The Revenue’s Offshore Tax Blunder

(Guardian) – IF YOU HAVE JUST HAD A NEW TAX CODE or VAT demand, it is likely that the Revenue & Customs office that issued it is managed in a tax haven.

And if you have recently visited an old Abbey National office of Santander Bank you are on the premises of an offshore managed office.

You probably didn’t know either. Today an analysis by parliament’s watchdog, the National Audit Office (NAO), reveals the offshore company that managed both deals is legally set to avoid paying hundreds of millions of pounds of tax to the very offices making tax demands on you.

The findings by the Commons public accounts committee is the latest revelation on signing an outsourcing contract eight years ago, which MPs describe today as “highly damaging to the department’s reputation”.

In effect, to save an estimated £1.2bn, HM Revenue & Customs signed a £3.3bn contract with a firm now called Mapeley to hand over for 20 years the ownership and management of 591 tax offices, including the freehold of 132 offices to an offshore company then based in the Cayman Islands.

Today, the cost of contract has risen to £3.87bn, the maximum potential savings have dropped by £300m, and the department has found that it cannot recover its own VAT from the rent. It will have to draw up contingency plans costing over £100m should the company walk away following a decision to close 130 tax offices as part of the first wave of efficiency savings.

But the most extraordinary revelation is the rare glimpse given into tax avoidance by auditors from the NAO. After a stormy hearing at the Commons public accounts committee, the company allowed the NAO access to its offshore books to see the effect of the loss of tax revenue to the government. The figures, hidden at the back of the report, are staggering.

If Mapeley, now part of the US offshore Fortress group, was based in Britain rather than Bermuda, the tax coffers would be swelled by £184m. Easily enough to build a teaching hospital or renovate a lot of schools. In fact, the company is expected to pay £14m – saving £170m. That is hardly enough to renovate a big secondary school. Furthermore, Gordon Brown’s efficiency savings by closing tax offices is going to give the offshore company a tax bonanza if it can get a good price for them. Only the recession is stopping them.

These tax savings are only on the Revenue & Customs contract. The company has a similar deal with the old Abbey National, and if branch closures follow bank mergers under Santander, logic dictates even more tax savings.

No wonder the NAO concludes, in its prosaic way: “There is unlikely to be any overall benefit to the exchequer from such arrangements as any apparent savings for the department are accompanied by reduced tax revenues.”

With everybody living in this country having to pay more tax and face cuts in services to pay for the bailout of the banks, the prospect of the Treasury being deprived by the Revenue of extra tax is obscene.

The people who negotiated this deal should hang their heads in shame, and the politicians – and that includes Gordon Brown, chancellor at the time – should be brought to account for such an inept negotiation.

For while we debate the scale of tax rises and spending cuts in the general election campaign, the directors of the company involved must be laughing all the way to their offshore bank.

A Question For Parliament – Are You Listening, Bob?

BOB SPINK, our local MP, is keen to ask questions in parliament. Well, here is a pertinent question that needs to be asked on behalf of many of his married female constituents:-

Why are married women, who have elected to forgo any entitlement to unemployment benefits by choosing to pay the old ‘B’ Rate, Married Woman’s stamp, now being prevented by this government’s pension reforms from being able to purchase Class 3 contributions to top-up their state pension entitlement?

Prior to 1975, married women were given the opportunity of reducing their National Insurance contributions to assist their families in making ends meet – on the understanding that the reduced rate would not permit them to claim state benefits should they find themselves out of work.

Many responsible wives, on small, part-time incomes, took-up the offer reasoning that – in the absence of any other advice – their contribution would still entitle them to NHS treatment (true) and a full state pension when they retired (false). It now transpires that someone retiring next year, despite being employed full-time for over 40 years and never being in a position to claim state benefits, will be entitled to around just £20 per week.

On the other hand, a female who has enjoyed state benefits throughout their working lives, and never worked, will ‘retire’ on a full state pension.

The anomaly, which needs to be addressed immediately by this government, goes to the heart of what is fair in a modern society.

Currently, married women on the old ‘B’ Rate stamp, can claim against their husband’s contributions to ensure they receive a ‘60% Pension;’ but they can only do that when he retires.

Had the couple not married, spent their lives on benefits and never worked: both would receive a full state pension when they reached retirement age.

