Small businesses are collateral damage in social care tax hike | Nils Pratley
The 1.25-point rise in tax on dividend income will hit sole traders and the self-employed
Last modified on Wed 8 Sep 2021 16.13 EDT
The lower-profile element in the government’s tax hike to raise cash for health and social care was the 1.25% percentage point increase in tax on dividend income. It didn’t generate the same attention as the core revenue-raising “social care levy” on national insurance contributions because, first, the sums are smaller, and, second, because wealthy individuals enjoying dividend income from vast share portfolios are viewed as fair game.
But therein lies the political cynicism in the measure. While some fortunate folk do indeed fit the dividend-happy caricature, not many will be touched by this measure. Those at the top of the bracket long ago moved their holdings offshore. And the comfortable class of private investor knows the first rule of the game: utilise your annual tax-free Isa allowance (currently £20,000).
By international standards, taxes in the UK are relatively modest. The amount taken by the state will be around 35% of national income following the decision to bring in a new health and social care levy, which puts Britain in the bottom half of the league table and well behind the 40%-plus rates in France and the Scandinavian nations.
By the UK’s own standards, however, the tax take is historically high. On a sustained basis, it is necessary to go back to the immediate aftermath of the second world war to find a time when tax as a share of gross domestic product stood at 35% – and at that time the trend was sharply down.
Carl Emmerson, the deputy director of the Institute for Fiscal Studies, said there was no comparable data for the period before the second world war but the tax take was almost certainly lower. “It was much cheaper to run an empire than a welfare state,” he said.
The tax take fell after 1945 for two reasons. Peacetime required a smaller state and the economy grew by around 3% on average. A country’s tax “burden” depends not just on whether taxes are going up or down but how fast the economy is expanding and so by the end of the 1950s the tax-to-GDP ratio was down to 27% of GDP. Higher government spending in the 10 years that followed meant higher taxes, which briefly hit 35% of GDP at the end of the 1960s, and remained only just below that level when Margaret Thatcher came to power in 1979.
There was then another 15-year decline in tax as a share of national income taking it once again below 30% by 1994. Since then, the trend has been steadily upwards, with only a few temporary dips.
A wealthy individual who has been Isa-ed up to the max for a couple of decades may well now have a very valuable portfolio of shares that lies, and will continue to lie, entirely outside the reach of dividend taxes. Isa millionaires genuinely exist.
So the bulk of the £600m that the government expects to raise via the change is very likely to come from sole traders, self-employed individuals and directors of very small companies who pay themselves primarily through dividends. Should they also be regarded as a suitable target?
Maybe some should be. But the howls of protest from the likes of the Federation of Small Business “anti-small business, anti-startup” measure deserve sympathy. Many of the affected individuals will be those who got through lockdown without furlough or equivalent support. Their position seems to have been ignored by ministers because talk of taxing dividends conjures a different image.
The measure seems to have been tacked on to the main national insurance proposal at the 11th hour in a desperate attempt to deflect the criticism about the distributional unfairness of hiking national insurance rates. Small businesses and sole traders have been treated as collateral damage in the manoeuvre. If it were a Labour administration making this move, Tories would be screaming blue murder.
The last time the Takeover Panel sanctioned a rare auction for a public company, the process turned out to be a damp squib. Carlyle, one of the bidders for healthcare group Vectura, didn’t see the point in competing with Philip Morris’ deep pockets and said it wouldn’t improve its second-placed offer. The auctioneer’s gavel was not required.
Next month’s likely auction for Morrisons is more likely to happen and to be a lively affair. On one side, there’s Fortress Group, which ought to be motivated by the fact that its pursuit of Morrisons is its first big adventure in the UK (Majestic Wine was just a tiddler).
On the other, there’s Clayton, Dubilier and Rice, currently in the lead with its existing £7bn offer. In theory, the private equity firm has an advantage in being able to squeeze a few savings by combining Morrisons with a chain of petrol stations it owns. Really, though, it’s hard to call a clear favourite in the contest.
