RSM’s The Loop: With special guest Dame Margaret Hodge

RSM partner and CIOT president, Susan Ball, talks to Dame Margaret Hodge, former chair of the Public Accounts Committee, Labour MP and "loud commentator" on all things tax.

Speakers
Susan Ball - RSM UK Partner, Employer Solutions 
Dame Margaret Hodge - MP 

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Transcript

Susan [00:00:03]  Hello and welcome to The Loop. I'm Susan Ball, a tax partner at RSM specialising in employment-related tax matters and the current president of the Chartered Institute of Taxation. The Loop is usually where we untangle today's business issues by throwing real life scenarios at a panel of experts from RSM. But this episode's a little different. In this first of a mini series, we dedicated to all things tax. Tax is always a topic for lively discussion, but it's a conversation with real heat at the moment, thanks to the comings and goings at Number ten, the cost of living crisis, the risk of recession, inflation rates that just keep on inflating. And that's before we get onto fiscal statements, Autumn Statements, or anything else. So we thought we would ask some leading lights in the profession their views, including what they would do if they were put in charge of the UK tax system. My guest for this episode is Dame Margaret Hodge. Margaret's been an MP since 1994, and over her long and varied political career, she's had portfolios across education, work and pensions, business and culture. And in 2010, Margaret became the first woman elected to the chair of the Public Accounts Committee, serving until 2015. So, Margaret, welcome to The Loop. 

Margaret [00:01:26] Thank you very much indeed. (Laughing) I'm not sure I would classify myself as a tax expert, but I'm certainly a loud commentator. 

Susan [00:01:37] Certainly that's the case, and obviously that's what we'd like to talk about today. So thank you very much for joining us. A lot of us will know you actually for being the MP of Barking, but also the chair of the Public Accounts Committee and the current chair of the cross-party group of politicians, the APPG on Anti-Corruption and Responsible Tax. Perhaps you'd like to tell us a bit about your background, where you're from, how you got into politics, the role with the committee, and perhaps latterly the APPG. 

Margaret [00:02:18] That could take some time. I was working out the other day that I have been an elected representative for 50 years. 2023. So it's a long time. I mean, I got into I was always political. I went to the London School of Economics. I was a campaigner on, in those days, single issues like anti-apartheid and the Campaign for Nuclear Disarmament, looking back to the sixties, and then I was always a member of the Labour Party. But I became, actually, an elected representative on a council when I started having children and you know, it was impossible to carry on with my full time job, which involved extensive travelling abroad. So, somebody said to me, go onto the council, it'll keep you sane whilst you're changing nappies, which is probably not the best motivation, but did it keep me sane? I think being in politics is a sort of drug and once you're in it, you want to change the world, you want to make the world a better place. It's very hard to give it up, although there are downs as there are ups in political life. So I was very lucky to be a minister through most of the years of the Labour Government, under Tony Blair and Gordon Brown. Incredibly privileged. And then when we lost the 2010 election, I'd also been widowed very recently before that and I was trying to think how to lead my life. And another friend of mine said to me, "Go on, go and chair the Public Accounts Committee," and I thought that would be really boring. But to put my hat in the ring and it was the first time we'd had elections. And as you say, I was I went I had, I think, sort of 48 hours or something crazy to go round and go on to votes and support from all backbench MPs from across parliament. And I sold myself as being a woman, there'd never been a woman in the job before. And I also had just successfully beaten off the British National Party, the BNP, in my own constituency and that had raised my profile. So, both beating the BNP, which I think everybody supported - again across the political spectrum - and being a woman I think were the two key reasons I was successful and got elected. And that got me into tax,. And then, through that I developed a real passion for ensuring that we had a fair taxation system, between individuals, corporations and individuals, and that we tackle the massive, massive issue of tax avoidance. And so, you know, I think we did a lot of work in the Public Accounts Committee, as we did investigations of what we considered wrongdoing in the way the tax system was looking. And then that moved me. I'd always talked of it as a spectrum. So we started our journey on sort of, you know, tax avoidance Then that very quickly gets you into issues like economic crime, money laundering and fraud and that huge agenda. And that lead then, after I'd done the Public Accounts Committee for the five years, that it made it into setting up an all-party parliamentary group looking for responsible tax. And very quickly, we also decided that corruption and economic crime had to be part of the agenda. And I'm very proud of that coalition, it really is genuinely cross-party. People come to supporting our agenda from very different perspectives and very different values, but we all come to the same place in the end. And I think we have built our credibility in Parliament. We've got our credibility among the government. I hope we've built a bit of credibility with the professionals like you, and I hope that we have really got incredibly wide support. So now as we tackle the second economic crime where I'm sitting on the Bill committee as we speak, that support is very important in trying to get amendments into that Bill, to make it robust, useful and will really help bear down on the terrible position Britain's got itself into in relation to money laundering and fraud. 

