2012 and all that

So, it’s the end of the year. It’s been a bit of a funny one, in many ways. We started with a drought, and ended it the wettest year on record. On a personal note, it’s the year I was elected Deputy Mayor of Evesham, and I’ve enjoyed every part of it. I’m looking forward to the forthcoming year even more. But it hasn’t all been good: the weather caused massive disruption to several of our festival events with the wind meaning no balloons at the balloon festival and the rain resulting in too much river for the river festival. A combination of last winter’s ice and the summer’s rain led to lumps of masonry falling off the Bell Tower. Flood water has been back onto the roads and back into premises on the aptly-named Waterside, although we’ve been fortunate that we didn’t come anywhere near the devastating floods of five years ago.

Long to reign over us

Nationally, it’s been a historic year. A British monarch celebrated 60 years on the throne for only the second time in history, and the Olympics returned to Britain for only the third time. We’ve had a lot to celebrate, although coverage of the Queen’s diamond jubilee was some of the most shockingly inept broadcasting I’ve ever seen from the BBC. Not that the BBC was entirely alone in that respect; the inanity of celebrity comperes at the jubilee concert in The Mall was rivalled only by some performers who don’t know the difference between a birthday and a jubilee. Not that it matters, really, the monarchy has probably never been as popular among the general public.

A potential Romneyshambles

Although we would never have admitted it at the time, a lot of us privately might have agreed with Mitt Romney’s comments about London not being quite ready for the Olympics. Media stories about the army having to be roped in to cover for G4S’s inability to recruit and train staff, and negative publicity about some of the more stupid branding rules associated with the event, weren’t exactly the best build-up. Add to that the fact that the great British public loves a good moan, and everything was in place for a gold medal performance in self-flagellation. Or possibly a silver medal, because someone else would undoubtedly have beaten us better than we could beat ourselves.

It didn’t happen that way, of course. I had an inkling of how big it was going to be when the Olympic flame made its way through Evesham. I have honestly never seen the town centre so full. As I made my own way to the High Street, it seemed as if the entire population of the town was heading the same way. Every last vantage point was taken, with the crowds several layers deep.

Be not afeard: the isle is full of noises

I wasn’t in Evesham when the Olympics actually started. Instead, I watched the opening ceremony in a log cabin in Scotland, at the end of a family holiday. Again, it could so easily have gone wrong. Olympic opening ceremonies of the past have varied from the turgid to the bombastic, and everyone knew we didn’t have the budget to compete with Beijing. But Danny Boyle’s bizarre combination of Shakespeare, JK Rowling, Isambard Kingdom Brunel, a flock of live sheep, Mr Bean, NHS patients bouncing on their beds, Dizzy Rascal, the Queen and Tim Berners-Leee – all soundtracked by those guys who wrote the song which goes “lager lager lager lager lager lager” – was an audacious triumph.

The games themselves weren’t half bad, either. No, that kind of British understatement just won’t do. They were absolutely, stokingly, stupendously brilliant. Even the BBC managed to redeem themselves from their jubilee disaster by getting their coverage spot on. Some might argue that this is due to the unique way in which the BBC is funded, but I put it down to the fact that sport is one of the few areas of programming that is still run by people who know what they’re talking about. However you look at it, though, even the BBC would have struggled to make the games look good if the competitors hadn’t produced the goods. But produce they did. The best performance by a British Olympic squad (please, no “team GB”) for over a century, and even when it wasn’t the Brits winning it was our favourite global superstars. And I did what I have been telling myself I would do, ever since I first saw the Olympics on TV, and went to see them on home turf. Not at the stadium (missed out on the ballot for that), but at the triathlon in Hyde Park. It was a great day out, topped off by a British victory.

There were other sporting achievements, too, of course. Bradley Wiggins became the first British winner of the Tour de France, and Chelsea became the sixth English winners of the European Cup – itself a record for any one country. Incidentally, Bayern Munich have now lost in the final to three different English teams. We’ll gloss over the record of the England team in the European Championships.

Guns and posers

Royalty and sport provided the highlights, and the weather the main lowlights. Over in the US, yet another mass killing gave NRA spokesman Wayne LaPieree the opportunity to claim gold medal for sheer, utter stupidity. But 2012 will also be noted for an unprecedented musical achievement. Never before has a Korean artist so much as troubled the UK charts, let alone approached the top of them. But a song poking fun at the aspirations of a posh Seoul suburb became not only the most viewed video ever on Youtube, but also the soundtrack to a thousand parodies and a million embarrassing dad-dance moves. Oppan Gangnam seutayil.

