The current pandemic is having startling effects on economies around the world, and the UK is by no means immune to these problems. Businesses from the village hairdressers, to multinational airlines, to fast-food restaurants are struggling right now, and are in dire need of some financial assistance from the Government. The British Government should, of course, do all it can to keep these businesses afloat- the effects of not doing so would be disastrous for the country- job losses aplenty or a potentially more dangerous problem of businesses sending workers into unsafe conditions. However, if companies want to receive help from the government, they should at least meet some very lenient standards to ensure that a) they are able to be sustainable for the future, and b) they contribute fairly to the well-being of society.
In 2008, the financial crash rocked the banking industry to near-collapse. RBS and Lloyds TSB (via Halifax, Bank of Scotland) had to be bailed out by the Government to the tune of £500 billion. Unfortunately, when the bailout package was given, nothing fundamentally changed that would either prevent something similar happening again, or that would make the banking giants play a more beneficial role for the country at large. There was an opportunity to punish RBS specifically, for the “arrogance, greed and sheer stupidity” that led to their massive losses.
The banks at the time were, perhaps rightly, considered ‘too big to fail’- the amount of money the public held within them was so great that letting them go bust would have been disastrous. You could therefore have expected the Government to look out for the wellbeing of the British citizens to ensure that no bank could be ‘too big to fail’ in the future. Banks could have been ‘broken up’ and regulations tightened to increase security against future crashes. Sadly, no such condition was applied to the bailout money.
“This time round, such a package should come with some strings attached”
Now in 2020, with another economic crisis upon us, there is again a necessity for the Government to step in and support businesses who would otherwise fail. This time round, such a package should come with some strings attached. We now have even the most devout capitalists at the Financial Times calling for such measures: for corporations listed in tax havens to be exempt from receiving Government money. This policy has been introduced in Poland, Denmark and France already, as well as recently being supported by the Labour government in Wales.
If a company doesn’t want to conform to the, already ridiculously easy rules of paying just 19% corporation tax on their profits (less than the basic rate of income tax), then why should you be eligible to receive funding which, after all, will come out of the pockets of the taxpayers. A corporation which reaps the benefits of workers and consumers within the UK, whose health, education, infrastructure and transport are funded by taxes from the UK, has a responsibility to give something back. And if you can’t meet those basic standards- and want to instead use your team of accountants, and your residency in Monaco, Panama, or Luxembourg to ‘technically’ not be subject to UK tax law, then why should our government give you money when you can’t survive on your own two feet.
Ordinary citizens who had to bear the brunt of the effects of 10 years of brutal austerity, with wage freezes and cuts to essential public services, were constantly told they should’ve saved up during the good times. If they couldn’t hack these tough economic conditions, then tough luck, because in a society based on neoliberal capitalism, you’re on your own. Well that should surely apply to businesses too.
It is currently estimated that about £5.3 trillion of the world’s wealth is stored in tax havens, with this costing world Governments roughly £700 billion/year. This money could obviously be a huge boost to governments wishing to invest in the health, and general quality of life of their citizens but instead, simply goes to making those who are already extremely wealthy, even richer.
“It might even make them think twice about their actions in the future”
Of course, in the future, it could and should be possible to severely limit the amount of taxable income lost to tax havens. Either by creating an international formula whereby countries around the globe agree to tax multinational companies “based on their sales, investments and employee numbers in various countries”, or through simply unilaterally taxing companies’ revenues instead of simply their stated profits. However, in the meantime, it could send a huge message to these companies that wish to flout taxes, if our Government decided that they were not eligible for taxpayer-provided funding during a crisis. It might even make them think twice about their actions in the future. It’s a low bar, but pressure will still need to put on Boris and Sunak to do anything that would penalise their wealthy friends and Conservative party donors.
A very welcome but surprising update has just come from the Treasury who have announced that companies receiving Government funds during the Coronavirus crisis will be banned from paying bonuses and dividends. This is a great start, and is certainly deserving of praise. However, there is still a lot more that the Government can do in this unique position they find themselves in.
Other strings which could be attached to Coronavirus bailout packages could include environmental standards. For businesses such as airlines, and car manufacturers who are seriously struggling due to lockdown, now is the perfect opportunity for the Government to use their increased leverage to apply tough regulations on carbon output. This could be done through setting a target for net-zero emissions or mandating these companies spend a proportion of their profits on green technology. As we come out of one crisis, we will soon be facing another one on the horizon, and such a policy should be brought in whilst companies (who otherwise have no economic interest in curbing their carbon footprint) are desperate for government funding.
As well as this, the Government could apply rules which would benefit the workers of these companies. They could make it so that companies wishing to receive grants or loans would have to pay their workers a real living wage, allow workers to unionise and actually end the gender pay gap (which somehow still exists despite the Equal Pay Act being passed in 1970).
All in all, there is a lot that could be done whilst the power is in the hands of the state. Adding these strings to the bailout which these wealthy and powerful companies are calling for would give some real tangible benefits to millions of people who are struggling. And looking forward, it would force corporations to reconsider some of the worst aspects of their business models, and allow our country to be better off in the future. Other countries have taken the lead on this but there is no reason why we can’t follow the good example set by Denmark, Poland, Wales and others. Will Boris and Sunak do it? Probably not. But if/when they don’t, they should be held to account for costing our taxpayers and caving to corporate demands at the expense of workers, the environment and equality.
By Glyn Sheldon
For some further information on tax havens, and the 2008 bailouts as well as the current state of state-provided support for businesses, check out some of these pieces: