openDemocracyUK

Head of the UK's tax scandal - is parliament powerless

Margaret Hodge MP is leading a campaign to make HM Revenue and Customs accountable after revelations of cosy deal-making with big corporations.
Stuart Weir
23 October 2011

Margaret Hodge MP is one of the Labour’s most effective politicians. She was an outstanding chair of housing in Islington before becoming leader there, but was kept at arm’s length as a minister by Tony Blair after she became MP for Barking. She is now chair of the Public Accounts Committee, one of the strongest select committees in the Commons, and she has begun to make significant waves.

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She is now leading the committee in a campaign to make HM Revenue and Customs accountable to the National Audit Office and the committee for its dealings with big  business. HMRC’s permanent secretary, Dave Hartnett, has allowed Vodafone to escape at least £1 billion in tax. He has now agreed a deal with Goldman Sachs to escape penalties and interest in unpaid tax that ordinary taxpayers like us have to pay if we try to evade tax and fall behind in payments. Goldman Sachs has refused to pay outstanding tax and penalties for five years, having mounted a failed tax evasion scam in 2005 through a tax haven, British Virgin Islands. Hartnett intervened in the saga, allowing Goldman to pay the back tax but waiving £7 million in interest payments.

Hartnett assured the Treasury Committee that he did not deal with Goldman’s tax affairs, but then had to admit to the Public Accounts Committee that he had confirmed the decision to allow them to escape the outstanding interest and penalties. MPs on the committee assert that if he were a politician, he would have been forced to resign, for lying to Parliament. He has not endeared himself to MPs, having enjoyed 107 lunches over two years with corporate businesses, the four large accountancy firms, and banks, including Goldman Sachs.

The hunt has taken another deeper turn. The committee has taken the matter to Gus O’Donnell, the head of the civil service, arguing for structural measures to make HMRC accountable for its dealings with corporate business. Hartnett refuses to answer questions about his dealings with Vodafone and Goldman Sachs on the grounds that taxpayers’ affairs are confidential.  But Hodge argues that corporations are not entitled to the privacy rights of individuals. Her committee wants two further reforms.  First, that HMRC should be accountable to the National Audit Office and thus open to the inquiries of NAO officials and through them, to the Public Accounts Committee. Secondly, that the current practice, under which Hartnett makes deals, and then as tax commissioner approves them, should come to an end.

It will be interesting to see how O’Donnell responds to these demands. He will have to cope not only with Hodge and the committee, but also with Nick Cohen, the Observer journalist, and Alex Brummer, of the Daily Mail, who are following the issue.

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