Cyber-crime, terrorism and the big bad wolf

A rather strange article in the Daily Telegraph claims that

Britain is losing the war on internet crime, a leading police officer has admitted, after it emerged that cyber crime cost UK businesses around £205 million in lost revenue last year.

That’s a fairly scary headline, and if true is something to be concerned about. But the rest of the article doesn’t even mention this cost to business. Instead, it talks instead about fraudsters using the Internet to target their victims:

Commissioner Adrian Leppard, head of City of London police, said online fraud is rising “exponentially”, with the largest number of attacks originating from Eastern Europe and Russia.

Mr Leppard said half of all fraud in the UK, which costs the country £70bn a year, is now conducted online.

Among the victims are wealthy retired people who are conned out of large sums money in fraudulent share schemes at a cost of £3.5bn a year.

The average cost to the victim is £25,000 and half of those who lose out under the schemes are over 65.

The article doesn’t give details, but the implication is that many traditional scams, such as “boiler rooms” are increasingly being carried out via the web rather than by phone or post. Phishing, too, would probably fall into the same category – people lose money from their bank accounts after being duped into giving away their login details.

That is, clearly, a problem, and the international nature of the Internet makes it a lot easier for the criminals to be in one part of the world and their victims in another. I don’t find it at all surprising that the Russia and Eastern Europe is the source of the largest number of such frauds. But the article makes a different, rather more puzzling, claim:

There is “plenty of evidence” that al-Qaeda and other terrorist groups are using the proceeds of online fraud to finance their activities, he said. The police and security services are seeking to disrupt those lines of funding.

Now, call me ignorant if you want, but I wasn’t aware that al-Queda had a major presence in Eastern Europe. And, truth is, I’d be surprised if there is any significant overlap between the online activities of al-Queda and those of Eastern European fraud gangs.

So, forgive me if I’m being just a little cynical, but I’m wondering if al-Queda aren’t really little more than a bogeyman in this discussion. After all, as the article goes on to say

However, Mr Leppard warned that the 800 specialist internet crime officers face being cut by one quarter under spending cuts.

Whether or not the government will be deaf to Mr Leppard’s claims remains to be seen, but it’s hard to see this as anything more than a piece of propaganda. Of course, crime is an issue, and we need to be aware of trends in technology-based crime and take appropriate steps to remain up to date. But it seems to me that the issue is more about ability than funding, and I have a feeling that I’m not the only one:

Keith Vaz, chairman of the commons Home Affairs select committee, suggested to Mr Leppard that internet criminals “keep running rings around some of the best police officers in the country”, adding: “Are we winning this battle?”

What’s more worrying here, from a political perspective, is that playing the al-Queda card is often a prelude to asking not just for more money, but more powers. Given the mauling that the draft Communications Data Bill has received at the hands of the parliamentary select committee, is this just another ploy to try and manipulate public, and political, opinion? I have a feeling that the answer is “yes”.

Incidentally, going back to the previously quoted statements, it’s clear that older people are far more at risk of online fraud. These are, of course, precisely those who are likely to be less familiar with the Internet, and, in particular, may be unaware of just how easy it is to fake an identity online. So it seems to me that a major plank of any solution will be a combination of greater user education and better security management by online institutions. And by “better security management” I don’t mean requiring more complex passwords or adding more hoops for users to jump through, but developing systems which are secure by design. Some of the biggest culprits here are the banks and credit card companies which have devised systems intended primarily to insulate them from the costs of fraud rather than actually reduce it. The fact that the police apparently are not aware of these systemic flaws in the mechanisms ostensibly designed to protect consumers rather suggests that Keith Vaz is spot on in his comments.

Some facts about Google

Prompted by yet another economically illiterate tweet criticising Google for the relatively small amount of corporation tax paid in the UK, I decided to do a little research myself and find out a bit more about Google’s financial situation here.

Google is, of course, a multiheaded multinational, with a lot of different companies both in the UK and trading in the UK. But we’ll start with the most obvious, Google UK Limited.

