by Angela Eagle
The introduction of unitary taxation for multinational companies is key to progress. This would end the so-called arm’s length principle that has been a feature of international tax law since it was agreed at the League of Nations in the inter-war years. Unitary taxation would stop treating multinational corporations as if they were separate companies in each jurisdiction joined by a head office. Recognising that they actually operate as one global company and assessing their global profits would allow those profits then to be allocated according to the economic activity they are responsible for in each country. This would avoid double taxation of profits but be a much fairer way of assessing their real tax liabilities. Indicators of economic activity could include multinational companies’ physical assets, turnover, payroll and sales in each separate jurisdiction. Such a ‘unitary’ treatment would stop tax avoidance scams such as profit-shifting in their tracks. If this system had been in operation in 2012, Facebook would not have paid only £238,000 in tax on UK sales of £175 million; Starbucks would not have got away with paying only £8.5 million tax in fourteen years on £3 billion of UK sales; and Google would almost certainly have had to pay more than £6 million on its UK revenues of £395 million.34 This is why both the USA and the EU are now considering introducing a unitary tax for global multinational companies. A requirement for country-by-country reporting by multinational corporations would facilitate more transparency and scrutiny of their accounts to prevent internal accounting tricks which minimise tax liabilities. Publication of the controlling ownership of shell companies and beneficial trusts on a publicly available register would transform levels of transparency, as would the publication and availability of all individual tax returns (as already happens in Norway).
BEEFING UP ENFORCEMENT
It is imperative that we increase the chances of prosecution for those who take part in tax evasion and dubious avoidance. The financial and reputational risks have to be substantially increased in order to discourage it. Globalised capital markets which allow easy transfer of assets across borders and tax jurisdictions imply the need for stronger global co-ordination of enforcement. Building international structures to co-ordinate this will be an investment that will quickly pay for itself in recovered revenue. Other cross-border law enforcement co-ordination structures such as Interpol exist and are used increasingly to strengthen the fight against terrorism and cross-border crime. We need one for tax enforcement. And we need much closer cross-border co-operation to be routinely practised.
Signalling an intent to crack down on avoidance as well as evasion must be backed up by the provision of the specialist support needed to make it effective. In the UK, we need to invest in HMRC by employing more specialist staff to crack down on avoidance as well as evasion. They must also be properly resourced and incentivised to take on the complex investigations which will yield the most lost revenue. Hearings before the Public Accounts Committee have demonstrated on numerous occasions the cosy relationships that often grow up between powerful large companies and the tax inspectors who are expected to supervise them. This is often in sharp contrast to the service that small businesses receive. In the past, the complexity and cost of pursuing the most powerful companies and the most serious offences has often defeated the tax authorities.
Furthermore, those organisations that opt out of their responsibilities as taxpayers should not expect to have a share in the £200 billion of public contracts which are let in the UK each year. Transparency in tax matters should be a prerequisite in companies that wish to bid for public procurement contracts – a huge new downside to avoidance behaviour. Such a requirement could be introduced in the UK with due warning so that transitional arrangements could be made with minimum disruption to existing contracts.
The greatest victory of Hayek’s disciples has been their success in fundamentally changing the way people see tax. Opaque groups like the Taxpayers’ Alliance (funded by super-rich donors) use Orwellian phrases like ‘tax burden’ to reframe the payment of tax as a pernicious thing, rather than an act of social solidarity, mutualism and kindness. We believe that taxes are the subscription fee to belong to a society which will nurture you as it looks out for others. We believe that we do best when we care for each other and care for the kind of society we live in. Before we can make any changes to taxation, however, we need to decide what kind of society we want. Only then can we work out how best to pay for it.
