Margaret Hodge shrugs off “tax prat" line

Interview with the PAC chairman.

It’s been an interesting year for tax, and in particular the debate about where the line is drawn between legitimate tax planning and aggressive avoidance. The focus on whether everyone is contributing their fair share is a consequence of austerity and is being played out all around the world, where every pound, dollar and euro of income is more valuable than ever.

In the UK, the Public Accounts Committee (PAC), the body responsible for shining a light into the murkier corners of government finance and making sure taxpayers get value for money, has been at the heart of this debate. The current chairman of the committee is Lady Margaret Hodge. Lady Hodge (the title comes from her second husband) is proud of the PAC’s work on tax, a project it kicked off after a whistleblower reported a so-called sweetheart deal between Goldman Sachs and HMRC. In getting the committee to focus on the issue, Hodge has turned tax into something of a personal crusade.

In the process she rounded on tax advisors, including accountants and lawyers, who devise tax-minimising schemes. The PAC hauled the top tax partners at the Big Four in for a challenging session. In the process she has earned the ire of parts of the profession. Taxation dubbed her its “Tax Prat of the Year”, in a cover story that challenged almost every aspect of the PAC’s report.

Sitting in her Westminster office, Hodge shrugs off the “tax prat” line and claims she doesn’t have a view about the accountancy profession as a whole. “There are people who do a good, honest job. But there is a divide. There are others, in accountancy and the legal profession, who take a different view to mine about the role of tax in society.”

Anyone who has followed the work of the PAC, or indeed who has followed Hodge’s career, won’t be surprised to hear her mount a passionate defence of the positive redistributive role of tax.

“There is a civic duty on all of us to contribute according to our means to the common good,” she says. “In very practical ways all your readers want a public transport system that works and want the realm defended and so on. Even if you can manage on your own and don’t need the support of the state, there are all sorts of things you want from the state and there is a moral imperative to pay a fair contribution to society.

"I know there are people who don’t think that way, I just disagree with them.”

Hodge admits the PAC stumbled onto tax avoidance as an area for investigation, but she is clear why it has become such a defining issue.

“The reason it’s become a big issue is because we’re living in hard times and everyone is feeling the pinch. People want to know everyone is paying a fair share. And it is about fairness. There are those who see tax as just a legal obligation, but I don’t agree. There are legal obligations, but they arise out of a civic duty.”

The rest of this interview can be read on economia.

Margaret Hodge MP. Photograph: Getty Images

This is a news story from economia.

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The future of the left: The path ahead is full of challenges

Be in no doubt: the left faces a struggle for survival.

There are plenty of grounds for pessimism about the left’s prospects and they are well rehearsed.  Across Europe, social democrats are out of power and when they do manage to enter government, it is under the skirts of dominant centre-right parties or at the helm of fragile coalitions. Ageing western societies have become more conservative, immigration has driven a cultural wedge into the cross-class coalitions that once undergirded centre-left voting blocs, and austerity has ushered in a politics of security, not reform. Only those who have borne the brunt of the financial crisis and its aftermath, like the unemployed youth and evicted homeowners of Southern Europe, have swung decisively to the left, joined by relatively protected but angry older middle class liberals of Northern Europe. Even in Latin America, where the left swept the board at the turn of the century, politics is shifting to the right. Bright spots, such as municipal experimentalism in Spanish cities, or energetic liberalism in Canada and Italy, illuminate the gloom. But mostly, darkness is visible.

Is this condition terminal? Inequality, stagnant living standards and the turbulence of global capitalism generate profound political discontent. They give oxygen to progressive protest movements as well as populist reactionaries, as the convulsions in US politics show. But only a facile determinism reads off political progress from economic crisis. There is nothing to guarantee that revulsion at political and economic elites will give birth to a new egalitarianism. The left needs a clearer headed view of the political terrain that it will face in the 2020s.

Demographic change is a given. Advanced democracies like Britain will get older and the weight of older voters in elections will increase, not diminish. The gap in turnout rates between young and old is unlikely to close, tilting politics even further towards the cultural concerns and economic interests of the over fifties. Leadership credentials and economic competence matter for these voters more than abstract appeals to equality. But a generation of young people will also enter middle age in the 2020s having endured the worst of the age of austerity, with lower wages, stymied home ownership aspirations and stunted career progression to show for it. So just as 20th century catch-all parties built cross-class electoral alliances, successful political movements in the coming decades will need to secure inter-generational voting blocs. Stitching these together will foreground the politics of family and focus policy attention on transfers of wealth and opportunity across multiple generations. 

Ageing will also ratchet up fiscal pressures on the state, as costs mount for the NHS, care of the elderly and pensions. But Britain’s tax base has been weakened by low productivity, corporate tax avoidance and expensive personal allowance giveaways. In the 2020s, this crunch will loom large over fiscal policy and force hard choices over priorities. Just as in the 1990s, we can expect public disquiet at the run-down of investment in public services to mount, but this time there won’t be the same spending headroom to respond to it. The political debate currently underway in Scotland about raising income tax is therefore a harbinger of the future for the rest of the UK.

Fiscal constraints will also force the left to take seriously the agenda of economic reform opened up under the ungainly title of “pre-distribution”. Without an account of how to generate and share prosperity more equitably within the market economy, social democracy is purposeless. But it will need a far more robust and plausible political strategy for achieving these ambitions than anything that has been on offer hitherto. Technological change will not usher in a new economy of its own accord, and without the solid base of an organised working class to ground its politics, the left needs to be open to a wide set of alliances with businesses, big and small. Combining economic radicalism with credibility and popular appeal, particularly to voters who still blame it for the financial crisis, is the hardest challenge the left faces, but there is no getting away from it.

On a note of optimism, the left is currently strong in cities, from which it can build out. Diversity is a strength in major urban centres, not a weakness, and powerful city leaders endow progressive politics with governing authority. Cities are the places where new social movements are most active and much of the energy of contemporary politics can be found, even if elections are fought on wider terrain. The task is to combine a propensity to decentralise and devolve with clear national political direction. The same holds with party reform: the mass political parties of the 20th century are dead, but networks can’t fight elections, so combining openness and democratic engagement, with discipline and national purpose, is vital. 

Nick Pearce is the director of the Institute for Public Policy Research.