Government tax avoidance measures fail to bring in avoided tax

“A crackdown on offshore tax cheats has only recovered about a third of the £1bn that the government had predicted, according to estimates.

Figures from HM Revenue & Customs suggest that a series of measures to tackle offshore tax evasion will only bring in £349m a year – £650m a year less than had been hoped for.

Other measures aimed at closing tax avoidance loopholes have also failed to generate the revenues that had been expected, undermining assurances from ministers that were made following the Paradise Papers exposé.

Paradise Papers: Davos panel calls for global corporate tax reform
The figure appears in a list of updated estimates provided by HMRC to the independent Office for Budget Responsibility over the last two years and released under a freedom of information request by the Labour party.

The shadow chancellor, John McDonnell, said these figures exposed “the utter failure” of the government to ensure the super-rich and big corporations were paying their fair share in tax.

“This could be just the tip of the iceberg,” he said. McDonnell said that after the Paradise Papers revelations last year, the government had been quick to promise action but slow to deliver on it. “Now they have been shown to not even deliver on what they originally promise,” he said.

Measures have been launched to tackle the use of offshore accounts to hide money from HMRC, including agreements with Switzerland, Liechtenstein and other low-tax regimes to recover unpaid tax.

In total, these measures were forecast to bring in an extra £997m a year to the Treasury. However, a new forecast in September 2017, after most of the measures had closed, downgraded that figure to £349m a year.

Labour says a total of 28 anti-avoidance measures introduced under the coalition and Conservative government were bringing in less than expected, and that the gap between the tax take originally expected from them and the revised forecasts totalled £2.1bn, or 25%.

Measures that are now expected to raise less than originally forecast include a package of moves to tackle base-erosion and profit-shifting, where companies artificially move profits to locations with low tax rates.

These, which included new taxes on diverted profits and royalties, were expected to bring in a total of £515m a year but are now expected to raise £175m less each year.

Accelerated payments, whereby investors in avoidance schemes are asked to pay any disputed tax upfront, were forecast to bring in £1.1bn annually, £154m more than the latest forecasts suggest has been raised.

Some measures have yielded more than the original forecasts predicted, and offset some of the £2.1bn difference. For instance, the sums raised through cracking down on the way company takeovers are structured have been revised up to 554% of the original forecast. Preventing companies from avoiding stamp duty by cancelling and reissuing shares during a takeover is forecast to make the Treasury £425m a year against an original figure of £65m.

McDonnell said the downwards revision of other forecasts showed the Conservatives were dragging their feet on tax avoidance. …”

https://www.theguardian.com/politics/2018/feb/04/tax-abuse-crackdown-only-third-expected-1bn-freedom-information

Has the NHS already been privatised? Of course it has!

People are confused when the Government says “The NHS has not been privatised” thinking: “Well, it’s still free so it can’t be private”. THIS IS WHAT THE GOVERNMENT WANTS YOU TO THINK. The reality is that many services have already been privatised. So, why don’t we pay for them? WE DO! The private companies (eg Virgin, which already has more than £1 billion of NHS contracts) charge the NHS for their services, adding on their cut for profits (directors salaries, perks and pensions) and their rewards to shareholders by way of dividends. This ADDS to the cost of the NHS which allows Jeremy Hunt to say we cannot afford it!

Of course we can’t if we are already paying private companies over the odds

And see the letter below this image:

For example:

Guardian letters:

“The problem with the King’s Fund’s latest analysis (NHS privatisation would be ‘political suicide’ says thinktank, theguardian.com, 1 February) is that it ignores the fact some privatisation has already taken place. Of course it would be madness for any government to hand over the whole NHS to insurance companies, or privatise it in the way that Margaret Thatcher privatised British Gas. There is not even a majority for this among Tory party members. But only a handful of people seriously believe that’s the plan: the private sector doesn’t want most of the NHS – care, complex care, treatment of chronic illness, most mental health services. No matter how wealthy you are, you can’t buy any private equivalent to NHS emergency services, maternity, or many others.

Instead private firms want to take over services that they see as potentially profitable – especially the provision of simple elective surgery – the bread and butter of Britain’s tiny private hospitals (average size 50 beds). But the lack of any public support for privatisation has not stopped commissioners giving contracts to Virgin and other private companies for work previously done by NHS trusts. This, by any reasonable definition, is privatisation. In 2015-16, 7.6% of NHS spending was on private providers.

