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3 July 2008 : Column 1066

Is that not exactly what he did? If she is saying that he did not comply with those terms of reference, should she not have referred the report back to him, so that he could comply with them?

Ms Harman: I make no criticism of the work that Sir John has done in his review. When a review is commissioned, the Government remain entitled to put forward their response and to tell the House and others whether they agree with its findings, having considered the arguments. We are then able to put forward our view, and that is what we are doing.

Simon Hughes: I understand the Government’s position. They took a similar position when they asked somebody to advise on nurses’ pay in England, but then rejected that advice, and when they asked somebody to advise independently on police pay, when they also rejected that advice. What is the right hon. and learned Lady’s advice today for those of us who have consistently said that if we ask an external body to recommend, we should follow its recommendation, and who voted accordingly on nurses’ pay and police pay?

Ms Harman: We are making an alternative proposal to that which Sir John Baker has put forward. We are also proposing to the House that after today, when the SSRB, which we propose as the mechanism for independent review, reviews the issue in the first year of the next Parliament, it will not be for the Government, or indeed any hon. Member, to vote on whatever proposition is put forward, which will instead be notified to the Speaker and implemented. As I have said, this is the last time that the House will be able to vote on propositions that are put forward, before the Government take a view and then seek to win support in the House.

I hope that the Government position will be supported, but whatever the House decides, I should like to take this opportunity to say that the overwhelming majority of hon. Members carry out their duties with probity, energy, dedication and commitment. The media reporting that includes expenditure on the salaries of our staff and on our office costs and which says that they are part of our salary is misleading and often malicious. After today, when we have, as I hope, established the independent review mechanism and reformed our system of allowances, I hope that we will be able to get on with our work in the interests of our constituents, of this country and of our democracy, free from the innuendo and misrepresentations about pay that have hung over this House for too long.

2.9 pm

Mrs. Theresa May (Maidenhead) (Con): Like the Government, the official Opposition will not be offering a wind-up speech today, in order to give more hon. Members the opportunity to speak. Also, I will speak only briefly on the motions and amendments before the House.

The House has an opportunity today to take an important and historic decision on the way in which it is run and the way in which Members of Parliament are remunerated. This decision could start to restore the broken trust between the people and their politicians. Sadly, too many people have felt for too long that MPs have their snouts in the trough. I will not go into the way in which the media have encouraged that view, but I
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have said in previous debates on this issue that they need to look at the way in which they report expenditure on our members of staff, for example, as being part of our own salaries. That gives most people a totally distorted picture of the situation of Members of Parliament.

It is true, however, that people are concerned about what they see in relation to our expenses and allowances—which we will be debating later—and about the fact that we decide on our own levels of pay. Notwithstanding the fact that, over the years, Governments of various colours have urged and exercised restraint on pay—indeed, the Leader of the House has urged us to exercise restraint again today—there is still a feeling that MPs should not be able to set their own levels of financial reward. I share that feeling, as does the Conservative party. Indeed, more than a year ago, we proposed that MPs should stop voting on their own pay and start looking into ways in which that could be undertaken.

We welcome the principle of the proposal put forward by Sir John Baker for a mechanism to determine the level of pay at the start of a Parliament, and for decisions on annual pay changes thereafter to be made by the same outside body, the Senior Salaries Review Body, rather than by this House. As I have said, I welcome the principle of the Baker review, but I also agree with the Government that we should adopt a different index for determining those annual pay increases. The measure proposed by the Government would give a lower increase than that proposed by Sir John Baker, based on the current known figures, but I support it because it is preferable as a measure for determining annual pay increases to that proposed by Sir John.

Mr. John Spellar (Warley) (Lab): Did we not get into this difficulty in the first place by being linked to pay rates rather than to earnings? Modern management often looks at lower basic rates, but then looks at performance-related payments to determine the overall package of earnings. Will this proposal not lead us straight back to the problem that we have had before, which led to the big disparity that the Baker review has rightly identified?

Mrs. May: One of the important things that we shall be able to do today is to take this whole issue away from the House, which is crucial. If I understand the right hon. Gentleman correctly, he is suggesting that the Government’s proposal relates to earnings rather than to increases in earnings. In fact, it relates to annual increases in earnings, albeit for a different and very particular group of workers, as identified in the proposal.

Mr. Spellar: If the right hon. Lady is basing her policy on that, I am afraid that she is basing it on a misapprehension. The Government’s proposal relates to settlements, and settlements are rates rather than earnings. This has been a consistent problem with public sector pay—first with increments and subsequently even more with the senior civil service—because so much emphasis is now placed on performance-related pay. Indeed, the SSRB’s latest report on senior salaries adds another 1 per cent.—up to 8 per cent. of total salaries—to the performance pot. Settlements and earnings are quite different things. This is how we got into this problem, with our link to the senior civil service; the rates have stuck, but the earnings have gone up. [ Interruption.]

