Government-owned Student Loans Company issues spurious legal threat to press

On Monday 28th May 2012, former Prime Minister Tony Blair was giving evidence to the Leveson Inquiry into the press. Over the course of that week a number of cabinet ministers gave evidence: Theresa May, Michael Gove, Vince Cable, Kenneth Clarke and Jeremy Hunt. It followed a sensational week of evidence from a succession of politicians, spin doctors and senior political journalists.

The behaviour of the press in relation to politicians and government had never been under such intense scrutiny.

So it is all the more remarkable that a government department – at this of all times – should authorise the release of a misleading press statement by an arms-length body indicating that it had grounds to seek legal redress following critical newspaper reports.

The body was the Student Loans Company, majority owned by the UK Government with a minority of shares held by the devolved assemblies and governments in Wales, Scotland and Northern Ireland. The news reports concerned the unusual tax arrangements of its chief executive Ed Lester.

The misleading statement said that “The Student Loans Company is disappointed by misleading reports that seek to link Ed Lester’s planned departure to recent media coverage of the previous tax arrangements in his contract.

Were the media reports misleading? Did they link his departure to the tax controversy?

The Independent reported: “Student Loans Company head Ed Lester will stand down when his contract expires next year in the wake of controversy over his tax arrangements. Mr Lester was paid through a company in order legally to reduce his liability for tax until ministers intervened in February this year. The Student Loans Company said his contract expires at the end of January next year and work had begun to recruit his replacement.

The Guardian said: “The chief executive of the Student Loans Company, whose tax arrangements triggered a Whitehall crackdown on tax avoidance in the civil service, is to stand down next year, it was revealed on Friday. Ed Lester will leave his post when his two-year contract comes to an end in January. The company said his decision to leave was not related to the controversy that arose when it was revealed he was paid through a personal service company.

The Daily Mail reported: “The head of the Student Loans Company will stand down when his contract expires next year in the wake of controversy over his tax arrangements.

The Daily Telegraph said: “The head of the Student Loans Company, whose tax affairs led to the revelation that more than 2,000 civil servants were being paid off pay roll, is to leave his post. Ed Lester is standing down as chief executive of the Student Loans Company when his contract expires in January next year.

The Times reported that “The head of a government agency who was accused of tax avoidance on his £182,000 salary has announced his resignation. Ed Lester, the chief executive of the Student Loans Company (SLC), received his salary through a private firm, saving him an estimated £40,000 a year. He will leave when his contract expires at the end of January next year.

BBC News said that “The chief executive of the Student Loans Company, who attracted controversy over his tax arrangements, is to stand down. The publicly-funded body says Ed Lester will leave his £182,000 post when his contract expires early next year.

Exaro, the investigative news website, first broke the story before it was followed up by the mainstream media. Its report stated: “Ed Lester is to stand down as chief executive of the Student Loans Company, Exaro can reveal. It follows the furore over how the senior public official was paid through his personal-service company – with no tax deducted at source. A spokeswoman for the Student Loans Company (SLC) confirmed that Lester has decided to leave when his contract runs out next January.

Ed Lester
Ed Lester

So, NONE of the news reports linked his departure to the furore in a way that suggested that he was leaving because of it. And ALL of the reports made clear that he was leaving at the conclusion of his contract.

Yes, the reports did make mention of his controversial tax affairs; but then, frankly, that is what Ed Lester was known for. It is still what he is known for. I’m sure he’s a very nice man who plays an important contribution to society. But the departure of the chief executive of an arms-length government body is not news-worthy. Ed Lester was newsworthy because of his tax affairs.

Were the newspapers right to “drag up” his tax situation after the matter had already been reported? Well, that’s a matter of judgment. In my view they were. They still remain controversial. After his tax arrangements became public he was forced by the Treasury to regularise his tax position; as were other civil servants on similar arrangements.

And just a few months ago, as the new head of the Land Registry, he was required to give assurances that he was being paid “on the books”. The chair of the House of Commons’ Public Accounts Committee, Margaret Hodge, told the Telegraph: “My committee and the public will want immediate reassurances that Mr Lester is being employed on PAYE and paying proper tax and national insurance contributions.

