John McDonnell has, as is not unprecedented, suggested introducing a bad policy. As the drama surrounding ‘Traingate’ continues unfolded, McDonnell responded to Richard Branson’s intervention by floating the idea of stripping him of his knighthood.
Writing in the Sunday Mirror, McDonnell described Branson as a “tax exile who thinks he can try and intervene and undermine our democracy”, and went on to write that:
“But the whole purpose of the honours system is undermined when the rich and the powerful can collect their gongs without giving anything back. It’s even worse when tax exiles are given honours.
[…]
And tax exiles should not be allowed to keep the privilege of an honour or a title. It should be a simple choice for the mega-rich. Run off to tax exile if you want. But you leave your titles and your honours behind when you go.”
There are a few things wrong with this. It is certainly not the case that Branson has given nothing back. His tax arrangements do not invalidate his contributions. And he has every right to “intervene” in “our democracy”.
It is true that Branson is a “tax exile”. He is a resident in the British Virgin Islands and pays no income tax. However, this is perfectly legal and McDonnell is not accusing him of tax evasion. Virgin Group, the conglomerate that owns the various Virgin enterprises, does pay millions of pounds in UK tax, as do many of its subsidiaries.
Virgin Group employs around 50,000 people worldwide, many of them in the UK. Subsidiaries of Virgin, such as Virgin Mobile and Virgin Money, provide a plethora of services to millions of people in the UK. In fact, since the 1970s Virgin has operated in the music, aviation, and telecoms industries before selling its share in its subsidiaries. Many of these, such as Virgin Media and Virgin Records, still exist today under different ownership. Virgin, and Branson personally, have also made significant contributions to charitable causes.
Even if Branson’s tax status is problematic, that doesn’t trump these significant contributions. Even if the law is in need of reform, that doesn’t make what Branson is doing especially objectionable. People are not, and should not be, under an obligation to pay as much tax as possible, above and beyond what is required by law.
As for Branson’s “intervention”, I’m not going to comment in detail on Traingate. However, regardless of the rights and wrongs of the situation, as someone with a stake in businesses based in this country, Branson has every right to “intervene”. And, in any case, ignoring the opinion of everyone who is not resident in the UK is a horribly insular vision. This applies just as much to Branson’s “interventions” on matters such as the EU Referendum and drugs policy, and equally to those of other informed parties.
McDonnell also succeeds in the muddying the waters by mentioning Sir Philip Green’s tax avoidance. Whether or not Green is at fault over the BHS pension deficit, it is a separate issue from his tax affairs. His conduct, and whether it warrants the loss of his knighthood, should be judged without reference to tax.
Stripping legal tax avoiders of honours sets a bad precedent. Does minimising your tax bill invalidate job creation, providing services to millions, sporting achievements, public service, or community work? Or would McDonnell only strip honours from people the Labour leadership dislikes? The idea that your “contribution” can only be measured by, or trumped by, the amount of tax you pay is dangerous and ignores the fact that the state is not identical with society.