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  • Dawn Primarolo – 2001 Speech to the British-Swiss Chamber of Commerce

    Dawn Primarolo – 2001 Speech to the British-Swiss Chamber of Commerce

    The speech made by Dawn Primarolo, the then Paymaster General, on 12 December 2001.

    Ladies and Gentlemen,

    I am delighted to be here in Zurich today and very pleased to have the opportunity to address such a distinguished audience. I know that the British-Swiss Chamber of Commerce plays an important role in developing the commercial relationships between our two countries And I applaud the success of your efforts not only in relation to trade but also in promoting friendship and understanding between the British and Swiss peoples. The value of that contribution is fully recognised by the British government and I am confident that your work will continue to strengthen the ties that we are here to celebrate.

    The United Kingdom and Switzerland have a particular affinity as world leaders in banking and international finance. We often find ourselves in competition in the market. But we share a common understanding of the elements that have to be in place to enable our banking and financial sector to develop and prosper.

    Both of our countries have enjoyed a long period of stability in our political structures. And that stability provides an essential foundation for economic prosperity and growth. It has reinforced the attractions of our two countries to international investors and has enabled us to offer a firm base for stable and successful banking businesses.

    As you know, I am here primarily on inter-governmental business and to meet the leaders of the Swiss banking community. And I am grateful to all those that I have met for making their time available to me.

    As the minister responsible for business taxation within Her Majesty’s Treasury, I want to take this opportunity to say a few opening words about our approach to business taxation and then to spend some time on what I see primarily as a banking industry issue.

    The year ahead looks set to be fuller than most of developments in the area of corporate taxation. On the European front, we have the promise of the Commission’s conference on company taxation; and a number of initiatives that they have recently announced in such areas as transfer pricing and cross border loss relief. The Commission has set out its priorities and there will be no shortage of issues to discuss under the Spanish and Danish presidencies. And, of course, my own work, as Chair of the Code of Conduct Group, will continue as we tie together the strands in the tax package for the end of 2002.

    In the UK, we see economic reform as the priority for the European Union and taxation as an issue under that umbrella. In Brussels, there is some danger that discussion on taxation takes on a life of its own. We need to guard against that and against the danger of introspection.

    In our domestic economy, we have continued to work towards a more neutral system of business taxation. But we have also seen it as a responsibility of government to intervene in areas where there has been significant market failure. And to take action where we believe there is an opportunity to bring about change that will help us achieve higher, sustainable levels of economic growth.

    For example, we are currently consulting with business on a range of improvements to our corporate tax system. Among them is a proposal to extend to large companies the system of tax credits for research and development that we successfully introduced for small and medium sized companies.

    Research and development, with its spill-over benefits into the wider economy, is essential to sustainable growth. And the Chancellor of the Exchequer, Gordon Brown, has already signalled our conviction that there should be wider support across the European Union, for a higher level of commitment to research and development spending to raise the quality and volume of the r&d carried out in Europe.

    There are many challenges ahead in the process of economic reform and changes in taxation can undoubtedly contribute to the better fulfilment of the objectives set at Stockholm and Lisbon.

    But let me return to the banking industry and, in particular, to the subject of private banking.

    I am particularly pleased to have had the opportunity yesterday and today, to meet representatives of the private banking businesses based in Switzerland and to enter into a dialogue with them.

    I have spent only 24 hours here but, with grateful thanks to my hosts, I already feel that I have a much better understanding of the private banking sector. And a better appreciation of the factors that contribute to a successful relationship between the banker and his client and, therefore, to a successful private banking business.

    It is not simply the efficiency and service levels of the bank itself or the returns on the funds invested. Both of these are important, but to be successful the private banker has to offer more than that.

    There has to be mutual trust. There has to be respect and confidence. And, from the banker, there has to be a sense of obligation – obligation that is more deeply rooted than the simple obligation of a deposit-taker to its depositors. It is these qualities that differentiate the private bank from the mass market provider.

    And underpinning all of this is reputation. Without reputation, at home and abroad, there is no prospect of building a successful private banking business.

    I want to stop with reputation for a moment. Politicians and private bankers. We both rely to an enormous extent on our reputations. In politics, a reputation can be lost irretrievably by a careless word or act, by an omission, by a failure to see that the world has moved on. And through the continual public gaze of media attention.

    Governments of every shade of opinion, around the world, and the individual politicians within them have become increasingly aware of the pressures of public interest and have had to respond to them. The media reflect the public desire to know and it is a brave or foolish politician who tries simply to put up barriers to it.

