Leading article: The tax system is credible only if fair

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When the Chief Secretary to the Treasury, Danny Alexander, was summoned to the House of Commons to explain why the head of the student loans company was being paid as a private contractor, rather than as a government employee, he just about defused the scandal. He announced that Ed Lester would in future have his tax deducted at source, he said that he, Mr Alexander, was setting up a review to discover the extent of the practice throughout Whitehall, and he gave the impression that such pay arrangements were highly unusual.

Not so unusual; it now transpires that two dozen or more senior staff paid by the Department of Health benefit from a similar tax status. The department has now apologised for denying in a Commons written answer that any of its civil servants were paid through private companies. It turns out this was true only in the narrowest sense. All anyone had to do was apply the duck test – if it walks like one, talks like one and looks like one, it probably is one. If the employees concerned are not classified as civil servants only by dint of being paid through a private company – even though they are doing essentially government jobs – any distinction is spurious.

It is also worth noting that the Health Department produced its apology only after documents were leaked to a newspaper, which must fuel the suspicion that paying senior staff through companies has become rather more widespread across Whitehall than ministers might have divulged, or even realised. Mr Alexander's review has much work to do.

The Government now finds itself steering welfare reforms through Parliament that will have the effect of cutting many people's benefits, while appearing to connive with tax avoidance by some of its own best-paid employees. This is as absurd as it is unjust. The only remedy is full transparency from the Government about who it employs, on what terms and why. At present, some departments publish such information, but many others do not. Any evidence that Whitehall operates one tax rule for senior employees and another for the rest risks discrediting the whole system. It is in the Government's own interest to get its house in order.

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