This blog will be updated regularly by IPSA team members who will raise particular issues, provide interesting information and report back on developments.
The weekend press contained a few stories suggesting that MPs defeated at the election would get a £88,000 "payout". This is simply not the case. Two very different sums, with very different purposes, are being put together to get that figure. Once again it's confusing personal benefit with running the business.
The two sums are as follows:
· A resettlement payment of about £33,000 for MPs who have lost their seats. This is a legacy of earlier Parliaments. We have halved it and only allowed it for MPs losing their seats (those retiring also received it before). In future elections we will move to a payment based on normal redundancy calculations.
· A "winding up" budget of around £55,000, which is the maximum amount that an MP can spend while closing the constituency office. This will be for things like staff salaries while the office is closed down, any remaining rent, and so on. In most cases, MPs won't need to spend anything like that.
It's understandable that expenses have been viewed as a personal benefit, given that the expenses scandal revealed many practices that were not acceptable. But that was five years ago. We have moved on. IPSA has ensured that expenses are all for the business of being an MP, not for the benefit of the MP.
Let's illustrate the concept with a fictional example. Jo Bloggs is MP for Trentville in the Midlands. Or, I should say, was, as she has just lost in the election.
In 2014-15, Ms Bloggs received a salary of £67,060. The tax payer also made some pension contributions on her behalf, as with other public servants. This was the extent of her personal benefit. Paid for doing her job.
As the MP for Trentville, she had a number of budgets to finance her parliamentary business. Think of this as Trentville Constituency PF (parliamentary functions). Current representative, Jo Bloggs. In 2014-15, she spent the following amounts, all within budget, as the vast majority of MPs are.
· Staffing - £135,000. This paid for 4 people, 3 to run the constituency office and 1 to support her at Westminster.
· Office costs - £22,000. This is mostly for rent, business rates, constituent surgeries, energy costs and office supplies.
· Accommodation costs - £19,000. This is to rent a one bedroom flat in London, in Ms Bloggs' case, in Kennington. MPs from outside London need somewhere to stay when they are at Westminster. A flat is generally much better value than staying in a hotel.
· Travel costs - £4,500. This was mainly spent on travelling from Trentville to London and back 35 times in the year, plus using her car to travel around the constituency at the weekends and when the House of Commons isn't sitting. She also had one trip to the European Parliament in Strasbourg.
So Trentville Constituency PF incurred business costs of £180,500 in 2014-15. Not perks for Jo Bloggs, not "snouts in the trough". Business costs, for providing support to constituents and supporting the work of an MP at Westminster.
So let's now examine that "payout", after Ms Bloggs lost the election.
First the personal bit. As noted above, she gets a £33,000 resettlement payment. This is calculated by paying a month of salary for every year as an MP, up to a maximum of six months. In the past this used to be a full year's salary, for every departing MP, including those who retired. IPSA has changed that, and will change it further at future elections. From now on it will be twice the statutory minimum for redundancy. The amount will depend on age and length of service, but is likely to be less than £15,000 for most MPs.
Second, Trentville Constituency PF can continue to claim for costs while the office is closed down, constituents' case files are disposed of, and so on. Ms Bloggs doesn't receive a salary, but her staff, who have to be made redundant do, until they finish work. There is another month of rent, phone and electricity bills and some small stationery costs. No surgery costs, of course. Things have to be concluded within two months and Ms Bloggs doesn't get her resettlement payment until everything has been settled, in accordance with IPSA’s rules.
In all, including staff costs, she expects spending will be around £17,000. IPSA’s budget is a simple limit of a third of annual staff and office budgets, but nothing like the maximum will be spent. Neither Ms Bloggs nor Trentville Constituency PF gets to keep any unspent budget. It is not an allowance, simply an upper limit to spending.
So, in summary, Ms Bloggs gets £33,000 and winding up costs of £17,000 are incurred. Overall cost to tax payer, £50,000. Additionally, there will be the redundancy costs of her staff, which IPSA will fund centrally.
No "payout" of £88,000 going in the pocket of the MP. Just a conclusion of affairs. Normal business.
This morning’s papers have reported that the cost of the MPs’ Scheme of Business costs and Expenses has, for the first time under IPSA, risen above the cost of the old allowances system in the House of Commons.
In the last Parliament, under the House of Commons allowances system, MPs’ claims in 2008-9 were £102.01m in the money of the day.
