This article is from the February issue of Total Politics
A report into the handling of tax disputes at Her Majesty’s Revenue & Customs (HMRC) that lifted the veil of secrecy on ‘sweetheart’ corporate tax deals makes public accounts committee chair Margaret Hodge February’s MP of the month.
The Labour MP for Barking and her colleagues spent much of the autumn investigating the question of how HMRC settles tax disputes with large, litigious corporations, and published its findings in December. This question is a pressing one – £25bn is outstanding in unresolved tax bills.
The 166-page report’s findings revealed “both specific and systematic” failings. It concluded that a mistake meant that one settlement reached with Goldman Sachs cost taxpayers “a potential £20m”, after interest on a tax liability was not collected.
These findings did not come easily. Though a whistleblower from inside the department first raised concerns surrounding specific settlements, dogged investigation and questioning by Hodge and her colleagues has made the report the success it has been.
According to Hodge, her motivation was an old-fashioned but in-vogue principle: fairness. “There is something so unfair,” she says, “about having one set of rules for big companies supported by expert advisers, who are thumpingly rich, and another for the small cornershop or the SME [small and medium-sized enterprise] struggling to survive in an economic downturn.”
There are no tax deals for the latter, she says. “HMRC doesn’t hesitate to come down heavy. It’s just not fair”.
Fairness matters, but, according to Hodge, these tight-pocketed times make a properly functioning HMRC even more important. “The role of our committee is hugely important when you’re cutting £80bn out of spending,” she says. “There is complete bipartisan agreement that, if you’re spending less, you want to make sure that every pound of taxpayers’ money is well spent to protect frontline services.”
Throughout the process, she has emphasised the “team effort” it required to hold HMRC and its chief executive Dave Hartnett to account. “If you watch the first hearing, it was a good example of us pulling in the same direction, but coming at it in slightly different ways.”
The committee’s relationship with HMRC is not nearly as co-operative, as shown by the department’s response to the accusations made by Hodge and her colleagues. As one statement read: “HMRC rejects the conclusion of the public accounts committee that there are systemic failures in the management of tax disputes. The report is based on partial information, inaccurate opinion and some misunderstanding of facts.”
But Hodge refuses to back down. “They are asserting that, but refusing to give us the evidence that backs up their assertion,” she says. “We made our judgement on the evidence available to us.” On Dave Hartnett, she is scathing. At the crux of the issue is Hartnett’s claim that he played no part in the agreement with Goldman Sachs. According to Hodge, minutes from one meeting show that it was Hartnett who “shook hands” on the deal. “I think he’s lied,” she states plainly. Harnett has denied the charge.
The public accounts committee’s work has prompted further investigation into HMRC’s secretive tax deals. An internal, judge-led inquiry will begin soon and will look at cases not yet in the public domain. As an MP who has spent most of her time either in government or supporting the government, how is Hodge enjoying scrutinising public finances in opposition? “I’d rather be in government,” she replies, laughing.
"I’ve found a role that is fantastically interesting because you see the full landscape of public spending. It’s very stimulating.”
She describes herself as “incredibly lucky” nonetheless. “One goes into politics to make a difference, and if you can’t be in government, making a difference then, this is the best job to have in opposition. I’m relishing it.”
From the editor:
The PAC’s investigation into the HMRC is precisely the kind of dogged investigation select committees should carry out. External scrutiny is complicated because HMRC is a non-ministerial department, but it should be possible to establish basic facts about important tax arrangements. As Hodge puts it: “When you’re playing with billions, you can’t have a system where there’s no public accountability, where the only way to find out what’s going on is from a whistleblower or by reading Private Eye.”
One of the report’s suggestions is to make a stricter, important separation between the brokering and authorising of tax deals. When Lin Homer replaces Dave Hartnett this summer, she should heed Hodge’s warning about accountability and governance.
Ben Duckworth
Honorable mentions
Oliver Colvile - Conservative MP for Plymouth Sutton and Devonport
Oliver Colvile has demonstrated that it never hurts to ask. The Conservative MP for Plymouth Sutton and Devonport called for the government to waive VAT on sales of the Military Wives’ Christmas single, Wherever You Are.
The Treasury not only agreed, but also promised to pass the 20 per cent levy on to the charities receiving proceeds from the single’s sales, the Royal British Legion and the Soldiers, Sailors, Airmen and Families Association. The choir, based in Colvile’s constituency, sold 556,000 copies in the week before Christmas, comfortably beating the competition for the number one spot.
Talking to the BBC, Colvile stated modestly: “I’ve only played a very small part,” but he has demonstrated that, if well-timed and capturing the public’s imagination, a backbencher’s question can make a real difference.
Jeremy LeFroy - Conservative MP for Stafford
Arguing over exactly how quickly we should be able to whizz from London to Birmingham, or taking offence to a provocative tweet, it’s easy to forget how good we Brits have it.
One MP who refuses to forget some of the world’s gravest problems is Jeremy Lefroy.
The Conservative MP for Stafford founded Equity for Africa, an anti-poverty charity, and chairs the all-party parliamentary group on malaria and neglected tropical diseases, which still kill hundreds of thousands people each year.
In December, the government confirmed its continued commitment to the Global Fund on AIDS, TB and malaria. Lefroy’s work has ensured that this issue has not disappeared off the radar.
Sir Bob Russell - Lib Dem MP for Colchester
Arise, Sir Bob. For his life of public service, Bob Russell was given a well-deserved and hard-fought knighthood in the New Year Honours list.
Russell was elected as the Liberal Democrat MP for Colchester in 1997, but his service to the town and its residents began more than 40 years ago when he became a Labour councillor.
He was a councillor for 20 years and eventually led Colchester Borough Council, undergoing a political metamorphosis to SDP and then Lib Dem while in office. Reacting to news of the knighthood, Russell was at his candid best. He described the honour as “a matter of great personal importance and significance”, adding: “I grin to myself because I’ve spent my entire adult life fighting the establishment, but clearly, I’ve failed.”
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