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.

Left Foot Forward on Tory delays on passing 0.7% law

Left Foot Forward reports on the Tory-led government delay in enshrining the 0.7% target in law.

Reminding readers that, it’s not the first time that the Tories have broken this commitment;

As Left Foot Forward reported on June 4th 2010, just weeks after the election, it’s a promise the Tories failed to immediately deliver once they’d made it to power, omitting it from their first Queen’s Speech. Back then, there was criticism the legislation wouldn’t make the statute book by theSeptember 2010 New York Millennium Development Goals summit; it now looks like it won’t even be law by the May 2012 Cape Town MDG summit.

Tories break manifesto commitment to legislate on aid spending

Today’s Sun reveals that legislation to ensure Britain meets the UN goal of 0.7 per cent spending on international aid will be delayed despite a manifesto commitment from the Tories ahead of the 2010 election that they would;

legislate in the first session of a new Parliament to lock in this level of spending for every year from 2013.

And a further commitment in the Coalition agreement to;

We will honour our commitment to spend 0.7% of GNI on overseas aid from 2013, and to enshrine this commitment in law.

As Richard Darlington, former Special Advisor at DFID and now head of IPPR says over on the New Statesman blog;

This has been one of the longest ever Parliamentary sessions in history, running from May 2010 to May 2012. So what’s gone wrong?

There are still ten weeks left in this Parliamentary session and another three when MPs will be on holiday. DFID’s Bill is short with just a handful of clauses. It has already had pre-legislative scrutiny from the International Development Select Committee and there is cross-party consensus. There is no prospect of it being overturned in the Lords. It could probably be passed on a one line whip on a Thursday afternoon or Friday morning.

Are the government worried about the destabilising impact of another backbench rebellion so soon after their European troubles? Or are they worried that the next Parliamentary session does not have enough business? In a story in the Times today, Political Editor Roland Watson reports that the next Queen’s Speech will contain just 12 Bills because the Conservatives and Lib Dems are struggling to find enough common ground to agree a legislative programme.

On International Women’s Day call on the Government to back up UN Women

Today is International Women’s Day, Labour is holding the Conservative-led Government to account on its promise to women around the world. This comes a week after support for UN Women was left out of the aid review. In an email, Harriet Harman asked people to ask them why:

Today is International Women’s Day. Join me in calling on the Government to answer the question they failed to answer last week when they published their review of the UK’s international aid programme – how much will they commit to spending on the new UN women’s agency?

This new UN agency has the potential to make a real difference to the lives of women in both the developed and the developing world but it needs resources.

The Government say they are putting women and girls at the heart of their development work. Sign up and ask the Government to put their money where their mouth is and show the world that the UK is still a leader for women

The Labour Government played a key role in establishing “UN Women”. The new Government must continue that support. Empowering women is not only right in principle but essential for fighting poverty and achieving all of the Millennium Development Goals, such as reducing the number of women who die in childbirth, and increasing the number of girls who go to school.

It is women in developing countries who are best placed to fight for maternal health care, and for their daughters to go to school. UN Women must help them in that fight. Support UN Women by signing up to ask the Tory-led Government for a real commitment to back up women throughout the world

Decisions are being made on this now and women the world over need the UK to play its part. The women of the world shouldn’t have to wait any longer for this Government to make up its mind.

Best,

Harriet Harman
Shadow Secretary of State for International Development

 

Why is the government delaying the Bribery Act?

This article was first posted on Left Foot Forward

One of the last acts of the Labour government was to pass the Bribery Act 2010, which should enable courts to respond more effectively to bribery both at home but also abroad. It was passed with support from all parties, who acknowledged the UK needed to meet its international obligations, particularly under the OECD Anti-Bribery Convention.

Bribery-and-corruptionGiven that the cost of corruption in Africa alone has been estimated at US $148 billion a year, representing 25% of the continent’s GDP, the Act contains important measures to put an end to companies actively fuelling corruption by paying bribes to foreign officials, a practice that undermines development and results in money being wasted.

Back in October, in a highly trailed speech at the LSE, Secretary of State for International Development Andrew Mitchell MP said:

“…let me be clear: this government has a zero tolerance approach to corruption.

“The new Bribery Act, passed earlier this year, puts beyond doubt the fact that bribery of foreign officials and office-holders by UK nationals constitutes corruption, and makes it punishable as such through the British courts.”

Mitchell went on to question why it had taken the previous Labour government so long to implement such an Act before concluding that the Tory-led government:

“…supports it 100 per cent.”

Fast forward a few months and that 100 per cent support has evaporated at the first sign of resistance from business lobby groups, with the government dragging its feet in implementing legislation that would fulfil the UK’s international commitments and requirements.

On Monday, officials at the Ministry of Justice confirmed that the Act would be delayed beyond the anticipated April 2011 deadline. The official reason given is that the Business Guidance has not been completed, and that business needs three months to make the necessary changes ahead of them being implemented.

