MPs' pay and pensions blog
This blog will be updated regularly by IPSA team members who will raise particular issues, provide interesting information and report back on developments.
We published our first report on the Review of MPs' Pay and Pensions on 10 January.
There has been a lot of interest in the report, focusing principally on the survey of MPs' views, conducted by YouGov on our behalf.
Why did we commission this anonymised survey? Well, we believe that it is very important that the views of MPs themselves help to inform the debate on pay and pensions. A number of MPs did respond to our consultation, as did representative groups like the 1922 Committee and the Parliamentary Labour Party. (The consultation responses will be on the website shortly). But it is difficult for individual MPs to venture an opinion on the amount they should be paid, because the minute they do, the chorus of outrage begins. So, most prefer to keep their heads down, at least in public.
Is this good for our democracy? I don't think so - it is silencing an important voice in the debate. So, we tried another tack. The survey of 100 MPs by YouGov, a highly respected polling organisation. The results are really interesting, and maybe not that surprising - the majority of people probably think they are underpaid for what they do, often with justification.
The results are also really helpful, because they provide an authentic voice on behalf of MPs. Finally we have a view out in the open. The initial reaction is inevitably hostile, but maybe in time people will pause and ask, why do many MPs feel they are underpaid? And why do I agree or disagree with that?
And another point: MPs haven't DEMANDED a pay rise as a lot of the headlines say. They have been asked a question and answered it. Honestly. Isn't that better than brushing everything under the carpet?
So, as we move into the second phase of our consultation, to be launched in the spring, we will continue to seek an open, objective debate on the key issues surrounding MPs' pay and pensions. We will continue to encourage and listen to all views. We will be mindful of the economic circumstances and the challenges so many people face today. But we will continue to ask: what do we want from our MPs, and what is that worth?
JOHN SILLS - Director of Policy and Communications at IPSA
Our consultation on MPs' pay and pensions closes on Friday 7 December. 590 people have responded to our on-line survey and we have received 62 written responses. This is addition to to the 130 comments that have been made on "Share your views" or in response to our earlier blogs.
The results of the on-line survey and the written responses will be published in our report on the consultation in January 2013. The exception is where someone has either asked for their response either to be published anonymously or not to be published at all.
So if you would still like to contribute and haven't yet managed, three days left!
John Sills, Director of Policy and Communications
We’ve had a fair number of comments on our “Share Your Views” page since the consultation paper on MPs Pay and Pensions was launched. Thank you to everyone who has taken the time to respond.
Some of the comments refer to stories other than pay and pensions that have recently been in the news: the questions around owning and renting accommodation, the class of train travel, and so on. These aren’t irrelevant because together they go to the heart of the question about pay and pensions: what are our expectations of our MPs, of their role and the support they need to carry out that role? And from that question we can start to ask, what is the fair rate of remuneration?
One of the themes of the comments is that people often compare the remuneration of MPs with the circumstances facing people in other walks of life. One comment likened taking MPs’ outside earnings into account to the tests faced by people who are claiming welfare benefits. Another suggested that a defined contribution pension scheme would directly link the returns and therefore the pension benefits to the health of the economy. Others are attracted to the idea of linking MPs pay to average earnings.
Another theme is that quite a few of the ideas are quite centralist (I use the term neutrally). For example, acquiring a block of flats, or “barracks” to house MPs in London, or providing them with “civil servants” to run their offices for them. All would involve a much bigger role for IPSA, with the possibility of significant extra costs for the tax payer. And if that is the case, then the first question you have to ask is, what is the problem we are trying address here?
Take the block of flats idea - simply as an example. It is based on an assumption that all MPs with constituencies outside London live with their families (if they have families) in the constituency and just stay in London during the week when the House is sitting. That is not always the case. Some MPs and their families are based in London and rent a property in their constituencies. So it wouldn’t work for them.
In other words, there is rarely a simple solution once you look at an idea and scratch the surface. But it’s important to have the ideas first and then look at whether they are workable, affordable and fair.
So please keep them coming!
It’s only eight days since we launched the MP’s pay and pension consultation – seems like a lot longer with all that has gone on in between! In the reaction to the document one of the most common headlines in the press was that we planned to give MPs a pay rise, to £92,000. There is no such proposal, as it happens. The consultation paper explores ideas and options rather than making proposals at this stage. The derivation of that figure was obvious though. Someone got their calculator out, took an estimate for the average wage – £23,000 a year – and multiplied by four.
