MPs' Pay and Expenses

MPs' pay and expenses.

Responsibility for parliamentary pay, pensions and expenses claims was transferred to the Independent Parliamentary Standards Authority (IPSA) at the beginning of the 2010 Parliament.

PAY

With effect from 1 April 2010, the salary for an MP is £65,738.

Ministers also receive a supplementary salary in addition to their basic MP's salary. For the Prime Minister this is currently £132,923 bringing his total pay to £198,661. Cabinet Ministers and the Government Chief Whip receive an additional £79,754; the Leader of the Opposition £73,617; the Solicitor General £69,491; Ministers of State, the Government Deputy Chief Whip and the Opposition Chief Whip £41,370; Parliamentary Under Secretaries of State £31,401, and Government Whips and Assistant Whips, and the Opposition Deputy Chief Whip receive £26,624.

The number of paid Ministerial posts is limited by law to 109. Any Ministerial appointments in excess of 109 must be unpaid.

A number of Parliamentary office holders also receive supplementary salaries. The Speaker receives an additional £79,754, the Chairman of Ways and Means (Deputy Speaker) £41,370 and the First and Second Deputy Chairs of Ways of Means £36,360.

Since late 2003, chairs of Select Committees have been entitled to an additional payment on top of their salaries; this is currently £14,582. In 2005 this additional salary was extended to the Chairmen's Panel - a group of around 30 MPs who chair other general Commons committees.

Salaries are updated annually (from 1 April) according to the average increase in the mid-points of the Senior Civil Service pay bands.

PENSIONS

Members of Parliament belong to the parliamentary pension scheme - a final salary scheme with
a choice of accrual rates. MPs can choose to contribute at 1/40th, 1/50th or 1/60th. It is a contributory pension with the contribution rates set at 11.9%, 7.9% and 5.9% respectively.

EXPENSES

The new MPs' Expenses Scheme came into effect on 7th May 2010 and the Independent Parliamentary Standards Authority (IPSA) took over responsibility for the payment of MPs' expenses from that date.

The new scheme differs considerably from the previous system in that it has a new set of rules based on reimbursing expenses rather than paying allowances. The scheme consists of 12 parts and two Schedules.

Schedule 1 - Fundamental Principles:
1. Members of Parliament should always behave with probity and integrity when making claims on public resources. MPs should be held, and regard themselves as, personally responsible and accountable for expenses incurred, and claims made, and for adherence to these principles as well as to the rules.
2. Members of Parliament have the right to be reimbursed for unavoidable costs where they are incurred wholly, exclusively, and necessarily in the performance of their parliamentary duties, but not otherwise.
3. Members of Parliament must not exploit the system for personal financial advantage, nor to confer an undue advantage on a political organisation.
4. a) The system should be open and transparent.
b) The system should be subject to independent audit and assurance.
5. The details of the expenses scheme for Members of Parliament should be determined independently of Parliament.
6. There should be clear, effective and proportionate sanctions for breaches of the rules, robustly enforced.
7. The presumption should be that in matters relating to expenses, MPs should be treated in the same manner as other citizens. If the arrangements depart from those which would normally be expected elsewhere, those departures need to be explicitly justified.
8. The scheme should provide value for the taxpayer. Value for money should not necessarily be judged by reference to financial costs alone.
9. Arrangements should be flexible enough to take account of the diverse working patterns and demands placed upon individual MPs, and should not unduly deter representation from all sections of society.
10. The system should be clear and understandable. If it is difficult to explain an element of the system in terms which the general public will regard as reasonable, that is a powerful argument against it.
11. The system should prohibit MPs from entering into arrangements which might appear to create a conflict of interests in the use of public resources.
12. The system must give the public confidence that high standards of honesty will be upheld.

Schedule 2 - lists the constituencies (currently 128) whose MPs are ineligible for accommodation expenses.

Expenses for which MPs may claim include:

Accommodation: Payable only to non-London area MPs to cover expenses incurred for overnight accommodation necessary for the performance of an MP's parliamentary duties. Claims may be made for rental payments and associated expenses such as utility bills, up to an annual limit of £19,900 of which a maximum of £17,400 may be claimed for rental payments. Alternatively MPs may claim for hotel accommodation up to a maximum of £130 per night in the London area and £105 elsewhere.

London Area Living Payment: This payment is limited to £3,760 per financial year payable monthly and is intended to contribute towards the additional expense of living within the London area.

