Garden Bridge Review

Archive for September, 2016

Garden Bridge Review

Thursday, September 22nd, 2016

I’m delighted to accept the Mayor of London, Sadiq Khan’s, offer to look in detail at some of the key decisions made so far around the Garden Bridge.

It’s not a project that I have previously had an opinion on either for or against, but given the millions of pounds of public money allocated to the project, it is clear that there needs to be far more transparency around how funds are being spent. The planned bridge is a major project in an iconic part of London, and there are clearly questions that remain unanswered around issues like procurement.

From his first day in office Sadiq has been relentless in his drive to ensure Londoners get value for money, both around the Garden Bridge and other areas of major spending. I look forward to presenting the findings of the review, and assessing the lessons we can learn for other major projects in our city.

BBC Radio 4 ‘Start the Week’ interview on ‘Called to Account’

Monday, September 19th, 2016

This morning I appeared on BBC Radio 4’s ‘Start the Week’ to talk about my time as Chair of the Public Accounts Committee and my new book ‘Called to Account’.
You can listen to the programme below:

Interview with The Sunday Times

Monday, September 19th, 2016

In case you missed it, Rosie Kinchen of The Sunday Times interviewed me on my time as Chair of the Public Accounts Committee

You are no one in this country until you have been heckled by Margaret Hodge. During her time as chairwoman of the Commons public accounts committee she pursued every suit in the Establishment and mauled them with the fury of a demonic ferret. There was Matt Brittin, the Google executive (“I think you do evil”), Andrew Cecil of Amazon (accused of talking “unacceptable nonsense”) and Rona Fairhead, the chairwoman of the BBC Trust (“I think the government should sack you”).

So I am a little disappointed when I arrive at her Westminster office to find her perky and radiating goodwill.

She has been up all night “puking”, she says, having caught something from one of her 11 grandchildren, but is about to publish a book of her time on the committee and did not want to miss the chance to reminisce. She trots through her highlights with the grace of an actress who has pulled off the performance of her career.

There was Fairhead, “awful, so awful, and on half a million quid. What did she think she was doing?”, Gus O’Donnell, the former head of the civil service, who was “trying to control me”, and she becomes so excited talking about David Hartnett, the former head of HM Revenue & Customs, whose cosy relationship with Goldman Sachs provided her first scalp, that she begins to wriggle in her chair.

It is quite obvious that the MP for Barking, 72, has been having the time of her life. There is a quote on the sleeve of her new book, supposedly written by an “anonymous colleague” but oozing Hodgean drama, that says she is “a bit like a tarantula. You don’t want to become too intimate with it, but you admire its danger and its grace.”

She initially thought the job would be dull, and put herself forward only because she needed something to distract herself after the death of her second husband, Henry.

She “had no clue” about tax, she says, or anything about the weaponry — “boys’ toys, I call them” — being purchased for vast sums by the Ministry of Defence, but was quickly gripped by the scale of waste within the public sector and the morally dubious tax arrangements of some multinationals.

What had been a dreary audit committee was suddenly the hottest ticket in Westminster — thanks largely to her own theatrical flourishes. At one point she forced Anthony Inglese, the top lawyer at HMRC, to swear an oath on the Bible. She titters bashfully, “I have a line that many politicians are failed actors, and when I started at LSE I did act, it was my great ambition.”

There were others on the committee who tried to “rein” her in, she admits, but she felt she had to “use theatre” because it did not really have any other tools. “There was no executive power,” she says. “If I got a headline, it wasn’t a headline for headline’s sake; it was a headline with a purpose.”

She worked incredibly hard on these performances; each hearing “required four to five hours of preparation”. She had her “three wizards”, a clique of experts who would coach her on her timing and order of the questions, and it was thrilling when it all went to plan. In the course of her research she “came across” some clips of her quizzing Amazon executives over its tax affairs: “I thought I’ll just watch and see what it’s like. And what really hit me about it was it was really funny.”

I do not think I have ever met a politician quite like Hodge; like a rogue parish council member who has developed a taste for blood. She has postponed the pictures today because she has “holiday hair” and was quite disgruntled that a friend saw her picture on the book sleeve and said she looked “fat” and “old”.

