BBC’s new director-general, John Birt, walked into a storm this weekend when a newspaper revealed he was being paid by the pubcaster as a freelance consultant rather than a full-time employee, enabling him to pay less tax.

Birt immediately moved to snuff out the crisis by announcing Monday that he would become a salaried employee of the BBC.

But it will not be so easy for him to shake off the damage that the revelations have done to his reputation, and therefore to his effectiveness as leader of one of Britain’s major public institutions.

The incident will provide powerful ammunition for Birt’s many enemies in the industry and press, who dislike his reformist zeal and his personal style, which many find cold, ascetic and somewhat arrogant.

It is particularly damaging because his publicly declared mission, stated and restated in lengthy manifestos cluttered with business-school language and concepts, is to bring greater financial efficiency and accountability to the pubcaster. This has involved the cutting of 7,000 jobs, and led one senior TV exec to accuse him of “brutalizing” the BBC.

The question is how quickly, if at all, Birt will now be able to win back the moral authority to continue pushing through his radical and painful reforms.

The Independent on Sunday revealed that for the past six years, when Birt was deputy director-general, his salary of about T140,000 ($ 200,200) a year was paid to a company named John Birt Prods. Ltd., which allowed him to deduct a number of expenses against tax — including his designer suits and his trips to the theater.

The company then paid him a much lower salary of T59,000 ($ 84,370), the only money on which he paid tax.

In a statement yesterday, Birt said the arrangement dated back 25 years to the time he first entered TV and lasted through his time as director of programs at London Weekend TV, before he joined the BBC.

“I chose this route chiefly for the benefits of independence and flexibility in a characteristically mobile industry,” he said. “There are some tax advantages — though they are modest compared with some of the speculation of these past few days.”

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