Reshaping the law to allow this piecemeal privatisation was the aim of the Health and Social Care Act 2012, which compels CCGs to put services out to tender. The King’s Fund lends weight to disingenuous government denials that they have been privatising services. They would do better to endorse demands for the repeal of the 2012 act and the reinstatement of the NHS as a publicly owned and publicly provided service.
Dr John Lister
Co-chair, Keep Our NHS Public”

https://www.theguardian.com/politics/2018/feb/04/risks-of-outsourcing-and-privatisation-laid-bare

“Two Freemasons’ lodges operating secretly at Westminster”

Expect to see a comment from Owl’s East Devon Freemason’s spokesperson on this one!

“Two Freemasons’ lodges set up for members of parliament and political journalists are continuing to operate secretly at Westminster, the Guardian has learned.

New Welcome Lodge, which recruits MPs, peers and parliamentary staff, and Gallery Lodge, established for members of the political press corps known as the lobby, both remain active, according to Freemasonry records.

A third lodge called the Alfred Robbins Lodge, which was also set up for journalists, also continues to meet regularly in London.

The identities of the members of these three lodges remain unknown outside the world of Freemasonry, however, and so discreet are the members of Gallery Lodge that few journalists working in the lobby appear to be aware of its existence.

One current member of New Welcome told the Guardian that its members keep Gallery Lodge masons at arm’s length, on the grounds that while they are fellow members of the brotherhood, they are still journalists, and “they wouldn’t want journalists listening to their conversations”.

David Staples, the chief executive of the United Grand Lodge of England (UGLE), the governing body for Freemasons in England and Wales, said there was no contradiction between the practice of journalism and membership of Freemasonry.

“Contrary to populist perception, being a Freemason helps those members in roles serving society in the broader sense, including journalists, politicians, policemen and lawyers, to be better in those jobs by encouraging them to act as better people themselves. Their membership is a positive for both them as individuals, and for society at large,” he said.

More Freemasons would declare their membership, he added, if they did not fear prejudice and discrimination: “There should be no conflict between an individual choosing whether to declare their membership or not with that individual’s ability to do their job well. But there is, because some choose to believe otherwise, and some of our detractors are doing so based on nothing other than blind prejudice.”

The disclosure that both political journalists and politicians are Freemasons comes after the outgoing chair of the Police Federation alleged that Freemasons were blocking reforms in policing and thwarting the progress of women and officers from black and minority ethnic communities.

After three years as the chair of the Police Federation, Steve White said: “I found that there were people who were fundamentally against any kind of change and any kind of progress, and they always happened to be Freemasons.”

The charge brought an angry denial from the UGLE. In a letter to the press, Staples said: “We are quietly proud that throughout history, when people have suffered discrimination both in public and social life, Freemasonry has welcomed them into our lodges as equals.” He added that many Freemasons chose to keep their membership secret in order to avoid being discriminated against.

At Westminster, MPs and peers are not obliged to declare their membership of the Freemasons, although the Commons authorities say they can disclose this information voluntarily on the registers of members’ and Lords’ financial interests. None currently do so.

Nor do any political journalists declare their membership of the Freemasons on the register of journalists’ interests, which is maintained by parliament.

The three lodges each meet four times a year at Freemasons’ Hall, the UGLE’s headquarters in Covent Garden, London.

The UGLE said Gallery Lodge currently has 45 members and Alfred Robbins Lodge – which is named after a former newspaperman and prominent mason – has 18 members.

“None of the members who have joined either of these two lodges since 2000 have their occupation recorded as journalist or anything obviously linked to the newspaper industry,” the spokesman said.

It is unclear how many of their members joined before that year, however, and UGLE will not identify the lodges’ members.

The Guardian understands past members of Gallery Lodge have included former journalists at the Times, the Daily Express, the Scotsman, and several Hansard reporters.

While the New Welcome lodge has about 30 to 40 members, the Guardian understands only about four of the current members are MPs, and that none are peers. Most of the members of the lodge are former MPs, parliamentary staff or police officers who have served at Westminster. MPs who are Freemasons are members of other lodges, however.

Although New Welcome lodge was set up following the 1926 general strike, to admit Labour politicians who had previously been refused entry to Freemasonry, the Guardian understands that none of its current members are Labour MPs.

Many are said to have left the Freemasons in the 1980s, fearing they would lose their seats if they were questioned about membership while reapplying for the Labour party’s nomination in between general elections, which had become a requirement at the start of that decade.

At least one Labour MP is said to have left New Welcome Lodge when facing reselection at this time, and arranged for his membership to be held in abeyance so that he could be quietly readmitted once he knew his parliamentary seat was secure.”

https://www.theguardian.com/politics/2018/feb/04/two-freemasons-lodges-operating-secretly-at-westminster

“Why money still rules the roost in British Politics” and why the very, very few control the not so many in the Tory Party

Electoral Reform Society:

If ever there was a story which revealed the disproportionate influence exerted by big party donors, it was the on the front page of The Times on Tuesday.

