Sarah Ingham: Tech, tax – and out of this world wealth

12 Jun

Sarah Ingham is a writer and a Conservative Party member.

It’s been a good week for Chancellor of the Exchequer and a so-so seven days for the richest man on the planet, Jeff Bezos.

The agreement between G7 Finance Ministers to introduce a global minimum tax rate of 15 per cent on businesses was hailed as historic by Rishi Sunak. This should lead to “the largest multinational tech giants paying their fair share of tax in the UK”.

“About time too!” cries Britain, nodding in approval at this “seismic tax reform” – ©No 11 Downing Street.

The full consequences of the tech revolution we have been living through for the past two decades or so are, as yet, unknown. Dot dot dot com. The most tangible IRL effect can be seen in the nation’s high streets which have been hollowed out by the switch to online shopping and services such as banking.

In 2006 – tech world’s pre-iPhone Pleistocene epoch – online sales accounted for 2.8 per cent of total retail sales in Britain, according to the Office for National Statistics. By June 2019, this had risen to 18.3 per cent. In January this year, a whopping 36.3 per cent of all retail sales were online. Lockdown, the government’s chosen response to Covid-19, accelerated an existing trend.

In March, USDAW highlighted that many retailers and their employees were at ‘breaking point’, with 180,000 jobs lost and 16,000 store closures in 2020. Famous names went into administration, including Laura Ashley and Jaeger. While Debenhams and the Arcadia Group, which includes Topshop, live to fight another day as brands, the rescue package for both did not include the bricks-and-mortar stores, resulting in 25,000 job losses, 80 per cent of them women employees.

Months before the Covid virus decimated the travel industry, Thomas Cook collapsed, stranding 150,000 holidaymakers abroad. Founded in 1841, the travel agency toppled under the weight of old-fashioned debt as much as innovations in the sector. The firm’s slogan ‘Don’t just book it, Thomas Cook it’ became as redundant as its 560 town centre stores, because millions of us chose to cut out the middleman and book a trip ourselves. A few clicks on a smart device secured us a budget airline ticket to fly us to our Airbnb.

How concerned have we been about the advance of e-commerce? Online shopping can be seen a quicker, easier, twenty-first century version of mail order catalogues, which have been a huge social benefit ever since the mid nineteenth century.

‘Don’t Be Evil’ has now been removed from Google’s code of conduct. Turning Britain’s social fabric inside-out is not exactly evil, but has been far from an unalloyed public benefit. It is, however, too easy to blame the tech giants, rather than examining our own code of conduct as individual consumers: ‘Alexa, save my local bookshop.’ Communities are not built or sustained by us sitting on our backsides watching a movie on Netflix while we tuck into a Deliveroo.

‘As public finances are ever more strained due to Covid-19, the public’s tolerance for tax avoidance by multinational companies is nil,” declares the Organisation for Economic Cooperation and Development, in its Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors. Really? Tax evasion is illegal and tests public tolerance. Tax avoidance is about exploiting the loopholes caused by an unnecessarily complex taxation system overseen by finance ministers and central bank governors.

The OECD worked on the proposals to rewrite the global tax rules which are being advanced by Sunak and his G7 colleagues. In the days since the announcement confusion has arisen, not least about whether any changes will be agreed by the G20 and if Britain is seeking to get financial services excluded from the reforms.

Alexa, is the UK’s Digital Services Tax going to be scrapped in exchange for the global tech tax? Effective from April 2020, HMRC predicted it would raise £515 million by 2024/25. It seems that tech firms might actually pay less into the UK’s coffers if the reforms were adopted and digital sales tax abolished.

The tech titans themselves seemed none-too-bothered by this possible new assault on their finances. Apart from Netflix, the other four FAANGs – Facebook, Amazon, Apple and Google – have seen their share prices rise in the past week.

Just as possible changes to the international tax system have come onto the agenda, details of US billionaires’ tax returns have mysteriously found their way into the public domain. Tada!

Warren Buffett is among the Croesus-rich outed by investigative journalists at ProPublica as paying little or nothing in the way of income tax. Perhaps the OECD’s Tax Inspectors Without Borders team can explain to breathless hacks the difference between income and capital.

