The Big Con by Mariana Mazzucato;Rosie Collington; & Rosie Collington

Author:Mariana Mazzucato;Rosie Collington; & Rosie Collington [Mazzucato, Mariana & Collington, Rosie]
Language: eng
Format: epub
Publisher: Penguin Random House LLC
Published: 2023-03-07T00:00:00+00:00

Poachers and gamekeepers

Beyond the potential for political influence when consultancies serve “both sides of the street”—governments (or international governance organizations) and markets—there is also a risk that consultancies use government knowledge and information in ways that benefit business clients and undermine legislation.

Such cases are usually only revealed later through newspaper investigations or special government inquiries. In the UK, the apparently duplicitous role of the Big Four in developing and then selling insights about new tax rules became the subject of a 2013 inquiry by the parliamentary Public Accounts Committee. The Committee found that Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers had all seconded staff to the Treasury to “provide tax technical input and commercial experience.” In one complex and contested area of tax law—transfer pricing—there were “four times as many staff working for the four firms than for HMRC.” Transfer pricing is “a technique used by multinational corporations to shift profits out of the countries where they operate and into tax havens that involves a multinational selling itself goods and services at an artificially high price.”[28] If the consultancies wanted to shape the rules to a particular end, they were certainly in a good position to do so.[29]

The Public Accounts Committee was, however, less concerned about the Big Four’s ability to influence tax rules through its involvement in drafting legislation than “by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax.” Its final report cited the example of KPMG, whose staff had been involved in developing “controlled foreign company” and “patent box” rules at the Treasury. Those same employees had then returned to KPMG and produced marketing brochures for potential business clients that highlighted the role they had played in developing the law.[30] Responding to the findings, the Committee’s chair, Labour MP Margaret Hodge, declared the actions of the Big Four “tantamount to a scam,” saying they represented a “ridiculous conflict of interest” and “poacher turned gamekeeper turned poacher syndrome.” As a former consultant at Price Waterhouse herself, who built a ministerial career under the Blair governments, Hodge was in a better position than most to make this analysis.

Consulting companies do not need to second individuals or even secure contracts with governments to gain knowledge about policy processes and legislative changes that they can then offer to other clients. In some countries, they can simply employ a politician to work for them directly—while that politician is still in office. This can also be an important avenue for influencing future contract decisions.

In many government bodies, including the British House of Commons, the European Parliament and the German Bundestag, there are no rules preventing Members of Parliament from also working for management consulting firms and other companies—and many of them do so.[31] Historically, there have been high-profile instances of alleged conflict of interest resulting from politicians working simultaneously for a consulting company. In 2014, for example, the Conservative MP Stephen Dorrell was accused

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