To adjust the 2008-9 figure for inflation, we have used HM Treasury GDP deflators, which are used in the calculation of the budget. As you can see from the below table, if the 2008-9 figure is inflated using the HM Treasury calculations, the 2008-9 cost in 2014 money is £113.09m. This is £10m more than the actual IPSA costs last year.
The table below makes a similar calculation for each of the years in which IPSA has been operating. This shows that the cumulative saving to the taxpayer over the four years is £60m.
1 The cumulative savings figure of £60m is higher than the £58m we published yesterday. The £58m comes from the figures in our annual accounts, audited by the National Audit Office. Using the more up-to-date, but unaudited figures we published yesterday, the savings would be £60m.
We will read the report with interest as it addresses a number of issues which we take very seriously.
We would have welcomed the opportunity to provide evidence to the inquiry.
The report says that in the past MPs were permitted accommodation in two locations and that we have stopped that. That is untrue. In the past, MPs had access to support if they needed a second place to stay – just as they have now. It used to be that MPs could claim support towards a mortgage on a second home. We have stopped that and instead make a provision for renting a second home. And for those with children or caring responsibilities, there is extra support – up to £2,425 per dependant. So, an MP with two children would have an annual accommodation budget of up to £25,450.
And, of course, every year we carry out a public consultation and review of our rules to assess any potential negative impacts on equality and diversity, including for women. This includes a formal Equality Impact Assessment to identify any unintended consequences which might impact negatively on anyone with any of the protected characteristics. The results of the this Assessment are published each year.
We will be writing to the APPG and again make ourselves available to discuss these issues with them.
In the Standard yesterday, the article, ‘The real reasons why Maria Miller had to resign’, lists a number of depressing problems – that there have been no changes since 2009, that MPs are still building property portfolios, and that they ‘flip’ back and forth as it suits them, and that we have an expenses system governed by MPs. It is a damning picture to paint. It is also plain wrong.
Let’s start with five basic facts.
One, in 2010 the system of costs and expenses was radically reformed with tight restrictions on what can be claimed, clear budgets, proper scrutiny and real transparency. Even the sternest critic would accept that.
Two, MPs cannot build property portfolios at the taxpayer’s expenses. We banned that practice.
And so, three, flipping is impossible under IPSA.
Four, MPs do not govern the system. It is handled completely independently by IPSA.
And five, it is worth noting that the Maria Miller case is nothing to do with the new reformed system. It relates to what happened over 5 years ago, before IPSA existed. Indeed it simply couldn't have happened under IPSA’s new system.
The reformed system has stopped the egregious practices of the past. Allowances are gone. Mortgage interest payments are history. In their wake is transparency, scrutiny and clarity around the rules and their application. And, it must be said, MPs are playing their part too and sticking to the rules.
Not only do we have a new system - a system which is now being monitored internationally by other Parliaments who might be able to learn from us - but a system which saves the taxpayer a huge sum of money.
IPSA’s reforms have saved the taxpayer £35m and counting.
While the final historic cases of the expenses scandal are cleaned up, it will always make one pause and wonder what else we should do. But in doing so, it is wrong to ignore the huge progress and savings made and radical reforms we introduced and which are working.
A reformed system, gaining respect around the world, regulating MPs, delivering transparency and savings millions. If this were not politics, it would be celebrated as a great triumph.
Public anger about the abuses of the past is real and carries on. Challenge and scrutiny is important in rebuilding trust, but it ought to be built on facts and reality, not outrageous rhetoric and misinformation.
Following some of the news coverage in the wake of the Maria Miller case, Sir Ian Kennedy has sent the following letter to the Daily Express:
Your leader column yesterday ‘Expenses system broken’, ignores the major reforms introduced after the scandal and after the Maria Miller case.
Gone are the days of MPs and the House of Commons setting the rules, gone are the days of MPs receiving allowances without proving they incurred costs, gone are the days of MPs claiming for mortgage interest payments (as in the Maria Miller case), and gone are the days of the public being in the dark about MPs’ costs and expenses.
IPSA overhauled the system and we now have clear rules and limits, proper scrutiny and real transparency – anyone can now go online see what their MP has claimed. And in introducing these major reforms we have saved the taxpayer more than £35 million.
In short, there has been a huge change for the better. That historic cases are still being discussed just goes to underline the importance of the changes we have introduced to make sure such instances are not repeated in the future.
