Ministers' Tax Affairs no longer private


The Tax Returns of senior ministers could become common knowledge as increased numbers of leading public figures say they have no problem ‘in principle’ with publishing their full annual tax statements. 

Just weeks ago, most cabinet members contacted after the Budget refused to say whether they would benefit from the move to cut the top rate of tax from 50p to 45p, insisting that “Tax is a private matter.”

However, cabinet ministers are now falling over themselves to tell reporters that they have no problem 'in principle' with publishing their full annual tax statements.

Deputy prime minister Nick Clegg became the latest to do so on Wednesday when he said: “I personally have got no principle objection at all to greater transparency by politicians of their tax return.  I think you would probably find mine rather boring. I earned one salary and paid tax on it, and that’s it.”

However, an adviser to one cabinet minister told the Financial Times: “Transparency is, of course, a good thing, but unlimited transparency can produce perverse results.”

Ministers know how damaging such transparency can be for their own poll ratings. They have watched Ken Livingstone’s campaign to become Labour Mayor of London become bogged down in allegations of tax avoidance after it emerged he received income through a private company, on which he did not pay income tax.

But even if their tax affairs are as straightforward Mr Clegg claims his to be, they know Labour is likely to make political capital out of any cabinet minister found to be paying the top rate of income tax.

Given their ministerial salary of £135,000 per annum, cabinet ministers need outside earnings of just £15,000 to take them into the top tax band, so it is likely that several will fall into that bracket, as the prime minister has said he does.

According to the House of Commons’ register of interests, half of the cabinet benefit from outside earnings, mostly from property.

Yet the income received by senior Conservative ministers has decreased – relatively – since June 2009 when Cameron ordered all his frontbenchers to drop their directorships amid the MPs expenses scandal.

Prior to this, it was commonplace for frontbenchers to hold a number of external positions: For example, Andrew Mitchell, now the international development secretary, and Lord Strathclyde, the leader of the Lords, both had six outside directorships.

However, experts point out that publishing Tax Returns would not reveal the full extent of ministers’ wealth nor whether any tax avoidance is being used.

Richard Murphy of Tax Research UK said: “A great deal of tax avoidance is not seen on the Tax Return itself. One of the first objectives of the tax avoider is to make sure their income is not theirs. They move it into a trust, off-shore, and therefore just publishing a Tax Return will not tell the whole story.”

Some ministers simply transfer assets into their spouse’s name. George Osborne has not yet commented on whether he paid the top rate of tax last year despite having rented out his Notting Hill house – bought for £1.8m in 2006 – since July 2011. The house is jointly owned with his wife Frances, meaning he is not the only one collecting the thousands of pounds a month likely to be earned in rental income.

But it is not just personal embarrassment that is driving concerns about where this level of transparency is likely to end. Many, especially within the Conservative party, are concerned about whether the move will stoke public anger against wealthy people in general and erode the principle that tax is private.

Ian Lidell-Grainger, the Tory MP who heads the all party group on tax, said: “I worry that if everybody has to publish their Tax Returns envy will come in.”

He added: “It is an abominable slope. In America the politicians publish their tax returns and what good has it done them? None.”


  • Date posted:
    13/04/2012
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