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Whitehall tax row: government accused of falsehood

Former business minister Gareth Thomas today accused the government of falsely claiming that no civil servant was paid through private companies.

The Labour MP and shadow minister for the Cabinet Office made his dramatic intervention in a debate in Parliament after Exaro yesterday revealed how ministers approved a contract that enabled Ed Lester, chief executive of the Student Loans Company (SLC), to reduce his tax bill by thousands of pounds by working through a private company instead of being on the payroll.

MPs lined up to challenge ministers during the emergency debate triggered by Exaro’s investigation, carried out in conjunction with BBC2’s Newsnight. Ministers were forced to go to the House of Commons to answer questions from MPs over Exaro’s disclosures.

Whitehall documents obtained by Exaro show that the Department for Business, Innovation and Skills (BIS), which oversees the state-owned SLC, negotiated the deal. They also show that Danny Alexander, chief secretary to the Treasury agreed to Lester’s contract.

Those genuinely working at the front line in the public sector will find these revelations obscene

Conor Burns, Conservative MP

Thomas told Alexander in Parliament today: “In December, I tabled a round-robin question to every government department asking whether senior staff in departments, in executive agencies and in non-departmental public bodies were paid by means of payments to a limited company.

“On the fifth of December, the minister for consumer affairs, the member for Surbiton [Edward Davey], replied on behalf of the department for business that the department’s policy was that staff salaries are paid into employees’ bank accounts.

“He went on, there is no evidence that any senior civil servant in the department for business, and its non-departmental public bodies, were paid by means of payments to a limited company in lieu of a salary. Why did they get it wrong? And also, why did I not get an answer from the chief executive of the Student Loans Company?”

Alexander replied: “The answer that he has described certainly describes the arrangements as I understood them until I received the information about this case in the last few days. And, of course, the inquiry I have put in place will reveal whether any more of these arrangements exist elsewhere in government.”

After Exaro told Alexander about the revelations and asked him for comment, he said that he was unaware of any potential tax benefit to Lester and ordered an immediate Whitehall-wide review of the issue.

The SLC’s position was that Lester’s tax arrangements were a matter for him and HMRC, but that he declined to comment.

Nick Brown, the backbench MP and former Labour chief whip, was granted permission for an ‘urgent question’ on the issue in Parliament after hearing of Exaro’s disclosures. He spoke of “a demoralising and corrosive effect” that such arrangements “must have on the rest of public service.”

Conor Burns, Conservative, was one of 34 MPs who spoke in the lively debate in Parliament. He said: “Those genuinely working at the front line in the public sector will find these revelations obscene.”

As MPs pressed questions over Lester’s contract, Alexander defended him by saying: “This man was brought in to run [the SLC]. I think it is widely agreed that he has done a very, very good job in turning the SLC round.”

Dennis Skinner, Labour MP, said: “Which minister is going to carry the can for this mess?”

Alexander replied: “Well, I’m here answering questions about it, and that is appropriate, given that the question was a general one about tax avoidance that I’m very pleased to answer.”

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