Ken Livingstone tax avoidance: 'Red Ken caught red-handed,' says PM

Only one of these men has paid his full share of tax

The astonishing story of Ken’s tax affairs continues to build, with further revelations in today’s Standard. After I revealed, on Sunday, that this great critic of “rich bastard” tax avoiders had avoided at least £50,000 in tax by channelling his earnings through a personal company (paying 21% corporation tax rather than 40% income tax), Ken said he would shut the company down if he became mayor.

It now turns out, however, that for about six years of his previous mayoralty, Ken had a similar arrangement. As I described on Monday, he channelled most of his (very large) income before his election in 2000 through a personal tax-shelter company, Localaction. What the Standard today reveals is that he did not shut down Localaction, and continued to process his non-mayoral-salary income through it, until 2006.

Ken insisted today that he had simply been “too busy” to wind down Localaction and that all the non-salary income he earned after becoming mayor had been donated to an (unspecified) charity “for the education of children who had had their fathers killed in India.” I’ve just asked his spokesman what charity that is and will update you when he responds.

The Standard has done a lead editorial today saying Ken’s behaviour “sits uncomfortably with his jibes about ‘rich bastards’ avoiding tax… Mr Livingstone’s public image does not quite square with minimising tax obligations.”

Ken’s tax avoidance also came up at Prime Minister’s Questions today. Asked by a London Tory MP about the issue, David Cameron said: “Whether it is Barclays Bank or, frankly, Ken Livingstone, people should pay the full amount of tax.

“I hope HMRC will look carefully at all these sorts of cases. Frankly, Londoners, many of whom live in Labour-controlled areas with high Labour council taxes, will be pretty angry about what they have seen. They will probably conclude Red Ken has been caught red-handed.”

Ouch.

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Ken Livingstone's anti-fascist group appoints fascist as vice-chair

One of this blog’s oldest friends, Azad Ali, has a great new post. As the Harry’s Place blog reports, Azad is the new vice-chair of Unite Against Fascism, the ostensibly anti-racist group (in fact more of a meal-ticket for the leadership of the Socialist Workers’ Party.)

Azad is the community affairs co-ordinator of the extremist Islamic Forum of Europe, which controls the East London Mosque and which is dedicated, in its own words, to changing the “very infrastructure of society, its institutions, its culture, its political order and its creed … from ignorance to Islam.” Through “hisbah” (the enforcement of Islamic law) and “jihad,” it aims to create a “global” Islamic dictatorship, the caliphate, and its “primary work” in this “is in Europe, because it is this continent, despite all the furore about its achievements, which has a moral and spiritual vacuum.”

The IFE has already made some progress towards its goal, exercising strong influence over Tower Hamlets Council through its close ally, the elected mayor, Lutfur Rahman. Lutfur’s council has been busily engaged in enforcing Islamic law on, for instance, local strip clubs and a gay pub. At the last election Azad and the IFE also helped to deliver extraordinary and unprecedented swings in their East London heartland for their equally close friend, Ken Livingstone (Ken had given the East London Mosque more than £1 million of City Hall money to build the IFE a new headquarters, despite the strenuous objections of his officials.)

Azad has written on his IFE blog of his “love” for Anwar al-Awlaki, the al-Qaeda cleric. He used to attend talks by Al-Qaeda’s main representative in the UK, Abu Qatada. He has described al-Qaeda as a “myth” and said that the Mumbai terrorist attacks were not terrorism. On his IFE blog, he advocated the killing of British troops in Iraq (he sued a newspaper for reporting this, and lost.) Filmed by an undercover reporter for my Channel 4 Dispatches on the IFE, Azad said: “Democracy, if it means at the expense of not implementing the sharia, of course no-one agrees with that.” His response to this exposure was to threaten our undercover reporter.

It would, I think, be fair to describe Azad Ali as an Islamic fascist.

And Azad’s immediate boss, UAF’s chair, is… Ken Livingstone. In this small world, isn’t it fascinating how the same names keep cropping up?

Ken Livingstone promises to take a pay cut. Well, he can afford it…

When a product is hard to shift, you cut the price. Not enough voters are buying Ken Livingstone’s election promises at the moment – can’t think why – so Ken’s launched a money-off sale. Of himself.

In the Guardian, Ken has promised that he will take a tax pay cut if he is elected mayor in May. He’s offering to reduce his mayoral salary by “at least” five per cent, saving Londoners £7,150 annually. That’s – let me see – a big-value 0.1p a year each!

Not sure this’ll have us rushing to the polling stations on its own, Ken – you’ll probably have to think up some more bargain deals. How about a free Lee Jasper with every Ken Livingstone purchased?