The article set out what has been described as a ‘donors’ revolt’ over Theresa May’s leadership, based on an account of a fundraising event held last week.

At the event it was reported that “about a quarter of the 50 donors present were said to have demanded her resignation.”

The story reflects the nature of power in the UK: a handful of wealthy individuals can buy access to government Ministers – and with it, the ability to ensure their views are heard on the front pages.

What distinguishes these individuals from most other people, of course, is the fact they are bankrolling the Conservative Party led by Mrs May.

But should that fact alone – particularly when very few people can afford to make significant donations to a political party – entitle them to have such a domineering voice on their leader’s credentials?

In a 21st century democracy, the answer should be a clear ‘no’. The Prime Minister and the government should be accountable to all citizens – regardless of how much money they have.

But the problem of big money in politics is not a new one. Senior politicians from a variety of different parties have been held to ransom by those with the deepest pockets – a fact which has led to scandal after scandal over the years: from Labour’s ‘cash for honours’ crisis, to the Liberal Democrats being caught arranging a private meeting with the Chief Secretary to the Treasury for a potentially illegal donor.

As we noted in our report, ‘Deal or No Deal: How to Put an End to Party Funding Scandals’, there is an expectation that comes with donations. The Committee on Standards in Public Life interviewed several of the major party donors in 2011, throwing up some uncomfortable if wholly logical conclusions about the relationship between donations, policy influence and honors.

Donor Stuart Wheeler suggested it was ‘natural’ and unobjectionable that donors would gain policy influence: “If it is influence in the sense of being able to put their views on what is best for the country and how the country should be run, I do not see any objection to that.”

House of Lords appointee Michael Farmer suggested that many donors would expect an honour in return for their finance:

“You cannot get away from the fact that the word ‘peerage’ is connected to large donations, so if you are giving a large donation there is a part of your mind somewhere that every now and then thinks about it”

The problem with the UK’s big-donor culture, even when the donations are legitimate, is that it gives those with the most money a disproportionately large say.

The story this week concerned just a handful of very rich individuals. Compare that to the 12.4 million people who voted for the Conservative party at last year’s election.

It highlights once again that the system of party funding in this country is broken and skews politics away from ordinary people who should be at the forefront of politicians’ minds when they are making decisions.

The ability to purchase political influence is damaging to trust and confidence in our democratic institutions. It is time we had a fairer model for funding our politics – one which put voters at the centre.”

https://www.electoral-reform.org.uk/why-money-still-rules-the-roost-in-british-politics/

Virgin – propped up by British Government

“As Britain’s best-known businessman, seen by millions as a buccaneering role model, Sir Richard Branson has produced bookshelves of advice about “relying on yourself”, creating a “nation of go-getters” and “standing on your own feet”.

As he wrote in his self-help manual, Screw It, Let’s Do It: “If you want milk, don’t sit in the middle of the field in the hope that the cow will back up to you.” This year, however, is likely to be one where Branson gets most of his British milk from the taxpayer teat.

Using recently published company accounts and regulatory disclosures, The Sunday Times has established that Branson’s Virgin Group is on course to join what critics call the “corporate welfare state” — with the majority of its UK revenues coming from work subsidised, or wholly funded, by the public purse.

More than 80% of revenues at Virgin UK Holdings, Branson’s main holding company in Britain, already come from operations dependent on public funding, mainly rail and the NHS, the accounts show.

Branson’s companies received £320m from taxpayers in 2016 for running public services. Some £262m of this was from the health service or local councils for medical and social care through his Virgin Care business. Then there was a net government subsidy of £58m for Virgin’s share of the East and West Coast rail franchises, a joint ventures with Stagecoach.

Virgin UK Holdings does not own all Branson’s British businesses, such as his stakes in Virgin Money and Virgin Atlantic, his biggest cash cow in 2016. And the tycoon — who lives mostly in his tax haven personal island of Necker in the Caribbean — now has substantial international interests, not least his space venture.

Nonetheless, in the UK, the balance of his income is shifting more towards public services. In a deal likely to be completed this year, Branson will slash his interest in Virgin Atlantic, from 51% to 20%. He has already cut his stake in Virgin Money to 35%.

Even in 2016, with the airline still on board, healthcare and rail accounted for about 40% of Virgin’s total UK revenues. By comparison, the now-collapsed Carillion earned about 45% of its UK income from the government that year.

Virgin Care has more or less doubled its NHS work in the past two years. If that growth were to continue, it is easy to imagine that more than half of Virgin’s UK revenues could be derived from public sector work — particularly in light of the likely reduction of Branson’s airline holding.

“Branson poses as a champion of competition, but has always been reliant on getting government-granted contracts and monopolies.” said Branson’s biographer, Tom Bower. “But as that sort of work grows, so does the risk that political controversy over it contaminates the brand loyalty, which is Virgin’s only real asset.”