Travel and Subsistence: MPs may claim for certain travel and subsistence expenses, including food and non-alcoholic drinks, incurred in relation to their parliamentary duties. This includes journeys between the constituency and Westminster, travel within the constituency, extended UK travel and journeys to the EU, all subject to specific limitations and conditions set out by IPSA. MPs may also claim for travel and subsistence expenses incurred for family members and members of their staff, again subject to specific conditions. Claims may also be made in relation to late night parliamentary sittings for hotel accommodation and taxi fares.

Staffing Expenditure: MPs may claim for costs incurred in employing staff including salaries, employers' contributions to National Insurance and pension schemes, bought-in services, overtime payments etc. The annual staffing budget for each MP in 2010/11 is £109,548. MPs may employ only one person who is a "connected party" - i.e. spouse, civil or co-habiting partner, family member, or business partner, unless arrangements were already in place to employ more than one such person when the scheme came into effect.

Constituency Office Rental Expenditure (CORE): MPs may claim for the costs of maintaining constituency offices and for the rental or hire of offices to provide surgeries. For London area MPs the annual CORE budget for 2010/11 is limited to £12,761 and for non-London area MPs the limit is £10,663. No expenses may be claimed for the rental of a property if the MP or a "connected party" is the owner of the property.

General Administration Expenditure (GAE): MPs may claim for office equipment including initial installation and maintenance, the procurement of services and for communication costs including stationery. The annual GAE budget is limited to £10,394.

Winding Up Expenses: These expenses are designed to meet the cost of completing the outstanding parliamentary functions of a person who ceases to be a Member of Parliament and are limited to £40,609.

Miscellaneous Expenses: These include Disability Assistance which may be claimed for necessary additional expenditure incurred in the performance of parliamentary functions which is attributable to the disability of an MP. Security Assistance which may be claimed for any additional security measures deemed necessary for an MP. Contingency payments which may be claimed for expenditure incurred in relation to an MP's parliamentary duties which is not covered elsewhere in the scheme.

Background

Despite a number of attempts throughout the late 18th and 19th Centuries to secure salaries for MPs, it was not until 1911 that this was agreed. An allowance of £400 per annum was granted by a vote of 265 to 173, due largely to pressure from the nascent Labour Party. Then as now, MPs' salaries and allowances are set by decisions of the House of Commons itself - albeit usually on the basis of recommendations from an independent review body.

Salaries for Ministers were introduced under the Ministers of the Crown Act 1937, and are governed today by the Ministerial and Other Salaries Act 1975, as amended. They are periodically uprated through Orders made under the Act.

Although the idea that a salary for MPs was remuneration for a "career" in politics was strenuously rejected at the time, the move to paying Members was a critical step in both the democratisation and "professionalisation" of politics. With Parliamentary work being paid, it was no longer necessary to be an individual of independent means to seek elected office.

The wage was reviewed irregularly in its early years, and was in fact reduced in 1931. In 1963, the Lawrence Committee was set up to review payments to MPs and Ministers more regularly. Its first recommendations were accepted by Parliament in 1964, increasing the Parliamentary Salary from £1,500 to £3,250. Pensions for MPs were provided for the first time by the Ministerial Salaries and Members' Pensions Act 1965.

In 1970, the Top Salaries Review Body was charged with examining MPs' pay, and it reported roughly annually from 1971 to 1992. In 1996 the Senior Salaries Review Board became responsible, also reporting roughly annually. In 1996, MPs voted - against the Government - to adopt the SSRB's proposals of a 26 per cent pay rise (to around £43,000), and adopted procedures for automatically uprating pay without the need for a separate resolution. That year, moreover, Ministers were permitted to claim the full Parliamentary Salary for the first time, this having been resisted previously on the grounds that Ministerial office impeded a Member's work as an MP.

A major review of the system occurred in 2001-2002, when the focus of the SSRB reports on pay and pensions and subsequent parliamentary debate concerned the level of Members' pensions and allowances, with the House making significant changes to both. In particular, Office Cost Allowances were abolished and replaced by a fundamentally new system of separate allowances.

More controversially, the terms of MPs' pension arrangements were dramatically improved, providing the option of a 1/40th of salary accrual rate in exchange for higher contributions - which not all MPs have taken up. A report from the SSRB: Review of Parliamentary Pay, Pensions and Allowances 2007 recommended that Members should be able to opt for a 1/60th accrual rate in exchange for reduced contributions.

In 2009, the Independent Parliamentary Standards Authority (IPSA) was created under the Parliamentary Standards Act 2009. This Act and the subsequent Constitutional Reform and Governance Act 2010 transferred powers to IPSA to determine and to pay MPs' salaries, pensions and expenses. This change followed a major and highly publicised scandal surrounding MPs' expenses claims.

Controversies

Although controversial at the time, it is now rarely argued that MPs should not be paid at all, as it is widely accepted that the work of an MP is a full-time job in a way it was not in the 19th Century.

