Taxman urged to investigate Birt pay deal

THE INLAND REVENUE has been asked to investigate the tax affairs of John Birt by the chairman of the powerful Commons Treasury Select Committee.

John Watts called for the inquiry yesterday as the BBC launched a strong defence of its director-general, citing an accountancy report which said his controversial tax arrangements saved him only pounds 810 in one year.

The BBC and Mr Birt mounted their most detailed counter-attack since the Independent on Sunday disclosed 10 days ago that the director-general had been paid on a freelance basis, without tax-deductions, through his own company, John Birt Productions Ltd, rather than on the Pay As You Earn basis covering other BBC employees and freelances.

In a letter in today's Times Mr Birt says he regrets 'the distress . . . caused by my contractual arrangements . . . .' And he released the findings of an examination of his accounts by Ernst & Young, the City accountants, which showed he had saved only pounds 810 by being paid on a freelance basis rather than as an employee.

Mr Birt said his salary arrangements had been approved by the BBC when he joined in 1987. He was given a five-year contract only, so it was 'sensible' to retain the contractual arrangements whereby his services were supplied to the BBC by his company.

He said talks about his salary started last autumn with the aim of his joining the BBC staff on the retirement of the former director- general, Michael Checkland. When Mr Checkland decided to leave early last Christmas, the talks had not been completed.

Despite Mr Birt's explanation, Mr Watts said he was writing to the chairman of the Board of the Inland Revenue, Sir Anthony Battishill, expressing his wish that taxpayers should be treated even- handedly. 'I am not trying to launch a vendetta against Mr Birt. I know that the Inland Revenue is zealous in its pursuit of people who are not self-employed. I just want to see that it is even-handed in its treatment of those who are,' he said. He was anxious to establish whether, as Mr Birt's employer, the BBC 'had been party to what is, on the face of it, a tax avoidance exercise'.

Mr Birt received the public backing of Marmaduke Hussey, the chairman of the BBC; Lord Barnett, its vice-chairman; and the BBC's Board of Management after a meeting at which the director-general is believed to have explained his tax position.

The board said it appreciated his 'openness, honesty and expression of regret' and would continue to support him. Mr Hussey and Lord Barnett issued a joint statement saying John Birt was 'a man of integrity and conviction' who had made a 'significant contribution' to the success of the BBC.

They said the Ernst & Young report 'establishes beyond doubt the veracity of his statement and the falsehood of the accusations against him'. Much of what had been written about the director-general and his tax payments was misleading and unjust, they added.

'In coming to the BBC as deputy director-general in 1987, John Birt gave up the share options he had enjoyed at London Weekend Television, and the substantial benefits they would have brought him, but asked to continue his contractual arrangements. We agreed,' the statement said.

It is understood Mr Hussey and Lord Barnett were joined in that agreement by Keith Oates, the finance director of Marks and Spencer. Together, the three men constitute the BBC's remuneration committee which negotiated Mr Birt's terms and conditions. The other nine BBC governors are not thought to have known about the deal to pay Mr Birt through his private company.

Birt's taxes; text of letter, page 3