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HMRC’s Paul Gray never resigned, Cruickshank did

18th Jan 2008
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After news of the data loss scandal broke, there was a joke was doing the rounds at HMRC about Paul Gray.

“Paul Gray didn’t resign,” it went. “He was pensioned off due to ill-health. He had two slipped discs.”

Boom boom, as Basil Brush would add. But the joke came far closer to the truth than any journalist did. Paul Gray, for those of you with short or just very selective memories, was chief executive of HMRC, who resigned when the missing CDs were formally announced. The action was lauded as a rare example of professional honour in an age where most politicians and senior civil servants carry on regardless. But is that what really happened? On closer inspection, it appears that Gray never really resigned at all.

The devil is in the detail

The Paul Gray story is a classic example of modern media manipulation: never lie, but lead the press and the opposition to make a desired assumption, and then fail to correct it. Famously, this was what the government did with the 45 minute claim in the “dodgy dossier.” If the Sun took it to mean that Saddam’s Iraq could drop anthrax warheads on Cyprus with less than an hour’s notice, then so be it. It was untrue, and the government knew it was untrue, but it was politically convenient, so they let it lie. This is exactly what happened with Paul Gray. Here’s how they did it.

First off, Gray’s so-called “resignation” letter doesn’t actually have the word resignation anywhere in it. He refers to his “standing down as chairman” and his “departure”, and that is all.

“I am announcing today I will be standing down,” opens the letter. But when will he be standing down? The absence of any actual date surrounding Gray’s departure is significant, so bear this in mind.

“I am extremely sorry that you may have learned about this first from the media,” Gray apologises. This is rather disingenuous, for a number of reasons. Firstly, Cerberus has been unable to find any media reports of Gray’s resignation that predate Darling’s speech in parliament. Secondly, given that Gray and Darling had been having private discussions in the long weeks prior to making the data loss public, a likely topic of conversation would be how to spin the story to minimise political damage. The media had to know first because it was the media that had to make the assumption. Darling, Gray et al couldn’t say that Gray had actually resigned, because he hadn’t.

In his letter Gray also says that he will “provide further details after the parliamentary statement.” But he failed to do so.

So that’s Gray, what about the Chancellor? An examination of Hansard shows that Darling never said that Gray had resigned at all, only that he accepted responsibility.

“Last week Paul Gray told me on his own initiative that given the seriousness of the operational failing he should resign,” was what the Chancellor actually said. “He has now confirmed that intention, and I am grateful to him.”

Confirming your intention to resign, it must be pointed out, is not the same as resigning. At no point that day did Darling or Gray announce that the HMRC chief exec had actually resigned. Vince Cable, the Lib Dem shadow chancellor, was the first to respond to Darling’s speech, and he bought into the noble image of the honourable civil servant falling on his sword hook, line and sinker.

“Paul Gray has now resigned as a matter of honour,” Cable said, as if Gray had already gone. In reality, Gray was clinging on in the shadows, waiting until he could take early retirement at the end of the year.

Non-immediate effect

Less than a fortnight later, Gray turned up in Whitehall working on a “special project” on “cross-governmental matters” for Sir Gus O’Donnell.

“Paul Gray resigned with immediate effect on November 20,” the cabinet office finally announced in early December, which was more than HMRC or the Chancellor ever did. But the letter Gray drafted on that date, as we have seen, said no such thing.

“For contractual reasons he remains a senior civil servant,” the cabinet office then added, contradicting itself somewhat. “When he resigned, his period of notice meant he would be paid until the end of the year. As a result, he could receive payment for no work, or receive payment for doing some work. It was thought to be better in the public interest that he did some work. There is no additional cost. He will leave the payroll on 31 December.”

According to Charles Ramsden, secretary to the cabinet office’s very own Committee on Standards in Public Life, this is a very unusual state of affairs.

“You could resign and then be re-employed, or you could not resign and then switch departments,” he told Cerberus. “But if you resign, then the normal rule is that once you have resigned, until such time as you pop up in another government department, you are not a civil servant. It’s not like being a lawyer, whereby if you leave your firm you can still be a solicitor. The civil service doesn’t have a corporate existence in that way.”

So what was Gray really doing at the cabinet office, if he had left “with immediate effect” in November? If he was working out his notice, there is little evidence of his labours. Cerberus spoke to the cabinet office and found that there had never been any listing for Paul Gray in its internal telephone directory, and neither did its HR department have any records of him.

In December, a cabinet office spokesperson let slip that Gray was not only still on full pay, but that he would collect his full pension (a not inconsiderable sum of £1.7 million) and that severance terms were still being negotiated.

