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DERMOT MURNAGHAN: It has been called an unprecedented move, the Prime Minister’s release of his tax returns in response to speculation about his family finances but is it enough to silence the opposition?  Well the Shadow Chancellor, John McDonnell, is here and a very good morning to you Mr McDonnell.  Well first of all this from Angus Robertson saying it’s moving on now to the Cabinet and in particular the Chancellor, would you like to have a look at his tax affairs?  

JOHN MCDONNELL: Well I publish my own, I published my own some months ago and actually I think it is quite a good standard to set.  In other European countries this happens and I think people now want a sort of openness and transparency so it is up to individuals at the  moment but I think the system should be changed so that certainly those who are taking, whether it is Cabinet or Shadow Cabinet decisions, I think it is quite important that people are …

DM: But particularly the Chancellor when he’s dealing, you are shadowing him, when he’s dealing with issues like British Overseas Territories, he’s setting the law, he’s changing the law, he’s meant to be chasing down the taxes.  

JOHN MCDONNELL: When I published mine I did this on a voluntary basis because a journalist asked me the question and I said yes, I will but when I did mine I said when you are dealing with particularly financial matters and you are dealing with the taxation system, it is best to be open and transparent and as I say, it happens in other countries so I don’t see a problem with it and I think people should just get on and do it.  

DM: Your leader was saying this morning that it should be compulsory for people in public life, particularly MPs, they should just publish their tax returns.  

JOHN MCDONNELL: That system works elsewhere perfectly well and I think now that people … the general public are really concerned about the fairness of the taxation system so I think yes, it will set a good standard for us all.  

DM: I’ve got your tax return here, I just want to ask you a couple of questions about it.  There’s not much in there apart from your MPs salary but you don’t give any money to charity.  

JOHN MCDONNELL:  Well I do but I don’t claim any tax on it.  

DM: Okay, you don’t claim your tax back and it would be tax efficient, in fairness I am sure the charities would tell you.  You have got a pension haven’t you from Westminster Council, £14,000 plus.  Did you take a tax free lump sum when you accessed that?  

JOHN MCDONNELL: No, I don't think there was a tax free lump sum with that?  

DM: There wasn’t an option …

JOHN MCDONNELL: No, no.

DM: Because that equates to something like a £300,000 pension pot.  

JOHN MCDONNELL: No, there wasn’t a tax free lump sum, I don’t believe that was available.  It is a local government scheme and I’m 64 now so I qualified for it, I’d paid into in the normal way and I declared it.  You can see from my tax return that what I have is my MPs salary and my local government pension.  

DM: But I am just asking about the very legitimate ways, the ways that the government encourages and Labour administrations in the past have done too, to avoid taxing people.   Have you got ISAs as well?

JOHN MCDONNELL: I’ve got one small ISA of £5000, it is only about that now but again I think what we’re saying is, if it’s open and transparent and an ISA for example is to encourage people to save, it is well and proper so I don’t see any problem about being completely open and transparent about all those matters if you are a politician at a senior level making decisions on taxation.  What people are concerned about is the fairness of the system.  

DM: But it is wider than that.  Just on what Mr Corbyn said this morning, he just said everyone in public life, he perhaps suggested the journalists who ask you lot questions should put up these things, do you agree with that?

JOHN MCDONNELL: Well I would like everything to be as open and transparent as possible.  Jeremy started the debate on that now and I think that’s going to be really useful but as a first step I think actually senior politicians, I think voluntarily now they should do it anyway.

DM: And what about your colleague, your senior colleague of course, the Shadow Foreign Secretary Hilary Benn, we know when his father passed and a lot of Mr Cameron’s affairs were about inheritance, when Tony Benn passed away there was a very, very expensive house in Holland Park that he passed on to his family and it seems that there were legal devices used by the family to mitigate tax.  Do you think you would encourage Mr Benn to publish his tax affairs?

JOHN MCDONNELL: I think anyone now … My own view is this, anyone at a senior level in politics who are making decisions or potentially making decisions, the Shadow Cabinet for example, about the taxation affairs of our country, it is better to be completely open and transparent.  It is voluntary at the moment but I would like to see a system, and as I say it operates in other countries and I don’t see why it doesn’t here.

DM: But people asking these specific questions about Hilary Benn, you’d say Hilary get on with it and show us what happened?

JOHN MCDONNELL: It is up to the individual concerned but I think it is best to be open and transparent.  

