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Latest News - Interim Chief Will Have To Pay Paye & Ni, Say Ministers

Thursday Feb 2

Interim Chief will have to pay PAYE & NI, say Ministers

The head of the Student Loans Company will have tax and National Insurance payments deducted from his 182,000 pay package in future, ministers say.

BBC Newsnight reported that Ed Lester was not added to the SLC payroll when he was given a two-year contract in January 2011.

He was paid through a private firm - an arrangement agreed with tax chiefs.

Chief Secretary to the Treasury Danny Alexander told MPs Mr Lester's tax and NI would now be deducted "at source".

The Labour Party had asked an "urgent question" on the matter - forcing a minister to come to the Commons - following the BBC Newsnight and Exaro News investigation.

The chief secretary, who signs off civil service salaries above 142,500, said he was "not aware... of any tax benefit to the individual concerned" when approving the salary level, which he claimed he had "reduced significantly".

He said official guidance said public sector organisations should "avoid using tax advisers and avoidance schemes" - because any savings were only made "at the expense of other taxpayers or other parts of the public sector".

"There is no place for tax avoidance in government," he said.

He said in light of Mr Lester's case, he had asked the Treasury to review the "appropriateness of allowing public sector appointees to be paid through this mechanism".

"I have also asked the Treasury officer of accounts to write to all accounting officers across Whitehall to remind them that all appointments should, in line with existing guidance, consider the wider cost of lost revenue to the Exchequer when considering value for money."

'Signed off by government'
 
All departments would carry out an internal audit by the end of March, he said, and would include pay deals agreed under the previous Labour government.

Labour MP Nick Brown said it was "reassuring" to hear that income tax and NI would be deducted from Mr Lester's pay package in future and said such practices had a "demoralising and corrosive effect" on the wider public sector.

He also asked what fees were being paid to the private service company through which Mr Lester was paid and whether the cabinet secretary, prime minister or business secretary had agreed to the "controversial" arrangements.

Mr Alexander was repeatedly pressed on what ministers knew about the tax arrangements by Labour MPs - who said it was "signed off by the government, for all his protestations now".

Labour's Shabana Mahmood - shadow business minister - said at a time the economy was flatlining, "the news that ministers approved the contract of a senior official, which allowed tax and National Insurance to be avoided, shows just how out of touch they are".

Mr Alexander said the terms were put forward by the SLC and he simply agreed the salary level.

"Terms and conditions" were negotiated by the appointing department", he said. The Department for Business, Innovation and Skills appointed Mr Lester.

Business Secretary Vince Cable earlier said Mr Lester was "an exceptionally useful individual who has helped to turn round that organisation [the Student Loans Company]".

He added: "The arrangements under which the negotiations took place involved substantial value for money for the taxpayer, a tax cut by the individual and we will pursue matters of public concern on the tax issues."

But Conservative MP Richard Bacon said there was "too much of this going on" and criticised the way a senior executive of the Rural Payments Agency had been employed "in an interim way" under the previous government.

He quoted former Tory leader Michael, now Lord, Howard - saying "special rules for special groups breed anger and division".

Source: www.bbc.co.uk - 2 February 2012

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