Are Michael Gove's advisers avoiding tax?

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Michael Gove

Kevin Brennan, the shadow schools minister, has written to Michael Gove, the Education Secretary, asking for clarification about the payment of his 'academy brokers'. It emerged yesterday that they were being paid as personal service companies rather than being employed by the government.

But why is this happening, and are taxpayers being ripped off?


Off-the-books

There are 24 Academy Brokers, who work to encourage state schools to apply to be academies. Brennan started asking questions yesterday in parliament, and Gove's answers revealed that instead of being employed by the civil service, they are paid off-the-books.

Gove's office told The Daily Telegraph that they did this in order to ensure that the advisers could be used flexibly and effectively. They explained that these were experts - including former head teachers and Ofsted Inspectors - who could not be sourced from within the Civil Service. They also emphasised that it was an arrangement set up when Labour was in power, and that Gove's office had actually negotiated lower rates.

Not cheap

However, it's not cheap. Some individuals are paid up to £1,000 a day for their services. It's also a great way for the individuals in question to pay less tax: they are able to pay corporation tax at 20% rather than income tax at anything up to 45%.

There's nothing illegal about these arrangements, but the government has spoken out against using this sort of pay arrangement in the civil service, claiming they are depriving the Treasury of essential funds.

It's unfortunate that this news should break on the day that David Cameron took his anti-avoidance message to the EU, complaining that the losses from 'aggressive avoidance' were 'staggering'.

He said: "In a period of fiscal consolidation where hard-working citizens and businesses are being asked to bear extra burdens, we need co-ordinated, truly global action to address these issues."

It seems that his government could do with a similar slice of co-ordination.

At the same time, there's the question of whether at these sorts of rates it can really be more cost-effective to employ these people as freelancers. Given that the Public Accounts Committee attacked the Academies project for overspending this week, these revelations are coming at an embarrassing time.

Asking questions

Now Brennan has another raft of questions, which could also prove difficult for Gove. He asks: "What steps has the department taken to ensure academy brokers are paying the correct tax? How many of them are former civil servants? How many academy brokers are there in total, how many are on payroll and how many are off?"

The pressure is now on for Gove to investigate the individual tax affairs of his advisers, and discover whether they are taking payment from the government, and paying as little of it back as possible.

The question is whether he will go this far? Is it any of his business? What do you think? let us know in the comments.

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