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Its perfectly legitimate for people to tax plan. They are only obliged to render unto Caesar what is due to Caesar.
We must be careful about what we are addressing. There is a danger of confusion in some of the criticisms made about the level of tax avoidance. A number of hon. Members have mentioned the Trades Union Congress report that refers to a tax gap. The work was undertaken by Mr. Richard Murphy, who identifies a £25 billion tax gap caused by tax avoidance. Essentially, he looked at headline tax rates and then at the total tax rate, measured the gap and said that it was caused by tax avoidance, but that fails to take into account that we as a Parliament deliberately introduced measures that mean that entities, individuals and companies are not necessarily paying the headline rate.
It appears that half of the £25 billion gap is due to a combination of independent taxation in the UK between spouses and civil partners and the fact that companies can defer taxation through capital allowances. Bill Dodwell of Deloitte put it well when he said:
The TUCs report doesnt inform the tax avoidance debate: it seems to be challenging policy choices (independent taxation; the taxation of the self-employed; capital allowance rates) by labelling them as tax avoidance.
Christian Aid has led the argument on the international development element of the issue. I know that it is in frequent communication and contact with my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell), our spokesman on international development. Christian Aid makes the point made by the hon. Member for North-West Leicestershire: it is better that countries should be self-sufficient and rely on their own tax revenue rather than aid. That is an interesting point for the Minister to answer. How much are the Government doing to assist in that?
On a note of caution, my party and I believe that globalisation has many positive effects and that it is good for countries to trade with each other and for multinationals to be active in developing countries. As my hon. Friend the Member for Banbury (Tony Baldry) pointed out, multinationals go to developing countries and create jobs, which benefits those countries. One reason why they may do so is the lower tax burden. It might be a combination of accident and designmy hon. Friend referred to tax holidays, for example but if the lower tax burden is no longer available, it is legitimate to question whether multinationals would invest in the same way and create the same number of jobs.
To what extent do the numbers in the Christian Aid report incorporate a dynamic model? If not for what it describes as the tax leakage from developing countries to developed countries, would there be as much economic activity? I question whether that is the case.
To conclude, in order to allow the Minister his full time, there should be more transparency and greater exchange of information, and it is right that we should debate the practical ways of developing them, but I have two questions about the UK and anti-avoidance. To follow the comments made by the hon. Member for Twickenham, how much is HMRC investing in enforcement and tackling tax avoidance? There were reports that the amount being spent on those matters increased to £1 billion, although we do not have comparable figures for previous years. Will the Minister put that £1 billion figure into context?
Secondly, avoidance activity is likely to increase when tax rates increase. A new 50p income tax rate has just been announced. It was reported that Treasury modelling said that 69 per cent. of those affected by the 50p rate will avoid or evade paying at least some of the tax. Will the Minister confirm whether those reports are accurate?
The Economic Secretary to the Treasury (Ian Pearson): It is a pleasure to serve under your chairmanship this afternoon, Mr. Hancock. The debate has been excellent with well-informed and interesting contributions from the hon. Member for Banbury (Tony Baldry) and my hon. Friends the Members for Llanelli (Nia Griffith), for Great Grimsby (Mr. Mitchell) and for Leeds, East (Mr. Mudie), as well as from the Opposition spokesmen, the hon. Members for Twickenham (Dr. Cable) and for South-West Hertfordshire (Mr. Gauke). In particular, I congratulate my hon. Friend the Member for North-West Leicestershire (David Taylor) on securing this timely debate on tax avoidance and evasion.
The Government believe that for any tax system to be effective, everyone must pay their fair share. Tax evasion and avoidance damage the ability of the tax system to deliver its objective of paying for services that we all use and need. It is important to say that the vast majority of people in Britain pay the right amount of tax. It is unsurprising that those who pay are angered by reports of the small minority of people and companies who seek deliberately to evade or avoid paying their fair share. The Government have been consistent in challenging avoidance and evasion through legislation and litigation, and by working closely with other countries, which is increasingly important in the global economy.
It is said that businesses that operate internationally can most readily reduce the amount of tax they pay and that globalisation opens opportunities to avoid tax. From the UK point of view, we must keep our rules under review and work with international partners to support our competitive position and protect our tax base. We must also ensure that our partners systems are not open to abuse. I will shortly say more about the important international agenda that we are pursuing in response to the points made by my hon. Friend the Member for North-West Leicestershire.
The Government are also taking strong domestic action to counter tax evasion and avoidance. The Budget set out a further package of measures to tackle tax evasion and avoidance. In addition to closing down a number of abusive and artificial tax avoidance schemes, we announced measures to tackle cross-border tax evasion, including an opportunity for holders of offshore bank accounts to come forward and pay what they owe. The Chancellor announced steps to ensure that large taxpayers take responsibility and accountability for paying tax, including a duty on the senior accounting officers of the largest companies to sign off on tax returns. As hon. Members noted, we are also introducing legislation that will allow HMRC to publish the names of serious tax defaulters. That package of measures will raise more than £1 billion in the next three years and, by 2010, will protect a further £3 billion of tax receipts from evasion and avoidance each year.