Most professional media relations’ advisers would say that the media reports – uncomfortable as they may be for the person being reported on – were fair and accurate. But not the SLC. It was bad enough that they issued a report saying that they were “disappointed” by the “misleading reports”; but they went further.

The press statement quoted SLC chairman Ed Smith praising Lester and his role in the SLC, and went on to say: “Ed’s planned departure from Student Loans Company has always been a matter of public record. It is in no way linked to the tax arrangements in his contract agreed by BIS, HM Treasury, HM Revenue and Customs and the Head of the Civil Service.

That’s fine. But the news reports hadn’t said otherwise. They said he was going when his contract expired.

The most damning aspect of the press statement was the final paragraph: “The SLC has instructed legal advisers to review these reports in consideration of seeking redress.

WOW! A government-funded body has instructed lawyers to consider seeking redress for a private individual!?

If the media reports were defamatory – and they were not – then the only person who could claim to be defamed was Ed Lester. It was for Ed Lester, if he wanted, to instruct solicitors to seek redress. It was certainly not for the SLC; not least because any compensation awarded by the courts could only be awarded to Ed Lester personally.

But, rest assured, no tax-payers money was wasted on this futile exercise (apart from the costs of employing inept PR staff and in distributing a misleading press release). I know this because the SLC might act as a private company – and that is its legal structure – but it is owned by the government, funded by taxation, and carries out a public function; so it is subject to the Freedom of Information Act.

Over the past 12 months I have submitted three separate Freedom of Information Act requests to the SLC about this press release. The company still hasn’t revealed all the information sought saying, amongst other things, that its chairman Ed Smith doesn’t have an SLC email address and “would therefore have to provide any relevant emails separately via his own personal email address” at a time estimate of two hours. I am referring the matter to the Information Commissioner for a ruling.

But the documents that have been released by the SLC reveals an organisation that has contempt for the truth.

The original FOI request, made on 25th July 2012, asked eight questions:

  1. The identity of the solicitors, barristers or firms instructed to provide this advice;
  2. The cost, to date, of legal advice in relation to this matter;
  3. Any anticipated or on-going costs that the SLC have budgeted for this matter or have been advised by their legal advisers may be payable;
  4. Who authorised this expenditure and, if at board or committee level, provide copies of the relevant minutes;
  5. Whether any warning letters or letters before action have been sent to any party, and if so, who;
  6. Whether any claim has been issued in any court in relation to the above, and if so, details of the courts and case numbers;
  7. Whether any party has agreed to pay compensation or damages in relation to the above, and if so, to whom;
  8. The basis on which the SLC believes it has reasonable cause to “seek redress” in relation to these reports.

The SLC’s response was curt:

I can confirm that SLC has in-house solicitors, who deal with any legal issues arising within SLC unless specific specialist advice is required. No external solicitors were instructed and there has been no additional expenditure incurred in relation to this matter.  There are no anticipated or on-going costs budgeted for and no authorisation of expenditure has been required.


SLC is no longer considering seeking redress in relation to this matter.  I can also confirm that no warning letters, letters before action or legal proceedings were issued, and no party has agreed to pay compensation or damages.”

Of course it failed to mention the basis on which it had cause to “seek redress” in relation to the newspaper reports. They were asked again to do so.

A very useful tool in seeking the truth from Freedom of Information Act requests is to issue a second request after the first has been complied with, in which you ask for copies of notes, memos, emails, board minutes and associated documents relating to the original request and how it was dealt with.

I did just that and the response revealed that the officer compiling the response to the original Freedom of Information Act request had “kept the response very brief, to avoid any possible follow-up requests.” She went on to say that “Chris had mentioned about subsequently backing away from this course of action, and I have not referred to the decision being taken not to pursue the misleading reports further, as this could potentially lead to a further request about how and when this decision was taken.”

The FOI Act requires organisations to provide information that has been requested; not conceal information which may be damaging or “lead to a further request.”

The reference to “Chris” is interesting. It refers to company secretary Chris Andrew, the man responsible for legal compliance at the SLC. He sent an email to the SLC’s FOI department saying: “I wasn’t aware of this press release either, and had also understood that while this had been suggested at the time, we had subsequently backed away from taking any such action.

