Council high pay culture includes “tax avoidance scheme”

It’s long been acknowledged that council big wigs are taking home astronomical sums despite the fact that the public often have no idea what they do.

However one Labour MP, Margaret Hodge, has denounced the practice of using external companies to pay top council officials as a “tax avoidance scheme, which is totally wrong… Where you are a public servant it’s not right you should be paid in a way that avoids tax”. Hodge, who chairs the Public Accounts Committee was concerned that using these arms length private arrangements meant a lack of transparency.

The BBC reports that “Some officials may be paying PAYE through their limited companies but they have the option to pay themselves via dividends, which are taxed at a lower rate. The arrangements also mean they can pay national insurance contributions at a lower rate.”

With a growing inequality in pay councils are uniquely placed to try to rein in disparities in pay, a task that some have taken more seriously than others. Camden council now has a just over ten to one ration in pay between the highest and lowest paid staff members for example. As councils have come under increasing financial pressures there is a growing mood to tackle out of control high pay, as well as ensuring that the lowest paid staff have enough to live on.

Hackney Council have 39 top staff paid through these external agencies and Hammersmith and Fulham Council have 11 – indicating that in some areas the high pay culture and lack of transparency may be getting out of control.

Tax avoidance in the private sector has come under increasing scrutiny with the leaders of the three largest parties all coming out in favour of cracking down on the practices. This is the first time  however that the issue has been highlighted at a national level for council staff.