CHAPTER SEVENTEEN
THE LABOUR MARKET AND FAIRNESS AT WORK
The achievement of fair treatment for those at work has always been at the centre of the Labour Party’s and the trade union movement’s concerns. The nature of those concerns have evolved over the years, but they will never be extinguished. As we have seen, the institutional structures and linkages between those Labour-affiliated trade unions and the constitution and governing structures of the party are unique to Britain. Even though trade union membership has fallen dramatically in the past thirty years, the link between the Labour Party and the millions of people who belong to a trade union is still a potent one. Market fundamentalists know just how powerful it is, which is why they constantly seek to delegitimise it and legislate for its destruction. The latest in a long line of such attacks is the 2016 Trade Union Act, which amended the law yet again to make collective action and freedom of association even harder to organise legally.35
Angela led the fight against this attack on collective rights as Labour’s shadow Secretary of State for Business, Industry and Skills. While she secured some major concessions during the passage of the Bill through Parliament, the Act as passed by the Conservative majority in Parliament forces each individual trade union member to have to opt in to trade union political funds – an attempt to destroy both the collective political voice of the trade unions in society and the finances of the Labour Party, the likes of which has not seen since the aftermath of the defeat of the General Strike in 1926.
Hayek was unashamed in his hatred of trade unions because he rightly identified collective worker action as a potent countervailing power to capital. Trade unions were highly effective in ensuring that the share of national income that went to those who were employed, as opposed to those who own capital, was more fairly distributed. In a letter to The Times on 2 August 1977, Hayek did not mince his words: ‘The trade unions being politically sacrosanct have been allowed to destroy the British economy. And it is time that somebody had the courage to eradicate this cancer from the British economy.’ In his 1979 publication, 1980s Unemployment and the Unions, he called trade unions the ‘biggest obstacle to raising the living standards of the working classes as a whole, the chief cause of the big differences between the best and the worst paid workers – the prime source of unemployment and the main reason for the decline in the British economy.’ He also expressed his opposition to organised labour in his approval of political dictatorship, and was especially supportive of General Pinochet’s 1973 military coup, which had overthrown Salvador Allende, the legitimately elected socialist President of Chile. In a 1978 letter to The Times, headlined ‘The dangers to personal liberty’, he opined: ‘The marketplace is indispensable to personal liberty whilst the ballot box is not.’ We suppose that it never occurred to him to think about the personal liberty of those the Pinochet regime ‘disappeared’.
These are the shockingly anti-democratic, authoritarian views of the ‘guru’ who inspired the rise of market fundamentalism and to whose extreme reactionary views elements of the Conservative Party in the UK has been in thrall since the 1940s. The lack of evidence to substantiate his visceral dislike of trade unions even shocked some of his intellectual supporters,36 who felt he was propagandising rather than being academically rigorous. Market fundamentalism quickly adopted his techniques and has continued to propagandise regardless of facts or basic truth ever since.
ECONOMIC AND SOCIAL EFFECTS OF THE TETHERING OF ORGANISED LABOUR
If they had access to a time machine, Ned Ludd and Captain Swing would recognis
e some of the abuses commonplace today in Britain’s labour market. But they would also encounter increasing numbers of people who say they are happy and satisfied at work. The explanation for this seeming paradox is that the labour market has never been more ‘segmented’. There is an increasing gulf between those who enjoy well-paid, secure, interesting and rewarding jobs (the ‘white-collar’ workers) and those at the lower end of the income distribution – who tend to be less skilled and more likely to work in ‘blue-collar’ sectors of the economy – who do not. This phenomenon has been aptly characterised as the split into ‘lovely’ and ‘lousy’ jobs,37 and the lousy jobs comprise the heart of the New Serfdom. Many middle-tier jobs have disappeared and much of the growth of employment recently recorded seems to be taking place at the lower, ‘lousy’ end. According to the TUC, one in ten of those working today, over 3 million people, are now facing significant insecurity at work.38 This comprises 900,000 people on zero-hours contracts, 760,000 in temporary agency and casual work and 1.7 million people in ‘self-employment’ who are paid below the level of the government’s so-called living wage.39
Figures from the ONS reveal that nine out of ten of the fulltime jobs created in the third quarter of 2017 were categorised as ‘self-employed’.40 That would not necessarily be bad in itself, but a closer inspection reveals what is really happening in this sector that now comprises 15.1 per cent of the UK workforce and rising.