But enactment has already been delayed once and media reports suggest the government has caved in to pressure from business, with the new head of the CBI, John Cridland, recently claiming that the act was:

“…not fit for purpose.”

No new concrete date has been set for implementation of the Bribery Act, and there is concern that it may be indefinitely delayed or ‘watered-down’ by vested interests, resulting in nothing more than a tick-box exercise for companies.

Mitchell had good reason to support the Act back in October. Only last week, representatives of development NGOs wrote to the prime minister urging the government to maintain the Bribery Act in an undiluted form and ensure it commences as planned in April 2011, arguing that:

“Our experience has taught us that corruption continues to be one of the biggest obstacles to development, poverty alleviation and good governance.”

The delay in implementing the Act is already said to be testing the patience of others, with the chair of the OECD saying:

“Competitors are getting ready to take robust action against the UK in the light of continued lack of compliance with international law.”

In a strong response to those who have criticised the Act, like the CBI and the Evening Standard – who have argued against the Act on the grounds that it would harm UK competitiveness – Prof. Mark Pieth, who heads the OECD’s working group on bribery in international business transactions, has said that a failure to implement will have the opposite effect:

“This move will hurt the competitiveness of British industry at a moment when it is most vulnerable. Allowing companies to continue to generate business by bribery actually weakens their competitive clout as they become dependent on illegal means.”

Shadow international development secretary Harriet Harman has already called on Mitchell to act:

“The government is wrong to delay this vital legislation. It should have helped fight corruption which hits developing countries hard. Andrew Mitchell should be demanding this legislation as soon as possible. The government must think again.”

If he fails to take action and stand up for the Act, Mr Mitchell risks undermining his publicly stated “zero tolerance” approach to corruption along with his claim that he will:

“…do everything… use every policy tool at our disposal, bang every head together, if necessary, in our determination to make life better for the world’s poorest.”

 

Tax Havens, Conservatives and the Developing World

After the recent investigation by Channel 4 Dispatches programme that Conservative Ministers, Andrew Mitchell the International Development Secretary amongst them, store their wealth in off-shore bank accounts, the question of the harm done by these locations and their practices are now being asked.

The figure quoted in the Dispatches investigation is that for every £1 that goes into the developing world via aid and trade, £10 goes into off-shore tax havens. That is a staggering amount of money that is being re-directed away from where it could of use to world’s poorest. There has been a growing acceptance in the international community that more needs to be done to ensure that fair and accountable tax regimes become common practice. The G20 meeting in April 2009 set a clear set of targets to see these practices clamped down on, due in part to the damage they do to the developing world, stating that they aimed ‘to make it easier for developing countries to secure the benefits of a new cooperative tax environment.’

The OECD in late 2009 looked into the progress being made to achieve the aims set out by the G20 and found that 42 signatories had yet to implement the internationally agreed recommendations – one of these being the favoured tax haven of the now International Development Secretary, the British Virgin Islands (a British Overseas Territory).

Closer to home the House of Commons International Development Select Committee has stated that tax havens are a severe hindrance to the developing world. In its report in October 2009 ‘Aid under Pressure’ it had the following to say on tax havens;

“114. Tax evasion is a major problem faced by developing countries in attempting to raise tax revenue. Tax havens facilitate tax evasion by operating lax regulations; providing companies with anonymity through bank secrecy; and by failing to co-operate on tax matters with authorities from the country in which the funds originated.”

Given that the G20, the House of Commons and the OECD all agree that tax havens damage the developing world, its increasingly curious that the Development Secretary feels it is acceptable to benefit from using their services.

Furthermore, the question of fair taxation is not only a problem within developing nations, its also a problem within aid-giving states. If the money that wealthy UK citizens and companies stored overseas were repatriated to the UK not only would our GDP increase (and the amount of money that constitutes the target of 0.7% of GDP going into development would substantially increase) we would also have more taxable income that could be re-directed into DfID’s budget.

It is very simple economics, but economics that substantially harms the developing world. That the international community has already stated its clear aim of dealing with the problem of off-shore tax havens, it is therefore concerning that members of the UK government are indulging in these practices, particularly those whose remits are to tackle the very problems that tax havens are exacerbating.

The Secretary of State has said he has done nothing illegal, and that is true. But that does not exonerate him from the charge that he, and by extension his government, are unwilling or incapable of tackling the practices that are in part responsible for underdevelopment in many parts of the world. In fact, they are taking part in and enjoying the benefits of those practices. Whilst leaders in the developed world fail to understand why underdevelopment takes place, and whilst they are unwilling to seriously deal with these problems and lead by example, the depravity that those in the developing world face will continue to worsen.

Lee Butcher is a Parliamentary Researcher to a Labour MP – views expressed are done so in a personal capacity.