The row about senior government staff being paid through service companies has spread to local authorities. The ever-helpful Eric Pickles has minted a new term – “town hall tax dodgers” – and ordered councils to publicly declare any such payments.
The reporting of this story is becoming almost slanderous, with the public sector bashing right and the self-righteous left portraying these arrangements as tax dodges. As I said on Thursday, there are often good reasons for using interims rather than permanent staff. True, some of them stay in their roles for too long because lazy or under-confident managers allow them to do so, but that is not a reason to abolish their use entirely.
Let’s just get a few things straight. Civil service employees, those with employment rights, holiday pay, pensions and the rest, are not having their salaries paid to private companies. If they are employees, they get paid through the payroll. The people being paid through companies are not employees and, therefore, have no employment rights, no holiday pay, no sick pay and no membership of the pension scheme. If they mess up they can be removed without notice and if their jobs disappear, or their departments are closed down, there are no redundancy costs to pay.
It’s not true, either, that these workers don’t pay income tax. They pay corporation tax on their company profits but they still have to declare their dividends as income which, if it goes above a certain level, is taxed at a higher rate. The only tax avoided by this arrangement is National Insurance.
By all means, put all these ‘public sector tax-dodgers’ on the payroll. Pay them for their holidays and when they are sick. Give them maternity and paternity leave. Add them to the pension scheme. And, if they mess up, or the organisation is restructured, give them huge payoffs and wait for the ‘rewards for failure’ headlines in the papers. That’s assuming that you can fill the jobs at all. As the First Division Association’s Jonathan Baume points out, many of these arrangements were put in place when civil service pay failed to attract the right sort of candidates.
There are lots of people working under self-employed contracts in both public and private sectors. There are good business reasons, on both sides, for doing this. Sure, some of them have been covering senior line roles for a long time and questions need to be asked about why these jobs haven’t been filled by permanent employees. But that is a management issue, not a reason to condemn these arrangements out of hand.
Suggesting that senior interims in the public sector are engaged in an elaborate tax dodging ruse is a nasty slur. But, as is the way during witch-hunts, the voices of reason are being shouted down.