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.
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.
Originally published in The Sunday Times, 10 November 2013
Over the last week, media discussion about MPs’ costs and expenses – in particular over their claiming bills for a second property – highlights the nature of the transparency IPSA has introduced: it is the disinfectant that hurts as it heals.
One of the first commitments I made in this job was to bring real transparency to an issue which had previously lived in the shadows. I said we would publish all claims made by all MPs. And we have.
That is what enabled campaigners to write, unfairly, about the ‘shame’ of MPs claiming for such costs. On the point of the costs themselves – it is worth being clear: MPs pay the cost of running and heating their own home, just as you or I do. Reports to the contrary are just plain wrong.
It is right that we should support MPs in the cost of travelling between the constituency and Westminster and, where they represent places beyond commuting distance, support them with somewhere to stay. Not a mansion; not helping them to build a property portfolio. But enabling them to rent a place and help with some of the unavoidable costs that come with that.
I know some see any money going to MPs as too much. That race to the bottom isn’t healthy for our democracy. We need to ensure the support isn’t too generous, but that it enables MPs to get on with the job of scrutinising legislation and supporting constituents. That’s the balance I think we have found.
Details of the rules aside, we gave all of this information to the public and, while sometimes it might be painful to MPs when it provokes hyperbole, openness is the only solution to the deep rooted cynicism about our Parliament which was exacerbated by the abuse and secrecy of the past.
Over time, the best chance we have of overcoming cynicism about politics is by making information available. That idea has been central in IPSA’s work and something we’ll continue next week when we will publish details setting out from whom MPs rent office space. Many MPs hire offices for their staff to work in and in which to meet constituents. It is right that we support them to do so. But we also think it is in the public interest to know where that money goes. So on Thursday, we’ll tell you.
Again, this will produce a mix of commentary and reaction – some considered and thoughtful; some not. But making information available drives informed discussion. That is a great prize to secure.
Facts are crucial to proper public debate. That’s why we are releasing these details. They are the first step in a public review of the support available for MPs to rent offices and work away from home, and the rules and checks we need to protect public money.
We know that MPs renting offices from their local party is a contentious issue.
To my mind, there are two aspects which need consideration. The first is value for money. We have a safety check designed to meet that concern, which is the need for an independent valuation confirming rent is being paid at the market rate. And there is the quite separate issue of whether taxpayers’ money is being used to fund political activities.
It is timely and appropriate to test both of these. They are important and complex issues and that is why we are acting now to engage and inform people as we set out on this work.
So, while this openness will cause discomfort in some quarters, we remain focused on the longer term goal of promoting understanding and confidence. In reaching that goal, transparency is our greatest asset. And like many disinfectants; you know it is working when it stings a little.
Last month, IPSA published all the details of every claim made by every MP for the full 2012-13 calendar year. Publishing this information is one of the most important things IPSA does – it means everyone can see exactly where public money is being spent.
It also means everyone can see exactly how much was claimed overall, and how this total changes over time.
If you read the news reports, you’d be forgiven for thinking that in 2012-13 MPs’ claimed more in business costs and expenses than ever before. In fact, several newspapers said exactly that.
The problem is, they were entirely wrong.
I should point out that IPSA doesn’t think that expense claims rising or falling is necessarily a good thing – MPs’ need to run effective offices, and need resources to do their jobs. Each MP decides how to run their office differently, depending on the needs of their constituency, and costs will naturally change over time.
At the same time, it’s important that debates about how we allocate limited public resources are conducted with accurate facts.
So, fact one: the total value of claims published by IPSA for 2012-13 was £98.1m. You can find them all here.
Fact two: In 2008-09, the last year before the expenses scandal, the House of Commons Fees Office paid a total of £102.3m in expenses. You can find that on page 34 of this report (you need to subtract the cost of paying for Opposition parties for it to be a fair comparison - it’s not something IPSA pays).
Some simple calculator work will show you that the IPSA total for 2012-13 is £4.2m lower than the House was in 2008-09 - clearly not the record, then.
However, this gap doesn’t allow for the increase in prices between the 2008 and 2013. Once price and wage inflation is added in, the 2008-09 total rises to £108.4m – more than £10m higher than IPSA in 2012-13.