Amazon’s founder, Jeff Bezos, whose personal wealth has ping-ponged around the $200 billion mark since last August, apparently paid no income tax during 2007 and 2011, while Tesla’s Elon Musk, vying with Bezos for pole position in the global wealth stakes, paid none in 2018. Neither has done anything illegal. The public was probably far less tolerant of Amazon withholding tips to its delivery drivers, for which it was fined $62 million in February.

Perhaps their stratospheric wealth explains Bezos and Musk’s fascination with space exploration. It would be easy to write off the attitude of both as ‘only little earthlings pay taxes’, but the current taxation system, bound up as it is with national sovereignty, allows them to get away with it. If we had the money, and the money to afford the accountants, we’d probably all be into ‘tax planning’, which is fancy pants for haggling with HMRC.

Time for flat taxes, Chancellor. And, BTW, voters have a tolerance for keeping their own money rather than handing it over in taxes – even to you.

If test and trace is to succeed, a centralised approach won’t work

9 Oct

Despite being initially hailed as the main way to manage Covid-19, test and trace has proven something of a nightmare for the Government. From technological flaws in its contact tracing app, to u-turns on whether to use Apple and Google’s technology, the papers have been filled with negative stories about progress in this area.

Perhaps it could be said that this week has provided the biggest headache so far for ministers, beginning with the news that 16,000 people who tested positive for Covid-19 between September 25 and October 2 disappeared from official records in England.

This was reportedly due to Public Health England (PHE) using an outdated version of Microsoft Excel to process data. The spreadsheet could only handle a limited amount of information, hence why so many contacts were missed.

The result is that there are potentially tens of thousands of infectious people who have not been contacted; indeed, NHS Test and Trace apparently had to track down an estimated 40,000 Covid-19 cases.

Matters were made worse by the fact that Ring Central, NHS Test and Trace’s call system, allegedly failed to work too – locking workers out of their profiles for prolonged periods.

As if that wasn’t troublesome enough, yesterday it was shown that NHS Test and Trace contact rate figures have reached their lowest rate yet, with 68.6 per cent of close contacts of individuals who’d tested positive for Covid-19 in England reached in the week ending September 30 (the system needs to reach 80 per cent of contacts in order to be considered viable). 

Furthermore, it was shown that fewer than one in four people testing positive for Covid-19 receive their results in 24 hours – a far cry from Boris Johnson’s initial pledge that, by the end of June, results of all in-person tests would be back within that timeframe.

With all of these events, the Government can look forward to even harsher criticisms from Keir Starmer and the opposition on testing, which has repeatedly been called a “shambles”.

No doubt many members of the public, too, are wondering how many more of these problems are to come in test and trace; whether the strategy will ever work, and what it means for their livelihoods in the meantime. So what exactly has gone wrong?

Several hypotheses have been put forward to explain the repeated weaknesses in the contact tracing system.

The first, straightforward one is that the Government simply did not plan enough for a pandemic. Whereas countries like South Korea were able to deploy pre-existing infrastructure for contact tracing, the Government started from scratch – creating NHS Test and Trace, which has had to “learn” on the job.

Even more significantly, NHS Test and Trace highlights an instinct of the Government that has run throughout this crisis; its tendency to create large-scale, centralised solutions to managing Covid-19, rather than utilising existing systems (one of the main examples being its initial desire to build a centralised contact tracing app – instead of going with Apple and Google’s technology).

Many will remember Dido Harding announcing of NHS Test and Trace at its inception: “This is a brand new service which has been launched at incredible speed and scale.” But it is this speed and scale that might explain why there have been so many issues – as rushing something out of this complexity in a pandemic represents huge logistical challenges.

It could be said that the Government has missed a trick by not tapping into local teams and networks to carry out processes such as contact tracing. This is why Germany, Italy and much of Asia have got ahead, using large-scale local investment and resources to do contact tracing.

And indeed, when England started to switch to using local contact tracers, it made a massive difference to success rates. In the week to September 30, for example, these teams were able to reach 97.1 per cent of contacts, much higher than NHS Test and Trace’s rate of 68.6 per cent (done via online messaging or phone calls).

