Select Committee on Members Estimate Committee Third Report


7  Accommodation costs of working away from home

The current system

172.  All MPs with constituencies outside London need to divide their time between London and the constituency and as a result incur substantial additional costs, either on hotels, renting a flat or buying a second home. This is necessary expenditure to allow them to carry out their parliamentary duties and should be reimbursed. The Additional Costs Allowance provided for up to £23,083 to be claimed in 2007-08 and £24,006 in 2008-09. Members representing inner London constituencies cannot claim ACA but receive a London supplement of £2,916. Members representing outer London constituencies can choose whether to claim ACA or the London supplement.

173.  Figures for 2006-07 show that of the 621 MPs eligible for ACA, 589 do claim it. Of these 415 (70%) claim for mortgage interest payments. 133 MPs claim for rent and 12 for hotels. 80% of Members register a London home as their second home. 45% of Members claim all or almost the full allowance and nearly two-thirds claim over 90% of the ACA. Of those who do claim, the average spend is £19,375 (88% of the maximum).The average spent on mortgage interest is £12,000 a year. Average rental costs are £15,000 a year.

174.  In addition to claiming for hotel bills, rent or mortgage payments, Members may claim for other costs related to the running of a second home: utility bills, service/maintenance, repairs, furniture and household goods, food and cleaning. Members are advised that "you must ensure that arrangements for your ACA claims are above reproach and that there can be no grounds for a suggestion of misuse of public money. Members should bear in mind the need to obtain value for money from accommodation, goods or services funded from the allowances. …You must avoid any arrangement which may give rise to an accusation that you are, or someone close to you is, obtaining an immediate benefit or subsidy from public funds or that public money is being diverted for the benefit of a political organisation. …You should avoid purchases which could be seen as extravagant or luxurious." [39]

History of the allowance

175.  The Additional Costs Allowance was introduced by Resolution of the House in December 1971 to cover the reasonable additional cost to provincial Members of staying either in London or their constituency, when engaged on parliamentary duties. The Top Salaries Review Body (TSRB) had proposed that the allowance should take the form of a daily subsistence rate. The Government proposed, however, a scheme which reimbursed expenses within an annual limit.

176.  The annual limit was initially set at £750, from 1 April 1972. It was increased in 1974 and 1975. This was superseded by a Resolution in 1975 which provided for an enhanced amount for 1975-76 and provided for the regular uprating of the allowance based on civil service night subsistence rates.

177.  The Additional Costs Allowance rates were uprated in July each year from 1976 to 1979 and in August from 1980 until 1992. The Resolutions establishing the allowance referred to a year as the period from 1 April to 31 March and required the maximum annual allowances to be calculated as a weighted average of the rates that applied. So between 1976-77 and 1979-80 the maximum amount that could be claimed in a financial year was ¼ of the old rate + ¾ of the new rate; and then from 1980-81 to 1992-93 the maximum amount that could be claimed in a financial year was ? of the old rate + ? of the new rate. In 1985, Members were advised that "there is no reason why [they] should not claim mortgage interest payments against this allowance".

178.  In 1994, when the centralised civil service subsistence rates no longer pertained, the House agreed that from 1 April 1995 onwards the annual rate should be increased in line with inflation (increases were to be based on the annual increase in the retail price index to the previous March). In March 2004, the Members Estimate Committee amended the 1994 Resolution to provide for the annual increase to be based on the change in the retail price index to the previous December.

179.  In 2001, the SSRB made no recommendations on the Additional Costs Allowance. The House agreed, however, to a backbench amendment proposing a significant increase from £13,322 to £19,469 in the maximum rate for the allowance. The SSRB's 2004 and 2007 reviews did not recommend any substantive changes. In 2005 and 2006, the Members Estimate Committee agreed changes to the Additional Costs Allowance to allow for increased mortgage payments in certain circumstances and to permit overnight stays on journeys to a Member's constituency, when it was not practicable to complete the journey in one day.

