MPs express concern over 'off-payroll' deals in local government and NHS

An influential committee of MPs has expressed concern at the lack of information on the use of personal service companies in the wider public sector, including local government.

In a report into the use of off-payroll arrangements in the public sector, the Public Accounts Committee pointed out that the Treasury’s recent review was limited in scope to central government and did not cover other public services, such as local government, the NHS and the BBC.

Margaret Hodge MP, chair of the committee, said: “We still do not fully know how endemic the use of personal service companies is in other parts of the public sector.

“The Local Government Association does not consider the practice to be widespread in local authorities but does not have accurate data.”

The MP added that the committee suspected that many individuals and employers in local government and in the health service did not pay their proper tax and national insurance contributions.

Hodge claimed that "avoiding tax and national insurance when paying public sector staff is almost always staggeringly inappropriate”.

The committee chair insisted that the public sector had to maintain the highest standards of propriety in its employment practices if it was to show leadership in the fight against tax avoidance.

She said: “It must avoid the practice of using off-payroll arrangements for staff who should be on the payroll - a practice which generates suspicions of complicity in tax avoidance and which fails to meet the standards expected of public officials.”

Those whose income is derived from monies raised through taxation have a particular obligation to make sure that they do not use tax avoidance schemes, Hodge added.

The committee acknowledged that the Treasury review’s recommendations earlier this year would go some way to addressing the prevalence of the practice.

However, it said it wanted to know how the Government would implement those recommendations. The report criticised the lack of clarity over the ‘exceptional circumstances’ when personal service companies might still be used.

The committee also urged the Government to address the issue of Whitehall’s long-term skills requirements.

A copy of the PAC’s report can be viewed here.