David Cameron has been accused by critics of getting too close to Google amid growing anger over the government’s £130m tax deal for being too lenient towards the tech giant.
Former cabinet minister Vince Cable, media mogul Rupert Murdoch and Margaret Hodge, the former chair of the Commons public accounts committee, all voiced concerns on Wednesday that Cameron and George Osborne had allowed the tech giant to hold too much sway.
Cable, the Lib Dem former business secretary, said Google had a “great deal of influence” in No 10 under the coalition and that Google’s billionaire executive chairman, Eric Schmidt, in particular enjoyed good links with Downing Street.
He said that “very close relationship probably made it very difficult for HMRC to be aggressive in its tax settlement with the company”.
Cable also said the UK’s decision to announce a tax deal unilaterally “undermines the effort to deal with this internationally”, including the reported attempts by France and Italy to extract higher levels of back taxes from Google.
Downing Street said Cameron and Osborne had nothing to do with the agreement struck by HM Revenue Customs last week to force Google to hand over £130m in underpaid taxes.
Murdoch was another to accuse the “posh boys in Downing Street” of being too easily awed by Google. The multibillionaire executive chairman of News Corp, who ultimately controls the Times and the Sun, sent a series of tweets on Wednesday suggesting Downing Street was too close to Google and accusing the company of “paying token amounts for PR purposes”.
“Google has cleverly planted dozens of their people in White House, Downing St, other governments. Most brilliant new lobbying effort yet,” he wrote.
He made the pronouncements despite facing accusations during the phone-hacking scandal that he and his executives were too close to senior politicians in the UK and had too much lobbying power. Murdoch, a long-time critic of Google, has also seen his company tax affairs come under scrutiny in Australia.
Hodge said Google had purposely targeted all political parties in the company’s efforts to win influence in Westminster. “They are very, very clever at building their political links. If I am absolutely honest, they had as strong links with Labour. But their executives realise that these things really do matter, even when negotiating tax deals,” she told the Guardian.
MPs on Wednesday raised concerns about extensive links between No 10 and Google executives, including Cameron’s appointment of Schmidt to his exclusive business advisory board until July last year.
Cameron is also a personal friend of Rachel Whetstone, who was Google’s PR chief until last year and a former aide to the Tories who is married to Cameron’s former chief strategist, Steve Hilton. There is another link through Tim Chatwin, who also moved straight from being Cameron’s head of strategic communications to a role as senior director of communications at Google in 2012.
Baroness (Joanna) Shields, who was ennobled by Cameron last year and made his internet security minister, is a former managing director at Google as well as many other tech companies.
Downing Street could not say whether Cameron has ever discussed Google’s tax affairs with any company executives and insisted most of its 25 meetings with ministers were about issues such as internet security. It also claimed that Cameron and Osborne were unaware of the deal until shortly before Google announced it and the chancellor hailed it as a “major success”.
HMRC is still refusing to say how the £130m was calculated, whether it includes any fines or interest, and what effective rate of tax Google has ended up paying, citing taxpayer confidentiality.
But Labour leader Jeremy Corbyn said experts thought it amounted to an effective rate of around 3%, in contrast to rates of corporation tax of above 20% over the last decade.
Corbyn said most people do not have the luxury of personal meetings to discuss their tax affairs. “Millions of people are this week filling in their tax returns to get them in by 31 January,” he said. “They have to send the form back. They do not get the option of 25 meetings with 17 ministers to decide what their rate of tax is.
“Many people going to their HMRC offices or returning the [form] online this week will say this: ‘Why is there one rule for big multinational companies and another for ordinary small businesses and self-employed workers?’”
This exchange at prime minister’s questions forced Cameron into defending the deal, saying it was better than Labour’s failure to collect any back taxes from Google at all.
The prime minister said he was “genuinely angry” about HMRC’s failures under Labour and insisted it was wrong to say that Google was only paying a 3% rate of tax.
However, there were few in the Tory party willing to stand up vocally for the deal, with no one willing to repeat Osborne’s claim on Friday that it was a “victory”. Anna Soubry, a business minister, inflamed criticism of the government by telling the BBC’s World at One: “It doesn’t sound like an awful lot of money, of course it doesn’t. It would be silly to say otherwise. But if it is within the rules …”
Caroline Flint, a member of the Commons public accounts committee, called for Cameron to look at asking companies to publish their tax returns – which was rebuffed by the government.
She also said Cameron and other ministers should disclose whether tax was discussed in their meetings with Google.
“It’s fair for us to ask, if ministers and advisers have been having meetings with Google, for them to explain what those meetings are about,” she said.
Eva Joly, a French MEP and vice-chair of the European Parliament’s Special Committee on Tax Rulings, said she wanted Osborne to answer questions about the “very bad deal”.
A Google spokesman said: “After a six-year audit by the tax authority we are paying the amount of tax that HMRC agrees we should pay. Governments make tax law, the tax authorities enforce the law and Google complies with the law.”
Peter Barron, Google’s head of communications and public affairs, publicly defended the deal for the first time, saying criticism had not taken into account how international tax law works.
He wrote a letter to the FT, saying: “After a six-year audit we are paying the full amount of tax that HM Revenue Customs agrees we should pay, including £130m in additional back tax. Governments make tax law, the tax authorities independently enforce the law, and Google complies with the law.”