Murnaghan 09.06.13 Interview with Vince Cable MP, Business Secretary

PLEASE ATTRIBUTE ANY QUOTES USED TO MURNAGHAN, SKY NEWS  

DERMOT MURNAGHAN:  This week the telecommunications company Vodafone has paid no corporation tax in Britain for the second year in succession, despite making profits in this country amounting to hundreds of millions of pounds. So, is that simply good tax planning by a global corporation we are lucky to have based in the UK, or do some big companies owe more to us than that? In a moment, I will ask the business secretary Vince Cable what he thinks, but also watching the debate online or our Twitter panelist, the Political Editor with the Metro, John Higginson, Deputy Political Editor of the Daily Mirror, James Ryans and the Political Correspondent with the Evening Standard, Pippa Crerar. They provide their reactions on Twitter and if you are watching on HD, you read the tweets on the side panel and follow the programme if you like through Twitter @MurnaghanSky, and of course join in yourself if you add the #Murnaghan. Well, let’s say a very good morning to the Business Secretary, Vince Cable. Thank you very much for coming Mr Cable. Well, let’s go straight in on, not just Vodafone, I mean the other companies and corporate tax. What can you do to make them pay what many people would deem to be their fair share of tax, in a country where they make big profits?   

VINCE CABLE: Well, we can do something at a national level. Lots can be done internationally. But lets go back to what is actually going on. I think the re is a kind of massive amount of public cynicism about this, I mean public services are being squeezed because we are having to make these economies. People are having to pay more tax, small businesses can’t go off to some tropical island to do their tax affairs, they are paying through the nose, and yet they see the big players not paying their tax. And, they aren’t doing anything illegal, but they are exploiting loopholes in the system. Your question, what can you do about it? Well there are things we can do at a national level and the government is introducing this general anti-avoidance principle which shifts the burden of proof somewhat, helps the Inland Revenue deal with these cases. I am working with my colleagues at the moment on creating a register of beneficial ownership, as we call it, to have out in the open who owns what. But, these are limited necessarily because in a very complex world, companies can shift their profits, their royalty payments in ways that are very opaque. So you have got to have tough international rules. That is where the G8 might take us forward.  

DM: Okay, so international co-operation, we have got that loud and clear. But of course, on the real stage that you operate on, I know you have been on many of these trips. You are playing beggar my neighbour with other countries. For instance, let’s hypothesize it this way… say there is a large Korean manufacturing company says we want to set up in the European Union, they come along to Britain and say we are also talking to France, Denmark and Germany, whatever. We offer them a deal don’t we which can involve not paying much tax for a while.   

VC: Yes, I mean the whole international tax rule system was set up to help companies avoid paying taxes in the way that we now want them to do. It was devised actually in the Colonial times, a lot of profits were made in Africa and places like that, and the companies wanted to have the money here and not pay tax in Africa. And that system has continued over the age and we have never reformed it. But, what is now beginning to happen, is that countries are getting agreements, data sharing, we have done this, we have probably made more progress than most countries. There will hopefully be some progress in dealing with tax havens, which are frankly a blot on the landscape.  They need to be made much more transparent.   

DM: Now, I was going to ask you about tax havens. Because if you look, for international co-operation aren’t there. Some countries are going to point at the United Kingdom and say, well you have got one or two tax havens under your jurisdiction, and a couple of them quite close to your own shores, in the form of the Isle of Man and the Channel Islands.  

VC: Well they vary a great deal, but you have what you might call sunny places for shady people, and quite a few of those are British dependent territories.   

DM: Do you include the Isle of Man and parts of the Channel Islands?  

VC: I haven’t looked in detail at their particular tax arrangements. The OECD has a code of conduct, which it expects tax havens to follow and they are classified on a range from white to black. And the better ones have tidied up their act, they are more transparent and we need to make sure all of them operate according to good principles.  

DM: Okay. We want to see these companies making profits and we want to see them pay more tax. Do you see this as an inelegant way of moving it on to the economy from your department, what are you seeing in terms of economic activity at the moment? Are you seeing, perhaps, that the data in the past was a little pessimistic and it is looking pretty good for the future?  

VC: Well, there is a lot more confidence around the last few months. That is for sure. Businesses are more optimistic, consumers are more optimistic. There is good employment data, I think we have all been pleasantly surprised that unemployment hasn’t been much higher, it is still unacceptably high, but it hasn’t gone up to the levels experienced in many parts of Europe. Those are good things. We have yet to see any real sustained recovery in manufacturing, in construction and in exports, which are the absolute key areas to have a sustained recovery. But, the last month or so, the figures are looking a bit better. I think you would be very foolish to talk about green shoots of recover, other politicians have made fools of themselves by doing that. There are some encouraging signs.  

