How the new spending chief can tackle tax without being a prat

Meg Hillier MP. Martin Rickett / PA Archive/Press Association Images

Meg Hillier, Labour MP for Hackney South and Shoreditch, has been elected Chair of the Public Accounts Committee. In what is arguably one of the biggest jobs available to an opposition MP, she is in charge of overseeing all public spending by the government. And she has big boots to fill as successor to Margaret Hodge who became known for her lively investigations into tax avoidance and evasion.

Hodge’s chairmanship of the committee offers some important lessons for Meg Hillier. Hodge included among her titles both “tax prat of the year” and Tax Personality of the Year when in office. This was because she shone a spotlight on the tax industry, despite not having a background in tax, leading to admiration from some and disdain from others.

The job at hand

The PAC has no oversight of either the development or merits of any particular policy: its focus is purely on whether the policy has been carried out effectively and economically. Its evolution into the scourge of tax administration seems to have been partly deliberate choice and partly happy accident. Hillier will have HMRC’s performance on the agenda, particularly its performance in the digital age as it moves to “abolish” the tax return.

Under Hodge, reports on Starbucks, Google and Amazon’s tax arrangements, on marketed tax avoidance schemes, and on the Big Four accountancy firms and their role in tax avoidance in particular, moved the debate on tax from the pages of specialist journals into the wider public discourse.

A tax prat?

So why was Margaret Hodge’s attempt to bring debates around tax into the public eye so unpopular with the tax profession? The “tax prat” article accuses her of “idiosyncratic and ill-informed views about tax avoidance” which were “marginalising the Public Accounts Committee” and which “made it a joke to those who understand the subject”.

Does a failure to understand the arcana of tax legislation mean that an elected official is unable to comment on the way the legislation is framed? One of the talking points from the tax avoidance hearings that she led was the practice of the Treasury using secondees from accountancy firms in tax policymaking roles. In particular the patent box and the controlled foreign company rules – both means for companies to pay less tax under certain circumstances.

Margaret Hodge MP. Labour, CC BY-NC-SA

The suggestion was that the same senior officials, seconded from accountancy firms to help develop legislation, then returned to their companies and were named in advertising material promising to help companies use it – to make “more economical use” of tax losses and in the “preparation of defendable expense allocation”.

The tax profession found this an affront to their professionalism and expected the public to understand that they were acting with professional integrity, even if the public were unable to understand the results of their actions.

Speaking a different language

Hodge’s period at PAC raises the question of whether discussing these issues is solely the business of the tax professional and how to achieve democratic accountability when elected representatives barely understand the legislation they are being asked to pass.

In researching the coalition government’s progress towards its four tax objectives of a greener, fairer, simpler and more competitive tax system, I noted that the tax profession and the wider public had different understandings of these terms. I went on to consider whether the general public’s dissatisfaction with the results of tax policymaking are being disregarded by the profession because they literally are not speaking the same language.

It is not enough for the tax profession to retreat into a bunker and dismiss anyone who doesn’t understand its language as being ineligible to take part in its debates: tax belongs to all of us. As HMRC’s raison d'etre says, it is “responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support”. Surely this, by definition, affects everyone. More people should therefore have the right to a seat at the table where tax is discussed.

Margaret Hodge also brought up the issue of morality when it comes to tax policy, despite being criticised by professionals for it. At the height of the controversy she said:

I keep hearing it is ridiculous to talk about tax as a moral issue and that it is a simple legal issue. But if it was that simple, you wouldn’t have a bunch of lawyers and accountants making a ruddy fortune out of it, would you?

The task for Hillier will be to find a way of bridging the gap; of helping the tax profession learn that they must consider politicians and the general public not as tax prats but as engaged citizens.