One can say, though, that an auction is a sensible way to settle the issue, with the important proviso that the trustees of Morrisons’ pension fund must be satisfied with the financial pledges of both bidders. If more upfront cash or securities are demanded, so be it. But it’s time to push for a conclusion to a saga that has been running since mid-June. That’s long enough in the spotlight.
The way Smiths Group told the tale a month ago, the FTSE 100 engineering group had scoured the globe and considered multiple offers, as it sought a sale of its misfit medical devices division.
There’s no reason to doubt the thoroughness because Smiths had been trying to sell, on and off, for about a decade. But the resulting planned disposal to US private equity firm TA Associates has now been trumped by California-based ICU Medical, which is the buyer Smiths had lined up three long years ago before that deal collapsed.
The new offer, at an enterprise value of $2.7bn (£1.95bn), is better than TA’s to the tune of $400m on Smiths’ calculations. And, in practice, the terms are slightly sweeter because Smiths gets a 10% stake in ICU by way of $500m part-payment and the buyer’s shares immediately rose by a third.
All’s well that ends well, assuming ICU gets across the line this time. But, blimey, Smiths, which has lost one chief executive along the way, has made this disposal look like hard work.
‘We Truly Have Lost Everything’: A Journey Out of Kabul the Day It Fell
Nadima Sahar, a government official, was determined to stay. But then she learned the palace staff, and maybe even the president, had already fled.
ARLINGTON, Va. — Nadima Sahar, a 36-year-old government official in Kabul, was resigned at first. She would stay, no matter how bad things got. She saw hope in the progress Afghanistan had made over the past two decades. Maybe, she thought, she could push for an inclusive government, with more women and ethnic minorities.
But on the day the city fell to the Taliban, her friends and family members flooded her phone with calls and text messages, begging her to leave.
When one friend told her that the presidential palace staff had already fled, and that there were rumors President Ashraf Ghani was gone, too, Ms. Sahar decided she had to get out. As a high-ranking government official in education, she said that she knew that the Taliban would probably kill or arrest her.
“As soon as I heard that, my heart just sunk,” Ms. Sahar said. “If the president had left the country, then that meant we truly were in a bad situation. We truly have lost everything.”
Ms. Sahar’s 9-year-old daughter and 7-year-old son had left Kabul three days earlier with her sister, Sadaf Sultani, who was visiting from Britain.
“My sister was willing to fight until the end,” Ms. Sultani said. “But I had to force her to allow me to take her kids.”
Ms. Sahar let them go thinking it would only be a few weeks before conditions in Kabul calmed down, even as the Taliban advanced toward the city after seizing province after province. On nights when the gunfire and explosions were especially loud, the family would shelter in the living room, which had few windows.
For Ms. Sahar and thousands of others, fleeing Afghanistan meant abandoning the only home they knew. Although many were determined to escape in the last days before the U.S. troop withdrawal, risking their lives to reach the airport, others resisted leaving, worried about relatives and clinging to the lives they spent years building.
Ms. Sahar knew it was naïve to think that the situation in Kabul might not become so bad. But the thought of leaving again terrified her. She had been through this before: When she was about 5, she had fled to Pakistan during Afghanistan’s civil war.
“I think it was that crippling fear of becoming a refugee again, not knowing what the future holds for you and starting your life from scratch,” Ms. Sahar said, her hands wrapped around a cup of tea in a friend’s apartment in Virginia, where she has been staying since she fled. “I guess I just didn’t want to face that.”
By Aug. 15, the day the government collapsed, only Ms. Sahar and a cousin were still living in the four-bedroom apartment.
Around 2:30 p.m., she grabbed a backpack and tossed in her documents, wallet, laptop and scarf. She took one extra set of clothes: a bright floral-print chapan, her favorite piece of clothing. As she packed, her hands couldn’t stop shaking.
The cousins fled on foot after they heard that the Taliban had invaded Kabul. They tried to take a taxi, but the streets were already crowded, and every driver told them it was impossible to drive through the mayhem. People were crying and shouting on the phone, and some had started to loot banks.
