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

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How austere will Philip Hammond be?

The Chancellor must choose between softening or abandoning George Osborne's approach in his Autumn Statement. 

After becoming Chancellor, Philip Hammond was swift to confirm that George Osborne's budget surplus target would be abandoned. The move was hailed by some as the beginning of a new era of fiscal policy - but it was more modest than it appeared. Rather than a statement of principle, the abandonment of the 2019-20 target was merely an acceptance of reality. In the absence of additional spending cuts or tax rises, it would inevitably be missed (as Osborne himself recognised following the EU referendum). The decision did not represent, as some suggested, "the end of austerity".

Ahead of his first Autumn Statement on 23 November, the defining choice facing Hammond is whether to make a more radical break. As a new Resolution Foundation report notes, the Chancellor could either delay the surplus target (the conservative option) or embrace an alternative goal. Were he to seek a current budget suplus, rather than an overall one (as Labour pledged at the last general election), Hammond would avoid the need for further austerity and give himself up to £17bn of headroom. This would allow him to borrow for investment and to provide support for the "just managing" families (as Theresa May calls them) who will be squeezed by the continuing benefits freeze.

Alternatively, should Hammond merely delay Osborne's surplus target by a year (to 2020-21), he would be forced to impose an additional £9bn of tax rises or spending cuts. Were he to reject any further fiscal tightening, a surplus would not be achieved until 2023-24 - too late to be politically relevant. 

The most logical option, as the Resolution Foundation concludes, is for Hammond to target a current surplus. But since entering office, both he and May have emphasised their continuing commitment to fiscal conservatism ("He talks about austerity – I call it living within our means," the latter told Jeremy Corbyn at her first PMQs). For Hammond to abandon the goal of the UK's first budget surplus since 2001-02 would be a defining moment. 

George Eaton is political editor of the New Statesman.