No public spending with tax avoiding companies

Ethical Consumer's Amazon campaign has one ask for UK political parties in the 2024 election year.

This is to change the law to allow public authorities to take into account responsible tax conduct when awarding government contracts.

Around £300 billion of public money is spent annually with external suppliers by the government, UK local authorities and other public bodies like the NHS. Research shows that nearly 20% of this spend goes to companies with obvious links to tax havens.

In 2023 we learned that, ironically, it was the UK's tax authority (HMRC) which spent the most with Amazon over the last five years (£228 million). This provided 36% of Amazon's public sector revenue. HMRC was followed by the Home Office, which spent £189 million.

The UK government's yearly spending with Amazon is now at around £222 million. According to the GMB which did the research, "99 per cent of identifiable spending was on Amazon Web Services, the company's lucrative internet hosting arm".

We are entering a period when the government will need all the revenue it can get to help fund the just transition to the more sustainable society which we all need.  Funds are needed for a wide range of infrastructure investments from insulating the homes of people in the worst fuel poverty to building new energy grids.

We think it makes no sense for government bodies which need this revenue to be spending it with Amazon and other companies which are working hard to reduce the amount of tax they will pay to the government in the following year.

At present, the law is unhelpful to public sector organisations which want to take tax conduct into account before awarding contracts. This needs to change, and our sister organisation at Fair Tax Foundation has outlined in detail how it thinks the law needs to be amended.

This includes expressly permitting public sector organisations to award more points to companies:

• (a) with clear policies not to use tax havens for tax avoidance
• (b) which report publicly their annual income and tax paid in each country in which they operate.

Getting these rules into party manifestos

This is a popular policy with UK voters. UK polling in 2023 found that two thirds of people believed that public procurement should consider the tax conduct of a business before contracts are agreed.

At the time of writing (January 2024), the UK's main political parties have not yet published their manifestos, but we plan to keep a track here of any signs of support for this campaign.

The Labour Party

Encouragingly, at the Labour party annual conference in 2022, Angela Rayner (deputy leader at that time) said that, should they be elected, companies receiving contracts would be expected to make commitments to 'shun' tax avoidance and not be registered in tax havens. Firms would also be expected to be open about whether they pay full UK taxes.

Background to tax campaign

Ethical Consumer has long called for public purchasing to be used as a lever for more ethical business practice. Our 2019 'manifesto for change' called for parties to 'Ban government contracts with companies engaged in tax avoidance". This time our demands have been reframed to be aligned with others around policies which parties will find more easy to adopt in practice.

Changing the rules around public sector purchasing has always been difficult, not least because most governments have signed corporate-friendly international agreements not to introduce rules which are 'unfair' to corporations.

Prior to Brexit, the main international agreement blocking changes to these rules were EU regulations. Although UK governments since then have talked up how they can now make better law, in practice little meaningful has happened around tax avoidance.

In Europe, there have been some promising discussions but little actual progress. The European Parliament passed a resolution on 26 March 2019 on "financial crimes, tax evasion and tax avoidance". Amongst other things, they asked "the Commission to publish a proposal that would oblige the Member States to ensure that economic operators participating in public procurement procedures comply with a minimum level of transparency regarding tax, in particular public country-by-country reporting and transparent ownership structures."

This is something very similar to the way that the Fair Tax Foundation has framed the request for UK parties this year.