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