Susan [00:08:23] That's really interesting points to kind of reflect on, in that you know we had the first Bill which went through in a real hurry, obviously because of the circumstances at the time and what we were trying to do, you know, from a political point of view, this one obviously, as you say, you know, it could be wide reaching. I guess what are some key points that you'd like to draw out that you think are a particular issue with it? 

Margaret [00:08:50] Well there are you know, there were loopholes you're going to try and sort of close during the course of the Bill. And there are omissions that we're going to try to tackle. But let me just say that interestingly enough, in the latest reshuffle with the latest prime minister, we have two ministers who are leading the work, the Bill, who have been strong supporters, of the APPG, so it'll be interesting. Kevin Hollinrake and Tom Tugendhat - Kevin Hollinrake is now the minister in place who is taking through the Bill from that perspective. And Tom Tugendhat is the security minister in the House of Commons, so he's taking it from that perspective. So I'm much more optimistic than I was before, that we can have a rational debate and try and really amend the Bill. So the first thing, I mean, what are the most important things we're trying to achieve? I think none of this will work if we don't properly fund enforcement agencies so that everybody from Companies House, which will become more of an enforcement agency through to the SFO, the NCA, National Crime Agency and HMRC and the police, all those agencies have to be properly funded, so that they really do carry out their enforcement role. So that's one key issue. The other issue, which I think is probably more controversial for your members, but I think the supervision of the professionals is not good enough, That's another issue that we're going to try to toughen up during the course of the Bill. Also, in the end, I think you have to place a duty on both the companies involved and the directors involved to behave properly. And so we want to introduce a new criminal offence, which would impact on all those working to a devise, which is a failure to prevent economic crime. It modernises, really our corporate liability legislation and brings it in 21st century. Now this isn't "we want to lock up a whole load of accountants and lawyers and bankers". Actually, we think it'll be a very effective preventative mechanism, which will make everybody think twice before they either collude in or facilitate economic crime. And the analogy that Kevin Hollinrake always uses, and I think is very powerful, is to look at what happened in the construction sector. So if you go back many, many years, lots of people died on construction sites. And it was only when legislation was introduced, to have direct responsibility for failing to prevent accidents on their sites, that when that was brought in, miraculously overnight, the number of deaths on construction sites went down by over 90%. So it's an incredibly powerful preventative measure. I think those are the big things that we want. And then there are other issues that, you know, were just where if we're not tight enough, we won't meet will mean that the legislation isn't as effective as we want it to be. For example, you could still have opaque companies who know that a company registered in the UK will actually be held by a company in the BVI, so you don't really know who is the owner behind itI think it's that sort of detail and those sort of loopholes that we have to address during the course of the legislation to toughen it. 

Susan [00:13:48] And obviously, as you said, that that means that, you know, particularly on that point where it's Companies House who effectively will be ID'ing people and getting more information, they're going to need more funding. I mean, from my perspective, obviously, you know, you also mentioned HMRC in there, and obviously tax advisers, now I know that, you know, when we look at the issues we've had more recently, HMRC have consulted on legislation to effectively regulate tax advice. At the moment we're waiting on potentially another consultation, having the initial ones, you know, and the idea of putting PI insurance on everybody was found to be, I guess, too difficult. And, you know, - I'm president of the institute and you'd expect me to say that obviously all of our members comply with the legislation, but there is 30% of the tax advisers who help people who aren't regulated at all. So I guess that's the area which, you know, we're likely to see more on and links in with exactly what you've just been saying. 

Margaret [00:14:58] We've got to regulate the tax advisers. But I'd simply put a challenge back to you is I don't think all the other professionals are adequately regulated to date. And I think the problem is sometimes with organisations like yours, is because you're a trade body as well as a regulator. So on your trade you know, you're representing the interests of your members. That means you're lobbying people like me on their behalf. And does that role sit well with being the regulator? So I think there are issues around the supervision of regulators, which we've got to tackle. Can I just say one thing about all this? Because I don't want more regulation. The last thing I want is, I want businesses to flourish. But if we don't actually pull out these bad apples, if we don't tackle the grift and fraud and economic crime in the UK, we will actually lose our reputation as a trusted jurisdiction. And that won't help the financial services, which is a really critical sector in the UK for the economic growth and economic prosperity. So we've got to sort it out, we've got to tackle it,. We've got to tackle that and we've got to do it by smart regulation. 

