Blog Archives

Tax cheats (£34-120bn) cost far more than benefits cheats (£1+ bn) – yet far fewer are prosecuted

hmrcAnalysis of HMRC data shows that the political culture is sympathetic to tax avoiders

Summary of an article by Prem Sikka, professor of accounting at the University of Essex, which may be read in full here, adding official data confirming the thoughts of John Wight

Social security benefits come in many shapes, including the state pension, pension credits, income support, disability living allowance, employment and support allowance, jobseeker’s allowances and housing benefits.

  • The total cost of all benefits for 2013-14 is about £164 billion.
  • Around £1.2 billion or 0.7 per cent of the total is attributed to fraud. ‘
  • Benefit fraud has continued to average between 0.6 per cent and 0.8 per cent for the period 2005/06 to 20013/14.

The government has set up a benefit fraud hotline and people are encouraged the blow the whistle on their neighbours and anyone else suspected of fraud. The sanctions:

  • a £50 spot fine, without a court order, on individuals who mistakenly provide inaccurate information on their claims forms.
  • Those suspected of fraud may be able to pay fines of between £350 and £2,000 in lieu for prosecution. From April 2015, the upper limit of the fine will be £5,000.
  • Some may lose their benefits altogether for a fixed period.
  • Private debt collection firms, bailiffs and forced house sales are used to collect penalties.
  • Suspects can be charged under the Fraud Act 2006, which carries a maximum prison sentence of up to 10 years.

The data shows that most of the criminal convictions are for frauds of less than £10,000. In 2011, two-thirds of fines imposed were for £200 or less. The largest fine imposed was £5,000. For the period 2008-2012, some 1,306 offenders received a prison sentence.

Benefit fraud is officially estimated to cost £1.2 billion (2013-2014) but HMRC estimates an annual tax gap – that is tax avoidance, tax evasion and monies of £34 billion (2012-13).

HMRC’s model is challenged by others who put the tax gap at around £120 billion.

Even in 2004, a former World Bank adviser was saying that the UK is losing over £100 billion a year to tax avoidance and evasion. HMRC’s 2013-14 report states that during the year 421 individuals were detained after arrest by HMRC officers, but none were charged.

Preliminary conclusions

The amounts attributed by the government to tax avoidance and evasion are much larger than the amounts attributed to benefit fraud. But the number of prosecutions and convictions for benefit fraud are much greater.

The political culture is more sympathetic to tax avoiders. HMRC was made aware of the HSBC tax frauds in 2008, but so far only one person has been charged. An excuse offered by HMRC is that it likes to make financial recoveries and thus does not go for prosecutions.

The revolving door swings and tax avoiders go scot-free

Vodafone cio to HMRCWe add that in 2013, just as the Treasury was under pressure to review rules allowing Vodafone to avoid paying tax on its massive £84bn windfall from selling its stake in the American mobile phone giant Verizon, HMRC appointed Mark Dearnley, CIO at Vodafone, as its new Chief Digital and Information Officer.

Sikka points out that, on a number of occasions, the courts have declared some of the tax avoidance schemes to be unlawful. This has not been followed-up by any investigation or even recovery of the cost of fighting the schemes. Big accountancy firms are often the brains behind the schemes but no firm or partner has ever been fined even after the schemes have been declared unlawful.

  • The same firms are given taxpayer-funded contracts, such as those relating to privatisation and Private Finance Initiative (PFI).
  • Their partners advise HM Treasury and other government departments.
  • The firms fund political parties and also provide jobs for former and potential ministers.

In April 2013, the government introduced rules to ban companies and individuals who took part in failed tax avoidance schemes from being awarded government contracts. So far, no such business has been barred.

Advertisements

Professor Sikka calls for policies placing the interests of the 99% at the heart of the debate

prem sikka 4Prem Sikka, Professor of Accounting, Business School, University of Essex surveys the World Economic Forum at the Swiss ski resort of Davos, where the world’s rich and powerful gather to discuss the world’s economic and social problems.

