Off- payroll public sector pay arrangements.
The subject of 'Town Hall Tax Dodging', (a phrase coined by the Rt Hon Eric Pickles MP, Secretary of State for Communities and Local Government), is one of enormous interest to the Barnet bloggers, and we applaud the attention paid to this issue by the parliamentary Public Accounts Committee (chaired by the Rt Hon Margaret Hodge MP) which took place on Monday 16 July 2012.
This investigation of the issue of tax avoidance by individuals in publicly funded posts came about following the disclosure by Westminster journalist David Hencke, that Ed Lester, the head of the Student Loan Company, was being paid through a service company, and that there are similar arrangements on a very significant scale throughout the civil service and the wider public sector.
One witness before the committee was Carolyn Downs, the Chief Executive of the Local Government Association (LGA). She stated that the LGA had found only 13 examples of off -payroll public sector pay.
We know that this national figure of 13 is an understatement since the draft (i.e. unaudited) Annual Accounts of Barnet Council for the year ending March 2012 show that there are 14 such arrangements recorded as having been in place during the year for senior officers.
Far from being a practice that is diminishing it is noted that in the previous year's accounts there were only 8 such arrangements.
The evidence to the committee was that these arrangements were used in the short-term. We can show that this is not true and that, on the contrary, these arrangements are used routinely for long term appointments.
In Barnet, one ‘interim’ post paid through a private company has lasted for more than three years. An appointment lasting over 3 years cannot be described as short-term. In addition, a Freedom of Information request has revealed that there have been no efforts to replace this individual with a permanent staff member.
Evidence to the committee also suggested that, there was virtually no difference between the tax paid under PAYE or via a service company. That is to ignore two factors. If a service company is used certain expenses, such as travelling, can be reclaimed whereas an employee does not get tax relief for home to work travel costs. In addition, service companies are able to pay out their profits as dividends and National Insurance Contributions are not paid on those. The overall contribution to the Exchequer will be less if a service company is employed.
We look forward to the day when Barnet Council ensures that all its officers (employees) are treated equally and that all those people who receive their pay from the public purse recognise what Mrs Hodge referred to as a ‘moral duty’ to make their fair contribution to the taxes which contribute to the good of society.
We call on Nick Walkley, the Chief Executive of Barnet Council, to negotiate the return to the payroll of the officers concerned as this will reduce the penalties that will have to be paid as a consequence of the inevitable HM Revenue & Customs PAYE compliance visit.
We also look forward to following the evolution of this story in front of the Public Accounts Committee once the summer recess is over.