She entered local politics late and by accident, looking for something to occupy her when her four children were growing up, and almost instantly became a “leading light of the loony left” for which she was tortured in the press.

Hoping to coax out a flicker of venom, I raise the notorious story that she once spent £500 on gym mats for lesbians. But she smiles fondly: “Yes! Do you remember that?” she cries before regaling me with another one about her banning fox-hunting on the A1.

It was, she says, a “horrible time” when “the press absolutely hated me”. Despite her Establishment credentials — she lived on the same street as the Blairs and her second husband was a solicitor chum of Cherie’s — she says she felt an “outsider”. Her family are German Jews who settled in Cairo before the war. The family moved to Britain after a brick was thrown through their window, and deliberately settled in Orpington, south London, to encourage their children to integrate. It was while she was at boarding school in Oxford that she noticed the class divide and became interested in the politics of the left.

Hodge’s problem is that she is also stinking rich. Her family founded the steel trading corporation Stemcor, one of the largest privately owned steel companies in the world. She describes the money as a “complete pain” because it was “never real. It was always in the company. I had shares in the company and it was doing well, but we never got massive dividends or anything like that.”

Nevertheless, it has provided endless fodder for her detractors. The most recent issue arose earlier this year when it emerged the family had made use of a Liechtenstein disclosure facility to move funds that had been held in offshore accounts back to the UK.

She sighs philosophically. “That was a mistake. My brother dealt with all that stuff and I should have been closer to it,” she says. “At the time I thought it’s not really relevant, but I should have been open.” In any case the money is all gone now, she says happily. “We haven’t got it any more. With the steel industry going, it has gone bust.”

So too has the big house in Islington, north London. She now lives in nearby Hackney to be near the grandchildren.

She has always been big on work/life balance, and avoided national politics until her children were in their teens. We talk about the focus on motherhood in Westminster and Nicola Sturgeon’s revelation about her miscarriage.

Hodge herself had “a whole load of miscarriages, too”, she says, and has always made a point of talking about it.

It is a part of her “feminism” and important “not to allow those things that have been a part of the tapestry of life to become things you daren’t talk about in the workplace”.

She ponders this. “Maybe somebody else wouldn’t have told you they had been puking all night,” she hoots. It is this attitude that persuaded her to ask for compassionate leave in 2008 from her job in Gordon Brown’s cabinet when her late husband was diagnosed with leukaemia.

It was an “awful time”, she recalls, and she was very grateful to Brown for agreeing. She remembers asking him for advice years earlier when one of her daughters lost her sight in one eye. It was a 30-second chat in the lift, but two hours later a four-page handwritten letter came down from his office, full of practical advice such as where to put things on the dressing table. “He was very good on that personal side. He was just hopeless at being prime minister,” she says.

She has a lot less time for Jeremy Corbyn, who she says has been “terrible” when it comes to women’s rights. “It is a very male-dominated leadership. He would say he believes in gender equality, but you’ve got to live it.” She has also found herself on the receiving end of anti-semitic abuse for the first time in her career, and recently handed two abusive emails to the police.

Despite this, she has no plans to stand down at the next election, looking aghast at the suggestion. Partly this is because her work is not yet done — the public accounts committee highlighted problems but did not always solve them. She left the committee in March and has set up an all-party group on taxation; she is now itching to sink her teeth into reforming the civil service, which she thinks is “opaque” and “unaccountable”.

The other reason is that, having done the dirty work, she is having too much fun basking in the applause. “People stop me in the street and say thank you for the work you’re doing,” she says, growing misty-eyed. “It’s been a very rewarding period of my life. It felt purposeful, and it was nice to be liked. That’s very rare for a politician.”

Rosie Kinchen
The Sunday Times
Sunday 18th September 2016

Originally published here

You can order my book ‘Called to Account’ here

Called to Account – fifth Daily Mail serialisation

Thursday, September 15th, 2016

As I’m always pleased to see women promoted to top jobs, my first instinct was to support Rona Fairhead. I met her when she’d been appointed to chair the BBC Trust — a prestigious £110,000-a-year post.