Why four? Well, in discussing the idea of linking MPs’ pay to average earnings, we noted that there had been suggestions from the public ranging from 1.5 to 4, as the multiple to use. It’s quite a big leap to turn that into “IPSA to raise MPs’ pay to £92,000”, but there you go. The link to average earnings is an interesting one though, both as a way of establishing the initial level of pay and then determining changes in the rate thereafter. We have a graph in the paper which shows how the multiple has evolved over the years.
From the early 1920s it has oscillated most of the time around a multiple of three, and is currently a little below that. Three times £23,000 would of course be £69,000, not vastly different to the current rate of pay.
What do you think about the idea of linking MPs’ pay to national average earnings? And where would you set the multiple?
John Sills, Director of Policy and Communications
One of the questions we’re grappling with is what pensions MPs should receive when they retire?
It’s sometimes helpful to think about this issue in terms of public/private. Public servants, including MPs, currently have pensions based on the final salary before retirement. The amount of pension is guaranteed and is indexed, so that it increases with inflation each year. These schemes are expensive and are now very rare in the private sector, indeed they are being ended in the public sector too. Public servants will from 2015 instead have a fairer system which works instead on a “career average” basis – in other words, the pension is based on an average of the salary across the employee’s career. This means that those who get promoted in the final few years before retirement will no longer benefit disproportionately. This makes these kind of schemes cheaper (than traditional final salary schemes) to the employer.
In the private sector, final salary schemes used to be common, but now almost all workplace pensions (including stakeholder pensions) are on a “defined contribution” basis. In these schemes, contributions from the employer and employee are invested in the financial markets while the employee is still at work. When he or she retires, the invested money (which hopefully will have grown over time) is used to buy a pension from an insurance company, which will be paid for life and may be indexed to inflation. This kind of defined contribution scheme doesn’t provide a guaranteed pension to the employee (as it depends on the investment returns) and as the insurance company will need to cover overheads and make provision for risks, is likely to provide a lower pension for the same contributions.
So one of the key questions is: should we treat MPs like other public servants and provide a career average scheme with a guaranteed pension? Or should we treat them like many of their constituents who work in the private sector and provide a defined contribution scheme? One the one hand, MPs very clearly work in the public sector – they are at the heart of our representative democracy. But on the other, hand, many of their constituents do not receive guaranteed, index linked pensions.
It’s not the only choice we need to make. We need to bear in mind, too, the principles against which we will be assessing the options, including the need to provide an adequate pension, the need for the pension scheme to be affordable and sustainable and to be fair between MPs of differing ages, backgrounds and income levels.
We’d like your views! Please take a look at our consultation document here, or respond to our online survey.
Tony Lord – Head of Policy at IPSA
There has been a lot of press coverage about our new consultation, suggesting that we are proposing to cut MPs’ salaries if they have income from outside activities. In fact, we don’t propose to do this. But through our consultation we are asking the public (and MPs, academics and others), to tell us what they think of the various ideas that have been raised with us over the past few months as we talked to the public through radio phone-in shows, opinion polling, focus groups and citizens’ juries. Members of the public are full of ideas about how to set MPs’ pay and we were very fortunate to have lots of suggestions (some more practical than others) come our way.
One of those ideas is that MPs with outside income should have a smaller parliamentary salary. Outside income is a totemic issue for some people, with the perception that many, or even most, MPs have substantial amounts from second jobs. But as we make clear in our consultation document, the reality is somewhat different. Out of 650 MPs, only 68 have declared more than £10,000 of income in the Register of Members’ Financial Interests, meaning that about 90% have no, or very little, external income. This doesn’t seem as big an issue as some may think.
Some of the press reports said that there are “proposals” or “plans” from IPSA to cut MPs’ pay if they have outside income. That’s not right: our consultation is based on the ideas and suggestions that have been raised with us and we’re asking the public what they think. And for us, that’s the important thing: for the first time the public will have a voice in the independent determination of MPs’ pay and pensions. We’re very grateful for the public’s help as we end centuries of self-regulation.
Please take a look at our consultation document and let us know what you think about this, or any of the other ideas that have been raised with us.
