Margaret Hodge BOOKtalk


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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

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

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

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

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

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an agenda shaped by defending your East London seat against an

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

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challenge. They came out of the protest vote

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

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anything else. That did send shock waves. Ht meant

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

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

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

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my voters. I always felt conscious and the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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would impinge on a parliamentary Select Committee that was, hts

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

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

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

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

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

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

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

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

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

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

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Committee. The Select Committee members challenged him on the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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have suggested this was preprepared performance art. Absolutely not it

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

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

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

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

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

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

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

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transparency and openness bdtween civil servants and Parliament and

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

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

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

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accountable to Parliament. They are accountable to ministers who are

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accountable to Parliament. That doctrine was established in 191 ,

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

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

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

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

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

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

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

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

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this old doctrine, where only ministers are accountable for

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

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

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

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

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Government scale? We really captured something that the public fdlt

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

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

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

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

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

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

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

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

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automat tickcally. It is only the multinationals and rich indhviduals

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

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

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

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

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interesting because the arrhval of a brown envelope from an anonxmous

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

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

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

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

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contractors or multinational companies or HMRC or whoever for the

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

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

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at stake there from British taxpayers hiding their monex in

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

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

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

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authorities, again Price Waterhouse Coopers only reaction was not

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

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

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

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

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

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

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properly? Are you defending his rights? Actually they used

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

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

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pressure, informal pressure and hostility from the managers and his

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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makes society work well. And actually the richest benefit the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Twitter feed and everything that this was something that resonated

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

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

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

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

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

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

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

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community-based independent book-sellers. Among our supporters

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

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also feeling the brunt when there is unfair competition, because

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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week. Do join us then.

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