Sir Ian Kennedy,
Over the last few days we have seen, yet again, that rational thought and fact plays second fiddle to overblown rhetoric in the discussion of MPs’ costs and expenses.
The latest hysteria is about a ‘fresh row’ because MPs are trying to comply with Health and Safety regulations. In particular, if a member of staff has to use a computer screen a great deal, then Health and Safety (Display Screen Equipment) Regulations 1992, states they can claim for the cost of an eye test. And if as a result of the test the optician believes glasses are needed for screen work, then help in paying for glasses, too. In this area there are regulations all employers should follow and yet when it comes to MPs doing so – we are encouraged to be outraged.
This latest noise is indicative of a wider problem, where context or facts are displaced in favour of excitement and hyperbole.
So, let’s just remind ourselves of some facts.
• In the wake of the expenses scandal, IPSA overhauled the system which governs how MPs can use public funds.
• Following public consultation we introduced clear rules and budgets.
• We banned and put safeguards around the practices from the past which caused most outrage.
• MPs can no longer claim for a second mortgage.
• Where they choose to employ a family member, they have to be employed on a legal contract and we publish the name and salary band of the individual concerned.
• There is genuine transparency – we have published every claim made by every MP.
• And the changes we have introduced have saved the taxpayer a huge sum of money – over £35m in four years.
But despite the huge progress made in a short period of time, some still try to promote hysteria about MPs incurring business costs.
I have heard MPs receive criticism for their stationery bills (it is standard for employers to provide paper, ink, staplers etc, but some suggest MPs should be treated differently), for travelling (even though they work in two locations – their constituency and Westminster), and even for having a website developed (there are very few organisations which don’t have one and which don’t need some expertise to help develop one).
And when I look at this sort of reaction, I am struck about the behaviour not of MPs, but of those commentators concerned. Some appear determined to manufacture ‘outrage’.
These monies are not a top up to an MP’s income. It is money which is properly incurred in the course of business and which is being properly accounted for.
I think it is time to grow up. It is absolutely right that we have rules and restrictions and transparency around the costs MPs incur – exactly as IPSA introduced - but it is also right that people realise that there is a cost of having someone represent us in Parliament. The alternatives are that MPs are unable to carry out their duties as we, or they, would wish, or that we have a Parliament packed full of those who are rich enough to bankroll everything themselves. I cannot believe either of those outcomes is desirable.
I do hope we are able to move to a more mature, constructive discussion of costs and expenses and leave behind those determined to work themselves into lather.
From time to time there is media coverage – often billed as an investigation, but actually built on information which we make available for all to see – which criticises MPs or pokes fun at them because of the cost of running their Parliamentary office or travelling in their constituency. At times, I feel some of this goes beyond holding to account and becomes an unfair attack on individuals or MPs as a group. Such articles invariably include the line ‘MPs don’t get it’ before raising eyebrows about the business costs MPs incur in going about their duties of serving constituents or legislating.
Before reaching for such hackneyed lines, it is worth remembering that there has been major reform. The system is unrecognisable from the one in 2009 – and rightly so. We now have clear rules properly enforced. Genuine transparency meaning all claims are online for anyone to see. At times that has meant some try to trivialise the smaller amounts. These claims provide support to help MPs do their Parliamentary work and are published in such detail because the stationery bills are itemised and we ask MPs to account for individual journeys in the constituency. This approach has to be the right one, doesn’t it?
And, in addition to this new approach of openness, the changes we have introduced have saved the taxpayer around £35m since 2010.
The crisis is over. The system is working. And the taxpayer and public are benefitting. And MPs are getting the support they need to do their job
Yesterday, I sent the following letter to the Daily Mail for publication:
In response to the article published on Saturday, claiming ‘Proof expenses loving MPs still don’t get it’, it is worth making three points.
First, in response to the suggestion that MPs are squeezing every last penny out of the taxpayer – that simply isn’t right. IPSA has checks in place to stop that happening. We have actually saved the taxpayer around £35m since 2010.
Second, the list of office costs you cite as evidence of abuse are no such thing. MPs should not have to fund the costs of running an office from their own pockets – doing so would make Parliament the preserve of the rich.