Tony Lord - Head of Policy at IPSA
Today, 15 October, we are launching our consultation, Reviewing MPs’ Pay & Pensions.
At the same time, we are publishing MPs’ Pay and Pensions: A Public Verdict - the findings from research conducted on our behalf by the opinion research and polling organisation, ComRes.
The consultation marks a new phase in IPSA’s work, having introduced a scheme for MPs’ business costs and expenses which is ensuring that taxpayers’ money is being properly spent and accounted for. We have the opportunity now to address the question of what is the appropriate remuneration for MPs in the 21st century. And by remuneration, we mean pay and pensions. For the first time they can be looked at together, as a package.
The consultation is open until 7 December. After that, we expect to report on the findings in early January 2013, with a view to developing proposals later in 2013 for a new remuneration package for MPs in the next Parliament. The package will be introduced after the 2015 general election.
We’ve been researching the subject and consulting informally since May this year and the document published today shows what we have established so far. The consultation questions are high level at the moment, as we want to encourage debate about the principles as well as detailed questions like the exact amount MPs should be paid.
We are very keen that the debate on MPs’ pay and pensions should be a public one and not be limited to those with a direct stake in the matter. Equally, we are keen that the voice of MPs themselves should be heard. The job that they do is a vital one and that needs to be recognised. We are looking at ways to ensure that MPs can have a say.
The consultation paper is of course on the website, for all to see. It is quite long, as we are covering a range of issues and want to share the evidence that we have found. But we realise that not everyone will have time to read it, so we have provided other ways for you to get involved. They include:
· a summary of the consultation paper, which includes all the questions we ask;
· an on-line survey, posing some of the key questions;
· following us on Twitter @Mppayandpension;
· and of course this blog! I and my policy colleague, Tony Lord, are planning to post regularly, raising issues, providing information that we think is interesting and reporting back on developments.
So, I hope you find the consultation paper and the public opinion research interesting and I look forward to receiving your comments over the next couple of months.
John Sills, Director of Policy and Communications at IPSA
One of the matters with which the IPSA Board has to grapple when considering MPs’ pay and pensions is the issue of resettlement payments. When an MP loses or voluntarily gives up his seat should he receive a payment to help him adjust to life outside Parliament and, if so, how much?
There is at present in place an interim arrangement set up by IPSA to cover the event of an early election. Under this arrangement, an MP who stands for re-election and loses his seat receives a lump sum payment equal to one month’s salary for each completed year of service up to a maximum of six months. This is not taxable up to £30,000 (i.e. like a redundancy payment).
Just as we have to decide what the new pay and pension arrangements should be, so too we have to decide what, if any, resettlement payment there should be; it is all part of the total remuneration package.
We have already heard arguments on both sides. On the one hand an MP who has given his all to Parliament and his constituents for a period of years can find it very difficult to obtain other employment in a difficult market without relevant experience, but on the other, as recent publicity has shown, several MPs have other occupations and sources of income which might enable them to slip back easily into the ordinary world.
It seems to me that the resettlement issue raises many questions and we would like your views in answering them. Should a resettlement grant be paid at all and, if so, should it be paid to all, regardless of individual circumstances? Should it make any difference whether an MP stands down voluntarily or loses his seat as a result of boundary changes or in an election? How should any grant be calculated, for example should age or years of service make a difference? Is one option that MPs should be left to make their own arrangements by some form of insurance or by savings but that something should be built into the salary to reflect the need to do this?
We would very much like you to join the debate on these questions and any others that occur to you that arise out of the resettlement payment issue. This is important to IPSA because, at the end of the day, we have to make a decision that is both fair to MPs and fair to the taxpayer.
Our fundamental review of MPs’ remuneration is, in many respects, a break with the past. For the first time, a body independent of Parliament will consult the public on MPs’ pay and will determine the outcome without a vote in the Commons. And so it represents a fresh start. But we'd be foolish to embark on this review without considering what lessons we might draw from the experience of those who have been here before us and, indeed, without looking at the history of MPs’ pay. The work of the Senior Salaries Review Body and of various committees and inquiries over the years represents essential reading for anybody with an interest in this topic. In this blog I want to look primarily at what the pattern of expenditure over the last 40 years show us.