The added advantage of local teams is that they can help ensure compliance in those contacted, some of whom may want to avoid call centres – wary that a number beginning 0300 could mean a tracing team is getting in touch.

It’s not only that devolving responsibilities can enhance the tracing process, but decentralisation can boost testing too – which smaller labs in universities and the private sector initially offered to help the Government with. Instead, it has mostly relied upon PHE labs and NHS trusts to carry out this work.

While the Government should be praised for how quickly it managed to scale up testing, there have been problems with laboratories being too slow to process results (allegedly as a result of over-reliance on post-graduate science students to analyse lab results, who were only there over summer), and incompatibilities between systems – both of which might have been addressed with a more decentralised approach, and flexibility about which labs were used.

Robert Buckland, Secretary of State for Justice, since said that the Government would open 100 more test centres, including a “mega lab” on the way to enhance capacity.

But maybe this brings us back to the initial point – that the Government’s quest for new systems, as opposed to tapping into local and/ or existing solutions, might ultimately hold it back in accelerating testing. Instead of devolving powers, the Government’s instinct has always been to take more responsibility.

Will there be a change to the direction the Government is going in? The shift to using more contact tracing teams is certainly promising – and should be built upon, but given the amount of money, energy and investment that has gone into Test and Trace – along with the Government’s recent plan to merge PHE and NHS Test and Trace into the new “National Institute for Health Protection” – centralisation seems one area it is reticent to u-turn on.

The latest developments in contact tracing – and why the Government is not alone in having problems with its system

11 Aug

Yesterday there was uproar over the fact that the Government has made another change to its contact tracing strategy. “Troubled test and trace system to be scaled back”, read one headline, and The New York Times was particularly unflattering. “England’s flawed virus contact tracing will be revamped”, began one of its articles, which also accused the system of “faltering” and being “one of many missteps that have contributed to Britain’s having the worst outbreak in Europe.”

These reports followed a press release from the Department of Health and Social Care, which was generally worded in quite a positive way, but whose opening text was taken as an admission of failure. It said that “NHS Test and Trace and Public Health England (PHE) will extend its partnership with local authorities in order to reach more people testing positive and their contacts”.

Previously the companies Serco and Sitel had been managing a centralised version of the UK’s contact tracing process. The Government, however, changed its approach after new research came in showing that only 56 per cent of close contacts had been reached online or through call centres.

In comparison, it was found that local teams managed to contact 98 per cent of contacts, with there already being successful council-led trials for contact tracing in Leicester, Luton and Blackburn with Darwen.

Going forward, councils will be much more involved in contact tracing, with workers knocking on doors to follow up contacts. Clearly this will make a difference, as one of the main reasons it was suggested that call centres failed to get through is that people believed they were receiving cold calls (as the number started with 0300) and did not answer.

As is so often the case in the Coronavirus crisis, the latest move will no doubt lead to accusations that the Government is chaotic, and the rest, as it had already come under huge criticism in its approach to contact tracing. Having wanted to use its own app to carry out the process initially – while shunning Apple and Google technology it has since been forced to try theirs out after running into difficulties.

There’s also the fact that the move is expensive, meaning that 6,000 of the 18,000 call handlers will be axed) from a system that cost £10 billion.

Speaking about the NHS Test and Trace system, Boris Johnson has previously said it was “world-beating” and that the UK is “now testing more per head of the population than virtually any country in Europe”; words which were not readily believed.

The truth, however, is that even if the system has had issues, the UK is strong in regards to testing, with capacity at 338,413 since August 2.

One of the best metrics for understanding a country’s ability to test is “positive rate”, which is described as “the level of testing relative to the size of the outbreak”. In May, the WHO said that a positive rate of less than five per cent is an indicator that Covid-19 is under control in a country; the lower the better, in essence.

As of August 8, the UK’s figure stands at 0.60 per cent, a better rate than that of Belgium, Greece, Italy and Sweden, among other countries.

