Exclusive: The East Coast rail bosses tax avoidance scheme that hit the buffers

East Coast trains at Kings Cross. Pic courtesy:;  www.rail.co.uk

East Coast trains at Kings Cross. Pic courtesy:; http://www.rail.co.uk

A blunder by the Department of Transport has allowed two top state rail bosses to repeat a tax avoidance scheme which should have been outlawed in Whitehall following the exposure of Ed Lester, the former head of the Student Loans Company.

The deal allowed the highly paid chief executive, Michael Holden, and his finance director, David Walker, to avoid having tax  and national insurance deducted at source from the state-owned Directly Operated Railways, which is responsible for the East Coast mainline. They are now on the pay roll and are currently paid £244,000 and £171,000 a year respectively. Originally it appears the money was paid into their two personal service companies run with their wives.

A  full report in Exaro News today names the two top officials cited in a written Parliamentary statement from Danny Alexander, Chief Secretary to the Treasury last week which revealed that 128 civil servants had been caught on ” off pay roll” contracts that should be have been full-time employees, Some 125 former civil servants who quit have now been reported to Revenue and Customs.

 But the Treasury has put the blame on the other three on two ministries, Transport and the Department of Environment, Food and Rural Affairs and has fined both ministries over £500,000 between them for the lapse which they should have put an end after six months.

Michael Holden. chief executive of  state-owned Directly Operated Railways

Michael Holden. chief executive of state owned Directly Operated Railways

 Michael Holden appears to be all round railway buff,competitive  swimmer, fell walker, and an advocate of the beauties of Surrey living in Woking. As non executive chairman of East Coast Rail ( which I can praise for a good service to disabled people) a member of the travelling public recently asked him to pose for a picture on their mobile.

He describes himself on his Twitter account as: “A bit grumpy, mostly old, but all man, busy with railways, being dad and lots of other stuff. Looking for that elusive work-life balance thingy.”

On his Linked-In page, he says: “I lead the UK government’s business unit capable of running rail franchises when no tendered franchise can be put in place.” He runs a personal-service company, Coledale Consulting. He describes it as: “Railway-management consultancy specialising in strategic advice to railway companies. Clients include infrastructure providers, train operating groups and companies, and client side including government. UK, Ireland, Sweden.”

David Walker appears to be  a less flamboyant and is not on Twitter. He has interesting links with Romanian as well British railways..

The third case uncovered by the Treasury was at the Animal Health and Veterinary Laboratories Agency (AHVLA), which hired Claire Evans off payroll as director of corporate services in October 2012.

Her annual salary last year was between £140,000 and £145,000.

Again, the Treasury said that the AHVLA was too slow to put Evans on the payroll. 

The biggest offender for off pay roll contracts is Vince Cable’s department of business,innovation and skills and its agencies – accounting for almost half the 125.





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