Here is a short video produced by Exaro showing how I got hold of the original story and the repercussions that followed. For those interested in this you can view it here.
It also partly a tribute to Whitehall sources who decided this scandal had to stop and a warning to ministers how clever some Whitehall people are in slipping stuff through right under their noses.
Almost entirely missed by the press coverage of the Budget this morning, George Osborne, the Chancellor, announced a radical review of freelance tax employment rules through what is known as IR 35.
Not mentioned in his speech – the changes were hidden away in the full Budget document. The full story of this change written by Alison Winward and Frederika Whitehead is on the Exaro news website at http://www.exaronews.com.
For those worried by the changes to the IR 35 rules the official Treasury document uses the dreaded word simplification – the same phrase used by the Chancellor to impose a ” Granny Tax ” – a future loss of income for 4.5 million pensioners by freezing tax allowances for most of those who have incomes above the state pension. Like pensioners this could affect millions of people.
The full section in the Treasury reads:
” Personal service companies and IR35 –
The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business.
This will include: strengthening up specialist compliance teams to tackle avoidance of employment income; simplifying the way IR35 is administered;
and subject to consultation, requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)”
Basically Hmrc are giving a warning that the wheeze that enabled Student Loans Company chief Ed Lester to hold one official position in Whitehall, will be banned everywhere. It will also effect local government, the NHS and now the private sector, as people won’t be able to claim it as freelance earnings through a personal services company. They will have to go through PAYE and pay national insurance.
There is at least a year’s grace before this happens – as legislation is planned for next year’s finance bill – and implementation could be delayed until 2014.
In the meantime the small print announces a crackdown from Hmrc on freelances who use this method. The revenge of Danny Alexander, chief secretary of the Treasury, who missed the whole Ed Lester arrangement when he personally approved all high paid Whitehall staff, looks like being rather more widespread than people anticipated.
An idyllic scene at Temple Mill Island, which used to be the home of Ed Lester's personal service company.
Student Loans Company chief executive, Ed Lester, is closing down his personal service company after the furore over the revelations of his tax arrangements.
A notice in today’s London Gazette reveals he and his partner Dolores Hawkins have applied to Companies House to have the firm called Placepass struck off the register.
Full details of the story are on the website http://www.exaronews.com but suffice to say the company has been around for 14 years during the time Mr Lester worked for the Office for Government Commerce, NHS Direct and Motability and has had various home addresses from Cambridge to London Docklands.
The firm was used as a ” tax efficient” way for the chief executive to funnel his £182,000 pay and pension package and his £28,000 in expenses from the Student Loans Company. It was based at his home on Temple Mills island on the River Thames at Marlow, Buckinghamshire. The island is a gated community.
Ed Lester’s decision is interesting . The story of his tax arrangements is already causing alarm among thousands of other people working for government departments, agencies ,the NHS and local government. The chancellor, George Osborne, is also looking at changing the tax laws covering this in tomorrow’s budget. It will be complicated and people need to watch for the small print in the Budget statement to find out what will happen.
David Gauke MP, the Treasury minister who wants his intern to work for free for at least six months
Today the website graduatefog reports that David Gauke has been reported to HM Revenue and Customs for being in breach of the minimum wage legislation for offering an unpaid ” training post” in his constituency. As readers of this blog know this is not the first time he has had advertised for a six month unpaid vacancy. So perhaps HMRC should take other recent appointments into consideration.+
Since this blog appeared Mr Gauke has attacked as ” morally repugnant” people who pay cash to builders, cleaners etc. if they beleive it is part of tax avoidance. But presumably this does not arise for his interns – as they work for free anyway.
After a Budget that gave tax cuts for the rich and pay freezes and job losses for the poor, step forward, David Gauke, Exchequer Secretary to the Treasury, forced to answer questions on the pasty tax U turn today. He is the man who will oversee the tax cuts in the new finance bill and has overall responsibility for HM Revenue.and Customs. He is also in charge of policing the minimum wage when unscrupulous employers avoid paying staff ( you couldn’t make this up)
His big contribution to help Britain moving is to offer one new personal job at his constituency office in Rickmansworth, Herts. There is only one problem. You need to either have rich parents ( who will give you an allowance) or a lot of inherited wealth. There is no pay and you must be Tory inclined( and obviously believe working for free is a good Tory policy)
The advert is here. http://bit.ly/AlHBho
As a minimum condition you must work for him for nothing for six months if not a year or more and you better have at your own expense, learnt advance computer skills ( doesn’t sound that Mr Gauke is computer savvy).
