Senior local government officials face a potential Treasury probe into their personal tax affairs following revelations that the head of the Student Loans Company (SLC) avoided paying tax on his salary, under arrangements agreed within Whitehall.

Ed Lester was not added to the SLC payroll when given a two-year contract in January 2011, and was paid through a private firm - a loophole which saved him an estimated £40,000 a year on his tax bill.