The Chief Secretary to the Treasury is still struggling to enforce the rules on payments to public officialsby Emran Mian / July 14, 2014 / Leave a comment
Who said what to whom? In February 2012, BBC Newsnight reported that the chief of the student loans company was paid through a private firm, potentially reducing his liability for tax and national insurance. Responding to an urgent question in Parliament, Danny Alexander said that he was asking the Treasury to review the “appropriateness of allowing public sector appointees to be paid through this mechanism.”
What does it mean? The review found that more than 2,400 people in the public sector were paid through off-payroll arrangements. Some of the arrangements were of long standing, suggesting there was potential that they could be used to minimise tax payments. The Chief Secretary stopped short of a commitment that no public appointee would be paid through a private firm in the future though he did introduce stricter rules. But now two years later Monitor finds that 30 foundation trusts still don’t wholly comply with them.
What could go wrong? Monitor declares that the non-compliant trusts are “taking action to end their off-payroll arrangements over the coming months.” Somehow, the previous two years haven’t been time enough.
But there are enforcement issues closer to home for Danny Alexander too. The Department for Environment & Rural Affairs received a fine of £102,080 for a breach of the guidelines in March this year. At the same time, the Department for Transport was fined £398,500 in relation to two senior appointees paid off-payroll at the Directly Operated Railway, the very same organisation that many in the Labour party hope will lead the renationalisation of rail services.
When will we know? More fines will probably be imposed from time to time. Some people inside government think that Treasury over-reacted to the initial controversy. Off-payroll arrangements might be appropriate where public appointees have a portfolio of roles. Plus the tax efficiency of the arrangement for the individual may mean that the headline pay is lower than it would be otherwise, so that’s a saving to the public purse, isn’t it?
Nevertheless the guidelines were established as they were, more than two years ago now, and compliance is far from universal.