    Increasingly, we are pressed for greater transparency – in our lives and in our decision-making. And most of us would have to agree, that transparency is essential in a democratic society.

    But these are not pressures that are unique to politicians. I think that it would be fair to say that most of us in this room feel the demands for greater openness and more transparency in the different facets of our everyday lives.

    Within financial services, investors are looking for greater transparency and improved information when financial products are sold; and so are the regulators that serve them. And when it comes to fees, commissions and charges, investors and regulators are looking for that same openness and transparency. We can all point to situations where transparency has been lacking , investors misled and products mis-sold.

    Transparency has a cost. It has a cost for politicians as well as for bankers. But it is a cost that we have both to accept. Because without transparency in what we do and how we do it, without the ability to withstand scrutiny, there is no reputation. And without reputation, neither politician nor banker can stay in business for long.

    Coming out of September 11th, I think that all of us have had some re-assessments to make. We have had to look again at what is really important to us and what isn’t. Where our obligations lie and to whom. And above all, how we need to act to be worthy of our reputations. The last few months have been a time of action but they have also been a time for reflection.

    Terrorism is a serious crime. And there can have been few crimes more serious than those carried out in Washington and New York on September 11th.. We rightly take action to strengthen our hand against those within our societies that would seek to damage or destroy them and against those who provide the terrorists with the financial means to do so.

    But these are not the only threats that we face. And this is not the only kind of crime against which we need to strengthen our laws.

    It is easy to turn our backs on other forms of crime, particularly those forms of crime that are much less dramatic, involve no violence against the person and that apparently have no victims. But financial crime is crime none the less.

    When the crime is tax evasion, it shifts the burden from the evader to the honest citizen. And the victims are all of those – all of us who – pay more as a result, or who go without the services that additional tax revenues would have funded.

    I just want to pause here a moment. And to put down some points about taxation, tax competition and tax evasion. Because some of the things that I have read recently make me think there is scope for misunderstanding here in Switzerland and I don’t want there to be any misunderstanding.

    Bruno Spinner, the Swiss ambassador to London, recently summarised the EU and OECD action against harmful tax competition as “…high tax countries… resisting the outflows of capital to countries which impose only modest taxes, or none at all…”.

    I do not share his analysis.

    I have already said a few words about our approach to taxation in the United Kingdom and our views on taxation in the wider context of economic reform in Europe.

    There was a time when the UK taxed investment income at 98% in the hands of wealthy individuals. The highest marginal rate is now 40%. And the present government has provided many opportunities for tax-favoured investment to encourage savings and a strong and dynamic economy. We have also introduced major capital gains tax changes that give entrepreneurs and investors alike the potential to realise their gains at an effective tax rate of 10%. The UK is not a high-taxing country for individuals.

    Nor is it a high tax country for the corporate sector. We have brought down the headline rates of corporation tax to unprecedented low levels. And we are in the process, as I have explained, of simplifying and modernising the system to provide a more consistent and coherent framework. A system that will allow more structural flexibility to companies than they have ever enjoyed before.

    By global standards, the UK is an attractive place to invest. And we, as a government, are proud of our ability to attract, year in, year out, more inward direct investment than any other country in the world except the US.

    So let’s be clear. The harmful tax competition agenda, from a UK perspective, is not a protectionist agenda. It is aimed at levelling the playing field and opening up markets and opportunities to truly global competition.

    Like the Swiss government, we are committed to tax competition. To fair tax competition. And to the sovereignty of the state in tax matters.

    We respect the right – the absolute right – of sovereign states to tax their citizens as they wish. And we do not stand in their way.

    And we expect, in return, that other sovereign states will not stand in our way. Or prejudice our ability to tax our citizens, our residents, in accordance with the laws that our parliament has passed.

    Like the Swiss government, we have a democratic mandate and our taxation system derives its validity from that mandate. We tax our citizens, our residents, on their world-wide income at their marginal rate and give them credit for foreign taxes suffered. There is nothing radical or new in that approach. It is not unusual as a way of taxing individuals and we believe that it is fair.

    Within any society there are, of course, those who want to make sure that they pay as little as possible to the state in taxation. And while they stay within the law, that is their right.

    But there are unfortunately some who want to pay even less than that. And choosing not to report income is one way, albeit a rather crude way, that some of those individuals seek to side-step their obligation to pay tax.

    This is tax evasion. In the UK, as in many countries, it is a criminal offence. Those who evade tax take advantage of government spending on health or education, roads or railways, power or policing. But don’t want to pay towards it.

