Further thoughts on MPs' expenses proposals

June 26, 2008 5:29 PM

ParliamentFurther to our Chief Executive's post on CentreRight.com yesterday, giving the TPA's initial reaction to the Parliamentary Members' Estimate Committee review of MPs' expenses, a good 24 hours of robust debate have highlighted in more detail some of the good and not-so-good things about the Committee's proposals.


It's worth noting that the report has, of course, been written by a Committee of MPs, leading to possibly a more generous financial settlement than outside observers might have suggested. It also means it's peppered with gems like "we observe with confidence that many MPs' spouses...are first class employees" (translation: I had to say this, or my dinner's in the dog) and "the benefits of the Parliamentary Contributory Pension Fund are grossly misreported and exaggerated" (translation: hands off our gold-plated deal).


1) Transparency


As Matthew noted yesterday, the MEC's report is rather light on the transparency side of things. It acknowledges the fact that the public are concerned about the lack of transparency, but it doesn't go much further than that. Nick Harvey MP, speaking for the MEC, has made clear that the Additional Costs Allowance - widely known as the second home allowance - will be fully transparent from the autumn, with receipts published in full for every MP. This is a good thing, but considering MPs were forced into disclosure by a lengthy legal battle culminating in the High Court, it's not new.


There is no promise of full transparency, to include travel, office and communications allowance, so there is still plenty of room both for any MP intent on breaking the rules to manoevre out of sight and for the public to remain suspicious of all MPs. Those MPs protesting that they do everything above board but are being tarred with the Conway brush should recognise that full disclosure of all expenses is the best way to properly dispel the suspicion hanging - often unfairly - over the whole House of Commons.


2) Auditing


The report does advise a vastly improved system of audits, accounting, record-keeping and spot-checks, which can only be a good thing. Whilst MPs have taken most of the flak for the dodgy claims that have come to light in recent months, the Commons authorities must be held partially responsible, too. The Fees Office has been extraordinarily lax and permissive in not only letting people bend and even break the spirit of the rules, but not strictly enforcing the rules when they are found to be broken. People found to be in breach of the rules have even been allowed a "grace period" running into years to correct their behaviour. The presence of proper, external auditors would be a welcome breath of cold, fresh air into the system.


There still remain a large number of areas in which Parliamentary expenses either run on a basis completely different to the rest of the economy or even in apparent contravention of the standards and rules that HMRC would demand from private companies and other public sector employers. The review doesn't go into this compliance issue at all, but it is one that will undoubtedly need ironing out in future. Until it is ironed out it may be difficult for any auditor coming into Parliament - do you highlight every single way in which Parliament differs from the wider norm, potentially ending up in the kind of pitched legal battle Michael Martin fought to keep ACA details secret, or do you audit within the weird Parliamentary culture of rules, half-rules and grey areas, risking being caught up in a scandal or at least having the unedifying experience of being seen to apply one standard to Westminster and another to your corporate clients?


In brief, bringing in external auditors to carry out regular inspections is an improvement, but it only defers the debate over the rules themselves and their questionable implementation. I imagine there are some serious questions in the minds of accountancy firms considering bidding for the contract.


3) What can be claimed?


There are three encouraging and welcome improvements in the report on the topic of what will be claimable on expenses.


One is that from now on MPs shouldn't be able to claim anything unless they have a receipt (with one suggested exception, which we address in Section 4). This would drag Parliament up to speed with the rest of the human race - not so long ago MPs could claim up to £250 without a receipt, and the limit currently stands at £25. It's right that this should be abolished - if you can't prove you spent it, you don't get the money.

The second is that the ability to buy furnishings and equipment for your second home - the so-called John Lewis List - should be abolished. There is no reason why MPs should be able to spend taxpayers' money on £750 TVs and stereos, or in the case of recently released claims £10,600 kitchens (Tony Blair), £4,000 of groceries (John Prescott) and Sky TV subscriptions (Gordon Brown).


The third good move is a tightening up of the Communications Allowance, which is essentially a free £10,000 budget for incumbent MPs to propagandise to their constituents. The Committee advises banning CA money being spent on letters during election time, and a ban on party logos, which would make it less of a blot on the political landscape, but it's still in our view a propaganda budget that shouldn't really exist at all.