Bob’s Office Expenses To Be Kept Under Wraps Until After The Election

(Telegraph) – HOUSE OF COMMONS authorities were accused of a “cosy stitch up” last night after it emerged that full details of MPs’ expenses claims will not be published until after the general election.

Many MPs had feared that the totals claimed for items including travel, office costs, communications and staff for 2008-09 would be published before polling day, expected to be on 6 May.

It can be revealed, however, that the figures will not be brought out until June, well after the election, meaning voters will not have the chance to assess their MPs’ most recent records in full before making their choice.

The Fees Office – the body criticised for its role in last year’s expenses scandal uncovered by The Telegraph – last week sent each MP the total amounts it proposes to publish for each individual.

MPs then have until 26 April to check the figures and confirm they are accurate.

However, instead of publishing the totals immediately, voters will have to wait at least six further weeks before they see them.

Last night a source close to the Members Estimate Committee, the group of senior MPs with overall control over the allowances system, defended the decision to wait until June before revealing the totals.

The source cited the “huge amount of work” needed to process the tens of thousands of claims by Commons officials and said the previous year’s figures, for 2007-08, had also been brought out in June.

However, campaigners said Commons authorities could easily have speeded up the process this year and said voters had a right to know before polling day.

Matthew Elliott, chief executive of the TaxPayers’ Alliance, said: “This sounds like a typically cosy stitch up by the parliamentary authorities. They should be much more open and transparent with the public.

“There remains a great deal of disquiet over expenses and this shows MPs have not learnt the lessons from what has happened.

“Voters have the right to know the full details about their representatives’ allowances and expenses before casting their vote.”

One of the most controversial sets of allowance claims, for MPs’ second homes for 2008-09, was published last year. This has now been abolished, however, in reforms brought in in the wake of the scandal.

This week will see the publication of the final version of the new rules which MPs will have to abide by after the election.

It follows a wide-ranging consultation by the new Independent Parliamentary Standards Authority, chaired by Sir Ian Kennedy.

Under draft proposals last year, MPs would in future only be able to claim rent for second homes outside London, not mortgage repayments.

They would have to provide receipts before any repayments were made and no future claims would be permitted for furnishings or food.

Payouts worth up to £65,000 to MPs who step down are also under threat, as is the communications allowance.

IPSA could also rule this week on whether MPs will continue to be allowed to employ family members, and whether they will be allowed to keep the profits on the sale of their taxpayer-funded second homes, or return them to public funds.

Earlier this month The Sunday Telegraph disclosed that MPs have demanded the right to first-class rail travel because they say they need to be able to work during journeys to and from Westminster.

The pleas were recorded in nearly 50 submissions made by MPs to IPSA’s consultation.

Sir Ian has proposed that they should only be allowed to travel first class in “exceptional circumstances” such as a journey of more than two and a half hours.

Cash For Access Scandal MPs In-Line For Cosy Peerage

(Daily Mail) – THREE DISGRACED FORMER CABINET MINISTERS at the heart of the ‘cash-for-access’ scandal are in line for lavish golden goodbye payments and seats in the House of Lords, it emerged last night.

The Commons authorities yesterday admitted they were powerless to block generous resettlement grants of up to £65,000 each to Stephen Byers, Patricia Hewitt and Geoff Hoon.

All three were caught on film offering to help private companies access Government in return for thousands of pounds a day.

And Gordon Brown refused to rule out peerages for the three who, as former Cabinet ministers, can expect a cosy berth in the Lords after the election.

The revelations caused outrage at Westminster. David Cameron said the saga had fuelled public perceptions that ‘politicians are sleazy pigs out for their own gain’.

He renewed his call for a full inquiry into the affair and promised the Tories would crack down on lobbying if they win power.

The Tory leader said anyone watching the investigation by Channel 4’s Dispatches programme ‘could not help but be frankly disgusted by what they saw’.

Mr Byers’ said he was ‘like a cab for hire’ and boasted that he had helped National Express and Tesco gain favourable Government decisions – claims denied by ministers and the companies.

Mr Hoon said he was looking to turn his Government contacts ‘into something that, bluntly, makes money’.

Miss Hewitt said she had helped a firm she is paid by win a place on a Government taskforce investigating its area of business.

Last night it emerged that the Government had delayed publishing the annual list of ministerial interests, prompting new allegations of a cover-up.

Justice Secretary Jack Straw said the former ministers’ had brought Labour and Parliament ‘into disrepute’.

The scandal also provoked fury among grassroots Labour activists.

