25.04.2012

How not to fight Tory smears

The tax row between Ken Livingstone and Boris Johnson reveals the limits of Labour's individual moralism, argues Eddie Ford

This year’s contest for London mayor will be probably be most remembered for the fierce exchanges between Boris Johnson and Ken Livingstone over their respective tax arrangements rather than their different political positions and policies - a further ‘Americanisation’ of politics, typified by personal attacks on individuals and their supposedly ‘immoral’ private lives or personal conduct.

For many weeks the Tory attack dogs in parliament and the press - desperate to get the obnoxious Johnson re-elected on May 3 - had been attacking Livingstone for the fact that he is paid via a company (Silveta Limited) and therefore was only liable for corporation tax at 20%, as opposed to paying full income tax. The allegation was that Livingstone was involved in some sort of nefarious tax avoidance scheme, unlike his clean-as-a-whistle Tory opponent, of course, allowing him to avoid paying at least £75,000 in ‘extra’ tax. Thus, according to Livingstone’s Tory critics, he fully deserves to be condemned as a hypocrite, given his extremely harsh remarks in the past about those who do not cough up enough in taxes.

For example, in 2009 Livingstone wrote in The Sun that “rich bastards just don’t get it” - like members of David Cameron’s cabinet who “have become super-rich by exploiting every tax fiddle” and devise tax policies that “aim to reward the rich and screw the rest of us”. He went on to demand that “no-one should be allowed to vote in a British election, let alone sit in our parliament, unless they are paying their full share of tax” - urging any incoming Labour government to “sweep away all the tax scams” and make everybody pay tax at the “same rate on their earnings and all other income”. A populist attempt to exploit the growing resentment against the better off sections of the middle class and the bourgeoisie.

However, during a live LBC radio debate on April 3 the long simmering tax dispute - fuelled by the Tory press - flared up into a personalised row. When pressed about his financial affairs, Livingstone stated that he was not operating a “tax avoidance thing”, as he paid income tax on “everything” he gets - to say otherwise was a “smear”. But, he added, he had to pay three members of staff and “you can’t do that just on some casual arrangement” - after all, he continued, “nobody in Britain employs people and pays income tax on the money they pay them”. Therefore he and Johnson were in the “exact same position”, bearing in mind that the latter had run a TV production company called Finland Station when he was a Tory MP, meaning that “we both had media earnings” and “we both put them through a company” - hence, Livingstone reminded the listeners, you “pay tax on the money you take out” out of the company. In no way does this equate to tax avoidance or anything remotely corrupt.

In response to Livingstone’s logical-sounding argument, Johnson angrily exclaimed that the “guy’s a bare-faced liar”. True, he had “briefly” been a director of Finland Station, but had never used it to avoid paying income tax - righteously declaring that he had “never used a company to minimise my tax obligations” (apparently, Johnson had “privately explained” his tax arrangements to Livingstone some three weeks earlier). Still feeling bruised, immediately after the radio show Johnson called Livingstone a “fucking liar” whilst sharing a lift with him and the Liberal Democratic candidate, the gay former Metropolitan Police officer, Brian Paddick - who jokily remarked about arresting the mayor for “threatening behaviour”. The fractious exchanges rumbled on the next day on the BBC’s Newsnight programme, where Johnson refused to apologise for his lift comment. On the same show the four main contenders for the mayorship - including the Green, Jenny Jones - pledged to publish all earnings and taxes paid in the past four years in order to “bring it all out into the open”, as Jones put it, and finally bring an end to the personal acrimony.

Of course, that did not bring an end to the tax row - far from it. On the subsequent day, April 5, Johnson and Paddick published their tax details in the form of PDF files checked and authorised by their accountants. However, Livingstone initially refused to do this, claiming that the only way to achieve “full disclosure” would be for all the candidates to reveal their total household incomes - not just their individual earnings. His reasons for this were that the tax avoidance allegations levelled against him also involve his wife, Emma Beal, who typed up her husband’s memoirs - and other tasks - and was paid by the same company (ie, Silveta Ltd). He admitted furthermore that he did not know how much his wife earns and has “no interest in managing my financial affairs”, having hired an accountant after his 2008 mayoral defeat because he was travelling the world advising mayors and so on. “I’d have just screwed it up,” he remarked, if he attempted to manage or “sort out” his own various financial dealings. Doubtlessly correct.

But, somewhat inevitably, Livingstone was accused of stalling and after coming under even more pressure from the other candidates and the likes of The Daily Telegraph - now running a barely disguised hate campaign against him - he eventually issued a PDF of his own outlining his financial/tax dealings over the last four years, even if was not from his actual accountant (though claiming that is where the figures came from)^[1]. From now on, he promised, he would openly publish his tax records every year - which, he maintained, should be a relatively simple matter because with the exception of LBC radio (where he has a regular show) everything else he earns is a “one-off”.

