Defeated Ken Livingstone would receive tax-free 'parachute payment'

The Government today stood accused of helping an "old political crony" by ensuring that if Ken Livingstone loses the London mayoral election nearly half his £70,000 golden parachute payment will be tax-free.

Shadow treasury chief secretary Philip Hammond claimed the move, included in the Finance Bill, showed Labour had "written off" Mr Livingstone's chances of securing a third term in Thursday's ballot.

The measures mean severance payments to the Mayor and London Assembly Members who lose their seats or stand down will be tax-free for the first £30,000.

As MPs debated the committee stage of the Finance Bill, Mr Hammond said: "It is clear that as the Livingstone regime draws to an end the Labour Party is determined to look after the soon to be ex-mayor in as clear a demonstration as we could ask for that they have written off his chances this Thursday."

Mr Hammond said when the Greater London Authority (GLA) was set up it was promised that it would cost each taxpayer in the capital just 3p a week to run.

"But under the Livingstone regime, the spin doctors, the publicity, the staffing, the jollies and jaunts, the left-wing jamborees have all spiralled out of control.

"So now the non-borough council tax element in London is three times higher than it was in 1997-98.

"So a £70,000 payment to the ex-mayor on his departure will make his going entirely in keeping with the manner of his occupation of the office."

Mr Hammond called for ministers to explain why the payment would be given tax relief "so that we address any lingering suspicion that the Government is merely seeking to offer a golden parachute to an old political crony as he comes to the end of his political career".

Financial Secretary Jane Kennedy said the move brought the GLA's severance payments in line with the other devolved administrations and Westminster.

She conceded that "this was not the best timing" to consider the issue but said it would also benefit Conservative assembly members who were standing down.

"The GLA severance payment scheme is similar to those for members of the devolved assemblies.

"For the sake of consistency and fairness it is right that the same tax treatment should apply to all these schemes."

Ms Kennedy said the total cost this year for six members standing down was about £151,700.

"I hope the current holder of the office of Mayor of London continues for many years in his post and has no need to avail himself of these measures. But I do believe the House should put them in place."

Mr Hammond said an "anomaly" was being created for a small group of people "all of whom happen to be politicians".

But he added: "Thirty thousands pounds of taxpayers' money will probably be a price well worth paying to see the back of the spiralling expenditure of the Livingstone regime in City Hall."