As British prime minister Theresa May and her cabinet struggle to find a way of carrying out their election mandate of extracting Britain from the European Union, another senior Alpha Female politician has just emerged from the opposing side of the political divide, with a tell-all tale about the waste she saw during her five years as the first-ever elected chair of the government’s powerful Public Accounts Committee.
Called to Account: How Corporate Bad Behaviour and Government Waste Combine to Cost Us Millions is Labour MP Margaret Hodge’s blow-by-blow account of where the money went, and – rather too often – didn’t go, because it had vanished, or there simply wasn’t enough of it.
Here, tax commentator Gerry Brown shares his thoughts about the book, which in December won the “Best Non-Fiction by a Parliamentarian” gong in the first-ever Parliamentary Book Awards.
In 2010, Margaret Hodge, at that time a 65-year-old member of Parliament for an East London district, became the first elected chair of the UK Government’s Public Accounts Committee (PAC).
The PAC exists to scrutinise the extent to which UK Government public spending achieves value for money, and generally holds the government, and its civil servants, to account for the delivery of public services.
It should be said at the outset that this is not a conventional political memoir. The first 65 years of Hodge’s life, for example, are covered in just 17 pages.
What Hodge prefers to concentrate on is the five-year period that she was chairwoman of the PAC, from 2010 to 2015.
Shortly after her appointment, David Davis, now Secretary of State for Exiting the European Union, told her that she must “look at Vodafone and tax”. Hodge confesses to not having understood the implications of this “tip-off” at the time, but now says that during her years in the PAC role, she became only too well aware how the tax affairs of multinational companies were relevant to a Parliamentary committee concerned with “looking after the taxpayer’s pound”.
Among the interesting stories Hodge shares with us is an account of the PAC’s examination of the so-called “tax gap” – the difference between what HM Revenue & Customs (HMRC) thinks it should be received in tax, and what it’s actually getting. This “gap” is notoriously difficult to measure, but in 2011-2012 HMRC estimated it at £35bn. (Some commentators believe the figure to have in fact been significantly higher.)
This, Hodge tells us, became the starting point for a number of PAC investigations, including into what was known as the Goldman Sachs “special deal”; the tax avoidance activities of Starbucks, Google and Amazon; the role of the “Big Four” accountancy firms in enabling their clients to avoid tax; and the allegedly “cosy” relationship between HMRC and tax professionals, particularly with respect to the drafting of tax legislation.
Boutique advisers and their promotion of tax avoidance schemes, the role HSBC was found to have played in allowing the use of secret bank accounts in its Swiss operations, and the number and complexity of the tax reliefs available to UK taxpayers at that time were also subject to particular scrutiny that year.
To her credit, Hodge explains the issues in these investigations – even those involving complex corporate structures – in an understandable way. She also shares with her readers the fact that she and other members of the PAC were unimpressed with the HMRC approach to large scale tax avoidance.
So widely reported were Hodge’s tax gap investigations during this time, she writes, that she became a regular interviewee on Radio 4’s Today Show. That the investigations weren’t always appreciated by tax professionals, though, was underscored in 2013, she tells us, when she was named “Tax Prat of the Year” by Tax Journal, a trade publication.
The second half of Called To Account deals with the other side of the ledger, so to speak – the public spending part. Hodge starts with an undeniable truth, that “wasting public money is unforgivable.” She also asserts that “everybody accepts that we should not be spending more on current services than we secure in income through taxation”, and, again incontrovertibly, all resources must be used effectively.
She then discusses PAC investigations into a number of public expenditure projects. These make depressing reading. In 1998, for example, a decision was taken to replace the Navy’s three existing aircraft carriers with two new ones. The estimated cost was £2.8bn. The latest estimate is that the total cost will exceed £6.2bn. (The first carrier will not be operational until 2020.)
A very significant part of that cost overrun, as is often the case, we’re told, is a consequence of governments (of both political hues) changing specifications mid-project.
Hodge goes on to criticise the Civil Service, accusing it of failing to develop the financial, commercial, IT and project management skills that modern government demands.
“Permanent secretaries,” she writes, “may have good academic qualifications, but most of them have neither the life experience nor the skills needed in the twenty-first century.”
It’s easy to see why Called To Account won that Parliamentary Book Award: it’s well structured, and the points made by the author are expressed in a coherent and understandable way.
Hodge is much stronger in identifying weaknesses than in suggesting solutions, though she does offer some ideas for improvement.
Anyone interested in UK “economic politics” would likely enjoy this book enormously, and would benefit from reading it. (Excluded from that group, though, would be civil servants, unless they happen to have been blessed with the skin of a rhinoceros.)
Called To Account: How Corporate Bad Behaviour and Government Waste Combine to Cost Us Millions
by Margaret Hodge
Little, Brown 379 pp
UK RRP £18.99
This book review appeared in the February, 2017 issue of International Investment magazine.