George Osborne, tax evasion and the failings of New Labour

(c) HM Treasury

Tom Bailey

George Osborne recently announced a tax deal with Switzerland with the aim of getting back some of the enormous sum (somewhere between £15 billion to £40 billion) that is estimated to be lost annually to tax evasion. It comes after a similar deal which was announced between Germany and Switzerland.

While you might have thought mistakenly like me that tax evasion would be an issue raised in The Guardian rather than The Telegraph, the issue does not quite so clearly divide the main political parties or between the left and right wings. Commentators from all perspectives are angered by the greed of those who fail to pay their dues.

For instance, Peter Oborne recently condemned the richest tax evaders as ‘oblivious to decency and morality’ in a recent piece attacking the moral vacuum throughout British society. There is a wide held feeling, at this time as much as ever, that the richest should pay their fair contribution to the taxpayer.

Given this consensus, the detail of Osborne’s deal has disappointed commentators for a variety of reasons. While action against tax evasion is welcome, this deal’s has shortcomings both in principle and in practice. Private Eye stated that, on account of its flaws, Nick Shaxson, author of a book on tax havens, Treasure Islands, has called for the resignation of HMRC boss Dave Hartnett.

Osborne promised to hit the tax evaders as hard as benefit cheats but the deal will do no such thing. Richard Murphy of the Tax Justice Network attacked the deal for letting tax dodgers off the hook as it both left their anonymity preserved and demanded a low rate of payback. There certainly is a sense of unfairness; you cannot imagine (and rightly so) that a benefit cheat would get off paying back only a fraction of what they owed without disclosing their identity.

Left Foot Forward argued that the move destroyed international efforts at a treaty. Further to these moral objections to the deal, there seem to be a series of practical leaks that might make collection of £5 billion extremely optimistic. I can see that there is a need for any such deal to be pragmatic to actually achieve anything. The no name disclosure could perhaps encourage payment from those who would otherwise flee elsewhere.

However, that is only if any funds remain there in Switzerland as the timescale of the deal may well undermine its success. Private Eye noted that, as the deal takes effect in early 2013, there exists a large opportunity for funds to be siphoned off to Singapore or whichever haven provides the best means for the super rich to escape the UK taxman.

How depressing then that Osborne, despite the many leaks of his own policy, has been able to take the moral high ground on the issue against Labour as he can rightly point to the fact that they did no better. The argument that has been made that Brown wanted a global deal does not address the fact that this attempt came only at the end of his time as prime minister.

He became chancellor in 1997; efforts towards that deal came after nearly twelve years of apparent inactivity. The only other action of note was when, late in 2009, the UK signed a deal with Liechtenstein over tax evasion. It is dismal that it was only after the economic crash occurred that there was this effort to tackle such serious and immoral criminality amongst those super rich to whom New Labour’s leadership were so deferent to. While the crash compounded the need for a proper contribution from the most wealthy in society, the government should have been taking action throughout the boom years as well.

Blair’s desire to appeal to the middle class aspiration seemed to feed into a sense of contempt for the notion that the richest should pay their full dues, a view brilliantly satirised in this photoshopped photo. Perhaps most famous of all, Peter Mandelson is often quoted as saying that New Labour would be ‘intensely relaxed about people getting filthy rich’.

The full quote was that Mandelson felt that they were ‘intensely relaxed about people getting filthy rich as long as they paid their taxes’. The difference between the two accurately rather neatly reflects the difference between what Labour seemed to say said about tax evasion on the one hand and their actual action against it on the other.

Osborne’s deal with Switzerland has many flaws but his £900 million boost to efforts to tackle tax evasion is a step beyond New Labour’s disappointing record of inaction and a damning indictment of that previous government’s failure for thirteen long years to make any sustained effort to tackle the immoral crime of tax evasion.

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