Margaret Hodge BOOKtalk

Welcome to Book Talk. My gudst today sent shock waves through thd City

when she held an investigathon into how they pay billions in Brhtain but

pay little. She is Margaret Hodge, who became the waste master general,

the public chair of the publics account committee. When you arrived

in the chair of the PAC, as it is known in Westminster, you c`me with

an agenda shaped by defending your East London seat against an

unaccustomed seat, and that influenced you? Yes. It with tuz

challenge. They came out of the protest vote

against Labour. We were used to weighing the votes in, rathdr than

anything else. That did send shock waves. Ht meant

that I felt that everything I did had to help me reconnect with my

voters. It was not cutting ribbons in the Town Hall or spending endless

time in meetings. That did not matter. How could I reconnect with

my voters. I always felt conscious and the

questions I asked is what would the people of Barking and Dagenham want

me to ask. How would they vhew this? It meant I was much straighter. I

tried to keep things simple. I was very direct and I wouldn't take sort

of Westminster bubble style answers, which are very pop puss. Might be

a-- pompous and in some instances might be economical with thd truth.

The PAC is routine referred to as the most powerful committee. It was

set up by William Gladstone. It is 150 years old. So when you `ctually

assume the chair there, you had a sort of very powerful institution at

your disposal and you wanted to point it at something. What decided

you to point it at tax evashon? It wasn't deliberate. I'll tell you the

story. It was David Davis who had been a chair of the Public @ccounts

Committee, not the previous one but the one before that. Was very

helpful to me. He came up and said, I will help you mar get to get this

right. He pointed a finger `t me and said Vodafone, you've got to look at

Vodafone. I couldn't understand how the tax affairs of a privatd company

would impinge on a parliamentary Select Committee that was, hts

purpose was to look at valud for money of public expenditure. Of

course the way in which we collect tax goes to the heart of thd

efficiency of HMRC. So it is relevant. Then what happened was I

didn't get a brilliant report from HMRC or actually from the N`tional

Audit Office who did providd high-quality reports to unddrpin our

hearings, I read Private Eyd and it was about Goldman Sachs and how they

had done a sweet heart deal with HMRC and did not pay all thd tax

that was due. So it was that that started us on our journey. Ht was

quite an amusing journey re`lly looking back on it.

He had appeared a couple of weeks before that to the Treasury Select

Committee. The Select Committee members challenged him on the

Goldman Sachs sweet heart ddal. He said he had nothing to do whth the

deal. He came in front of otr committee and gave that sort of

evasive answer and said tax affairs are private. They are confident

And therefore he couldn't dhscuss the matter with us. I was vdry

frustrated. After the hearing I got a big brown envelope. And it was

from a whistle-blower. And ly Clark said to me, you know, you mtst read

it Margaret. It was very thhck and I was very busy at the time. So I

thought, OK I will. In that I found one sheet of paper and that sheet of

paper were the minutes of the meeting held by the head of law in

HMRC about the Goldman Sachs deal. In the minute read that the head of

tax had shaken hands on the deal so, he had misled, it appeared the

Select Committee by telling them he had nothing to do with it and the

head of law called the deal uncontionable. We called back the

head of tax. He said he couldn't discuss anything with us because of

confidentiality of taxpayers' interests. We called in the head of

law. He was waffling on at the end of the table and then my vice chair,

who was the Conservative MP for Norfolk, Richard Bacon, who had been

on the committee for a long time, whispered in my ear, put hil on

oath. That was one of the most dramatic things in the corrhdor that

anybody could remember. I whispered back to him, I can not do that. I

had only been chair for six months. I turned to my Clark and whhspered

to him, can I put him on oath. I said, go and find a bible and it

took them 20 minutes to loc`te a bible in the Palace of Westlinster.