You can get a full copy of Google UK’s financial statements as submitted to Companies house from that link, but you have to be registered and logged in to do it. So, for the benefit of those who can’t be bothered, there’s a copy of the most recent here. And here’s a summary of what you’ll find:

Google UK’s income for 2011 was approximately £396 million (£395,757,534 to be precise, but for the rest of this article I’ll stick to rounded numbers as they’re easier to take in at a glance. You can get the details from the linked documents) That’s all gross profit as Google UK doesn’t have any outstanding debts or liabilities.

However, Google UK’s expenditure for the year was £417 million. It doesn’t take a genius to work out that this actually makes Google UK unprofitable in a standalone sense. I’ll come back to that later, as the question of where Google is profitable is relevant. But, for now, here are some of the payments which account for that expenditure:

Payments to the parent company Google Inc: £62 million
Donations to charity: £76 million
Wages and salaries: £214 million
Social security costs: £22 million
Corporation Tax: £6 million

(I can’t be sure, but I suspect that the “social security costs” are things like SSP and Employer’s NIC contributions).

The rest is mostly things like marketing expenditure, pension contributions, rental and lease costs, etc. None of it is exceptional or unusual.

Google does have several other companies registered in the UK, but compared to Google Uk Limited they are all pretty small and, to all intents and purposes, fiscally irrelevant.

It’s pretty clear, therefore, that Google UK’s corporation tax liability is actually more than what would be expected. Any standalone company with these figures wouldn’t be paying corporation tax at all. So where is the money coming from?

The answer to that is Google Ireland Limited, which is the EU base for the majority of Google’s operations. In particular, if you are based in the EU and you use Google Adwords (which is Google’s primary income stream) to advertise your business, then you’re paying Google Ireland to do so.

Unfortunately, data from Irish companies isn’t as easy to get hold of as data from Companies House in the UK, but the Guardian has helpfully put a copy of Google Ireland’s financial statement from 2009 online at Scribd. It isn’t as up to date as the UK version, but it is, nonetheless, interesting. Here are some headline figures (in Euros now):

Turnover in 2009 was €7.9 billion (that’s US billions, ie, thousand millions, as this seems to now be standard in the financial world)

Of that, €2.4 billion was paid out as “cost of sales”, leaving just over €5.5 billion was gross profit.

(Most of that “cost of sales” is money paid out to website operators who display Google Adsense on their sites. Like this website for example. A teeny, tiny little bit of that pile of cash came to me for adverts on this blog. I suspect I spent most of it on beer.)

However, Google Ireland paid out just under €5.4 billion in administrative expenses, leaving a total operating profit of €45 million.

That may not seem a lot left, so where did all that money go?

This, unfortunately, is where the Irish accounts let us down a bit, because they’re nowhere as detailed as those from the UK. But there are a few interesting tidbits:

“Research costs”: €18 million
Wages and salaries: €100 million
Social welfare costs: €10 million
Asset purchases: €118 million
Depreciation: €87 million
Amounts owed to other Google group companies: €1.2 billion

That doesn’t add up to the total amount of expenses, but, again, I’d expect that most of the rest of it is normal corporate expenditure on things like rent, leases, consumables, etc. It’s that €1.2 billion which is interesting. Where is it going, and why?

The accounts don’t say, but media reports suggest that it’s going to Google Bermuda, which, contrary to what you might think, is the real financial HQ of the company. Bermuda’s tax rates are low, and Google has no significant expenses there, which means that practically all of the money which flows into Google Bermuda can flow out again to the shareholders without being taxed on the way. The shareholders will, of course, pay tax on those dividends in their local jurisdiction, but that’s unavoidable and, in any case, is of no interest to Google the company.

What’s also worth noting is Google Ireland’s final corporation tax situation. Initially, the assessed tax for 2009 was €17 million. But not all of that went to the Irish authorities. Further down the document, we see that Google Ireland owed €8 million in foreign withholding tax. Withholding tax is tax paid to the government of a territory in which a company operates, as opposed to the one in which it is based, and what that means is that Google Ireland owed €8 million to various non-Irish governments for that year. Some of that will have been the UK, as Google Ireland sells to UK-based customers. Checking a few other documents suggests that, in 2009, HMRC received £1.8 million.

