Danny Alexander: £900m to fight tax avoidance and evasion

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Sunday lunchtime saw Chief Secretary to the Treasury Danny Alexander address Liberal Democrat conference. The packed nature of the hall, the fullest it had been so far save for the rally on Saturday night, reflects both the importance of Danny’s role and the interest from many members in hearing direct from him.

What’s really happening with the cuts? How much is fairness figuring? And can Danny present the message successfully? Not being David Laws is a burden that has hung over his early days in office and this speech was his opportunity to establish himself in party eyes as his own man.

“Not because it was easy, but because it was right” – that was his opening refrain, name-checking many party favourites who had taken tough rather than easy choices over the years, including Charles Kennedy’s opposition to the Iraq war. That too was his description of what the party has been doing since the general election.

Danny AlexanderNotable in his list of party achievements was the heavy applause received for his reference to raising the basic income tax allowance on the way to achieving the party’s goal of a £10,000 allowance. It received more applause even than many of his digs at Labour’s financial legacy, such as highlighting that “For every four pounds Labour spent, one pound had to be borrowed”. The speed with which that £10,000 target will be reached has not been much discussed, either in the party or in the media, but if the audience’s reaction is anything to go by the amount of further progress made in the next budget will be watched closely by many Liberal Democrats.

Danny Alexander went on to say, “There is nothing progressive about leaving the paying of debt to the next generation … Our plan is credible. It is already supporting economic growth … Labour allowed political convenience to trump economic necessity once too often.”

On welfare, he said the underlying principle should be, “Work for those who can. Proper support for those who cannot,” before going on to add “We must ensure that every tax bill is paid in full”, deriding tax dodging as an unacceptable lifestyle choice that takes money away from those who need it more and is “morally indefensible”.

Hence the significant new announcement in the speech: £900m extra is to be invested in cracking down on tax avoidance and evasion. I expect that we will see a lot more of this pairing up of welfare and tax issues with rhetoric about how welfare cheaters are wrong, but so too are tax cheats.

Danny Alexander then moved on to praise those working in public services, promising to listen to their views and give them more autonomy even as the government seeks to save money.

The end result of the government’s economic policies? “The country will be stronger, fairer and more prosperous”, said Danny Alexander.

The standing ovation at the end was a little slow to start, partly as it was not immediately obvious that Danny had finished speaking but also because it was a good, competent speech rather than a barnstormer.

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31 Comments

  • Questions for Danny Alexander (Chief Secretary to
    the Treasury):

    1. Are there to be any legislative changes as part of the “major
    clampdown”? For example, to close particular loopholes or to “tighten up”
    appropriate parts of the system. Or is this clampdown simply the
    announcement of additional expenditure?

    2. Is there any ongoing policy work being undertaken by HMRC looking at
    improvements in the efficiency and fairness of the tax system? If so, what
    is the nature of this work and are there plans to release details to the
    public? If not, why not?

    3. How much is it estimated each of the new measures outlined today will
    raise in each year of this parliament and the next parliament? How have
    each of these figures been arrived at and have they (or will they) be
    assessed by the Office for Government Responsibility.

    4. How was the budget for the $900 million extra expenditure determined?
    For example if the amount dedicated to collection of tax was doubled what
    increase could be expected in recoveries?

  • Barry George 19th Sep '10 - 7:36pm

    Mark

    However he did ‘avoid paying capital gains tax on his second home sale’ , via a tax loophole. Certainly not illegal but whether it was a moral thing to do is another question.

    Is it right that a man that takes full advantage of tax avoidance should be announcing a crack down on such mentioned tax avoidance ?

    He clearly didn’t want a crack down when he was selling his second home.

  • @Red Rag: Enforcement and Compliance’s budget is a little over £1 billion a year. Its around a 20% increase of that part of the organizations budget over 4 years.

  • @Red Rag: I did do the maths. You certainly tried, but you’ve got it wrong. £225 million is 4.68 percent of the overall HMRC budget a year. You’re using long scale, but we use short scale. And enforcement and compliance has less than a quarter of that overall spend at just over £1 billion. Taken that this is just for enforcement and compliance its an increase in what we spend on that by a little over 20%.

  • @Red Rag: £4.8 billion. Thats 4.8 thousand million, not 4.8 million million. You’ve got a decimal error on your hands, the treasury moved to short scale instead of long in 1975.

  • @Red Rag: And I’ve got no idea. It could have lost as much as £5.76 billion at 40% cuts, because we won’t know until October what the spending review recommendation is. What I can tell you is that enforcement and compliance will have an extra £225 million a year, and that it’s current budget being 1,040 million, means it’s getting 20% more as it stands right now. We’ll have to see where the cuts actually fall in the department before we see whether that’s a net decrease, a net increase, or a wash. You’re right to point out that it isn’t as simple as it seems, but we can’t make a full judgement until the spending review is fully detailed.

  • Anthony Aloysius St 19th Sep '10 - 9:16pm

    Of course, this is rather like the situation with the pupil premium, where a relatively small amount of extra funding (maybe 1 or 2% of the education budget?) is being provided, but it has to be seen in the context of cuts of 10-20% in existing spending.

  • @Red Rag: When you’re talking about resources allocated to a specific subset of a department, I do feel its just as pertinent to consider the funding of that portion of the department, and as we can’t know how much or where within the department cuts will fall until October I think it’s best to reserve judgement good and bad until then. You may well be turn out to be right, and if you are I’ll point it out, but until then you are only making an assumption.
    I take it from your lack of acknowledgement that your decimal error will remain, here and on your blog?

  • Philip Rolle 19th Sep '10 - 9:18pm

    Tax avoidance measures may please the crowd, but they will not yield significant revenue.