DM: Do you think, it would become more encouraging if, and something you have been banging on about ever since you became Secretary of State, telling these banks to lend more to nurture whatever kinds of shoots there are out there?  

VC: Yeah, it is massively frustrating. I attended a Downing Street section a few days ago and met a lot of small businesses, they were coming up to me and saying, well our big banks are telling us they won’t lend to manufacturing, they won’t lend for exports. And this is totally undermining…  

DM: Do you get hard with them when they come in and see you and say yes of course we all lend to manufacturing, and you say well hold on a minute… who is telling the truth here?  

VC: Well I do. They bat the ball back to me, and say well the government is insisting on tougher regulations so we don’t collapse again, holding more reserves, so they do have a defense. But nonetheless, there is a very serious problem, and we are trying to find ways of dealing with it, trying to find ways of going round the banks or supporting new banks and establishing this business bank at the moment that will hopefully create new sources of credit. But it is unfortunately something that will prevent us having a proper recovery unless it is really dealt with properly.  

DM: What do you think, I mean this might go some way to addressing that, this idea that has been floated for a while, it is on the front page of one of the papers today, the banks we own or partially own, offering the public shares, discounted shares in them?  

VC: Well that is something my party has argued for in the past. Actually a free distribution…  

DM: Are you getting any nearer the Treasury now, it seems George Osborne is thinking about it?  

VC: I think that is a secondary issue in a way, I mean the banks have just got to be restored to health, and they have got to be restored to normal lending, so they are actually getting something out to the productive businesses. That is the first ask. A question of who owns the shares is a longer term question.  

DM: I know but what would it achieve if you did offer discounted shares in…?  

VC: Well what it would achieve if we eventually went down that road, would be that the tax payer would enjoy the benefits of these banks eventually restoring to normality and share price appreciating. The tax payer would then get the benefit.  

DM: But if it is at a discount it leads in to a bigger hole in the public finances doesn’t it?  

VC: Well if the public are the people who then benefit from the appreciation. But it is an academic issue, we are not talking about that at the moment, it is a longer term task, we have to first of all get the banks lending and functioning and safe, those are the priorities.  

DM: Let me ask you about the current spending review, and I hear you are going to get hauled before the Chancellor’s Star Chamber. You haven’t settled yet?  

VC: I don’t think so, no. What is happening and what will happen, is that we have perfectly sensible grown-up discussions with the Treasury about future spending, and certainly mine have been perfectly amicable. We don’t need amateur theatricals, Star Chambers and all that. I’ve never seen that in action, I doubt it will be. There are just business-like discussions about how we reconcile two things. How we get the public finances in order, dealing with the deficit, we have got to do that. And all departments, including mine, have got to find efficiency savings, and reforms. We are doing that, and happily contributing to it. But we have also got to get growth and recovery and my department deals with skills, with science, with innovation, supporting the industrial strategy, building up our universities, and these are absolutely fundamental to recovery. So I am arguing very strongly that we need to support that.  

DM: How strongly? Does it get to the point where you are going to say to a colleague down the Alexander, say to the Chancellor, well look if you cut my department any further I won’t be able to do those very things that you have tasked me with. How hard-ball are you playing it?  

VC: Well I am saying those things, and I think he understands that. There is a recognition that we are trying to balance two very difficult things. Certainly, as I say, the things I do are not just unique, I’ve got other colleagues in government who are doing very valuable things to support recovery too.   

DM: But I mean, not to be the Star Chamber itself, you put your offer on the table, the Treasury accepted that and if they want more, what are you going to say?  

VC: Well it is an on-going process; we are someway off the end point. But, all the conversations I have had so far have been very constructive, and both sides are listening.  

DM: What about from the point of view of your party when looking for savings. Is it now the case that the Welfare Bill has been cut enough now, it has taken enough of the pain now and that is now sacrosanct, more-or-less ring-fenced in your eyes?  

VC: Well in a way ring-fencing is a bit unhelpful, but certainly we have taken the view that there have already been some very difficult welfare reforms, particularly effecting disability. And we are not keen to see more in that direction.  

DM: Well, where could it come from?  

VC: Well, there is a combination of things. There is the balance between taxation and spending. There is the balance between different government departments, and at the end of the day, we have just got to look at the thing in the round, but we are far from the end game. And I am just continuing to make the case that the things that I and my colleagues do is contributing to growth. And that is what we absolutely now need to happen.  