Nonetheless, it remains acceptable for MPs to continue to work in other capacities and many - albeit a declining number - do. There is some opposition to this permission within and outside Parliament, although it is not a substantial force.

A Register of Interests for MPs exists, which requires all earnings accrued by members other than through their Parliamentary Salaries to be declared.

Parliamentary Salary levels themselves have also been a source of some controversy, although opposition was rarely sustained or organised and tended to flare up only in response to recommendations of the SSRB and Parliamentary debates thereon. Unions have repeatedly condemned the pay and allowance rises approved for themselves by MPs, which have on occasion been considerably greater than those awarded elsewhere in the public sector.

Although the power of MPs themselves to decide their pay and conditions has been a source of grievance in some areas, it should be borne in mind that many MPs have frequently voted against large pay rises, and on occasion the discipline of the Government in Parliament has seen pay rises rejected (eg in 1975).

Nonetheless, the pension settlement agreed in 2002 was particularly controversial, given the difficulties being experienced by many private sector pension funds and the apparent lack of action on the Government's part to remedy it.

In January 2008 the Government asked Sir John Baker to carry out a review "to examine options and make recommendations for a mechanism for independently determining the pay and pensions of MPs which does not involve MPs voting on their own pay". He reported back in June of that year with a principal recommendation for MPs' pay to be increased each year in line with the previous year's increase in public sector average earnings, to keep MPs' pay in line with the earnings of public sector workers generally.
And he recommended three annual uplifts of £650 "to put MPs' pay at what the evidence suggests is the right starting level."

He also warned that the Commons' response to the recommendations "will have a significant impact on the climate surrounding this issue and on the calibre of the people who decide in future to enter - and remain - in Parliament. That in turn will determine the quality of the House of Commons itself."

In the event, however, the Government opposed the £650 annual top-up payments and MPs instead voted for a 2.25% pay rise. They also rejected a proposal to replace the Additional Costs Allowance (ACA) and end the so-called 'John Lewis list' under which public money was used to buy such items as kitchens and household goods for second homes.

Then in 2009 the Commons was hit by a major scandal when the Daily Telegraph published information about MPs' expenses claims it had obtained from a leaked computer disc. The paper began its drip-drip publication on 8th May with details of apparently erroneous claims made by Cabinet ministers over the previous four years. This was followed by similar revelations about Shadow Cabinet Ministers and MPs from across all parties.

Members were accused of avoiding capital gains tax, claiming mortgage payments on a mortgage that had been paid off, and 'flipping' houses - i.e. claiming costs for refurbishing a second home as allowed, then changing the designation of their main home to their second home in order to claim costs again on that property. Other costs funded by taxpayers' money included £2000 for Douglas Hogg to have his moat cleared, £1600 for Sir Peter Viggers' now infamous duck house, and risible claims for such things as a single light bulb, a chocolate bar and a bath plug.

Lengthy criminal investigations into some of the claims were launched by Scotland Yard and continued into 2010. Criminal charges were brought against three MPs. The scandal spread to the Lords with a Conservative peer charged with theft by false accounting and three peers suspended and ordered to repay thousands of pounds for expenses wrongly claimed.

The consequences of all this were devastating. The public's trust in politicians and the parliamentary system reached an all-time low. Some MPs were de-selected by their constituents, others resigned or decided not to stand again at the next election, while many repaid the expenses they had claimed. In their defence MPs said that the claims had been made according to the rules and pointed out that they had been accepted by the fees office.

Reviews were subsequently carried out into the allowances system and the newly created Independent Parliamentary Standards Authority became responsible for a new expenses scheme which came into effect on 7th May 2010.

Statistics

By October 2010 IPSA had:
processed 45,000 expense claims from 629 MPs with a collective value of over £6.5 million;
paid 152 MPs loans with a collective value of £279,000;
paid 251 MPs advances with a collective value of £947,000;
responded to over 10,000 emails and 12,000 phone calls;
held one-on-one systems training sessions with around 180 MPs;
held training sessions around the country for around 1000 MPs' staff;
IPSA's Board and senior management had held open meetings attended by around 200 MPs.

Source: IPSA - October 2010

Quotes

"People are right to be angry that some MPs have taken public money to pay for things few could afford. You've been let down. Politicians have done things that are unethical and wrong. I don't care if they were within the rules - they were wrong."

David Cameron - May 2009

"The new expenses scheme must meet the needs of a public now deeply distrustful of parliamentarians. It is crucial that we get it right......At the heart of our approach is the principle that MPs themselves must take responsibility for their actions."

IPSA chairman Sir Ian Kennedy - 2010