It’s essential for our NHS that we end the era of the British tax haven

mike kaneThis article first appeared on LabourList on Tuesday 1 November

By Mike Kane,  Shadow Minister for International Development and Labour MP for Wythenshawe and Sale East – @MikeKaneMP

Theresa May has pledged a crackdown on tax havens. She should start by cleaning up our own backyard – the secretive network of UK-linked tax havens like the British Virgin Islands, Bermuda and the Cayman Islands.

Today and tomorrow’s summit of overseas territories leaders, taking place in London, provides the perfect opportunity to kickstart that process. They are our very own treasure islands, stuffed full of booty from around the world: entire economies set up to help wealthy people and unscrupulous companies to avoid paying their fair share of tax. That is money that could be spent on public services like schools and hospitals.

Over the past few years the Tory government has talked a tough game on tax dodging, decrying bad practice and demanding alleged tax avoiders like Starbucks “wake up and smell the coffee”. Ongoing scandals like that which engulfed Apple, and a wilful blind spot when it comes to UK-linked tax havens, tell a different story.

And it is the world’s poorest countries that are the worst affected by this inaction. Corporate tax avoidance is estimated to cost developing countries an astonishing $200bn every year more than they receive in aid. Much of that is siphoned off via tax havens like Mauritius and the British Virgin Islands. Money needed to tackle poverty, cure disease and promote education disappears offshore never to be seen again. That is a gross injustice.

Back in April the Panama Papers leak blew a hole in tax haven secrecy. Those with the means to do so were bending or breaking the rules on a huge scale, benefiting at the expense of ordinary people in the UK and in the world’s poorest countries.

In response, 300 top economists including Thomas Piketty and Nobel laureate Angus Deaton, told world leaders that tax havens “serve no useful economic purpose“. They also argued that the UK is uniquely placed to lead a crackdown, because it has sovereignty over around a third of the world’s tax havens through its overseas territories and crown dependencies.

Our involvement cannot be understated: more than half of the 214,000 firms named in the Panama Papers were registered in the British Virgin Islands, a UK overseas territory. Make no mistake – the UK sits at the heart of a global web of tax havens.

David Cameron came up woefully short on his promises to fix this problem, culminating in the refusal of many overseas territories to even attend his much touted anti-corruption summit earlier this year, much less make the kind of commitments that are needed.

That’s not to say others aren’t trying.  The anti-poverty charity ActionAid has called for greater transparency from UK-linked tax havens; the tightening up of global rules; and reform of the UK’s tax treaties with poor countries – another tool big companies use to avoid paying tax.

Caroline Flint and her colleagues on the public accounts committee secured an amendment to the finance bill which could compel all UK companies to declare the tax they pay everywhere they do business – including tax havens. Ministers must now find the courage to implement the law.

The new prime minister talks a good game on tax dodging, but she can no longer ignore the glaring issue of the overseas territories: our single biggest contribution to the global tax system.

Transparency is a vital first step. We need to know who own the countless anonymous shell companies registered offshore. That’s why ActionAid and others are campaigning for registers of beneficial ownership. Only by tackling secrecy can we know who is hiding their money, and hold them to account.

All of us are expected to pay tax – we should demand no less of the wealthy and big corporations. Tax is the key building block of our public services. Without it there is no NHS, no police, no schools, no welfare state. Everyone should pay their fair share.

We are accountable for the overseas territories and they are accountable to us. And when it comes to cleaning up tax dodging, they are our greatest weakness and our greatest strength. They have a corrosive impact on the global tax system, eating it from the inside. But we have the power to change that. By acting to sort out our tax havens we could set an example to the world.

Theresa May must put the UK’s British treasure islands on notice. It’s time to end the age of the British tax haven.

Tories plot to divert aid away from world’s poorest

lChlPlPlBy Sam Rusthworth, LCID’s Membership & CLP Relations Officer – @SamJRushworth

 

There were gasps and raised eyebrows when Theresa May appointed Priti Patel as Minister for International Development in her new right-wing cabinet, but Patel’s first appearance before MPs last week suggests anyone concerned about global poverty is right to be worried.

In July, while commentators in the Westminster-Village were busy discussing how clever May had been to give senior cabinet jobs to hard-Brexiteers – including a bumbling foreign secretary with a track record for racial slurs and insulting world leaders, who she’d be able to sack by Christmas – at the Department for International Development a silent coup was underway. A new minister took charge who not long before had called for the whole department to be abolished. Shortly after, Ms Patel appointed Robert Oxley as her special advisor, whose previous roles include head of media at Vote Leave and campaign director for the TaxPayers’ Alliance while it was calling for government spending on aid to be cut.