SSRB proposals

180.  The SSRB made no substantive proposals for change in the ACA, apart from a change in vocabulary to 'Personal Accommodation Expenditure'. They said "Although … we have received no substantive evidence of abuse, we are concerned that it is in the area of ACA that the greatest scope for abuse is thought to exist…..this element of the expenses regime gives rise to more problems and misunderstandings, both within and outside the House, than any other and a fuller review of the ACA might be appropriate."[40] The SSRB went on to suggest that the division between inner and outer London for the purpose of ACA does not take into account improved public transport in London and the fact that the House normally only sits late in the evenings on Mondays and Tuesdays.

181.  The SSRB also reported "It has been argued by some observers that because MPs may make a capital gain from owning a second home the cost of which is met at least in part from ACA, there should be some means of sharing that gain with taxpayers. This seems to us a misplaced idea. First, gains on the sale of a home which is not the principal residence are already subject to Capital Gains Tax. Secondly, there would be the problem of attributing any gain to any particular period of time. And thirdly, if an MP was required to pay any reasonable gain to the tax payer, the quid pro quo would surely be to require the taxpayer to make good any loss incurred by the MP, thus encouraging MPs not to drive a hard bargain when buying or selling."[41]

The Committee on Standards in Public Life

182.  In its 'Principles to govern a review of MPs' allowances', the Committee on Standards in Public Life said: "There should be no double benefit for Members who are also Ministers (for example claiming for the cost of maintaining a second home in London if a grace and favour home is provided)".[42]

What happens in other organisations

183.  The Committee understands that in other organisations an employee who has to work in two different places over a long period of time would be recompensed by an addition to salary or some other benefit in kind. In the shorter term, such an employee might be given a budget to cover accommodation and subsistence costs. This would be accepted by HMRC on the basis of evidence from the organisation that the budget reflected actual costs incurred in the past. The claimant would have to demonstrate that he or she had actually worked at the two places. In public sector organisations there would also be some form of occasional and random audit of such claims.

What the courts have said

184.  In the recent High Court case concerning disclosure of information about the ACA requested under the Freedom of Information Act 2000, the judgment said

"In any event, once it had emerged that the system was deeply flawed, public scrutiny of the details of individual claims was inevitable. With respect to the balance between MPs' privacy and the public interest in disclosure of their residential addresses under paragraph 6(1) of Schedule 2 to the 1998 Act, there was a legitimate public interest capable of providing justification for the disclosure given the deep flaws in the additional costs allowance system identified by the tribunal which had so convincingly established the necessity of full disclosure. If the arrangements for oversight and control of the additional costs allowance system were to be changed, then the issues of the privacy and security of MPs and their families might lead to a different conclusion."[43]

The Scottish Parliament

185.  The recent review recommended that eligibility for accommodation costs should be divided into three categories based on travelling distance from Edinburgh:

186.  The review also recommended an end to the payment of mortgage interest in relation to property purchased in Edinburgh, with transitional measures for those already committed to such an arrangement. It also endorsed the existing provision for new members in an election year. It recommended that those MSPs entitled to lease accommodation in Edinburgh should also be able to claim as expenses only factoring charges, council tax, utility bills and telephone costs. The review also recommended an increase in the overnight expenses rate which MSPs can claim when visiting London on parliamentary business to £150.20 a night (based on accommodation costs of £131 and a meal rate of £19.20).[44]

Views expressed by Members

187.  Several Members in their submissions to this review argued that the Additional Costs Allowance should continue in its current form but with much tighter audit.

188.  Others suggested a radical shift towards merging the ACA with salary. "I don't think this increase should be pensionable but it would have to be taxable. This would sweep away a vast amount of bureaucracy in the House of Commons itself and end the dispute once and for all. I imagine it would be unpopular, for the wrong reasons, with our constituents in the short term but I think in the medium term everyone would gain including the taxpayer, who, I suspect, would save a considerable sum of money from reduced bureaucracy."[45]

189.  The merger of overnight costs with salary commanded the support of only a few of the Members who wrote to the Committee, with many opposing it.