Severance is of course most commonly given to those who have retired or been sacked. In some instances, it’s true, severance packages are given to those who resign regardless of circumstances. But in such instances, why would it ever need to be negotiated? How could negotiation even be possible? What, exactly, does a man who has already quit have to bargain with?

In effect, rather than resigning as a point of honour, Gray stayed on and managed to bag a very successful early retirement. Unable or unwilling to shift him, it looks like the cabinet office position was little more than the government’s attempt to justify why Gray was still around.

When Cerberus spoke to HMRC, a press officer confirmed the truth: Gray retired, he did not resign. But the Revenue has still made no formal announcement on the matter. What’s more, there have been no departmental board minutes posted on the HMRC website since August last year, and no executive committee minutes since June. At board level, the department has been on a general media lock-down since the summer (something that looks set to continue).

In part it may be a political reward for his timely illusion of civic honour; in part it may be that Gray knows the real and more damaging truth about the story of the missing discs, but Gray will not have to worry about his future. Compare that with the exit of Stuart Cruikshank.

Room at the top

When it comes to HMRC, the one thing everybody agrees about is that relentless budget cuts and office closures have left it with real performance issues. The one person you’d expect to know more about these cuts than any other was the chief financial officer. Nobody knows why, but CFO Stuart Cruickshank quit suddenly last week.

The HMRC website still lists him as chief finance officer. His department said he left to pursue other career interests, but as far as we know he had no job lined up. At the Treasury, on the other hand, Jane Kennedy, said he left because of the data loss scandal, but did not elaborate. HMRC said he had simply come to the end of his fixed-term contract, which sounds a bit fishy considering the Revenue made no mention of this contract when Cruikshank joined in December 2006. Fifteen months is rather odd length for a contract anyway, especially given the timing of his departure.

Perhaps he left because he was pushed, or perhaps it was some point of principle. Perhaps it was because it was somebody in Cruikshank’s department who told the NAO that they would receive the full, and not the amended, child benefit database. But that’s what a real resignation looks like: abrupt and chaotic and definitive. Maybe Cruikshank managed to negotiate his own, more secretive, golden goodbye. We will find out.

All in all, it’s no wonder that Kieran Poynter reckons HMRC staff are “disconnected” with bosses. Things have been changing so fast amongst the top brass they might as well stick a revolving door on the boardroom.

Dave Hartnett is still technically only acting chairman, there’s only an acting chief executive (business), and there’s no chief financial officer. Meanwhile the Revenue’s chief people officer, Robin Roberts from Egon Zehdner, is an interim on a six month contract, and a chunk of that will be spent finding a permanent successor. The chief information officer, Steve Lamey, the person most would consider primarily responsible for data security issues, has instead been promoted to chief operating officer. Lamey was hired on a four year contract in October 2004, so unless his terms and conditions have been renewed he could be out in nine months too.

Personally, the only solution that occurs to Cerberus is to pay everyone at HMRC more money. But that’s just what a monstrous three-headed dog with a snake for tail would probably say.

The howls of Cerberus:

Deckchair Re-Arrangement Squad, RMS Titanic: the Northern Rock non-execs
Paymaster General wanted: must know about money laundering
Sir John Bourn to write Good Hotel Guide?


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Replies (11)

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By User deleted
12th Feb 2008 04:53

Is there really no cost to the data loss? ...
Surely there are fines applicable to breaches of Data Protection?

One would assume that the loss of 26m records is a breach of DP and therefore would trigger fines.

If these fines are in the order of £50-£300 per record then there may well be a cost involved - even taking say £50 for 26m records this is a substantial sum by any reckoning

Accountability would seem to be an issue and since we have had an 'admission' by the person in charge can we look forward to him contributing to the extent of his worth ?

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By AnonymousUser
18th Jan 2008 17:29

There was no incorrect assumption in the dodgy dossier issue: the Government did actually lie.

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By camcca
19th Jan 2008 13:13

Mr Murphy - I'll tell you what I want what I really really want
I can't believe Richard Murphy's comment.

He always gives the impression of a "goody two shoes" uttering pronouncements on how the tax system must be fair and a model of economic perfection. But, when it transpires that the public have been sold a pup and the Government spin machine has been operating at full throttle to cover up what really happened, his answer is "What do you want?"

I'll tell you what I want:

1) A little less cant from Mr Murphy. In fact a lot less - has he thought about standing down - a la Paul Gray? He could always describe this as sick leave, we would all understand.

2) Stop this non stop spinning. Basically the story that has been planted in the public mind is that Mr Gray fell on his sword and took responsibilityb for the data loss scandal when the powers that be knew this not to be the case. A blatantly untrue story has been implanted without correction. At the very least that is duplicitous.