I mentioned that this problem is international. We are not the only country acting domestically to tackle tax evasion. Earlier this week the US Government released proposals to tackle the problem, which we will watch with interest. The need for international collaboration on taxation has never been clearer. The global financial downturn and the shocks that precipitated it highlight the extent to which our economies are intimately interconnected. The ability of large firms to move large flows of money around the world with ease provides greater opportunity for tax arbitrage through structures designed to minimise tax, as we have heard from hon. Members. As well as leading to a loss of tax revenues at home and in the developing world, such structures add capacity to the financial system and increase uncertainty about the location of risk and value.
The Government have long been committed to supporting developing economies. As well as providing aid to the poorest developing countries, we have been clear about the role that tax can play in the development process. I assure my hon. Friend the Member for Leeds, East that that is not a new conversionit has been a consistent policy over many years. In effect, we have led G20 discussions on taking action in this area. It was among the key issues discussed in London, where a great deal of progress was made. The G20 leaders agreed to take action against tax havens and noted the published OECD list of jurisdictions that do not meet international standards for exchanging tax information. They are ready to deploy sanctions, if necessary, and I will say more about that in a moment.
Tax information exchange agreements play a key role in combating evasion and avoidance by enabling tax authorities to obtain information on the foreign income and assets of their taxpayers for tax assessment and compliance purposes. That makes it more difficult for people to hide income in foreign accounts and to avoid paying tax to their own authorities. Perhaps more so than developed countries, developing countries suffer from flows of capital to tax havens. Tax information exchange agreements provide greater transparency and make it possible to ensure that tax is paid where it is due, meaning that illicit flows of ill-gotten gains are more easily discovered. Transparency has been a key theme of our debate.
The Governments priority is to ensure that momentum in this area does not falter and that our G20 commitments are delivered. We are looking to countries that do not
meet international standards on exchanging tax information to make swift progress. As the hon. Member for Twickenham mentioned, the Prime Minister has written to all our overseas territories to remind them of their commitments. The hon. Gentleman also asked about G20 sanctions. The G20 is certainly prepared to take counter-measures, and I refer him to the communication annexe of the G20 report, which outlines them.
We are talking to countries such as Switzerland and Lichtenstein, which were mentioned, about the implementation of their commitments to exchange tax information with the UK through bilateral treaties. Those steps will not only bring benefits for tax collection in the UK, but help developing nations to improve their tax systems. Rising revenues and sustainable economic growth are important for the strategies of developing countries to move out of aid dependency. With that in mind, we were able to secure the support of our G20 colleagues on ensuring that developing countries benefit from new measures to enhance co-operation on tax. The Prime Minister has written to the OECD to ask it to look at ways to enable developing countries to participate in and benefit from the exchange of tax information. He wrote specifically about extending global forum membership to developing countries. We will continue to explore mechanisms to support developing countries.
Transparency is the key to tackling tax evasion. Tax authorities need the capacity to collect the taxes that are due, but they also need to be able to assess the full extent of tax liabilities. The hon. Member for Banbury commented on the measures that we have taken in Sudan. In addition to those, we are exploring the OECDs model multilateral tax information exchange agreementperhaps that addresses the 192 squared point that my hon. Friend the Member for North-West Leicestershire
made about bilateral agreements. That agreement could be a significant step towards allowing developing countries access to relevant tax information without requiring time-consuming and resource-intensive bilateral negotiations.
HMRC will continue to work closely with other jurisdictions through the Joint International Tax Shelter Information Centre and other international groups to combat avoidance and global tax risks. HMRC deals with all information that is received on a resource-to-risk basis. I cannot comment on individual cases, but it is important to understand the operating efficiencies that have been made by HMRC in recent years. We are also building a better evidence base to underpin our work.
The Secretary of State for International Development has commissioned detailed research on the impact of tax evasion on developing countries and the interim review is expected imminently. Between 2001 and 2006, the Department for International Development undertook 101 tax-related projects to support developing countries in improving their tax systems. We are doing a lot with developing countries, not just Sudan, and I could give many further examples of the action we are taking. We are working through the African tax administration forum to share experiences on policy and process.
Mr. Mike Hancock (in the Chair): Order. I am afraid that I will have to interrupt you, Mr. Pearson. I thank all Members who have taken part for the courtesy that they have shown to the Chair and to each other, and I ask them to leave the Chamber quietly as we progress on to the next debate.
Dr. Richard Taylor (Wyre Forest) (Ind): I am delighted to be having this debate at such an appropriate time, and I am very pleased to see the Minister, with whom I often exchange shots across this Chamber. I am also very pleased to see, behind me, the hon. Members for Stafford (Mr. Kidney) and for Cannock Chase (Dr. Wright), who have been, and are, closely involved in whistleblowing issues.