DM: What did you make of the two speeches last week from the Labour side, from the two Ed’s of course? We have talked in the past about your discussions, your amicable discussions with the Labour leadership. Do you think they have now come round to your point of view and become even more palatable when it comes to spending, in particular. Become even more palatable to your party?  

VC: Well it was something they had to do, because frankly they weren’t very credible on economic issues. I think the problem is a deeper one, that they were around when the financial system collapsed, and of course it was an international issue, but it was worse here than in many other countries because of the way the bubble had been allowed to get out of control. And they were associated with, they were involved. It will take a long, long time before they are trusted to manage the economy again. But the statements they made were perfectly sensible, and there were aspects of it, like the commitment to large scale affordable house building, which is very positive.  

DM: Have you talked to them, Mr Milliband and or Mr Balls recently?  

VC: I haven’t talked to them for quite a long time. But I think it is important actually to have sensible grown-up conversations with other parties. We need that. 

DM: Let me ask you about this big issue, an idea to the Liberal Democrats heart, the GCHQ, and what is going on there. We have been discussing over recent months the data communications act, so called snoopers charter, your party’s opposition to that. Many people are saying what GCHQ has been doing through accessing the prison programme from the United States is achieving that without us knowing about it.  

VC: Well it may well have been and I think William Hague is making a statement to Parliament, he will explain exactly about…  

DM: What do you want to know?  

VC: Well I mean there are two separate issues I think. One is that the Americans have developed this very sophisticated prison system which enables them to get access to data in other countries with or without our knowledge, we don’t yet know that. And there is a second issue about whether the GCHQ were involved in some kind of collaborative exercise with them. I think a lot of people were re-assured that we do work well with the Americans. But the whole point about surveillance is you have got to have it, whether you are dealing with terrorism or economic crimes, and I have some economic enforcement agencies in my department. We have got to have that. But it has got to be proportionate, you can’t generalise snooping of individuals. And you have got to have some over-sight, legal, political. And those are the questions which will obviously want to be probed.   

DM: They are always different in the United States and even if it weren’t there is very little we can do to influence the United States security services, what we can influence is our own. It is at that juncture, that point you want to know don’t you, that there was the proper surveillance of those who are carrying out the surveillance, that there was oversight?  

VC: Yes, absolutely. And I think Sir Malcolm Rifkin chose the relevant committee in Parliament. They will probe this and put the right question. But I just repeat the point that if you are going to have a society which is safe, we do have to have surveillance, not just of terrorism but economic crime. We need to pursue people who are doing us harm, but there has to be oversight and it has to be proportionate. Those are the central principles we need to hang on.  

DM: But should we then have something like the data communications act, be debated in Parliament, we will know all about it, it is upfront, it is there and some say well it does offer those very protections. Isn’t that better than having this done covertly?  

VC: Well the problem that my party had with the data protection act was that it seemed to be expanding the scope of surveillance much wider and without the checks that you really do need to have.  

DM: Okay, just want to ask you lastly, Secretary of State, this issue, it seems to be there again lobbying today involving Tim Yeo and whether or not he was offering influence in exchange for, in a sense for money. Now I know you have been subject in the past yourself to under-cover journalists secretly recording you. And I want to ask you about that broad point. Do you feel that the well is getting rather poisoned, this relationship between journalists and politicians at the moment. There is an awful lot of this kind of stuff going on at the moment.   

VC: Well it is pretty disreputable practice, and it does undermine trust, not just between politicians and journalists but with the public. I mean in a way I can understand the reason for it in the lobbying case because there has been a lack of transparency over lobbying, which is why my party in particular, has been pushing the idea of the lobbying register. And if things are not out there then obviously investigative journalists are going to track what is going on behind the scenes. But the answer to this is to have transparency and clarity, to have things out in the open.  

DM: But there is also, I mean look at your job, I can’t imagine the number of businesses that come along to you and want to lobby you and lobby you correctly. Of course they want to influence your policy. But you just have to be incredibly careful don’t you. Isn’t one thought in your mind, are these genuine or are they making it up?  

VC: Well government has got some very strict procedures. As you say, I talk to numerous business people every day, and there will always be a civil servant present, records will be taken, there is a paper trail and of course I am very careful to make it clear I am not offering preferences to anybody or favours to anybody. The problem has arisen in Parliament, where there haven’t been sufficient transparency, whether in the Lords or the Commons, and that is what now needs to be addressed through the register. And of course there is the wider issue of party political funding, which we haven’t yet dealt with and has brought money into politics in a very unsatisfactory way.  

DM: Thereby lays another tale. I must end it there, Secretary of State thank you very much indeed. Vince Cable, Business Secretary. And you are watching Murnaghan here on Sky News. Coming up…  

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