EXCLUSIVE: HMRC vs Brent Liberal Democrat Leader (twice) on his tax arrangements

Official Government Documents reveal that Brent Liberal Democrat Leader Councillor Paul Lorber has been subject to two tax tribunal cases last year. LINK TO CASE 1LINK TO CASE 2  The official papers are available in the public domain for download through these two links.

The Lib Dem looked to argue that certain expenditures should treated as allowable expenditures because they relate to his role and job as a Councillor. According to the document, Cllr Lorber argued,

“… I use my home on a daily basis to perform my functions.  My home has an allocated room which I use as a study for my Council work, it has desks, computer, phone etc., in addition I use other parts of my house for meetings with my colleagues and constituents.

I do not accept the ludicrous £135 “home use” allowance.  My Council Tax is around £1,500, Home Insurance is around £300, Gas and Electricity around £500, Water rates around £200 plus wear and tear etc.  Your predecessors have accepted my claims for the past twenty years.  I fail to see what has changed.”

Cllr Lorber claimed an unspecified amount for subscriptions and publications.  His claim is expressed in his letter to HMRC as follows:

“The Government is constantly passing new laws impacting on Local Government and passing on new responsibilities.  There has been a massive growth in a new “Training of Councillors’ Industry and I am flooded by constant invitations to Seminars and Training Sessions.  The only problem is that they cost at least £250 a time.

A much cheaper and better alternative is a service provided by the Association of Liberal Democrat Councillors who provide publications advising on new developments and issues and on best practice.  They also publish helpful publications to assist my Leadership and Representative role.  They also provide advice on the phone which I use regularly.  The annual subscription is around £60 and the rest is spent on publications on things like new scrutiny functions etc.”

I find it incredible that he tried to argue this where money was being spent on a Party Political associated body.

The Judgement’s response was,

“By parity of reasoning, a subscription by a councillor to the Association of Liberal Democrat Councillors in return for which the councillor gets its publications and has access to information is not “necessary”; other councillors can carry out the duties without receiving the benefits provided in return for a subscription to that Association.  We have been provided with no details of the publications obtained by Mr Lorber in return for his subscription.  We have to infer that there is nothing exceptional about them that takes them outside the general rules set out above.  Moreover, it appears to us that the material obtained by Mr Lorber is not “job specific” (i.e. to deal with the immediate problems before him) but more generally qualifies him the better to carry out the duties of his office.  For that reason we are bound by authority to disallow this expenditure.”

The most damaging part of the document is The Liberal Democrat’s Communication Expenditure and how this was entangled with his tax affairs. The Document says,

“The question here is whether the communication expenses are incurred because Mr Lorber is obliged to incur and pay for them as an elected councillor and whether he has incurred them wholly, exclusively and necessarily in the performance of those duties.

The case for HMRC, presented by Mr I Allen, is that the relevant expenditure is neither exclusively nor necessarily incurred in the performance of Mr Lorber’s duties as a councillor.  The Newsletters, he accepts, keep constituents informed as to the intentions of the councillor, but, he argues, the newsletters promote the Liberal Democratic Party specifically. Each newsletter includes a statement that it has been published on behalf of the Brent Liberal Democrats and it canvasses support for LDP campaigns and invites donations towards the cost of the campaigning leaflets.  Thus, Mr Allen argues, the expenses in question are not incurred exclusively in the performance of Mr Lorber’s duties as a councillor.  Mr Allen goes on to argue that the expenditure is not necessarily incurred in the performance of those duties.  Mr Lorber would, contended Mr Allen, be able to perform those duties as councillor if the newsletters were not produced.”

It seems that the Brent Liberal Democrat Leader has some very serious questions to answer.

Guest Blog Post: Richard Lynch on why we must have change in 2012

When David Cameron was giving his New Year message twelve months ago, he said that the coalition had pulled Britain out of the danger zone and had laid firm foundations for economic growth and for cutting the deficit. Yet it is now clear that the past year has been a disastrous one for the economy, with growth worse than Gordon Brown achieved when the country was emerging from recession and most economists predicting that a return to recession is likely in the first half of 2012. And as for the deficit, that is now higher than ever and will take longer to reduce than under the Alistair Darling plan which the coalition ridiculed at the time of the general election.

Promises to bear down on unemployment have also fallen flat with 2.64 million people now out of work and 5.67 unemployed people chasing every job vacancy. These are not only higher figures than applied at the worst point of the recession but the highest since 1994 when the Conservatives were last in power. And all the predictions are that there is worse to come, with the Chartered Institute of Personnel and Development (CIPD) expecting an increase to 2.85 million by the end of 2012 and Capital Economics expecting a rise to three million. And the coalition’s own Office for Budget Responsibility, which had predicted that public sector job losses would hit 400,000 by 2016, is now predicting 710,000 such losses by 2017.

