Minister makes statement to Parliament on civil servants who work ‘off payroll’
By Hui Shan Khoo, Susan Cooke and Alex Varley-Winter | 23 May 2012
Announcing the results of a review by the UK Treasury into the practice, he said that 2,400 senior civil servants were avoiding millions of pounds in tax by working in this way.
He told the House of Commons: “I would like to thank the investigative journalists at Exaro News for bringing the issue to our attentions.”
Alexander ordered the review immediately after an investigation by Exaro, together with BBC2’s Newsnight, revealed in February that the Student Loans Company (SLC) was paying its chief executive, Ed Lester, through his personal-service company under concessions granted by HM Revenue & Customs, described in Whitehall memo as a “tax efficient” arrangement.
Alexander told MPs today: “As I said at the time to the House, and as I reiterate today, there is absolutely no place for tax avoidance in government. That is especially so at a time when money is tight, where we all have to pay our full and fair share to tackle the deficit.”
During a 30-minute debate in Parliament, other MPs also paid tribute to Exaro and the senior reporter here who broke the story, David Hencke. It was the third time that Parliament has debated the Exaro story.
Andy Slaughter, Labour MP and shadow justice minister, said in the debate following the statement: “The chief secretary is right to admit that without the work of Exaro and Newsnight he would not have a clue what was going on across government departments.”
Nick Brown, Labour MP and former government chief whip, said: “I pay credit not only to him [Alexander], but to the investigative journalist, David Hencke, and others who first drew it to all our attention.”
Alexander said, as Exaro reported yesterday, that more than 20 senior public officials have worked ‘off payroll’ and avoided paying tax at source for more than ten years.
Exaro revealed three weeks ago the results of the Whitehall-wide review.
The main findings were contained in a letter that Exaro published sent by Alexander to George Osborne, chancellor.
Civil servants are able to save themselves tens of thousands of pounds a year in tax by routing their pay through personal-service companies.
Immediately after Alexander’s statement, government departments began publishing details of civil servants who are being paid off payroll, but without identifying them.
HM Revenue & Customs reported that nine of its people were paid ‘off payroll’, three of whose positions have ended or been brought on staff since Exaro broke the story.
Since then, 350 contracts paying civil servants ‘off payroll’ have been ended, said Alexander, with 35 officials continuing under new terms and conditions.
The government would force those who were not on the payroll, had been working for more than six months and paid the equivalent of a senior civil servant’s salary, to prove that they were paying their fair share of tax, Alexander said. Otherwise, they would have their contracts terminated.
Departments that fail to comply would be “fined” by the Treasury up to five times the payments involved. The new rules will be enforced by September, Alexander said.
Alexander told MPs that 40 per cent of cases went back two years or more, and some as far as ten years. In 70% of cases, people had been earning more than £400 per day.
“It is clear that off-payroll engagement without sufficient transparency has been endemic in the public sector for too many years.
“It is a problem that built up and was presided over by the previous government. Indeed, it is likely, under their watch, many more thousands of cases of off-payroll payment may have come and gone, yet no one said a word.
“The solution to this problem is not to turn a blind eye or brush it under the carpet. We have to bring an end to the ‘don’t ask, don’t tell’ approach to this issue.
“It is clear the tax arrangements for off-payroll employees in the public sector are not as transparent to the employer as they should be.”