After running for more than an hour and a half, they reached Hamid Karzai International Airport, where hundreds of people were waiting inside. Families, government officials and affluent business executives clambered to reach the tarmac, desperate to find space on one of the few flights scheduled to leave that day.
One of Ms. Sahar’s friends booked her a ticket for a flight to Istanbul, the last plane set to take off. As they tried to get onto the tarmac, word spread that the Taliban had reached the gates outside. Ms. Sahar told her cousin to leave immediately. If they were found together, Ms. Sahar said, the Taliban might kill them both.
Tensions began to rise. One man beat an airport worker who was turning people away at the gate. All of the flights were overbooked, the workers told the crowd, and there was no chance that any of them would depart.
Ms. Sahar started to lose hope after trying to move forward for more than five hours. But then Kabir, an airport worker, took her through an employee-only door and onto the tarmac. He said he did not know her but felt a responsibility to help.
“She was crying,” he said. “She was alone, and nobody came to her.”
Kabir told one of his friends to stay with Ms. Sahar while he tried to find a way to leave. She attempted to board her flight to Istanbul, but flight crew members said the plane was already full and were turning people away.
About an hour later, Kabir called. He told his friend and Ms. Sahar that they had five minutes to get on a plane in another section of the tarmac. Its lights were off when they reached it, Ms. Sahar said.
They climbed the stairs to the plane, and even though Ms. Sahar did not have a ticket, the flight crew let them both on. They were the last two people to board.
About 20 minutes later, the flight took off. It was far from full, with every other seat empty, she said. Later, a crew member told Ms. Sahar that the plane did not have permission to fly, and that it had been chartered to evacuate the airline owner’s family and friends. She did not see any other plane take off that night.
On the flight, she said, feelings of guilt, shock and grief collided. But mostly, she felt numb.
Ms. Sahar did not know where they were going. About an hour in, she asked the person seated next to her, who did not know either, but they soon learned that they were on their way to Ukraine.
Once they arrived, the passengers were detained for several hours. Some of them had firearms and many did not have passports or visas.
After she was released, Ms. Sahar contacted a few friends and booked a flight to Northern Virginia. She arrived at Dulles International Airport on Aug. 17, just before thousands of Afghan evacuees arrived in the next few weeks.
Since then, she has been staying in a spare room in her friend’s apartment in nearby Arlington. The walls are mostly bare and the closet is nearly empty, except for a few shirts and pairs of pants her friends bought her.
Security workers at her apartment building in Kabul, where several government officials lived, have told her that the Taliban have come four times. Most recently, 21 people from the Red Unit, an elite force, showed up. The Taliban have also visited her office three times, leaving messages with her colleagues saying they would give her amnesty if she returned and transferred power to a new head of the education authority she ran. But Ms. Sahar and many others have grown skeptical, given the increasing reports of detentions, disappearances and executions at the hands of the Taliban.
“The strength of your word is something I no longer believe in,” Ms. Sahar said.
Ms. Sahar, a U.S. permanent resident, hopes to get a job in Virginia. She came to America in 2002, graduating from Roger Williams University and the University of Massachusetts Amherst. She worked in Washington for a year before returning to Afghanistan in 2009.
She does not know when she will be able to fly her children to the United States. For now, she is submitting job applications and calling her children every night to read them a bedtime story.
Even though she fears retaliation, she hopes to return to Afghanistan. Staying in America permanently, despite its security, is not an option, she said.
“That’s like giving up on everything you believe and saying, ‘You know what, do whatever you want to do with that country,’” Ms. Sahar said. “I would like to go there to contribute in whatever capacity that I can, even if it means being there as a voice of dissent.”
Merrick Garland's Texas Two-Step
Fed Officials’ Trading Draws Outcry, and Fuels Calls for Accountability
Central bank regional presidents traded securities in markets in which Fed choices mattered in 2020. Here’s why critics find that troubling.