So, a press statement is issued with a threat of legal action against the press and the company secretary is unaware that it is going out? So who did authorise the press release? Jenifer Stirton, director of marketing and communications at the SLC said that “this is the exact wording the chairman [Ed Smith] wanted in”. She goes on to confirm that the wording of the press statement had been “all cleared by BIS” [the department of Business Innovation and Skills]; but it is unclear who at BIS cleared the release as this has been redacted.

What’s worse, is that in defending the wording, Stirton says: “the very extensive coverage of Ed’s contractual position (media reports suggested he was having to leave which wasn’t the case) weren’t accurate but they weren’t inaccurate. A very clear warning therefore had to be given to the media that SLC would not accept this and would take steps to protect SLC and CEO reputation. This is normal practice when dealing with high profile media issues and also allows SLC to follow up with the PCC should this be necessary. By not warning of our intention would have made follow up with PCC difficult.

“This is an area -sadly- where I have extensive experience and is what any PR professional would advise.”

Oh dear, oh dear, oh dear. Here we have it, from the horse’s mouth: “they [the media reports] weren’t inaccurate”. So why say that they were? And worse, why threaten legal action?

The legal department seemed to be unaware of the threat of legal action too. The bundle released by the SLC includes a memo from the FOI department to Jenifer Stirton with a note from the company’s in-house solicitor asking for “the rationale behind including reference to seeking redress in the press statement.

Surely if the lawyers had been instructed to review the press reports with a view to seeking redress they would be aware of the rationale. They would have been all over the press statement before it was issued to ensure that it didn’t compromise any future litigation. Oh, but there wasn’t going to be any future litigation was there. And the SLC knew this full well.

The memo from Jenifer Stirton is chilling: to say that “a very clear warning therefore had to be given to the media that SLC would not accept this” shows contempt for the freedom of the press and its right – its duty – to hold organisations to account.

By the SLC’s own admission, the media reports were not inaccurate. So what is it that the SLC “would not accept”? Reports that it finds uncomfortable?

And as for the guff about this being “normal practice when dealing with high profile issues” – normal practice for who? I’ve worked in media relations and it wasn’t normal practice for me. And it wasn’t normal practice for the very many PRs from organisations large and small that I have had the privilege of working alongside.

When journalists get stories wrong, you tell them that they’re wrong. You don’t go around threatening legal action simply because you don’t like a story.

The press has a duty to not to publish inaccurate, misleading or distorted information. It has no obligation to only publish stories that the government or government departments and government-funded agencies approve of.

And there is no reason to issue a warning before complaining to the PCC (although, as the reports were not inaccurate, there would be no grounds to complain to the PCC in any event), so the line “by not warning of our intention would have made follow up with PCC difficult” is further nonsense.

What would make follow-up with the PCC difficulty would be that the newspaper articles were not inaccurate.

This week's Private Eye cover makes its view of the Royal Charter clear.
This week’s Private Eye cover makes its view of the Royal Charter clear.

Remember what I said at the start of this post: This press statement was issued by a government-owned, taxpayer-funded company with the approval of a government department on the very day that a former prime minister was giving evidence to a formal judge-led public inquiry looking into press standards.

It was nothing more than an immoral and unjustified attempt to intimidate the press into acting in a subservient way.

That a government department can not only countenance such a press statement in relation to innocuous, fair and accurate press reports; but actually go ahead and issue it and then seek to justify it afterwards even when they know full well that the reports that gave rise to it were accurate tells you all you need to know about what the government and its departments really thinks about the freedom of the press.

This is just one reason why the proposed Royal Charter on Self-Regulation of the Press is a dangerous step. The government can insist until its blue in the face that this isn’t statutory regulation; but it clearly is: the industry doesn’t want and the Privy Council is being used to by-pass proper Parliamentary scrutiny.

No other industry in modern times has had a charter imposed on it against its will by a Royal Charter. Why is the press being treated differently?

Is it because we take no notice when government agencies threaten legal action spuriously?s

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