Exaro News Archive

‘Tax deal is personal,’ but Alexander orders inquiry

By David Hencke | 1 February 2012

Officials declined to comment on the tax arrangements under which Ed Lester works as chief executive of the Student Loans Company.

The company does not deduct any tax from Lester’s pay under a concession granted by HM Revenue & Customs (HMRC).

Asked for a comment about the arrangements, which minimise the amount of tax due, a spokeswoman for the Student Loans Company (SLC) said in a written reply simply: “That is a matter for Mr Lester and HMRC.”

Exaro asked to talk directly to Lester, but the spokeswoman said: “I’m afraid Ed Lester isn’t available for a telephone interview.”

“Ed Lester’s preference was to continue on a similar basis to his original contract when appointed as interim chief executive”
– Student Loans Company spokeswoman

The SLC did not “have anything to add” to her answer on the arrangements that minimised the tax liability.

In response to questions about why the SLC agreed the contractual arrangement with Lester, she said: “Ed Lester was initially contracted to the Student Loans Company on an interim basis, following the departure of the company’s chief executive.

“The SLC board moved away from the interim contract as soon as practical, and, following an open and competitive process, Ed Lester was appointed as chief executive and accounting officer on a two-year contract.

“Ed Lester’s remuneration under the new service contract is lower than the interim arrangement and was approved by the SLC board and the required government processes.”

“Ed Lester’s preference was to continue on a similar basis to his original contract when appointed as interim chief executive.”

She said that he had also wanted the arrangement for his interim contract.

No other senior official working at the SLC has a similar tax arrangement, according to the spokeswoman.

Pressed on the fact that three other executives had also enjoyed similar contractual arrangements, she added: “The interim directors were hired at a time when the SLC was in extreme difficulty operationally.

“With the sudden departure of the chairman and chief executive in May 2010, there was a continued need for experienced senior managers who could help the company to take control and manage the situation.”

The Department for Business, Innovation and Skills (BIS), which oversees the SLC, negotiated the contract. BIS adopted a similar line to the SLC, with a spokeswoman for the department declining to answer specific questions and saying that tax arrangements were a matter for the individual. She said that it had followed the correct procedures.

However, the Treasury took a different approach. After hearing about Exaro’s revelations, Danny Alexander, chief secretary to the Treasury, ordered his department to “urgently review” the issue.

The full statement of his spokesman said: “The chief secretary to the Treasury is required to approve senior civil service appointments where the salary exceeds £142,500. Terms and conditions are negotiated by the appointing department, and presented to the chief secretary for approval of the salary level.

“In the case of the chief executive of the Student Loans Company, [he] approved the overall pay, at a reduced rate and in a continuation of the interim arrangements previously agreed. The chief secretary was not made aware of any potential tax benefit to an individual.

“The chief secretary has now asked the Treasury to urgently review the appropriateness of allowing public sector appointees to be paid through an agency by a personal-service company.

“The chief secretary has also written to secretaries of state notifying them that he has asked the Treasury officer of accounts to write to accounting officers to remind them that appointments should, in line with existing guidance, consider the wider cost of lost revenue to the exchequer when considering value for money.

“In addition, he has asked them to carry out an urgent internal audit to ensure that all senior consultancy appointments provide value for money in this regard. This will be completed by the end of March 2012.

“If any appointments are found which do not provide value for money, then the department should seek to unwind them as quickly as possible, in line with securing good value for money.

“As he has said before, the chief secretary believes everybody should pay the right tax at the right time.”

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Exaro News investigates matters of public interest and seeks to uncover the truth.