THE SELF-EMPLOYMENT SCAM
Hermes is a courier service which is responsible for delivering over a quarter of a billion parcels a year in the UK, and their working practices became the subject of scrutiny and concern in 2016.41 Hermes insists that all its 10,500 couriers are self-employed. This convenient arrangement transfers ‘risks’ to their drivers, while cutting Hermes’ own costs, including national insurance, and some of the liabilities they would have to face as an employer. Their ‘couriers’ have to supply, fuel and maintain their own transport at their own expense. They get no sickness benefit, no holiday pay, no pension and no payment for waiting at the depot while their parcels are sorted prior to delivery. If they are absent or wish to take time off, they must find a replacement courier to cover their workload. It is not unusual for them to work six days a week and have to deliver ninety to a hundred parcels a day, for which they are paid 48 pence a parcel. Because of their ‘self-employed’ status they are not covered by the minimum wage and can have their work schedule changed arbitrarily if they displease the company. This is called ‘withdrawal of your work’ and if applied it would further reduce a courier’s already meagre earnings. Many couriers are stressed out, driving far longer on the roads out delivering than is safe for them or other road users, and live in fear of their work being arbitrarily ‘withdrawn’. There is an employment tribunal claim which has been lodged against Hermes challenging the designation of drivers as self-employed. But as yet no decision has been forthcoming. Other gig economy workers are experiencing similar conditions. There was a recent dispute at delivery company Deliveroo caused by the company’s decision to change payments from an hourly amount to a per-delivery rate, which would require the completion of three deliveries every hour to earn the minimum wage.42 Pimlico Plumbers lost an employment case about the ‘self-employed’ status of all the plumbers who work for it in February 2017.43 Taxi app Uber has been in an ongoing dispute with its drivers as well as London’s taxi licensing authorities. The company was successfully taken to an employment tribunal by two of its drivers who claimed that they were really Uber employees, and were therefore entitled to some employee benefits, rather than being classed erroneously as ‘self-employed’. Having lost at the tribunal and the appeal in November 2017, Uber is seeking permission to go to the Supreme Court to overturn this inconvenient judgment.44
Long-established trade unions such as the GMB and newly emerging unions like the Independent Workers Union of Great Britain have been at the forefront of attempts to get existing employment law properly enforced in the emerging ‘gig’ economy sector. If the self-employment scam is not prevented by modernising employment law to close the loopholes being ruthlessly exploited by employers, then over time lousy jobs will come to predominate. Defenders of this practice claim the rise in self-employment is because of a more ‘entrepreneurial’ culture. This is nonsense. It is the result of perverse incentives in our tax system and employment law. The financial attractions of transferring all risk to employees by switching to a self-employment model are too lucrative for ruthless employers to ignore. It allows them to compete unfairly with good employers and, over time, the more exploitative model will drive the good employers out of business. This is especially true if company ethics aren’t important and the customers don’t care to examine too closely how their service is actually being provided.
Self-employment and false ‘incorporation’ has long been a feature in the UK construction industry; it is not unusual to find that the entire workforce on a large building site is ‘self-employed’, even though they are clearly working for a larger company which has contracted them to turn up to the same building site until the project is completed, directing them as an employer would. When she was at the Treasury, Angela won the backing of the then Prime Minister Gordon Brown to try to crack down on this longstanding abuse. Working with the construction union UCATT, she developed a proposal for changing the burden of proof on construction sites by ‘deeming’ that all such workers are employees, not self-employed. It was resisted by the civil service who seemed reluctant to disrupt the established order on construction sites because they believed it would be too difficult to enforce.
