Margaret Hodge BOOKtalk

Margaret Hodge

Mark D'Arcy in discussion with Labour MP Margaret Hodge about her book 'Called to Account: How Corporate Bad Behaviour and Government Waste Combine to Cost us Millions'.

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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.


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