So how much extra would we have got, had Google Ireland not sent €1.2 billion to Bermuda? Well, assuming it was all taxed at the same rate as the €45 million which was taxed, then Google Ireland would have paid something like €777 million in tax. In reality, it would have been lower, since that makes an effective tax rate of 37% and Ireland’s corporation tax rate is actually 12.5%. So something in the order of €263 million is more plausible. Of that, the UK would have received £59 million. Assume (which is always a dangerous assumption when it comes to finance, but what the heck) that broadly the same proportions applied last year, in 2011, when Google UK paid £6 million in tax, and that means HMRC would, instead have got around £197 million in tax instead.

(Apparently, Google’s own spokesman has said that the actual amount they have saved is around £150 million. That’s a bit less than my guesstimate, but it’s in the same ballpark. I’ll stick with my own figures, since I’ve already done the maths on them and it doesn’t affect the comparisons much, but it’s worth noting that I may be overestimating).

£197 million may sound a lot. And, of course, compared to £6 million, it is. But it’s less than Google UK paid in wages and salaries for the year. It’s also less than half what the government earns from fuel duty every single week of the year. It’s less than the government earns from alcohol duty every week. It’s about the same as a week’s worth of tobacco duty. It’s about eight hour’s worth of VAT.

In overall terms, therefore, the amount of corporation tax foregone by HMRC as a result of Google Ireland shuffling off revenue to Bermuda is trivial. And the same applies to pretty much every multinational. The reality is that Google is putting money into the British economy simply by being here – salaries paid to British workers, rents and leases paid for British properties, council tax, VAT, PAYE and even the money spent on pizza by its staff.

It would be open to the governments of both the UK and Ireland to legislate so as to force Google to retain more of its revenue here. But if that came at the cost of inducing Google to close its London and Dublin offices and, instead, sell to the UK and the rest of the EU directly from the US, then we would lose far more income in total than we are currently foregoing in corporation tax. Which, of course, is precisely why the British and Irish governments haven’t tried it, because they’re not stupid. And why those calling for such actions are.

Prime Minister promises porn block, fools newspaper editors

Online porn has cropped up in the news today, with an article in the Daily Mail by the Prime Minister that’s now being picked up and reported elsewhere. The article is about changes to make it harder for children to access porn on he Internet, and the Mail also has a leader column claiming that the PM has come round to supporting their campaign against online porn.

However, if you read the article carefully, it’s nothing at all like what the campaigners have been asking for. In particular, the one thing that it isn’t is enforced ISP-level filtering. Throughout the article, David Cameron refers to “computers”, as in this comment:

With our system, when people switch on their new computer, a question will pop up asking if there are children in the house. If there are, then parents will be automatically prompted to tailor their internet filters.

or, as the Daily Telegraph reports it,

“Under the plans, anyone turning on a new computer for the first time will be asked whether there are children in the house.”

Note the reference to computers, not Internet connections. All this is going to take place on the local machine, when you configure a new PC.

So does that mean that the PM has done a deal with all the PC manufacturers to enforce parental controls?

Well, no.

All he seems to be reporting is that the account management system of Windows 8 – according to Microsoft’s online documentation – asks you whether it will be used by children when you add any new account or turn on an OEM install for the first time. And, if you answer “yes”, it prompts you to set up parental controls.

That seems fine to me. In fact, it’s precisely the solution that most tech-savvy people would recommend. It leaves control with the parents, and doesn’t require the ISPs to intercept or filter anything. A later paragraph in the Telegraph, stating that

Internet providers will also be required to verify the age of the person setting the controls.

seems to be false, as no such suggestion is made in the original article.

In reality, therefore, nothing has changed. This is pure politics, with the PM trying to take some credit for a decision made by Microsoft. It is, of course entirely possible that this particular design feature in Windows 8 was at least partly prompted by concerns expressed by legislators, not just here but around the world, but it’s hardly a great achievement by this particular government.

If anything, I’m quite impressed by the fact that the PM has seemingly managed to fool the Daily Mail into thinking that they’ve got what they wanted from their pro-filtering campaign, when in reality they haven’t got anything like it. The appointment of Claire Perry (best-known for being anti-porn and technologically illiterate) as an advisor looks like just a sop to the pro-censorship brigade (and, again, the statement by the Telegraph that she will be “in charge of putting the new web filter system in place” is pure invention on their part).