DM: I want to ask you about this, Seema Malhotra in the Shadow Treasury Team there, writing today she’s saying – this is on Mr Cameron ‘Even now we don’t know if he’s telling the full story’, what are the Labour party’s concerns?

JOHN MCDONNELL: We haven’t seen the full tax returns yet, all he has done is publish a summary from his accountant, so it’s not the publication.  You said earlier he had published his tax returns, he hasn’t done it altogether really.  I think the question – and I don’t want to personalise this around David Cameron but what worried people is he was asked a straight question a week ago and you expect from your Prime Minister automatically a straight answer.  We didn’t get that and it has taken us a week to get this far, to get this amount of information and we still haven’t had the full tax returns.  So I think people are still querulous about what is the exact position itself.  People are asking questions today about the inheritance that he’s had as well, £300,000 from his father, just below the Inheritance Tax limit of 325, then two lump sums of £100,000 from his mother which takes his inheritance then to £500,000 and he never paid any tax on it whatsoever.  Again there is an issue here that people are saying there’s one law for the rich, another for the rest of us.

DM: But he just happens to be rich, it is entirely within the law.  Are you suggesting that something untoward has gone on?  

JOHN MCDONNELL: No, not at all but what people are saying is, is the system fair and shouldn’t we review the system to see if it is fair?  As I say he never paid a penny of Inheritance Tax on that and the government now is cutting Inheritance Tax.  The reason why people are asking whether it’s fair enough, I’ll just give one example, at the same time in the budget they are cutting Inheritance Tax, at the same time they were cutting benefits for disabled people by £30 a week. People just don’t think that’s fair and that’s not the way I think they’d like to see our system operate.    

DM: And just on the Prime Minister then, would you like to go further back as well and find out about offshore trusts and offshore investment vehicles, whether he’s had investments in the past, his father set up the fund a long time ago?

JOHN MCDONNELL: I think it is better for him to be completely open and transparent over that period.  The other thing I think people are asking questions about which is again policy, not personality, at the same time we were campaigning – and I’ve been campaigning on this for the last 15, 20 years – the same time we were campaigning we had a real victory about registering beneficiary interests in companies, he was blocking in Europe the registration of interest in trusts.  Again that’s not open and transparent that he was proclaiming he was about, that isn’t what he was actually doing.  

DM: I want to ask you a lot more about overseas dependencies and Crown Territories but just on this trust, Blairmore it was called and of course that resonates with people in terms of a former leader of your party who now we understand is very, very rich indeed, arranges his tax affairs I’m sure entirely legally but of course lives in many different jurisdictions around the world.  Do you think Tony Blair’s image and Tony Blair’s wealth is damaging to your party?

JOHN MCDONNELL: It’s not about the wealth as such of individuals, you can have wealthy people, it’s about whether the system is fair in terms of taxation.  If they are paying their taxes fairly that’s fine and legally, that’s fine but I think we are into an really moral discussion now about whether our taxation system really is fair and is it actually creating a society that is so unequal …

DM: Sorry to interrupt Chancellor but the specific question about Tony Blair, the former leader of your party.  Of course you are an entirely new leadership now but in the public’s mind they are saying there is a Labour leader who after he left office has made an awful lot of money and arranged his tax affairs accordingly, do you think?  

JOHN MCDONNELL: I don't know about his tax affairs.  He has certainly made a large amount of money, what he does with that money I’m not sure.  He might well be using it for good purposes, I don't know but this isn’t about people being rich or people just being on average wages, this is about is the system treating everybody fairly?  The system isn’t treating people fairly, that’s the general view at the moment, particularly if you can use various tax devices to avoid paying tax on quite a large scale.  That isn’t open to the ordinary person who goes to work and pays through PAYE so that’s why the system needs to be reformed.  

DM: Okay and the irony of this system, many of the territories that allow this to happen are of course in a relationship with the UK.  What would you do to the British Overseas Dependencies and their ability to offer these kind of …?

JOHN MCDONNELL: I think we’ve got to enforce a standard upon them of openness and transparency and tax regimes within their territories that are fair as well and that reflect what we want in this country as well.  If they don’t abide by that, my own view is that we should take action against them and if they themselves, who are largely supported by the UK, if they want to go independent that’s up to them but to be frank the OECD would most probably list them, and blacklist them, as tax havens anyway so it is better for them to cooperate with the UK government, have openness and transparency, register the interests of people who hold their wealth within those territories and pay appropriate levels of tax.

DM: So Crown Dependencies goes for the Isle of Man, goes for the Channel Islands?

