MPs' Pay and Expenses
MPs' pay and expenses.
Responsibility for the regulation and administration of MPs' pay and expenses was transferred to the Independent Parliamentary Standards Authority (IPSA) following the 2010 General Election. In 2011, IPSA was also made responsible for determining MPs' pay and pensions.
With effect from 1 April 2010, the salary for an MP was set at £65,738. In February 2012, IPSA announced that Members’ pay would remain frozen at £65,738 for 2012/13 and that "in due course" there would be a public consultation on a 1% increase in the years 2013/14 and 2014/15.
Ministers also receive a supplementary salary in addition to their basic MP's salary.
In May 2010, the new Coalition government announced that ministerial salaries would be reduced by 5 per cent, compared to those drawn by the previous Government, and then frozen for the lifetime of the current Parliament.
The combined Ministerial and Parliamentary salaries for the current Government are:
Prime Minister £142,500; Cabinet Minister £134,565; Minister of State £98,740; Parliamentary Under-Secretary of State £89,435
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 a combined salary of £141,504.
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.
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 13.75%, 9.75% and 7.75% respectively, with effect from 1 April 2012. The Exchequer contribution is just over 20%.
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.
In March 2012, IPSA announced that the Accommodation Expenditure budget would rise in line with inflation. The budget for mortgage interest has been reduced because that subsidy will not be claimable after August 2012.
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: In its annual review published March 2012, IPSA stated that it had increased the budget limit for staffing to £137,200 for non-London area MPs and £144,000 for London area MPs. This money can be paid directly to staff as salaries and related costs: it is not a personal expense available to the MP. IPSA will also revise the job descriptions of MPs’ staff, but pay ranges for staff remain unchanged.
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.
In March 2012, IPSA announced that the Office Costs Expenditure budget would rise in line with inflation.
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.
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.
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.
The post of Compliance Officer for IPSA was established by the Parliamentary Standards Act 2009 (as amended by the Constitutional Reform and Governance Act 2010). The role of the Compliance Officer is to carry out an independent investigation if he has reason to believe an MP has received an expenses payment to which he or she is not entitled.
Former police chief superintendent Peter Davis was appointed as Compliance Officer for IPSA in December 2011.
We processed 182,851 claims, with a value of £17.5million. We processed 95.06% within our new KPI target of 10 working days.
We received 18,077 emails and responded to 91.5% within our KPI target of 5 working days
We received 25,798 calls and answered 68% within 20 seconds and 97.5% within one minute
We paid 646 MPs and 2,841 members of their staff last month (including 82 leavers and 77 new starters), with 99.99% accuracy, meeting our KPI target.
Using the NAO methodology on the estimate figures, the cost of processing a claim is £12.14, down from last year’s figure of £16.69
The direct cost of processing a claim is £4.60, down from last year’s figure or £7.58
We delivered on our commitment of a 5% saving in year. We will have delivered savings of £359k (5.92%) on a like for like basis, comparing 2011-12 with 2012-13.
We will have saved £320k (10%) on staffing costs.
Transparency and public engagement:
We published 196,635 claims with an accuracy of 99.98%
We answered 98 FOI requests and 62 parliamentary questions
We carried out 3 public consultations and online surveys with 548 responses
Source: IPSA - 2012
"As we get our review underway to find a long-term, sustainable solution, we are aware of the strong and often polar views that people have. We have already heard opinions ranging from: ‘MPs should receive no salary – it is a privilege to do the job’, to ‘MPs should earn an annual wage of £250,000 to reflect the importance of their role’. We aim to reach our view by Spring 2013."
IPSA - 2012