There’s no real policy change here at all, and certainly no change at all from the government’s previously stated position of opposing mandatory ISP-level filtering. It’s just a piece of political theatre designed to make the “something must be done” brigade think that something is being done. And I think it’s a very fine piece of theatre, too. It’s certainly duped the Daily Mail. It’s hard to see that as anything other than a win for the PM.

BBC headlines are ‘mostly guff’

One of the things that irritates me a lot about the BBC news website is its tendency to use quotes as headlines. That is, where all or part of the headline is simply a quote of what someone else has said. These are some examples:

Councils ‘have £13bn in reserves’
Data scheme ‘as good as ID cards’
Spending cuts ‘to fund schools’
Deficit cut ‘could take longer’
New runways ‘not the answer’
Trains fiasco ‘to cost taxpayer’
Starbucks ‘planning changes to tax policy’
Guernsey girl’s crash death ‘a tragic accident’
Motorist ‘hits speed of 136mph’
Bears ‘defecate in woods’

Actually, I made the last one up, but you get the point.

There’s nothing wrong per se with the headline quote. It has two main purposes, firstly, when the quote itself is the story (eg, “Pope says ‘I am not a Catholic'”) and secondly to indicate that the statement is a matter of opinion rather than necessarily being a fact. Up to a point, that’s an established journalistic tradition, and for those who understand it then there isn’t necessarily anything wrong with it.

The problem I have with the BBC is its tendency to over-use the headline quote, and use it in a way which is itself misleading. Here, for example, is how the BBC captioned two very similar stories today:

Stuart Hall ‘innocent of charges’
Ex-news boss denies raping girl

Both of these are stories related to a well-known person who has been accused of sexually-related crimes. I make no comment at all on whether either of them are actually guilty or not; that’s for a court to decide and I have absolutely no evidence available to me that would enable me to make any even remotely informed decision. But the first caption strongly suggests that Stuart Hall is, in fact, innocent, or at at least there is strong evidence that he is, while in the second case we just have someone denying guilt – which, of course, is what people accused of crimes often do. You have to click through the link to the actual story to discover that the person quoted as calling Hall “innocent” happens to be his lawyer, someone who is, of course, paid to say precisely that. So why not caption the link “Stuart Hall denies accusations”, or “Stuart Hall insists he is innocent”?

Apart from the fact that a lot of quoted headlines would simply be more informative if they were written without the quotes, it seems to me that the BBC is far too willing to use quotes that give a far from neutral impression of the content of the story. And that, quite simply, is bad journalism.

Tax? Wake up and smell the coffee…

Tax is in the news. In particular, the tax arrangements of multinationals such as Starbucks, Amazon and Google. Because, when it comes to corporation tax, they aren’t paying very much of it, at least not in the UK.

I say “corporation tax” deliberately, because, of course, they are paying quite a lot of other taxes. They’re paying VAT, business rates and employers’ National Insurance directly, as well as unavoidably being subject to Vehicle Excise Duty on any company cars and trucks they run and Fuel Duty on any petrol or diesel they buy to put in them. Their UK-based employees also pay tax and National Insurance on their earnings. And, even for a wholly UK-based company paying all its corporation taxes here instead of elsewhere, these are still by far their biggest contributions to HMRC. So Starbucks, Amazon and Google aren’t exactly paying peanuts even if they are minimising their corporation tax liability.

That does not, of course, excuse tax evasion if it is taking place. Even if you spend a hundred quid a week at the supermarket, you’re still guilty of theft if you walk out without paying for a £5 bottle of wine. But is evasion going on?

We need to be clear, first, about the difference between tax evasion and tax avoidance. I’m sure most of my readers understand that perfectly well, so I’m not going to describe it in detail. But, in essence, tax avoidance is minimising the amount of tax that government wants you to pay, while tax evasion is finding ways not to pay what the government has decided you should. And I’m putting it that way deliberately, too, because there is no meaningful sense in which anyone owes any tax until the government has decided how much to take from them.

Now, I’m not an out and out libertarian, and nor do I subscribe to the “Freeman on the Land” nonsense which asserts that people can somehow opt out of tax by reciting afew magic words. I fully agree that the government has an absolute right to impose taxes, and I also agree that, in a modern society which expects things like state-provided welfare, defence, healthcare, education, etc then taxes will be essential. I don’t think we are horrendously over-taxed in the UK, and I don’t have a problem with corporation taxes being part of the overall mix. (That doesn’t mean I’m entirely happy with the current state of affairs; in fact I’m not. But that’s not directly relevant to this particular debate).

