May 2009 11

Are MPs Underpaid?16


Houghton Hall – built on the proceeds of Sir Robert Walpole's efforts not to get rich in public service

Amidst all the jaw-dropping revelations about their abuse of expenses, we have heard many MPs saying "we become MPs to serve the public… I can assure you that nobody comes into politics to get rich". Some go further, and say "these allowances are only necessary because our salaries have been artifically held back for many years… in reality, we are underpaid".

But what are the facts?

As things stand, MPs get a salary of £64,766 pa. However, they can also claim £100,000 pa for staffing – which can include members of their own families – £22,000 pa for "incidental expenses", £10,000 pa for "communication", and 20p per mile for riding a bike. Most egregiously, they can claim £24,000 pa for "additional costs", which as we now know covers a host of sins, from property "flipping" to watching porn films.

Not forgetting, of course, membership of the most generous final salary pension scheme in Britain.

So what does it all add up to, and how does it compare to the rest of the population?

Let's take the kindest possible interpretation, and just focus on salary and the additional costs allowance. On that basis, the MPs package comes to around £89,000 pa.

But unlike employee expense payments outside, MPs have excused themselves from paying tax on their allowances. So to get a proper comparison we have to gross up the allowance for 40% tax, which means it's £40,000 pa. So total pay and allowances gross of tax comes to £109,000 pa.

Now, according to the latest official ONS stats (the 2008 Annual Survey of Hours and Earnings), the median gross pay for full-time workers across the economy as a whole is £25,000 pa. And most workers get no additional allowances, and no pension to speak of.

So relative to the median worker, MPs get well over four times as much. A pretty healthy differential.

What about relative to other high earners, which is the benchmark MPs would prefer?

Across the whole economy, top decile full-time earnings are £50,000 pa (ie only 10% of workers get more than £50,000 pa).

So MPs do considerably better even than our top 10% of earners (most of whom will not get anything like the same additional allowances and pension).

In fact, according to HMRC stats, only around 2% of taxpayers have an income over £100,000 pa, so our MPs are actually in the top 2% of the income distribution.

Most people would say that being in the top 2% make you pretty well off.

True, many MPs do need London accommodation as well as a constituency home. But taxpayers can't understand why that should not be provided in government-owned apartments, as happens in various other countries. Why do MPs need to be given £24 grand a year tax-free to spend more or less as they like?

Despite what they like to suggest, there is no serious evidence that MPs are underpaid. The ultimate test of this is the marketplace, and as the Senior Salaries Review Body, in their most recent – and weighty – report on Parliamentary pay (2007) puts it:

"…there is little or no difficulty in recruiting sufficient suitable candidates to stand for election. There does not appear to be a problem of retention. We heard no evidence to suggest that MPs are leaving the Commons because of inadequate pay."

Never mind being underpaid. The real question – the one taxpayers are asking – is whether our MPs are grossly overpaid?

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  • john

    No, MPs are not under-paid; but it is true to say that a lot of other people/professios are over-paid. The solution to the current state of affairs is that MPs should :
    -have a 10% cut in salary
    -have no expenses
    -reduce the number of MPs by at least 100
    then stand back and see how many of the entities want to stay as MPs. My betting is that most of them will.
    Employ the same revision to all sectors of society and I’ll be surprised if many of the so-called exceptional talent decide it’s not worth their while. I have a visceral hatred of socialism, but one thing I recall of Stalin’s era, which I liked, was his periodic purges. Shoot a few thousand teachers, bankers, MPs, social workers. It would certainly clarify their minds about who is in charge.

  • Tony Rogers

    Oh but they’re all “sorry” now. I wonder when they’re going to pay their plundered loot back? Not that sorry then.

  • Steve Robson

    While I don’t agree with MP’s exploiting the expenses system, it amazes me that once again this blog demonstrates the flawed analysis of the TPA. There really can’t be a lower brow pressure group in Britain and I sincerely hope you pay everyone below the median wage and no expenses.
    How can you analyse MP’s pay and include the very expenses in it that everyone wants rid of. How flawed can your analysis be. The point is they should get paid and not rely on expenses as a top up, yet you say they are well paid by including their expenses rather than analysing the base pay.
    The solution is easy:
    > half the number of MP’s
    > increase pay by £15K to £80K
    > let them have an office up to £100K but NOT allowed to employ relatives
    > end all sittings by 9pm
    > allow expenses only for MP’s outside Greater London and then they can only claim costs incurred for reasonable hotel stays and NOT mortgages. Absolute Maximum £20K pa.
    Simple, cheaper (and more modern) than john’s solution and based on the facts rather than a flawed analysis like the TPA’s.
    This would save approaching £100million per annum. How about the TPA start coming up with solutions rather than just sniping from the sidelines. I’ve suggested it before, but you never take me up on it, just keep coming up with slogans and banner headlines.

