Ed Lester: Isle of Wight Council Parallels?

We question whether there are parallels with the story about the head of the Student Loans company, Ed Lester, and the two stories we ran last year about council employees being paid through limited companies.

If you’ve heard the news today you won’t have missed the story about Ed Lester, head of the Student Loans Company and the questions being raised over him working full time, not as an employee, but through a company instead.

Ed LesterThe story was broken by David Hencke writing on investigative news site Exaro (where ex-VB intern Alex Varley-Winter now works) and he collaborated with Newsnight for their extensive report on it last night.

VentnorBlog has in the past draw attention to this kind of arrangement happening at the Isle of Wight council for Dave Burbage, the Strategic Director of Resources and Roger Edwardson, now-ex Head of Education.

Paid through limited companies
They work/ed for the council, but through a limited company, not on a council salary, so like Ed Lester, not paying National Insurance or Income Tax at source. Their chosen companies are Dave Burbage Consulting Ltd and Roger Edwardson Education and Childrens (sic) Services Ltd, respectively.

Special attention was given to the fact that that Ed Lester was an Accounting Officer – financially responsible. The paralell with Dave Burbage here is exact. He is the council Section 151 Officer. The person responsible for the council finances.

Watch Newsnight coverage for background
If you watch the Newsnight coverage (worth doing), you’ll hear phrases like “An employee of the state ought to be paying all of their taxes”; that by working via a company Lester would be “Tens of thousands of pounds better off”; “He doesn’t pay NI or tax at source – despite having a full time job”;

They also revealed that Danny Alexander of the Treasury, has written to all Whitehall departments asking if similar deals exist. Will that also be extended to the local councils?

Urgent Internal Audit
Alexander has called for an “Urgent Internal Audit” to be completed by the end of March.

It will question “the appropriateness” of these deals and will “consider the wider cost of lost revenue to the exchequer when considering value for money.”

If deals are uncovered, the treasury says it will seek to “unwind them.”

Arrangement labelled unsuitable and inappropriate
In the discussion on Newsnight, Richard Bacon, a Conservative MP labelled this type of arrangement, “Plainly unsuitable and inappropriate. It shouldn’t be happening and we’ve got to stamp it out.”

When this was raised before, it was pushed aside as “Standard”, in fact Steve Beynon, Chief Exec of the Isle of Wight council wrote a long email to elected members attempting to persuade them of the “advantage” to the council (a letter VentnorBlog reproduced in full).

Questions need to be asked about this ‘Standard’ practice – and those questions need to have proper answers.

30 Comments

  1. 76offset's comment is rated +14 Vote +1 Vote -1

    2.Feb.2012 7:30pm

    IWC Public relations policy: Say nowt & Brass it out and Brass it out.

    Reply
  2. Paul Miller's comment is rated +13 Vote +1 Vote -1

    2.Feb.2012 7:52pm

    One feels like paraphrasing at this point:

    “What didn’t the [Council Leader] know, and when didn’t he know it?”

    Reply
  3. Steephill Jack's comment is rated +12 Vote +1 Vote -1

    2.Feb.2012 7:59pm

    These people are laughing all the way to the bank, and the people in the bank are laughing at us too.
    Government, local and national, is becoming irrelevant because they can’t govern.
    I feel riot, destruction and the barricades coming on.

    Reply
    • Asite2c's comment is rated +11 Vote +1 Vote -1

      3.Feb.2012 12:44pm

      If Burbage was interviewed and asked how he felt about pocketing council tax payers money, he would probably reply, “lovely jubbly”.

      Reply
  4. Cynic's comment is rated +9 Vote +1 Vote -1

    2.Feb.2012 8:21pm

    Was Dave Burbage the s.151 officer that the Tory councillors prioritised consulting in preference to listening to their electorate as reported in VB?
    …………………………….
    “The duty of the CFO (s.151 officer) to report is triggered if s(he) believes that
    • a decision involves (or would involve) unlawful expenditure
    • a course of action is unlawful and is likely to cause a loss or deficiency
    • an entry of account is unlawful.”