    Within the European Union, we have joined the fight against this kind of crime. Against tax evasion. We have agreed, without discrimination, to share information freely, openly and automatically between our revenue authorities about cross border flows of interest to those who are resident in our countries. Subject to all the stringent rules and safeguards that prevent the wider use of that information. And, in doing so, we have committed to making it more difficult for individuals who want to evade their responsibilities towards their neighbours and fellow citizens.

    We would like Switzerland to join us in that project.

    I spoke a few minutes ago about the need for relationships built on trust. On confidence. On a sense of obligation. To be successful in private banking.

    I also spoke about transparency and indeed the increasing demand for transparency from both the public and the regulators.

    And I spoke about reputation, which underpins everything else, whether you are a politician or a banker.

    Switzerland has enjoyed an enviable reputation for its banking business. And many Swiss banks have emerged to become banks of truly international standing.

    When I stand back and reflect on that reputation, I have no doubt as to its strength today. And no doubt about the quality of what has been built on it. Or how its strength is nurtured through bonds of trust, respect and confidence and through the sense of obligation that I referred to earlier.

    And I find it difficult to believe that a reputation and a business as strong as this can be balanced so precariously on the pin-point of banking secrecy.

    I think that Swiss banking is stronger and better than that. And I have become more convinced of that the more of its leaders I have met. And I hope that they will have the confidence to see their reputation burnished by a greater transparency rather than cloaked by an over-attachment to secrecy.

    In the UK, banking and financial services are among our most important industries. And we, like the Swiss, started off by being sceptical of a proposal that looked as if it would only damage those industries without achieving its objective. But we worked with the proposal and, with the increasing help and understanding of other member states, it was refashioned into something more logical and more effective. And something that we are confident will not damage the City even though there will be some additional costs.

    We concluded that we could and should take up the responsibility to join a project to help our neighbours. And ask others to work with us and to join the fight against tax evasion.

    If we had turned our back instead, we would surely have lost our reputation and, in time, we would have lost what had been built on top of it as well.

    These are uncertain times. The global economy has been strong but we have entered a period in which none of us can look to the future without some shadow of recent events passing across our minds.

    We have learned, or perhaps re-learned, the strength that can come from acting together. Nation with nation. Voluntarily. Sharing a common goal. Even where the threat is not, initially, a threat directed at us.

    The bond between the Swiss and the British people is strong. The bond between Swiss and British businesses is strong. And we can celebrate that. And if we value it as well, we can and must continue to work together towards common, achievable goals that will reinforce and strengthen our economic and cultural relations.

    Thank you.

  • Dawn Primarolo – 1998 Speech to the Women's Budget Group

    Below is the text of the speech made by the then Financial Secretary to the Treasury, Dawn Primarolo, to the Women’s Budget Group on 12th February 1998.

    1.      I am very pleased to have this chance to address you here today.  Both in Opposition and in Government, my colleagues and I have had respect for the work done by members of the Women’s Budget Group.

    A:  THIS GOVERNMENT – TREASURY INCLUDED – IS PRO WOMEN

    2.       The Government – and the Treasury in particular – is committed to supporting women in their diverse roles:

    we want equality of opportunity for men and for women.   The Government must enable women to take their rightful place as the economic equals of men.  There is still much progress to be made: 79 years after women got the vote,  there are still far too many women in low income groups, low paid jobs and living in poverty in workless households.

    and we must support women in their role usually as the main carer for children. Fundamental to this Government’s mission, is to serve the children who are our future. We are committed to tackling child poverty.

    B: WE ACCEPT THE NEED FOR GENDER AWARENESS IN POLICY MAKING

    3.   I am proud to be part of a Government which understands that Governments should be aware of  – and take fully into account in the decision making-process – the differential effects of economic policy on men and women. Not as an afterthought, but as an integral part of policy making.

    4.   The reality is that – overall – women’s lives differ from men’s in ways which are structural to our economy.  So some Budget measures affect women differently than men.  That is why an analysis of gender impact lies right at the heart of this Government’s Budget process.  We will publish information on Budget Day setting out the gender impact of those policies which particularly affect women.

    5.   It is vital that our decisions – especially our Budget decisions – are taken on a gender aware basis.   Too often in the past, many of us have  felt that policy decisions have been taken in a way that is “gender blind.”  A poor policy process runs the risk of delivering poor decisions: decisions reflected in today’s status quo: a status quo which is failing women.