JOHN MCDONNELL: Yes, we’ve got to try and get agreements now internationally and globally about fair taxation.  We’ve been campaigning for that in Europe so the least we can do is make sure those that have a relationship with Britain should operate effectively as well.

DM: This from the former deputy leader, deputy Prime Minister, John Prescott, this morning, Lord Prescott.  He says ‘To me the British Virgin Islands and the Isle of Man and other overseas territories that promote their aggressive offshore status are nothing but parasites.’

JOHN MCDONNELL: Well I have to say this, some of these territories have actually used our services, have been supported by this government, by successive governments, by the UK, even received aid some of them and at the same time they are allowing their territories to be used as tax havens.  I don't think the British public think that’s fair and I think it has to be tackled.  That’s one of the issues we are saying to the government that they need to get on with quickly now.  We are calling for an inquiry now into Panama and into all these aspects for but we want that inquiry to be public and independent.  The government is setting up an inquiry but it is reporting to the Home Secretary and the Chancellor.  Now they are politicians from a political party whose donors have actually benefited from the system so it is hardly independent.  We also need to have HMRC properly resourced, stop the cuts, make sure the tax collectors are properly resourced to be able to undertake this inquiry.

DM: But parasites?

JOHN MCDONNELL: I’m afraid if they are taking money from us, if they’re enjoying our protection and using the name of Britain as well and at the same time they are operating as tax havens, denying tax resources to our public services, I can understand why John has gone that far.  

DM: I am going to be talking to the First Minister of Gibraltar, one of these parasites as Mr Prescott, Lord Prescott and you have termed them now. There is a specific answer with Gibraltar given the dispute with Spain, is hand them over.

JOHN MCDONNELL: Well that’s not what the people there want but if they wasn’t a relationship with Britain though they should play fair.  Everybody who wants a relationship with Britain should play fair, that means openness, transparency, proper register of interests and proper taxation levels.  They cannot be used to salt tax away from this country and every penny that goes in tax avoidance and tax evasion is a lack of investment in our NHS, lack of investment in education and in our public services and also in benefits for those who really need them within our country.  It’s not fair, it’s not acceptable.

DM: What are your views, we’ve been talking about the high end, about overseas trusts and those kind of things that most people in the country haven’t got a clue what they are and whether they can access them or not but of course there is tax avoidance and tax evasion that takes place on a grand scale but at a low level every day on streets, building sites and houses in Britain.  You know what I’m going to talk about, the cash in hand economy, the black economy.  What would you say to people for instance who have voted for you, get a small job done around the house and the tradesperson says it will cost you 20% less if you pay cash?

JOHN MCDONNELL: It’s not legal, it’s just not legal and people have to abide by the law.  Whatever level it is, I’m afraid you have to abide by the law.

DM: So what’s that, you have to ask for a receipt and ask if you are VAT registered?

JOHN MCDONNELL: I’m afraid so, you have to abide by the law and the issue for us at the moment is the vast bulk of our population, we’re not losing – on all the estimates we are not losing billions of pounds as a result of the odd cash in hand payment although we need people to abide by the law …

DM: Well the estimate is that billions are going in the pockets …

JOHN MCDONNELL: Well not in comparison with what’s going on with tax evasion and tax avoidance on an industrial scale in this country, it pales into insignificance, but nevertheless what we’re saying is that people need to abide by the law and the law has to be fair.

DM: Something you have talked about in another way in the past, it seems that a lot of big banks, British based banks some of them, have been involved in the Panama papers, have been named in the Panama papers in using this legal firm to facilitate their clients setting up certain trusts, so kind of deflecting it.  Do they need looking at?

JOHN MCDONNELL: Yes, we’ve included … this week we are publishing our plan for tackling tax evasion and tax avoidance and enforcing it effectively and that means banks being open and transparent with the register of their interests as well and how they use these tax havens.  Again it does need an independent inquiry into this whole system now.  I would also like to strengthen the powers of whistle-blowers because we wouldn’t have known anything about this unless there was leaks going on, so what we need to do is strengthen the powers of whistle-blowers.  Can I say also, with regards to the register of interests with MPs as well, at the moment there is a register of interests but actually there’s levels about how much you actually declare if you have got money in overseas trusts.  We want that reviewed as well so there is complete openness and transparency of individuals, companies, trusts and banks as well.  In that way we may be able to restore the faith in our taxation system.

DM: Mr McDonnell, great talking to you.  Shadow Chancellor, thank you very much indeed, John McDonnell there.