Policy Research in Macroeconomics

Don’t forget, UK government policy has been outsourced to Google!

The recent controversy over Google’s minute tax contribution to the UK, a settlement of £130 million over a decade or so, notwithstanding all the taxpayer-funded public services and investments it benefits from, activated a little memory stick in my brain. Especially since it was our Chancellor himself who has praised the settlement as “a major success”.

Back in March 2012, almost 4 long years ago, I was particularly struck by a joint article in the oped pages of the Financial Times entitled “California dreaming in such a British way”.  It was co-authored by George Osborne, Chancellor of the Exchequer, and Eric Schmidt, Executive Chairman of Google (now Alphabet).

Now I have – and had – no problem with the two of them doing a joint piece – it was rather the fact that they appeared to be (or worse still, were?)  jointly announcing UK government policy that rather got me thinking.  Thinking that – in our country that still has some aspiration to be a democracy – something, somewhere, was somehow out of joint.  So I penned a questioning reply which the FT were good enough to publish. And I feel it’s time to share again… for it seems that tax policy has also now been tax-farmed out to Google!

To show just how  mutually embedded the relationship was (is?), let’s cite a few passages from the Osborne-Schmidt article (my emphases):

So it is clear that Britain has the potential to be the technology centre of Europe. But what else do we need to do to make this vision a reality?

First, we need to invest in fibre broadband, the core infrastructure of the digital economy. 

Second, we must ensure the UK has the right skills base to keep pace with the digital age. Britain has a proud history of invention and industrial creativity, and we want to make sure this continues. That is why we have launched an overhaul of the way that computing is taught in schools, marking a move away from simply teaching young people how to use technology, and instead equipping them with the skills to write software and design apps.

Third, we need to make sure that creators of new technologies can access the early-stage finance they need to turn their ideas into world-beating companies. 

Fourth, we must pull out all the stops to support start-up businesses. This is why Google today launches its plans to support the next generation of British tech companies by creating a seven-storey “Campus” building in Shoreditch, in the heart of Tech City. 

Our industrial strategy is clear: the UK’s ambition is to become Europe’s technology centre. 

Google paid £20.5m in tax in 2013, the year after this article, based on attributed UK profits, despite raising $5.6bn in UK revenues (figures via FT).  I make that around 0.4% of UK revenues.   We may doubt that such a sum – if continued year on year – is quite sufficient for Google to fulfill all the above joint commitments, or even 50% as apparently equal shareholders in UK plc!  For more on the Google tax position, see e.g. Richard Murphy’s blog here and in many other articles on his blogsite.

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