Federal Reserve officials traded stocks and other securities in 2020, a year in which the central bank took emergency steps to prop up financial markets and prevent their collapse — raising questions about whether the Fed’s ethics standards have become too lax as its role has vastly expanded.
The trades appeared to be legal and in compliance with Fed rules. Million-dollar stock transactions from the Dallas Fed president, Robert S. Kaplan, have drawn particular attention, but none took place when the central bank was most actively backstopping financial markets in late March and April.
However, the mere possibility that Fed officials might be able to financially benefit from information they learn through their positions has prompted criticism of perceived shortcomings in the institution’s ethics rules, which were forged decades ago and are now struggling to keep up with the central bank’s 21st century function.
“What we have now is an ethics system built on a very narrow conception of what a central bank is and should be,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania.
On Thursday, Mr. Kaplan and Eric Rosengren, president of the Federal Reserve Bank of Boston, said they would sell all the individual stocks they own by Sept. 30 and move their financial holdings into passive investments.
“While my financial transactions conducted during my years as Dallas Fed president have complied with the Federal Reserve’s ethics rules, to avoid even the appearance of any conflict of interest, I have decided to change my personal investment practices,” Mr. Kaplan said in a statement. He added that “there will be no trading in these accounts as long as I am serving as president of the Dallas Fed.”
Mr. Rosengren, who had drawn criticism for trading in securities tied to real estate, also said he would divest his stock holdings and expressed regret about the perception of his transactions.
“I made some personal investment decisions last year that were permissible under Fed ethics rules,” he said in a statement. “Regrettably, the appearance of such permissible personal investment decisions has generated some questions, so I have made the decision to divest these assets to underscore my commitment to Fed ethics guidelines. It is extremely important to me to avoid even the appearance of a conflict of interest, and I believe these steps will achieve that.”
It was unclear on Thursday evening whether those moves would be enough to stop the groundswell of criticism as economists, academics and former employees asked why Fed officials are allowed to invest so broadly.
The Fed has gone from serving as a lender of last resort mostly to banks to, at extreme moments in both 2008 and 2020, using its tools to rescue large swaths of the financial system. That includes propping up the market for short-term corporate debt during the Great Recession and backstopping long-term company debt and enabling loans to Main Street businesses during the 2020 pandemic crisis.
That role has helped to make the Fed and its officials privy to information affecting every corner of finance.
Yet central bankers can still actively buy and sell most stocks and some types of bonds, subject to some limitations. They have long been barred from owning and trading the securities of supervised banks, in a nod to the Fed’s pivotal role in bank oversight, but those clear-cut restrictions have not widened alongside the Fed’s influence.
“Just as there is a set of rules for bank stocks, why not look to see if it is valuable to expand that to other assets that are directly affected by Fed policy?” said Roberto Perli at Cornerstone Macro, a former Fed Board employee himself. “There are plenty of people out there who think the Fed does nefarious things, and these headlines may contribute to that perception.”
The 2020 batch of disclosures has received extra attention because the Fed spent last year unveiling never-before-attempted programs to save a broad array of financial markets from pandemic fallout. Regional Fed presidents like Mr. Kaplan did not vote on the backstops, but they were regularly consulted on their design.
Critics said that raised the possibility — and risked creating the perception — that Fed presidents had access to information that could have benefited their personal trading.
Mr. Kaplan made nearly two dozen stock trades of $1 million or more last year, a fact first reported by The Wall Street Journal. Those included transactions in companies whose stocks were affected by the pandemic — such as Johnson & Johnson and several oil and gas companies — and in firms whose bonds the Fed eventually bought in its broad-based program.
None of those transactions took place between late March and May 1, a Fed official said, which would have curbed Mr. Kaplan’s ability to use information about the coming rescue programs to earn a profit.
But the trades drew attention for other reasons. Mr. Conti-Brown pointed out that Mr. Kaplan was buying and selling oil company shares just as the Fed was debating what role it should play in regulating climate-related finance. And everything the Fed did in 2020 — like slashing rates to near zero and buying trillions in government-backed debt — affected the stock market, sending equity prices higher.