As it says: “Duties will include administration, basic correspondence, diary management, fundraising, campaigning and related tasks. The intern will also have the opportunity to work one day a week in the Westminster office.”
Now I understand as his constituent that Mr Gauke is very hard up. He only has an income of just over £100,000 a year – with his £98,750 salary and he claims from the taxpayer a London living allowance of £3379.15 a year ( desperate problem for MPs having to pay for higher London prices except for the taxpayer paid subsidised food in Parliament)
Funnily enough his expenses paid by the taypayer for the last financial year come to almost the same £98,680.93 as his salary including some £78,000 on staff ( presumably in Westminster rather than Rickmansworth), another £9000+ on accommodation and £10,000+ on administration. So the poor man only has £200,000 going through his accounts.
Then there are his two homes to maintain by Tory standards well below any mansion tax level. But poor man,since this terrible crackdown on Mps expenses he has had to lose such a lot. He did grab £15,000 a year in mortgage interest payments ,a quarterly £687 maintenance charge and car parking fees- all paid from the taxpayer on his Westminster Bridge Road apartment in London which he paid £285,000 in 2007. Mind you he has had a £30,000 rise in his income since the coalition came to power.
Incidently none of this latest expenses information is on his personal website – which on this issue doesn’t appear to have been updated since 2009. No doubt this will be done free of charge by his new employee.
What one might have expected from a government with one million young people on the dole – is that Mr Gauke might have just gone down to the Watford or Hemel Hempstead dole office- and given a leg up to some Tory inclined youngster on the dole. Or he might like many other Mps in his party just decide to pay a minimum wage to one of the newly unemployed graduates. But obviously paying £6 an hour would send him and his wife to the bankruptcy courts. For Mr Gauke, it is not Greed is Good but Exploitation is Excellent.
Perhaps as a resident of Berkhamsted in his constituency we should launch an appeal for the cash stricken Treasury minister or send food parcels to his new recruit so he can at least survive on an egg sandwich.
Internaware who campaign at @internaware against exploiting interns are not impressed. Gus Baker said: “Revenue and Customs have set up a hit squad to enforce the minimum wage for interns and yet the minister in charge is refusing to pay the people in his own office.
“David Gauke… is also putting an opportunity out of the reach of the vast majority of young people who can’t afford to work for free.
“At a time of high youth unemployment when young people desperately need to demonstrate experience on their CVs, this is completely irresponsible.”
Mr Gauke is very comfortable with this. He told BBC News which followed this up : “It’s advertising for a post for volunteers. Lots of people want to do it. It’s good experience.
“It involves visiting my local Conservative Association, getting some experience of Westminster.
“I think that’s perfectly reasonable and those that have had the experience of working there have enjoyed it and found it very good experience.”
Anyway for those who want to tell him what they think his e-mail at Parliament is gauked@parliament.uk and the constituency office address for food parcels is Scotsbridge House
Scots Hill, Croxley Green,Rickmansworth Hertfordshire WD3 3BB.
Margaret Hodge: Standing Up for MPs' and the public's rights
Watch out for a major speech by Margaret Hodge, chair of the Commons public accounts committee, at Policy Exchange in London this Thursday on the accountability of Whitehall to Parliament.
This is going to be a historic moment for the relationship between MPs and mandarins and I am not expecting the doughty chairman of Parliament’s most powerful committee to pull any punches. I also expect it to ignite a big debate.
It is also important moment for people who believe that Parliament is just a talking shop. This is because it will show that MPs want action on the way our taxes are spent and even more so on who pays their taxes.
It is also about the honesty and integrity of Dave Hartnett, the head of the Inland Revenue (HMRC), and his attempt to get away with telling lies to MPs on a deal with one of biggest bankers, Goldman Sachs.
The story of this dispute is published today by Exaro News at http://bit.ly/zHz7pP or on the Exaro News website http:// www.exaronews.com .
Suffice to say it reveals a massive tussle between Lord O’Donnell, the former Cabinet Secretary and Mrs Hodge over whether civil servants are accountable to MPs or ministers – going to heart of the matter of whether MPs can stand up for us as taxpayers.
Lord O’Donnell ,who wrote the letter days before he retired ,has accused the Public Accounts Committee of publicly humiliating a senior law official at the revenue by making him swear on the Bible before giving evidence. He talks of widespread anger in Whitehall and in the legal profession about this.
But he ignores the reason – that the man’s boss, Dave Hartnett, had misled Parliament over a sweetheart tax deal he negotiated with Goldman Sachs saving them possibly billions in tax. He pretended it was nothing to do with him.
This is why people should back Margaret Hodge, her committee which includes very equally strong minded MPs like Tories Richard Bacon and Stephen Barclay in standing up for MPs and the public’s rights.
