Austeritarian politics minds less about balancing the books than cutting the state. It aims to bear down on public spending but also distrusts tax, particularly on the well-off. Austeritarians bang on about the debt while failing to plug revenue holes.

Labour muddied the issue last week by merging it with the question of toxic party funding. At prime minister’s questions Ed Miliband attacked Tory donors including Lord Fink, who’d benefited from HSBC’s newly exposed Swiss tax scamming. Miliband apparently saw this as a chance to brand the Tories as high-rollers contemptuous of the fisc. The tactic was doubly doomed. First, another HSBC tax-refugee client, Lord Paul, has donated to Labour, and Labour’s trade union sponsorship let the Tories play to the public view that all politicians are equally grasping. In a raucous PMQs, Miliband failed to land a glove.

Second, the scandal happened on Labour’s watch. When the whistleblower Hervé Falciani realised that HSBC depositors were using its Swiss branch to dodge tax abroad, he contacted revenue authorities in several jurisdictions, including the UK. In 2008 the Treasury had other worries. As crunch ground towards crisis, it was drafting plans for emergency bank recapitalisation. HSBC, whose portfolio of bad assets fell far short of the Lloyds and HBOS exposure, successfully held out against the government’s proposal to take a public equity stake in it. Most of HSBC’s business was overseas, but it had a significant market share (21 per cent) in the UK banking sector: the government needed HSBC more than the other way round. Alistair Darling said that ‘the key was to get capital into the banks that needed it – primarily RBS and HBOS... but at the same time to persuade a bank like HSBC, which had no obvious need for more capital, to join the scheme.’ RBS and Lloyds/HBOS apart, post-crash compliance was voluntary in Britain, unlike in the US, a factor that one study blames for the UK’s much higher bailout costs as a share of GDP, since the scheme had to cover bigger risks.

Meanwhile last week, the Public Accounts Committee chair, Margaret Hodge, was sticking it to Lin Homer, the chief executive of Her Majesty’s Revenue and Customs. Homer denied seeing the alert Falciani sent to HMRC on 18 March 2008; UK customers’ deposits with HSBC’s Swiss branch totalled £21.7 billion. Homer is no stranger to administrative incompetence. As Birmingham’s chief executive and returning officer in the 2004 local elections, she failed to spot industrial-scale postal vote rigging, designed to stop Labour councillors getting ejected in the anti-Iraq war backlash; fixers lugged bundles of votes to the count in plastic bags. With HSBC’s Switzerland depositors, the bags held ‘bricks’ of cash denominated in non-Swiss currency. The bag-carriers include the familiar Playmobil set of minor royalty, hedge-fund plutocrats, rock and film stars, conflict-gem dealers and restaurateurs.

Last summer the PAC noted that ‘the government is owed a massive amount of money but it has failed to take a strategic cross-government approach to managing that debt and getting more money paid to the exchequer.’ It estimated unpaid debt owed to HMRC at £15 billion. It now uses private collector firms to scare small-fry debtors into coughing up. Not that that’s been a runaway success: in 2012-13 HMRC wrote off £3.5bn of tax-credit debt as ‘uncollectable’. Meanwhile, HMRC goofs on such big projects as clamping down on tax-haven dodges. Recently it cut a deal with the Swiss banks to get at ‘black money’ deposited by UK clients there, only to see most of the cash shunted next door to Liechtenstein, where HMRC had concluded a parallel but fiscally much laxer settlement. That may have leeched as much as £3bn.

When it got Falciani’s email in 2008, did the government, mindful of being on the back foot over the bailout, decide to go softly on HSBC’s buccaneering approach to tax? Not necessarily. HMRC’s ‘sweetheart’ deals, sewn up in recent years with firms like Starbucks, Vodafone and Goldman Sachs, are well documented. The government’s lead negotiator, Dave Hartnett, was the HMRC permanent secretary for tax until 2012, and would have been responsible for investigating Falciani’s allegations. Vodafone owed the exchequer £6 billion, which after a reported 48 meetings between Hartnett and Vodafone’s accountants, Deloitte, shrank to £1.25 billion. According to another whistleblower, Osita Mba, who worked on Goldman Sachs’s tax accounts, Hartnett also wrote off more than £10 million of accumulated interest on Goldman’s tax arrears. Since retiring from HMRC, Hartnett – proving the adage that there’s always life on the other side of the table – has landed jobs with Deloitte and indeed HSBC, whom he advises on ‘financial risks and crime’. For his pains Mba was raided, at HMRC’s behest, by officers acting under the anti-terrorism Regulation of Investigatory Powers Act.