There’s one rather glaring problem, of course. As I revealed on Sunday, Ken is one of those progressives who only appears to believe in progressive taxation for other people. He has been using what he describes as a “tax avoidance option:” channelling his very substantial earnings (£232,000 in 2009) through a personal company, paying 21% corporation tax (a lower rate than my cleaner) instead of 40% income tax, splitting his income with his wife (even though it was earned solely by him) and depriving the Revenue of at least £50,000 in tax (a conservative estimate.) This despite his condemning tax avoiders as “rich bastards” who should not be allowed to vote.

It’ll take more than a 5% pay cut to make up for taxpayers’ losses on that canny little deal.

Ken Livingstone wins Oscar for best supporting hypocrite

Not somewhere Ken will ever need to go

Like a clockwork model you can’t unwind, Ken proceeded on his pre-programmed campaign path today – a new attack on Boris for his high earnings and alleged failure to give money to charity!

The day after Ken (income in 2009: £232,000; tax paid on that sum: about 21 per cent ) was exposed a tax-avoiding member of the “1 per cent,” Ken’s “very positive campaign” has launched attack ads on Boris for writing a well-paid Daily Telegraph column. He handed in a letter at Downing Street calling on Boris to give up his “second job” and which includes the following priceless passage:

“The global economic crisis, the arguments over bankers’ bonuses, and the scandals over MPs’ expenses, all mean the public now expect much higher standards about the accountability of people in public life than ever before.”

Boris does earn a lot of money. But he doesn’t channel it through a personal company to avoid at least £50,000 in tax. You’d think even Ken would have the shame – or at least the elementary political nous – to realise that this is the wrong moment for his big class-war thrust.

There is sometimes a point at which political campaigns tip into ridicule. I don’t think Ken is there, yet, but much more of this and he will be.

There’s one other problem with Ken’s latest piece of “very positive” campaigning. As the blogger Guido Fawkes has pointed out, Ken himself wrote a newspaper column, in The Independent, for about a year after he became mayor. It’s worse than that, actually. For more than a year after his election, he also remained as MP for Brent East.

So instead of having “two jobs,” Mayor Ken had three.

PS: According to ITV’s Simon Harris, Ken supporters have also hired a “protest double-decker” to follow Boris’s new Routemaster, which enters service today. Ridicule moment approaching faster than I thought…

PPS: A magnificent piss-take of Ken (“he needed more than just fine words to show that he is down with the One Per Cent”)  in Sam Leith’s Standard column today.

Ken Livingstone: what I am doing is a 'tax avoidance option'

Ken: that's pretty rich, in two ways

Ken, scourge of “rich bastard” tax avoiders, believer that “everybody should pay tax at the same rate on their earnings and all other income,” was pressed on the BBC tonight about my story that he avoided at least £50,000 in tax in 2009 alone by channelling his earnings (£232,000 that year) through a personal company, Silveta Ltd, with himself and his wife as the sole shareholders.

Under this arrangement, he paid corporation tax (20-21%) on the £232k instead of income tax (40% at the time).  Ken claimed to the BBC today that he was “not avoiding tax” because he paid further tax on any money that he drew out from the company. However, this statement has been contradicted from Ken’s own lips.

Ken has been accused of tax avoidance in the past. In 2000, before first being elected mayor, he channelled his non-parliamentary earnings through a company called Localaction. There, too, he paid corporation tax, rather than income tax, on it. His defence at the time was much the same – he’d paid further amounts in income tax on what he drew out of the company.

“It is only a tax avoidance option provided you’re not drawing the money out,” he said (Sunday Times, 23 January 2000.)

This “tax avoidance option” is, in fact, precisely what Ken is doing now. In 2009 and 2010, the only years for which Silveta’s accounts are available, he has drawn out little, if any, money from the company. By June 2010, the last date for which figures are available, he had piled up a cash mountain in the company of £320,000.

By the way, Ken’s claim that he is not avoiding tax if he draws money out of the company is not true, either.  You do indeed have to pay income tax on company dividends – but at a far lower rate than normal. National insurance (effectively another form of income tax, levied at up to 12% on the rest of us) is not payable at all. So even if you add the corporation tax and the dividend income tax together, you are still paying quite a lot less than some poor sap (such as myself or, well, most people) who is on PAYE, or a freelance who submits a tax return for his earnings in the normal way.

All that is even before Ken’s ability to split his company’s dividend 50-50 between himself and his wife, as joint owner of Silveta, even though all its money was earned by him. He can use Mrs L’s tax allowances and her status as a basic-rate taxpayer to make yet further lovely savings!