    C: THE STATUS QUO IS FAILING WOMEN

    6.        Previous Governments have failed to respond to the changing political and economic context, and the changes in women’s and men’s roles. They have led to a status quo that is failing women today. The figures speak for themselves. Of the lowest 10 per cent of earners in the UK, nearly two-thirds are women.  Average weekly earnings for women are only three quarters of the level for men.    Three quarters of clerical and secretarial posts are filled by women whereas they only occupy a third of managerial and administrator posts.  Women in managerial posts earn on average just two thirds of the salary of their male counterparts. More women than men are on temporary contracts.

    Previous Governments have failed to respond to womens’  changing place in the labour market.   The state –      through the benefit and tax systems – has continued to      assume that men work in secure long term jobs whilst women stay at home and care for the children. The reality is now much more diverse. More and more women are in employment  – in the last 15 years, we have seen an      increase of over 2 million working women. Many more women than men choose to take up the opportunities of part-time work.

    Specifically, the benefit system failed women by assuming a family structure in which women are dependent on men; where there is a male breadwinner, with women staying at home to look after children.  Just one example:  the benefits system fails to give partners of the unemployed the help and advice they need to find work, because of the overriding focus on getting the breadwinner back to work.

    The state has failed to adapt itself to changing social trends, for example the needs of  lone parents: parents who want to do the best by their children.  Lone parents have been denied the advice and help they need: instead, these parents were turned away with an order book, and told not to return until their youngest child had reached their 16th birthday.

    The state has failed to adapt to changing needs on childcare.  There has never been a national strategy to      ensure that childcare in Britain matches  women’s changing role in the labour market. The issue of affordability has been ignored for too long.  And the childcare disregard  has benefited only 31,000 families – less than 5 per cent of Family Credit recipients.

    The state has long failed to recognise the importance of unpaid work and the informal sector. Unpaid work plays a vital role in stitching together the fabric of society.

    D: WE WILL WORK TO ENSURE THAT WOMEN ARE FAILED NO LONGER

    7.       This Government is not prepared to sit by and watch women being failed in all of these different ways.  That is why we are embarked on a wide ranging programme of reform to ensure that women get a new deal from the state.  This new deal must ensure that we help women from welfare into work, that we ensure that work pays and that we support women in all of their diverse roles.

    8.     We have started to implement  the new deal for Lone Parents, giving women the advice and support they need in finding work, to improve their own and their children’s lifelong prospects.   This is the first national attempt to help lone parents – 90% of whom are mothers – into work.  The vast majority of lone parents  – just like women in couples – want the opportunity to work.  Not just for the financial rewards but for the self-respect and independence work brings. The employment rate for mothers in couples has risen from 53 per cent to 65 per cent, over the past 20 years.  At the same time,  the number of lone parents in work has fallen from 48 per cent to 40 per cent.  We are determined to give lone parents – and their children – a chance.

    9.     We will be spending £175 million on the New Deal for lone parents over this Parliament. The programme will be available nationally for all new claimants from April, and will involve personal assistance with jobsearch, training and childcare for people who have previously been ignored by the system.

    10.       We are modernising the tax and benefits system.  The key to tackling poverty among women and children is work.  Work provides a better standard of living than could ever be received on benefit. Our reforms aim to remove the financial penalties that the tax and benefits system present to those deciding to work.

    11.       The Government is committed to introducing a 10p tax rate when it is prudent to do so.  This will help improve take pay for the low paid – many of them women as we know –  and improve work incentives.

    12.           By setting a floor under wages, the National Minimum Wage will be of particular benefit to women in low-paid work. It will help to remove the worst cases of discrimination, and help promote work incentives. And  women stand to benefit from the introduction of the part-time workers’ directive, which aims to bring the rights of part-time workers more into line with those of full-time workers.

    13.       We are developing a national strategy for childcare.

    We have already started delivering, with a £300m out-of-school initiative.  Our national strategy will empower local communities to work together to meet their childcare needs. And we recognise the importance of, and are committed to promoting, family-friendly policies at work – for women and men and their families.

    14.         Taken together, we have a host of policies which are designed to address the failure of past policy vacuum.    We are determined to deliver on these promises, and we have already started to do so.  Doing nothing is not an option if we want to improve lives of women where the system is failing.

    E: OUR POLICIES WILL SUPPORT WOMEN CARING FOR THEIR CHILDREN

    15.       We recognise of course that many women choose to stay at home and look after their children.  The value to society of this unpaid caring work should not  be underestimated. Indeed I am pleased to note that the Office of National Statistics is now starting to collect and make sense of data on the unpaid sector of our economy.