4) Additional Costs Allowance reforms


The report puts forward three options for accommodation costs, which I'll discuss our concerns about as we go:


Option A - Adding accommodation costs to salary


Essentially, this would replace the £24,006 ACA, which is untaxed and non-pensionable, with a £40,000 pay rise (the figure is higher to take into account the tax which would be payable). The extra money would not be pensionable, requiring the introduction of primary legislation to exempt it.


TPA Comment: The idea of a sizeable salary increase to replace the ACA is simply unacceptable - not only because it would be an offensive increase at a time when everyone else is having to accept low pay rises and tighening economic conditions, but because it has serious implications for transparency. In effect you'd be replacing a £24,000 allowance which should only be claimable if expenses have actually been incurred - and when receipts are presented - with a £40,000, no questions asked lump sum. Even taking into account the fact that tax would knock the figure down to £24,000, replacing an expenses system with a non-transparent lump sum would be a blatant attempt to sidestep any calls for accountability, transparency and openness. Furthermore, it would be an effective reward for the dodgy goings on in the past, sending out the message that if you bend or break the rules, you won't get hold to account or subjected to stricter rules, the rules will just be abolished and you'll be given the cash without having to expend the energy on imaginative fiddles.


Option B - Overnight Expenses Allowance + £30 a day subsistence


This would replace the current £24,000 allowance with a two-part allowance. One would be a £140 a night allowance for working away from home, up to the value of £19,600 (equivalent to the 140 days Parliament sits). The second part would be a £30 a day subsistence allowance, intended to cover food, and payable automatically without any receipts being required.


TPA Comment: It's probably best to look at the two parts of this proposal separately. First, the £140 a night figure seems to have been plucked out of the air - there's no justification given for the figure. In fact, at £1633 a month you could rent or mortgage some pretty nice places - or stay in some of the capital's top hotels. A proper investigation should surely give a reason for the figure, based on the market prices in the area MPs are meant to be staying. It is a good sign, though, that MPs will be required to prove they actually stayed away from home in order to claim the allowance. The assumption that the report makes is that MPs stay over in London for four nights a week when they are working in London 4 days a week is probably mistaken, with many going home on Thursday night, so linking the allowance to how long they actually are away from home is a sensible move. That said, the report only says they would need to prove this "at audit", and it's unclear how they would do so. Perhaps a photograph of them with the day's paper in their lounge would suffice.


More worrying, though, is the £30 "subsistence allowance". This will for no apparent reason be paid without any requirement for receipts or proof that an expense has been incurred. MPs already enjoy heavily subsidised food in the Palace of Westminster, with the Refreshments Department currently running at a £4.8m annual subsidy. Is it really necessary for taxpayers to pay for the rest of the bill, too? Even if we want to pay for MPs' food as well as everything else, it should be on a receipt-recquired basis. There's not much point abolishing the right to buy a £750 TV if you just proceed to give MPs £30 a day to spend as they wish, with no transparency. The allowance would amount to £4200 annually per MP (£2.7 million altogether), no questions asked, which would undermine the good steps forward elswhere.


Option C: Daily Attendance Allowances of £140 plus £30 subsistence


TPA Comment: This system has been tried and heartily abused in the European Parliament, with Members signing in for their allowance then heading off elsewhere, secure in the knowledge the key part of their work - cashing in - is done. It also lacks any requirement for the proof of that money actually being necessary to get accommodation, again only requiring an undefined "proof" that they had worked away from home. Certainly the Brussels system of signing in at Parliament has proved as leaky as a sieve. The £30 subsistence allowance again suffers from the problems described in Option B.


The Committee have reccomended Option B as being the best system, but as you'll have guessed from our comments, we're not sure this offers the best solution and the best deal for the public. The bottom line for any system has got to be that the money dished out is only what's necessary to do the actual job - that's not just our view in the interests of public accountability, it tends to be HMRC's definition of expenses for the rest of the economy when it comes to tax exemption, so it's a reasonable standard to demand.


To ensure that, no money should be paid out for anything without receipts, and as the Parliamentary authorities have unfortunately proved to not be up to the task of properly policing the rules, those receipts should be published. The public want to see how their Parliament spends their money, and that's the best guarantee that our money will be spent carefully.


In summary, this report has some good bits, some awful bits and some glaring omissions. There are no rules proposed, for example, for cohabiting MPs, apparently because the investigation of Ed Balls and Yvette Cooper is still going on. Nor is there that crucial commitment that the public have a right to see everything - not just those bits the High Court has forced into the public domain.