And in yet another money-saver, it appears that Ken has been paying his wife – from company funds – to act as his PA and ammanuensis for his autobiography. “I don’t think anyone pays tax on the money they pay other people to work for them,” he claimed today. That’s a typically slippery formulation, if I may say so, Ken. When I pay, say, my cleaner, or plumber, I do so from income on which I have already paid my full share of tax. When you pay Mrs L, it sounds like you are paying her from untaxed (or partially taxed) income, treating her services as “company expenses” and setting them against tax, further reducing your already shrunken bills.

As several of my commenters have said, I hope UK Uncut’s reading all this. Some form of direct action against this particular tax-avoiding member of the “1 per cent” would seem due.

Ken Livingstone tax avoidance: the transcript

Cheque for Ken

Here’s how my story in today’s paper starts:

Ken Livingstone, who has attacked tax avoiders as “rich bastards” who should “not be allowed to vote,” has avoided at least £50,000 in tax by having himself paid through a personal company.

Companies House documents show that Mr Livingstone, who is Labour’s candidate for the London mayoralty, earned £232,000 in 2009, the first year after he was defeated by Boris Johnson at the last mayoral election. The money, from personal appearances, speechmaking and hosting a radio show, was paid directly into a new company set up by Mr Livingstone and his then partner, now wife, Emma, who are the sole shareholders.

Accountants shown the documents by The Sunday Telegraph say the move appears designed to ensure that Mr Livingstone paid corporation tax at 20 or 21 per cent, rather than income tax at up to 40 per cent – a loophole the former mayor has himself attacked as “Robin Hood in reverse.” Mr Livingstone confirmed the arrangement last night.

He is also able to split his income 50-50 with his wife, even though it was earned entirely by him, saving further substantial amounts of tax, and pay Mrs Livingstone from company funds for acting as his “assistant.”

At almost the exact moment that Ken was setting up his tax-avoidance scheme, he was also writing the following (in his column for The Sun, amusingly enough):

“THESE rich bastards just don’t get it…No one should be allowed to vote in a British election, let alone sit in our Parliament, unless they are paying their full share of tax.

“Cameron’s problem is too many of his team have become super rich by exploiting every tax fiddle. Given he is surrounded by so many millionaires in the shadow cabinet it’s not surprising their tax policies aim to reward the rich and screw the rest of us…

“If Brown wants to get re-elected he should promise to sweep away all the tax scams and everybody should pay tax at the same rate on their earnings and all other income.”

Hear, hear to that, Ken!

Here is the transcript of my conversation with Ken when I rang him up yesterday.

Q: Have you ever engaged in any measures to reduce your tax burden?

A: I have no idea, you’ll have to talk to my accountant.

Q: Have you paid income tax on all the income that’s passed through your company?

A: You’ll have to ask my accountant, I don’t deal with any tax matters.

Q: Well, look, we’ve shown the accounts of your company, Silveta, to three accountants, who say that it is clearly a legal tax avoidance device to pay corporation tax rather than income tax and to split any dividends with your wife, further reducing the tax burden. What do you say to that?

A: Do you expect my wife to work for nothing?

Q: So some of the income in the company is from her employment, is it?

A: Well, she was forced out of her job [as Ken’s PA] once Boris won, and then spent time organising my life and helping with the autobiography, so I think it’s right that she should be paid.

Q: So who’s been paying her?

A: Out of the company.

Q: OK, but the money that came into the company was from your employment, wasn’t it, from LBC and speaking engagements and things like that.

A: Yeah.

Q: But nobody formally paid into the company for her, right? You’ve been sharing out the profits of the company with her?

A: But there’s no way I could have done all that without her. She had to organise all my after-dinner speaking, travel, and sat there in the attic for three years whilst I dictated the autobiography. I mean, I do think she’s entitled to be paid.

Q: OK. What’s your response to what the accountants say, that this is a legal tax avoidance device to pay corporation rather than income tax?

A: Well, we seem to have paid an awful lot of tax.

Q: Have you paid the full amount of income tax on all the income that’s passed through your company, Silveta?

A: As I’m paid, yes I pay income tax.

Q: But the payment comes into the company, not to you. You’re not paid, the company is paid. Your clients pay the company.

A: Yeah, but then what you get is that we had a big influx of money in the year after I left [the mayoralty] because there were a load of people outstanding wanting me to go and advise them in various parts of the world, and then the money tailed off. So we spread it over the three years.

Q: Right. So let me just be clear on this, Ken. The money was paid in to the company–

A: And we paid tax on it, the company paid tax on it.

Q: The company paid corporation tax, right? And that is less than income tax.

A: [When] it then pays me, you pay an amount of tax that is effectively the same rate as you would have done on income tax.

Q: Well, I’m advised that it is actually substantially less, because Emma [his wife] is a basic rate taxpayer and she doesn’t pay any tax [on company dividends]. And you as a higher-rate tax payer only have to pay 18 per cent, so the overall effect is less. That’s the arrangement.