Thursday will light the blue touch-paper at Policy Exchange. If there are any seats left go and watch and hear. It’s free.
Lansley's latest complicated NHS Commissioning diagram:Uploaded with help of Political Scrapbook
Commissioning-Intelligence-Model-v13
Feeling ill and need to see your doctor. Well here’s a bit of draft helpful advice under the Lansley reform measures. Click on the link above and get a big surprise. Just a simple commissioning guide so the NHS can smoothly run to help meet David Cameron’s ” NHS is in my DNA ” pledge.
This was sent to me as part of the big response to the NHS London board diagram of how the NHS will look which I published on Sunday night. I can verify its contents and it comes from @nhs_supporters and the respected and informed Health Service Journal. It makes interesting bedtime reading.
This appears to lay out a few guidelines. By the time they have answered all these questions I suspect you might be dead. Notice that GPs will have to send in monthly accounts and that a lot of computer programmes (more waste on IT) will be employed to work out the mix of services. It sound a nightmare to me.
But I am sure you will be eternally grateful to the huge cut in bureaucracy needed to answer all these points. Have a good time at your doctor’s surgery. Or alternatively why not e-mail Mr Lansley himself on lansleya@parliament.uk and ask him to go through the process with you. He claims to have spent five years thinking all this up. Pity he didn’t bother to tell the voters at the election.
Can you understand this document reproduced below?
Simplified Map of how the London NHS will look after Lansley has finished with it
No, thought so.Well this is the all singing, dancing model of the remains of the National Health Service after Andrew Lansley has finished with it. It is being distributed by the NHS Commissioning Board and a copy has come my way.Have you seen such a complicated diagram with different arrangements for accountability and funding? Far from creating fewer bodies it seems to create a plethora of new bureaucratic ones who will have more complicated relationships than a man with 20 mistresses.
Note where the public and the patient – supposedly the focus of David Cameron’s reforms. They are hidden under three levels of bureaucracy at the bottom of this diagram – obviously the least important people around.
Note all the new bodies, Public Health England, London Health Education, the NHS Commissioning Body, London;The NHS Trust Development Authority, London; Clinical Senates, Clinical Commissioning Groups, Patch teams ( I think they put sticking plaster on people when it all falls apart) the Care Quality Commission ( the body whose boss has just quit before being pushed and finds it difficult to monitor one home let alone all the rest) and a role for local authorities who being stripped of cash anyway by Eric Pickles, the communities secretary.
There are also Commissioning Support Services – I think this is the bit where the private sector make their millions from the taxpayers before they take over the running of the hospitals.
In my view this document gives a complete lie to the idea that some how we are going to have a wonderful bureaucrat free NHS with thousands of new doctors and nurses and patients with a sensational choice for everybody in England to go any hospital they want, regardless of cost.
It more looks like a recipe for chaos, fragmentation, confused accountability and irresponsibility with taxpayer’s cash. This diagram illustrates why it is costing £1.3 billion to do this.
Andrew Lansley becomes excited when he see this wonderful NHS blueprint!
There still a little time left before collective madness sets it. If it wasn’t an insult to the thousands of mentally ill people suffering in this country, I would suggest that Mr Lansley ought to be sectioned under the Mental Health Act for all this mayhem he is about to cause. You can off course tell him he is mad yourself. His direct e-mail in the House of Commons is: lansleya@parliament.uk
New e-mails and financial advice put up today on the Exaro news website (http://exaronews.com) reveal more of the background surrounding the extraordinary decision to grant Ed Lester, the chief executive of the Student Loans Company, an arrangement when he was not taxed or paid his national insurance at source.
It shows that senior civil servants were really uneasy about the deal. In one e-mail, Daniel Jenkins of the Department of Business, Innovation and Skills legal department wrote: “Applying the tests of employment status, I wonder whether it is possible for a CEO to be anything other than an employee/office-holder, given the degree of integration into the company which he presumably needs to carry out his duties.”
In another e-mail Michael Hipkins, then a BIS appointee to the SLC board writes:
“The risk, which nearly the whole interim industry currently runs, is that a contract for ‘supplying an individual’ is deemed to be an employment contract, rather than a commercial contract for services. So it appears there is a risk, and there is a judgement whether the risk is worth running.
“For my part, I note that when the terms of the interim CEO’s remuneration were cleared with Treasury, they raised no objection to the form of the contract, nor that there was an agency acting as intermediary.”
“It looks as if the company would be running no greater a risk than any other company employing interims on consultancy contracts; and the fact that the Treasury raised no objection to the proposed arrangement in the case of the CEO must mitigate that risk further.”