190.  Several Members questioned whether reimbursements of mortgage interest payments was acceptable. "It is not acceptable that MPs should be able to use public funds to secure a mortgage on a second property and then benefit from a capital gain when the property is sold. We recommend that from 1 August 2008, the ACA can only be used to secure a mortgage on the condition that when the property is sold, any profit after costs is returned to the public purse."[46] This view was supported by a minority of the Members from both sides of the House who wrote to the Committee. Members opposed to such a change pointed out that mortgage interest payments were cheaper for the taxpayer than rental payments.[47]

191.  Some argued for the abolition of the 'John Lewis' list by which they meant the ability to purchase furniture and household goods at public expense where the items concerned become the property of the Member. The list itself is merely a guide for staff handling claims to ensure that purchases are not extravagant or luxurious. Others called for the list to be replaced by a test of reasonableness or a truncated list. Others still identified a need for new Members to receive assistance when first setting up home in London.

192.  On food, some Members expressed surprise at the arrangement under which Members may claim up to £400 a month for food without producing receipts. Others have said they allow themselves about £20 a day for food and minor costs while working away from home, especially when the length of the working day prevents them eating at home.

193.  In the context of ACA, several London Members drew attention to higher costs they incurred through living and working in the capital. They noted that the Government had not put to the House on 24 January the SSRB recommendation that the London Supplement be increased to £3,500. As they were not eligible for ACA, they were not able to claim any daily food expenses or taxis home even when the House sits late. Their staff costs were higher because of higher wage costs in the capital. The Department of Resources advised us that, although there is no longer a standard London weighting in the public sector, the market appears to require additional pay of about £4,000 for inner London, from a range of between £2,500 and £5,600 for private and public sector bodies.

Advice from the Department of Resources

194.  We have sought advice from the Department of Resources on how three alternatives to the Additional Costs Allowance might work in practice.

COMBINING WITH SALARY (OPTION A)

195.  Expenditure on overnight expenses could be combined with salary—this would be taxable but not pensionable and would add approximately £33,500 to salary:

OVERNIGHT EXPENSES ALLOWANCE (OPTION B)

196.  Overnight expenses could be divided into two elements—a daily subsistence rate of £30 for up to 140 days and a maximum limit for overnight accommodation expenditure (excluding capital improvements and furniture etc) of £19,600 a year based on 140 nights at £140 per night:

PER DIEM RATE: (OPTION C)

197.  There could be a daily rate (per diem) for overnight expenses—not to come into effect until the next Parliament—with two flat rate components: one to cover subsistence (£30) and the other to cover accommodation (£140)—based on a maximum of 140 nights in London each year:

198.  The table below shows various costs that may be relevant as comparators when determining either a per diem rate or annual allowance maximum. This has been split into two elements: cost of accommodation; and a daily food and subsistence allowance.
Cost comparators
Daily rate
Accommodation
Charing Cross hotel (Govt rate)
£187
Novotel Lambeth Road (Govt rate)
£127
City Inn (Westminster)
£200
Horseguards Hotel
£281
Marriott Count Hall (Govt rate)
£226
F & CO Accommodation (Inner London)
£120
Subsistence
F & CO (including £3 for incidentals)
£28
Department of Health (including £5 for incidentals)
£25.50
Department of Work & Pensions (including £5 for incidentals)
£26
Crown Prosecution Service (including £5 for incidentals)
£26
House of Commons staff—daily meal rate when working away from Westminster
£20.50
Average annual rent and essential associated cost in Pimlico/Kennington
£18,000 pa

Opinion of the Committee

199.  Much of the recent controversy about MPs' allowances has focused on the Additional Costs Allowance (ACA), which covers the extra accommodation costs which MPs incur in working in two locations: in their constituency and at Westminster. But, despite all the adverse publicity, even the harshest critics rarely go so far as to suggest that MPs should not be reimbursed at all for the costs which they incur in working away from their main home on a regular basis. It is usual in other jobs for such costs to be met by employers.

200.  There was a time when it was not uncommon for significant numbers of MPs to sleep in their parliamentary offices because they could not afford to stay anywhere in London. The Additional Costs Allowance was introduced in 1971, in part to remedy this.

201.  We have taken expert evidence from a range of relevant professional advisers as to the sort of arrangements which apply in other walks of life, across the private, public and voluntary sectors. We have probed both the level of expenses which are generally paid out, and the administrative arrangements governing such payments.