ParliamentFurther to our Chief Executive's post on CentreRight.com yesterday, giving the TPA's initial reaction to the Parliamentary Members' Estimate Committee review of MPs' expenses, a good 24 hours of robust debate have highlighted in more detail some of the good and not-so-good things about the Committee's proposals.


It's worth noting that the report has, of course, been written by a Committee of MPs, leading to possibly a more generous financial settlement than outside observers might have suggested. It also means it's peppered with gems like "we observe with confidence that many MPs' spouses...are first class employees" (translation: I had to say this, or my dinner's in the dog) and "the benefits of the Parliamentary Contributory Pension Fund are grossly misreported and exaggerated" (translation: hands off our gold-plated deal).


1) Transparency


As Matthew noted yesterday, the MEC's report is rather light on the transparency side of things. It acknowledges the fact that the public are concerned about the lack of transparency, but it doesn't go much further than that. Nick Harvey MP, speaking for the MEC, has made clear that the Additional Costs Allowance - widely known as the second home allowance - will be fully transparent from the autumn, with receipts published in full for every MP. This is a good thing, but considering MPs were forced into disclosure by a lengthy legal battle culminating in the High Court, it's not new.


There is no promise of full transparency, to include travel, office and communications allowance, so there is still plenty of room both for any MP intent on breaking the rules to manoevre out of sight and for the public to remain suspicious of all MPs. Those MPs protesting that they do everything above board but are being tarred with the Conway brush should recognise that full disclosure of all expenses is the best way to properly dispel the suspicion hanging - often unfairly - over the whole House of Commons.


2) Auditing


The report does advise a vastly improved system of audits, accounting, record-keeping and spot-checks, which can only be a good thing. Whilst MPs have taken most of the flak for the dodgy claims that have come to light in recent months, the Commons authorities must be held partially responsible, too. The Fees Office has been extraordinarily lax and permissive in not only letting people bend and even break the spirit of the rules, but not strictly enforcing the rules when they are found to be broken. People found to be in breach of the rules have even been allowed a "grace period" running into years to correct their behaviour. The presence of proper, external auditors would be a welcome breath of cold, fresh air into the system.


There still remain a large number of areas in which Parliamentary expenses either run on a basis completely different to the rest of the economy or even in apparent contravention of the standards and rules that HMRC would demand from private companies and other public sector employers. The review doesn't go into this compliance issue at all, but it is one that will undoubtedly need ironing out in future. Until it is ironed out it may be difficult for any auditor coming into Parliament - do you highlight every single way in which Parliament differs from the wider norm, potentially ending up in the kind of pitched legal battle Michael Martin fought to keep ACA details secret, or do you audit within the weird Parliamentary culture of rules, half-rules and grey areas, risking being caught up in a scandal or at least having the unedifying experience of being seen to apply one standard to Westminster and another to your corporate clients?


In brief, bringing in external auditors to carry out regular inspections is an improvement, but it only defers the debate over the rules themselves and their questionable implementation. I imagine there are some serious questions in the minds of accountancy firms considering bidding for the contract.


3) What can be claimed?


There are three encouraging and welcome improvements in the report on the topic of what will be claimable on expenses.


One is that from now on MPs shouldn't be able to claim anything unless they have a receipt (with one suggested exception, which we address in Section 4). This would drag Parliament up to speed with the rest of the human race - not so long ago MPs could claim up to £250 without a receipt, and the limit currently stands at £25. It's right that this should be abolished - if you can't prove you spent it, you don't get the money.

The second is that the ability to buy furnishings and equipment for your second home - the so-called John Lewis List - should be abolished. There is no reason why MPs should be able to spend taxpayers' money on £750 TVs and stereos, or in the case of recently released claims £10,600 kitchens (Tony Blair), £4,000 of groceries (John Prescott) and Sky TV subscriptions (Gordon Brown).


The third good move is a tightening up of the Communications Allowance, which is essentially a free £10,000 budget for incumbent MPs to propagandise to their constituents. The Committee advises banning CA money being spent on letters during election time, and a ban on party logos, which would make it less of a blot on the political landscape, but it's still in our view a propaganda budget that shouldn't really exist at all.


