Westminster blog

We revealed this morning in the FT that Treasury officials believe that as many as 100 civil servants may have been paid through private companies rather than individuals – far more than had previously been thought.

That marks a major widening from the 25 at the Department of Health exposed in the Guardian yesterday. The health department admitted that many of the staff paid in this way were full-time employees and had worked in the department for years.

Departments have sought to argue that nothing inappropriate has occurred and that it is legitimate to hire people who classify themselves as companies or partnerships.

You might wonder why this is allowed to happen and why there is no rule preventing it already.

The answer is that there is: It’s called IR35, which was introduced in 2000. It was set up to prevent people using such devices to avoid PAYE or National Insurance.

John Whiting, a leading tax expert, tells me that the HMRC should establish whether any of the individuals fell under IR35.

Mr Whiting, a director of the Chartered Institute of Taxation, said it was “terribly difficult” to establish if someone was using a company with the purpose of avoiding PAYE and National Insurance. But there are some clear guidelines.

“It doesn’t apply to someone doing a day here and a day there and working for several clients,” he said. “But where you have someone working half time for one orgniasation and for say six months, or a couple of years, they’re bang to rights.”

The Treasury only sent out its detailed guidance to departments last week and won’t produce a report until late March.

However, HM Revenue & Customs will be working closely with the Treasury on the issue, it told us.

“All sorts of people work through service companies for all sorts of reasons,” an HMRC spokesman said. “But where the arrangement is really only a way of avoiding PAYE tax and National Insurance, then the law says the service company must pay the PAYE and National Insurance to us on behalf of the individual at the end of the year. We police the application of that law and we are currently increasing the number of people focussed on compliance work making sure the tax rules apply as they should.”

David Cameron has been quoted saying he will not rule out quotas for women on boardrooms as a way to get more women into top executive jobs. Speaking at a summit in Sweden, the prime minister said he wanted to “accelerate” the increase in women on the boards of top UK firms – even if this was ideally without quotas.

A year ago an official report by Lord Davies into the issue urged companies to more than double the number of women on boards by 2015. At present the proportion of female FTSE 100 directors is about 15 per cent, though they tend to be non-executives rather than executives.

Mr Cameron said Scandinavian countries were “leading the way in Europe” on the issue of women in top executive jobs. In Norway, where quotas were introduced in 2008, the proportion is 40 per cent. (Other countries are following suit with quotas including France and Spain).

The issue of cuts to council tax benefit may sound esoteric; what’s one more cut in a world of public sector austerity?

Yet most cuts to benefits are relatively simple to administer: you still give people money, just less of it.

Council tax is rather different, as it involves taking money from people. Cutting council tax benefit means that you need to collect even more money from them.

There is already a high level of non-payment of this levy and some local authorities are worried that the problem will only get worse when the cut comes into force.

I explain the full situation in this article.

In a nutshell, the government is not only cutting the benefit by 10 per cent but also shifting responsibility to councils. But ministers have made it much harder for local authorities to carry out the cut as they have ordered them to exempt pensioners and “vulnerable groups”, thought to include the disabled and families with children.

That means that out of 5m people who receive the benefit, only an estimated 1.3m may have to take the impact of the cut – implying they could be hit with a reduction of almost a third.

That would mean an average of £330 per person, equivalent to the average household’s

Two strands of thought are emerging about David Miliband, the Labour leader that never was, who launched his report into youth unemployment on Monday.

The first is that he is a cowardly figure, willing to make coded but bitter attacks in the New Statesman against his brother, but unwilling to follow it up with action. The second is that he is a great wasted talent, a serious policy thinker who should be brought back into the front line, one way or another. (I should say, of course, that these two things are not mutually exclusive.)

The first was savagely articulated by Matthew Norman in Friday’s Telegraph. Under the title “The sniping and self-pitying of a truly feeble man”, Norman wrote:

It is hard to know who will take the political credit for Network Rail’s directors dropping their plan for any annual bonus this year: Ed Miliband or Justine Greening? Both had made clear their concerns about any extra pay-out to the board of the quasi-private company (which receives £4bn of taxpayers’ money every year) ahead of the announcement. Ms Greening, the transport secretary, had even vowed to turn up to a public meeting of the group on Friday to vote against its recommendations. Meanwhile there was growing pressure in the form of an early day motion by former Labour transport minister Tom Harris, signed by 30 MPs.

The news came through some five minutes ago: Not only will Network Rail delay its meetings of around 100 board members, which was due for Friday.

Also chief executive Sir David Higgins and his board will not keep any annual bonus this year if one is decided at a separate meeting in May. Instead they will donate the money to the  safety improvement fund for level crossings. (Network Rail pleaded guilty a few days ago to failings which led to the deaths of two teenage girls at a level crossing.)

Sir David said:

“Even if this (annual bonus) situation does arise this year, I and my directors decided last week that we would forego any entitlement and instead allocate the money to the safety improvement fund for level crossings. I can confirm that remains our intention.”

In fact Friday’s meeting had also been to discuss a “long-term incentive plan” – worth much more than the annual bonuses – and this will still go ahead.

Ms Greening had made clear that she was not against performance-related performance per se; but instead she wanted Network Rail to wait for the result of a “control paper” on the group’s corporate governance which will not be published for a couple of weeks.

In other words, her vote would have been as much about timing as it was about limiting the annual bonus. The five-year incentive plan is as likely to remain as ever, even if not quite in its original form.

Greening still wants to “beef up” taxpayers representation at NR and will seek to do so by getting a “special director” on the remuneration committee. This will be recommended in the command paper.

There has been no similar instance of ministers getting involved in NR’s corporate governance since the 2005 dismantling of the Strategic Rail Authority, according to coalition insiders. They point out that Labour ministers always used to wash their hands of final decisions on Network Rail remuneration, telling the Commons repeatedly that it was a “private company.”

Then again Tom Harris tells me that the power to appoint a special director has always been in the DfT’s powers over Network Rail: and therefore ministers could just do it without the command paper.