The councils changing procurement rules to tackle tax avoidance

Salford Council has joined the other 14 councils from across the UK that have adopted motions to support ethical procurement. Moved by Labour and Co-operative councillor Jim King, the recent motion strengthens checks in the council’s procurement to exclude businesses that engage in tax avoidance.

The initiative falls in line with a campaign launched in January by Christian Aid and the Fair Tax Mark, which calls on local councils to tackle tax dodging by introducing stronger tax compliance questions into their procurement procedures. Councils are also asked to raise awareness of the Fair Tax Mark. Christian Aid estimates that councils in England spend around £45m a year on buying goods and services from third parties.

Speaking in the chamber at Salford Council where a motion supporting Fair Tax was passed, Cllr King said: “Some 13 years ago in this chamber I moved that we should become a Fairtrade city and indeed a Fairtrade council. And that, too, was achieved. And, I might add, being recognised nationally for our work, I seem to recall. This motion therefore continues the theme of ‘fairness’ – ‘justice’ might be another similar term we might use.”

At national level, suppliers bidding for central government contracts over £5m have to certify their tax compliance. Local councils have the discretion to incorporate these questions into their procurement processes if they choose to and they can set their own thresholds for the size of contracts to which the questions would apply. It is estimated that £30bn is lost in tax avoidance each year, £9bn of which is unpaid tax by big businesses.

Since 2015, councils are being required to scrutinise the tax affairs of the companies with which they do business in more detail, through pre-qualification-questions. These questions ask whether a company has been involved in illegal tax practices. The campaign, led by Christian Aid and supported by the Fair Tax Mark, is calling on councils to go beyond that by asking companies about incorrect tax avoidance anywhere in the world. They are also encouraging residents to contact their councillors and arrange meetings with them to discuss the motion.

Oxford City Council was among the first to adopt such a motion in December last year. Jean Fooks, LibDem councillor for Summertown Ward commented for Christian Aid: “At a time when councils are struggling with ever deeper cuts to our budgets, it makes sense that we use our spending power to favour companies that pay their taxes. After all, it is companies’ and individuals’ tax payments that ultimately fund council budgets. I hope that councils across the UK will agree – and adopt policies similar to Oxford City Council’s.” Councils in Devon, Hampshire, Bristol City, Lambeth Borough and Durham have also adopted motions shaped around Christian Aid’s model.

Referring to the initiative, Paul Monaghan, founding director of the Fair Tax Mark, said: “This campaign has the potential to be the ultimate carrot and stick. It aims to hurt the tax dodgers via the loss of lucrative contracts, whilst incentivising those paying a fair share of tax. People already rightly expect their local council to screen out suppliers engaged in fraud, corruption and child labour. Tax dodging can be and should be added to this list, especially at a time when local government is faced with so many painful cuts to local services.”

Christian Aid’s campaigns manager Luke Harman added: “Christian Aid’s Sourced campaign is really gaining momentum and it is great to hear of Salford council’s recent passing of a motion which ensures more robust tax compliance questions in procurement processes as part of its tax justice campaign.

“Since launching in January, more than 1,100 councillors have been contacted about Sourced and local campaigns are starting all the time. 20 councils have debated a motion, and at least 14 other councils across England and Northern Ireland have now adopted Section 4 of the 2015 Public Contract Regulations – including Manchester, Birmingham, Oxford City, Hampshire, Southwark, Richmond and Belfast.

“We do expect the number of supportive councils to increase as our campaigners are telling us about more progress each week, and we continue to support them along the way.”