There’s also an element of realism missing around the contact tracing debate, with Keir Starmer giving the Government “a month” to fix its programme and teaching unions deciding that schools need the system to be completely fixed before a return to classrooms – despite the fact that children seem to have some of the lowest transmission levels.

The country is not alone, however, in having difficulties implementing this technology. Singapore’s app, as one example, was only used by 35 per cent of the population, and its government admitted the tech hadn’t been as successful as it had hoped. Australia’s system, which reportedly cost $2.75 million, has also had serious flaws, and there have been other problems and adaptations elsewhere

Clearly rolling it out is a logistical challenge of unprecedented levels, and there needs to be some patience and expectation management – not ideological point-scoring, as so often is the case in the media.

With the UK’s testing capacity having gone up so rapidly, far from being “faltering”, it may be the case that the country has more of a headstart than we think.

Matt Kilcoyne: Anti-democratic China is testing the West’s resolve, and it’s CANZUK that has risen to the occasion

11 Aug

Matt Kilcoyne is Deputy Director of the Adam Smith Institute

When I was growing up, I believed that the West had won. Not just won militarily, economically, or even culturally. But philosophically.

The enlightenment values of the United Kingdom, the free market popularised by thinkers in the United States, and the pragmatism of European countries converging after decades spent tearing each other asunder. No more a half-century long battle between communism and capitalism, no more chance of fascism or socialism holding down the liberties of the world’s peoples.

Slowly, but surely, the world had changed. Gradual liberalisation was inevitable. I thought, foolishly, that the empirics of a world made richer, with more choice, happier, freer, more tolerant people, engaged in commerce with others right across the world would be obvious to all.

I had not yet got that old enmities die hard and traditions die harder, or even that institutions really matter. I had misunderstood that, to a great degree, the victory of the liberal world order was one built on universal claims of the rights of men, but predicated on an uneasy realist peace between American, CANZUK (Canada, Australia, New Zealand and the UK), and European ideals.

I had mistaken the peace and prosperity that coincided with the end of the Cold War as a victory of our civilisations – when really other rulers, some far colder and more cruel, were always waiting to stake their claim.

To do so was wrong. Russian expansionism has re-emerged in Ukraine and Georgia and Putin has spent the past decade sabre rattling at Middle Eastern and Baltic states. Erdogan’s Ottomanite expressions in Turkey and his dalliances in Syria and Libya stand out too. And, of course, China – in its outwardly hostile relations to Taiwan, military skirmishes over the border with India, and treaty-defying legislation over Hong Kong.

Each of these states are nations, but I suspect that the leaders of them think of the international order they find themselves in as too limiting of their ambitions. They mean to mould the world around their vision for their own seemingly exceptional civilisations.

I suspect you know this in your heart of hearts. Russia’s consecration of the Main Cathedral of the Russian Armed Forces was egregious in its scale and its pomp. Christ has been co-opted to glorify the victories of the Red Army. Erdogan’s reconversion of the Hagia Sophia to a mosque marks the effective end of the secular republic of Ataturk. China’s placement of party power in Hong Kong, in silencing critics and arresting students for holding flags, shows a commitment to its communist ideology above that of international treaty obligations.

Foreign policy is not something the Adam Smith Institute focuses on too heavily. We prefer the domestic, and learning from the best of the rest around the world. The relations between foreign governments and our own is a fascination of some policy wonks, but we’d far rather ambassadors were left handing out Ferrero Rocher than having any real bearing on the everyday dealings between companies, scholars, friends, and family.

To that end our policies are focused on trying to make life as free as possible for people here, while proposing policy that would open up new opportunities overseas for trade and exchange. Sometimes though, the rest of the world comes knocking and you should not ignore when wolves are at the door.

Adam Smith said in his Lectures on Jurisprudence that “Opulence and Freedom, [are] the two greatest blessings men can possess.” I do not for a second suppose that he mistook the order of his words. People can tolerate lower levels of freedom if they’re rich enough to have choices left. However, there comes a point where a lack of freedom threatens the peace of a place.

In his first book, The Theory of Moral Sentiments, Smith makes the correct observation that “little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”

I’m afraid to say that Hong Kong’s opulence looks set to diminish. Yesterday the tolerable administration of justice was tested right to breaking point.

