Paul Gray is in a tricky position. This week, as the chairman of Her Majesty’s Revenue & Customs (HMRC), he sought tougher powers that would enable the taxman to take unpaid monies directly from individuals’ bank accounts.

However, his department yesterday was accused of incompetence for allowing a million people to pay the wrong amount of tax. Significantly more were overpaying than underpaying, according to the National Audit Office.

Having taken over as chairman in September 2006, not all of these errors occurred on Mr Gray’s watch. But he is the man who has taken on the difficult position. The hiring of Mr Gray’s predecessor, Sir David Varney, the former chief executive of British Gas, was heralded as a triumphant example of private sector talent being lured into the public sector.

Sir David lasted two years in the HMRC job, having presided over a £1 billion-plus annual loss to the Government from the tax credit system, as well as problems with carousel fraud and an increasingly tense relationship between the taxman and the business community.

Mr Gray, however, is public sector through and through. He began his Civil Service career at the Treasury in 1969 as an economist and moved through a number of departments.

Between 1988 and 1990 he was economic affairs private secretary to Margaret Thatcher. He later joined the Department for Social Security as head of policy.

More recently, Mr Gray was managing director of the pensions and disability division at the Department for Work and Pensions.

He was appointed deputy chairman of HMRC in September 2004 and helped Sir David create the new tax office from a merger of the Inland Revenue and HM Customs & Excise. His move to the chairman’s job was widely expected.

Mr Gray is also a nonexecutive director of Laing Management.