    A STATEMENT ON THE ROLE OF THE FINANCE DIRECTOR
    IN LOCAL GOVERNMENT (2003)by the Chartered Institute of Public Finance and Accounting (CIPFA)

    Reply
  5. daveq's comment is rated +14 Vote +1 Vote -1

    2.Feb.2012 8:49pm

    Its high time these greedy leeches were made to pay every penny in taxes that is due and they MUST NOT be allowed to continue this highly immoral practice.

    Reply
  6. Cynic's comment is rated +7 Vote +1 Vote -1

    2.Feb.2012 9:03pm

    Remember that a tax loophole- through which freelance consultants could avoid some taxation by taking dividends instead of salary- has been partially closed by the Inland Revenue (IR35). Further that all pension payments also attract taxation.

    So perhaps there is not a close comparison between the Student Loans Company case. Successive governments have been salami slicing and selling off the student loan book to private companies since the late 1990s.

    Reply
  7. Stewart Blackmore's comment is rated +18 Vote +1 Vote -1

    2.Feb.2012 9:03pm

    The fact that the CEO of the IW Council, with the approval of the Leader, can say that this is a ‘standard’ method of paying Officers shows just how the so-called ‘Big Society’ is laughable.
    If a Cooperative shop assistant told his/her boss that they would like their, probably minimal, wage paid into a limited company account, they would be laughed at.

    Put simply, this is a scam to ensure that already fabulously rewarded public servants can evade paying their full share of tax and NI contributions. It always has been and always will be ‘them & us’. It is a scandalous abuse of public funds and David Pugh should put a stop to it immediately.

    Reply
  8. playingthenumbers's comment is rated +10 Vote +1 Vote -1

    2.Feb.2012 9:14pm

    Well, well, are the rumours true? The Tories embrace of mercantilism (ethics) appears to be gathering apace. Stripping honours, tearing up contacts of renumeration for bankers & senior civil servants (over a £1m last week), whilst sitting on their hands as corporations swallow up the dynamism of small businesses. What happened to the party of free enterprise? (hollow laugh)

    Strange how a dialectic, born in renaissance Italy following the black death, happens to be on the reading list of so many, all at once. Might I suggest that they look to the source of this thinking, Cicero (De Officiis). Specifically the bit about justice; whether in high office or low – ‘it is the essence of propriety at its best’. Implement that thought & already the world starts to become a better place!

    Reply
  9. john's comment is rated +11 Vote +1 Vote -1

    2.Feb.2012 9:34pm

    How I agree. Paying staff through their own companies may not be illegal but it is definately immoral. How can councillors allow this?

    Reply
  10. Asite2c's comment is rated +6 Vote +1 Vote -1

    3.Feb.2012 12:00pm

    In my opinion, there should be a thorough, independent investigation into the council’s affairs regarding payments of council tax payers money to consultants and big businesses, especially at a time when public services are being cut and the rest of us are being told to tighten our belts.

    Reply
  11. Mike Starke's comment is rated +13 Vote +1 Vote -1

    3.Feb.2012 12:01pm

    One thing that many Islanders might think particulary galling about Mr Burbage’s remuneration arrangements with his County Hall cronies is that, as the architect of cuts in jobs and pay of honest-to-goodness IW council employees, he has made sure he wheelbarrows home wodges of Wight wonga beyond the wildest dreams of those lowly wage slaves and at a fraction of the tax rate his victims have to pay.

    Reply
  12. Meursault's comment is rated +8 Vote +1 Vote -1

    3.Feb.2012 12:23pm

    The whole structure of senior level pay and recruitment in the public sector/local government is a complete sham.

    The recruitment agencies are like cosy clubs that provide a merry-go round for many sub-standard execs and drive up pay rates under the guise of ‘top people cost top money’. But that is the problem, the performance is generally poor and yet they still get paid these huge salaries.

    They also argue that they need this salaries to compete with the private sector – but generally many of these execs have never stepped foot in the private sector, because if they did they would be found out. In the private sector if you don’t perform you get fired, in the public sector you carry on business as usual or simply transfer to a new body on an even higher salary.

    For all the six figure salaries paid to IWC staff over the past 10 years are there any stand-out performers who have implemented innovative management and dynamic policies? Not to my knowledge.

    Have any of the directors been sacked for lack of foresight in regard to not reacting to the financial crash until the coffers were dry? No.

    I am all for paying top wedge for star performance and would be happy to pay the IWC CEO double his current salary if he was truly exceptional. But sadly he is not.