Third, the idea ‘they don’t get it’ ignores the major reform to MPs’ costs and expenses we’ve introduced. There is now real transparency which is why your paper and any member of the public can go online and see in precise detail what their MP has claimed for. Add to that the savings for the taxpayer of £35m and it is clear that things really have changed for the better.
Sir Ian Kennedy
This morning we set out the terms of the new remuneration package for MPs, which we have set following two full public consultations. The full package, which will apply after the next general election, is set out in our report available here.
The reforms we are introducing do not cost the taxpayer a single penny more and come on the back of our already having taken tens of millions out of the cost of politics with the changes we made to the business costs and expenses. The reforms will see us make cuts to the generous pension scheme and resettlement payments, but make a one-off increase to MPs’ pay to £74,000.
But how did we reach this decision? In short, after carrying out the most wide-ranging and authoritative review of MPs’ remuneration ever undertaken. We considered this issue from every angle. We looked at international comparisons (which you can see in the chart below), comparisons with other jobs, historical trends, indexes against average earnings, and of course, all of the weighty research conducted on this issue in the past including by the SSRB and Sir John Baker. In addition to that, we conducted two formal public consultations and online discussions, surveys, focus groups and received thousands of responses.
As we said in our consultation document in July, setting MPs’ pay is not like setting pay in other jobs. Most of the tools used in other walks of life are not available to us: such as data on recruitment and retention, the market “value” of the job, the training requirements or qualifications needed.
Some people think we should set MPs’ pay by proxy and link it to the pay for, say, a family doctor or a local authority chief executive or a chief constable. We are not persuaded by simplistic comparisons with jobs that require extensive qualification and long training and have responsibility for performance. And of course, often this or that job is suggested because the salary is roughly what the person suggesting it thinks is about right: the judgement comes first, the most convenient comparator afterwards.
We also have not been persuaded by the claim that the quality of prospective candidates has fallen because of the current level of pay. We have found no evidence to support this claim and, indeed, the selection policies and procedures of the political parties are probably far more important in determining the quality and character of prospective candidates.
How best, then, to approach the determination of MPs’ salary? We have been particularly guided by the evidence that MPs’ pay has fallen behind.
1) In 2007, the Senior Salaries Review Body (SSRB) found that the cash element of the MPs’ reward package was worth 85% of the average cash reward available to a selected group of other public sector professions. Using 2012 figures, MPs’ cash reward has slipped to 80% of the cash reward available to those other public sector jobs used by the SSRB.
2) The SSRB recommended and Parliament accepted that the salary from 1 April 2007 should be £61,820. If this salary had kept pace with national average earnings, it would now be £68,954. Based on projections of earnings growth from the Office for Budget Responsibility, the salary in 2015 would be £73,365.
3) The relationship between MPs’ pay and average national earnings has changed over time. In the period from 1911 – when MPs were first paid a salary – to 1980, when the expenses/remuneration confusion began, MPs’ pay was 3.16 times average national earnings. Since 1980, the ratio has fallen to 2.7. Restore the ratio to its level before the muddling of expenses and remuneration and MPs’ pay in 2015 would be £83,430.
4) In 2008, Sir John Baker (previously the Chair of the SSRB) argued that changes in MPs’ pay (which he judged to be 10% too low) should be determined by reference to annual movements in average public sector earnings. Updated to reflect movements in public sector average earnings since 2008, Baker's formula would yield a salary today of £74,365. Project that figure forward to May 2015 and the prospective salary rises to £79,122.
Having considered these four reference points, we are persuaded that MPs’ pay should rise in 2015, and that its level should be in the range £73,365 - £83,430. In recognition of the current difficult economic circumstances we have set it at the lower end of this range: £74,000, indexed to national average earnings thereafter. This equates to an additional £6,269 in 2015, an increase of 9.26%.
Alongside this pay increase, we have made cuts elsewhere. We have removed the generous resettlement payment system that operated at the 2010 election, replaced with much smaller payments equivalent to double statutory redundancy, and only for MPs defeated at an election. We have ended the final salary pension scheme, replaced with a cheaper, career average system, with MPs paying a higher proportion of the cost. We have cut further the expenses that MPs can claim, removing those with a personal benefit.
Ever since we were given the responsibility to set MPs’ pay and pensions, IPSA has said that we will make our decision based on the evidence and the quality of the arguments put to us – and that we would do so following consultation with the public.
