Phillip Inman – Sorting out the rotten apples

The report by the National Audit Office into the Michael Allcock affair leaves a nasty taste in the mouth.

Most of the report centres on the inquiry by the Revenue into the conduct of Allcock’s colleagues in the Inland Revenue’s Special Compliance Office.

They accepted gifts and favours from taxpayers just like Allcock. They played along with his schemes, apparently never questioning whether the gambling chips and overseas trips they received compromised the Revenue. Then they withheld information from the department, the police and the courts about their activities.

The Revenue board also played along. After all, why query what Allcock was doing when he was bringing in millions of pounds in extra tax?

The parallels in the business world are legion. Two spectacular cases come to mind – Nick Leeson at Barings and Peter Young at Deutsche Morgan Grenfell.

In both cases an employee was allowed free reign to buy and sell what they liked and wine and dine who they liked because the figures looked good.

One chief similarity between these cases can be found in the treatment meted out to the employee by the directors – they were sacked. (The board directors escape any kind of censure in all three cases, but we’ll leave that to one side).

Yet there is noticeable difference in the treatment of other staff.

Many of the Barings managers not only lost their jobs when the bank crashed, but also their licence to operate in the City for several years and any bonuses they were due. At DMG, all those managers directly responsible for Young were sacked and banned from the City.

The NAO seems to think the demotion and one-off cuts in pay for the five tax inspectors who worked alongside Allcock shows the Revenue has put its house in order.

But the City regulators wouldn’t think so. They would have sacked them and then established a system of closer regulation.

To restore public confidence the government should follow this example and set up an independent committee to monitor the ethical arrangements across the Revenue. An ombudsman is not good enough.

In a period when tax inspectors are getting tougher, management priorities need to be scrutinised. The committee would make the workings of the Revenue more transparent. It could make a better job of restoring public confidence.

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