The debate is absolutely relevant. First, the country was staggered by the revelations from mid-Staffordshire, after which people inevitably asked why no doctor or senior nurse appeared to have spoken out. Then, at almost the same time, we got the answer with the case of the whistleblower from Brighton. She admitted that she had done wrong in breaching confidentiality, but felt that she was doing good by exposing publicly and effectively the standard of hospital care. She thought that was exactly the right thing to do, but she has been struck off. That has raised an absolute furore in the press, and there has been a petition by the Royal College of Nursing. The letter that I liked best was a short and brief one in The Independent of 20 April, from a lady called Fleur Ball, from Plymouth, who wrote:
I surely cant have understood this properly. A nurse has been struck off, not for failing to care for elderly, terminally ill patients, but for breaching their confidentiality by revealing how little care they received...And this only after alerting managers to the appalling lack of care given on that ward.
I looked up the Nursing and Midwifery Order 2001 and discovered that the conduct and competence committee has four options of punishment when it feels that allegations that have come before it are well founded. In this case, it elected to give the harshest punishment because, according to the report of the judgment, the panels view was that
the misconduct found is fundamentally incompatible with being a nurse.
It is not my place to express a particular opinion about the correctness of that decision, because it could well go to appeal, but one can say that it has been an absolute disaster for anyone in the NHS who was thinking of whistleblowing. Surely, the habit of leaving helpless elderly patients in pain, in filthy beds, without food or fluid, is incompatible with being a nurse, or indeed a doctor, if he or she condones it by not speaking out.
Recently, the Select Committee on Health had a trip to New Zealand, which was a long way to go, but was extremely useful. I have the Chair of the Committees permission to comment on one or two things. We met the chair of New Zealands Quality Improvement Commission, who told us:
The excuse, Im too pushed to do better, is rubbish.
The Royal College of Nursing has produced a very useful booklet called, Dignity at the heart of everything we do: Defending Dignitychallenges and opportunities for nursing. It says in the executive summary:
As one nurse explained: I believe there is always a way around obstacles and primarily it is you, yourself, your actions, standards and behaviour that deliver care.
So, however pushed people are, it is up to them to get over those obstacles, and that should be possible even on the most stressful occasions. Otherwise, people should
at least speak out and say that they cannot do something, and say what they need to be able to do it. Therefore, I ask the Minister an absolutely straight question: is there no way of reviewing or reversing the independent panels decision to strike that nurse off, other than appealing to the High Court?
Turning to Stafford, about which much has been said and writtenthere was an exemplary debate on it in this place recently, which was led by the hon. Member for Staffordseveral hon. Members have expressed their amazement that there were apparently no staff whistleblowers there. Dr. David Colin-Thomé, the Governments GP tsar, wrote in the introduction to his review of the lessons learned in mid-Staffordshire:
What has particularly shocked and disappointed me is that no NHS organisations, staff or representatives of the public reported any serious concerns about emergency services in the hospital. Yet patient complaints and patient surveys all pointed to poor care.
We need to know whether senior doctors and nurses attempted to speak out and whether they were silenced. I know that the Government are against it, but an independent inquiry is probably the only way to find out. I have permission to raise this matter in the Health Committee tomorrow, when I will see if its members will consider taking on an inquiry into whistleblowing. Personally, I am not sure whether that would be the best way of getting at doctors and nurses, and I might suggest, tomorrow, that a small group of Committee members, who are not in any way related, geographically, to the problems in that area of Staffordshire, could go there and meet one or two representatives, completely anonymously, just to talk about what they tried to do, if they tried to do anything.
My interest in whistleblowing arose after a number of complaints at home about the out-of-hours service that has taken over in Worcestershire. Three staff have talked to me about their concerns, which I quickly passed on to the chair and chief executive of the primary care trust, with whom I have a very close relationship, and I am glad to say that they are taking it very seriously, having ordered an independent review. Already, sources tell me, that service is improving, so I have not had to go to the press about it.
Why are staff scared? Allegations of bullying in the NHS are rife. If we look at back editions of the Health Service Journal, the editions of 2 April, 16 April and 23 April all had articles about bullying in the service. Thinking about it from the point of view of senior nurses and senior doctors, they are dependent on their managers for their jobs, their mortgages, their advancement, their salary and their salary increments. What has changed from my day? I am often accused of being a dinosaur, and it was some time ago, but in my day a hospital was run by a team that included a senior nurse, a consultant and an administrator. They were all part of the team that ran the hospital, delivering the best care possible for their patients, and there were no secretsthey knew what was going on. If they had a bad doctor, or if the standard of nursing was appalling, they knew about it and addressed it.
The Minister probably will not like what I am going to say next, but since the purchaser-provider split, the emphasis has had to be on finances, competition and targets, primarily, other than patient outcomes. A split has occurred between managers and staff, and that can
lead to these sorts of disasters. In some cases, but not all, it is noticeable that when a doctor or nurse moves from a purely clinical role to one that involves a large amount of management, their loyalty is tested. Are they fully loyal to the patients and staff, or to the management of the trust? That is where a problem arises. What can be done about that? I have one or two suggestions.
First, the Public Interest Disclosure Act 1998 is vital. I obtained a copy of a health service circular produced way back in 1999, at the back of which an annex provides a summary of the main provisions of that Act. The most useful paragraph is the one headed Wider Disclosures, which is so important I must read it out because I desperately want the Minister to publicise it widely. The circular states:
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