Rule Number One for governments: "Practise what you preach".
Early in January Deputy Prime Minister Nick Clegg pledged that the Coalition would act to combat the "wealthy elite or large businesses that can pay an army of tax accountants that can get out of paying their fair share of tax. They treat paying tax as an optional extra in which they can pick and choose the taxes they pay". His answer was a general anti-avoidance rule, which is expected in the spring budget.
Little wonder then that Chief Secretary to the Treasury and fellow LibDem Danny Alexander yesterday looked as if he would rather be anywhere than attempting to explain to the House of Commons why he had signed off a pay deal allowing the head of the Student Loans Company (SLC) to avoid paying thousands of pounds in tax.
Rather than being added to the SLC payroll, Ed Lester was paid through a private firm, an arrangement agreed by the Department for Business, Innovation and Skills, which also has a LibDem minister.
The background to this story is that the SLC was in a state of crisis and a person of Mr Lester's calibre and experience was needed to put it back on track. The arrangement was presumably intended to boost his remuneration package back towards what he might have commanded in the private sector. The arrangement was perfectly legal, unlike the estimated $3.1 trillion lost to world governments through tax evasion. That does not make it right. As Mr Alexander said yesterday, official guidance is that public organisations should "avoid using tax advisers and avoidance schemes". These schemes enable individuals to make savings at the expense of those who pay their fair share of tax.
The revelation about Mr Lester's tax arrangements is embarrassing for a government professing to crack down on executive pay and supposedly committed to tackling tax avoidance. It is particularly uncomfortable for the LibDems who have made great play of taking the lead on such issues. Mr Alexander's claim that he did not know what he was signing is a poor defence for a man with his job title. The investigation must now go wider. How many NHS or Government agency executives enjoy similar sweetheart deals with the taxman? Do any of them date back to the previous Labour Government? Who knew what at the Treasury? And who first suggested such an arrangement?
As Labour MP Nick Brown said yesterday, such revelations have a demoralising and corrosive effect. They merely deepen cynicism about political integrity in a society preoccupied with fairness. This week has witnessed attempts to cap the incomes of the poor, while demonstrating how the rich bend the rules. Now it is up to the Coalition to put its money where its mouth is (or seemed to be) when it comes to tackling tax avoidance.
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