Susan [00:17:51] And that links in, I guess, with the IPG recent report really. And obviously the fact that you were talking about in that HMRC should be enforcing the law of the land. So I think that's, you know, it's quite interesting and again, the fact that, you know, we're seeing unfortunately not so great service levels from HMRC. So clearly there is an issue there with, you know, we need to fund them more if we're going to get more out of them. 

Margaret [00:18:20] I can't remember the latest figure that HMRC use for every pound you invest. I think they now talk about £19. Is it £19? It's something like that. It is an enormous I mean, in my day they talked about 12. So it's gone up their efficiencies and their productivity and efficiency's improved since I was the chair of the Public Accounts Committee, which is very welcome. And it's this failure of government, inability of government to see where you can invest to save. It's just, you know, drove me potty when I was a minister, but it would drives me even more potty when I'm a backbencher. There are some areas where government investment will bring back more than you spend. And I think investment in this whole area of economic crime, tax avoidance is key. 

Susan [00:20:55] I mean, sort of taking you back a little bit because I mean, that's been a really interesting debate. But but we've kind of gone through the whole of your career in a sort of whistle stop tour. And I was wondering what was sort of a highlight for you really in all of that? Because I understand that, you know, you're coming up to the point where actually you're not going to stand going forwards. I'd be really interested to know what you think are your highlights. 

Margaret [00:21:20] I think I've been incredibly privileged in my career and it's very difficult to pick out one issue. I mean, I think if I'm allowed to put more than two? When I was when I was a local, when I was on a local council, I was really proud that we built and developed the biggest local council housing programme in the country. And a lot of it wasn't just new build, that we you know, obviously in Islington, I was in those days chair the housing committee in Islington, and went from rehabilitating 12 beautiful Georgian houses that didn't have any inside loos and inside toilets, in some homes. This was in the mid, late seventies. Some of the homes, the only form of power was gas. So they had gas lighting. It's extraordinary when you think back on it. And we went from doing 11 to doing 1,600 a year, and I'm really proud of that and that we still live in Islington, and when you go around the borough I think that people investment in homes was incredible. So that's one thing I'm proud of. I'm very proud of two huge battles that I had on racism. Racism, you know, fighting racism has been a sort of integral part of my values. I'm an immigrant. So I came here and I joined the Labour Party because as an immigrant I thought it was the party that sort of fought racism and promoted equality and you know, had an internationalist perspective. But my fight against the BNP, the British National Party, in Barking, was a huge battle which took four years. And if we hadn't done that, I think we might've ended up with Barking Dagenham having the first BNP Council and the first BNP MP. I did lots and lots of stuff. But the thing I really loved was developing Sure Start, the children's centres, which is able to do as Children's Minister. And I always thought a very important lesson to me there, I always thought I used to go around the country when I was Children's Minister saying we're developing a new frontier of the welfare state.  And then the final thing is actually all the stuff around tax, because when I first came across this tax was considered so technical. It was considered too difficult to understand. And I've always thought tax belongs to all of us. We all, most people, pay it. Most people don't try to avoid it. And it buys, it's our way it's part of our social contract. And we pay into the into the common pot for the common good. And if it belongs to all of us, we should all understand it. And it shouldn't just be an issue for tax professionals or the very rich or for the big corporations making, moving that from being something that is just dealt with in the boardrooms and in offices to something that taxes are talked about in... 

Susan [00:24:56] Well, I totally agree. I mean, that's I think that's where I really first came across you, Margaret, actually was on the Public Accounts Committee when, you know, tax became front page news. And for somebody who'd worked in tax for a number of years, that was kind of my first realisation that it was regularly going to be on the front cover of the paper. And I actually went and watched the Public Accounts Committee on television. So so you know, I totally agree. It's it's been one of those things now that we we see more and more, you know, in the papers. But but I you know, for me, certainly it stems back to when you were doing that work and we were seeing it regularly, which I don't remember before that particularly. And, you know, when we last had a conversation, it really resonated with me when you said that tax is everyone's issue and and I keep using that phrase, so apologies, I've stolen it from you. But but I guess the question then is, well, how do how do we make it better? Because part of the problem that we have, and you've just mentioned, is that actually it's complicated. And whilst that keeps me in a job, you know, it was less complicated when I started and I still had a job. And we've got a more complicated tax system, which for the vast majority of people, you know, isn't as straightforward, particularly now we've got people with multiple jobs. I think, you know, I deal with pay as you earn. That was set up when we thought people would only have one job at a time, not several jobs at a time. I don't know if you've got any comments on on what your thoughts are around that. 

