John Prescott was forced to apologise to the Commons for an "inadvertent error" in failing to pay the full rate of council tax on his grace-and-favour flat in Admiralty House.
The Deputy Prime Minister, who is responsible for council tax policy, agreed yesterday to pay his unpaid council tax bill for the past seven years, although he was not legally bound to do so, and he has reimbursed his department £3,564 for its payment of his council tax since 1997.
The Prime Minister's official spokesman said: "It was a classic case of the right hand not knowing what the left hand was doing." He added: "He discovered the misunderstanding because he thought what was being asserted [by the press] was wrong and discovered it wasn't."
His total bill could come to £10,000 but that will be less painful than the embarrassment of admitting that, as the minister in charge of local government, he has not paid the full rate of council tax on his London residence.
Mr Prescott used the flat for the dinners with Tony Blair and Gordon Brown to discuss their hand-over of power over steak pie. He is well known for doing his own catering to avoid rows over the use of the apartment for entertaining.
Ministers in the past said he did not have a personal liability for council tax on the property as it was paid by the Government, but in a written statement to Parliament yesterday, Mr Prescott said there had been an "inadvertent error based on a genuine misunderstanding". It arose because he paid 10 per cent of his salary in tax, about £12,000 a year, for the grace-and-favour apartment overlooking Horse Guards' Parade, and assumed that his council tax was included.
Mr Prescott thought the flat was being treated as his main residence, and his constituency home in Hull was treated as a second home.
Government officials, however, treated his Admiralty House flat as a second home, as they had with the previous tenant, Michael Portillo, the former Tory defence secretary, and paid at the discounted rate on his behalf, which was 50 per cent until Mr Prescott cut it to 10 per cent on all second homes. He has an official residence in the country, at Dorneywood, Buckinghamshire, but that is run by a charitable trust, which pays the council tax.
Caroline Spelman, the Tory spokesman, said: "At a time when pensioners are being jailed for not paying their council tax ... the man who has forced up their bills hasn't had to pay it himself."
Sarah Teather, the Liberal Democrat spokeswoman, said: "It is extremely embarrassing for the Government that the man in charge of councils hasn't paid his council tax for nearly eight years."Reuse content