So it came as no surprise when, in her comments to the parliamentary International Development Committee last week, as well as in an article she penned for the Daily Mail, itself a fervent campaigner against what it calls “the madness of aid”, Ms Patel repeated many of the well-worn cliches about aid money being wasted or stolen. The poorest should “work and trade their way out of poverty” not be “passive recipients of our support”, she declared, echoing popular misconceptions with a Nigel Faragian flare.

For most people, who do not spend their working lives unpicking the debates around aid and development, such arguments make sense, and believing them does not mean they do not care about global poverty. Images of famine, disease and suffering have been broadcast onto our TV screens for decades and things never seem to get any better. It is known that some African leaders who have presided over their countries for decades are worth millions of dollars while their people survive on less than $2 a day. Added to this are high profile examples of aid failures, such as £285 million Cameron’s government spent building an airport on St Helena which is unusable due to wind speeds. So it is easy for Priti Patel to conjure an image of a bloated UK Department for International Development dolling out money left, right and centre to corrupt regimes that steal or squander it – and understandable that so many believe it. Hopefully Ms Patel’s new staff at DfID will help her to see how inaccurate this image really is.

The truth about the UK’s international development spending is that, while imperfect, it has made substantial improvements in the lives of millions of people and helped many countries on the path to sustainable development. What’s more, many of the criticisms of aid are past their sell by date. Since Labour set up the Department for International Development in 1997, the UK has developed expertise in delivering aid effectiveness and become the world leader in global development. Contrary to popular myth, UK Aid money is not carelessly doled out but intelligently targeted and fully accounted for.

Just over forty percent of UK Aid money is entrusted to multilateral organisations such as the International Development Association, a financial institution administered by the World Bank, whose work has funded the immunization of over 300 million children, built over 100,000 km of paved roads and made micro-finance loans to over 120,000 small and medium enterprises. Other organizations trusted to spend UK aid on our behalf include The Global Fund to fight AIDS, Tuberculosis and Malaria; the World Food Program; and the United Nations Children’s Fund. Each of these organizations is transparent, accountable, and widely respected for making a real impact.

The remaining sixty percent of UK aid is given to fund specific projects and programs under bilateral arrangements with national governments or respected not-for-profit organisations and used to fund health, humanitarian aid, education, infrastructure, and water supply. Such bilateral aid also includes millions of pounds currently being spent on basic humanitarian assistance, food, shelter, relief packages, health care and emergency education to Syrian refugees in Turkey, Lebanon, and Jordan, as well humanitarian assistance and funding Red Cross activity in Syria. In 2014 £238 million was spent in Sierra Leone providing humanitarian relief to those affected by the Ebola crisis, including treatment and measures to prevent infections from spreading.

Again – and I stress this point – such aid money is not wistfully handed out to corrupt chiefs and princes. All over the world, expert DfID staff sit in foreign government ministries to advise and oversee development spending, while foreign governments are expected to sign performance contracts, with each tranche of aid being dependent on achieving results. Aid spent through non-government organisations with expertise in particular areas is likewise carefully monitored, independently evaluated and strictly accounted for.

I am not arguing that DfID gets everything right. When you set to work on some of the world’s messiest, most complex and seemingly intractable problems, mistakes are inevitable, but it is better to learn from them and continually improve aid effectiveness than cast aside two decades of experience and learning with a complete overhaul of aid spending for what are, let’s face it, unjustifiable and ideological reasons.

Priti Patel has even admitted that her plans for DfID are ideological, telling Daily Mail readers that her approach “will be built on some core Conservative principles. That the way to end poverty is wealth creation, not aid dependency…. …we need to empower the poorest to work and trade their way out of poverty”. Few could disagree with the rhetoric, but to suggest that miners in Bolivia, Coffee growers in Rwanda, or garment workers in Bangladesh are not already wearing out their lives in long hours hard work is insulting. Likewise, trade is nothing new. It has been fundamental to the West’s relationship with the developing world for centuries, only on terms that are grossly unbeneficial to the latter. It is worrying, given the evidence, that Ms Patel appears to be arguing that  replacing aid with more trade will miraculously end global poverty.

I am not saying that trade is unimportant. Export-led growth is essential for developing countries to acquire foreign exchange. A stronger entrepreneurial class in lower income countries would seek out ways to supply desired goods and services in a way government planners cannot. Foreign Direct Investment can provide jobs and transfer valuable learning. However, for the world’s poorest to take advantage of global trade they first need shelter, health care, sanitation, and education, while entrepreneurs need good infrastructure, security and access to finance. In other words, far from trapping people in “aid dependency”, the UK’s aid spending that Ms Patel is so quick to criticise is vital to empowering the poorest to work and trade their way out of poverty.