John Knight, a senior member of Mr Hoon’s local branch of the party, said the former defence secretary had ‘absolutely no affinity or understanding of the people’ he was supposed to represent.

Mr Knight, leader of the district council in Ashfield, Nottinghamshire, said: ‘I would like to tell you I was shocked and surprised, but frankly I wasn’t.

‘If we carry on like this, this will be the slow death of the Labour Party.’

Yesterday it emerged that several other former ministers had shown initial interest in working for the fake lobbying firm set up by reporters, though they either withdrew or the meetings were cancelled.

Labour confirmed that Mr Byers, Mr Hoon and Miss Hewitt had been suspended from the Parliamentary-Labour Party, banning them from attending the group’s weekly meetings. However they will not lose the party whip.

They will also still qualify for ‘golden goodbye’ payments when they step down at the election. Mr Byers and Mr Hoon will each receive the £64,766 maximum. Miss Hewitt and MP Margaret Moran, who was also filmed offering to influence policy, will get £54,403.

Downing Street said the Prime Minister ‘completely condemns the claims made by the former ministers’ but saw no reason for an inquiry into the scandal.

Cameron Renews Demand For Enquiry Into Lobbying Row

David Cameron

(Guardian) – DAVID CAMERON stepped up demands for a comprehensive inquiry into the government lobbying row today.

The Tory leader insisted the case for a full investigation was “incredibly strong” after three former cabinet ministers were suspended from the parliamentary Labour party last night.

The decision was taken by No 10 after party officials watched a Channel 4 programme that secretly recorded the former ministers expressing a desire to work for a consultancy firm at a fee of up to £5,000 a day.

Gordon Brown had dismissed the need for an inquiry yesterday afternoon after receiving assurances from Whitehall department heads that no improper influence was exerted.

Jack Straw, the justice secretary, insisted the investigation demanded by the Tories had already been carried out and found there was not a “scintilla” of evidence of government impropriety.

But Cameron said today that the prime minister needed to “think again” in light of events that unfolded yesterday.

Speaking at a previously arranged press conference, the Tory leader said: “If it was serious enough to strip these former ministers of the party whip, it is surely serious enough for a brief but comprehensive inquiry.

“But Gordon Brown has decided to rule out an inquiry even before the Labour whips had seen the programme and decided to take the action against their MPs. I believe he needs to think again.”

He said the case for an inquiry was also supported by the fact that ministers were saying different things about their discussions with Stephen Byers, who was secretly filmed claiming he had changed government policy.

“Stephen Byers said he didn’t lobby Lord Adonis [the transport secretary]. Lord Adonis said he did. Stephen Byers said he called Peter Mandelson [the business secretary] and got regulations changed. Lord Mandelson said he did not. That’s why we need a proper inquiry into all this.”

He added: “We do know that the policies referred to did actually change, so we need to see the minutes of meetings, the emails, the telephone logs, those things, to rapidly establish what did actually happen.”

He said an incoming government would have to undertake a “full review” of this episode to “learn the lessons of what has gone wrong and change any other rules necessary to make sure it doesn’t happen again”.

Straw told BBC Radio 4’s Today programme that an investigation had already been conducted. “There is not a shred of evidence – not a single scintilla of evidence – of any impropriety whatsoever; that’s why it’s been swift.”

The three MPs at the centre of the lobbying row had been suspended under a Labour standing order against bringing the party into disrepute, he added.

“It’s my view certainly, having seen what I have seen, that their behaviour, prima facie, does indeed bring the parliamentary Labour party, as well as parliament, into disrepute, because it appears that former cabinet ministers are more interested in making money than they are in properly representing their constituents. That’s why there is such anger in the parliamentary Labour party, as well as I may say incredulity, about their stupidity in allowing themselves to be suckered in a sting like this.”

He also insisted the MPs’ treatment had nothing to do with their reputations for being staunch Blairites. Two of the suspended MPs, Geoff Hoon and Patricia Hewitt, led a failed coup against Brown earlier this year.

“I was talking last night to a close friend of mine, who was and is extremely close to [Tony] Blair, and I can tell you their anger is incendiary.”

Labour MPs were not the only ones to feel the heat following last night’s TV screening.

Cameron also used his press conference to make it clear to Tory MP Sir John Butterfill, who was filmed on the programme speculating that he would get a peerage, that he would not be heading for the Lords. “I can tell you that’s not going to happen,” he said.

