Is Rachel Reeves serious about tackling tax abuse?

This week, Rachel Reeves, in her role as Labour's Shadow Chancellor, suddenly discovered that she had an enthusiasm for closing the tax gap that she had not previously declared. The tax gap is the difference between the amount of tax that HM Revenue & Customs (HMRC) should be paid in the UK each year if the law was complied with and the actual sum that is settled.

Reeves's newfound interest in this issue has risen because Jeremy Hunt stole some of Labour’s tax-raising ideas in his March 2023 budget, leaving Rachael Reeves with a supposed funding gap to explain when it came to her spending commitments.

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Desperate to plug the missing £5 billion number in her spreadsheet, she resorted to the time-worn trick of almost all Chancellors over the last 15 years or so and declared that she will crack down on tax abuse to provide the funds that she needs.

The first glaringly question obvious question to be asked of Reeves is why, if she now realises by spending an additional £550 million on HMRC she can raise £5 billion of extra tax, she had not already planned to do so? Did it really require Jeremey Hunt to spur her into action? If so, why?

I am left with the overwhelming impression that she was indifferent to tax abuse until Hunt forced her into being so, and that troubles me. She should always have had this concern.

My concerns have, however, only grown over the last day or so because alongside her announcement of this plan, Reeves also disclosed her intention to appoint an advisory board on taxation matters made up of four people.

I know three of them, which is why I have concerns about their suitability for this task.

Margaret Hodge MP

Her first choice is Margaret Hodge MP (above), with whom I cooperated on tax justice issues at one time, not least playing when I played a major part in helping her expose the activities of Google, Amazon and Starbucks more than a decade ago.

The trouble is that what I learned of her then suggests that she is not up to the task Reeves is asking her to undertake now. Firstly, she did not then and, as far as I can see, does not now know anything very much at all about tax. That is not helpful when it comes to this role.

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Second, when I pointed out to her at the time that she was taking on multinational corporations that the real problem with uncollected tax within the UK did not relate to the affairs of those companies, or even to the wealthy using offshore tax havens, but actually mainly arose because of the tax unpaid by small businesses, she dismissed my concern, saying that any action to collect tax from small companies was politically impossible.

If she still has that attitude now, and that would not surprise me, then the chance is that the advisory panel of which she is now a member will not help Rachael Reeves recover any of the tax Reeves is hoping to find, because most of the lost money is still being hidden away by the UK's small business community.

Bill Dodwell

Another member of this panel is Bill Dodwell (above). Bill is a charming man who knows a great deal about tax. He was also a former tax partner and head of tax policy for Deloitte, one of the Big Four firms of accountants.

Like all of those firms, Deloitte's track record in tax was far from unblemished.

Sir Edward Troup

The last of this triumvirate is Sir Edward Troup (below) , a former boss of HMRC who, prior to joining the civil service, was a solicitor for a firm in the City of London that was engaged in supplying tax advice to large corporations. He was also a special advisor to Ken Clarke when he was Chancellor of the Exchequer from 1995 to 1997. Neither of those career episodes appears to make him an obvious candidate to advise Rachael Reeves, but my concerns go deeper than that.

In 1997, Troup wrote an article in the Financial Times that suggested that he thought that tax was extortion by the state. That hardly shows an enlightened attitude towards either the state or the positive role of taxation in society and the good that both might do.

In addition, in 2004, he told the Treasury Committee at the House of Commons that he was not too concerned about tax abuse by small businesses in the UK because the money they did not pay still remained in the economy, and maybe that was no bad thing.

It was hardly the comment that I would have expected from somebody who, little more than a decade later, was to become the boss of HMRC, and who now, another decade on, is advising the Shadow Chancellor on how to close the tax gap.

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So, to go back to James Baldwin and his instruction that we should not believe what someone says, but that we should look at what they do, is it really the case that Rachael Reeves is serious about tackling tax abuse?

Or has she, by choosing advisors on this issue people who appear remarkably poorly qualified for the task given their previous occupations or comments, sent out the very clear message that she might have filled the hole in her spreadsheet for the time being but that she has no real intention of tackling tax abuse in the UK?

I will watch what she does, but I am not optimistic. Labour seems to be in the habit of making policy claims that do not stack, and this looks like another one of them.