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Mrs. May: Hon. Members are suggesting that I should just accept that, because the right hon. Gentleman, who chairs the Speaker’s advisory panel on these matters, knows what he is talking about. However, I am going to continue to disagree with him on this matter. The Government have brought forward a proposal that relates to increases. I acknowledge that it does not include bonuses—it excludes that opportunity—but it is entirely reasonable. The House should be willing to recognise that we need to set an example and to send out the signal that MPs are willing to look at their pay and put into place a different structure for the future. I therefore support the Government’s proposal for a different index.

Sir John Butterfill: Has my right hon. Friend not studied in detail Sir John Baker’s recommendations? In particular, paragraph 39 of his report states:

That is the whole principle behind the proposals. On that basis, does my right hon. Friend totally disagree with Sir John Baker’s recommendations?

Mrs. May: I hoped that I had made it clear that I do not totally disagree with Sir John’s proposals. I agree with the principles behind his proposals, and with the mechanism that he has proposed—namely, the review that should take place in the first year of a Parliament, followed by automatic annual increases in pay on the basis of some measure. I disagree with two aspects of his proposals. The first is the index that should be adopted. The second is the issue of the catch-up payments over the next three years. That is why I do not agree with those hon. Members who have tabled amendments seeking to delay the implementation of the principle of the Baker review while ensuring that we receive the full proposed increase, albeit at a later date. I believe that we should now take the decision to accept that it would not be right for the House of Commons to continue to vote on our pay, and I hope that that view is shared across the House. We should also accept that a sensible mechanism has been proposed, and I hope that that view is shared across the whole House as well.

In recognition not only of the Government’s present public sector pay stance but of our responsibility as Members of Parliament to send the right signals to our constituents about the approach that we are willing to take in recognition of the concerns that they have expressed about our pay and costs, it is right that we should not take the uprating that Sir John Baker has proposed through the catch-up payments over the next three years. When restraint is being encouraged for others by the Government, it is right that Members of Parliament should be willing to accept such restraint for ourselves and to say that we will not vote on our own pay in future.

We should start that process off by showing, in this final vote, that we are willing to stand up and be counted and to exercise the restraint that we are encouraging in others. That is why I do not support the amendments that have been tabled today, and why I support the motion that sets out the Government’s proposals on the index and the mechanism that are to be used.

2.17 pm

Simon Hughes (North Southwark and Bermondsey) (LD): We are now having the debate that we all knew we
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had to have, and I take a very simple view on this matter. I expressed that view to the Leader of the House in an earlier question. We have had this nonsense year after year for all the time that I have been in this place—25 years, the same length of time as the Leader of the House. We are now rightly saying, “Let’s stop this annual game of trying to work out what we think we can get away with in our pay increase. Let’s have an independent system.” That has been agreed, which is a blessed relief.

We have asked two lots of people—the Senior Salaries Review Body and Sir John Baker—to give us a comparator and a starting point. Effectively, they have both come back with the same answer, saying, “Here is a comparator that we have worked out, having looked at lots of alternatives and rejected them, and here is a starting point.”

I should like to remind colleagues of what Sir John Baker said on the uprating mechanism. He said that it should meet certain criteria, including that

He rejected linking us to the civil service, for very good reasons, and rejected an approach based on another suggested basket of comparators. He came to a view that he recommends indexation. He could not have been clearer about that. He drew on the work of the Senior Salaries Review Body and suggested that the public sector average earnings index was the right comparator. He says:

but he concludes that it will provide the safest, most secure and most appropriate long-term comparison. Otherwise, he says, we will be in the same debate again, because we will either go ahead or fall behind the average public sector wage and we will not have what we want, which is the break between this debate and an annual recurrent questioning of the issue. I am clear that—for myself no more than anyone else—we really must get into a system that has an objectively assessed basis from the beginning and an objectively assessed comparison thereafter.

Let me put this point directly to the Government, as there is no other way of putting it. Of course, Governments have a pay policy and will always have a pay policy, but we cannot predict what it is going to be. Some of us have taken the consistent position that if we ask for independent advice about public sector pay, we should follow it—whether it be for nurses, the police or whatever. There is no logic in taking one view and then not adopting the same view for ourselves.

Somewhat more personally, let me say that it is easy for the Government to say, “Hold back, everybody”, because everyone in the Government is paid significantly more than anyone else here. I make that as a practical household point. Nobody in the Government will be
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affected in the same way as people who are not in the Government. That is obvious. I think there are only two other people in the House who get top-up salaries other than the Back-Bench MP salary.

