In a speech to the 'Business in the Community' conference on 23rd March 2012, David Cameron said that business ‘is the most powerful force for social progress the world has ever known’ (http://www.publicservice.co.uk/news_story.asp?id=19009).
While this might be an exaggeration (you might consider the role of education, community or government to be more important) there is no doubt that companies have a huge role to play in supporting the recovery and employing enough people to overcome the decline in the public sector.
To maximise the kind of private sector employment UnemployedNet would like to see, business owners and managers need to think differently, emphasising corporate responsibility rather than absolute profitability. This change would be of ultimate benefit to those companies, as it helps to release more money in to the economy which can be spent on their goods and services.
Other organisations and movements have proposed this change to corporate culture for different reasons. Those that represent environmental causes believe that issues such as natural resource protection and CO2 reduction should drive this, while those that emphasise the need for international development believe that corporations should put more of the money made from developing countries back in to helping the poor of those countries.
Those who support companies and their need to maximise profit suggest that profit promotes employment. However, through a number of tax avoidance mechanisms, such as declaring that sales were made in one country when they were actually made in another, declared profits can be minimised in the UK. The company can then use this as a pretext for redundancies and demands for additional productivity from existing workers, potentially reducing employment further.
We also need companies to pay their full share of tax to ensure the government can pay decent benefits to unemployed and economically inactive people, as well as provide the full range of public services. The principle that corporations pay tax from their profits is well established; a large contributor to the level of profit being made in a country is the public sector, including the legal system, education and health systems (unfit workers cannot work), training, transport, waste disposal and a whole range of other services.
The Corporation Tax rate is set by our democratically-elected government, and, if we want a lower or higher rate and enough others agree, we can change it by voting for politicians that represent this view. Avoidance negates this principle, with companies refusing to abide by democratic decisions.
The use of direct action to push companies to make a fuller contribution to employment and the wider economy could bring a great deal more revenue to the government and a large number of jobs. Many large British companies are sitting on substantial cash reserves, which are at the highest level in company history - http://www.cfoworld.co.uk/news/financial-planning/3335903/companies-cash-reserves-highest-level-on-record/ - so affordability is not the key issue here.
For further evidence of the level of tax avoidance, tax haven usage and affordability please see ‘The Evidence’ below.
Companies need to take their rightful place as both individual entities with responsibilities to their shareholders and a part of our wider society with important responsibilities to our communities. Unemployed Net encourages their growth and ability to create both profits and jobs, while also believing in their ability to make a full contribution to the improvement of our world.
We believe that UnemployedNet’s users, acting together, can gain some important concessions from companies through signing up to an active boycott of those companies that avoid tax. The first part of the campaign centres on banking, as one of the worst-offending sectors in tax avoidance and use of offshore accounts, and because of the poor service they give to unemployed people and those on a low income. The UnemployedNet campaign encourages our users to:
- switch bank accounts from those that use offshore companies (all of the big four – HSBC, Lloyds, RBS and Barclays) to those that operate on a more responsible basis, including building societies and the Co-operative Bank;
- write to your bank to tell them why you are switching accounts;
- encourage others to do the same; and
- sign up to Unemployed Net’s campaign so we can let banks know how many people support these measures. This will help us to lobby banks to get change in both their tax and employment arrangements and their service to unemployed and low income customers.
Unemployed Net supports the work of the Tax Justice Network (TJN), which campaigns for justice in tax payment, opposes the use of offshore accounts and tax havens, and supports responsible tax payment towards benefitting those without work and on low incomes.
TJN provides many good recommendations for improving tax payment from companies, including supporting transparency in company reporting, opposing tax havens and offshore finance, supporting international co-operation on tax, supporting corporate responsibility and fair rates of tax, and supporting compliance with the meaning and spirit of tax regulations.
Unemployed Net will promote the TJN agenda to banks. We will work with all willing financial institutions to help them develop their services for unemployed and low income people, particularly in the provision of full accounts.
While this campaign has begun with banking, Unemployed Net’s users are asked to contribute ideas on what sectors should be targeted next. Given recent reporting of tax violations this next phase could centre on clothes shops, mobile phone networks, supermarkets or another area.
The initial campaign is focused on banking. In addition to the tax avoidance issue the service provided by banks to unemployed people and those on a low income has been poor for many years, with a lack of access to full bank accounts affecting 35% of the population according to one report –
However, tax avoidance is the key reason why companies have a moral duty to act. The use of offshore accounts by British companies as a tax avoidance measure is at an all time high –
This TUC study suggests that the amount of tax avoided by Britain’s biggest companies in 2006 was £11.8 billion. The level of tax avoidance has been growing quickly and is likely to be much higher today. This figure only covers the large business sector, not small and medium businesses, but this includes banks.
The Public and Commercial Services Union (PCS) published a report in 2011 that tax havens cost the UK an estimated £18b per year. These are used extensively by large UK companies, with many hundreds of offshore companies used by the large banks -
Companies may be harming themselves by avoiding tax. The Independent suggests that they may hurt their reputations, but also their balance sheets through having to pay penalties to governments, as with Barclays, which in February 2012 was ordered to pay £500m in tax and penalties for avoiding tax –
RBS has had its own problems in this area –
As has HSBC –
And Lloyds –
Given the record of the big four UK banks in this area, as well as the additional issue that they advise other individuals and companies on minimising tax, focusing on this sector first is appropriate.
The Corporation Tax rate was cut by 2% in the 2012 budget at a time when large companies have more cash than ever before –
But this isn’t just about banks. ActionAid revealed in 2011 that 98 of the UK’s 100 biggest companies are using tax havens.
The most important part of this campaign is for Unemployed Net’s users to sign up to and comment on it. To register your interest please leave a comment below.
Please note that your first comment will be counted as support for the campaign unless you tell us in the comment that you do not want to be counted in this way. We will release details of the number of people who sign up to the campaign, and aim to build pressure on banks and other companies through weight of numbers. The more of us that sign up, the more power we can bring to discussions with companies and the more likely it is that we can get these changes made.
The first place UnemployedNet is focusing this campaign is on banks. Their irresponsible lending and poor management led us in to the financial downturn that started in 2007 and is still with us today. This downturn has led directly to the large increase in unemployment in the UK, and those that contributed to our negative circumstances should not be rewarded with our custom.
We want Unemployed Net’s users to boycott banks that prioritise tax avoidance and offshore arrangements and use instead those that favour proper bank accounts for all and full tax payment. For financial institutions we support the Co-operative Bank or any building society rather than any of the big four banks. This means:
- switching bank accounts from those that use offshore companies (particularly all of the big four – Lloyds, HSBC, Barclays, RBS) to those that operate on a more responsible basis, including building societies and the Co-operative Bank;
- writing to your bank to tell it why you are switching accounts;
- encouraging others to do the same;
- signing up to Unemployed Net’s campaign so we can let banks know how many people support this measure.
The second part of your potential involvement is also important. If you want to become more involved please contact your local MP and ask them to consider campaigning for these changes.
Find your local MP and their email address here:
Unemployed Net’s users are asked to contribute ideas on what sectors should be targeted next. Given recent reporting of tax violations these may be clothes shops, mobile phone networks, supermarkets or another area.
Please let us know what you have done, who you have contacted and what you think should be next through the comments section below and we will publicise your efforts.