Inflation has also been a huge failure for the coalition with the Retail Prices Index rising by 5% or more on 11 occasions in the first 11 months of 2011 (something which happened on only four occasions in the 13 years of the last Labour government). The Consumer Prices Index has not been quite as bad but has averaged 4.5% during the year and is now higher than the CPI in every other EU country, not to mention China, Japan and the USA. And rail fares have just risen by 5.9% on average, giving us the highest such fares in Europe.

Pay increases failed miserably to match inflation in 2011, with the gap between increases in average regular pay and the Retail Prices Index rising from 2.5% at the beginning of the year to 3.4% on the latest figures available. And, according to a recent CIPD survey, only 45% of workers got pay increases in 2011, with 48% having had their pay frozen and 5% having had it cut – worse figures than were ever seen during the recession.

Pensions have also been hit hard, and not only in the public sector (where two million people from 30 unions struck on 30 November – more than took action during the general strike). The Association of Consulting Actuaries recently said that there has been a ‘seismic collapse’ in private sector pension provision, with nine out of 10 private sector defined benefit schemes now closed to new entrants and 25% of companies planning to dispense with such schemes entirely in the next five years. According to other reports, employee participation in occupational pension funds is now at its lowest level since 1956 and 65% of employees have no such pensions and will only have the state pension to look forward to when they retire.

Because of the above and other factors, living standards have fallen sharply in the past year, with poorer families and those with children the worst affected. And all the indications are that this trend will continue, with the Institute of Fiscal Studies predicting that half a million more children will fall into ‘absolute poverty’ by 2015-16. This is not only reversing the fall in child poverty which we saw in recent years but indicates a level of impoverishment which has no precedent in modern times. And living standards are collapsing for older people as well, according to Age UK, with 1.8 million pensioners below the poverty line and local authority care services for the elderly cut by 4.5% in 2011.

While this is happening, the poor are being fleeced by pay-day loan companies like Wonga which can charge interest rates of up to 5,000% a year and by companies running ‘rent to own’ schemes which allow the poor access to cookers, washing machines and other necessities, but at outrageous prices. Pawnbrokers have also been doing a booming business and are making record profits from those who find themselves having to use their services.

The coalition says that all this austerity is inevitable because we have been living beyond our means and that we all have to make sacrifices before we can get back to the good times. Yet Britain is still one of the richest countries in the world (seventh richest according to the most recent assessment) and is awash with millionaires, multi millionaires, billionaires and cash-rich corporations for whom the good times have never disappeared.

These include corporate executives like Mick Davis of Xstrata, who made £18.4 million last year, Bart Brecht of Reckitt Benckiser, who made £17.9 million, Michael Spencer of ICAP, who made £13.4 million and Terry Leahy of Tesco, who made £12 million.

They also include Phil Bentley, CEO of British Gas, whose remuneration package was £4 million last year and Dave Hartnett, the HMRC head who agreed to let Goldman Sachs off interest payments of £10 million, who will be retiring this year with a reported £80,000 a year pension and a cash lump sum of £160,000.  And F1 Chief Bernie Ecclestone has been so untouched by the hard times that he has been able to put £3 billion in a trust fund for his two daughters and reportedly gave £27.5 million to a banker to encourage him not to disclose information about that fund to HMRC. (His daughter Petra lives in a £54 million mansion in LA and had £12 million spent on her wedding. His daughter Tamara lives in a £45 million London mansion which has a spa and massage parlour for her dogs, as well as other features.)

It is because of people like these that income inequality is rising faster in the UK than in any other developed nation, as the OECD recently pointed out in a report called Divided we stand: why inequality keeps rising. That report said that the richest 0.1% of people in the UK own 5% of the country’s wealth, the richest 1% own 14%, and the poorest 30% of people own only 3%. Yet it is the poorest who are affected most by the coalition’s austerity programme!

In his 2012 New Year statement, David Cameron said that he ‘gets it’ when people tell him they are suffering because of job insecurity and rising prices – and it wouldn’t be a surprise if he ‘feels their pain’ as well. But what he doesn’t get is that it is his austerity programme which is destroying the economy, because people who have lost their jobs are not paying taxes to bring down the deficit and people whose living standards are being squeezed are not able to spend on the goods and services which other people are providing; consequently, economic growth is being choked off.

And what some of us are not getting is that there is an alternative to these attacks on our jobs, living standards, the welfare state and our rights at work and that we can turn them back if we stop believing the lies we are being fed and join the growing resistance to coalition and employer austerity policies at work and in our communities in 2012. Let’s do it!

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.