As to the amendments, I can see the attractiveness of saying, “Hang on a minute, people; let us be careful; let us not implement this now”, but a proposal that says, “Not now, but catch up next year”, or “Not now, but catch up later” is, bluntly, a bit of a deception and not as honest and straightforward as going straight for the proposal before us now. Obviously, it is a less bad option than not linking into the independent system. Moving slowly towards that remains preferable to not moving to the independent system at all. I accept that and I understand that that is why the hon. Member for Manchester, Central (Tony Lloyd) and the right hon. Member for Islwyn (Mr. Touhig) are proposing amendments. I hope that colleagues will have the straightforward common sense to say, “Let’s grasp the nettle, accept the independent report, accept the overwhelmingly strong argument that Sir John Baker gives and solve the problem”, rather than have it coming back just before and just after a general election or at any time in the future.

2.22 pm

Tony Lloyd (Manchester, Central) (Lab): The House certainly owes Sir John Baker a considerable measure of gratitude for setting out, as he intended to do, an “independent, objective and robust” process, which removes MPs for ever from it. What we have to do today is ensure that we remove ourselves indefinitely from that process by whatever mechanism.

Public confidence in Members of Parliament relies on our grasping the nettle—of taking this House by our own hands—but it also depends and MPs’ confidence depends on the Government taking themselves out of the process. As Sir John says in paragraph 10,

The problem with the Government’s position today is that their motion will not achieve that.

Sir John is clear that any settlement should reflect movements in earnings rather than settlements. He goes into that at great length in paragraph 32 and he later makes it very clear that the problem with the SCS—senior civil service—index is that it is open to manipulation by the Government, which is one reason why he rejects the validity of that index for the short or longer term. Wherever we get to today, we must get back on to the Baker track.

Other Members may disagree with my proposals. Frankly, it is a matter of individual judgment on what is effectively a free vote for Opposition Members and Back Benchers. People will disagree over the rate at which we should adopt the Baker review proposals, but we should all certainly accept the Baker index and the Baker reference point as the starting point for our salary.

Sir Michael Spicer (West Worcestershire) (Con): I have very cordial relations with my opposite number, but may I ask him what is so special about the next Parliament? Sir John makes the point on the first page
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of his report that there is no right time for MPs to have their pay altered, so why is the next Parliament likely to be any better than this one?

Tony Lloyd: The hon. Gentleman anticipates exactly what I was coming on to say, so let me continue with my explanation of why I tabled the amendment. One justification may be regarded as a nuance, but before the Baker proposals come into operation, there will have been a general election. That gives every Member the opportunity to face their own electorates in the light of the offer by Sir John Baker. There will be an electoral test, which is not a trivial point and represents a specific advantage.

Let me explain another reason. If Members look at the figures that I have chosen for the uprating of pay this year, next year and in the first half of 2010, they will find that they are identical to the figures applied to nurses and other public health workers. This is a time of restraint in public pay; whether or not Members agree with that, it is a reality. It is also a reality that people up and down this land are feeling the impact of the belt-tightening that is inevitable when energy and food prices increase. In that context, there is an expectation that MPs should look at their own role, which is exactly what my right hon. Friend the Member for Islwyn (Mr. Touhig) has tried to reflect in his amendment—the need to recognise that now is not the right time to rush straight into the full Baker proposals. What we are discussing is the extent to which we need to operate through restraint and in the light of the test of a general election.

Mr. Kevan Jones (North Durham) (Lab): Does not my hon. Friend’s amendment basically push payments into the next Parliament? In one case, for example, a payment of £1,950 is pushed into the next Parliament, along with the main implications of the Baker review. New Members will be elected, having had no say in this whatever, and my hon. Friend’s crazy suggestions for pensions would give retiring Members a cash bung that they had not earned.

Tony Lloyd: Under any independent system, MPs will have no say over their salaries, irrespective of whether they are new or old Members. That is the whole point of what we are trying to achieve today. My hon. Friend thinks that my proposals on pensions are crazy, but the one group of people who will lose out in any period of restraint are those who either choose to retire or who are forcibly retired at the next election. The second part of my amendment is designed to protect those who will leave at the end of this Parliament.

Sir John Butterfill: I am a little puzzled by the hon. Gentleman’s proposals on pensions. I am not at all sure—I have not yet had the opportunity of taking legal advice—but I doubt whether his amendment would work legally. It might well require an amendment to the parliamentary pensions legislation, but it would certainly need an order to be made. As it stands, it cannot work. As currently presented, it is incompetent.

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