The idea

Learning from similar policy reforms recently introduced in Demark, we propose that government should legislate to require that in all public spending decisions about public service contracts, officials must verify (before confirming any final contract award) that any organisation to whom public funds are awarded is paying in full their appropriate taxes to the UK government for the business they do here. This should apply equally to all company forms and ownership structures of firms involved in public service contracting, whether registered as a British business or registered in another country.  

 

The impact we hope this will achieve

At present, markets like those which operate in children’s social care can be treated purely as sources of potential profit for private equity firms and investors, with little incentive for them to invest in good quality services over the long term. Private equity firms anywhere in the world can buy up small British providers, maximise the profits they can make from state contract fees, and then exit the market again after around 3 - 7 years. Complex ownership structures that trace back to registration in tax havens enable the extraction of what the CMA described as sometimes 'excessively high profits' out of the UK economy, without even being taxed properly 'on the way out'.  

We do not suggest that all private care companies, nor indeed all private investors, use such techniques currently, or would countenance doing so. Responsible companies and investors, who conduct their business and tax affairs entirely lawfully, definitely exist and operate ethically within the current market, and would not be the target for this reform. Indeed, making sure that responsible care organisations, ethical employers and caring investors aren’t having to 'compete' with ones that are behaving less ethically, and aren’t paying comparable taxes, to do similar work, in the same country, is one important reason for suggesting this should be a standard requirement in all public procurement conducted with public (ie taxpayers’) funds.