Student loans chief is let off tax, while the rest of us pay

Ed Lester, chief executive of the Student Loans Company, who was appointed in May 2010, has for the past 18 months been paid through Penna Consulting, which charged the Student Loans Company for his services. This means that income tax and national insurance contributions are not deducted at source, unlike student loan repayments.

Paperwork obtained by Newsnight shows that this was signed off at ministerial level, despite officials warning about the loss of revenue. Danny Alexander, George Osborne's right hand man at the Treasury, confirmed this in the House of Commons last week when he said: "As chief secretary, I now personally sign off any new pay above £142,000."

David Willetts, the universities minister, has defended the decision, saying the state saved money through this arrangement. If Lester had been obliged to pay tax like the rest of us, his wage bill would have been increased accordingly.

This is absurd. Why then should any public servant have to pay taxes? Should the head of HMRC have to pay income tax, or would it be more cost effective to let her off? Should the prime minister?

What kind of message does this send to self-employed workers in the private sector who have just spent January filling in their tax returns? What kind of message does it send to the benefit cheats and fraudsters that the PM says he is uncompromisingly chasing?

Willetts has form in this kind of intellectual triangulation. Back in the days of the John Major government he had to resign after "dissembling" over his involvement in Neil Hamilton's fall from grace.

In that same Treasury session in the Commons last week, Alexander said: "Our message to tax dodgers is, 'No matter how well known you are, how clever you think your accounts are or how far away you hide your money, we are coming to get you'." Sanctimonious hypocrisy.

It is a great irony that a government that has set up a new model of student finance which threatens to price a generation out of higher education has at the same time excused from taxation the very man in charge of recouping student debt.

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