The Tory leader signalled a tightening of the rules surrounding lobbying under a Conservative government to quell the “deepening suspicion” among the public that politicians are out for themselves, not the country.

He said he had warned two months ago that excessive lobbying – “the quiet word in a minister’s ear” – would be the next big scandal to hit parliament.

Cameron stopped short of supporting the suggestion that MPs should be banned from having any outside interests when sitting in parliament, on the grounds that he believes backbench MPs benefit from having “connection” with the outside world.

But he said that, under his watch, the amount of time that has to elapse before former ministers are allowed to lobby the government would be extended from one to two years, and the amount of time during which ex-ministers have to seek advice from the advisory committee on business appointments would be increased from two to 10 years.

Cameron said he would also put the advisory committee on a statutory footing so that ignoring its advice would be an offence.

MPs To Get Expenses After Leaving Parliament

(Telegraph) – MPS WHO LEAVE PARLIAMENT at the forthcoming election are to be allowed to continue claiming expenses for several months after polling day, following a controversial decision by the Parliamentary authorities.

MPs will be allowed to submit “advance” bills for utilities. Those who have signed rental agreements or other contracts stretching beyond the election will also have their claims paid.

The controversial decision, made at a meeting chaired by the Speaker last week, is expected to leave taxpayers with a bill running into tens of thousands of pounds.

It is the latest evidence that MPs have failed to properly clean-up the expenses system despite the public furore in the wake of the disclosures made by The Daily Telegraph last year.

Last night, Matthew Elliott, chief executive of the Taxpayers’ Alliance, said:

“It seems the Commons are living in a world of their own. The fundamental principle of expenses should be that only costs that have genuinely been incurred should be reimbursed. This proposal opens the door yet again to potential abuse for those MPs who are retiring or set to lose their seats. The authorities are effectively offering to sign a blank cheque.”

MPs leaving Parliament receive generous “resettlement grants” – worth up to a year’s salary plus money to pay-off staff and other office costs. This money is intended to help MPs meet the costs associated with returning to “normal life” so it is not clear why they have also been given permission to continue claiming expenses.

During the expenses scandal, several MPs including Alistair Darling, the chancellor, had to repay money after submitting advance invoices and then “flipping” their designated second home.

The decision to allow the claims was taken at a meeting of the House of Commons Commission held last week.

The minutes of the meeting record: “…where unavoidable legal and contractual obligations existed (including for a period beyond the election), these would exceptionally be met, and that utility bills, even if covering an advance period, would be paid so long as the bill was dated before the election.”

The House of Commons Commission is chaired by John Bercow who was elected as Speaker last year with a pledge to clean up the expenses system. Other members include Harriet Harman, the leader of the house, and Sir George Young, the shadow leader.

Sir George was previously the head of the Standards Committee which was responsible for overseeing the conduct of MPs.

Yesterday, David Cameron, the Conservative leader, reiterated his pledge to clean up the expenses system.

“We are saying ‘no more paying for food’, ‘no more paying for furniture’, ‘none of the rubbish’…every single thing must be transparent,” he said.

“If they break the rules they will be turfed out of Parliament by their constituents.”

However, Sir George appears to have defied his party leader by regularly claiming the Parliamentary “subsistence” allowance, intended to cover food bills, which is worth up to £25 a night.

The claims are likely to prove embarrassing to Mr Cameron as Sir George is in charge of the Conservative’s policy on expenses. His predecessor, Alan Duncan, was demoted after being secretly recorded complaining that MPs were “forced to live on rations”.

A Happy Ending For The Ghurkhas? Think Again!

(Nick Cohen) – A CULTURE THAT PREFERS FAST FOOD to home-cooked meals and Twenty20 cricket to five-day Tests cannot endure the long haul of political struggle. Boredom sets in. Fickle eyes flick away. “Been there, done that,” we say, a crass cliché at the best of times that turns delusional when we apply it to a political world in which very few causes are done within a decade, let alone a news cycle.

For those who like their gratification instant, no story appeared more satisfying than the campaign to give Ghurkha soldiers the right to settle in Britain. The plot was so pat Richard Curtis could have directed it. A legal action, initiated by London solicitors Howe & Co, to compel the government to grant residency rights to some of the 36,000 soldiers who had retired before 1997 provided the back-story. The audience joined the action in April last year, when Nick Clegg demanded that Parliament do what the judges could not. He thundered at Gordon Brown: “If someone is prepared to die for this country, surely they deserve to live in this country?” David Cameron said the same, but Brown failed to listen or understand the public mood.

