Danny Alexander warns of more cuts after Budget

The Chief Secretary to the Treasury made the announcement in a speech to the Scottish Liberal Democrat conference. He also signalled there will be more cuts to come after Chancellor George Osborne’s Budget on Wednesday.

Addressing delegates at the West Park Conference Centre in Dundee, Alexander said the Exchequer was losing around £100 million a year because of companies running their payrolls through offshore locations such as Jersey.

He said the practice was “completely counter” to the spirit of the law and “neither right nor fair”.

The Lib Dem MP for Inverness, Nairn, Badenoch and Strathspey said: “I can announce that in the Budget we will introduce new powers to clamp down on companies who avoid tax by putting their payrolls in tax havens.

“Our message is clear. British firms employing workers in Britain must pay British taxes – there is no hiding place. Everyone must pay their fair share.”

Three years ago, the publicly funded ferry firm Caledonian MacBrayne was criticised after it emerged that it had avoided paying National Insurance for hundreds of employees by registering them through an offshore company.

Online current affairs magazine Scottish Review claimed that 650 CalMac staff were employed by a Guernsey-based offshoot, allowing them to avoid paying contributions to the UK government.

Yesterday, a CalMac spokesman said: “Our payroll arrangements are fully compliant with UK law and mirror almost universal maritime industry practice. We decline to comment on the reported proposals.”

In his speech, Alexander also warned there would be more cuts after the Budget, saying that the road to recovery would be “long and hard”.

Looking beyond Wednesday, he added: “After the Budget, I will be conducting a spending round to set departmental budgets for 2015-16. We will still be in government at the start of that year – at least.

“Between now and the end of June, we will be working through where the savings can best be made. We do have to make those savings, and we will, but it won’t be a crude salami-slicing exercise.”

The tough message was delivered at a conference in which senior party figures tried to rally the troops, still bruised from the Holyrood election of 2011, which saw Lib Dem representation in the Scottish Parliament fall from 17 to just five MSPs.

The party has also had to face the bad publicity triggered by the conviction of Chris Huhne and his former wife Vicky Pryce for perverting the course of justice over speeding points. The party has also been rocked by the sexual harassment allegations levelled at former Lib Dem chief executive Lord Rennard.

Alexander defended his party’s partnership with the Conservatives and claimed measures taken by the coalition were helping turn round the economy.

“Our commitment to getting the economy growing is unwavering. Fiscal discipline – sorting out the financial mess left by Labour – is an essential to that goal,” he said.

“That is why we will continue to be unflinching in our pursuit of deficit reduction. But we will not be unthinking. Since the Liberal Democrats entered government, we have ensured that the wealthiest contribute the most to dealing with the deficit.

“We have taken action every year to ensure the wealthy pay their fair share. Aggressive tax avoidance and evasion are wrong in the best of times, but in times like this they are totally unacceptable.

“The British people will not tolerate it. Tackling this problem has been a big priority for me since I joined the Treasury.”

Alexander said the Lib Dems were also working hard for low and middle earners. He said ministers were close to achieving the goal of ensuring that the first £10,000 people earn was income tax free.

He said: “In less than three weeks, two million Scots will benefit from the biggest income tax cut for a generation.

“From April, those people will have seen their tax bill fall by £600 a year thanks to decisions that Liberal Democrats have made.”