 

davosElite retreat. World Economic Forum, CC BY-SA

Professor Sikka points out that the ‘grand narrative’ of the previous Davos summits have carved out policies for the rich to advance their own interests and done little to check inequalities. Past failures are evident from Oxfam’s latest report which states that very soon 1% of the world’s adult population will own more than the rest.

In the UK, the richest 1,000 people have doubled their wealth over the past five years to £519 billion. At the same time, millions of people in Britain have seen a real decrease in their income.

Political leaders will talk about tackling public debt, a cue for more austerity, reduction in public expenditure and further privatisation of state-owned enterprises, often at knock-down prices resulting in huge wealth transfers.

Economic policies are increasingly formed to appease financial markets where vast amounts are gambled every day though they produce little tangible economic activity.

In this narrative there is no space for workers, trade unions, industrial democracy, or people who want to live fulfilling lives. Markets are supposed to serve society but people are increasingly forced to dance to their short-term financial tunes.

The top 500 transnational corporations control 70% of the worldwide trade, 80% of the foreign investments, one-third of all manufacturing exports, 75% of all commodities trade and 80% of the trade in management and technical services. Breaking up these global behemoths and making them accountable to the public is not on the Davos agenda; corporations are frequently able to hold governments to ransom: “give us what we want or we are off” has become a familiar call from companies to discipline governments.

99%-3

International forums are increasingly essential to solve global problems, but they can’t be addressed by pursuing the interests of the 1%. The neoliberal experiment for the last 35 years has failed to deliver full employment, economic stability or equitable distribution of wealth. A radical shift is needed to develop policies that place the interests of the 99% at the heart of the debate.

Read his article in full here: https://theconversation.com/davos-delegates-dont-care-about-inequality-or-your-debt-36511

 

Prophet with track record: anti-establishment anger in the western world

Gillian Tett, Financial Times capital markets editor at the time, warned about the state of the credit markets for at least a year before the crisis; she was one of the few who predicted the 2008 economic catastrophe.

gillian tettNow U.S. managing editor of the FT, she writes:

“Anti-establishment anger is bubbling up elsewhere in the western world”. She sees a rejection of mainstream parties and the ‘organs of politics’ in America.

What explains this malaise? Tett points only to the rise of the internet and social media:

“Back in the days of President Kennedy, the only way that most people could hope to participate in political change or make their views known was via a political party or demonstration.

Today, people can express ideas at any time via social media. “In some ways, this creates a very engaged and noisy society; protests are spreading like wildfire, as cyber “flash mobs” congregate over all manner of issues”.

american hubris2She does not even hint at the roots of anger and disgust at the fruits of western (aka Anglo-Saxon) politics:

  • crony capitalism with its revolving door’
  • rising economic inequality;
  • healthcare, transport, water, fuel and energy privatised for profit not service’;
  • taxpayers money spent on armaments;
  • the shame of drones illegally killing civilians and ‘targets’ in other countries;
  • the young sent to wage wars of benefit only to arms manufacturers and other vested interests;
  • pollution and destruction of the environment for profit;
  • wilful ignoring the long-term consequences of all these actions.

Does Gillian Tett underestimate ‘the people’:

“[T]he problem with this engagement is that it tends to be short term, volatile and based around single issues. It is hard to turn cyber flash mobs into a party campaign”. She correctly adds: reversing this tide of antipathy . . . will take more than a new election (or two) or social media posts”.

What effective course of remedial action can anti-establishment anger take?

Will free healthcare be a thing of the past within a matter of years?

Clive Savage sent an article which expresses this belief.The account in the Chichester Observer reports that Dr Lucy Reynolds (London School of Hygiene and Tropical Medicine) spoke to an audience at St Paul’s Church recently, warning them that only the very poor or sick will be immune from paying for doctor appointments and surgery, with the ‘whole system about to fall apart’.

dr lucy reynoldshttp://learn4kicks.wordpress.com/2014/01/20/dr-lucy-reynolds-on-privatisation-of-the-nhs/

She said that some Clinical Commissioning Groups were going ‘hell for leather’ handing out NHS contracts to private companies and ‘totally encouraged by the government: “In the future, the NHS will still be tax-funded, partially, but we will also be expected to pay, either by insurance premiums or paying doctor’s bills directly. If we allow private companies to come in and take that money away then there will be less and less available to treat sick people. The system is about to fall apart and the government want someone to take the blame for it so GPs are taking the brunt of it.”