However, I do believe that nobody owes any tax unless and until the government has legislated so as to make them owe it. And if there are aspects of a person’s financial affairs that the government has chosen not to tax, then there is no sense whatsoever in which it can be said that they “owe” tax on that money, either legally or morally.

The essence of tax avoidance (as opposed to evasion) is in arranging your financial affairs so as to maximise the amount which falls within the untaxed areas and minimising those which are taxed (or, more accurately, at least in most real life situations, maximising the amount which falls into the areas which are taxed the least and minimising those which are taxed the most). And evasion, usually, consists of misrepresenting your financial affairs so as to make it appear that less of it falls into taxed (or more highly taxed) areas than is, in fact, the case. To give an example, tax avoidance is choosing to own an LPG powered car because fuel duty is lower on LPG than on petrol and diesel, while tax evasion is colluding with the garage to make it appear as if you are buying LPG when you are actually buying petrol.

So, is tax avoidance immoral? Despite what I’ve said above, there is an argument, at least for individuals, that someone who is wealthy enough not to need to keep every penny they earn should not seek to minimise their tax liability unreasonably. In this sense, paying a “fair” share of tax is simply another form of philanthropy, something which many people would consider a moral obligation for those who can afford it. I’m not going to go too far into this debate, nor even take a clear position on it; I mention it here merely to point out that it is an entirely legitimate strand of thinking. It is reasonable to argue that Premiership footballers, for example, should pay more in tax; even if you disagree with that argument you can’t dismiss it as invalid.

However, for corporations, the answer to that question is a lot less ambiguous, and is answered by the law itself. Unlike individuals, who are pretty much free to do whatever they want with their wealth including giving it all away if they want to (even to the government!) as well as hoarding it or spending it, corporations which exist as shareholder owned organisations (eg, limited companies) have a statutory duty to maximise shareholder value. That doesn’t mean they have no freedom to manoeuvre at all, and it doesn’t rule out philanthropy entirely – not least because reputation itself is of value, and generosity is often self-rewarding. But it does mean that a corporation is legally obliged to structure its financial affairs so as to minimise unnecessary expenditure which brings no tangible benefit. And one of those unnecessary expenditures is tax which can be reasonably avoided.

If, therefore, Amazon, Google and Starbucks aren’t doing anything illegal, then they are simply doing no more than the law actually requires of them. What makes it more complex here is that all three of them are minimising UK tax by transferring liability to other countries where corporation tax rates are lower. As far as their European operations are concerned, Amazon has chosen to base itself in Luxembourg, Google in Ireland and Starbucks in the Netherlands. All three of those countries have lower corporation tax rates than the UK.

As an aside, it should also be noted here that these are all EU countries, and that’s precisely why they’ve been chosen. EU single market rules mean that we can’t treat a Luxembourg company any differently to a UK-based one. None of these three companies could get away with doing what they are doing if they had chosen not to set up an EU base at all, as they couldn’t transfer tax liability to the US in the same way. I’m not making an anti-EU point here either; if you want my views on the EU then you’ll need to look elsewhere. But this has to be borne in mind if you do want to criticise companies for transferring tax liability within the EU in this way: it’s an inevitable consequence of our EU membership and if you think that’s a bad thing then you are opposed to one of the fundamental tenets of the EU itself. I don’t find myself in an awkward situation here, but some of those complaining the most loudly about tax transference almost certainly would do, if they actually stopped to think about it for a moment.

Anyway, going back to my previous point, the main reason companies transfer tax liability out of the UK is because other countries have lower corporation tax rates. Now, as it happens, I do think this is a bit unfair. It’s unfair on smaller, UK-based companies that aren’t in a position to set up subsidiaries elsewhere in the EU. It’s unfair on shareholders and employees of UK-based companies who have less money available to them. It’s unfair on customers of UK-based businesses who have to pay prices which reflect higher taxation costs.