3) I want openness, honesty and integrity in public life

That;'s what I want Mr Murphy. Presumably as a chartered accountant you will understand these terms.

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By carnmores
18th Jan 2008 18:36

so 2 wrongs make a right

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By User deleted
18th Jan 2008 18:34

Cruickshank did have a fixed term contract
...but it was a three-year contract commencing on 18 December 2006 per HM Revenue & Customs 2006–07 Accounts (page 21).

The accounts go on to say he and another Director General "have standard notice periods of three months from the employee and five weeks from the employer. No provision for compensation payments or other arrangements have been made in their contracts in the event of early termination of the contract."

So Cerberus not perfect on the facts, not that makes too much of a difference on what is said. Will be interesting to see what compensation he gets in the HMRC 2007-08 A/Cs.

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Richard Murphy
By Richard Murphy
21st Jan 2008 13:35

Raise your game
William has got hot under the collar. Quite inappropriately, I think.

My question was not aimed at exonerating HMRC. I am frequently a critic of that organisation. In case William has not noticed, my recent submission on income splitting says that its proposals are not well enough thought through. I have also criticised it on domicile, for selling its property portfolio offshore and numerous other acts. I am certainly no stooge for HMRC.

Nor do I have any love of misinformation. I do ;ittle else but argue for openness, honesty and integrity in public life. Unlike others though I ask for4 a level playing field and ask the same of the commercial sector as well.

With that in mind, I think this story is a 'non-event' at best, and is more of a spin than anything HMRC did. As such it brings no credit on this site, or accountants who take succour from it.

As a matter of fact Paul Gray ceased to be HMRC Chairman. He does not say he was sacked. Nor does anyone else. So he must have resigned since his term of office had not ended. The claim he resigned is, therefore, correct. The evidence supports it.

His resignation would however have triggered a notice period. That's what employment contracts do. Of course the government could have put him on gardening leave. They did not, or so it would appear. He worked for another part of the civil service, a hardly uncommon occurrence. As such they sought to get best value for money. I applaud that. When his notice period ended he retired, as no doubt given his age he was entitled to do.

Nothing, and by that I mean not one element of that story justified the style of reporting used here, which is nothing but a cheap and unsubstantiated jibe at HM Revenue & Customs. I'm not interested in such jibes. I'm interested in constructive criticism.

So my comment, cryptic as it was, was justified. Paul Gray got no special treatment, he did resign, he got no compensation and when the government had extracted value from his contract he was allowed to move into retirement as was no doubt his right. I drew deliberate contrast with the private sector, where failure always seems to be heavily rewarded. My comment of 'what do you want' was a follow on to that asking if that would have been the preferred option of the unnamed writer of this story.

In the circumstances I think my comment reasonable, reasoned and appropriate. And whilst accountants seem only capable of expressing unreasoned comment and bias I will happily draw attention to that fact. If it annoys William I have one comment:: raise your game.

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By User deleted
22nd Jan 2008 10:56

Game raised
Richard, Cerberus feels compelled to offer the following:

Cerberus has remained in contact with the Cabinet Office, and a spokesperson there has confirmed that as Grey was 59 when he left the payroll, he was offered early retirement. This is not something he would have been automatically entitled to. And that Gray (and HMRC, and the Cabinet office) felt he was entitled to it sits ill at ease with the idea that he genuinely and sincerely holds himself personally responsible for Britain's biggest ever data loss scandal.

The Cabinet Office maintains that Gray worked his notice and not a day beyond it. If Gray resigned on 20th November and left the payroll on 31st December he had a notice period of 41 days. This atypical time span casts serious doubts over that claim. By its own admission, the Cabinet Office was still negotiating Gray's severance as of 22nd November. Then on the 3rd December Channel Four broke the news that Gray was working for Sir Gus O'Donnell and all of a sudden the Cabinet Office were certain that Gray would be going at the end of the year no matter what. Strange how Channel Four breaking that story – or non-story, as you would have it – seemed to resolve negotiations so swiftly.

While Gray plainly ceased to be chairman as of 20th November, he obviously remained in employment. The assertion that Gray triggered a notice period on the 20th does not ring true. It seems more likely that the date of Gray's departure was dictated largely by external circumstances. If you really wanted to resign with immediate effect, and your employer no longer wanted you to work for them (plainly the case), why would there be a notice period anyway?

So Cerberus believes you are in the wrong to assert that "when his notice period ended he retired, as no doubt given his age he was entitled to do." Gray had no notice period to speak of, and his early retirement was a negotiated deal, not an entitlement. By all means keep the stuff about "cheap and unsubstantiated jibes" if you want.