The meeting also heard from Margaret Guest, chairman of Don’t Cut Us Out, who said the same level of privatisation had been occurring in adult social care to the detriment of the disabled and elderly.

A month ago, following the award of a £235m Musculoskeletal (MSK) contract to BUPA, the Observer launched a major campaign called A&E SOS to protect vital hospital services in Chichester. It has the backing of Chichester MP Andrew Tyrie and a number of campaign groups, NHS staff and patients.

hmg epetition logoIts epetition calls for a written guarantee that Accident & Emergency and orthopaedic services services at St Richard’s Hospital will not be adversely affected by a controversial NHS contract being awarded to BUPA CSH Ltd. 

The new National Health Action Party shares Dr Reynolds’ fears.

 –

Political madness – or is it? As huge debts remain uncollected, HMRC scrutinises compulsory returns from pensioners with modest incomes.

News from a reader in her seventies with income from pensions and savings below the national average, after tax has been deducted, prompted a search of collected data and online reports.

hmrc pensionersHer equally baffled MP had forwarded her case in 2008 to the Treasury Committee and the chairman’s assistant replied: “The issue you describe does seem confusing” and undertook to draw it to the attention of the committee before taking evidence from HMRC in autumn.

Needless to say HMRC compels her to continue, despite having all the information in their departments, which are said to be unable to share it, one officer saying angrily: “Why don’t you employ an accountant?”

Meanwhile, on Wednesday, the Independent reported that Her Majesty’s Revenue and Customs have caught only five of thirty people, some owing hundreds of thousands of pounds – and many owing millions – identified as costing the UK more than £844m.

Strangely, the government has been reducing staff and budget from this revenue-collecting department, despite concerns ant the shortfall in income due. A few examples follow:

hmrc staff shortfall poster2004: 15,000 jobs cut since March 2004 with 165 offices earmarked for closure or in the process of closing.

2008: closure of a further 95 offices across England, Scotland, Wales and Northern Ireland affecting up to 12,300 staff.

2010: the Public and Commercial Services Union warn that a decision by Revenue & Customs to close 130 offices would cause job losses, undermine tax collection and hit advice and support to taxpayers.

2014: the end for all 281 walk-in tax enquiry centres, with a further 23 large sites across the UK facing imminent closure. More than 2,000 fixed-term workers compulsorily redundant despite its own business plan revealing a staffing shortfall (staff levels decline, page 16, below):

HMRC staffing levels chart

The Public and Commercial Services Union criticises HMRC’s intention to privatise more of its debt collection and post handling, reporting huge backlogs of post and private debt collectors already being brought in to chase up tax credits overpayments.

Perhaps this apparent inefficiency and inconsistency is not political madness, but the outworking of a hidden agenda, with privatisation as the objective.

Does the government plan to dismantle and increasingly privatise the NHS?

National Health Action, an organisation led by health professionals, believes that the Government’s costly and unwanted top down reorganisation is designed to dismantle and increasingly privatise the NHS, and this is happening at an alarming rate with £2.5 billion worth of NHS contracts given to the private sector since the new Health Act became law in April this year.

nhs contract race2 2013It is pointed out that the privatisation process will accelerate if NHS services are included in the EU/US Free Trade Agreement, which opens the door to global private healthcare companies to bid for NHS contracts. Another source indicates that this process is well underway:

NHA has now formed a political party and will fight hard for the NHS to be exempted from this Free Trade Agreement.

NHA co-founder/leader Dr Clive Peedell, consultant oncologist

NHA co-founder/leader Dr Clive Peedell, consultant oncologist

This was all predicted by the leaked version of the NHS Risk Register 3 years ago, which not surprisingly, the Government still refuses to publish, despite an Information Tribunal ruling in March 2012 that the public interest in publishing the risk register was “very high, if not exceptional”. A draft version of the register was leaked, revealing the risks of rising costs of GP care, poorer response to health emergencies and the high chance that managers might lose financial control of the NHS.