“It’s really bad for the Fed, people are going to seize on it to say that the Fed is self-dealing,” said Sam Bell, a founder of Employ America, a group focused on economic policy. “Here’s a guy who influences monetary policy, and he’s making money for himself in the stock market.”
Mr. Perli noted that Mr. Kaplan’s financial activity included trading in a corporate bond exchange-traded fund, which is effectively a bundle of company debt that trades like a stock. The Fed bought shares in that type of fund last year.
Other key policymakers, including the New York Fed president, John C. Williams, reported much less financial activity in 2020, based on disclosures published or provided by their reserve banks. Mr. Williams told reporters on a call on Wednesday that he thought transparency measures around trading activity were critical.
“If you’re asking should those policies be reviewed or changed, I think that’s a broader question that I don’t have a particular answer for right now,” Mr. Williams said.
Washington-based board officials reported some financial activity, but it was more limited. Jerome H. Powell, the Fed chair, reported 41 recorded transactions made by him or on his or his family’s behalf in 2020, but those were typically in index funds and other relatively broad investment strategies. Randal K. Quarles, the Fed’s vice chair for supervision, recorded purchases and sales of Union Pacific stock last summer. Those stocks were assets of Mr. Quarles’s wife and he had no involvement in the transactions, a Fed spokesman said.
The Fed system is made up of a seven-seat board in Washington and 12 regional reserve banks. Board members — called governors — are politically appointed and answer to Congress. Regional officials — called presidents — are appointed by their boards of directors and confirmed by the Federal Reserve Board, and they do not answer to the public directly. Regional branches are chartered as corporations, rather than set up as government entities.
The most noteworthy 2020 transactions happened at the less-accountable regional banks, which could call attention to Fed governance, said Sarah Binder, a political scientist at George Washington University and the author of a book on the politics of the Fed.
“It highlights the crazy, weird, Byzantine nature of the Fed,” Ms. Binder said. “It’s just almost impossible to keep the rules straight, the lines of accountability straight.”
The board and the regional banks abide by generally similar ethics agreements. Employees are prohibited from using nonpublic information for gain. Officials cannot trade in the days around Fed meetings and face 30-day holding periods for many securities. Regional banks have their own ethics officers who regularly consult with ethics officials at the Fed’s Board, and presidents and governors alike disclose their financial activity annually.
Even with Mr. Kaplan and Mr. Rosengren’s individual responses, pressure could grow for the Fed to adopt more stringent rules, recognizing the special role the central bank plays in markets. That could include requiring officials to invest in broad indexes. The Fed could also apply stricter limits to how much officials can change their investment portfolios while in office, or expand formal limitations to ban trading in a broader list of Fed-sensitive securities, legal experts and former Fed employees suggested in interviews.
Fed-related financial activity has drawn other negative attention recently. Janet L. Yellen, the former central bank chair, faced criticism when financial documents filed as part of her nomination for Treasury secretary showed that she had received more than $7 million in bank and corporate speaking fees in 2019 and 2020, after leaving her top central bank role.
The Federal Reserve Act limits governors’ abilities to go straight to bank payrolls if they leave before their terms lapse, but speaking fees from the finance industry are permitted.
Defenders of the status quo sometimes argue that the Fed would struggle to attract top talent if it curbed how much current and former officials can participate in markets and the financial industry. They could face big tax bills if they had to turn financial holdings into cash upon starting central bank jobs. Because Fed officials tend to have financial backgrounds, banning financial sector work after they leave government could limit their options.
But few if any argue that former officials would command such large speaking fees if they had never held central bank leadership positions. And it is widely accepted that the ability to trade while in office as a Fed president raises issues of perception.
“People will ask, fairly or otherwise, about the extent to which his views about the balance sheet are interest rates are influenced by his personal investments in the stock market,” Ms. Binder said of Mr. Kaplan’s trades, speaking before his Thursday announcement. “That is not good for the Fed.”
