Thursday, 20 December 2012

What 'Plebgate' has to tell us about trust

For non-UK readers 'Plebgate' may hover between insignificance and mystery. It is the news story that a British government minister was pressured to resign his post as a result of abusing two police officers who were on security duty in the street outside the prime minister's office. It appears they declined to open the gates for him and insisted he wheel his bicycle (yes, really, some British government ministers are not grand while others make a public appearance of not being grand), at which point he lost his temper. It was alleged that he called them 'plebs', a short form of the latin word 'plebian' that implies a belief in his higher social standing.

Police reports were leaked and an enormous public fuss exploded in the national press and continued for days. It was all made worse by the minister, Andrew Mitchell, sticking firmly to the formula that he had not used the words attributed to him but refusing to say exactly which words he had not said. This raised suspicions that he was trying to muddy the waters having used the 'pleb' word but not used other words; or that he may not have used the 'pleb' word but had used other, equally uncivil language.

Anyway, what has this to do with governance?

It is actually all about trust. Our society is built on trust...does not function properly without it. That is the main reason why corruption is such a problem - the economic misallocation of resources is bad but corrosion of trust is far worse. Business depends on trust: you can't spend all your time in law courts getting redress from people who have tried to cheat you. So when it now turns out that police officers leaked the details of the original exchange and the ensuing investigation; and then allegedly went on to embellish the facts: that undermines civil trust.

Years ago I was a juror in a trial for possession of a knife as an offensive weapon. The defendant claimed in court that it was a tool he used for wire stripping but the policeman who had arrested him said that he had admitted it was for self defence. Eleven jurors found the man guilty but one found him not guilty and would not budge. She did not trust the police, so a man who was clearly guilty escaped justice (believe me, one look at the knife was enough to know its purpose). In much the same way, because trust in some aspects of the evidence is undermined, Andrew Mitchell looks likely to be allowed to return to front line politics despite having admitted that he behaved in an undignified and ungentlemanly manner (my words here). This trivial affair will result in the institution of policing being damaged - maybe other guilty people will escape justice because jurors don't believe police evidence - and engagement with civil society will be damaged as some potential voters think all politicians are smarmy liars who secretly despise them.

Tuesday, 4 December 2012

The Starbucks Tax Scandal

Poor Starbucks. They seem to have been informally voted the leading corporate tax dodger in the UK by that independent, impartial and totally just tribunal: the press. Admittedly other US based corporations such as Amazon, Google and Apple have been held up to opprobrium too for contriving to shift taxable profits out of the UK, but Starbucks seems to have been awarded the crown.

Now there is a good point of public interest in this story. Clearly it is a sound argument that, if UK companies are unable to shift their taxable profits from the UK whilst foreign competitors can, then they will be at an economic disadvantage. Clearly, also, it would be madness for UK public policy to allow this to continue. But where does responsibility lie? When I started writing I intended to observe that there is an old maxim that nobody is obliged to arrange their affairs in a way that renders them liable to tax. I intended to qualify that by observing that people may not, however, arrange their fairs to flout the law. But that principle has  been taken further and legislation was introduced years ago in the UK to make arrangements whose sole purpose is to avoid tax unlawful. In more recent times a new constraint has been developed, that of public opinion. As ideas of corporate (and personal) social responsibility have developed, so pressures have grown on those who seek to avoid paying tax.

 I do wonder whether this is not, at least a bit, unfair. Is this not a scandal relating to the ineptitude of the tax authorities as much as anything else? Why do they allow companies to charge UK businesses fees from corporations they own abroad that drain away all their taxable profits? It is, after all, pretty clear that the businesses that stand stark naked (of profit) before them are, in fact, successful businesses that are playing the system. If they are allowed to get away with it then they will obviously all pile in. Whilst it is useful that journalists have revealed this scandal, the most appropriate outcome would be if it embarrassed the tax authorities into taking actions they should have taken years ago to limit these fees from connected companies that are allowable deductions against tax bills!

I don't say that the corporations or the individuals who have been a previous target of investigative journalism are simply freed of responsibility and can place all blame on governments that let them get away with it. It may be stretching a simile, but that is rather like a thief blaming his misdeeds on the householder who leaves a window open. There is a responsibility to be a good citizen and the public may take revenge if you are not.