Tuesday, March 13, 2012

Council and Company

NOBODY likes paying too much tax, and how some people manage to avoid it, by not being on PAYE for a start, is lately the subject of some envy and accusation, not to say admiration. Labour's Ken Livingstone has had to rebut suggestions of hypocrisy over his criticism of tax evasion, because his earnings from talks and articles etc are paid into a company, though as he points out this is quite normal, and ennables him to employ staff, rather than being salted away in an overseas tax haven.

These days many workers in ordinary jobs are self-employed of course, particularly when it suits big companies to have them take responsibilities without security. Some blacklisted workers such as electricians have had no option. But a report by BBC Radio 4's File on Four programme found something quite different.

"Almost 100 permanent posts at local councils are being filled by people paid through limited companies, the BBC has learned. Dozens of high-earners are allowed to make their own tax arrangements rather than be paid through the PAYE system. Public accounts committee chair Margaret Hodge described the situation as a "tax avoidance scheme, which is totally wrong".


As a former leader of Islington council back in its red flag-flying days, Margaret Hodge might take note of what's happening in its Labour neighbour.

"Hackney Council in London had the highest number, with 39 people in permanent posts paid through external companies", says the BBC report. That's not bad for what's been called the poorest borough in London, if not the country, and a council which has lost responsibility for some schools and estates because it was deemed unfit to run them.

I'd be interested to hear more about this from friends who live in the borough (one of them is a councillor), but meantime its interesting to read what happens lower down the scale, when for instance regular council staff are replaced by agency workers.


Moving over from Hackney in the east to Hammersmith in relatively prosperous (for some) west London, we read:

"In one case investigated by File on 4, the chief executive of a London council's housing arm was paid more than £900,000 ($1.4m) through his company over a four year period. Nick Johnson took up his post with Hammersmith and Fulham Homes Ltd in early 2008 after retiring from Bexley council in south London, where he had been chief executive.

His £900-a-day fee was paid into his company, Davies Johnson Ltd".

We've met Nick Johnson before in this blog. He's the partner of Kate Davies, or Kate Marshall as used to be, back when she was a leading member of the Revolutionary Communist Party. Nowadays she is chief executive of the Notting Hill Housing Trust, a charity, though don't go mixing her up with the volunteers you might find working in charity shops.


Here's a report in the respectably Tory Daily Mail about Nick Johnson, which seems to shows what an enterprising fellow he is:

A council chief who retired on a gold-plated £50,000-a-year pension on the grounds of ill-health walked into a new publicly funded £260,000 job four months later.

Yet despite sparking a fresh row over extravagant town hall salaries, Nick Johnson – who earns more than twice as much as the Prime Minister – insists his pay packet is ‘really not a lot’.

Mr Johnson, 57, is eligible for the full income from his final salary pension scheme because he left his £203,000 job as chief executive of Bexley Council in South London on health grounds.

I guess the government could cite this as an example of success in getting people with ill-health back into work again, though I don't suppose many will do so well financially.

One of Tory Hammersmith and Fulham council's leading lights is Councillor Harry Phibbs, one time Federation of Conservative Students star whom even Norman Tebbitt found too right-wing. He has been known to criticise profligate spending by other public bodies.


So it is nice to see the council showing its more generous side in paying Nick Johnson so well. (He for his part has acted as a council spokesman on occasion) But after opposition councillors raised concerns about the arrangements, the accountancy firm PricewaterhouseCoopers (PwC) was asked to report on whether the council risked facing a bill for unpaid tax.

In a confidential report seen by the BBC, PwC told the council:

"Normally the position of chief executive is considered to be an office holder. On that basis there would be a medium-to-high risk that there was a PAYE obligation on Hammersmith and Fulham Homes Ltd." The report went on to say Mr Johnson's particular duties were such that he might be able to claim his arrangements were lawful - but that the taxman might take a different view.


Then again, Her Majesty's Customs and Revenue can be known to tread very carefully when approaching people at a certain level.

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