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Supreme Court Stays Execution in Dispute Over Pastor’s Role
The ruling was the latest in a string of decisions on the role that spiritual advisers may play in death row inmates’ final moments.
WASHINGTON — The Supreme Court on Wednesday stayed the execution of a Texas inmate whose request that his pastor be able to touch and pray aloud with him in the death chamber had been rejected by prison authorities.
The court also agreed to review the case on its merits, without noted dissents. The court’s brief order said the case would be argued in October or November.
The stay was the latest in a string of Supreme Court rulings on the role that spiritual advisers may play in death row inmates’ final moments.
The new case concerned John Henry Ramirez, who was sentenced to death for the 2004 murder of a convenience store worker. Mr. Ramirez stabbed the worker, Pablo Castro, 29 times in a robbery that yielded $1.25.
In prison, Mr. Ramirez forged a relationship with Dana Moore, the pastor of Second Baptist Church in Corpus Christi. Mr. Ramirez asked that his pastor be allowed to hold his hand or touch his shoulder or foot and to pray out loud with him as he dies.
When prison officials rejected his request, citing security concerns, Mr. Ramirez sued, saying the policy violated his right to exercise his faith at the moment when, as his lawyer put it in a brief, “most Christians believe they will either ascend to heaven or descend to hell — in other words, when religious instruction and practice is most needed.”
Judge David Hittner of the Federal District Court in Houston ruled against Mr. Ramirez, saying it was enough that prison officials intended to allow Mr. Moore “to stand nearby during the execution.” Courts should not become entangled, Judge Hittner wrote, in the minutia of prison security procedures.
A divided three-judge panel of the U.S. Court of Appeals for the Fifth Circuit, in New Orleans, upheld the lower court’s decision. In dissent, Judge James L. Dennis questioned Texas’ new policy, which permitted spiritual advisers to be present in the death chamber but prohibited them from touching or praying aloud with the condemned inmates.
“What purpose is there for allowing a spiritual adviser, like a pastor, to be present in the execution chamber if that pastor is prohibited from attending to the spiritual needs of the condemned during the final moments of his life, through audible prayer, physical touch, or otherwise?” Judge Dennis wrote. “At the end of life, what does a pastor do but minister to and comfort his parishioner?”
In urging the justices to deny a stay of execution, Ken Paxton, Texas’ attorney general, a Republican, said Mr. Ramirez had engaged in litigation gamesmanship. For instance, Mr. Paxton wrote, Mr. Ramirez had at one point asked only that his pastor be present and need not touch him.
The Supreme Court has taken a variety of approaches to suits in which death row inmates asked that their spiritual advisers be present to comfort them during their executions,
In 2019, for instance, the court allowed by a 5-to-4 vote the execution of an Alabama inmate, Domineque Ray, a Muslim whose request that his imam be present had been denied. At the time, Alabama allowed only a Christian chaplain employed by the prison system to offer spiritual guidance to condemned inmates during their last moments.
Justice Elena Kagan, writing for the dissenters in 2019, said the majority was “profoundly wrong.” Under Alabama’s policy, she wrote, “a Christian prisoner may have a minister of his own faith accompany him into the execution chamber to say his last rites.”
“But if an inmate practices a different religion — whether Islam, Judaism or any other — he may not die with a minister of his own faith by his side,” Justice Kagan wrote.
A few weeks later, the court confronted a similar case from Texas and came to a different conclusion, staying the execution of a Buddhist inmate whose request that his spiritual adviser be present in the execution chamber had been denied.
In a brief, unsigned order, the court said that Texas could not execute the inmate, Patrick H. Murphy, “unless the state permits Murphy’s Buddhist spiritual adviser or another Buddhist reverend of the state’s choosing to accompany Murphy in the execution chamber during the execution.”
In a concurring opinion, Justice Brett M. Kavanaugh wrote that the state’s policy of allowing only Christian and Muslim chaplains to attend executions amounted to unconstitutional religious discrimination. “The government may not discriminate against religion generally or against particular religious denominations,” he wrote.