Perhaps Ms Patel would respond by questioning why governments of lower income countries are unable to fund infrastructure investment and public services themselves – why they are so ‘dependent’. The answer is partly that they struggle to extract tax because so much economic activity is informal and they lack the resources and expertise to capture it, but more so because so many foreign-owned multi-nationals shift profits to avoid their tax obligations in developing countries. The UN Conference on Trade and Development (UNCTAD) last year published a study which showed that developing countries lose over $100 billion per year in revenues for this reason. The IMF put it at $200 million  – over seventeen times the UK’s total annual international development spend.

It is not yet clear quite what Priti Patel actually means by extolling the benefits of trade as though it is an alternative to aid while at the same time pledging to maintain the UK’s commitment to spend 0.7% of GDP on aid, but reading between the lines it appears she intends to divert funds away from health and education for the world’s poorest and into the hands of businesses charged with ‘increasing trade’, possibly by out-sourcing more low paid, insecure jobs to developing countries.

Indeed – and this is the most iniquitous part of all – Patel has hinted at reversing the principle of Labour’s 2002 International Development Act that aid should target poverty reduction, and instead prioritise aid spending in countries with highest migration flows to the UK, potentially enabling British business to secure cheaper labour, just not on British soil.

This would be the ultimate application of Patel’s “core Conservative principles” to development aid – diverting tax payer’s money into the hands of private business and trusting it ‘trickles down’ to the poorest in the world.

Labour must defend its legacy on International Development and not allow the Tories to take us backwards. The Labour Campaign for International Development is where that fight starts.

Owen Smith MP – my commitment to tackling poverty at home and abroad

owen-smith-2Owen Smith MP, candidate in the 2016 Labour Leadership contest, blogs for LCID on his commitment to international development – @OwenSmith_MP

Anyone in any doubt about the right-wing agenda of this new Tory government should take a look at two of Theresa May’s lesser commented-on appointments over the summer – that of Priti Patel as International Development Secretary, and her Special Adviser Robert Oxley – formerly of the Brexit campaign and the ideological Taxpayer’s Alliance.

Both Patel and Oxley have spent years attacking the very department that they now lead, arguing for the aid budget to be redirected, cut or even scrapped – and even at one point suggesting that DFID should be abolished or reformed. Even more shockingly they appear to be willing to undermine the cross-party consensus on the 0.7% aid target to spend a small but guaranteed proportion of our income on supporting education, health and responding to disasters around the world. They must be stopped.

Establishing DFID, leading the way on both the quality and quantity of our development assistance, and while abandoning the type of policies that led to the Pergau dam scandal – was one of the proudest achievements of the last Labour government. An achievement that literally saved lives around the world, and showed the type of outward looking internationalism that Britain and Labour should represent.

It is clear that there is a moral case for international development assistance – and focusing this on those who need it the most. Who can say that we should turn by and walk on the other side when so many children remain unable to go to school, when millions face the threat of HIV/Aids, Malaria or TB, and when women and girls often bear the brunt – not least in conflict zones. And as we see the effects of climate change and disorganised war and conflict impacting on many more – we also have to prepare for the challenges of the future.

It’s why the agreement of the Sustainable Development Goals was so important – recognising that tackling poverty and injustice requires concerted action in many areas, and in the richest countries domestic policies as well as their international action – not least when it comes to sustainability, climate change, taxation and corporate behaviour overseas. I want to see a Labour government that leads the way in delivering the goals domestically and internationally.

But as well as the moral case – international development is clearly in our national interest. Whether it is the tragedy of poverty and conflict driven thousands drowning in boats in the Mediterranean – or the threat of instability and poor governance in countries across Africa and the Middle East leading providing the space for extremism to grow – we ignore these challenges at our own peril. There is no zero-sum game between our Defence, Development and Diplomatic efforts around the world. We must ensure there is coherence and collaboration to ensure a safer, fairer and more just world for all.

But I believe there is something more fundamental at stake. Many understand the need for charity – but only Labour has historically recognised the need for justice – whether for garment workers in Bangladesh, women fleeing rape in the DRC or the refugees of Syria. We need to address the immediate impacts – but also the economic and political structures that drive injustice, poverty and conflict – for example through global tax transparency or fair trade. DFID and our aid budget have been at the heart of that fight for justice since 1997, and I will fight tooth and nail as Labour’s Leader to ensure the Tories don’t take an ideological axe to its work – and pledge to put tackling poverty at home and abroad at the heart of my programme as Labour’s next Prime Minister.

