Growth and Infrastructure Bill

Part of Business of the House – in the House of Commons at 6:39 pm on 5th November 2012.

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Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover 6:39 pm, 5th November 2012

I rise to welcome the Bill and to speak particularly about infrastructure issues, which I hope the Committee will explore when it examines the Bill clause by clause.

The Bill’s long title says that it is

“To make provision in connection” with “the provision…of infrastructure”. In that context, I particularly welcome clause 7, which deals with the speeding up of broadband infrastructure provision. However, not all infrastructure comes cost-free; much of it is paid for out of public funds. Broadband infrastructure is made great use of by content providers, not all of which contribute to public funds as they perhaps should. Google, a big content provider, had declared earnings for the financial year of £2.5 billion, with a pre-tax profit, estimated on the basis of its global operating margin, of £836.7 million, and a tax charge of just £3.4 million, which is equivalent to an effective tax rate of 0.4%.

Payment for the provision of infrastructure is an important matter, particularly in the case of companies based overseas—big multinationals—which, according to Securities and Exchange Commission filings, have much higher effective tax rates in their home territories: 21% in the case of Google, whose effective tax rate over all its foreign territories is just 3.25%. The same is true of Amazon, which had declared UK earnings for the financial year of £3.9 billion, a pre-tax profit, estimated on the basis of its global operating margins, of £76.9 million, and a tax charge in the UK of £1.9 million—equivalent to an effective tax rate of 2.5%, while back in the States it had a rate of 31.2%. It is very important to tackle the abuse of the tax system and make sure that people pay their fair share to the UK authorities. I welcomed the statements that Chancellor and Wolfgang Schäuble made about this. When the Committee considers clause 7, I hope that it will focus on how infrastructure can be paid for, because that is an essential issue, particularly when the money comes from taxpayer funds.

I welcome clause 3, which deals with the cost of compulsory purchase inquiries. In Dover we have an office building called Burlington house which is the subject of a compulsory purchase order application that will go forward in due course. There is great concern about the cost of CPOs, and it is important to speed up inquiries and ensure that resisting a CPO is not penalty-free.

Clause 5 relates to section 106 obligations. I hope that the Committee will explore in more detail the question of infrastructure contributions where a business is clamouring for infrastructure to be put in place. For example, the east Kent access extension of the A256 in my constituency cost public funds £87 million, but the contribution from the business that was clamouring for it—Pfizer, which has a plant in Sandwich—was only about £1.6 million. Business is making a very small contribution. We should be rather more robust in saying, “Perhaps you should pay a bit more for the infrastructure you’re clamouring for”, particularly when, once it is built, the company closes down its plant, losing a lot of jobs. Pfizer had declared UK earnings for the financial year of £1.8 billion and a pre-tax profit, estimated on the basis of its global operating margin, of £347 million, and it did not pay a penny in tax in the UK in the previous financial year or the year before that. We should say to large multinationals, “You ought to contribute to the cost of this infrastructure. You shouldn’t play the game of transfer pricing and royalties—you should think of helping to pay for, improve and invest in UK infrastructure, thus helping the UK to grow.”

Clause 5 deals with the important aspect of viability. My own district council in Dover has been very positive in relation to viability by engaging with developers and talking about affordable housing contributions, but I recognise that that is not true of every district council or planning authority. We need to consider the whole issue of viability and how to ensure that there are strong, overarching powers should the need arise.

On the chapter entitled “Economic measures”, I welcome the provision on employer owners, but I hope that the Committee will explore the growth side in terms of open and competitive playing fields and level markets. For example, why should Costa Coffee pay tax while Starbucks, which has declared UK earnings for the financial year of £397 million and made a pre-tax profit, estimated on the basis of its global operating margin, of £59.6 million, paid no tax at all? That is a matter of great concern. I hope that we will examine transfer pricing and the abuse of our tax system to make sure that a fair share of tax is paid in the UK as well.