Standing up for Britain

We used to be America’s most important ally; today we are little more than a client state

In the days when I reviewed books for The Times and Sunday Times, I voiced my opinions on whatever was put in front of me. It was the taxi-rank principle. So it is a pleasure, in retirement, to pay my own money for a title that genuinely intrigues me: Vassal State, by Angus Hanton, a businessman and long-time economics commentator.

Here’s how Hanton’s publisher, The Swift Press, describes  it: “Vassal State – How America Runs Britain – lays bare the extent to which US corporations own and control Britain’s economy: how American business chiefs decide what we’re paid, what we buy, and how we buy it. US companies have carved up Britain between them, siphoning off enormous profits, buying up our most lucrative firms and assets, and extracting huge rents from UK PLC – all while paying little or no tax. Meanwhile, policymakers, from Whitehall mandarins to NHS chiefs, shape their decisions to suit the whims of our American corporate overlords.”

But you get the gist. America, according to Hanton, may not be our enemy, but it is certainly not our friend.

It is a complex case, riddled with rabbit holes. But the following extract seems to me to get to the heart of the issue. Hanton details the way in which America’s giant corporations – Apple, Google, Amazon, Facebook and the rest – use a mechanism known as the Bermuda Black Hole, to avoid paying tax locally on the business they transact in the UK. Profits running into billions of pounds each year are routed not through London, but by way of Bermuda, where they are untaxed and – as Father Ted might put it – “rest” in subsidaries that notionally “lend” the money back to the parent companies in the US.

HMRC, the UK’s tax-raising authority, collects only a tiny fraction of the tax that would be due if the companies concerned were British. This wouldn’t matter if the business in question was on the margins of the economy. But in fact, as transacted by the 1,000-plus multinationals operating in the UK, it makes up 30 per cent of the country’s trading economy while the tax paid adds up to little more than 1 per cent of the total tax take.

Hanton concludes: “This effect has hit Britain hard: of the world's top 50 countries, the UK has been losing more tax from the offshoring of profits than anyone else. One way to quantify the loss would be to say that, typically, US multinationals make 10 per cent profit on their turnover, so that their combined UK turnover should be generating declared profits of about $70 billion! With the UK's 25 per cent corporation tax rate they should be paying $17.5 billion in UK tax, but typically in recent years they have been paying less than $10 billion.

“But,” he goes on, “this does not take account of the sales to the UK made direct from tax havens such as Ireland, Luxembourg and the Netherlands, which may well be more than double that number [and on which no UK tax is levied]. If those estimates are right, the annual tax loss is likely to have been more than £12 billion, enough to build an extra 150,000 new homes each year, or twice the current rate of construction.”

Vassal State by no means stops there. The author is deeply concerned by the extent to which overseas companies in general, but American companies in particular, have been buying up British industry. He is especially vexed by the manner in which they feast on British startups that look as as they could grow into market leaders. The pattern he reveals is well-established. They wait until the companies’ teething problems have been resolved, then assess the potential for growth before putting in an offer that makes the British founders rich but transfers their potential – which is to say, their long-term profitability – to the US.

Deep Mind, the company that many would say leads the field in Artificial Intelligence, used to be British. Today, as Vassal State reminds us, it is a wholly-owned subsidiary of the Google Corporation. It is one of many.

Full disclosure: on page 33 of his book, Hanton quotes me, from a piece I wrote for the UK website CapX back in 2016.

What we are seeing is the continuing flight of British capital from anything that requires long-term investment and a commitment over time to the technologies of the physical world. UK governments past and present, as well as a generation of British entrepreneurs … fell into a trap of their own making. It is one thing for Britain to attract inward investment, quite another simply to take the money and run.

I couldn’t have put it better myself.

The problem Hanton faces is that, as far as his mainstream reviewers are concerned, he is all diagnosis and no cure. I don’t mean by that that he doesn’t come up with what, to me, look to be intelligent remedies, but that no one in government or the British economic-industrial complex is about to take on America and demand justice. Too many of them have their fingers in the pie. Decades ago, when The Oxbridge Conspiracy, my study of élitism in the UK’s higher education system, came out, I faced the same wall of abuse. It was all very well for me to point out, in detail, how Oxford and Cambridge had come to dominate vital sections of British society, from politics and the law all the way down to popular comedy, but what did I propose should be done about it? I did in fact suggest a whose raft of reforms that would go some way to reducing the iron grip of the two ancient universities, but my critics – nearly all of them with Oxon or Cantab after their names – weren’t having it. I should simply shut up and leave the running of the country to my betters.

So how did that work out?

Angus Hanton will, I suspect, come up against much the same reactionary response. I wonder will his book even be published in America. It and its message will more likely vanish into the night. But he is right and he is brave and he should be listened to. Britain didn’t leave the EU just to become the 51^st state … or did it?