Montagu: still toughing it out at Revenue

The MPs concerned – those on the Treasury select committee – are fortunate in that they get two goes at Montagu. They rough him up when he gives evidence, and then, while the bruising is still fresh, they put the boot in by issuing a critical report that receives fresh coverage in the press.

Last week’s committee report did just that, and on three fronts. First, the MPs wanted to investigate the use of offshore tax structures.

This was really concerned with the Revenue and Customs & Excise’s decision to transfer 600 properties in a PFI deal to the Mapeley Group, a company registered in the offshore tax haven of Bermuda.

Then, MPs wanted to delve into the highly controversial implementation of tax credits.

The committee also wanted to review the very specific issue of national insurance contributions deficiency notices and the decision to stop using them.

All these issues were bound to attract attention and would inevitably end in criticism of the Revenue. Which indeed they did, but the committee also pointed the finger directly at Sir Nick.

‘Our report sets out a catalogue of significant administrative failures by the Revenue, which Treasury ministers must address as a matter of urgency.

It also raises serious questions about how the department has been led,’ wrote Michael Fallon, MP, chairman of the committee that carried out the inquiry.

The committee concluded that the Revenue ‘struggled’ with the problems brought about by the introduction of tax credits. The Revenue and ministers, the report says, should pursue a compensation claim against EDS, the IT contractor for the tax credit system. Cost generated as a result of the failures should not be borne by the public.

On the NICs notices, which were discontinued by the Revenue without informing the relevant minister, the committee said it was ‘astonished’ by the department’s behaviour.

Its statement called the episode a ‘further example in a growing list of communication failures’. The committee pointed out that, while the Revenue had not briefed the paymaster general Dawn Primarolo, civil servants at the Department of Social Services had continued to keep their ministers up-to-date on the issue.

On whether the tax haven status of bidders for government contracts will be taken into account, the committee simply said it was ‘dissatisfied by conflicting evidence’ given by Montagu and Primarolo.

That was not to be enough for some members of the committee. Soon after the report was published, David Ruffley, a committee member who had once been special adviser to former chancellor Kenneth Clarke, called for Primarolo to resign for her involvement in the national insurance contributions’ notices debacle.

A little over the top? It’s difficult to tell. Ruffley is a Tory and you would expect him to complain, but problems at the Revenue have lasted months with Sir Nick in the sights of those who sense they are close to winning a scalp.

Sir Nick, a civil service hard man, has toughed it out. At the moment he is ‘not doing press’ following the Treasury committee’s report. In the past, however, he has been willing to come out and defend his corner.

In May, when the first select committee report was released, it emerged that he had faced demands to step down. Sir Nick, however, was defiant.

Speaking exclusively to Accountancy Age on the Mapeley property deal, he said: ‘I won’t be resigning. There was no suggestion from ministers that I should resign. I have talked personally to the chancellor and have his full support.’

That is the key to the security of his position. While Gordon Brown stands steadfast behind Montagu, there will be little chance of his departure before his retirement date next year. MPs on select committees might huff and puff, but the chancellor’s men stay put until he says otherwise.

Montagu is well liked. He has that characteristic rarely found among the most high ranking of Whitehall mandarins – he is willing to come clean when things have gone wrong. In May’s interview, he called the Mapeley fiasco a ‘pure cock-up’.

But he has another feature that probably rankles with MPs. If he feels he, or his staff, have been unfairly treated, he will come out fighting.

Appearing before select committees, he is one of the few civil servants that does not recoil from the abrasive interrogation of MPs.

More intelligent than most of the people asking the questions, he can become combative and demonstrate real determination not to give way.

The Revenue is always likely to have problems, no doubt new ones will emerge long after Sir Nick has retired in 2004. As the nation’s tax collector, and now the means by which many people receive benefits, the Revenue will never be far from controversy. As a result, neither will its leaders.

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