A: Don’t forget the money when it comes in to the company is taxed. When you add the two together, it is much the same as any directly employed [person.]

Q: It’s not actually, Ken, it is less. But just to be clear about this: when the money comes in it’s taxed at corporation tax [rates] and when you take it out as dividends, you do pay a lesser rate of income tax [and no national insurance], and that’s how it works.

A: You’d have to ask the accountants.

Q: In terms of the dividends, you haven’t actually taken any dividends out. You’ve got a large cash pile sitting there at the moment. So you haven’t actually paid any income tax on any of that money because you haven’t taken it as dividends.

A: I haven’t any idea at all, I’m not involved in any of this. I leave it to the accountant and to Emma.

Q: You have obviously heavily criticised tax avoidance in the past. In 2009, you said: “Cameron’s problem is too many of his team have become super-rich by exploiting every tax fiddle… [We should] sweep away all the tax scams and everybody should pay tax at the same rate on their earnings and all other income.”

A: If you make me Chancellor, if the Telegraph leads a campaign for me to be Chancellor, that’s exactly what I would do….

Q: What’s your response to the charge of hypocrisy?

(Livingstone puts phone down)

 

Boris Johnson's new bus: first ride of many

From Monday, for the first time in years on a proper route, Londoners can hop on a bus again. I took a preview ride on the new Borismaster on Thursday – and it was great.

As regular readers may know, I have reservations about the design. Some of those reservations remain. But the more I see it, the more I like it. Nor am I the only one. As we drove through the streets of central London, along the first route (the 38) that it will serve, heads turned. Small crowds of people gathered wherever it stopped, snapping pictures on their phones and having to be gently dissuaded from climbing on to the open platform.

It is quiet. It arrived at the stop with an electric hum. The ride is smooth, and it has more headroom than I remembered from the mockup. A long stripe of glass snakes all the way down the back, lighting up the curly rear staircase. The old Routemaster’s half-cab is no more (boo!) But its slatted, wood-effect floors, its classic dark-red interior, its conductors – and, above all, its platform at the back – return. Once more, from Monday, you can hop off between stops if the traffic is slow. Once more, you can run after the bus and haul yourself aboard. The authorities are treating us like adults again.

Now those reservations. I predict (justified) complaints about the lower-deck seating: very little of it is step-free, and quite a few seats face backwards. Bumping your head might still be a problem when you get up from some of the seats.

Although the buses will have conductors for most of the day, the conductor’s role has deliberately been made close to pointless. He or she will not take your money or swipe your Oyster card – which you must still tap in, a la bendy bus, on a reader by the doors. This is likely to restore to the network bendy-bus levels of fare evasion, one of the very reasons for getting rid of the old junction-blockers. The conductors’ main duty will be to supervise passenger security – but they will not be on duty after about 7pm, when the need for security is greatest.

All this feels like TfL’s sneaky bureaucracy (which never really wanted this bus) in action. By giving the conductors no real work to do, TfL is setting them up to be axed at the earliest possible moment. The rear platform will then be almost permanently closed, and the bus operated nearly all the time as a conventional one-person double-decker. Boris should put a stop to this transparent ploy. The conductors should sell tickets, and swipe Oyster cards, at people’s seats. They would easily pay for themselves in extra fare revenue gained.

No doubt, too, there will be teething problems with the new bus – as there are with everything new. There is only one of them at the moment, so in the first weeks even a minor problem will bring the entire Borismaster service to a juddering halt. London traffic and London passenger loads are demanding, and the sole bus will be battling them for 18 hours a day. The Borismaster has a small but committed chorus of joyless haters who will inflate every flat tyre into a new humiliation for the mayor. (If Ken Livingstone had done this, they would of course love it. The new bus, however, is possibly the only thing on earth that Ken has promised not to spend money on.)

But you know what, I think most people will love this thing. It feels surprisingly modern: “sleek,” “forward-looking” and “classy” were the kinds of words that came from the passers-by I grabbed.

According to David Hampson-Ghani, TfL’s project manager for the new bus, there are “no firm plans” to order any more than the initial eight. But there is, he says, a “high possibility” that TfL will place an order for a further 30 to 50 – enough to convert a complete route – in July, and “the intention is to order hundreds.”

Most of all, this vehicle is a giant red smack in the face for the cheap, nasty and degraded new PFI hospitals, schools – and buses – with which this country has been splattered. Right down to its chunky bell-pushes, the Borismaster is thrillingly evocative of an age when form and function mattered in the public sector, when things were designed to please, to work, and to last. At £1 for each person in London, who can complain about that?