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A Short History of the Tax Avoidance Specialists Helping to Write Labour's Tax Policy

Controversial accountants PwC have given Labour £600,000 worth of "research help" to write tax policy. Here's their experience in helping the good governance of the UK.

(Photo by Simon Childs)

PwC (PricewaterhouseCoopers) are one of the world's biggest accountancy firms. They're specialists in minimising big corporate clients' tax bills and finding loopholes to exploit. Which makes it weird that yesterday's Guardian revealed that the Labour Party have accepted £600,000 worth of "research help" from PwC, amongst other things to help them write their tax policies. Labour describes the situation as "long standing support" and the staff "do not influence opposition policy decisions" – so no need to worry then. But not everyone trusts that PwC are helping write tax legislation for free, just because they're really nice, helpful guys. Margaret Hodge, chair of the Public Accounts Committee, described the practice as a "ridiculous conflic​t of interest".

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You might think that'd be enough for Labour not to take advice off them, but you'd be wrong. In fact, PwC's history is full of things that might make you think Labour should stone wall them completely. Here's a brief history of PwC's "long standing support" to British politics:

The nineties
In this decade PwC get in trouble several times for crappy but lucrative auditing. The best example comes in 1991 when the Bank of Credit and Commerce International (BCCI) is closed down. The bank was ​involved in *deep breath*: "support of terrorism, arms trafficking, and the sale of nuclear technologies; management of prostitution; the commission and facilitation of income tax evasion, smuggling and illegal immigration; illicit purchases of banks and real estate; and a panoply of financial crimes limited only by the imagination of its officers and customers". The liquidators, Deloitte, take the fallen bank's auditors to court - those auditors being Ernst & Young and… PwC (then called Price Waterhouse). The case is ​settled for $175 million.

2002: PwC are great friends to have
​ The Department for Work and Pensions asks PwC's consulting arm whether to hand over a portfolio of 1,00​0 pro​perties to the private sector in a Private Finance Initiative (PFI) deal worth £1.6 billion. PwC suggests that instead of going through the usual tedious bidding process the DWP should instead just hand the contract to Land Securities Trillium without any other bidders. By a strange coincidence, Trillium pays PwC to audit its accounts.

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2002: It's not their fault
​PwC changes th​e​ wording of its audit contracts, to make clear that if it signed off a company as in good health and the company subsequently collapsed, it would accept no legal responsibility for anyone owed money by the company. Considering the events of the coming years this was a real stroke of genius.

2003: They got rich fucking up the London Underground
​On their website you can see PwC's glowing ​report of their own suggestion to part-privatise the Tube. Their proposals for a Public Private Partnership (PPP), duly carried out, split the maintenance of the Tube into three companies. One of them, Metronet, collapsed just four years later – costing the taxpayer £410​ million. The whole PPP was a costly shambles from start to finish but it made some people an awful lot of money. Including PwC.

2004: The revolving door
​PwC  ​hire Nicholas Montagu, who had been chair of Inland Revenue for seven years. Obviously, as tax a company that advises companies how not to pay too much tax, hiring the top taxman in the land is pretty shrewd.

A run on a Northern Rock branch (Photo by  ​Dominic Alves)

2007: Remember the run on Northern Rock? Guess whose fault that was
​Parliament criticises PwC for giving a clean bill of health to a bank that may not in fact have been in tip-top condition – Northern Rock. The run on Northern Rock, the first in Britain for 150 years, was the first domino in what would become the biggest financial collapse since the Great Depression. Northern Rock's collapse required emergency borr​owing of £30 billion.

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The year before it went under, the bank had paid ​PwC £500,000 for auditing and £700,000 for non-audit fees, specifically "in respect of securitisation transactions and the raising of wholesale funding" – in other words PwC had helped create and later signed off on the very policies which ended up sinking the bank.

2008: They helped ruin Iceland
​The Icelandic economy blows up. Two banks – Glitnir and Landsbanki – sink, taking with them around £900 million of British taxpayers' money in investments from British councils. The auditor​ of both banks that didn't notice anything was up was PwC. In a lawsuit brought by US bond investors in relation to Glitnir, the c​laimants allege that the "defendants could not have succeeded in their conspiracy without the complicity of PwC".

2010: They get loads of money for marking their own homework
​The world economy is in turmoil, everyone's pissed off and the financial sector is a tabloid pariah. People demand restraints on the pay of city fat cats. In September, PwC reveals that it paid its partners an average of​ £759,000 for the last year.