But the angst is nothing to the role of KPMG, the auditors and advisers to the SLC, who gave contrary advice in the space of a month.
First they said – as subsequently was proved right by Chief Secretary to the Treasury,Danny Alexander’s decision to cancel the deal,- that no office holder could be a limited company.
Then they changed their mind saying; HMRC “may agree on a concessionary basis”, under a provision known as the extra-statutory concession, A37, to override the rule that all company office-holders must pay tax and national insurance.
It said that Lester’s pay can then be treated as “income of Penna (who acted as the recruiting agency for Ed Lester) for corporation-tax purposes and not income of EL for income-tax purposes.”
KPMG said that the SLC should make no expenses or bonus payment direct to Lester, but only through Penna to his personal company, otherwise it would invalidate any concession.
Even more interesting given the developing furore over this issue the memo reveals that KPMG had done this before.
It said KPMG “have been successful in the past in agreeing with HMRC that the concession can be extended to circumstances similar to the arrangements in place here. However as this is a concession (rather than a statutory provision) there is no guarantee that HMRC will agree that the concession applies in this case given the agency and personal service company arangements in place.”
The next questions in this saga will be who else has benefitted from this arrangement and what George Osborne, the chancellor, proposes to do to close this loophole in the budget this month. The full story is revealed in four new articles on the Exaro website.
Office for Nuclear Regulation:First victim of Whitehall cull
The man in charge of running nuclear regulation has had his contract terminated in the wake of panic across Whitehall following the disclosure that Ed Lester, chief executive of the Student Loans Company, avoided having tax and national insurance deducted by being paid through a personal service company.
Paul Brown, interim chief operating officer of the newly formed Office for Nuclear Regulation,has been told that his contract will not be renewed next month provoking extraordinary anger among professional organisations representing freelances.They fear the whole situation is getting out of hand and that there could be a witch hunt in Whitehall against anyone who has a personal company.
The full story is published on the investigative news website http://www.exaronews.com .But the essence of the dispute is that Whitehall panic – generated by the decision of Danny Alexander, Chief Secretary to the Treasury,checking 4000 senior civil servants pay arrangements could lead to the wrong people being asked to go.
The difference between Ed Lester’s arrangement, now moved to PAYE for his £182,000 post, and Paul Brown’s post, is that Ed Lester seemed to have only one job and was getting paid holidays and a £28,000 pension contribution,normally associated with a full-time post.
Paul Brown’s company,Operations Improvements Ltd, seems to be a tailor-made vehicle to offer his services for a string of jobs including previous posts at the Health and Safety Executive and the Forensic Science Service. His Linked-In site also shows he does mentoring and emergency work as a director.
The irony of all this is that Ed Lester who has had to accept a PAYE arrangement has kept his job while Mr Brown seems to have become the first senior man in Whitehall to lose his.
PCG, the organisation which represents some 20,000 freelance contractors and professionals, also has a WordPress blog where Chris Bryce,chairman of PCG, outlines the arguments for not treating everyone the same.The blog is at http://www.insidepcg.wordpress.com for those who want to read it.
Paul Brown is barred by his existing contract from speaking about this, but friends tell me he is furious about the decision.
Last night (Friday) it became clear that a second senior official, Jon Seddon, the finance director of the nuclear agency, had also had his contract terminated.
Following the exposure by the joint Exaro News and BBC Newsnight investigation Ed Lester, head of the Student Loans Company, is now having his tax and national insurance deducted at source.
The deal backdated to February 1 will mean he will be on the pay roll until his contract ends in February 2013. The change will mean that he will have to pay full National Insurance contributions. The SLC – which has avoided paying NI will have to pay £17,000 to the tax authorities this coming year. Calculations by accountancy specialists means that on his £182,00o salary (including £14,000 bonus and £28,000 pension ) he will be possibly have to pay £26,000 in tax which he could have avoided by placing the contract through his personal service company, Placepass, based at his home on an island in River Thames at Marlow, Buckinghamshire.
He could also be charged benefits in kind on his Glasgow flat which the government is funding as part of a £550 a week expenses package.
This is the statement from the Student Loans Company:
“We are taking forward the changes to Ed Lester’s contract, following the announcement by Universities Minister, David Willetts on 2 February 2012.
“Ed Lester will be a Student Loans Company employee with effect from 1 February 2012 and tax and NI will be deducted at source. His salary and bonus arrangements will be consistent with his previous contract.”
One down, how many more to go, when the investigation by Danny Alexander, chief secretary to the Treasury, starts to bite.
Westminster Confidential 