david willetts | Westminster Confidential

David Willetts: Two dismembered brains? Pic courtesy: The Guardian

Update: Three hours after Exaro News revealed the delay, London Metropolitan University announced it was scrapping the scheme altogether. A statement said it was going to call in fresh consultants and start again. It has abandoned the tendering exercise. David Willetts has truly lost everything over this.

The furore over the threatened deportation of thousands of overseas students studying at London Metropolitan University is well-known. What is not so well-known is the political battle between two prominent ministers, Theresa May, the home secretary, and David Willetts, the universities minister – known as ” two brains” because of his formidable intelligence, over the heart and soul of Tory policy.

The train crash happened at the London Met because two different Tory policies collided with each other. Theresa is a champion of curbing illegal immigration. David Willetts is a champion of university privatisation. Successful and profitable privatisation however depends on attracting more- not less – immigration to the UK in the form of overseas students. The London Met, as we shall see below, was his pet project.

The two ministers were at loggerheads before this started and so far Theresa has outwitted brainy Willetts.

Theresa May: Pic courtesy: The Guardian

The clue is revealed in the court case that London Metropolitan brought to try to overturn the ban on recruiting overseas students. Here it is revealed it was Theresa May not the UK Borders Agency that ordered the ban. It was a political not an operational decision. Here I am indebted to Andrew McGettigan whose critical education site is well worth following. ( See http://andrewmcgettigan.org/2012/09/24/update-on-london-metropolitan/ )

Now why was this decision so damning to Willetts? Well it was taken almost on the day London Met was to decide which private bidder – from BT Global, Capita and Indian firm Wipro – would take over running the university and win a £74m five year contract. Not only was this the biggest contract for a university in the UK but if successful the private company could offer to run other universities, making the contract worth a staggering £500m. Full details are in my articles in Exaro News (http://www.exaronews.com)

Now Willetts and George Osborne had staked a lot on this and it was smashed overnight. Willetts is closely connected to Malcolm Gillies, vice-chancellor of the university. His former special adviser Jonathan Woodhead, is now a £75,000 a year executive reporting directly to the vice-chancellor. Both Willetts and Gillies are strong advocates of what they call ” shared services” which allow a private company to take over the running of everything at a university with the exception of the teaching and the vc’s office.

George Osborne had been helpful by creating a hardly noticed change to VAT legislation this year -exempting private companies bidding for shared ownership schemes from being liable for VAT. At a stroke this cut their bid price by 20 percent.

But the uncertainty surrounding whether London Metropolitan University will get back its special status to recruit overseas students means that no private company is likely to touch the deal as they won’t know the size of the university or whether the university can survive at all without overseas students. And even though the university is appealing there is no date set for the judicial review.

So at a stroke Willetts’ pet privatisation scheme has been put on hold. Indeed altogether not a good year for Willetts. A separate plan to introduce a bill extending the rights of private universities to award degrees has been shelved for a year and he was the person who appointed Ed Lester, head of the student loans company, to his job under a ” tax avoidance” scheme that has now been vetoed,increasing Mr Lester’s tax bill.

Willetts has also in Tory terms been outclassed by the more radical and dangerous Michael Gove. Indeed if Willetts was a state school, his performance to date would mean he would be hived off to the private sector after failing his Ofsted.

Flashy Student Loan Co HQ where Ed Lester works without being taxed at source. Pic courtesy BBC

Civil servants could be able to avoid legally paying tens of thousands of tax while working in Whitehall. An investigation by Exaro News and BBC Newsnight based on documents obtained by me through a Freedom of Information request has revealed an extraordinary personal tax deal negotiated by the Student Loan Company for its £182,000 a year Whitehall boss, Ed Lester. The deal is £140,000 salary,£14,000 bonus, £28,000 pension and £28,000 expenses for flight and Glasgow flat.

Documents released by the SLC and the Department of Business,Innovation and Skills reveal that Mr Lester, chief executive,pays no tax or national insurance at source but instead the SLC pay a consulting firm called Penna who pass the gross cash to a personal service company run by Mr Lester and a partner. This arrangement was approved by HM Revenue and Customs and the deal was signed off by David Willetts, the universities minister, and Danny Alexander, chief secretary to the Treasury.

As a result instead of paying tax at the top rate of 50 per cent – the company is likely to only have to pay corporation tax at the government’s new lower small company rate of 21 per cent and minimal national insurance. Mr Lester has declined to discuss the matter with Newsnight or Exaro News.

Full and extensive details are revealed in a series of articles on the Exaro News website (http://www.exaronews.com) – behind a pay wall but if you register it is free for a week – or you can see the film about it on BBC Newsnight.

The investigation has forced Mr Alexander into ordering a Whitehall wide inquiry to find out how many civil servants are benefitting from the same secret deals. The reason is that ministers DONT’ KNOW and it looks like in Mr Willetts’ case DON’T CARE. Alexander personally examined each top pay contract and now admits he missed the tax implications of this particular deal.

Whatever his inquiry reveals this arrangement looks to me on a par with all the recent scandals involving banker’s bonuses and Sir Fred the Shred’s stripped honours. Basically you as a taxpayer are paying the state to negotiate a deal for a very highly paid official to avoid tax. This can’t be fair, right or decent to millions of low paid public and private sector workers who are paying a big whack in tax and can’t set up personal service companies – effectively to avoid paying tax. It also has the added insult that the man who has got this deal is pursuing every single student in the UK to make sure they pay every penny back of their student loan.