HMRC Is Shite

HMRC Is Shite
Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.

Thursday, 15 March 2012

War Is Declared II - Hodge Speaks Out

As I noted on Tuesday, today is the day when Margaret Hodge (Chairman of the Public Accounts Committee) is going to make a speech at Policy Exchange (a think tank) in which she fans the flames of the war between the mandarins in Whitehall and PAC.

I understand that she will call for the Freedom of Information Act to be extended to companies and other organisations that deliver government services.

Now this would be very useful for those of us with an interest in HMRC, given that a large number of crucial functions (eg IT, printing etc) have been outsourced to the private sector. It would be very interesting for example to learn if contracts with these companies have penalty clauses for when projects are delayed, fall apart or when services fail (eg printing errors etc).

Anyhoo, by way of a taster for today's speech the BBC have provided some extracts:

"Lately, it seems that the Public Accounts Committee has been rattling the cage too much for some.

There are those who say that shows we're doing our job properly, but there is a real challenge from the civil service on how we are approaching our work on behalf of Parliament and the taxpayer.

Some have upped the ante, even asserting that the PAC's activism affronts some constitutional principle - of which the civil servants consider themselves custodians. Anonymous briefings suggest that some would even like to dismantle the committee itself...

But it's our job to blow the whistle and shout loudly when the evidence before us is that the executive is not doing a good enough job. That is going to be uncomfortable for both ministers and the civil service."

Regarding GOD, now Lord O'Donnell, she will say that in a letter he wrote to her shortly before retiring he:

"..berated me for the way in which the Public Accounts Committee was seeking to hold the executive to account.

He was particularly exercised about the hearings we had held during the autumn involving HM Revenue & Customs investigating how it had tackled tax disputes with large corporations and specifically the settlement it had made with Goldman Sachs.

It was as if he had taken on the role of shop steward for aggrieved permanent secretaries.

 ...old doctrine of accountability isn't fit for the 21st Century.

It's our job to blow the whistle and shout loudly when the evidence before us is that the executive is not doing a good enough job. That is going to be uncomfortable for both ministers and the civil service.

Rather than responding defensively, the civil service should embrace the opportunity. It is in all our interests for this to happen. It will help all of us to deliver better public services with better value."

Regarding the exchange of letters between Ms Hodge and GOD, Exaro have a copy of Hodge's response:

"Dear Gus,
Thank you for your letter of December 20, which I now understand has been widely circulated across the civil service.

I was rather surprised by your criticisms about the way the public accounts committee conducted our inquiry into HMRC’s handling of tax disputes with large corporations. As you are aware, £25 billion is outstanding in unresolved tax bills and the role of HMRC governance is critical in explaining why this substantial sum remains unresolved.

As a direct result of the committee’s inquiry, major systematic failures in the governance of HMRC and the way it handles tax disputes with large companies were uncovered. In several of the largest settlements examined by the National Audit Office, the department did not comply with its own procedures, and the same senior officials were involved both in negotiating and in approving deals, which is simply inappropriate. 

In the case we looked at, Goldman Sachs, there were extremely serious questions about the role played by the permanent secretary for tax [Dave Hartnett], whether appropriate legal advice was sought and acted upon, and the veracity of the evidence he gave to the Treasury select committee.

The committee was very disappointed by the failure of senior officials to assist us actively and answer our questions in a spirit of openness and transparency. Some of the evidence given to, and seen by, the committee was, at best, inconsistent and, at worst, misleading.
  • First, there was a clear discrepancy between Dave Hartnett’s statement to the Treasury select committee on September 12, 2011 that “I know nothing of Goldman’s tax affairs… I do not deal with Goldman’s tax affairs,” and the internal minute of the meeting that took place in Anthony Inglese’s office on December 8, 2010, which referred to “a deal on which DH had ‘shaken hands’ with GS” to settle an outstanding tax dispute.
  • Second, at our hearing on October 17, 2011 Mr Hartnett told us that he had informed Mr Inglese, as HMRC’s most senior lawyer, that there had been a mistake with the Goldman’s settlement on Monday November 22, 2010 – the day the mistake was identified – or “very soon after”. At our subsequent hearing on November 7, 2011, Mr Inglese told us that Mr Hartnett had not informed him of the mistake until December 7, 2010, more than two weeks after the deal had been done on November 19, 2010.
  • Third, at our hearing on October 12, 2011, Mr Hartnett said that no disciplinary action had been taken against anybody as a result of the mistake. However, at our hearing of November 7, 2011, he said that “the error was taken into account in someone’s annual appraisal… It affected their non-consolidated pay, because there was no pay rise that year.”
These are serious concerns that should be addressed by the cabinet secretary. However, in this case, you told us your powers were limited because HMRC is a non-ministerial department. I would be grateful if you would set out how, in these circumstances, senior officials are held to account in carrying out their duties with “honesty and integrity”.

Your letter also makes various points about constitutional matters. Over recent times, Parliament’s role in holding the executive to account has strengthened. The public’s expectations in relation to transparency and accountability are greater, and this is reflected in the way select committees approach their work. 

As a result, there have been useful developments in conventional practice that have improved accountability and public understanding. For example, on a number of occasions in recent years (such as with Sir John Gieve on the disclaimer of the Home Office accounts, Catherine Bell on government support for MG Rover and, very recently, Dame Helen Ghosh on the Rural Payments Agency) the committee’s inquiries have been materially assisted by the attendance as a witness of the department’s former accounting officer who had held responsibility and knowledge at the time of the matters under discussion. While such occasions are infrequent, I have no doubt that they have enriched the committee’s understanding and helped us to serve the public better.

If we accepted all conventional past practices we could not respond to expectations of the present. The civil service will merely be seen as having things to hide if it follows the outdated and defensive path of action you propose. Furthermore, past conventions would not help us in holding properly to account departments that do not have ministerial oversight. I hope you would agree that the lack of ministerial oversight makes parliamentary oversight even more important.

I have worked in many government departments and have the highest regard for the civil service. I have seen at first hand the commitment of civil servants, and, if you read all the PAC reports, you will see that we warmly acknowledge success and good practice. However, I believe it is the duty of the committee to pursue fearlessly the public and taxpayers’ interest whenever and wherever we deem it necessary.

You also raise concerns about our questioning of Mr Inglese. In taking evidence from Mr Inglese, our aim was simply to get to the bottom of a settlement that he himself is on record as suggesting may be “unconscionable”. His advice was at the heart of understanding the truth to a particularly tangled and unacceptable story. Requiring a witness to swear an oath should indeed be a rare step, taken only in exceptional circumstances. I am surprised that you are not more concerned about the circumstances that made it necessary on this occasion.

Finally, in your successful time as cabinet secretary and head of the civil service you have dedicated a considerable part of your tenure in trying to deepen its capacity – an enterprise in which the PAC has been an ally. Now you have moved on and I wish you well. I look forward to my committee working constructively with all those who succeed you and all those called to give evidence in the future.

Yours sincerely
Rt Hon Margaret Hodge MP
Chair of the Committee"

A well written and scathing response to GOD (BTW, Goldman Sachs rather hit the headlines yesterday courtesy of Greg Smith).

The key to the problem of oversight and accountability, is that HMRC is non ministerial department. However, the risk of placing it in the hands of a minister is that it becomes more politicised than it is already; when in fact it should be (at its "simplest") a non partisan bureaucracy that collects taxes in the most cost effective and efficient manner possible.

Tax does have to be taxing.

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  1. Margaret Hodge is my hero! I loved watching her in action at the PAC.

    1. I'm sure the victims of sexual abuse in Islington, who Hodge slandered, then had to pay off, would agree totally with you.