Isabel Hardman

Cameron’s tax tightrope

Cameron's tax tightrope
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David Cameron didn't spend yesterday wringing his hands in Downing Street about the progress of his gay marriage bill: he was meeting his business advisory group. He allowed Google CEO Eric Schmidt to sneak out via the No 10 back door, a rather awkward metaphor for the company's tax arrangements.

The Prime Minister is well aware of rising public anger about tax avoidance, and the rise of Margaret Hodge, who has a Calvinist preacher tendency in her role as chair of the Public Accounts Committee. His spokesman yesterday explained that 'we don't talk about individual companies' tax affairs' (forgetting perhaps that Cameron managed to irritate Starbucks when he told multinationals to 'wake up and smell the coffee' in his Davos speech), but that he would be taking the business advisory group through his G8 agenda and 'he certainly is going to raise tax'. But Cameron has a tax tightrope to walk.

The problem with moralising with these companies is, as the Guardian and FT report, they start to hit back by threatening to pull out. David Gauke warned yesterday that the government's desire to make Britain's tax regime as competitive as possible could be undermined by anti-business sentiment, which 'would cost us jobs and investment'. The companies themselves argue that it is the tax system that is evil, not them.

As more and more organisations join the 'evil' list, the closer we get to a critical mass of tax avoidance that makes it impossible to moralise and boycott. Marks & Spencer, that cuddly homegrown company, found its tax arrangements splashed all over the newspapers yesterday. Others offering essential services will be on that list, too. But the challenge for the Prime Minister is to give the impression he is being tough on tax avoidance rather than idolising the leaders of those companies, while avoiding the Hodge tendency of scolding people for doing something entirely within the law.