Let's look at a couple of charts which show the movements in MPs’ pay in cash terms and then in real terms (i.e. allowing for the impact of inflation). Both charts begin in 1971, the date from which a distinct allowance was established as a separate provision to cover the expenses MPs incurred in the course of their business. It should be added that the charts only reflects MPs’ pay: they do not take any account of their expenses or of their pensions. They show MPs’ pay in real terms and include, by way of comparator, movements in UK average earnings (for MPs’ pay and UK average earning their respective totals in 1971 have been indexed as 100).
What can we learn from this information? Three points seemed to me to be especially striking. The first is that in real terms MPs’ pay does not recover to its 1971 levels for about eight years and it only decisively moves ahead of the starting level in 1996. The second point is to note that since 2002 MPs’ pay has declined in real terms at a time when the trend in the UK average earnings has been upwards. The third concerns the sharp periodic adjustments in MPs’ pay, something that is even more apparent if one looks at a longer time series (see, for example, the sharp increases in 1979 and 1996).
Of the many lessons that one might take from these charts, I will leave you with a couple. The relative movements of MPs’ pay and of UK average earnings in real terms since 2002 surely suggest that this is a good time to be looking afresh at MPs’ remuneration. And the sharp corrections encourage the view that there's been something perverse about the overall process by which MPs’ pay has been determined in the past. There is clearly a strong case to bring an end to the cycle of sharp adjustments and subsequent slow decline of pay. How might this be done? Should MPs’ pay be linked to that of other public servants? Should it be linked to a price or earnings index? Or should it even be linked to the performance of the national economy as a whole?
Tell us what you think – about the future adjustment of MPs’ pay levels and, for that matter, about the lessons you take from these charts.
Paul Seaward, ‘A Summary of Members’ pay and expenses 1911-71’ (October 2011) [http://www.publications.parliament.uk/pa/cm201012/cmselect/cmmemex/writev/1484/1484.pdf, accessed 04/07/12], pp. 29 – 43.
In the past few weeks we’ve had some fascinating on-line comments and questions about MPs’ pay and pensions on our website. We’ve been talking to academics and our Board members have engaged with listeners on national and local radio. We have commissioned some opinion polling, focus groups and citizens’ juries, to explore the public’s views in different ways. From all of this a number of themes are emerging, and above all a very basic one. What do MPs do? What do we, the tax payers and voters, get for our money?
It’s important to stress at the outset that IPSA is not attempting to determine what MPs should do. That is a matter for Parliament and, of course, for the voter. But a better understanding of the role of the MP is crucial to any exercise which is asking the question, how much should MPs be paid?
I observed a focus group in London back in May. The people on the group were well-informed, politically aware, considered in their views. But they were clear that they couldn’t support any notion of a pay increase because they didn’t know enough about what they were paying for. Interestingly it wasn’t so much MPs’ constituency activities that they knew little about (in fact they had strong views on these), but what goes on at Westminster.
And if you don’t know what goes on, how can you put a value on it, or compare it with other jobs with any confidence?
It’s easy enough to reel off the generic activities that an MP may be involved in: scrutiny of legislation, holding the Government (and others) to account, exploring and debating policy issues, supporting important causes, dealing with constituents’ questions and individual problems, representing the views of their constituents... and so on. It’s a formidable list, and people who know MPs will attest to the fact that many of them work long hours and are truly dedicated to the interests of their constituents. But, as we are often told by MPs, each one of them is different. There is no standard job description. Some have ministerial jobs too, some may have other paid work, some are involved in select committees, some prioritise constituency work while others see their main role as legislators. Their circumstances are hugely different: an inner London MP has very different demands on him or her than, say, an MP for a constituency in rural Scotland.
One of the best descriptions of this issue that I have read is by the ex-MP, Tony Wright. His article is called “What Are MPs For?” and you can read it at:
So where does this leave us as we ponder the right level of MPs’ pay? And if MPs all do the job differently, is it right to pay them all the same amount, or should we try to differentiate? If we did differentiate, how would we do it? Number of years as an MP? Experience prior to entering Parliament? Full time or part time? Committee involvement? Attendance in the House of Commons chamber, or volumes of constituency casework? All these factors have been put forward. All have their attractions and, no doubt, their flaws.
So we welcome your views. Do you need to know more about what MPs do to have a view on pay? How do you think that could be achieved? Is one-size-fits-all the right approach to MPs’ pay? If not, how do you differentiate?
Please have your say!