Despite Darling’s promises that the Poynter and the Hannigan reports would be completed in the spring, it now appears they will be delayed until after the local elections in May. Cerberus is aware you never thought the data loss was much of a story at all, Richard, but you must concede the government’s handling of it has been dishonest. In fact, the truth has been so deeply hidden it will, eventually, have to come out – as long as we all keep asking questions.

Thanks to all who have commented so far, particularly the individual who pointed out Steve Lamey and Stuart Cruickshank were both on three year contracts.

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By User deleted
22nd Jan 2008 21:29

My motivation is this
Cerberus is a duplicitous sod who has no intention of revealing his identity, but he has resigned enough times to know what it looks like if you are truly serious about carrying the can.

Sadly, you are correct on one point. It would appear that Gray’s departure really is par for the course these days. As for the cost of the missing discs, it clearly cost him nothing (and what purpose did it serve, other than to take the heat off Alistair Darling?). But there is a hidden cost to this matter, although it only seems to be hidden to you.

There is no evidence that the missing data has been used for fraudulent purposes (you are again correct in this). In terms of costs, I suppose there has been the Poynter review, the Hannigan review, the cost of the search, the costs incurred by the police, the man-hours spent “minding” the “junior official” in his “safe house”, and the mail-out. Perhaps there are a few other items, but fingers crossed, that is all. We have been very lucky. But it should not have been a matter of luck.

The Ministry of Defence lost a laptop this week with the records of 600,000 individuals on it; individuals who had been or were considering a career in the armed forces. Many of them will already be serving. In previous decades, obtaining this information would have been a hard job for a foreign intelligence agency. Now you can pick it up from a car park. It’s just as well the Good Friday Agreement is still holding water, or there would be a lot of worried families in Northern Ireland right now.

The government has for a very long time failed to provide adequate data security for its citizens, across several departments, and has conspired to obfuscate the fact. To you this would simply appear to be a form of incompetence that doesn’t matter, and ergo the dishonesty surrounding it doesn’t matter either. And Gray's departure is only one part of that. If you cannot concede that, even as a general point, then we are destined to disagree.

Cerberus believes you to be a person with strong moral views, and so finds it surprising that you cannot – at least publicly - accept any of this. As innocent as you believe HMRC to be, you cannot defend them without also defending by proxy the actions of the Cabinet Office and the Chancellor. It may be your personal loyalties to Gray have left you in an awkward position.

However, Cerberus accepts that your (much learned and well researched) writing output on the injustice of tax havens far exceeds his own. As far as he can determine, this is a stigma he shares with the rest of the English-speaking world.

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Richard Murphy
By Richard Murphy
22nd Jan 2008 16:58

If you are so committed to transparency yourself.

As for what you have written - so what?

Have you lived in the real world? A departure was negotiated after a resignation was announced. That's 100% normal. There is no story here. You are clutching at straws to spin a story that does not exist - all to try to prove that HM Revenue & Customs spun a story. It's not a credible line of argument. So I withdraw not one word of what I wrote.

As for the data loss - apart from the cost of looking for the discs and mailing people to say sorry (which would seem appropriate) is there any evidence that as yet one single penny has been lost? If that's the case, why pursue the matter? What's your motive?

Why not tackle something real - like the abuse of tax havens - which the Treasury does allow, and about which I argue with it regularly.

Richard Murphy

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Richard Murphy
By Richard Murphy
23rd Jan 2008 12:46

I think you are confused.

I never met Paul Gray. I have no idea if he knows who I am. I have no loyalty to him. My comments sought to be objective. I do happen to think the story of Paul Gray's resignation as told here is a complete non-event. I do happen to think the 25 million data discs probably had little on them that could cause harm, even of there was a lot of alarm.

That does not make me a poodle for HMRC or the Treasury. I criticise both. Let's talk small business tax, domicile, tax havens, the tax gap and on and on. I have a relationship of respect with both bodies. But I'm certainly very critical. I just seek to be constructive in that process and find it profoundly annoying that other accountants will not be so, relying on cheap jibes and dogma instead. It's that that is not good enough.

As for indifference for data concerns - again, far from it. But I continually wonder how much is because the private sector sold the government a pup. Mind you, taking the lowest bid is rarely the best way to get a good deal, so the government shares the blame.

Nut again - I make the point - please do some analysis when criticising. It would really help our profession to be seen as thought leaders, rather than just claim to be so.

Richard Murphy

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Richard Murphy
By Richard Murphy
18th Jan 2008 15:58

And what would the private sector have done?
Presumably have paid Paul Gray several million as well.

What do you want?

Richard Murphy

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