The arrest of the founder of Apple Daily, journalist Jimmy Lai, the arrest of ITV News freelancer and British National Wilson Li, young pro-democracy activist Agnes Chow and the likes of Reuters, AP and AFP from a news conference show that individuals are now targets of the state. It shows too that the commitment under Article 4 of the new National Security Law supposedly upholding freedom of the press is not worth the paper it is printed upon.

This is a test of the West’s resolve and our ability to act. But the West is splintered. Macron’s acquiescence to Xi Jingping showed up a coward’s response. The French president is a man of action as his stint in Lebanon shows but no action is forthcoming on China. Merkel decided her little chats with Beijing were worth more than the rights of Chinese people. The EU Commission called the National Security Law deplorable but again did nothing beyond pushing the press release to save face at home.

The CANZUK states though, and the US, have risen to the occasion. Canada, Australia, New Zealand and the United Kingdom joined the USA in condemning moves to shut down free and fair elections in Hong Kong this autumn. Australia and the UK joined Taiwan in offering refuge from those looking to escape communist control of the city.

The universal values that we preached, that we set in the basic law of Hong Kong, have been an inspiration to Hong Kongers that took to the streets. It was the Union Jack and the Stars and Stripes that flew in protestors hands.

Yes the fact of easy geography plays to regional blocs strengths. But our common cause in recent months with CANZUK states on Russia and Chinese aggression has shown the ease with which we, with common language, common political systems, common history, common sense of purpose, translate into a sheer force of fact re-emergence of a global role that has eluded the mandarins in the foreign office for far too long.

Our civilisation needs champions to save it from opponents and challengers abroad, but also nationalists at home. Greater freedoms for us all, and expanded out to include those in our sister countries overseas allow us all to be the champions of it through our deeds. We must defend the gains of globalisation for the whole of the world, while challenging those that seek to usurp the norms that made those gains possible.

Adam Smith was right when he argued that there was a great deal of ruin in a nation. But there might yet be a great deal of good in our civilisation.

At 6-7pm tonight, the Adam Smith Institute is hosting an event titled: In Defence of Globalisation. Click this link to register your place.

Facebook, Liz Truss and future challenges with the internet giants

3 Jul

In recent weeks, Facebook has been up against huge pressure to control hate speech and groups on its site. Much of this increased after President Donald Trump posted “when the looting starts, the shooting starts”, in response to protests in Minneapolis, on both Twitter and Facebook. The aftermath exemplified, among many things, that the two dominant social media sites had taken very different strategies to tackling inflammatory content.

Twitter went for the cautious approach. It added a warning label for the post to say that it had glorified violence, and hid the content unless it was clicked on. Facebook, on the other hand, kept Trump’s post up, on the basis that it was not an incitement of violence, but an announcement of state use of force.

Facebook’s “hands-off” approach to Trump only changed when a number of powerful companies pulled out of advertising with the site, such as Coca-Cola, Verizon and Ford, in a campaign co-ordinated by Stop Hate for Profit. Some have called these organisations opportunistic – Covid-19 has eaten into advertising budgets, and surely any company will jump on the chance to look socially righteous – but it’s still an expensive wobble that Facebook no doubt wants to avoid.

As a result, the social media has said that it will add a label to tell people that content may violate its policies; it’s a watered down version of what Twitter is offering. Even so, Zuckerberg has been fairly resilient in dealing with Stop Hate for Profit, which has set out a list of content it wants gone from Facebook and other sites. Zuckerberg said that he would not change Facebook’s policies; that he thinks advertisers will be back “soon enough”, and that he remains committed to democracy and free speech.

In spite of this, one strange area Facebook has increasingly delved into is political affairs, especially in anticipation of the upcoming US election. Some of this is to right the wrongs of 2016, in which there was foreign interference, with Russia attempting to “undermine the voting power of left-leaning African-American citizens, by spreading misinformation about the electoral process”, among other activitiesFacebook has since spent “billions of dollars in technology” and hired “tens of thousands of people” to fix this. (Incidentally, the UK is still waiting for its report on the alleged Russian interference in politics to understand the extent of it here.)