It is not, however, unfair on the UK government, which has, presumably, calculated that the amount of tax foregone by transference to other EU countries is less than the amount which would be foregone by reducing rates overall. And if it is not unfair on the UK government, then neither is it unfair on the recipients of the UK government’s expenditure, since the government is already doing its best to maximise revenues and the disparity in tax paid is precisely a result of that maximisation.

Having said that, I do think there is a case for reducing corporation tax in the UK. I’m not at all convinced that we are maximising revenues by keeping rates comparatively high; I think there’s a strong argument that reducing them would not only reduce outward transference but also encourage inward transference. If Amazon, Google and Starbucks – among others – were to base their EU operations in London, then the financial benefits to the UK could be quite significant.

The only rational outcome that can stem from the publicity given to Amazon, Starbucks and Google’s tax affairs, therefore, is a campaign for a reduction in UK corporation tax. Any argument that these companies are behaving “immorally” is fatally flawed; the law require them to minimise tax where possible, and the EU makes it impossible for any member state to outlaw minimisation by means of transference.

It would be nice to think that all those up in arms about the low values of corporation tax paid by Google, Amazon and Starbucks are aware of all this, but I suspect that most of it is beyond them. It certainly isn’t beyond the government, though, which is why it bothers me a bit that we have senior government ministers making statements about “corporate morality”. They are, surely, well aware that there’s nothing immoral at all about acting within the law and in accordance with the requirements of the law. Of course, the spin doctors may well be saying that it’s bad politics to be seen to be siding with rich multinationals, but, frankly, I think it’s worse politics to take a position in public that, in private, you know is unsustainable. And I think that the government is missing an opportunity here, too: the opportunity to say “We’re losing out on all this revenue because the previous government put taxes up too much, that’s why we need to do something about it and attract these companies into the UK instead of driving them away”.

Maybe it’s just the politics of coalition, and, to be fair, there are some things where I’m more in tune with our Liberal partners than with some in my own party. But when it comes to basic, simple fiscal responsibility it would be nice to have Conservative ministers giving a truthfully Conservative opinion rather than trying to pander to a sector of the electorate that is, in any case, already predisposed to disbelieve what they hear.

Either our corporation taxes are too high or they’re not. If they are, then they need to come down. If they’re not, then liability transference by multinationals is simply part of the price we pay for having the rate we want to have. Either of those positions is defensible. Blaming the corporations themselves for managing their finances carefully is not.


Actually, there may be some justification for criticising one of these companies. It turns out that the particular mechanism used by Starbucks, of paying themselves a royalty in order to use their own name and recipes, may actually be evasion – not avoidance – after all. There is case law to the effect that you can’t form a contract with yourself and that, therefore, creating an artificial distinction between one part of an organisation and another cannot affect the overall tax liability of the organisation. This may possibly be a large part of the reason why Starbucks is reportedly “negotiating” with HMRC about changes to their future tax payments, while the other companies mentioned are doing nothing of the sort. But this information comes along with reports that the extra tax will be paid for, effectively, by their staff. Now, what was it I said earlier about high corporation tax rates being unfair on employees?

Leveson musings

So, the long-awaited Leveson report was finally published this week. I haven’t read all of it (it’s over 2,000 pages and runs to four volumes!), but I have at least skimmed it, which is more than can be said for a lot of those commenting on it (including some leading politicians, it seems). My initial impressions are that Lord Justice Leveson has accurately identified the main problems with the British newspaper industry, but has reached the wrong conclusions as to what to do about it.

Firstly, it has to be said that the tabloid newspapers of the UK have, by and large, operated in an atmosphere of callous disregard for both morality and the law. And this has been apparent across the board. The News of the World may have triggered the investigation when it was caught out accessing private voicemails (so-called “phone hacking”, although it isn’t really hacking at all in the sense that would be used in the computer industry), but there is no doubt whatsoever that it was not alone. In fact, had other proprietors had the same response as Rupert Murdoch, we would barely have a national tabloid left. The Leveson report gives explicit examples of wrongdoing across a whole range of titles. The Daily Mail and the Daily Express repeatedly and deliberately print material they know to be false – that is, they are habitual liars – and the Daily Mirror, under the leadership of Piers Morgan, made extensive use of material they knew to be sourced by phone hacking. The Sun mounted a deliberate smear campaign against prominent campaigners against page 3. There simply is no tabloid newspaper which can claim to be clean. And, although it wasn’t part of Leveson’s remit, we shouldn’t forget that the so-called “quality” papers have had their issues too – Independent columnist Johann Hari being exposed as a liar and plagiarist is just one example, and it shouldn’t be forgotten that one of the key accusations originally made by The Guardian against the News of the World – that they deleted voicemails on Milly Dowler’s phone – turned out to be false.

