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What the NAO was actually criticising

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20th Jul 2011
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The headline read NAO criticises HMRC tax deals, suggesting that they were not impressed with some of the settlements reached with large corporate bodies in the last year or two, explains Simon Sweetman.

Well, up to a point.

The NAO can have had no idea whether the settlements were technically reasonable. What they actually criticised was that in three cases one of the Commissioners who signed off the deal had also been part of the negotiating team, saying:

“This reduced the demonstrable assurance to taxpayers and Parliament that the settlements reached were appropriate…To give confidence to external and internal stakeholders, however, HMRC needs to ensure that, for all major tax disputes, there is a demonstrable separation between those responsible for negotiating the settlements and those responsible for approving them.”

Given some of the current examples of conduct in public life we are seeing at the moment, this is a very minor swipe. But it does illustrate something that seems to me very important.

The Civil Service is essentially a Victorian invention, and part of the Victorian project was to clean up the swamp of corruption that was British public life by reforming the armed and civil services. Now it might well not have occurred to your average 18th century public servant that he was corrupt, because all that he did was what everyone else was doing and in any case he was British so his moral standards must be beyond reproach. Some – Clive of India or Warren Hastings for instance – became extremely rich, others merely prospered and built themselves grand mansions.

It is greatly to the Victorians’ credit that it did not seem to them that being British was enough, even though they took seriously Cecil Rhodes’ notion that to be born English was to have won first prize in the lottery of life. That, they believed, carried responsibilities with it that extended beyond the right to get completely pissed in any foreign capital. As far as the Civil Service was concerned that meant entry by competitive examination, and while this did not exactly extend entrance to all and sundry, it did mean the end of nepotism in the public service. They then set up systems of checks to ensure that people did not behave corruptly. Those systems worked to the extent that a fellow worker of mine in the 1960s was severely told off by his District Inspector for accepting a pencil with an accountant’s name on it. The point is that strong systems mean that it is never worth falling for temptation. As an Inspector of Taxes, how much would you need to offset the risk of losing your job and your pension?

But for systems to work it is important that those who monitor them do not get complacent, and the recent history of this country is full of examples from the West Midlands Serious Crime Squad to MPs’ expenses to the habits of the News of the World. These do not require that everyone is wicked: they merely require that everyone becomes slack and self-satisfied, so £12,000 for five weeks in a health spa seems like nothing to worry about.

I worked too with an Inspector who later went to prison. He had gone to a branch of enforcement who were told in essence to get tax in and not bother too much about the niceties, and with the controls off, things went to the bad. Cutting out those controls in the name of reducing bureaucracy is the road to corruption.

What is being revealed at the moment and recently is corruption in Parliament, in the press, in the Crown Prosecution Service and in the police force – I do not think the word is too strong. In that context it is right that the NAO should issue a warning about the level of settlements, and for HMRC and their masters to take that warning seriously, even though nothing may have been done that could not be justified.

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