The Supreme Court has today (19 October 2016) issued a judgement criticising the conduct of Dave Hartnett, the former Permanent Secretary in charge of Her Majesty’s Revenue and Customs (HMRC), for remarks he made about Patrick McKenna, founder of the Ingenious Media Group, in an interview in The Times in June 2012.
“Scams for scumbags”
Dave Hartnett, a controversial figure himself, was not named in The Times’ article and was referred to only as a “senior tax official” but he was reported as saying:
“‘He (Patrick McKenna)’s never left my radar. He’s an urbane man, …, he’s a clever guy, he’s made a fortune, he’s a banker, but actually he’s a big risk for us so we would like to recover lots of the tax relief he’s generated for himself and other people. Are we winning? I would say, beginning to. I think we’ll clean up on film schemes over the next few years.’”
The Ingenious Media Group has been a well-known promoter of arrangements involving the film and entertainment industries that were designed to deliver tax savings and deferral mechanisms to participants. A number of these are still being litigated. The Court heard that Dave Hartnett had described such arrangements as “scams for scumbags” although The Times did not choose to report that particular remark.
The main issue for the Court to decide in this case was whether Mr Hartnett had breached taxpayer confidentiality by naming Mr McKenna and discussing his confidential affairs with The Times, and also whether such a breach was justified on a number of grounds.
Off the record…
The Court was unimpressed by argument on Dave Hartnett’s behalf that the breach was justified because he believed that the discussion with The Times’ journalists would help to explain HMRC’s views on film schemes and tax avoidance generally, and might possibly result in him obtaining information on tax avoidance arrangements not previously known to HMRC. Furthermore, the fact that Mr Hartnett had stated at the outset that the interview would be “utterly off the record” did not alter the simple fact that the duty of confidentiality had been breached by disclosure of confidential information to the journalists.
Selective memory?
It is, and clearly should be, alarming if the Permanent Secretary in charge of HMRC is unaware of the nature and extent of his and his department’s duties of confidentiality to taxpayers, especially when, as the Supreme Court pointed out, section 19 of the Commissioners for Revenue and Customs Act 2005 makes it a criminal offence to contravene the rules. However, it appears that Mr Hartnett’s interpretation of his duties in this respect was selective; reference was made by the Court to Mr Hartnett’s appearance before the Public Accounts Committee during which he refused to answer the committee’s questions regarding alleged “sweetheart” deals with major corporations such as Goldman Sachs on the grounds of taxpayer confidentiality. It appears that Mr Hartnett was perfectly able to remember his obligations when it suited him.
Dave Hartnett’s controversial career
Dave Hartnett’s long career with HMRC attracted more than its fair share of controversy. In June 2010, according to a survey by City University, Mr Hartnett was the nation’s “most wined and dined civil servant”. The Telegraph reported that he was entertained 107 times between 2007 and 2009, mostly at breakfasts, lunches and dinners, by some of the UK’s biggest banks, law firms and accountancy firms, including Goldman Sachs, JP Morgan, Ernst & Young, KPMG, PriceWaterhouse Coopers, and Deloitte.
Sweetheart deals
This fact may not be entirely unconnected with the “sweetheart” deals with major companies, particularly Goldman Sachs, for which he was criticised, originally in articles in Private Eye, leading eventually to an uncomfortable inquisition by the Public Accounts Committee, as mentioned in the judgement. Following his retirement as a civil servant in June 2012, he accepted an appointment as a consultant with Deloitte, the accountancy firm which represented some of the very companies with which the so-called “sweetheart deals” were negotiated.
Time to hear from HMRC?
I wonder if we can expect any comment from HMRC on this important case? I think we can almost certainly assume that prosecuting Dave Hartnett under section 19 of the Commissioners for Revenue and Customs Act will not be considered to be in the public interest. Yet confidence in HMRC’s attitude towards its duty of confidentiality to taxpayers is sure to be undermined, not only by the outcome of this case, but by the way that HMRC has sought unsuccessfully to justify Dave Hartnett’s actions.
It is important to all citizens that they can trust implicitly that public bodies will abide by the laws they are entrusted to administer and that they can be expected to be treated with courtesy and respect, neither of which were afforded by Mr Hartnett to Mr McKenna. However, what is most important about this case is not so much Dave Hartnett’s unacceptable indiscretions as what it reveals about the culture and attitudes now prevailing within HMRC, and, unfortunately, within Government in general. At least we can be thankful that the Supreme Court has the good sense to curb its worst excesses.