Even voters who denounced immigration were on the Ghurkhas’ side, reasoning that if Britain let in people who hated it, the government should not bar those who had fought for it. In Joanna Lumley, the Ghurkhas had a formidable champion. The daughter of Major James Lumley of the 6th Ghurkha Rifles served her family’s regiment well by confronting Phil Woolas, Labour’s immigration minister, at the BBC. She was glamorous and filled with righteous anger. She looked down on Woolas, a careworn and equivocating politician in an ill-fitting suit, and wiped the floor with him.

Her commanding performance was too much. Labour, whose back-benchers had already mutinied, gave in. It decided to do the decent thing and open a Ghurkha settlement office in Nepal. Its staff provide advice to often elderly men on managing the move to Britain, give them National Insurance numbers so that they can find work or claim benefits and help them fill visa application forms. All free of charge.

In the final scene, the victorious Lumley flew to Kathmandu where members of the Ghurkha Army Ex-Servicemen’s Organisation (Gaeso) cheered her until they were hoarse.

As far as the media and the public were concerned, the movie ended there. For Dr Hugh Milroy from the London-based charity Veterans’ Aid, the drama is just beginning. He is a battle-hardened officer, but nothing he has seen has prepared him for the homeless men who are arriving at his door. One Ghurkha, just off the plane, was mentally ill and could not speak English. His possessions consisted of two flea-ridden blankets and an equally lousy jacket with pockets stuffed with dog ends. He didn’t know where he was or what to do; in the end, Milroy and his colleagues had to find the money to send him home.

Milroy fears he will soon be overwhelmed by old soldiers. They have not gone to the resettlement centre for free advice. Instead, they have listened to middlemen, who are anxious to fill their pockets with a currency more valuable than dog ends. “I am deeply concerned,” he told me. “It is clear to us that if people who have never opened a bank account or dealt with our welfare bureaucracy do not go through the MoD resettlement service they will not be prepared for life in a strange land. It is utterly immoral. I’ve nothing against Joanna, but we’re seeing unintended consequences and exploitation.”

In Nepal, rival veterans’ groups are accusing Gaeso of doing the exploiting. No one disputes that it asks each veteran to give £500 for help the British government is offering for nothing, before sending him to see advisers from the UK law firms who have come to Nepal, including advisers from Howe & Co. Its lawyers told me they did not take money from Ghurkhas, but claimed the fees for the 1,500 people they have advised to date from the British taxpayer. Gaeso insists that the payments it asks for before the men talk to Howe & Co are “voluntary, not compulsory”.

£500 may not seem an inflated sum to readers from a rich country. But Nepal is poverty-stricken and still recovering from a civil war between monarchists and Maoists. When Ghurkhas add the cost of the “voluntary contribution” to the £500 they must pay for a British settlement visa and £400 for the airfare, many find they must sell their homes and land.

On Tuesday, the Commons home affairs committee will hear from Tim Heaver, a solicitor, who married the widow of a Ghurkha soldier and has seen middlemen take the money of his wife’s family. “Guys are putting themselves in debt who are little old men,” he said. “They give up everything to get here because they are told they will have the good life and find no work and long delays for benefits.”

A media and public that claimed to care so much about Ghurkhas in 2009 ought to be asking how they are managing in 2010. Relevant questions should include whether the Foreign Office should investigate if smart operators are relieving Ghurkhas of their money, whether charities such as Veterans’ Aid deserve public support and whether we should insist that only ex-servicemen who have received free and frank advice from British officials should come here. (The answer to all of them is “yes”, by the way.)

But the circus has moved on. With the exception of Sue Reid of the Mail, no journalist has shown the smallest interest in what happened to the Ghurkhas next, while Clegg and Cameron have found new distractions to stop the fickle viewers reaching for the remote control. The task of preventing a small outbreak of suffering on British streets has been left to Labour MPs. Backbenchers such as Martin Salter, who led the revolt against the government and is organising the home affairs committee hearings, are co-operating with Woolas and Kevan Jones, the defence minister, who wanted to maintain the status quo. Although they were once on different sides, they can sense trouble coming and believe they have a duty to alleviate it.

We will miss these unfashionable men in ill-fitting suits when we throw them out in May. Assuming we do throw them out, that is.