    Arguably, we need to re-think self assessment. Self assessment ( and indeed PAYE ) only works if those who makes mistakes or deliberately conceal income are caught. A £42 billion black hole suggests that the current system is not working. To that end, I would propose the introduction of tax audits.

    Under such audits, each individual would be audited by HMRC every two, five or ten years, the frequency depending on their income and risk profile. Audits could be advanced or delayed, so the taxpayer would not know which year would be looked at. All taxpayers would be subject to audit, not just those within self assessment.

    Such a system would discourage non compliance.

    As things stand, those who are inclined to hide income or overclaim on expenses know fullwell that the Revenue has insufficient resources to investigate them. The chances of an enquiry notice are extremely low. Furthermore, claimants of tax credits can see from the delays experienced that the Revenue are struggling to process their renewals claims, let alone check whether they are right.

    The position for some benefits is worse still. There are standing instructions at some councils to allow housing benefit claims without initially checking them. They they rely on cross checks which may be undertaken months or even years later.

    In such circumstances, suggestions of bringing in further avoidance measures are wide of the mark and they badly misjudge what is required to get the tax system operating properly. HMRC need more staff; they need to be better qualified and the system needs to be changed as above to ensure a better tax due recovery rate.

  • So let’s get this straight. HMRC are in a mess. They can’t get their own sums right. They are busy sending out corrections which themselves appear to contain more mistakes. What are we politicians doing to help out?

    Well, we’re about to cut their overall budget and thereby disrupt their performance. By how much, we don’t yet know. But courtesy of the Lib Dems, we are also going to make them increase their budget a little in one specific area, the prevention of tax evasion and avoidance. That will of course mean correspondingly bigger cuts in the other areas, such as sorting out the muddle.

    In other words, we’re playing to the gallery, at the expense of good government. Just the sort of thing we used to condemn Labour for.

    Presumably we just have to play to the gallery on chasing rich tax evaders, because this sort of motherhood-and-apple-pie policy is just about all of our centre-left tradition that Old Nick will give the time of day to.

  • Barry George 20th Sep '10 - 12:18am

    Mark

    Thanks’ for your response.

    it’s partly a matter of different semantics,

    I agree with that and in the current political climate you won’t find me pursuing Danny Alexander for doing what was his lawful right. Though not entirely inline with his more (shall I say) moral obligations.

    There are far greater issues and concerns within the party and much bigger fish to fry than him.

    Mine was just a passing comment. I will leave the complexities of departmental economics to those more apt to translating them.

  • Roy's Claret Army 20th Sep '10 - 10:18am

    Mark Pack:

    Your primary residence is where you live most of the time, whether you own the house or not. Pretending that the flat you own in London is your primary residence whilst your family are living in Inverness is tax avoidance. And where presumably he is registered to vote, registers his car and puts his children down for school places.

    The law was designed to help people who have to move jobs and end up owning more than one house at a time. This benign law has been fiddled by Danny.

  • Roy’s Claret Army: You’ve been rumbled son, Mark has explained why. Now do yourself a favour and stop digging.

  • I saw the snippet of Danny Alexander’s speech on the 10 O’clock News last night. I was horrified. Here was a Chief Secretary to the Treasury who clearly did not understand the distinction between tax evasion and tax avoidance. The former is unlawful and wrong, the second is lawful and not wrong. The first can be dealt with under the existing law, the second requires changes to legislation.

    This was a piece of red meat thrown to the membership to prove that Nick Clegg and his fellow Cameron-worshipping Orange Book afficionados are still Liberal Democrats, even though they increasingly behave like Tories. It didn’t convince me, and I don’t suppose it will convince the Lib Dem backbenchers, many of whom have voiced coded criticisms of Clegg and his team over the past four months, voices that are likely to become louder and less disguised as Clegg’s propping up exercise progresses.

    Why was someone so lightweight made Chief Secretary to the Treasury? Oh, I forgot. He is Clegg’s travelling companion and confidante, to whom the Great One speaks his opinions about colleagues in earshot of reporters.

  • Roy's Claret Army 20th Sep '10 - 1:24pm

    Stop this nonsensical bluster please.

    Danny Alexander told the HoC authorities that this was his second home, he told HMRC it was his first home when he sold it in order to avoid CGT.

    Mark, perhaps you might like to list which tax avoidance measures should not be covered by Danny’s crackdown???

  • Anthony Aloysius St 20th Sep '10 - 2:29pm

    Roy’s Claret Army

    I can assure you I’m not the kind of person who would defend any politician if I thought he’d broken the rules. But this one was discussed at great length, and on the information we have, Danny Alexander acted entirely by the book (whether you think the book should be rewritten is another matter). You can find all the details here:
    http://www.libdemvoice.org/danny-alexander-issues-statement-on-his-capital-gains-tax-affairs-19762.html

  • Barry George 20th Sep '10 - 2:57pm

    Roy

    Danny did nothing illigal. I have already said that in my view it wasn’t his greatest moral decision but you are flogging a dead horse. It was within the law.

    Fight to change the law by all means but you will get nowhere trying to drive a truck up a cul de sac.

    Sesenco

    I have to admit that the more I read your comments the more I am inclined to agree with you. Not on everything of course but it is clear that your eyes are wide open and that alone has been a distinct ,rare and much needed element on this site. I look forward to your comments and I hope that the many that have doubts read them with their eyes open too..

  • Roy's Claret Army 20th Sep '10 - 3:04pm

    I know he has not broken the rules.

    He has legally avoided a tax by using a loophole that was originally designed not to punish people who had to buy a home before selling their first one.

  • John Fraser 20th Sep '10 - 7:43pm

    Leaving Danny alexanders house to one side for a minute . Did he actually say the Colaition was going to bring legislation in to stop TAX AVOIDANCE if not its all a bit airey fairey. XCan someone please advise ??

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