Margaret [00:26:22] That, but I mean, it's far too complicated. It's ridiculous. And, you know, the tax code, I don't know how big it is now. You know, it's completely potty. So where I consider the first thing I do is I would really, just simply get rid of a whole load of those tax reliefs and simplify the system. And the problem is that the way that our politics is constructed, the Chancellor gets very few chances to say and to do anything publicly, you know, he's in the back, he/she is in the background the whole time. They get their, you know, autumn statements and their budgets. And so they all use that to bring in something that, you know, will make them popular with the country or make them popular with their party or something or other. I would simplify, simplify massively and I would open much more to public account. I think if you want to build trust in the system, you've got to get more open and there are various ways of doing that. I think the current proposal that we're going to be working with with a similar economic crime agenda, so you could set up a committee of both houses of Parliament that is really that is to advise mirrored on what happens with a security committee. So people come to it from both the law and the commons. They they have to abide by confidentiality so they're not allowed to, in the way that the Secure People Security Committee aren't allowed to discuss it. They can call for the papers around a particular tax issue or fraud issue or economic crime issue. You can't release them, but you can then put into the public domain, a report, a systemic report. If there is something systemic in the HMRC works, that means that sweetheart deals are struck. And until you have that confidence that sweetheart deals aren't struck, you will not have really trust in HMRC to the level that we need if we are to pay our tax.  

Susan [00:29:51] Oh, there's so much in there I'd like to discuss with you, but I'm conscious of the fact that if we go on too long some people won't want to tune in (laughing). So, I mean, simplification was one of the things obviously that actually was mentioned recently by one of the recent Chancellors we've had and and making sure that Treasury and HMRC have have that as a focus as well, which I don't think it's been there before. We do have the Office of Tax Simplification to go again. We're not quite sure where that's going to go at the moment, but it does seem that you're right. I mean, the trouble we've got is that everybody wants to write something new without actually sometimes going back to what we've got and saying, is this fit for purpose now? So I think that's a really interesting... 

Margaret [00:30:38] Absolutely, yeah, I completely agree with that. 

Susan [00:30:40] Really interesting point. So I suppose, you know, we've we've talked a bit about obviously, as you say, your career, etc., what you'd like to change. And I know you've said that obviously you're not going to stand at the next election, but do you think you'll ever get away from getting involved in tax of some shape or form? 

Margaret [00:31:00] No, I hope not. You know, I'm very proud of our APG and it's been very generously funded. You know, we have the charitable trust fund now so that we've become much more, I hope you recognise that, we're much more professional in the way we do our work, you know, and I think that's good. I think the early days we were floundering a little bit, but I feel much more professional in our approach and I want that to carry on. So goodness knows, I mean, I haven't really sorted out that for another two years, you know, and unless this administration completely implodes, I've got another two years in which to sort that out. But we are much you know, we've got staff in the APPG, we are much more professional, I think we're doing a really important job, we bring together politicians across the political divide. Everybody always thinks it's Prime Minister's questions is what parliament is about. That's not what we're about. We really do have support right across right across the chamber of the House of Commons and across the benches in the House of Lords. So I want to sort of embed that permanently. I'd love to carry on being involved. I feel passionately about sorting this out and you know, particularly when we've got this cost of living crisis. You know, if we actually if the figures on economic crime are 290 billion a year lost to the UK economy through economic crime. The figures on tax avoidance and it's always around 30 - 32 billion a year. You know, if we just sort that out, just think of money we'd have available without imposing any more tax on a very highly taxed population. Just think the money we'd have available. And on the fair taxation thing, I think the big debate at the moment is whether we are tapping income from work disproportionately to income gained from wealth. And I think that's where the big debate is going to be over the over the coming period, balancing that more fairly between individuals, you know, between the rich and the poor, between [inaudible] in the country, all that sort of stuff between young and old, all that the way in which you can get a fair system of tax rates. And if you get fairness in it, you get the money and it should be coming in to fund the public services we all want. I think you really build confidence and it's really key to confidence if we're to use tax to fund those public services that bring us together as a community. 

Susan [00:34:05] Well, I think that's a fantastic summary of all the things we've discussed and perhaps a really good point to leave on, actually -- fairness in the system. So thank you again, today's guest, Dame Margaret Hodge. Certainly that's given us a lot of food for thought. From our point of view, if you'd like to contact us to talk about tax, you can do so on WW dot rsm, uk dot com and our contact details as shown on the show notes. To stay in touch with The Loop just subscribe to The Loop. We're always keen to hear your views and please rate us to leave a review and we look forward to you joining us for the next episode. Thank you very much.