Unions have called on the government to disclose how many Whitehall staff have been paid under an arrangement that could allow them to pay less tax.
The Department for Health apologised today after it was revealed that it was paying the salaries of 25 senior staff direct to limited companies controlled by the individuals.
This will have almost certainly reduced their tax bills, as corporation tax is levied at 20% for profits under £300,000, lower than the income tax rate that would have been paid.
Jonathan Baume, general secretary of the FDA trade union for senior civil servants, said that he was ‘disappointed but not surprised’ by the revelation that the staff were paid this way. He called for a transparent end to the arrangements.
It is likely that most of the people paid this way worked for the DoH’s arm’s-length bodies, he said, adding that it was also probable other departments had similar contracts in place.
He told Public Finance: ‘What we need to do is find to what extent this happened in core departments and in arm’s-length bodies. We need to make sure no more contracts are awarded in this way and end those that are.
‘This happened as the civil service wasn’t offering effective pay rates and it’s a question about setting effective pay levels. I think with salaries being held down, this was a way to get round it. But [the government should] pay market rates, instead of having this legal but somewhat immoral arrangement.’
The Public and Commercial Services union has also called on the government to stop what general secretary Mark Serwotka called ‘tax avoidance schemes’.
He said: ‘Public sector workers like customs officers, coastguards, teachers and nurses have had their pay frozen for two years while price rises have been going up by about 5%. They face two more years of pay rises limited to 1% while inflation is still nearly 4%.
‘This amounts to a huge pay cut while some fat cats are trousering a fortune and being helped by the government to avoid paying the taxes that are needed to pay for public services.’
A DoH spokesman said that it was undertaking a full audit of the use of such schemes, in line with the Treasury review of public sector pay arrangements.
He added that the department apologised for a ‘misunderstanding’ over the payments. Health minister Simon Burns said in a written parliamentary answer last December that no civil servants were being paid in this way.