So, what’s the solution? More regulation? I’m not convinced. Again, I entirely agree with Lord Leveson that the previous system of self-regulation has been a dismal failure. Not only has it been toothless in the face of the misdeeds I’ve already mentioned, but it is simply ignore by the Express’s proprietor – former porn baron Richard Desmond – on the basis that he doesn’t want to be part of it at all. But I still don’t think we need a statutory regulatory body.

Part of the reason for that is that I am, at heart, a liberal, with a small “l”. That is, I don’t think the government should be seeking to control and regulate things unless it can be shown beyond reasonable doubt that regulation is necessary. And I’m also a conservative, with both a large and small “c”. I believe that it is important to protect and defend our society, and I am a member of the Conservative party, a Conservative councillor and a member of my constituency’s executive committee. I mention that because I don’t want anyone to be in doubt as to where I’m coming from, politically. I agree with David Cameron when he says that regulating the press is a rubicon that we should not lightly cross. I am not saying that because I have any particular affinity for the so-called “right wing” tabloid media. I would not shed a tear for the Daily Mail and Daily Express if they were to close down. As a centre-right politician, I don’t particularly value their support. If anything, their lack of concern for the truth is positively damaging to my cause. Political neutrals – floating voters – the people we particularly need to appeal to – look at papers such as the Mail and think that they are representative of right-wing thinking. And all that will do is put them off.

But I digress. There’s a whole lot wrong with the tabloid media, and as far as I’m concerned (and as far as Lord Leveson is concerned, too) the whole lot of them are pretty much as bad as each other. But I don’t want statutory regulation, for two main reasons.

The first reason is that statutory regulation isn’t going to add anything to our ability to deal with things like phone hacking. This is already illegal, as Andy Coulson, Rebekah Brooks and Piers Morgan are likely to discover. A regulator isn’t going to be any better than the police at dealing with lawbreaking by media organisations. If anything, it may even make it harder to deal with, as there will then be a natural tendency for the police to think that it’s a matter for the regulator rather than something which requires their own effort. What we need here are not new laws, but better enforcement of existing laws.

The second reason is that the media are, to a very great extent, what people want them to be. The reason that the Mail and the Express get away with printing lies is the same reason that the Sun gets away with printing pictures of topless women: because it’s what their readers want them to do. And all the tabloid newspapers vie with each other to be the first with the latest showbiz gossip, rumour and innuendo. They’re not doing this because they feel they are performing some kind of public service, but because they know that it’s what sells newspapers.

If nobody bought the tabloids, then we wouldn’t even be having this debate. The fact that we are demonstrates that it isn’t really about regulation at all, it’s about what people want.

There has always been a strand of totalitarian thinking which wants to dictate what people may find enjoyable. From Hitler banning jazz to Soviet Russia banning western pop music, one of the hallmarks of authoritarian government is that it seeks to regulate popular culture. And that is, I think, evident in some of the responses to Leveson. A lot of the antipathy towards the tabloid media stems from a metropolitan intellectual elitism which is intolerant of anything it deems beneath it. And, yes, I’m guilty of that too. The difference is that, unlike Ed Miliband and Nick Clegg, I don’t want to regulate it out of existence. When it comes to free speech, I prefer Voltaire’s dictum: “I disapprove of your views, but would fight to the death for your right to express them.”

That’s not to say that we can’t benefit from looking at some of our existing legislation and trying to work out where it could be improved. One of the things I would like to see is a more egalitarian libel law, which doesn’t favour the side with the deepest pockets and which does give the wronged party a more effective recompense. And we do need a replacement for the Press Complaints Commission, one which isn’t dominated by the newspapers themselves. There’s a lot which can be done within our existing legal framework which will make a significant difference. But that’s all the more reason why statutory regulation is, in my opinion, unnecessary.

In a free society, regulation imposed by consumer demand is generally superior to regulation imposed by fiat. Ultimately, the best way to regulate newspapers is not to buy the ones that print crap.