On fairness the government is taxing its credibility
“We are all in this together!” So goes the war cry of austerity, but some seem to be in it more than others.
We’ve had the saga of multi-million pound bonuses at publicly-owned RBS, the spectre of excessive executive pay and now we have dodgy dealings on tax in the civil service.
It seems that if you sit on the board of a FTSE 100 company, used to be a knight of the realm or happen to be a mandarin, austerity has passed you by.
The coalition has set its priority on fairness. In late January, Vince Cable announced proposals to tackle executive pay, the government pressured Stephen Hester to drop his bonus, David Cameron has advocated ‘popular capitalism’ and Nick Clegg has been blazing a trail for the flagship Liberal Democrat policy to lift the tax threshold to £10,000.
The revelation, however, that the chief executive of the Student Loans Company has an arrangement with HM Revenue and Customs to not pay tax takes that priority and dumps it in woods.
There is only one way to describe Ed Lester’s tax arrangement. It stinks.
In essence a senior civil servant has come to an arrangement with other senior civil servants at the treasury to avoid paying any tax. If this was the private sector Danny Alexander wouldn’t be announcing an internal review. The police would be announcing an investigation into fraud.
And while the Chief Secretary to the Treasury repeatedly said in his statement that he was responsible for signing off the level of salary, questioned by the Commons he refused to mention or defend his colleague, David Willetts, who almost certainly knew about the tax implications of the deal. The questions for him have only just begun.
Lester should be paying the top rate of tax, levied on the top 300,000 people who earn £150,000 or more. By my calculations that means he’s avoided £69,000 income tax and £7,000 in national insurance in the last financial year alone, or let me put it this way, he’s avoided more tax than an MP's salary.
There was a time when being a civil servant was seen as a public duty, rather than a for-profit enterprise. A review might well expose that hundreds of top ranking civil servants, in both central and local government, are paid extremely well with special concessions not afforded to the mere mortal taxpayer simply because of who they know. It’s a potentially massive scandal.
Fairness in capitalism and government needs more than speeches, reviews and committees. The public needs to see concrete action.
As students see their fees tripled in the name of austerity, the head of the Student Loans regime avoids tax altogether. As workers are squeezed between inflation and low pay rises, executives see their pay increase by as much as 17%. As a benefits cap is implemented bosses of banks propped up by taxpayer money take home millions in bonuses.
It’s not about envy. The average taxpayer is feeling the pain of cuts to government spending. The small business owner is suffering from a lack of access to capital and punitive fines of up to £3,000 under HMRC’s Business Record Check. Low-ranking civil servants have faced cuts to their pay as it becomes clear that those at the top get to avoid tax. It’s about fairness. Nothing else.
Words are empty gestures. If the coalition is to deliver austerity fairly it must tackle the moral dubiousness of those at the top as well as crack down on abuses further down.
Danny Alexander told MPs: "There is no place for tax avoidance in government". HMRC, which infamously threatened a church with legal action for making a £500 mistake in its tax return, was criticised by the public accounts committee in December for giving large companies favourable treatment in avoiding late taxes while cracking down on small firms and for a lack of public accountability over how it comes to make deals with rich individuals and large companies.
HMRC has been aiding and abetting, not tackling, those rich enough to escape their tax commitment to the country while coming down hard on those of more modest means. The government stands accused of doing the same with austerity. This is a situation that is unacceptable and untenable.
Far from a fair capitalism the rich seem to have adopted the predatory economics of Lewis Carroll's1871 poem 'The Walrus and the Carpenter'. ‘I am he as you are he as you are me and we are all together,' it says. It makes about as much sense.