    The whole system is rotten to the core and needs a complete overhaul.

    Reply
  13. Asite2c's comment is rated +6 Vote +1 Vote -1

    3.Feb.2012 12:25pm

    People like Burbage and his clan, probably look down upon low paid workers as statistics, which can simply be changed according to their will on a calculator or back of a fag packet.

    Reply
  14. Island Monkey's comment is rated +4 Vote +1 Vote -1

    4.Feb.2012 8:06am

    Someone at my firm once tried this ‘I will be a contractor’ tax and NI dodge. The Inland Revenue soon put a stop to it – and demanded the correct tax and interest from the employer.

    The rules state that you cannot be ‘continuously employed’ (which they appear to be) and that you have to be working independently, under your own direction, doing the work in your own time and place. As officers of the council, how can these people possibly claim that?

    Mark my words, we taxpayers will eventually pick up the tab for this blunder.

    Reply
  15. adrian nicholas's comment is rated +3 Vote +1 Vote -1

    4.Feb.2012 10:03am

    Surely, an example of Cameron’s ‘we’re all in it together’ big societal policy idea justification in reality and practice.
    The case highlights a major development of the last 30 rs. since deregulation and a two tier economy and respective tax regimes was allowed to dictate state and globalist conditional policy.
    A small state, low tax objective of traditional tory and neo-liberal advantage means no or low tax for the most advantaged and tax and less public service for the rest with ‘austerity’ a vehicle of convenience for a select few to take larger middle men commissions as per city, savings and pensions, firesale privatisation of respected public services like health and education and then avoid tax like the policy facilitators, in a Lester’s national case to local Burbage’s case, confirming that its effectively one law for the rich and another for the poor.
    That just a few months ago , Osborne and some tories were talking about a 10p upper tax threshold for the top 1%, and UK income disparity at 1918 levels, shows how austerity as a veneer for achieving those goals by creation of uk as a low wage, low skill, labour market for same tory and funders goals to attract ‘investment’ by essentially non-dom tax except investors/cronies.
    That at last full council meeting, senior tories defended the arrangements of senior IWC staff with such personally limited contractual arrangements now seems ironic.
    The whole ethos of public service is undermined by such limited companies for individual senior staff.
    That Dave Burbage has his own special arrangements to avoid full tax liability has been consistently publically raised by Mike Starke and should need no reminder, as also the arrogant and derogatory replies given by council leader Pugh to both Geoff Lumley and Graham Barry when they have tried unsuccessfully to bring this issue up at full council on a number of occasions.

    Reply
    • Cynic's comment is rated +4 Vote +1 Vote -1

      4.Feb.2012 10:41am

      There are two separate issues being discussed in this thread.

      1. Should the IoW Council employ contractors in senior management positions?

      The reason organisations in trouble replace permanent staff with contractors is that such contractors do not appear in the organisation’s headcount or direct salary bill (they are paid by Accounts Receivable on invoice.) In this way, the bosses of the organisation can claim they have reduced their headcount and direct salary costs- and collect any bonuses due to them for apparently achieving these targets.

      In reality, this “achievement” is an illusion as the contractor will have already factored into his/her price such things as sick and holiday pay, pension contributions plus a premium for early close of contract. So the cost will be the same, if not higher, and the contractor will consume as much management time, office space and car parking as the person he/she is replacing.

      2. Does the process allow such contractors to avoid/reduce their tax and NI contributions?

      Probably not!. Over the last 10+ years, the HMRC has concentrated on closing the loophole whereby contractors could avoid tax/NI by taking only dividends from their private companies. The IR35 provisions regarding contracts are very tough and HMRC inspectors diligent in sniffing out contract seeking to avoid/reduce tax/NI. (Take a look at http://www.contractorcalculator.co.uk/IR35_Test_Start.aspx to see the obstacles that have to avoided to escape IR35).

      In summary, should IoW Council employ contractors for senior management jobs? In my opinion, no.

      Are those contractors likely to escape tax/NI responsibilities. In my opinion, highly unlikely unless they are extremely clever or prepared to run the risk of an HRMC investigation and hefty fines.