  • takingthemichael

    Agree with some of the points raised by Steve, apart from £100k for an office- I thought that the portcullis building had been built specifically to accomodate MP’s ?
    Maybe misinformed?
    Agree with cutting the number of MP’s, and the 9pm sittings then many overnight stop overs aren’t required.
    Think I agree that not enough action is being taken over this abuse- but then again I have just witnessed Stephen Fry telling me that we all fiddle our expenses- so that being stated as a truth- we had all better pack up and go home

  • Steve Robson

    I meant £100K for staffing an office, not the building. I think that is probably provided. £100K may be too much but I think they do need a secretary and a researcher each.
    While I certainly don’t share the TPA’s delight in all this, it is quite compelling. It is almost a farce. The level of abuse, whether legal or not is staggering. Stephen Fry may have a point if talking about MP’s making a profit on a second home that is at least legitimate, eg a Scottish MP owning a London flat, but the same cannot be said of a Luton MP having a second home in Southampton or a Tory cleaning his country estate swimming pool. That is not stretching expenses, that is completely outrageous.
    The worst thing is the Speaker is completely hopeless, so how will it be sorted. I think Brown and Cameron should sack a few front benchers and withdraw the whip from a few others TOMORROW.

  • Robert

    Do not forget some Union MP’s getting union backing upwards of £25,000

  • Charlie

    It’s time for a complete radical change in the way we view MPs and a focus on the fact that they should be REPRESENTATIVE- i.e. just like us and the lives we live.
    I am a tax payer, work dam hard and have just had my pay reduced due to the economic situation to £22,000 from £25,000. My only expenses are half my monthly train pass and 40p per mile if I have to visit a client in my own car, i don’t have a company car. I would say that I am fairly typical of most people in my town.
    And this is my point, MPs are meant to be representative of those in their constituency. We can’t all turn up to vote at the commons so we elect someone to do it for us. Therefore, that person should be like a typical cross section of the local community, a Mr/Mrs average. They should also be passionate about serving the community and making changes for the better.
    It should be a vocation, and in the way that a priest’s pay is kept low to attract genuine people, so should an MPs.
    Drop the pay to a far more representative figure of £35,000 to £40,000 a year with use of a government owned house in the constituency which will be open door to the community in the way that a vicarage is, and provide shared government owned houses in London.
    Give basic travel expenses like standard rail tickets and put all MPs staff on central payrole so that the MPs don’t fund the office staff themselves.
    Provide them with the tools for doing the job like a computer, printer, website, stationary, but no other perks.
    This way, people will go into public service for the right reasons and will have lives that are far more representative of those they serve. This may attract different types of people to stand as MPs, people who have previously felt excluded by the high earnings and other-worldliness of it all, like car mechanics, shop workers, call centre workers, admin staff, nurses, communtiy workers and charity shop volunteers.
    These people would make great MPs because they are representative. Lowering the pay would attract better people not worse, we don’t need brilliant academics or high flying executives, we need real people who are passionate about change. The sort of people that give up all their spare time to help out with community activities often with no pay or expenses at all. People who love their local area with a passion, drink in the local pub, run youth clubs, help out at the local charity shop, visit the elderly, live in an average house, drive a basic car, go to the NHS doctor and NHS dentist, children go to local comp – this is the sort of person I want as my MP.
    Paying MPs such a high wage and giving fantastic expenses simply alienates them from those who pay for them and removes them from the common experience making them less representative. This has to stop, now is time for a complete alternative to the elitist system we currently have. I now no longer support any party as I feel that they are all as bad as eachother and have lost all faith in our political system which i help to pay for.

