Government acts over loan chief's tax dodge

 

The Government today said it was ending a deal under which the head of the Student Loans Company has been paid via a company without tax being deducted.

The Treasury Chief Secretary Danny Alexander announced the move after criticism that it was allowing Ed Lester to save tens of thousands of pounds in tax.

He also pledged to "unwind" any similar arrangements across the rest of the public sector.

The arrangement with Mr Lester, entered into in 2010, was disclosed in an HM Revenue and Customs (HMRC) letter obtained under the Freedom of Information Act by Exaro News and BBC Newsnight.

The revelation is embarrassing for the coalition, which has been mounting a high-profile campaign against tax avoidance.

Responding to an urgent question from Labour in the Commons, Mr Alexander said the way in which Mr Lester received his £182,000 salary was now being changed.

"The Student Loans Company will, for the remainder of the contract in question, change the arrangements and deduct tax and National Insurance at source," the Liberal Democrat said.

"Across Government, if any appointments are found, whether agreed by this or the previous government, which do not provide value for money I would urge departments to seek to unwind them as quickly as possible and as quickly as is compatible with securing good value for public money.

"At a time when we all have to pull in the same direction to tackle the country's financial problems, it is essential that we all pay our full and fair share.

"That is why I have taken this action to make sure Government departments do not support tax avoidance schemes."

Mr Alexander signed off Mr Lester's pay deal in common with all public sector salaries of more than £142,500.

He apparently insisted the package was reduced by £13,000 when the interim appointment became permanent in January last year.

However, Mr Alexander told MPs: "I was not made aware of any tax benefit to any individual in this case."

The Student Loans Company insisted it had followed "all Government guidelines" over the chief executive's pay.

"Ed Lester accepted the position as permanent chief executive and accounting officer to the Student Loans Company on a two-year contract, which was formally announced in December 2010," a spokeswoman said.

"He was offered this post after a solid performance as interim CEO, where his leadership led to considerable improvement in the company's overall performance.

"SLC followed all Government guidelines on the appointment and remuneration of the CEO.

"Mr Lester's two-year contract with the SLC officially started on 1st February 2011 and will end on 31st January 2013."

Earlier, Business Secretary Vince Cable defended the SLC chief executive.

He described Mr Lester as "an exceptionally useful individual who has helped to turn round that organisation".

"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," Mr Cable said.

Labour higher education spokeswoman Shabana Mahmood wrote to universities minister David Willetts, demanding to know whether he or Mr Alexander signed off Mr Lester's employment arrangements.

Ms Mahmood asked to know when approval was given by the Business Department, the Treasury and HM Revenue and Customs, how much tax and national insurance was avoided and whether any other similar arrangements are in place.

"It is deeply concerning that David Willetts was happy for the chief executive of the Student Loans Company to be appointed in this manner," said Ms Mahmood. "That's why I have written to him to demand answers.

"It is clear that the Government still has questions to answer about this issue. We need to know which ministers signed off these arrangements, and who was aware of the tax and national insurance arrangements in the contract.

"We need to know why ministers thought this to be an acceptable arrangement - especially at a time when the economy is flatlining, people are being squeezed and David Willetts is tripling tuition fees.

"If ministers have sanctioned a pay deal for a senior official which appears to be designed to make it easy for him to avoid paying tax, it is clear that the Government are totally out of touch on this issue."

PA

* Outcry at student loan boss's tax dodge

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Ashdown Group: Front-End UI Application Developer

£30000 - £40000 per annum + Benefits: Ashdown Group: Front-End UI Application ...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...