The Treasury clawed back £5bn of the NHS budget over the last 3 years, whilst still trying to claim that NHS spending has not fallen in real terms. It will not be able to cope with this level of cuts and service failure is inevitable. It is already happening in places and that is precisely what this Government wants to happen to allow their privatisation plans to flourish – tactics reminiscent of the 1970s Ridley Report ( see the text of The Economist article, and a link to the full report at the Margaret Thatcher Foundation).

Government propaganda: successful public services are said to “crowd out” the private sector, whereas “failing” public services are seen as ripe for privatisation

NHA observes that right wing media constantly denigrate the NHS to soften up the public to swallow the privatisation pill and seeks to expose the real reasons for the problems in the NHS: “Chronic underfunding, constant re-disorganisations, and 30 years of a failed market in healthcare with the purchaser-provider split, which has separated General Practice from Hospital care and massively increased administration costs gulping up to 10% of total NHS budget”.

NHAP logoThe NHS needs restoring and improving, not dismantling and privatising. In early 2014 we will launch our new 12 point plan for the NHS, which will keep it in public hands, reverse privatisation, increase accountability, increase the focus on public health, and reject economic austerity, which is so damaging to the health of our economy and population.

A preview:

NHS graphic

NHA: the NHS is “a precious gift to our nation following the war effort”

.

Soapbox for the 99%: the grandest larceny ever – public funds handed over to bolster profit

99-3

 

John Tyrrell writes:

Schools, hospitals, even prisons contribute to the likes of the Chief Executives of G4S, and ATOS who thrive at the expense of the peoples’ misery. They take over key services providing poorly trained, low paid staff.

Is austerity necessary? Yes it is if you have the view that the key to a successful economy is maximising profit and rewarding the few who happen to be in the right place and the right time.

This is the dominant version espoused by politicians, the elite who court them and a press ever more tightly reigned in to serve their purpose.

Many more are seeing through the great lie and, as the power of the state is abused, resistance will intensify – as we have seen across Europe in Spain, Greece and now Turkey.

KC comments by email:

“the valuable deeds and opinions of the most responsible and conscientious individuals and front line workers count for very little when ruled by an inner circle within a financially driven and ruthlessly competitive establishment”.

 

Soapbox for the 99%: privatisation is grand theft from the public

99-3
Richard Bruce says:

Having given a lot of thought about nationalisation, privatisation and the results of policy decisions, I have come to the conclusion that privatisation is in fact grand theft from the public which is then made to pay again for what they had already both paid for and provided the funding to build the infrastructure that made the sell-off possible.

We are seeing it again with the rescued banks – they will be re-privatised at a massive loss.

Public loss, private gain

The population at large blamed nationalisation for failure when the reality is that placemen put into the hierarchy deliberately run down the businesses so that a sell-off at a fraction of the real value could take place without too much public outcry. Those responsible enriched themselves handsomely.

The Post Office

This is happening again with the Post Office which has priced itself out of the general letter post making it almost impossible for people to afford to send letters and cards as they once did and which now relies on the massively annoying junk mail problem, just to keep profitable, which wastes an enormous amount of resources and landfill.

What was once a respected next day delivery service to all addresses in the UK is now rapidly degenerating into a third-class service where there is no guarantee for delivery even for recorded delivery letters. Where once the mail was routinely delivered before 9 am in the morning some are lucky if they get deliveries by mid-afternoon as consolidation of rounds mean postmen have much bigger rounds than they once had.

Politicians of all parties are to blame as they have allowed competitors to cream off the most profitable services but add to the cost of the Post Office by making them carry the burden of less profitable deliveries. One can only wonder if those politicians held shares in the competitors.

If we examine what has happened to the privatised formerly nationalised services the outlook for the Post Office looks bleak.

The railways

I well remember talking to a well-spoken gentleman on a station platform and how he declared that once the railways were privatised things would improve. How wrong he was. Ticket prices soared. Subsidies increased. Shareholders ran away with the profits that would have eased the tax burden on us all. Worse still we no longer have a joined up national railway with problems now similar to those that required nationalisation in the first place – and some regional services are run by foreign owned nationalised companies.