      Reply
  16. Mike Starke's comment is rated +5 Vote +1 Vote -1

    4.Feb.2012 1:27pm

    A point about the Dave Burbage Consulting Ltd scandalthat should not be forgotten is that the sole employee of that firm, the eponymous Dave, was the architect of the cuts that have robbed the Island of social services (in some measure illegally and at a cost of £197,000 in court costs, we now know).

    In addition, while he enjoys the “tax efficiency” of his legal loophole to enhance his £150,000 a year wodge of Wight wonga, his budget cuts have insisted that lower paid IW council workers must lose 20 per cent and more of their wages.

    Now Burbage’s close colleague, chief executive Steve Beynon, has come out in favour of his chum’s pay arrangements.

    That speaks volumes for the ethos of County Hall.

    Reply
    • Cynic's comment is rated +2 Vote +1 Vote -1

      4.Feb.2012 2:11pm

      Mike Starke assumes the Burbage contract escapes IR35. How does he know?

      Reply
      • eye-land's comment is rated +6 Vote +1 Vote -1

        4.Feb.2012 2:37pm

        IR35 was introduced in April 2000 to stop people using a limited company to carry out full-time work for another organisation where they should in fact be employed and paid through PAYE. The revenue call it ‘Working through an intermediary, such as a Personal Service Company’, as we’ve all been hearing in the national news this week.

        For those who don’t know what IR35 is, here’s some background http://www.hmrc.gov.uk/ir35/

        If Mr Burbage is working full-time at the Isle of Wight Council, how could he possibly have other customers for his Personal Service Company? Perhaps he’d like to reveal to make the situation clear. He is, after all, very well paid by the tax payers of the island, so has an obligation to us.

        Or then again perhaps he, and those at County Hall that originally sanction it, and most-relevantly, continue to sanction it, would prefer it just went away.

        Am I alone in thinking that it’s important that it doesn’t just go away?

        Reply
      • Stewart Blackmore's comment is rated +2 Vote +1 Vote -1

        4.Feb.2012 9:34pm

        Because it’s true. Ref: Margaret Hodge, Chair of the Public Accounts Committee.

        Reply
  17. Island Monkey's comment is rated +4 Vote +1 Vote -1

    4.Feb.2012 4:59pm

    Just because Burbage, Beynon and Pugh say it is OK it doesn’t mean it is OK.

    I do hope if it is found to be against the rules, the three of them personally repay whatever fines, interest and back taxes are imposed?

    Perhaps VB, IW Radio and the County Press could ask them for such an assurance?

    Reply
  18. Island Monkey's comment is rated +4 Vote +1 Vote -1

    4.Feb.2012 5:02pm

    Former Isle of Wight Council Chief Exec Mike Fisher is doing a similar thing elsewhere. David Pugh said the council have ‘no plans’ to review his pension when it was revealed in Private Eye.

    At best, it does look as if the taxpayer is being short changed.

    Reply
  19. The Auditor's comment is rated +6 Vote +1 Vote -1

    3.Feb.2012 9:06am

    Interesting. Does his previous employer know the current position? If they were to be made aware of it, they may have cause to review his pension arrangements.

    Reply
  20. Steve Goodman's comment is rated +7 Vote +1 Vote -1

    3.Feb.2012 9:25am

    They will know if they are Private Eye readers.

    Trouble is, this scam for the greedy is not illegal, however immoral or unjust it is.
    (Like RBS bonuses, or Fred’s knighthood…?)

    I’m now wondering how much pension we are paying to ‘retired’ IOW CX’s for their brief efforts here; and I’m guessing such pensions are unaffected by the stated need to reduce the wages bill.

    Reply
  21. The Auditor's comment is rated +4 Vote +1 Vote -1

    4.Feb.2012 3:50pm

    Having re-read this thread, is it not time that HMRC investigated the legality of this contractors relationship with County Hall? IF it is legitimate, then he has nothing to fear. If however it is proven to be a tax & NI evasion exercise then no doubt the Revenue will seek exactitude.

    Reply
  22. biggmarket's comment is rated +4 Vote +1 Vote -1

    4.Feb.2012 4:55pm

    I would assume that as with Mr. Lester and the Student Loans Company the Council would have okayed this arrangement with HMRC. This leaves you to wonder how it was agreed.

    Andrew Turner on Vectis Radio said he thought Mr. Burbage should be subject to PAYE. This could create an interesting situation because it could effect his pension from his previous employment

    Reply

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