Letters set out constitutional clash over MPs’ attempt to hold officials to account

By David Hencke | 9 March 2012

Revealed: Whitehall declares war on ParliamentWhitehall mandarins have declared war on MPs in a constitutional stand-off over Parliament’s efforts to hold civil servants to account.

Exaro has seen an extraordinary exchange of letters in which MPs on the House of Commons public accounts committee – and its chairwoman, Margaret Hodge – are accused of publicly humiliating civil servants who appear at hearings before it.

Hodge is set to unveil details of the correspondence in a speech due to be given next Thursday at Policy Exchange, the centre-right think-tank.

The blistering row began when Sir Gus (now Lord) O’Donnell, in his last days as cabinet secretary and head of the UK’s civil service, wrote to Hodge in December to say that civil servants should not be accountable to Parliament.

O’Donnell, who became a member of the House of Lords in January, is understood to have discussed the issue with permanent secretaries before writing, in effect, on their behalf to tell Hodge that civil servants are accountable to ministers, and not to MPs.

However, Hodge replied to O’Donnell by robustly rejecting this.

Hodge is understood to have cross-party support from the committee, resulting in an unprecedented stand-off between Whitehall and Parliament. Ministers may be forced to intervene to try to resolve the matter.

O’Donnell told Exaro: “We already have a constitutional position that civil servants are responsible to ministers, not Parliament. It is in the code of conduct for civil servants. Margaret Hodge is entitled to her views, and we can debate it.”

In his letter to Hodge, O’Donnell accused Parliament’s most powerful committee of using hearings as a “theatrical exercise in public humiliation”, adding, “praise certainly can be a more effective tool for change than blame.”

“There is now a serious issue about the way you are perceived by the wider civil service, but most especially in the legal community.”

Hodge is also understood to have been given a dossier of anonymous, highly critical comments from civil servants and government lawyers who object to her committee’s conduct. The dossier was handed to her at a conference organised by the Institute for Government, a think-tank that advises senior civil servants.

On Thursday, she is also expected to complain about anonymous briefings by senior civil servants against her committee, in a move that will highlight the heat between Whitehall and Parliament over the constitutional clash.

The row was triggered by the committee’s scrutiny of the decision by HM Revenue & Customs (HMRC), to forgive Goldman Sachs, the investment bank, from having to pay up to £10 million in tax.

Senior civil servants across Whitehall were livid about the committee’s grilling of Anthony Inglese, HMRC’s general counsel, forcing him under oath to disclose his legal advice on the tax deal.

O’Donnell strongly objected to the hearing and to Hodge’s belief that civil servants are accountable to Parliament. In his letter to her, he said: “I disagree strongly with this as a general principle.”

He argued that only accounting officers – departmental permanent secretaries and quango chief executives – were directly accountable to Parliament, and even then on limited areas of responsibility. “No court would permit the style of questioning adopted by the committee.”

Legal officers felt that their legal professional privilege to give advice in private was compromised by the committee, he wrote.

Hodge responded by writing that MPs needed to question HMRC in detail about £25 billion of unresolved tax disputes with big companies and banks.

She warned that Whitehall could be accused of trying to hide matters from MPs and the public if it took O’Donnell’s “outdated and defensive” view.

She also defended forcing Inglese to swear on the Bible as the only way for the committee to scrutinise properly the Goldman Sachs decision. She was more worried why O’Donnell could not see the circumstances that led MPs to take such a rare step.

Hodge told Exaro: “Accountability by civil servants to MPs is a major constitutional issue between Whitehall and Parliament. I would agree that Whitehall seems to have declared war on Parliament.”

The row is set to be fuelled by the committee’s plans to examine contracts that allow senior civil servants to minimise their tax, following Exaro’s exposure of the deal for Ed Lester, chief executive of the Student Loans Company. Under his contract, Lester was paid through a personal-service company rather than as an employee.

Exaro later revealed e-mails, obtained under the Freedom of Information Act (FOIA), showing how O’Donnell, when he was cabinet secretary, was aware of Lester’s arrangements. Other documents, also disclosed to Exaro under FOIA, showed why O’Donnell approved Lester’s contract.

O’Donnell has, ironically, launched a public attack on FOIA, for example, saying that the act should be overhauled to prevent civil servants’ advice becoming public.

He told Exaro: “I am in favour of complete transparency, but we shall not get complete transparency if civil servants feel that their advice is being given in a public document. They simply will not write the document and you will not be able to get it.”

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