Mark Field is the Member of Parliament for the Cities of London and Westminster and currently serves as a member of the Intelligence and Security Committee. Follow Mark on Twitter
Berate banks and bankers if you
Slate the tax
arrangements of large multinationals, whose contributions in VAT and employers’
national insurance remains substantial even if their corporate tax
contributions (thanks to a hopelessly complicated UK tax code) fall short of
that demanded by a print media (whose own holding companies are operated by
But for so
long as UK governments of any colour remain addicted to spending well beyond
our means, then we are in hock to both banks and global corporations. For even
as the annual ritual of banker bonus baiting is upon us, it is these
institutions that are integral to the market system that feeds the national
borrowing and spending addiction.
truth is that the clamour for ever greater public expenditure is the biggest
roadblock to meaningful reform of our banks.
The Government’s attempts to kick start bank activity via the Funding for Lending
scheme have delivered some success in the area of subsidised mortgages (albeit
largely where borrowers have existing significant equity holdings). But progress at lending into the real economy has been more faltering.
manager after bank manager has told me, the trouble is that for all their plans
to lend more, widely there are relatively few borrowers in the market place at
the moment. Confidence remains elusive. Meanwhile the twin burdens of tax and
fears of rising interest rates are dissuading many companies from investing
for the future.
The big retail
banks remain fearful of the next toxic legacy of the boom years of the Noughties
that will begin to unravel. PFI, Libor, interest rate swaps and other synthetic
derivative products will no doubt be joined by a range of other novel financial
products that were marketed in the past, but with the benefit of 20:20
hindsight will be regarded as missold. If in future banks are terrified at the
prospect of any sort of innovation, we should not be surprised to see their
profits plummet permanently. The prospect of several new waves of class action
litigation claims arises at the very time we desperately need banks to lend
normally. If certainty and stability does not return to the world of financial
services there is precious little prospect of the UK enjoying the future
economic wellbeing that is created by growth.
dispute David Cameron’s recent proclamation at Davos that when it comes to
paying tax, large multinationals need to ‘smell the coffee’. However,
taking such a political stance has its risks. Not that anyone should be overly
concerned at the knee-jerk reaction by many FTSE 250 communications directors
in the immediate aftermath, arguing that UK Plc was being ‘talked down’.
legitimate concern is the hazard that tax and regulation becomes arbitrary. One
of our nation’s greatest assets as a place to do business is our reputation as
predictable, reliable, certain and underpinned by the rule of law. We undermine
that timeless tradition as an open place to trade and prosper at our peril. If large
international corporations are arranging their affairs to avoid paying their
‘fair share’ of tax, the government should cease moralising and get back to
legislating such loopholes out of existence. Naturally, the sheer complexity and
size of the UK tax code, now larger even than the once-derided Indian version,
has been the creator of the highly remunerated Guild of Tax Avoiders.
worry us most is that once the tax authorities are empowered to make ethical
judgements on the affairs of global corporations, before long they will turn
their attention to ordinary taxpayers, who have every right to feel that once
settled their tax affairs should not be re-opened on a whim. This perceived
imbalance between the rewards for success and the risks of failure is the
essential roadblock to restoring confidence in our small, medium-sized and
growing business sectors. Without it, economic recovery will remain