By David Hencke | 1 February 2012

Only after the Student Loans Company found a new interim chief executive did it decide how it would pay him. Ed Lester was hastily appointed to the role in May 2010 following the fiasco the previous autumn that led to 241,000 students not receiving their loan payments on time.

Earlier that month, Ralph Seymour-Jackson and John Goodfellow resigned as chief executive and chairman respectively of the Student Loans Company (SLC), with approval from David Willetts, the universities minister.

Lester, the former chief executive of NHS Direct, the health helpline, had been working as a procurement consultant with the Office of Government Commerce. He became interim chief executive of the SLC within 24 hours of his interview by the company’s board.

Documents released to Exaro under the Freedom of Information Act show that the post was not advertised, and Lester was appointed through Penna Consulting, the human-resources group.

“The justification for paying living expenses relates to the need to recruit an individual who has the skills and experience”
– Sally Smedley, non-executive director, Student Loans Company

Penna, which is listed on AIM, the London Stock Exchange’s alternative market for smaller companies, negotiated the deal with the Department for Business, Innovation and Skills (BIS), which oversees the SLC.

E-mails show that, within 24 hours of the board making its recommendation, the SLC officially announced the appointment.

But the SLC does not deduct any tax from Lester’s pay, under a concession granted by HM Revenue & Customs (HMRC).

Under the interim deal, which was intended to last between six and eight months, Lester was offered an annual package worth up to £195,300 – basic pay of £167,400 and a possible £27,900 in bonuses – plus “travel and subsistence expenses”. Lester had to work the equivalent of only 186 days a year, or just over 3.5 days a week. Penna received a daily £150 fee, rising to £300 if Lester received a bonus.

However, the internal Whitehall documents showed that officials were discussing how Lester should be paid after the announcement of his appointment to the interim post.

HMRC only agreed  in October 2010 to the concession for him to be paid through a company rather than as an employee.

The interim appointment lasted until the end of January 2011, and it put Lester in a strong position to be confirmed in post on a further two-year contract.

The SLC interviewed five candidates for the job in November 2010 after advertising the post and using headhunters to search for suitable people. Two were shortlisted.

Sally Smedley, an SLC non-executive director, gave an update that same month to Howard Orme, director general of the finance and commercial group at BIS, saying: “Our preferred candidate is Ed Lester who is, as you know, currently on an interim contract with SLC.

“There are, of course, benefits to us all in having the continuity and costs savings (no overlapping contracts etc) that his appointment would provide. We do, however, also have a good second choice should we be unable to conclude a deal with Ed.”

She went on to discuss his expenses, which she described as “a key issue” for both Lester and the second-choice candidate because both were from England while the SLC is based in Glasgow.

She proposed in a later memo that these expenses should be £550 a week to pay for accommodation near the SLC’s head office and travel between London and Glasgow. “This could only be avoided in the unlikely event that we identified a local (to Glasgow) candidate.”

She continued: “The justification for paying living expenses relates to the need to recruit an individual who has the skills and experience to succeed in the role, which is Glasgow based. Unfortunately, there were no suitable candidates residing in the area and the first and second choices for this role are both England-based.”

In December 2010, a document outlining the proposed two-year contract said that it would include “normal SLC benefits, eg holiday”.

Lester’s two-year contract was also for 186 days a year, but needed another concession from HMRC. Penna receives under this contract a fee equivalent to 17 per cent of basic salary and pension contributions and half of any bonus, a total of up to £35,600 for each of the two years.

The SLC told Exaro that Lester’s tax arrangements were a matter for him and HMRC.

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