In the midst of public interest and investigation into the salaries of Britain’s most highly-paid bosses, head of the Student Loans Company, Ed Lester, has been caught out for tax avoidance. It was discovered in February this year that Lester had been evading tax from his £182,000 salary when a Her Majesty’s Revenue and Customs (HMRC) letter was released to BBC Newsnight and Exaro News under the Freedom of Information Act. An investigatory show was broadcast by these news companies on Wednesday 23rd May. It was found that Lester had established a private firm through which he received his salary. By not accepting payments directly, he managed to avoid up to £40,000 of tax per year.
The payment of Lester’s salary into a private company was cleared and signed by David Willetts, Minister for Universities and Science, and apparently “agreed by Chief Secretary to the Treasury”, Danny Alexander. This revelation has come at a bad time for the Chief Secretary, threatening to undermine his recent claim to have “personally” cut over £1million from the salaries of top government employees. Mr Alexander argues not to have recognised the method as a tax-avoidance mechanism, but has consequently ordered further investigation into Whitehall salaries. It has been found that over 2,400 public sector staff are employed in a similar manner, and that some have managed to avoid full income tax for a decade or more. The government claims to be tightening the rules and regulations of earnings, and on Thursday [24th May] Mr Alexander stated that everyone in the public sector now “should be on the payroll and paying the correct amount of tax”.
It remains to be seen how accountable public sector workers such as Lester can be. His contract is an example of one that is due to end soon regardless of the allegations, and his ‘standing down’ should not be mistaken for a firing or resignation. It was previously agreed that his employment would terminate in January next year. A spokesperson from the Student Loans Company said: “Ed Lester’s two-year contract ends on January 31st 2013 … The process to recruit his replacement is under way now to ensure that there is a smooth handover in the change of leadership at the Student Loans Company.” Such a handover was to occur even without the intrigue. Ed Lester, then, shall leave the job un-scathed and largely un-taxed.