We did put the witness on o`th. The civil service were pretty ftrious

with us. It didn't shed much more light on the whole affair, but it

captured the media attention. Was it a calculated piece of theatre? Some

have suggested this was preprepared performance art. Absolutely not it

occurred in the middle of the hearing. So, no, it was not

calculated. Of course in a Select Committee you do use theatrd. You

have no executive powers and the only power you have is to draw the

public's attention to issues that are important. There was a lot of

blow back. Even the head of the civil service was writing to you

about humiliating a senior civil service. He was and I think he was

wrong. I think that our remht is to follow the money. Not enough

transparency and openness bdtween civil servants and Parliament and

civil servants and ministers and Parliament. I think we do, H argue

in the book that we need to revisit the doctrine of ministerial

accountability, which is thd old doctrine that civil servants are not

accountable to Parliament. They are accountable to ministers who are

accountable to Parliament. That doctrine was established in 191 ,

when there was something like 2 civil servants in the Home Office.

Today there are 28,000. Govdrnment has got much more complex. Ht is

much bigger. If I go back to Gladstone's day, in Gladstone's day

the Public Accounts Committde when it was established looked at ?6

million. That was the Government's spend about ?8 billion in today s

money. Today, this year, thd budget is ?770 billion. It is masshve. It

is very much more complicatdd, very fragmented. The private sector now

delivers over half of public services. So, the idea that you have

this old doctrine, where only ministers are accountable for

everything that happens in their complex departments, is abstrd and I

think needs to be revisited. And the reason this enquiry into taxation

got so interesting is because we are not talking here about thred and

four pence, we are talking `bout money game changing even on a

Government scale? We really captured something that the public fdlt

hugely angry about. HMRC assess the gap between what they should collect

and what they do collect. And they assess it about ?34 billion. It has

not shifted very much. Even though they have been putting greater

efforts into that. Tax camp`igners put the gap at ?120 billion.

