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The Guardian: He’s no Hector

The Guardian: He’s no Hector

David Varney, executive chairman of Revenue and Customs: “Varney admits to being “very concerned” about seeing Shell immersed in a reserves scandal.”

Terry Macalister

Saturday August 28, 2004

David Varney is not anybody’s idea of a typical taxman, but from next week he will become the top public face of both the Inland Revenue and of the Customs people who search your car at Dover.

The state-educated south Londoner could not be further removed from bowler-hatted cartoon character Hector the Tax Inspector, who used to exhort us to get our end of year forms in. Relaxed and chirpy, the bearded 58-year-old is willing to comment on pretty much anything – including troubled Shell, where he worked for 28 years and is still viewed by some as a potential chairman.

Varney stepped down from just such a job at mobile phone firm mmO2 last month and formally enters the rather less glossy and fast-moving world of tax returns next Wednesday. He has not only been charged by the government to lead the tax authorities but also Customs and Excise, as executive chairman of what will be called Her Majesty’s Revenue and Customs.

He has a three-year contract, and during that time has to restructure a bureaucratic giant that will have 90,000 staff and a budget of £4.2bn. More than 10,000 jobs are due to go and two complex IT systems have to be merged into one.

Fixing the Revenue sounds not just daunting but also a bit worthy to many in the City, but Varney has always been a public-spirited and inquisitive type.

He chairs Business in the Community and has always sat on an array of bodies, including the Institute of Employment Studies and thinktank Demos. Politics has been in the background since his days as a student union president but he certainly has the ear of Labour – or at least that of the ultimate tax boss, Gordon Brown.

The new post has come at a convenient time for him. Last year he moved from full-time to part-time, and non-executive chairmanship at mmO2, which is marketed under the O2 brand, and which he has just squeezed into profit.

He sees some parallels between his new job and what he had to do in spinning out O2 from BT. “I think it’s important for the country that the people who are charged with raising taxes and Customs and Excise are efficient and effective. So I decided I would do this one,” he says.

Varney insists he has no master plan and hopes to have a better picture of what needs to be done after talking to staff. He has not spent the break between jobs entirely at his Buckingham home with his wife, a retired doctor, but has also been visiting the organisations he must weld together. It is not as daunting as all that, he insists. “It cannot be just two bits added together with a bit of efficiency saving but one that, because of its knowledge base and interface with its clients, can actually do more. We have seen in other parts of the world – Australia and Canada – where this sort of merger has produced more joined-up government.”

Revenue and Customs will formally come about via an act of parliament, but some basic outlines are clear. “There will be a single organisation. The intention is not to have a neapolitan ice-cream with Customs, then Excise with a corporate management on top of that … At the moment the organisations don’t share information in an open sense and they have not been asked to do a single interface, but what we will look at is whether we could do a one-stop shop for various clients and customer groups.”

So, will the series of IT schemes be scrapped in favour of a single system? “Give us a break. I don’t start until September,” he says. But he does make clear that the appointment of a chief of information services will be one of his first jobs.

There is no doubt the tax system needs overhauling. Varney notes that Britain shares its fiscal structure with just two other nations, Israel and Malawi. “There is a lovely line in the Canadian annual report which is about how there is no other part in the public service that touches so many Canadians. I think the new organisation could say the same thing.”

Not all those dealings will be cordial, however, given that the tax authorities are engaged in a crackdown to reduce an 8% gap between what they should pull in and what they actually do. Varney believes friction with the public is not a given because the majority want to pay the tax they owe. “Most people want to comply with what their obligations are. There may be a degree of frustration surrounding that, but there is also a small group who do not want to comply – and they need to be deterred and detected, otherwise the burden on us who do want to comply will be higher.”

Asked whether he is impressed by what he has seen of Revenue and Customs and Excise so far, Varney’s message is diplomatic but clear: “We have a big job to do.”

Part of that task will be to shed 10,500 jobs and convince those who remain their future will be brighter. Varney has a reputation for being a decent bloke, but says he is no “poodle” to be manipulated by the government or shy away from tough decisions. At Shell he derecognised the T&G union after it refused to cooperate in a restructuring of the Shellhaven refinery in Essex.

Are we heading for the kind of clashes seen at Royal Mail, when Allan Leighton wanted to restructure the postal system? He says he does not expect problems with the civil service unions, adding he has yet to meet their representatives but looks forward to working with them.

Varney clearly blames union unwillingness to accept change for the closure of Shellhaven, but says they have changed since the early 1990s, when that took place. “I think most unions now want to be part of a successful organisation and recognise painful changes sometimes have to be made. That’s not to say they are patsies, but the dialogue is different now. We had our moments at British Gas [where he was chief executive], but generally we got along well. I still get Christmas cards from some union leaders, so I can’t be a complete ogre.”

He declines to discuss regional office closures and will only talk in general terms about wider staffing issues. “Both organisations have a proud history and powerful internal cultures, but this provides an opportunity for a new organisation of which staff can be proud and leave a heritage for a future generation. The transformation offers a chance for people to show they can thrive and prosper in a new world,” he says.

Has he been surprised by anything he has seen so far? “I do not surprise easily. When I came into O2 we wrote down all the potential risks to the business. I thought that was very useful. The best way of not being surprised is spending time looking at what can go wrong.”

He dismisses fears about the difficulty of recruiting new and younger staff, insisting many are looking for corporate responsibility or to spend time in the public sector. Varney makes comparisons with establishing O2 as a separate entity, and is proud many staff wanted to stay but accepts some chose to leave rather than continue the “journey”. Since he joined two years ago O2 has broken into the FTSE 100, but its future as an independent remains in doubt, given its small size in a sector of giants.

Would he not have preferred to secure its future by tying up a proposed merger earlier this year with KPN of Holland? “No,” he insists. “The whole point of being on the FTSE is to be vulnerable, to make yourself efficient and effective for all shareholders.”

Varney admits to being “very concerned” about seeing Shell immersed in a reserves scandal. He went to the oil group’s recent annual meeting, in part to see how another chairman dealt with such a crisis. Did he learn anything? His reply is withering: “There were not many lessons I wanted to take away for the O2 board.”

http://www.guardian.co.uk/business/story/0,,1292742,00.html

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