Since then, apparent self-employment has spread across the economy, especially in construction, administrative and support activities, transport and storage, professional, scientific and technical and the wholesale and retail trade. This ‘free-riding’ trend continues to threaten the capacity to collect national insurance contributions and it must be stopped. Left unchecked, apparent self-employment will grow and national insurance revenue will fall. There is also a clear trend away from paying hourly wage rates in these sectors. Increasing numbers of workers are being switched from an hourly rate to being paid per item they pick, produce or deliver (so-called ‘piecework’). This is actually a very old and exploitative payment model which predates the emergence of trade unions or employment law protections. We must arrest and reverse the spread of this form of work. Genuine self-employment is a good thing, but fake self-employment is most decidedly not, and it should be reduced by strict enforcement of effective new employment law.
ZERO-HOURS CONTRACTS AND CONSTANT SURVEILLANCE AT WORK
The Labour Force Survey estimates that there are now 900,000 zero-hours contracts currently in force in the UK. As many will know first-hand, the benefits derived from such a contract to employers and employees are wholly asymmetric. Employers gain because they keep wage costs down and reap the benefit of quick, easy access to workers without the costs of having to finance the obligations they might otherwise acquire as employers (such as financing holiday pay, sick pay and redundancy). It is often stated that workers also gain because they prefer the convenience and flexibility of this arrangement, but the reality is that their choice is often a zero-hours contract or no employment at all. Research by the TUC showed that 66 per cent of workers on zero-hours contracts are not there by choice and want a permanent contract. The Resolution Foundation has found that those on zero-hours contracts are more likely to be young, be from a black or ethnic minority background, work in health and social care, work fewer hours and receive lower pay than those who do not.45 As we have shown, many of those on zero-hours contracts work in the health and domiciliary care sector doing very low-paid jobs in extremely trying circumstances. They routinely suffer from ‘fragmented time contracts’, where they are only paid for the time that they spend ‘face to face’ with those they care for and they are expected to ‘care’ in visits of fifteen minutes’ duration. This means they are not paid for the time they must s
pend travelling from one visit to another. Angela once had to deal with a constituency case in which a domiciliary care worker found her client on the floor after falling from bed overnight. The care worker was not allowed to stay with the patient as she had other visits to do. She alerted the ambulance and the neighbours and then had to go on to her next job. Research into the sector by Manchester University reported by the Institute of Employment Rights demonstrates that 69 per cent of domiciliary care workers were offered a zero-hours contract and given no other choice. Eighty-one per cent of them receive no pay for travelling from one visit to the next and 88 per cent of them get no pay for breaks between visits, when this ‘fragmented free time’ cannot practically be counted as time off or productively used as personal time. Thus, they often have to work in bits of time across all seven days of the week just to earn a full-time minimum wage. While the vast majority of these domiciliary care services are provided by the private and voluntary sector, the bulk of them are commissioned by local authorities using public money. It is no surprise, therefore, that public-sector unions such as Unison have campaigned loud and long on care work. Unison has particularly focused on securing domiciliary care workers the right to be paid the national minimum wage. The Labour Party has also campaigned against the worst excesses of insecurity highlighted here, and quite right too.
Shocking abuses at the Sports Direct warehouse in Shirebrook, Derbyshire, were documented by The Guardian newspaper in December 2015.46 They sent undercover reporters into the warehouse after hearing about the conditions there and discovered a working environment that William Blake would have recognised from the days of the ‘dark satanic mills’. Eighty per cent of the staff working there were on zero-hours contracts. They were harangued by tannoy to work faster, docked fifteen minutes’ pay if they clocked on just one minute late, subjected to compulsory body searches on the way in and out of the factory, and subjected to a ‘six strikes and you’re out’ policy. Workers would be summarily sacked if they spent too long talking or going to the toilet, and they were not paid overtime if they clocked off late to finish a job. The local school reported that parents were so frightened they would be sacked if they took any time off to take care of their children that pupils who became ill were routinely kept in school until their parents had finished work and felt able to collect them.
