MMO2 chief to head merged Revenue

Financial Times: MMO2 chief to head merged Revenue

By Christopher Adams Political Correspondent

May 14, 2004 

David Varney, chairman of MMO2, the mobile phone operator, became Whitehall’s biggest private sector catch yesterday when he was named as Gordon Brown’s choice to run the merged Revenue and Customs department.

*Mr Varney, 58, previously chief executive of BG and a former director of Shell, will take an 80 per cent pay cut when he leaves his lucrative FTSE 100 job. He begins his new role in September.

Business organisations and the accountancy profession welcomed the appointment and said having a single department would greatly simplify the payment of taxes and duties.

The chancellor described the MMO2 chairman, who was one of three private sector executives advising the Treasury on its plans to merge the departments, as “an outstanding business leader with a first-rate record proven across the private sector”.

Mr Varney, who received a £500,000 salary in the year to the end of March 2003 and £17,000 of additional benefits, is believed to have wanted to take on the challenge of the merger. As executive chairman of Her Majesty’s Revenue and Customs, as the new department is to be called, his salary will be between £100,000 and £150,000, less than that of Sir Andrew Turnbull, cabinet secretary and head of the civil service, and Gus O’Donnell, permanent secretary at the Treasury. Paul Gray, a senior official at the Deparment for Work and Pensions who brought together the old department for social security with employment, will be deputy chairman.

Ministers want strong leaders to supervise the planned merger to ensure it does not descend into chaos. Revenue and Customs officials could get distracted from their core task of collecting tax if the integration is badly implemented.

In a submission accompanying the Treasury’s strategy document for the proposed merger, published alongside the Budget, Mr Varney said there was “a good case for a single department dealing with tax administration”.

“International trends support integration, particularly to ensure that VAT is administered as an integrated part of a business tax system,” he said, but added: “None of this means that creating a single department will be easy. It is quite clear it will be a tremendous challenge.

“It will be a challenge to keep a long-term focus on the effectiveness prizes and not fall prey to the temptation to substitute short-term, cost-reduction objectives.”

A central objective will be to cut 10,500 jobs at the combined department, roughly 10 per cent of the combined workforce. Another 3,500 staff will be redeployed. The savings from the merger will form part of the 2.5 per cent efficiency gains, equivalent to £450m, which the new department is expected to make over three years as part of the Gershon proposals to cut government waste.

Mr Varney will have a relatively free rein. The Treasury’s view is that the nature of the merger is a matter for the chairman.

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