 

Owen Smith

Owen Smith MP signs LCID pledge for Leadership candidates

owen-smith-mpAs with previous leadership contests in 2010 and 2015, LCID will not be endorsing a leadership candidate in the current contest.

However we have asked candidates to sign the International pledge for 2016 Leadership candidates.

We are delighted that Owen Smith MP has signed the pledge and agreed to uphold the principles it contains.

We are awaiting a response from Jeremy Corbyn MP.

 

International pledge for 2016 Leadership candidates:

 

  1. I believe tackling poverty and inequality is what Labour governments are for. Any government I lead will take a ‘whole government’ approach to global justice, ensuring that our policies on tax, trade, climate change, home affairs, education, business regulation, defence, and security deliver for the world’s poorest people.

 

  1. I back British aid. I will ensure we spend 0.7% of GNI on aid and spend it well, focusing our aid exclusively and explicitly on tackling poverty and inequality, even in the hardest to reach places.

 

  1. I want DFID to be a development department, not just an aid administrator. I will ensure DFID is an innovative, independent department with a seat at the cabinet table and representation on all the relevant cabinet committees

 

  1. The Government I lead will pursue an ethical foreign policy and champion a progressive approach to humanitarian intervention in line with our international obligations, such as the UN’s Responsibility To Protect Civilians commitment.

 

BREXIT: A threat to tackling global poverty

mike kaneBy Mike Kane,  Shadow Minister for International Development and Labour MP for Wythenshawe and Sale East – @MikeKaneMP

 

Whatever side of the EU Referendum Debate you sit on it is hard to deny that being able to work collaboratively with some of the world’s strongest economies, to pool financial, institutional and technological resources enables us to make much more significant inroads into tackling global poverty than it would if the UK simply acted alone.

As ActionAid UK’s Chief Executive, Girlish Menon said in a recent blog on the subject: “To end poverty we need stronger, not weaker collaboration.”

I am proud of the UK’s commitment to International Development over many years and successive Governments. The last Labour government helped 3 million people out of poverty a year, and 40 million children into education, tripled aid, dropped the debt, and built international coalitions to secure agreements that were right for Britain and the world. Had we sat outside the EU would those achievements have been possible on the same scale?  I do not believe they would.

As a Shadow Minister for International Development I was involved in the campaign to enshrine in law our 0.7% commitment to development aid spending. British aid makes a huge difference to millions. But it is amplified by being a member of the European Union which is the world’s largest aid donor. An example of how working collaboratively with the EU increases the effectiveness of our aid budget is in relation to global reach. The UK has aid agencies which operate in 28 countries around the world – include our partners in the European Union and that figure rises to 150.

Kevin Watkins, Executive Director of the Overseas Development Institute is right to point out in his recent article for The New Statesman that the EU Referendum debate so far as failed to address some of the important questions about our role and place in an increasingly interconnected world.  Even those who don’t adhere to the view that we have a moral obligation in relation to international development understand than in an increasingly unstable and insecure world efforts to tackle global poverty and end conflict have positive benefits beyond the countries in which they are made, including for the UK.

It’s not just about money, cooperation and global reach, of equal importance is the ability to pursue shared policies which go beyond international development yet impact significantly on the developing world. Progress on global tax justice has been led by the European Union but there is still much to do. We need to rework broken OECD tax rules and mandate the UN to develop a set of rules that ensure big businesses pay their fair share of tax in every country they do business in. Achieving this without the influence and leverage of the European Union is highly unlikely.

For me personally, as a former CEO of an organisation that built movements that mobilise the power of people to take action, I fear the impact of a UK exit on the influence of Civil Society.  Through the European Union the UK’s excellent network of NGOs have built the capacity of Civil Society across Europe. This has enabled civil society influence over key decision in relation to issues like climate change and tax transparency.

It’s time the debate on the EU Referendum dealt with the reality of the world as it today. A world that if we fail to address the challenge of global poverty will become increasingly unstable. A challenge that we will be much less able to address whilst sitting on the outskirts of the European Union.

 

Invitation: Join LCID MPs in discussion of ‘Brexit’

In conjunction with the Labour Movement for Europe (LME) and Labour’s Environmental Campaign Group (SERA), LCID is hosting to an exclusive Panel Q&A on the evening of June 14th, 19.00-21.00, at UNITE Head Quarters in London.

The evening’s discussion, entitled “Brexit: A danger to security, tackling climate change and international development”, will be addressed by Mary Creagh MP, Stephen Doughty MP, Glenys Kinnock and speakers from across the Labour Party. Our panellists will make the environmental, security, human rights and international development case for remaining in the European Union on June 23rd.

