The chief executive of the Student Loans Company has not paid Income Tax or National Insurance on his £182,000 pay packet.
Ed Lester received a new SLC contract in January 2011 but requested to stay on the terms of the temporary contract he had held since taking the position on an interim basis in May 2010.
This agreement saw Lester receive £900 per day for his work, paid by a private firm rather than on the standard SLC payroll. This allowed the parties to agree a deal where tax and National Insurance contributions would not be deducted from his wages.
This agreement was accepted by Universities Minister David Willetts and Cabinet Secretary Sir Gus O’Donnell. The information was revealed on Wednesday night, bringing a storm of criticism of the arrangements in the House of Commons on Thursday.
Labour asked an urgent question on the matter, with Shadow Business Minister Shabana Mahmood commenting that in current economic circumstances “the news that ministers approved the contract of a senior official, which allowed tax and National Insurance to be avoided, shows just how out of touch they are.”
However Danny Alexander told the Commons that he was “not made aware” of any tax benefits in Lester’s contract when he approved it. As Chief Secretary to the Treasury he is responsible for signing off civil service salaries above £142,500 but claimed that in fact the salary level had been “reduced significantly” in the negotiated contract. In response to the criticism he announced that the SLC will now change the arrangements and “deduct tax at source.”
Vince Cable, the government’s Business Secretary, stated that Lester was “an exceptionally useful individual who has helped to turn round [the SLC].” He described the agreed arrangements as “substantial value for money for the taxpayer,” although agreeing that tax issues should be investigated.
However second year Classicist Ben Hudson was less supportive of the positive effect of Lester’s management. He told Cherwell how a paperwork issue had left him with only a non-means tested loan which barely covered half his rent this year, commenting, “I’ve got off lightly, the year before hundreds didn’t get their loans for months and months, including people with no source of income.”
He added, “You expect people to be paid ridiculous sums of money, but the quality of service isn’t improving. It’s our money that’s paying his salary.”
Lizzie Fortin, a Drama student at UWE, added that she had spent “Two years in a row virtually starving because they haven’t got my application sorted.” She commented, “I think it’s absurd that he doesn’t pay tax, and also that money is going into pockets instead of into improving the efficiency of a poorly managed system which leaves hundreds of students without the loans they are entitled to for completely unacceptable periods of time.” Univ college PPE student Alex Lynchehaun added, “A civil servant who earns more than the Prime Minister shouldn’t need to be exempt from tax.”
However Mansfield student Beth Hodgett gave a more measured response, stating, “He is providing a service that is used literally by every student in the UK, if he’s doing the job well he deserves a salary that recognises that he’s running a company that lots of students depend on. I can understand the logic of paying people who are good at their jobs lots of money, if he’s the best person for the job he should be rewarded.”
However she added, “I think it’s unacceptable to have all the benefits of society without contributing towards that by paying tax on their salary. It makes me wonder who else is doing this without being caught.”
The Student Loans Company issued a statement to Cherwell, revealing that they ‘will now be taking forward the changes to Ed Lester’s contract as announced by the Universities Minister, David Willetts.’ They added, ‘SLC followed all government guidlines on the appointment and remuneration of the CEO.’