In fact, when you compare what IPSA has paid in business costs and expenses to the system we replaced, it’s pretty obvious we’ve saved the taxpayer quite a bit of money:
Expenses paid, £m (inflation-adjusted)
*IPSA started paying MPs’ expenses following the May 2010 election. This means the IPSA figure only covers 10 months. The Fees Office figure of £105.6m has been reduced to also reflect 10 months.
**2008-09 total in £ of the day
That’s £38.5 million saved, in less than three years. And still £10m a year cheaper than the system we replaced.
That’s worth remembering next time someone tells you that nothing has changed since 2009.
As the consultation on our recommendations for MPs’ remuneration continues over the summer, IPSA members will discuss elements of the package here on the IPSA blog.
Something that came through very clearly from all the public research we undertook as part of our pay and pensions review is that members of the public have very little information about what it is their MPs’ actually do – particularly at Westminster.
We also found that the more people knew about the work their MP did, the more they thought they did a good job (and, incidentally, the more they should be paid!).
Importantly, this wasn’t simply a case of the politically interested being fans of their MPs. The citizens’ juries showed a causal relationship: when participants were given more information about the role of MPs, their attitudes changed.
We believe this signal something important: that there is an information gap between the public and MPs about what MPs do day to day.
We have recommended that one way to begin bridging this gap is for MPs to produce an annual report on what they have achieved with the salary they received and the expenses they claimed.
This form of reporting is not only important for bridging the information gap with the public – it also brings MPs into line with many other professions, where reporting and accountability are an important and everyday part of doing the job.
Since launching our consultation, we have asked the public how interested they are in finding out more about what their MP does, and if an annual report would help.
The answer to both has been a resounding ‘YES!’
As well as confirming our earlier research on the knowledge gap, polling by YouGov found that 65 per cent of respondents wanted more information about what their MP does, and 74 per cent would be interested in receiving an annual report.
Clearly, the public is willing to do their bit to cross the information gap, and we believe annual reporting would be a good step from the MP side.
Do you want to know more about what your MP does? Would you be interested in an annual report? What sort of thing would you like to know?
This article was originally published in The Independent on Friday 12 July 2013
There have been a lot of screaming headlines over the last 24 hours – all focused on a recommended pay rise for MPs.
Well, it is true that we are recommending a pay rise, but that is not the whole truth.
Take a step back and look at the facts. IPSA was tasked with cleaning up expenses and with reviewing and revising how we pay MPs.
We’ve done the first part over the last three years and now we have turned our mind to the second. Once you begin to look at MPs’ remuneration, you can’t help but be struck at the peculiar benefits which have grown up over time.
Successive governments failed to address MPs’ pay in a transparent way. Resettlement payments emerged – worth up a year’s salary. And MPs’ pensions evolved into something quite unsustainable.
And of course, up until 2009, there was also the whispered encouragement that MPs could top up their salary through allowances. We’ve already brought this final one to a juddering halt. But we also need to strip back these other peculiarities. And at the same time we need to tackle the question of MPs’ pay head on, no longer relying on supplements of one sort or another to make up for the fact that their pay has fallen behind in recent years. That is not just our view, but the view of successive reviews in recent years.
And so we are recommending a package of reforms. Getting rid of the golden parachutes, bringing pensions into line with the rest of the public sector, further tightening of the expenses regime and, yes, a pay rise of about £6,300.
Not now, I hear you say. But the time is never good to tackle this question. Look at the experience of the last 30 years, which teaches us that this issue will never be politically convenient – or popular. And so we are addressing the question now, but doing so in a way which is mindful of the economic context and mindful of the pressures on taxpayers.
Taken together, the changes we’ve introduced to MPs’ costs and expenses and to their pay and pensions will save the taxpayer some £7m a year.
We’ve cleaned up the system, introduced unprecedented transparency, and now we’re recommending reforming and opening up MPs’ pay and benefits – removing their peculiar perks. And we’re doing all this with a healthy saving for the taxpayer .
And beyond that, we are proposing to MPs that they introduce an annual report – in a standard format, to help explain their activity to their constituents. Because it is clear from our research that many voters do not understand what MPs do in their constituencies and especially what they do at Westminster.
That has to be good news for the taxpayer. For MPs. And for our democracy.
Andrew Mc Donald
IPSA Chief Executive
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