Water, electricity and telephone services

If we look at water, electricity and telephone services we see the same story. What was once owned by the taxpayers via government is now more often than not run by foreign companies with the British customer being forced to pay excessively high prices to satisfy shareholders and foreign companies.

Housing

Housing was another privatisation scam. Well-built council houses were sold for political reasons at a fraction of their worth and that triggered a shortage of homes for those who could not afford to buy and fuelled increases in house prices and the rents linked to them.

That in turn increased the welfare bill because the owners of property no longer paid rates and the tenants often could not afford to pay rent and the council tax, plus the water bills that were once included in the rates. Worse than that was the replacement housing costs which required agreements with builders and more subsidies for the provision of what are basically little more than wooden sheds with decorative walls but which are still priced as if they were built to last. Why can no politician see the glaring scandal there?

We now have a government that is reportedly going to offer money to first time buyers who cannot afford the required deposits so that they can once again get the property owning sector moving again. What seems to have been forgotten is that it is this very issue that supposedly started the current financial crisis with the sub-prime mortgages failures that brought down long-established banks.

Of course we should question if there really is/was a financial crisis as it should be noted that the elite are doing very nicely thank you and it is only the very poorest in society who are being hit, as is usual.

The Coalition’s current policy is to once again support those who cannot afford mortgages while at the same time punishing those who are unable to afford their rents and who have received financial assistance not for themselves but as direct payments to wealthy landlords as inflated rents. Both actions will no doubt end in disaster.

National Health Service

We were told that the NHS would be safe but it is clear that there is a move towards privatisation with the changes to Foundation Trusts which offer members discounts at local shops whilst at the same time drastically cutting numbers of hospital beds, Nurses and Blood Donor Services. The added stress of staff is unbearable and we have seen the same in the changes made to the education system with the cuts hitting as they did before at the basic infrastructure, which is usually far cheaper to properly maintain than it is to replace after being run-down.

Once again short-term political gain is to be paid for by even greater financial problems down the track.

The prison service

Not so very long ago there was an outcry that government was using a prison ship because there were too many prisoners and there were promises that more prisons would be built. The reality is that they have closed prisons and shortened sentences and yet crime has reached a point where hardly a day goes by without reports of murder.

All of the formerly nationalised services were sold off at a fraction of their true worth as a temporary fix for the economy – but surely anyone with eyes to see would realise that such a short-term fix brings long-term pain.

Welfare and NHS cuts

Look closer and we can see that once again it is grand theft from the people of this country who provided the investment, just as the new welfare and NHS cuts are a betrayal of the ideals of the National Insurance Contributions scheme, which was supposed to protect those injured at work or by accident illness etc. Now that too is slowly being privatised, as are the services that determine eligibility, and here too those who have eyes to see can see obvious fraud and deception, but the politicians responsible see only good in what they do because they know that they will never have to suffer from the consequences of their actions.

They are alright Jack – and the rest of us will just have to take it all on the chin and from our wallets….

 

 

 

The Revolving Door: from the Ministry of Defence to an aerospace and defence technology company

Senior civil servants and government ministers move into business – overseen by ACOBA

revolving_doorAndrew Tyler, the British Defence Ministry’s former procurement chief, directed a wide portfolio of projects in the Defence Procurement Agency, including the Queen Elizabeth-class aircraft carriers, Type 45 destroyer, armoured fighting vehicles, artillery and munitions projects, and the F-35 Lightning II aircraft.

He was also responsible for directing the procurement and support of all the Royal Navy’s surface assets, during his five year period at the MoD.

 

andrew tylerIn 2008 he became chief operating officer of Defence Equipment & Support (DE&S), responsible for the procurement and support of all the equipment used by the British Armed Forces and was said to be ‘highly regarded’ despite the poor record of DE&S which minister Philip Hammond said, in 2012, was not giving value for money. This had added “significant additional costs to the defence budget of the order of hundreds of millions of pounds each year”. Privatisation is being considered.

