Alexander wants review to include health authorities, local government and BBC

By David Hencke and Frederika Whitehead | 10 February 2012

Whitehall widens inquiry into civil servants’ contractsMinisters are extending the inquiry into how many UK public officials beyond Whitehall are not paying tax at source.

Exaro can reveal that the review is to be extended to cover people working outside central government, in health authorities, local government – and even the BBC.

Danny Alexander, chief secretary to the Treasury, ordered the Whitehall review immediately after we put our revelations to him last week about how Ed Lester, chief executive of the Student Loans Company (SLC), was being paid off the payroll.

His decision to widen the review underlines the shock within government about the disclosure of such deals.

An investigation by Exaro, in conjunction with BBC2’s Newsnight, revealed how Lester was able to save around £26,000 a year in tax by being paid through a personal-service company.

Yesterday, Exaro disclosed e-mails that show how Lord O’Donnell, when he was cabinet secretary, was aware of the arrangements.

The day after Exaro broke the story, Alexander was summoned to Parliament to answer an ‘urgent question’ about Lester’s contract, which was triggered by the Labour MP, Nick Brown. Alexander announced that Lester would go on the payroll – and have tax and national insurance deducted at source – from then on.

However, Exaro has established that Lester’s new contract is still being negotiated. Alexander’s spokesman said that the minister has told the SLC to renegotiate the deal and report back to him.

The SLC says that Lester’s tax arrangements are a matter for him and HM Revenue & Customs, but that he declined to comment.

Exaro has been told that officials working through personal companies are more widespread in other public bodies, with one government agency’s chief executive actively encouraging staff to strike similar deals. The review is due to be completed in March.

Alexander’s spokesman also confirmed to Exaro that the review, which was initially to cover Whitehall departments, will extend to health authorities, including hospital trusts, throughout the UK. Eric Pickles, communities and local government secretary, is also writing to ask the Local Government Association, which represents councils in England and Wales, to carry out a similar exercise.

The spokesman said: “It will be a very big exercise involving the checking of at least 4,000 senior civil servants’ posts in Whitehall.

“The chief secretary has also asked Eric Pickles to write to the Local Government Association to hold a review into contracts held by senior officials in local authorities.”

In addition, Alexander wants the BBC to launch a similar review. Many working at the BBC – especially star talents – are paid through companies and so do not have tax deducted at source.

One past example is its former director general, Lord Birt, who was paid through his own private company. However, the current director general, Mark Thompson, is on the BBC’s payroll.

Jeremy Hunt, culture secretary, is said to be uneasy about telling the BBC to review its contracts and has pointed out that ministers cannot order the BBC to do so.

But Alexander hopes to “nudge” the BBC into taking to take action, according to his spokesman.

A BBC spokesman said: “All members of the BBC executive board, and indeed our non-executive directors, have their taxation deducted at source by the BBC.”

Rob Wilson, Conservative MP, who wrote to Alexander after the parliamentary debate to ask him to extend the review, welcomed the government’s response. He said: “It is good news that the Treasury has accepted my request for other organisations, such as the BBC and local government, to be included in the review.

“It is right, wherever public money is spent, that all such public bodies are open to the same levels of scrutiny and review. Also, it is only right that if this is being clamped down on at the Student Loans Company, it should also happen right across government. I am sure all organisations prescribed by the Treasury will welcome the scrutiny.”

In his letter to Alexander, Wilson wrote: “I would request that the review be broader than just jobs in central government. I recommend that it be extended to other agencies, individuals and organisations where salaries are drawn from taxpayers’ money – for example, the office of the speaker of the House of Commons and the BBC.”

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