In November, it emerges that the "big  four" – PwC and its main competitors – have not only been auditing government accounts, but also been paid as consultants to provide advice. The end result being that they are essentially being asked to sign off on their own recommendations. In just four months after the 2010 general election PwC was paid over £​22 million from the public purse. It was paid over a million pounds by the department for business for auditing services, yet had been paid by the very same department for consultancy and research. Which is kind of like asking school children to mark their own homework, and paying them exorbitant fees to do so.

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2012: Making money out of the crash that they helped create
In January ​PwC is fined £​1.4 million for signing off on JP Morgan books. They had confirmed that client money had been kept segregated from the bank's own money when in fact it hadn't – leaving £5 billion of client money at risk every day. This was a similar practice to what went on at Lehman Brothers, causing the crash which led to the more severe phase of the financial crisis.

​Fortunately for PwC, there's money to be made from the mess at Lehman Brothers and giving dodgy advise elsewhere doesn't stop them from getting at it. In April it is announced that PwC earn nearly £500 million ​in fees for winding down the European arm of the giant investment bank and dealing with its creditors.

April 2013: Cashing in on the NHS while helping their clients not to cough up
In April, a parliamentary committee reports on the seven tier, "​extraordinary structure" of subsidiaries and money flows setup by PwC for its client to avoid tax on six London properties they acquired for £670 million. Fielding questions from the committee for PwC was Kevin Nicholson – who used to work as a tax inspector at HMRC.

A month later, ​PwC hire Alan​ Milburn to oversee its healthcare portfolio. Alan Milburn was health secretary under Labour from 1999 to 2003 and has a wealth of Westminster contacts which should come in handy for PwC. They're doing well in the new market free-for-all that the Tories have imposed on the NHS, earning nearly a million pounds for advising six Clinical Commissioning Groups (CCGs) in London, and nearly £​3 million for running a probe into 14 NHS Trusts – four of which were paying PwC for auditing services. They also received nearly ha​lf a million pounds from one NHS trust for advising them on dealing with crippling PFI debts. That would be the same PFI sham that has cost the country hundreds of billions of pounds and is heavily promoted by… PwC. As the Mirror no​tes, since Cameron became Prime Minister the Conservatives have received £545,000 worth of non-cash donations from the firm – secondments, research, and so on.

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(Photo by  ​Nick Page)

2014: Helping bankers dodge tax. Helping the EU write tax rules
​In June, Richard Murphy estimates Barclays bank is avoiding u​p to £150 million in tax. Their accountants? PwC.

​In July, 32 civil society groups from across Europe write to the European Commission opposing its decision t​o hire PwC to do an impact assessment of introducing "country by country" tax reporting – a way of stopping large amounts of tax avoidance by changing the way multinational firms account for their profits. Despite its potential to substantially reduce tax avoidance and give huge amounts of extra revenues for schools and hospitals across Europe, PwC opposes it (as, I'm sure, do their multinational clients).

Lutfur Rahman, mayor of Tower Hamlets (Photo: Simon Childs)

Now they're the corruption police
In November 2014, ​a government commissioned PwC report says that Tower Hamlets council is "riddled with cronyism and corruption". Frankly, I can't think of anyone with more expertise in these areas. Communities secretary Eric Pickles sends in takeover squads to oversee mayor Lutfur Rahman's administration.

Last week the  Guardian reported on tho​usands of leaked documents showing PwC at the centre of what is alleged to be "tax avoidance on an industrial scale". Operated through Luxembourg – that bastion of tax propriety – PwC appear to have facilitated substantial savings to a host of multinational firms. How does this sort of scheme work? Essentially, companies lend themselves money across borders, via subsidiaries, and deduct their interest payments from their taxable profits – it's as simple as that. It costs treasuries around the world billions.

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And now, these guys are helping Labour write tax policy. All in all, the revolving door between state and the private sector, the widespread conflicts of interest, the repeated failures, the collusion with the financial shenanigans of the 2000s, an unflinching conviction that anything and everything must be privatised – PwC could have had no better preparation for life at the heart of British politics.

​@OllyHuitson

More UK politics:

​Boris Johnson and His Luxury Housing Lobbyist Bedfellows

​The Labour Party Conference Was a Playground for Corporate Lobbyists

​Who's Going to Get Rich Off Fracking the UK