  • Call me Dave

    It’s a very good question and I really don’t know the answer. That said I believe that MP’s pay should not be decided by themselves or the SSRB. MP’s salaries should be linked as a multiple of median NET pay in the private sector. All public sector posts should then be linked as a percentage of MP’s salaries. This way we avoid the distastful situation we are currently experiencing where the public sector remain untouched by a collapsing economy. MP’s “rewards” would be directly linked to private sector productivity and public sector efficiency (hence why it needs to be linked to take home pay rather than gross)
    This way MP’s would focus on delivery of policy that benefits the greater good rather than their own personal wealth.
    On expenses there is one golden rule which applies to all private sector companies I am aware of;
    There must never be personal financial gain.
    It’s a very simple rule which should be applied to MP’s with both immediate and retrospective effect. Therefor all personal profit from the sale of homes funded by the taxpayer must be paid back. Any expenses claimed by “flipping” should result in prosecution.
    If I were to become an MP I could fairly expect to be “put up” near Westminster albeit under a different set of rules from that that currently exists. I would KNOW that to then subsequently “Flip” my nomination of 2nd home to that that I currently live in to carry out maintenance, home improvements etc was certainly immoral and (hopefully) illegal.
    It is little wonder town hall waste millions and demand a feathered existence.
    Any MP’s who were party to obstructing the FOI act applying to MP’s expenses should be shown the door. A list of them need to be published in time for the next election.
    Any MP’s involved in the immoral practice of Flipping should not only be shown the door but also prosecuted.
    I want to see a list of MP’s who’s behaviour has been honorable. I do not expect it to be very long but I do want these individuals to run the coutry.

  • Call me Dave

    We should focus next on the matter which is costing us literally millions for MP’s and billions for the public sector. Public sector final salary pensions are immoral and must be switched immediately to money purchase schemes which over 90% of private sector employees “enjoy”. Again this will focus the mind and repay the billions of debt labour are responsible for.

  • Brian Smith

    One thing I ask for; no special tax cases for MPs.
    The rules the Revenue apply to all of us must be applied equally forcefully to MPs with no exceptions or exceptional legislation passed just to suit this tiny self-serving workforce.
    Oh, and one other thing; a fixed constituency size of 100,000 electors. (With a few possible exceptions for rural Welsh, Scottish and Northern Ireland MPs). This will ensure that all MPs have the same workload and authority and reduce their numbers from the current 646 to 430 or so; more than enough.
    Let’s not tinker with expenses, let’s have root and branch reform.

  • Marc

    I would vote for someone who decided that in excess of £64K was more than enough to never have to claim a single penny of expenses, even factoring in London costs. And it’s absurd that they can claim back council tax on “second homes” when tax pays their salaries in the first place! This is like when the government fines itself e.g. the NHS…

  • Marc

    Okay I realise that my last analogy is somewhat flawed in this instance, but I definitely think that expense claims need to severely restricted or abolished completely.

  • Eugene Forrester

    How much an MP gets paid is not the really important issue here because a good decision would be worth millions to our country. It is more important that we can trust an MP to use the power invested in him/her fairly and justly. If they cannot be trusted to act with decency and honour regarding expenses then how can we be sure that they are making the right decisions for our country?

  • brenda ersanilli

    I was told a few years ago that MPs do not pay income tax on their salaries.
    If this is correct, £80,000 would be sufficient to cover their costs.
    Also MPs should not be accepted as candidates for a constituency unless they already have a property of their own there. The costs of this should be a private matter for them and not be eligible for repayment of costs by the taxpayer.
    It cannot be difficult to create a system minus loopholes, not with London being stuffed with lawyers!

  • Eugene Forrester

    You get what you vote for

  • Markrcooper1

    MP’s are paid far too much considering the job, if you can call it a job, is in fact a part-time one. Each MP cost the taxpayer 260,000 poundsa year, this is 260k x 650 MP’s or 169,497,9000 pounds – For a part time job.
    This could not happen in Industry or Commerce. How many successful companies have 650 Managing Directors? NONE I hear you say, and that is why we are in the mess we are in. Not one MP is accountable for the damage they inflict on the electorate/taxpayer.

    We need only, one MP for each County, with a small team of assistants
    at base to front the electorate, accountable to the electorate no the
    other way round.
    They do not understand the damage they have done by stealing expenses from the public purse and all those caught should resign without question. It is theft!!!