The Guardian view on Labour and the tax gap: a £5bn question for a coterie of insiders
In February 2016, the Labour MP Dame Margaret Hodge went on the warpath. She tweeted: “I hear Edward Troup to head HMRC … Good news for big biz. Bad news for ordinary taxpayers.” Repeating her criticism to this paper, she described Sir Edward Troup as “a rather anonymous-looking person, but incredibly powerful”. This week, the Labour party created a new panel of experts to help it crack down on tax avoidance. Of its four members, two will be Sir Edward … and Dame Margaret. To use a 2016-era term: awks.
This is no mere clash of personalities. It cuts to the core of where Labour stands on tax. In a distinguished career, Sir Edward has been a corporate lawyer in the City, an adviser to the Treasury and a commentator on tax affairs. In that last role, he wrote in the Financial Times in 1999 that “taxation is legalised extortion”. In 2004, he told MPs on the Treasury select committee: “I would not like to support anything which is perceived as tax avoidance, but you have got to remember that this is money left in the economy and this is not necessarily a bad thing for the economy.”
As chair of the public accounts committee after the banking crash, Dame Margaret battled tax avoidance. She took Sir Edward to task over his positions and clashed with another member of Labour’s tax panel, Bill Dodwell, declaring that his then-employer, Deloitte, benefited unfairly from its links to the Treasury. Now all three will work together, drawing up policies to claw back as much as £5bn in missing tax revenues.
A welcome burst of pluralism? Hardly. That would have meant drafting in experts on small businesses (which account for most tax avoidance), and others from outside the tax industry. There are plenty of academics, trade unionists and independent investigators who would have merited inclusion. In December, Labour established a review of financial services to “boost economic growth and make working people better off ”, yet among its 10 appointees, there was not one from a consumer rights group or from an organisation representing working people. There were, however, senior figures from Barclays, Prudential and Legal & General. Sir Keir Starmer makes no secret of his admiration for Tony Blair, yet New Labour’s early enthusiasm for stakeholder capitalism led it to pull together a wider range of perspectives.
For now, this need not bother Sir Keir’s advisers. Just weeks after Jeremy Hunt stole their proposals on taxing non-doms and splurged the cash for more tax cuts, they now have an answer to any troublesome Tory who asks how Labour will pay for those breakfast clubs and extra NHS appointments. But it is not much of a figleaf, nor in this harsh economic climate will it stay in place for long. By setting its face against taxes on wealth or extra borrowing, the Labour leadership has boxed itself into an exceedingly and unnecessarily tight corner.
Taxes on share dividends and capital gains are far lower than the rates paid on income from work or pensions: they should be equalised. As tax experts argued in a 2016 paper for Labour, large corporations should be compelled to publish their tax returns and HMRC needs substantially more money. Until basic things like these are done, the tax system will remain, in the words of one of its longest-serving MPs, “Good news for big biz. Bad news for ordinary taxpayers.”