Ron Sandler, the troubleshooter brought in by Gordon Brown to oversee the rescue of Northern Rock, has been revealed to be a non-dom who does not pay UK taxes on his offshore earnings.
Mr Sandler will be paid £1m a year for turning the nationalised bank around, and will be expected to pay taxes on his UK earnings. But the revelation of his non-domiciled tax status constitutes an embarrassment for the Government which recently announced measures to penalise non-doms by imposing a tax of £30,000 a year after they have lived in Britain for seven years. The Zimbabwe-born Mr Sandler, who holds a German passport, has lived and worked in the UK since the mid-1980s, and would be eligible for the £30,000 annual payment.
The Treasury said it was unable to discuss an individual's tax arrangements, but a spokesman added: "If he were a non-dom, we would be quite relaxed about that. We have got a tax regime which allows people not domiciled in the UK to come here and work. Regardless of what people's position is, they pay tax on their income in the UK."
The Liberal Democrat Treasury spokesman Vincent Cable said: "The Government does seem to have an extraordinary search engine which it finds banana skins to fall on. All the Government's favourite businessmen, including Sir Richard Branson and now Ron Sandler, appear to have so little commitment to the country, let alone the Government, that they prefer to pay their taxes somewhere else.
"Ron Sandler presumably is now becoming the second best-paid person in Newcastle after Michael Owen – at least Michael Owen pays his taxes here." Mr Sandler's chief financial officer at the bank, Ann Godbehere, is also reported to be resident abroad for tax purposes.
The Liberal Democrat Treasury spokesman Lord Oakeshott, who has campaigned for non-doms to be taxed, said: "Taxpayers peering into the Northern Rock black hole will insist Mr Sandler pays full British tax on the £1.08m a year we pay him. He is the top-paid British civil servant by a mile and he must only get a performance fee when Northern Rock has paid every penny of our cash back."
Yesterday the Government pushed ahead with legislation to nationalise Northern Rock despite howls of protest from MPs of all parties that the Bill was being forced through in a matter of hours. MPs had only four hours to debate the principle of nationalisation. Detailed debate on the legislation – which gives ministers the theoretical power to take any crisis-hit bank into public ownership – was allocated less than an hour-and-a-half. Peers will debate the Bill today before the Bill returns to the Commons on Thursday when MPs will have just one hour to discuss any amendments from the Lords.
Philip Hammond, the shadow Chief Secretary to the Treasury, said the debate was a "travesty of a scrutiny process".
But Alistair Darling, the Chancellor, insisted: "It is essential we proceed quickly... It is impossible to run a bank – let alone any other company – unless it is clear who is in charge of that bank."
George Osborne, the shadow Chancellor, said: "We don't know how much we are buying this bank for, we don't know what we are buying in terms of its assets and liabilities, we don't know how long we are buying it for. What does the Government plan to do with it once it's been bought?"
Meanwhile union leaders held talks with MPs from the North-east, amid demands for a ban on compulsory redundancies. Leaders of the banking industry also expressed concern that the nationalisation would lead to unfair competition.