    16.  Our policies will be designed with the importance of this unpaid caring sector in mind.  For example, we are committed to introducing citizenship pensions for those who assume caring responsibilities and lose out on pension entitlements.  This is part of our agenda to ensure a decent  income for women over their whole lifetime.

    17.      The primary caring role that women have traditionally held within the family, of course,  means that it is often women that are closer to the needs of children.  We are determined to bring forward policies which will enable women to look after the needs of their children.

    18.       I want to reassure you today that child welfare is at the heart of our policies.  We know that investing in children – in this country’s future – is the most important investment we can make. The first few years of life are the most important in determining ability to thrive at school, in work, and in society more widely. Disadvantage in childhood can lead to life-long problems which affect the rest of the community – through crime, drug abuse and unemployment. The best way of supporting children is enabling parents to give their children the best start in life.

    19.         We recognise the importance of child benefit as a mechanism for ensuring the extra cost of children is recognised.

    That’s why we had manifesto commitment to retain it as universal benefit for the under 16s.  Child benefit has been frozen on a number of occasions in recent decades. This Government is committed to uprate it at least in line with prices.

    F: AND – CRUCIALLY – OUR POLICIES WILL BE DESIGNED TO  SUPPORT FAMILIES IN WORK

    20.    Welfare to Work and the Working Families Tax Credit  are key policies which  underpin our agenda for creating fairness, justice and equal opportunities for all. Our policies must facilitate the move from welfare to work, and must also ensure that work pays. A WFTC would be key to this strategy.

    21.    Family credit has contained successful elements.  But we should have no illusions about its failings.  It is taken up by only 70 per cent of potential recipients.  And the childcare disregard has benefited only 31,000 families, only one-fifth of the number originally anticipated. Family Credit has  contributed to penal marginal withdrawal rates. 650,000 families face marginal rates of 70 per cent or more, with women usually the greatest losers. It is also administratively cumbersome: almost half a million families on Family Credit receive a benefit cheque from the DSS while paying income tax to the Inland Revenue.

    22.      A new tax credit would have a number of advantages over the existing system of Family Credit:

    its clear link with employment would demonstrate the

    rewards of work over welfare and help people move off benefits into work.

    the payment of a tax credit will guarantee working

    families a minimum income, above and beyond the level of the minimum wage the onus would be on government to help ensure that as many individuals as were entitled would receive the tax credit, which – together with its status as a tax credit rather than a welfare benefit – should improve take-up  and, as the Chancellor made clear in his Pre-Budget Statement, the new system would also involve improved support for childcare through reform of the childcare disregard which has failed to cover adequately the childcare costs of lone parents and others on low incomes.

    23.     Much of the attention surrounding today’s Conference has been focussed on what a Working Families Tax Credit would mean for women. The Working Families Tax Credit would be paid  to families with children.  One in five children live in families without work. Families without work are families without independence.  We are determined to help families with children give their children the best start in life.  The Working Families Tax Credit will help people’s incomes rise as the new system improves incentives to work.

    24.       It is women who have been the greatest losers from the lack of coordination between tax and benefits systems to date.

    It is women who have most often been prevented from working by the barriers the state has created which fail to give people incentives  to work and to move up the job ladder.  A reformed system is what women and their families deserve.

    25.         The final issue that I want to talk about is the purse to wallet issue.  I believe that we need to be quite clear about the evidence on income sharing patterns within households.

    Ruth Lister’s research is a helpful start, but her findings are clearly open to a variety of interpretations. Her work shows is that there is an extremely diverse pattern of income distribution within households.  There is no  one dominant model.

    26.        There is no threat to independent taxation from the working families tax credit.  Nor would there be a compulsory transfer of resources from women to men. If the working families tax credit replaced Family Credit, families would have the right to elect to whom the tax credit is paid – the woman or the man.

    27.  Women, because they are greatly over represented in the poorest groups, will be the main beneficiaries of a WFTC. This is especially true once the dynamic effects are taken into account. It is essential not to base thinking about welfare on the false premise that we are merely sharing out the state’s resources. That can only ever be a short term view.

    G: CONCLUDING REMARKS

    28.      This government is embarked on a vast programme of change. We have put an end to men only economic policy. We will always consider the impact of our policies on women.  We will continue to support women in all of their diverse roles – as breadwinners and as carers in the home.

    29.  My message to you today is that this programme of change is not a threat to women, rather it is essential for delivering a fair deal for women. We mustn’t look back. Only by moving forward can we deliver this agenda together.