4) Additional Costs Allowance reforms


The report puts forward three options for accommodation costs, which I'll discuss our concerns about as we go:


Option A - Adding accommodation costs to salary


Essentially, this would replace the £24,006 ACA, which is untaxed and non-pensionable, with a £40,000 pay rise (the figure is higher to take into account the tax which would be payable). The extra money would not be pensionable, requiring the introduction of primary legislation to exempt it.


TPA Comment: The idea of a sizeable salary increase to replace the ACA is simply unacceptable - not only because it would be an offensive increase at a time when everyone else is having to accept low pay rises and tighening economic conditions, but because it has serious implications for transparency. In effect you'd be replacing a £24,000 allowance which should only be claimable if expenses have actually been incurred - and when receipts are presented - with a £40,000, no questions asked lump sum. Even taking into account the fact that tax would knock the figure down to £24,000, replacing an expenses system with a non-transparent lump sum would be a blatant attempt to sidestep any calls for accountability, transparency and openness. Furthermore, it would be an effective reward for the dodgy goings on in the past, sending out the message that if you bend or break the rules, you won't get hold to account or subjected to stricter rules, the rules will just be abolished and you'll be given the cash without having to expend the energy on imaginative fiddles.


Option B - Overnight Expenses Allowance + £30 a day subsistence


This would replace the current £24,000 allowance with a two-part allowance. One would be a £140 a night allowance for working away from home, up to the value of £19,600 (equivalent to the 140 days Parliament sits). The second part would be a £30 a day subsistence allowance, intended to cover food, and payable automatically without any receipts being required.


TPA Comment: It's probably best to look at the two parts of this proposal separately. First, the £140 a night figure seems to have been plucked out of the air - there's no justification given for the figure. In fact, at £1633 a month you could rent or mortgage some pretty nice places - or stay in some of the capital's top hotels. A proper investigation should surely give a reason for the figure, based on the market prices in the area MPs are meant to be staying. It is a good sign, though, that MPs will be required to prove they actually stayed away from home in order to claim the allowance. The assumption that the report makes is that MPs stay over in London for four nights a week when they are working in London 4 days a week is probably mistaken, with many going home on Thursday night, so linking the allowance to how long they actually are away from home is a sensible move. That said, the report only says they would need to prove this "at audit", and it's unclear how they would do so. Perhaps a photograph of them with the day's paper in their lounge would suffice.


More worrying, though, is the £30 "subsistence allowance". This will for no apparent reason be paid without any requirement for receipts or proof that an expense has been incurred. MPs already enjoy heavily subsidised food in the Palace of Westminster, with the Refreshments Department currently running at a £4.8m annual subsidy. Is it really necessary for taxpayers to pay for the rest of the bill, too? Even if we want to pay for MPs' food as well as everything else, it should be on a receipt-recquired basis. There's not much point abolishing the right to buy a £750 TV if you just proceed to give MPs £30 a day to spend as they wish, with no transparency. The allowance would amount to £4200 annually per MP (£2.7 million altogether), no questions asked, which would undermine the good steps forward elswhere.


Option C: Daily Attendance Allowances of £140 plus £30 subsistence


TPA Comment: This system has been tried and heartily abused in the European Parliament, with Members signing in for their allowance then heading off elsewhere, secure in the knowledge the key part of their work - cashing in - is done. It also lacks any requirement for the proof of that money actually being necessary to get accommodation, again only requiring an undefined "proof" that they had worked away from home. Certainly the Brussels system of signing in at Parliament has proved as leaky as a sieve. The £30 subsistence allowance again suffers from the problems described in Option B.


The Committee have reccomended Option B as being the best system, but as you'll have guessed from our comments, we're not sure this offers the best solution and the best deal for the public. The bottom line for any system has got to be that the money dished out is only what's necessary to do the actual job - that's not just our view in the interests of public accountability, it tends to be HMRC's definition of expenses for the rest of the economy when it comes to tax exemption, so it's a reasonable standard to demand.


To ensure that, no money should be paid out for anything without receipts, and as the Parliamentary authorities have unfortunately proved to not be up to the task of properly policing the rules, those receipts should be published. The public want to see how their Parliament spends their money, and that's the best guarantee that our money will be spent carefully.


In summary, this report has some good bits, some awful bits and some glaring omissions. There are no rules proposed, for example, for cohabiting MPs, apparently because the investigation of Ed Balls and Yvette Cooper is still going on. Nor is there that crucial commitment that the public have a right to see everything - not just those bits the High Court has forced into the public domain.

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