Billion. Let imagine they do exaggerate a bit. If you settle in

the middle at say ?70-?8 oh billion, that is a heck of a -- ?80 billion,

that is a heck of a lot of loney when public services are behng cut,

when people are struggling to pay their taxes and most of us do pay it

automat tickcally. It is only the multinationals and rich indhviduals

who find ways around it, th`t just captured the public's anger. And I

think stimulated debate. Ond of the interesting things is the whole

most of our work around tax and tax avoidance and we did a lot hn the

five years, came actually from whistle-blowers. It is very

interesting because the arrhval of a brown envelope from an anonxmous

source is a regular theme hdre. People watching what you ard doing

and deciding to weigh-in. Isn't that a good thing that whistle blowers

can contact MPs. We can use the intelligence to open again, to

public account, to call to `ccount civil servants or private

contractors or multinational companies or HMRC or whoever for the

actions they are undertaking. What is so depressing is when we looked,

for example, at HSBC and its Swiss bank, when there was a lot of money

at stake there from British taxpayers hiding their monex in

Switzerland, the best that Rona Fairhead could come up with was

calling them a thief. When we got a leak of the business in Luxdmbourg

and how they were signing up tax avoidance deals with the Luxembourg

authorities, again Price Waterhouse Coopers only reaction was not

crumbs, are we doing things right? Should we think about how wd are

behaving? No. They pursued the guy who leaked the information to get

him imprisoned. I am angry `bout that. The original lawyer from HMRC

who came to me with the big brown envelope that started this whole

journey off, I was unable to protect him. I tried really hard. I kept

saying to the Permanent Secretary in HMRC, are you looking after him

properly? Are you defending his rights? Actually they used

anti-terrorism law to cut through to his phone calls, to look at what was

on his hard drive, on his computer. And in the end, he'd had so much

pressure, informal pressure and hostility from the managers and his

colleagues in HMRC that he left the service. You seem very confhdent of

the rights and wrongs of thd schemes that people use to avoid tax, but

surely any company has a duty to minimise its tax bill. It is

something that pretty much dverybody does. And if it is within the law,

is that a problem? Is that wrong? There's a difference between tax

avoidance, which is illegal, legally arranging your affairs and tax

evasion which is not paying tax on it. Listen, we have a ridictlous tax

code here in the UK. It is three feet... It is mad and we should

simplify it. We have written too much law, but the law is not copper

bottomed. It has ambiguities. It is open to interpretation and xou know,

what of this army of people working for the big accountancy firls t

lawyers who work in the tax field, the banks, the advisers, thdy are

all spending their time tryhng to find loopholes and time aftdr time

after time we found that colpanies were interpreting the law in a way

that Parliament didn't intend. Shouldn't Parliament be doing a

better job of writing the l`w? Parliament should be doing ` better

job. If you accept, which I think the big accountancy firms dhd and

HMRC did that you cannot wrhte copper bottomed law I think the

moral argument comes in and goes like this, that we are all part of a

society. We all agree to abhde by rules in that society. That's what

makes society work well. And actually the richest benefit the

most from adhering to the rtles And one of those rules is that we decide

that you're going to contribute to the common pot from your we`lth or

your assets, for the common good, a fair amount and when you he`r that

Google, over ten years, has only paid I cannot remember, ?150 million

in tax, on something like ?24 million -- $24 billion worth of

business and when you hear that the head of google paid himself 1 ? 40

million for four years and when you hear he paid ?76 million in one year

alone, it doesn't smell right, does it? Why didn't you get more

political support. Why wasn't the then Government keener on doing the

kind of things you are talkhng about, about enforcing the tax code

snoo why weren't Labour's top team? Is is after we had the Starbucks

enquiry, Starbucks and Google. David Cameron went to Davos and s`id, I am

going to be tough on tax avoidance. At the world economic Summit. He

said, I will be tough on tax avoidance. They did take sole steps.

So the lead the process of rewriting international laws to prevent people

shifting profits from Britahn or high tax Judas diction is too low

tax jurisdictions or no tax Judas dictions. They did do some good

stuff. But the British Government, the Coalition Government, does

believe in tax competition, so they... Isn't this the case post

Brexit? Can we afford to do the things you suggest? I now h`ve an

all-party group on responsible taxation. One of the things they

will look at in the new parliament is, what does Brexit mean for tax?

My fear is that the UK Government will think this is an opportunity to

create even stronger tax haven conditions here in the UK. Xou asked

me about the Labour Party. H was very keen that the Labour P`rty

front bench should last this agenda. I could just tell from my inbox and

Twitter feed and everything that this was something that resonated

across class, gender and geography with ordinary people in the country.

I think there was a fear amongst the two Eds that they had some `re being

complicit in not pursuing t`x avoidance. I think they thotght it

was an anti-business agenda. It was never that. It was always April

fairness agenda. Because if Starbucks does not pay tax `nd

undercuts prices, it kills of community-based coffee shops. And if

Amazon doesn't pay tax and tndercuts other people, it kills of

community-based independent book-sellers. Among our supporters

in this campaign have been big companies like John Lewis, who are

also feeling the brunt when there is unfair competition, because

companies do not pay their fair share of tax. We touched on it a

moment ago. Whether this calpaign go now? You're not longer in the chair

of the accounts committee bdcause you have moved on. What happens

next. I hope they continue to pursue this agenda. I have set up this

all-party group on responsible taxation. I am afraid my first year

in this new department has been taken up with writing this book My

second year will be taken up with really, really focusing on keeping

England. What we succeeded hn doing and what was so brilliant w`s that

there was real cross-party co-operation and determinathon to

tackle this. Each team right, maybe, Stewart Jackson, to the extreme

left, Austin Mitchell, they both were really, really committdd to

pursuing this agenda of tax avoidance. And what we achidved was,

we begun to change the convdrsation in the boardroom. People usdd to

think it was cool to avoid paying tax. I think people now think the

reputational harm that can occur to the brand if they are not sdem to be

paying a fair share of taxes more than it is worth, actually, in tax

they avoid. We will see if there is a sequel to come in five ye`rs'

time. Margaret Hodge, thank you for joining us. We'll be back again next

week. Do join us then.