A sense of proportion

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The following blog was not written by me. The person who wrote it is known to me. I have every reason to believe all that he or she says is offered with sincerity. I offer it here in the same spirit.

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For my sins, although not to bank, I was in Geneva last week. As I left, on the shuttle from my hotel to the airport, I was seated with a group of Syngenta workers. They discussed at some length the absurdity of MPs’ expenses claims, explaining them to non-UK colleagues – from moats and tennis courts to non-existent mortgage payments. Finally one said ‚ÄòIf I tried to put any of this through expenses at Syngenta I’d be fired.’

While I share the outrage at the MPs’ expenses system, I do think it has been overdone. On the one hand, because those who paid attention were fully aware that the deal was done, initially under a Conservative government, in order to allow MPs to draw a higher income without increasing their formal salary. UK MPs are paid less than many equivalents, without taking the expense allowance into account, but for political reasons it was felt easier to increase this on the side. The same somewhat dishonest political rationale explains increases in VAT and NI over nearly thirty years while headline income tax rates fell. In that sense, the expense payments were completely transparent but less prominent nonetheless.

Is it reasonable then to join a mob mentality against all MPs – many of whom either were not part of the decision to pursue this route, or have indeed not taken the opportunity personally to do so, or in a good many cases both? And of course many of whom were simply given the impression that the full allowance was effectively theirs to top up their salary. While I’m not absolutely certain about my feelings on each of these groups, it does inevitable that transparency will be part of the new regime, and regardless of the actual rules put in place, this transparency will be the most powerful deterrent to abuse. And of course we may well see formal salaries rise once the current crisis is over.

The funny thing about the comments I heard on the way to Geneva airport is that they highlighted the lack of proportion in many of these discussions. As a former Labour press officer said to me today, the money paid out in dubious expense allowance claims hardly compares to the public money wasted on, for example, continuing with rail privatisation.

More pertinently to the shuttle discussants perhaps, it does not approach the public money lost to corporate tax dodging. Christian Aid estimates that developing countries lose $160 billion a year to just one form of corporate tax evasion. The TUC estimate a UK loss of at least £4 billion a year. If each of the 646 MPs had falsely claimed £25,000, the annual loss to the public exchequer would only be £16 million.

Now, fair enough, MPs should be held to a higher standard than companies, but even so the difference in scale is startling. The employer of my travelling companions, Syngenta, is known to base its global operations in low-tax hubs, and as a result only pays 5.2% of its gross profit, or 18.1% in 2008 of its income, before taxes, in tax.  On pre-tax income under IFRS of $1.7 billion, a further 1% paid in tax would mean an additional $17 million of public money.

Once again, transparency rather than strict regulation may be the key – let’s have country-by-country reporting to let us clarify who, if anyone, appears to be losing from individual company profit-shifting – which we assume, like most MPs’ expenses behaviour, to be completely legal. Then the court of public opinion can decide what they think is legitimate – a quite different question.