Justice Kavanaugh wrote that states could exclude advisers of all denominations from the execution chamber, but may not allow only some to be present.
Alabama responded by excluding all spiritual advisers from the death chamber. In February, the Supreme Court nonetheless let stand a ruling that halted the execution of an Alabama inmate, Willie B. Smith III, a Christian, unless the state allowed his pastor to be present in the death chamber.
“Alabama has not carried its burden of showing that the exclusion of all clergy members from the execution chamber is necessary to ensure prison security,” Justice Kagan wrote for four justices in a concurring opinion. “So the state cannot now execute Smith without his pastor present, to ease what Smith calls the ‘transition between the worlds of the living and the dead.’”
In a dissent in the Alabama case, Justice Kavanaugh wrote that “the state’s policy is nondiscriminatory and, in my view, serves the state’s compelling interests in ensuring the safety, security and solemnity of the execution room.”
Justice Kavanaugh added some practical advice.
“States that want to avoid months or years of litigation delays,” he wrote, “should figure out a way to allow spiritual advisers into the execution room, as other states and the federal government have done. Doing so not only would satisfy inmates’ requests, but also would avoid still further delays and bring long overdue closure for victims’ families.”
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Priti Patel meets French minister over migrant crossings
Tory MPs urge home secretary to send arrivals back to France after influx of boats this week
First published on Wed 8 Sep 2021 06.26 EDT
Priti Patel has met with the French interior minister, Gérald Darmanin, after a tense exchange between the two countries over the number of migrants crossing the Channel to the UK.
The talks broke up on Wednesday afternoon and followed an influx of small boats during warm weather this week, increasing pressure on the home secretary from Downing Street and other members of her party.
According to a statement about the talks released by the Home Office, Patel “made clear that delivering results and stopping crossings were an absolute priority for the British people, and that tackling the scourge of illegal migration and organised criminal networks is a joint challenge that neither country can tackle alone”.
Earlier, the department said 785 people crossed the Channel in small boats on Monday, short of last month’s record daily total of 828 migrants.
Patel started a war of words on Monday when she told MPs that Britain could withhold £54.2m it had promised to pay France to help deal with the situation, unless more boats were intercepted.
Conservative MPs have called for the home secretary to break international law and send all migrants arriving illegally by boat straight back to France.
A detailed rebuttal from the French interior ministry on Tuesday warned the UK not to attempt any action that was contrary to international law, saying there would be “consequences” if Britain refused to hand over cash that was agreed in July to combat small boat crossings.
The ministry said the deal was negotiated “in detail with the British side” and there was “never any question of making payment conditional on targets … Such an approach would reflect a serious loss of confidence in our cooperation.”
A record 13,500 migrants have crossed the Channel in small boats this year, including 1,000 in the past two days. Two hundred were prevented from crossing by the French on Monday, when 742 reached the UK.
The French ministry said it had prevented more than one in two crossings since January, or more than 10,000 migrants, after deploying “considerable and constantly increasing resources”. It had also doubled its resources in southern France to tackle migrants crossing the Mediterranean.
Pierre-Henri Dumont, France’s MP for Calais, accused Patel of attempting to use British taxpayers’ money to pile pressure on the French authorities.
“We are just doing our jobs and trying to save lives in the Channel and make sure that it does not turn into a graveyard,” he said. “The UK needs to address the causes that make people want to claim asylum in the UK. Many of these people are from former British colonies.”
Conservative MPs who lobbied Patel on Monday to send boats straight back to France have been criticised by refugee campaigners.
Minnie Rahman, the campaigns director at the Joint Council for the Welfare of Immigrants, said: “What MPs are suggesting is that the government take illegal action by sending people to France without first processing their claims. Hysterical, dog-whistle responses do nothing to help asylum seekers get the protection that they need.
“The only way to end these journeys is for the government to share responsibility with France, and ensure that people are able to travel to the UK safely.”