 

Siemens’ Marine Current Turbines unit appointed Andrew Tyler as acting CEO in 2011 but in 2012 he resigned and has now become the chief executive of Northrop Grumman’s UK and European operations. Northrop Grumman is a large American global aerospace and defence technology company.

The movement of senior civil servants and government ministers into business roles is overseen by the Advisory Committee on Business Appointments (ACOBA).

A Transparency International UK report published in May 2011, called for ACOBA to be replaced by a statutory body with greater powers to regulate the post-public employment of former ministers and crown servants.
.

The destruction of public science: an Indian scientist records one aspect of Margaret Thatcher’s legacy

The positive and negative aspects of Margaret Thatcher’s legacy are being aired. For the writer, the damaging effects of privatisation, mass unemployment, waste of North Sea oil revenue, financial deregulation and outsourcing far outweigh the rapprochement with Gorbachev – the only positive which comes readily to mind.
Dr Devinder Sharma writes today:

cambridge plant breeding instituteThe erstwhile Plant Breeding Institute at Cambridge (UK)

”Margaret Thatcher, 87, died yesterday. She is being hailed as the Iron Lady who transformed Britain. Every newspaper across the globe has paid rich tributes to her. Some have even carried her obituary on the front page, which is quite a rare honour.

”I only know that she had a steely resolve. Whatever she thought of doing, she did it. That’s what I have read over the years. And knowing the determination with which she destroyed public sector science, I can understand why and how she earned the title Iron Lady. Nevertheless, let me share this story of how Britain’s only woman Prime Minister, the unyielding Margaret Thatcher, eclipsed one of the world’s best known research centre in plant sciences, which was emerging as a global leader in plant molecular biology and genomics.

”I am talking of the famed Plant Breeding Institute (PBI) at Cambridge.

”For any plant scientist, the Plant Breeding Institute at Cambridge was a Mecca. As a student of plant breeding I too nourished the desire to make it one day to PBI. But by the time I reached the age to visit PBI as a researcher it had already been sold-off to Unilever. Later, in 1998, Unilever sold it to Monsanto. I remember the controversy over the priceless plant germplasm collections that PBI had, at the time it was sold to Unilever. After a lot of public pressure, the plant collections were shifted to another public sector research institute, John Innes Research Centre in Norwich.

”The sale of PBI to Unilever was a great loss to independent science, and of course a loss to humanity.

”It was in 1996 that I went to Cambridge as a Press Fellow. One fine day I called up Sir Ralph Riley, a very distinguished plant geneticist, who also happened to be the founder director of PBI. He came to see me at the Wolfson College, and very politely offered to give me a tour of Cambridge to show me around some of the better known places for plant genetic research. This was indeed a treat. ”After showing me the pub where Watson and Crick had dashed to after discovering the DNA structure, he drove me around to what used to be the PBI. Parked his car somewhere, got out and pointing to the research farm, he said:

“This is where plant breeding died.”

”I can never forget those words.

”I asked him whether PBI was incurring losses because that’s the only economic reason why a research institute would be sold-off. On the contrary, he said, when PBI was sold by Margaret Thatcher to MNC Unilever, it was bringing in a revenue of (British) Pound 10 million a year against an expenditure of Pound 4 million/year. I don’t know how you would take it, but how can any sane person justify selling-off a profit earning research centre? But then, that was the Iron Lady. She earned the title because of her dictatorial role in pushing privatisation. ”Subsequently, Sir Ralph Riley wrote:

“Unfortunately after I had ceased to have any involvement with the AFRC the government privatised that part of the PBI activity concerned with variety production even though it was generating a return to the Government of about £10 million per year from a total cost in the Institute of about 4 million pounds per year. Thus the work that we had done to bring fundamental and closely applied work together, to permit easy crossfeeding was destroyed. Nevertheless, it may be that it (the former PBI) provides a model that will subsequently be followed by others.” (See page 395-396 of this Royal Society publication: http://rsbm.royalsocietypublishing.org/content/49/385.full.pdf).

To read the whole article go to Ground Reality.