‘Honest mistake’

There were anomalies or inconsistencies with Livingstone’s records, most notably his claim that he paid £23,730 in “corporation tax on dividends”. Yet this is an obvious nonsense, as dividends do not attract corporation tax, but rather income tax. Subsequently, Livingstone said this was an “honest mistake” - whether by the accountant or Livingstone himself is unclear - and released a ‘revised’ declaration on April 12, so the column reads “corporation tax already paid on dividends”. Though still slightly cryptic, Livingstone seems to be telling us about the 21% corporation tax (the 2010 rate) he has paid on that part of his personal earnings - channelled through Silveta Ltd - which he has not set as “expenses” against tax (which according to his figures appears to be at just under 19%, testimony to the level of tax-deductible expenses he has claimed). It should also be remembered that Livingstone can avoid paying national insurance altogether and can split his earnings with his wife - a 50% shareholder in Silveta) - even though the money was earned entirely by him, therefore saving yet further tax. And he has previously admitted, quite openly, that he has held a large sum of money earned in one year as a cash pile in the company, taking it out as dividends in smaller chunks over several years to avoid higher-rate tax - a practice known in the business as “income spreading”.

The new ‘revised’ accounts now show that in 2008 Livingstone’s earnings were £63,400 and his taxes £20,000 - before they had said that that he earned £21,645 and paid £6,214 in tax. The difference, a Livingstone spokesman said, was due to a “relocation grant” paid to the former mayor when he left office in that year that the accountant “had not been aware of”. Doubtlessly correct too.

Naturally, the rightwing blogosphere lit up in rage - or glee - when Livingstone published his records. Yet another chance to nail the detested ‘Red’ Ken. On April 5 the Guido Fawkes blog run by the wretched libertarian, Paul Staines - who once described his politics as “Thatcher on drugs” and himself as a “rightwing pain in the butt” - published a chart purporting to demonstrate that Livingstone’s effective tax rate was actually 14.5%, compared to Boris Johnson’s magnificent 45.1%, if Silveta Ltd’s “numbers from all his media earnings are included” in the total picture.^[2]

Retaliating quick in an act of blog warfare, the Liberal Conspiracy blog counter-claimed on April 9 that Guido/Staines just could not add up - he was not comparing like with like.^[3] Instead, LC argues, he wants to include Silveta’s earnings as Livingstone’s earnings - though they are separate legal entities - and then wants to compare this to the most favourable year for Boris Johnson; that is, last year, the only year Johnson did not take allowable expenses upwards of £6,000 and the 50p tax rate applied to him. The basic point, LC reiterates, is that tax is paid on the income Livingstone receives, not the company earnings. Profitable companies pay corporation tax on their profits and they pay that tax after meeting their expenses, including pay - only then can they pay dividends. And the tax on dividends is deducted by the company from the recipient. For LC, Livingstone’s tax rate is lower than Johnson’s for the very simple reason that his income is much lower - less in four years than the mayor earns in a single year.

Ed Miliband weighed into the debate, declaring that the near unrelenting focus on Livingstone’s financial affairs and allegations of tax avoidance were part of a “desperate Tory campaign” to try to discredit Livingstone because he was “winning the battle of ideas” before the May 3 election. Therefore the Tories were running a United States-style “negative ad campaign all about Ken Livingstone and that says it all”. After delivering a speech on March 12 urging the government to ensure top earners contribute their “fair share” of tax, Miliband confidently said that Livingstone had “paid every pound of tax he is required to by law”.

There’s the rub, of course. Livingstone, like everyone else, is playing the system - perfectly legally. Frankly, why shouldn’t he? Moralistic handwringing in its leftist or rightist forms about the relative success Livingstone, or his accountant, have had in gaining pecuniary benefit from the diabolically complex tax system are quite ludicrous. And for Tories to come out with such accusations is a repellent exercise in utter hypocrisy. The communist position is clear. If the state sets rules which allow tax exemption/reduction in certain situations, then you cannot blame individuals for taking advantage of those rules - people are not saints nor should we expect them to be. We flatly reject the notion that there is a universal, classless, morality which dictates that each individual must in all circumstances hand over a portion of their money to the bourgeois state to use as it sees fit - ie, build up the means to oppress us. The bourgeois state is an enemy which we want to smash, not hand over money to like supplicants.

Having said that, communists do have criticisms of Livingstone over the tax spat. Not so much because he found a way to avoid paying so much, but because he - and the row in general - reduced the question to one of bourgeois individual morality rather than collective struggle. My tax records are more honest or scrupulous than yours - prove me wrong, punk. His rightwing critics, though, are not really concerned about such issues - that is transparent. A mere opportunist convenience. Like those in the US who obsessively spent years demanding that Barack Obama release his birth certificate in order to prove that he was a bona fide US citizen - not a commie-Islamist Kenyan - their real goal was not to see the documents themselves, but to distract the public from the wider issues and promote their irrational rightwing ideology, gradually undermining Obama. Ditto with Livingstone.

Not that communists, it goes without saying, are against making demands relating to taxation - ‘Tax the rich’ or ‘close the loopholes’ are perfectly legitimate slogans. But basically this is a demand that the bourgeoisie pay for the failings and inadequacies of their own system, not us.

eddie.ford@weeklyworker.org.uk

Notes

1. www.kenlivingstone.com/uploads/9ed45aea-c661-9044-5df9-f9a45647e85a.pdf.

2. http://order-order.com/2012/04/05/compare-and-contrast-candidates-effective-tax-rates.

3. http://liberalconspiracy.org/2012/04/09/ken-livingstones-actual-tax-rate-and-how-guido-fawkes-spun-the-truth.