Before long, however, I was having grave doubts about her competence.

Prior to joining the BBC Trust, Fairhead had enjoyed a successful career in business. She had risen through ICI and Pearsons to become chairman and chief executive of the Financial Times Group. She chaired HSBC bank’s audit committee (2007-10) and had then become chair of its risk committee.

By the time we met, she was earning more than £500,000 a year from non-executive positions with the bank — on top of her BBC salary and income from other non-executive positions.

My first rather naive thought was that her key positions at HSBC would have made her particularly vigilant.

It seemed, in short, inconceivable that she knew nothing about the bank actively encouraging clients to avoid paying tax. I was wrong. Indeed, her evidence to the Public Accounts Committee was astonishing.

The committee was investigating the way rich Britons with Swiss bank accounts were getting away with paying no tax.

It was not just aggressive tax avoidance by the rich, but what looked like tax evasion. And tax evasion is illegal. There’s no grey area nor any debate about morality to be had; it’s a criminal act.
What was particularly disturbing was that, thanks to a whistleblower’s documents, we knew HSBC had played an active role in facilitating avoidance and possible evasion.

HSBC had bought a Swiss private bank in 1999. By 2010, rich British citizens had deposited about £40 billion into this Swiss branch. Obviously, some had a perfectly legitimate explanation. But for many, Switzerland offered a good place to hide money.

In the committee, we were determined to discover what Rona Fairhead knew about this. As a senior non-executive, it was her job to make sure the bank acted properly.

Yet she claimed no knowledge at all. In her view, all the blame could be attributed to the tax evaders themselves, to junior front-line staff at the bank and to those who managed the Swiss branch of HSBC. No one else — least of all herself — was in the frame.
Exasperated, I said: ‘You’re getting paid £10,000 a day, but I don’t know what you do for it.’

Later in the session I was taken aback when she described the actions of the whistleblower in lifting the lid on what was happening as being those of a thief.

‘It was not until the end of 2009 that we realised the theft was much more significant,’ she said.

I was frankly riled that she’d shifted blame onto front-line staff, who were only doing what they’d been told. On top of that, she had the gall to label the whistleblower — who’d exposed HSBC’s complicity — a criminal.

It was unbelievable the chair of the audit committee had not been more alert to the dangers.

The existence of HSBC’s Swiss branch in itself should have been a red flag; the fact that there were so many people with secret accounts should have been another one; and the fact that the Swiss branch was securing disproportionately high profits warranted closer attention.

The failure to have proper systems in place must in part have been her responsibility; the culture of the bank that resulted in widespread complicity with tax avoidance and possible evasion in Switzerland, Mexico and elsewhere should have been something she identified; her seemingly passive, reactive and superficial approach to her highly-paid role was simply remarkable.

According to Rona Fairhead, she was unaware of any secret accounts. She relied on other bank executives to raise any troubling matters, she said.

She’d merely created lots of committees and lots of policies and given lots of presentations for her half-a-million a year — but she knew nothing.

In the end, I flipped. And I went for her: ‘Having watched your performance, I have to say this to you: either you knew, and if you knew, you colluded in tax evasion . . .’ I began.

Rona Fairhead: ‘I categorically deny that.’

I continued: ‘Or you didn’t know, and in that case, I think you were either incredibly naive or totally incompetent. The record you have shown of your performance here as a guardian of HSBC does not give me the confidence that you should be the guardian of the BBC licence-fee payers’ money.

‘I really do think that you should consider your position and should think about resigning. If not, I think the Government should sack you.’

Perhaps I should have kept a lid on my temper. But please don’t weep for Ms Fairhead. As an establishment figure, she could count on her friends to close in and protect her as one of their own.
Within hours, they’d rallied. Michael Portillo proclaimed on TV that I had behaved appallingly and that Rona Fairhead was really a very decent person.

Tory MP Alan Duncan attacked me publicly for what he called my ‘insulting and offensive performance’. He thought calling for Rona Fairhead’s resignation was ‘inexcusable’ and alleged I’d indulged in ‘a self-aggrandising outburst which was nothing short of vile’.
Fair enough, I thought. I’d been tough, so it was perfectly understandable that those who disagreed should subject me to similar treatment.

