“I don’t think in the
last 20 years or so one can say that governments have driven corporation tax
policy. It’s the large companies that have driven the direction of corporate
tax policy.” – Philip Baker QC,
a European tax expert and Treasury adviser
In 2013 George Osborne told the BBC: “The cost of welfare is
one of the things that makes the public finances unsustainable.” Richard
Branson’s Virgin Atlantic took £28m from the Welsh government in 2011 to set up
a call centre in Swansea, that was a form of welfare. The German, French and
Dutch companies that now run our train services are subsidised by the British
public to the tune of hundreds of millions. The £45bn taken by firms in
corporate tax benefits is a form of welfare. So is the ultra-low cost insurance
scheme the government runs for exporters such as BAE Systems. None of these are
labelled corporate welfare, but that’s precisely what they are: direct public
spending aimed at protecting and supporting businesses. Among the measures in
the coming budget is believed to be taxing disability benefits. That will raise
about £900m, according to the Institute for Fiscal Studies. That is about the
same sum as the state gives every year to managers who buy shares in, say,
their dotcom startup and see them soar in value, without having to pay much tax
on the gain, thanks to a scheme called Enterprise Management Incentives.
Business receive £93bn a year from the government in grants,
subsidies and tax breaks. George Osborne, the chancellor plans to cut £12bn more
from the social welfare bill yet it is less than the £14.5bn given to companies
in direct subsidies and grants alone. In the financial year 2012-13, the
government spent £58.2bn on subsidies, grants and corporate tax benefits. It took
just £41.3bn in corporation tax receipts. Many of the figures, especially on
direct payments, are hard to unearth, as they are scattered between various
arms of the state. The government admits: “There is no definitive source of
data about spending on subsidies to businesses in the UK.”
Many of the companies receiving the largest public grants
over the past few years previously paid little or zero corporation tax, the
analysis shows. They include some of the best-known names in Britain, such as
Amazon, Ford and Nissan. Cameron calls his government’s policy to make the UK
“the most open, welcoming, business-friendly country in the world”. Incentives
include the lowest corporation tax rate anywhere in the G7, tax exemptions for
research and direct government support. For decades, the UK has operated on the
basis that it is in an international fight to attract investment. It was summed
up by Michael Heseltine in his 2013 report on industrial policy: “Unless we
make it worthwhile for footloose capital to come here, it won’t.”
It has led to the slashing of corporation tax rates, so that
Britain has a lower corporation tax rate than the US, Japan or Germany. It has
encouraged devolved administrations in Holyrood and Cardiff to disburse
millions to big companies, without demanding much in return. The result has
been fiscally disastrous. As this research shows, of the 44 companies that
received more than £1m in government grants between 2005 and 2011, 13 paid no
corporation tax at all; a further 17 did not pay any corporation tax either the
year before or the year that they received public money.
In 2012, Amazon was attacked by MPs on parliament’s public
accounts committee for avoiding UK tax. Yet in the same period, the online
retailer was awarded £16.5m in grants by the administrations of Scotland and
Wales to help build distribution centres. To link the Wales plant to the
transport network, the Welsh assembly built the mile-long “Ffordd Amazon road”
at an additional cost of £3m. Of the regional development agencies that gave
grants to private companies until 2012, only one – for north-west England –
gives details on what it gave to whom, and that for just 2009-11. Civil
servants know a lot about the individuals who claim employment support
allowance: every last cough, spit and missed appointment at the job-centre. Yet
of the big companies that rake off millions in direct grants, taxpayers often
hear very little. The result is that the public do not know where billions of
their own taxes are going.
Offering sweeteners to businesses is usually justified by
the prospect of extra taxes flowing in, not only in corporation taxation, but
also employers’ national insurance. Business groups regularly call for
corporate welfare and other “pro-growth” measures on the grounds that they help
create jobs. Firms protesting against onerous taxes and red tape will sometimes
threaten to move, just as the giant bank HSBC is considering relocating to Hong
Kong.
The elements of the £93bn corporate handout break down as
follows:
• Subsidies and grants: £14.5bn. This includes cash to the
train operators to run services, subsidies to defence firms and grants to
businesses to induce them to invest. The £14.5bn figure for 2012-13 is used by
the Treasury in its own statistical analysis of government spending.
• Corporate tax benefits: £44bn Of the 93 major tax reliefs
provided by the Treasury, 27 are aimed at business. The largest amount was
spent allowing businesses to write off billions spent on plants, machinery and
equipment among other items.
In 2012-13, the public gave a £20bn subsidy to private
investment. The construction industry gained more than £7bn in exemptions on
new housing and land duty.
A 2009 study by the rich nations’ thinktank, the OECD, found
that the UK had more generous corporate tax benefits than the US, Germany or
any of the seven other major economies it examined.
• Hidden transport subsidies: £15bn. Unlike motorists and
the petrol levies they are charged, airlines do not pay tax on fuel – support
worth about £8.5bn a year, according to MPs on parliament’s transport select
committee. Train companies also enjoy lower duty on fuel.
• Energy subsidies: £3.8bn. Most public handouts to energy
firms are not widely acknowledged, according to a recent House of Commons environmental
audit committee report. It said: “The variation in definitions of subsidy
allows the government to resist acknowledging subsidy in many areas.” Yet the
dismantling of Britain’s nuclear power stations cost the public £2.3bn in
2012-13 alone.
• Insurance, advice and advocacy services: £406m Includes
such vital services as the state’s insurance scheme for trading abroad – the
export credit guarantee – of which the defence firm BAE Systems says: “Many of
our customers require it.” It also includes government trade advisers and
overseas business networks.
• Government procurement from the private sector: £15bn
Capita, Atos, G4S and Serco alone received £4bn worth of public-sector
contracts in 2012-13. While procurement provides the public with services, it
is not always about securing value for money for taxpayers, as the business
secretary at the time, Vince Cable, acknowledged in 2012. He said: “There is a
role for the government using procurement in a more strategic way.”
Drawing on the financial accounts of the big outsourcing
companies the direct above-cost element of procurement at £15bn out of a total
spend of £238bn. The £93bn sum is, he stresses, “a conservative estimate”. It
leaves out invaluable support on which it is nonetheless hard to put a price
tag – such as the trade delegations abroad led by Cameron, Osborne and other
politicians or the use of foreign aid to help British business win contracts in
poor countries. It also does not include the legacy costs of the bank bailouts
for 2008-09 and other crisis measures, which are estimated to have cost £35bn
in 2012-13.
The result is a stratum of businesses that is not beholden
to the same social settlement as previous generations. Modern big business has
got so used to tax breaks, handouts and easy ways of making cash (such as
squeezing staff pay and conditions) that it no longer researches or innovates. AstraZeneca
was assisted by a local MP to get a £5m government grant to develop its
research and development centre at Alderley Park, Cheshire. Five months later, in
2013, it announced it was closing the plant and shedding 2,100 jobs. Absent
from the public record is what it told its local MP. He was, of course, the
chancellor, George Osborne.
No comments:
Post a Comment