But more strikingly, Facebook has ventured into interventionist territory, with the new aim to “help 4 million people register to vote”. In doing this, Zuckerberg is taking the organisation much further away from its initial design. Many users, like myself (aged 17 when it first came out), will think of it predominantly as a tool for making friends online and posting photographs; a type of social peacocking, in many ways.

Zuckerberg, however, clearly has more profound visions. He says he wants to boost “authoritative information” for voting that he expects “160 million people in the US to see”. The goal sounds altruistic on the face of it, but it also poses big questions, like, who gets to categories “authoritative”? And should social media giants be involved in democracy at all?

Increasingly there’s been accusations from conservatives that in delving into the political realm, social media sites tend to show biases in favour of liberals, most notably Trump, who said “Twitter is completely stifling FREE SPEECH” after it fact-checked one of his Tweets. 

One writer suggests that out of “22 prominent, politically active individuals who are known to have been suspended since 2005 and who expressed a preference in the 2016 U.S. presidential election, 21 supported Donald Trump”. In UnHerd, the author and commentator Douglas Murray goes further, revealing his own suspicions that Twitter is penalising right-leaning writers, such as hiding “likes” (a way of showing support for posts) from their posts.

Some say that there is no evidence of social media biases, with Kevin Roose, a tech journalist, noting yesterday that the best performing accounts on Facebook are all conservative. A tech expert tells me that the “exact opposite viewpoint (of social media bias) is shared in various countries, where the view is that the anti-capitalist left is censored by American tech giants”.

None of this has reassured Trump, however, who is proposing a bill to make social media giants take legal liability for material that their users post. But this could crush free speech, to a certain extent, making companies more likely to remove content to protect against litigation.

Even if there is not algorithmic censorship, many people were concerned last week after Google UK launched into Liz Truss, the Conservative MP, on social media. On June 18 it posted a petition trying to lobby her on the Gender Recognition Act.

This event should have rung serious alarm bells; a tech giant coming for a Conservative politician is seriously bad news, although – tellingly – there was a dearth of news stories about it. One suspects if Google UK had attacked a Remainer politician on refusing to leave the EU, it would have received the proportion response. This was, after all, perhaps the world’s biggest holder of personal information interfering in UK democracy.

One concern that has been pointed out repeatedly about Silicon Valley, and its companies, is that the demographic make-up of its tech talent could influence the ways in which content is censored. Even Zuckerberg has called it “an extremely left-leaning place”, and many will wonder how this affects their role in deciding the terms of “offence” on social media sites, and otherwise. 

In the UK, perhaps the most significant issue is that we are just so removed from these authors of our (online) reality, even if they have domestic offices. We know little about the algorithms they use – and it suits tech companies this way, limiting others’ abilities to get into the sector.

Here brings us to the biggest question: how should UK politicians deal with Facebook and other tech giants? Much of the focus on these companies has been on their involvement in elections, but they also have an impact on Joe Bloggs’ income, too, as one report by the Competition and Markets Authority (CMA) elucidates on.

It points out that Google has “more than a 90 per cent share of £7.3 billion search advertising market in UK, while Facebook has over 50% of the £5.5 billion display advertising market”. The report suggests that by dominating the market, these organisations control the default prices for advertising, which are arguably higher than they need to be – and in turn effect the consumer, as advertisers keep their product costs high.

CMA sets out numerous ways in which the Government can start to break up these giants and encourage competition. It is quite alarming in the ways in which it highlights tech giants’ control over many things – from prices, to regulation. And all of this has to change.

Ultimately, along with the current 5G issues the Government is dwelling on, they are going to increasingly need the knowledge, and foresight, to intercept some of these tech powers before they become so dominant as to make their powers irreversible.

Already the Government has found that Apple stifled the approach it wanted to take to contact tracing, and this is just a taste of what’s to come – as the tech giants, sometimes working in conjunction, block out competition. There is a mammoth amount of information to take on board, changing all the time. Along with Brexit and Coronavirus, Tories will have their work cut out.