But I think there are wider implications to this kind of attack, which was by no means uncommon during the five years I chaired the Public Accounts Committee.

All too often, the committee’s own ‘attacks’ were on members of the British establishment. In some cases, we were criticising top bankers, people appointed by the prime minister and others who moved in closed establishment circles.

In other hearings, we challenged top industrialists, civil servants and people who’d secured their jobs because of who they knew, where they’d been educated and the social circle in which they moved.

In the outside world, however, criticism of such people regularly occurs below the radar. Our hearings challenged that tradition and forced those unaccustomed to it to account for themselves in public.

And, of course that’s uncomfortable. But it should be. As a society, we’re not afraid of naming and shaming benefit claimants who cheat the system.

We don’t hold back from harassing small businesses to pay every last penny of tax they owe. We’re quick to condemn those who over-claim on their tax credits.

So in my view, the former chair of audit at HSBC — not to mention her powerful friends — was simply wrong to maintain she’s blameless.

It was also unacceptable that Rona Fairhead remained the chair of the BBC Trust for so long. And it can only be right that she has gone.

Ever had the suspicion that there’s one law for the rich and powerful and another for everyone else? Let me take you into a hearing of the Public Accounts Committee.

In front of me was a Whitehall mandarin called Dave Hartnett. He looked unremarkable — bespectacled, with red cheeks and somewhat dishevelled hair — but he happened to be the most powerful official in government when it came to tax.

I had a simple question: why was he allowing rich Britons with Swiss bank accounts to get away with paying no tax?

After all, when single parents were overpaid extra tax credits by mistake, the tax authorities had come down on them like a ton of bricks. Surely it should do the same to tax-dodging millionaires?
Here’s what Hartnett said that day: ‘We know the people who have been overpaid tax credits and can address that.

‘But we do not know the identity of people in Switzerland and we cannot establish who they are . . .’

That kind of attitude, of course, is precisely why ordinary, law-abiding taxpayers have lost confidence in the system.

Hartnett, as it turned out, was being economical with the truth. HMRC — the government department responsible for collecting tax — did know the identities of people who’d squirreled millions away in Swiss bank accounts.

How? Because they’d been passed a list of them the year before, thanks to a whistleblower.

Eventually, HMRC at least started making the right noises. It announced it had ‘begun criminal and serious fraud investigations’ into some of the account holders. So we regularly questioned tax officials when they appeared before the Public Accounts Committee on this issue. And they always assured us they were making progress and, where appropriate, initiating prosecutions.
Four years went by. By that point, HMRC had traced 3,200 British individuals who had stashed away money in Switzerland. Of these, officials thought about 1,000 raised serious concerns.

Later, however, they whittled this down to 150 cases where they were considering criminal proceedings. And how many did they actually take to court in the end?

As I write these words, a staggering eight years after the whistleblower first shared his information, only one person has been charged. Just one.

So far, we’ve got back £135 million in unpaid tax. Yet the French and Spanish, who’d also been acting on the whistleblower’s information, between them recovered three times as much as we did. (And they had fewer documents to go on.) Many of the bank accounts tax avoiders used at HSBC were so-called ‘hold-mail’ accounts. This meant they were much more secret: no one could link the individual to the bank or to the money held in the account.
So didn’t that sound a bit dodgy to HSBC? One of the bank’s executives told us rather lamely: ‘It wasn’t considered a red flag at that time, because all the Swiss private banks were doing it.’
Chief executive Stuart Gulliver was a little more straightforward. ‘I would agree that there is a higher probability that “hold-mail” indicates areas of concern that we, as a bank, should take note of,’ he admitted, when pressed.

There were more shocking revelations to come. The former boss of HSBC’s Global Private Banking admitted openly that the bank was involved in tax avoidance. It had lent out money, for instance, for clients to invest in tax-dodging film production schemes.