Branson’s recent deal to escape up to £200m in future payments to the Treasury for his 10% share of the East Coast rail franchise drew that sort of political flak. Lord (Andrew) Adonis, a former transport secretary and chairman of the National Infrastructure Commission, called it “scandalous” — though Virgin points out that it has lost money on East Coast, and paid a £2m premium to the government last year.

On the far more lucrative West Coast line, Virgin’s 51% share generated revenues of £1.1bn, profits of £34m and it paid £7.5m in tax in 2016-17. The franchise also netted Branson £60m in state subsidy that year — and almost £1bn since 2008, according to the Office of Rail and Road (ORR) regulator.

Virgin says most of this money was paid to Network Rail to maintain the tracks its trains use. The ORR, however, defines it as a subsidy to Virgin, since the operator would otherwise have to pay Network Rail itself.

West Coast is much improved under Virgin — though Branson cannot claim all the credit, as he often does. The £9bn upgrade, allowing today’s faster, more frequent trains, was funded by further Treasury cash.

Despite all the subsidies, Virgin now charges £338 for a standard peak return from London to Manchester, up 50% since 2008. The morning peak period, during which such fares apply, finishes as late as 10.40am, while the evening peak for most English destinations starts at 3.01pm.

However, it is the NHS that has the potential to cause Branson the greatest political grief. Tellingly, in the 400 NHS and social care contracts now run by Virgin, its branding is extremely low-key. The Care Quality Commission, the health regulator, strongly praises many of its services. Yet middle England may not always agree. In Somerset and Yorkshire, where Virgin runs NHS contracts, there have been controversies about care standards. In Surrey, Virgin was criticised for suing the NHS, winning a multimillion-pound settlement. There is also controversy about tax. Branson’s core health and social care company, Virgin Care, made more than £8m profit in the year to March 2017. Its accounts, published on December 28, show a liability for corporation tax of £1.6m.

Across the web of companies that make up the Virgin Care group, however, “administrative expenses” of £31m were set against profits, reducing tax liabilities to nil. Virgin Care claims on its website that “we have always paid our UK taxes in full and will continue to do so”. In fact, it has never paid any UK tax — because, it says, it has never made a profit.

Virgin declined to respond to detailed questions about what the administrative expenses were, though it said they were less than in the public NHS.

Branson says Virgin Care has “saved the NHS and local authorities millions” and insists he does “not want or intend to profit personally from the NHS”. If and when a dividend was taken from the work, a spokesman said, all the money would be invested back into NHS services.

Virgin said last night that it had “many successful businesses across the world”, and continued to “start and invest in new ventures”. It said the publicly funded businesses accounted for a smaller share of profits than of revenues, and pointed out that it might no longer run West Coast after 2019, when its current deal ends, though it is bidding for a 30% share in the new franchise.

Branson’s trajectory in Britain seems clear, however. While Virgin’s name still adorns many UK businesses, it no longer owns most of them, including Virgin Mobile, Virgin Media and Virgin Radio, instead licensing other companies to use the Virgin brand. “Virgin is increasingly living off the state,” said Bower.

Yet even as it does so, new questions are being asked over the model, and even the very principle, of private involvement in public services. With the collapse of Carillion, the rise of the hard left, and a scathing National Audit Office verdict on the Private Finance Initiative, could Branson, for once, have misjudged a trend?”

Source: Sunday Times (paywall)

Scrutiny and Privatisation don’t go together like a horse and carriage

“A leading Capita shareholder has attacked the embattled outsourcing giant for flouting corporate governance rules, and claimed its current crisis was “preventable”.

Royal London Asset Management said it had been “privately raising concerns about Capita’s weak governance for a number of years” and had repeatedly voted against pay deals.

Shares in Capita crashed 55% last week after its new chief executive Jon Lewis said it would need a £700m rights issue, suspended its dividend and launched a fire sale of assets. Lewis, the former chief executive of oil services company Amec Foster Wheeler, plans to simplify the outsourcing behemoth, which has contracts ranging from army recruitment to Tesco Bank’s call centres.

The broadside by Royal London, a 0.4% shareholder, said the new board must “ensure that Capita does not repeat the mistakes of the past”. Royal London’s corporate governance chief, Ashley Hamilton Claxton, said: “Until recently, Capita’s board flouted one of the basic rules of the corporate governance code, with a small board primarily comprised of management insiders. The result was a board that lacked the independent spirit to rigorously assess whether the company was making the right long-term decisions.”

She added that Capita’s pay policy “left something to be desired” — citing big losses in 2013 that were excluded from the calculations on executives’ pay.”

Source: Sunday Times (paywall)