Over the last two years, we have held two full rounds of formal public consultation; received hundreds of responses from the public; taken part in dozens of radio phone-in programmes around the country; held focus groups in different regions; reviewed research and conducted some of our own; and discussed the questions on social media.
And, on Thursday, we will publish our findings. The package we will announce will be exactly that: a package. It will be about more than pay.
One of the strands of research we pursued was a survey of public opinion about the package we put out for consultation in the summer. As a reminder, that package included a one-off pay rise, thereafter linking MPs’ pay to average earnings; reforming MPs’ pensions; scrapping the outdated resettlement payments worth tens of thousands; further tightening up the expenses rules; and calling on MPs to complete an annual account of their work to help their constituents understand what it is MPs actually do.
In some ways, the research results were unsurprising: in general, when viewing each element of the package in isolation, people supported the recommendations which take money away from MPs, and didn’t support the recommendation to increase MPs’ pay.
When asked to weigh the recommendations as a whole - as a complete package - the public view is more sophisticated than many commentators have given them credit for in the past few days.
Taking the package together, our research suggests that, if the reformed package costs more overall, 58% thought it too generous and 30% thought it about right or not generous enough.
But, when presented with a similar package which does not cost the taxpayer any extra, public opinion is almost split down the middle: 45% say it would be too generous, and 43% say it is about right or not generous enough.
This shows us something important: this is an issue where the public has a more nuanced, and split, opinion than the reactive howls of ‘outrage’ from some commentators and politicians..
We have taken the time to ask people about their opinions in detail, and we have received them in kind.
We also know that when you engage the public in a detailed consideration of the issues, as we have, they will take the time to give the kind of thoughtful and considered response this issue deserves.
The package we will announce on Thursday will, taken as a whole, not cost the taxpayer a penny more. That message has not been heard in the hubbub of the last few days. Once it is, I am hopeful that our reforms will receive the same thoughtful response that we found in our polling. And that some commentators will pause before making sweeping assumptions about what the public think without asking them.
ComRes September Report
On 12 November I had the privilege of sitting on a panel to judge this year's Student Short Video Competition, run by the Political Studies Association. It's the third year of the competition, and this year's theme was "How much is an MP worth?”. Ties in nicely with our consultation on MPs' pay and pensions, which closed on 20 October.
Three schools were short listed: Cheadle Hume School, North Halifax Grammar School and Kings High Warwick. The videos were up to four minutes in duration. The panel watched all three and then talked to the students in turn for about 10-12 minutes. The videos were excellent: quite different in their approaches, but all creative and thought-provoking. The discussions with the students were brilliant. All three groups were really engaged, enthusiastic and insightful. 10-12 minutes just wasn't enough. Anyone who claims that young people aren't interested in politics should just talk to young people...
The panel took much longer than planned to come to a decision because the combination of the videos and the discussions afterwards were so good. By a whisker we went for Kings High Warwick, but it could have been any of the three. And while they were all different, I think there were some common themes, which are very relevant to our deliberations on MPs' remuneration. I'll just highlight three here - there were plenty more.
• Diversity. There was a strong feeling that Parliament needed to be representative of society - not just an elite - and a feeling that pay, and other state funding for politics, had to be pitched at the right level to help that. At the same time, pay should not be a big motivation in itself for standing for Parliament.
• The MP's role as a representative of his or her constituents was seen as the most important aspect of the job. Both as someone who can deal with people's problems in the constituency and as someone who can articulate the views of the constituency at Westminster. Of course it was recognised that those views can be diverse. But the MP was the voice of the constituency at Westminster.
• The more you know.... all three teams spoke of how their own views changed as they worked on their videos, took in more information, developed their thinking. On the whole, they ended up more aware of the range of roles MPs have and - and this is not to be sniffed at - the hours they put in.
So, this wasn't about putting a precise number on the right level of pay. But I sensed that all the teams became more amenable to the idea of higher pay as they looked deeper into the subject. And compared the salaries of MPs with head teachers, doctors, and others. They didn’t conclude that it definitely should be higher, because of the importance they attached to the views of the public at large. But they were open-minded about it.
This mirrors our findings when we conducted our "citizens juries" in 2012.
And highlights the importance of having a full understanding of what MPs do as we debate the right level of pay. Which is why we continue to explore the idea of some form of annual reporting, to help that understanding.
And shows how important it is that we listen to the views of all generations – future, as well as current, voters.