But even that wasn’t the whole story. Among the documents provided by the whistleblower was evidence HSBC itself was concocting new tax avoidance schemes. It had actually advised its Swiss-banking clients on how they could avoid a new piece of EU legislation. This had made banks legally responsible for extracting tax on interest from secret accounts.

HSBC’s way around this involved helping clients to set up ‘shell’ companies in tax havens. And it marketed this tax avoidance scheme widely. That was bad enough, but the whistleblower’s documents seemed to show HSBC was also colluding in criminal tax evasion.

One client, for instance, appeared to have brought the money he had in Switzerland into the UK by using a credit card issued by HSBC. This enabled him to take funds directly out of his Swiss bank account without the UK tax authorities knowing anything about it.

Notes on the file of another client read: ‘We had previously met last November, when I had promised to come back to her with a “considered” response to questions that preoccupied her: the fact that her account here — which she had inherited on the death of her husband — was not known to the UK tax authorities.’

Extraordinary, isn’t it, that HSBC needed months to consider what to say to a client who was breaking the law . . .

The Swiss account of a well-known UK restaurant owner also looked suspect. HSBC had allowed him, it seems, to withdraw the equivalent of £2.25 million in one day from its Swiss branch. No questions asked.

Why on earth, we wondered, were the British tax authorities sitting on their hands?

The explanation offered by officials was very frustrating. They insisted we couldn’t be told about individual cases — which simply added to our suspicions that the tax system wasn’t fair.

We asked Lin Homer, then permanent secretary at HMRC, why there had been only one prosecution. ‘Prosecution is one end of the tool-kit, and it is the expensive end,’ she argued. In other words, Homer seemed to be suggesting it was too expensive to take wealthy tax cheats to court.

As one of the MPs on our committee remarked: ‘The message that sends to people who might be inclined to evade tax by having Swiss bank accounts and other things is: “Don’t worry about it. If you get caught, there won’t be a prosecution . . .” ’

The role of Dave Hartnett was particularly questionable. As HMRC’s head of tax in 2012, he’d belatedly negotiated a deal with Swiss banks that was designed to help root out tax avoiders.
The Chancellor, George Osborne, confidently expected this to raise £3.2 billion in unpaid tax in one year. ‘It’s the largest tax evasion settlement in British history,’ he announced proudly.

In fact, HMRC recovered a fraction of that sum — £440 million.
What disturbed us was that Hartnett had already seen the whistleblower’s evidence about tax avoidance and potential evasion before this deal was drafted.

Armed with that knowledge, he’d inserted a paragraph into the agreement with the Swiss. What it added up to was this: that all financial advisers — including the banks — would be unlikely to face any action on money laundering.

In other words, the British tax authorities were letting them off the hook. Banks such as HSBC could rest easy: they’d never have anything to fear. Also worrying was our inability to pin down Hartnett’s relationship with HSBC.

He claimed that he hadn’t been involved in any decisions about investigations into the bank. Yet he’d held a meeting with HSBC within days of receiving the whistleblower’s data in February 2010.
What had they talked about at that meeting? Neither Hartnett nor Lin Homer was prepared to tell us. Apparently, that would betray taxpayer confidentiality.

And what do you know? Hartnett, forced by us, retired early — and within six months of leaving HMRC, he was given approval to accept a job with HSBC. His role? To prevent financial crime and other abuses of the financial system. I couldn’t have made that up if I’d tried.

This is the fifth and final edited extract from my book ‘Called to Account’ which appears in today’s Daily Mail. Read the extract in full here

‘Called to Account’ is out today. You can order here

‘Called to Account’ – Released Today

Thursday, September 15th, 2016

I am delighted that my new book ‘Called to Account, How Corporate Bad Behaviour and Government Waste Combine to Cost us Millions’, is out today.

The book is about my time as Chair of the Public Accounts Committee. After five years following the taxpayers’ pound, I have seen unconscionable amounts of waste and inefficiency and watched too many big companies, aided by advisers, banks and lawyers get away without paying their fair share of tax.

I want to share with you my stories from the frontline and give you my take on the lessons that should be learnt for the future so that all taxpayers get better value for money.

I encourage you all to read it and buy it from a high-street bookseller who pays their tax!

You can order it here