LCID is pleased to provide 50 free tickets for the evening, on a first-come-first-serve basis. This will provide access to UNITE, the right to ask questions of our panellists, and after-talk refreshments with MPs.

The event will take place in the Diskuss Room at Unite the Union, Unite House, 128 Theobald Road, Holborn, London, WC1X 8TN. The closest tube station is Holborn, accessible from the Central and Piccadilly Lines

If you are interested in attending, please email aaron@lcid.org.uk with your contact details as soon as possible. We anticipate high demand for tickets so encourage members to get in touch sooner rather than later!

Please bring identification with you on arrival.

On the 22nd Anniversary of the Genocide, Rwanda is defying both global expectations and wishes

By Claire Leigh – Consultant at UNDP, 2015 Labour Parliamentary Candidate and former Chair of LCID – @ClaireLeighLab  

Reconciliation village, Nyamata, 2016

Reconciliation village, Nyamata, 2016

It is almost frustrating to start every discussion on Rwanda by referencing the infamous genocide that took place there twenty two years ago. The country today is almost unrecognisable from the place that tore itself apart in 1994 at the cost of some 800 thousand lives, and its grim reputation abroad is starkly out of step with the feisty, controversial and modernising nation’s reality. Ask anyone what they know about Rwanda, and they will say the genocide. When pushed, they might mention gorillas. Pushed further they might have read a newspaper in which President Paul Kagame was slated as ‘another typical African dictator’.

But its government is faced with a dilemma when it comes to not allowing genocide to define it. Within Rwanda itself, the state has pursued a distinctive approach to reconciliation that makes ‘never forget’ more of an order than an entreaty. Constant and visible reminders of the genocide are everywhere; Memorials – often gruesome – appear in every town, while Reconciliation Villages bring perpetrators and victims together to give regular talks to Rwandans and visitors about the terrible events of April 1994. And the genocide is central to the governing regime’s domestic political narrative.

Skyscrapers in downtown KigaliAt the same time the country is attempting the unthinkable: to become a ‘hub’ for African business and a middle-income economy  within a generation. Already, the country seems to be making this vision seem less hallucinogenic, with GDP growth regularly in the double digits, and new sky-scrapers crowding the capital Kigali. But the PR issue remains very real; How to both ‘never forget’ at home while moving perceptions on abroad.

The result is that, despite its startling successes in maintaining the peace (against all expectations, the return to conflict being a miraculous non-event that the state fails to get credit for) and improving citizens’ prosperity, foreigners remain for the most part ignorant of the pretty astonishing changes taking place in Rwanda.

Observers who know more about its transformation are often deeply sceptical of the means by which it is being achieved. Part of the reason for this is Kagame himself, who is anything but a ‘typical African dictator’, but who is dictatorial nevertheless. Political space has been tightly controlled since the genocide, and democracy is simply not a priority of the Regime. As Harvard MBA students learn, Kagame runs Rwanda like the CEO of a large corporation. The government is ruthlessly performance-focused, and if it were judged by one of its own famous performance cards, it would get an A* for things like reducing maternal mortality, increasing incomes, and keeping kids in school. But the international community have in recent years awarded it a D- for democracy, with many withdrawing aid money in protest.

I lived in Rwanda six years ago (full disclosure, I worked for a charity and was based in the President’s Office) at a time when the international community was still in love with Kagame. And it is easy to see why; One of the safest countries in Africa, Rwanda is also the second least corrupt, and spends aid money incredibly effectively. And it was clear to anyone living there that the lives of ordinary Rwandans were being changed dramatically. Fast forward six years and the international romance is over (even ending in divorce for countries like the UK), with donors citing political repression as a growing concern. But Kagame, among the vast majority of Rwandans, remains wildly popular. Most Rwandans I talk to genuinely don’t seem to regard democratisation as either a priority or even desirable in the immediate future. After all, Rwandans have seen what majority rule can do in a country with a large ethnic minority. The government looks to Singapore – only recently democratising after decades of state-led development – as its role model, and surrounded as it is by weak democracies with even weaker development records, who are we to argue?

Twenty two years on from one of the greatest human tragedies of the modern era, Rwanda finds itself famous for all the wrong reasons, and criticised for achieving  all the right things in all the wrong ways. The defiantly unorthodox path being taken by Rwanda raises uncomfortable questions for the international community. We must continue to criticise where human rights abuses are apparent. And clearly Rwanda, like Singapore, needs an exit strategy from authoritarianism. But we must also be humble enough to admit that we might not have all the answers when it comes to Rwanda’s broader exit strategy from the tragic events of 1994.