1,000 parts per million, twice what scientists regard as a safe level. Greenhouse gas emissions from cars and lorries are now the fastest-rising cause of global warming. Unlike the last time we were in this situation, at the truck drivers’ fuel protest in 2000, when the environment wasn’t even mentioned, it should now occupy centre stage. The Government should have the courage to make the case – squarely and without apology – that fuel duty is a key instrument in controlling carbon dioxide emissions.
The counter to this argument is that increasing petrol duty is politically unpopular. It will not even be effective: the number of cars around the world, especially in developing countries such as China and India, is set to rise exponentially. Second, greenhouse gas emissions from industry – notably a massive increase in coal-burning to fuel China’s increasing industrialisation – are growing rapidly. These will not be affected by Western transport taxes.
However, if the West (including eventually the US, by far the worst polluter) does not give a lead when we are the biggest offenders, countries such as China and India, with two-fifths of the world’s population, will not follow suit. So the utterly devastating consequences of global warming will simply be visited on the whole world more quickly. If we delay until climatic disaster is so intense that we are forced to take action in order to survive, it will be too late because scientists believe there is at least a 200-year lead time before measures taken now will begin to cut carbon dioxide levels in the atmosphere.
But it does mean standing up to the vested interests, which the Government hitherto has not been good at, whether over tobacco advertising, promotion of unhealthy fast foods, airline subsidies or alcohol advertising. In the case of the transport lobby, it means sending out a clear and unambiguous message, whether for road traffic or air travel, that there are environmental costs that have to be paid for in full, not least to encourage the search for less damaging means of travel.
It is therefore a much, much bigger issue than whether or not to raise fuel duty by 2p a litre. Nor will pleading with Opec to increase production quotas have much effect when the output of member countries is already 10 per cent above the formal quota limits. What is needed is a long-term policy to escape the regular cycle whereby governments push billions of dollars into investing in alternative energy sources as oil markets tighten, only to allow such investments to dissipate as the oil crisis eases.
First, the Government should keep fuel duty steady in real terms, but make clear that it is adding a surcharge of, say, three per cent a year for environmental reasons. The extra proceeds should not accrue to the Exchequer, but should be invested in alternative, affordable public transport. Second, because the end of Big Oil is now in sight and steadily increasing demand will overtake supply by 2010-15 – pushing up the price of oil inexorably – a sustained multibillion pound investment in renewable energy is imperative. The eclipse of oil, the gradual rundown of coal and the phase-out of nuclear power, heralded in last year’s Energy White Paper, now need to be followed through in founding the new energy world order. That is the real lesson of the 2p debate.
6 June 2004