QUANTUM

202.  In terms of the scale of sums paid out, the starting point is usually the cost of a hotel room. For managerial and professional staff this is generally a three or four star hotel, depending on the location and availability. The second element is commonly the reimbursement of "subsistence" costs. These are the costs of eating "out" because work commitments prevent eating meals at home, and minor and incidental out-of-pocket expenses (in the case of MPs this might include an occasional taxi fare after a late sitting).

203.  We have investigated the costs of rooms in a range of hotels within easy reach of the House of Commons, both as "walk-in" customers, but also on the basis of a regular corporate arrangement with the hotel—which is probably a more valid comparison. We have also taken evidence as to the sums paid by a range of organisations to cover accommodation and subsistence costs of employees sent on business to work in central London.

204.  On the basis of these figures, we have concluded that a nightly accommodation rate of £140, and a daily subsistence rate of £30 (rates at which the HMRC might consider that there was no profit), would be appropriate and reasonable for MPs staying in central London.

205.  The question then arises as to how many nights a year this support should be available. The logical starting point is the parliamentary calendar. The number of days the House sits varies from year to year, but the average is around 150. Of these, 13 are usually Fridays when attendance is limited, and most MPs return to their main home by Friday night. So there is no case for paying for Friday night accommodation. Beyond that, patterns vary from MP to MP and from week to week. Many MPs regularly spend either Sunday or Thursday nights (or both) in London, while others do not. In all cases, however, MPs will also spend some time at Westminster during parliamentary recesses, attending to parliamentary and committee work. So taking all these factors in the round, our judgement is that accommodation costs should be reimbursed for a maximum of 140 nights a year.

206.  The multiple of £140 (accommodation) plus £30 (subsistence) times 140 nights comes to £23,800 as an annual figure,. This is close to but marginally less than the current ACA (£24,006 for 2008-09). We are not surprised by this, and believe it reinforces the judgement of the Senior Salaries Review Body last year that the ACA is at about the right level.

ADMINISTRATIVE ARRANGEMENTS

207.  Turning to the question of administration and accounting for these reimbursements in other organisations, a consistent picture has been painted by those whom we consulted:

a)  For short term and ad hoc working commitments away from home it is usual for employers to reimburse directly the actual costs which an employee has incurred, upon presentation of receipts. Often the employer will organise the booking of, or make direct payment to, the hotels.

b)  Where these working commitments become more regular, however, and are likely to continue for a while, it is more common for an employer either to procure and pay for a flat, which is made available for the use of the employee, or to agree a daily sum with the employee, who then makes their own accommodation arrangement and settles bills without further reference to employers. The HMRC will usually accept that such agreed daily sums can be paid without a taxable profit element but will normally only permit such arrangements for up to two years.

c)  In other circumstances it is general practice for an employer and employee to negotiate an agreed lump sum to cover the additional costs incurred in working in two locations, and for this to form part of the employee's remuneration package. This might be consolidated into salary, in which case it might become pensionable, or it might stand separately as a block sum—not pensionable, and reversible if the co-location should end and a normal pattern of work resume. In either case, salary or block sum, they are taxable and the gross sum negotiated would aim to deliver to the employee net the necessary recompense to cover their outgoings.

208.  On the basis of this evidence it could be argued that some of the difficulties MPs now find themselves in have come about as a result of superimposing in recent years the reimbursement logic described in (a) above onto a block sum system as described in (c), which is what the original recommendation for the ACA in 1971 actually proposed. Indeed it could be said that the ACA has ceased to be an "allowance" at all, but has become rather more a "budget" against which reimbursement can be claimed.

SCOPE OF WHAT CAN BE CLAIMED

209.  Although we have posited a value on the scale of accommodation costs which it seems reasonable to cover by reference to hotel costs, the practical reality is that virtually nobody working in a particular location regularly and permanently will wish to remove all their personal effects every week and cart them back to their permanent home, probably by public transport. Taking a flat on a permanent basis is clearly a far more practical option, and also a more comfortable one than living almost permanently out of a suitcase.

210.  Renting even a modest flat in central London can be prohibitively expensive, but so long as an MP is able to find one without it costing the tax payer more than staying in a hotel would cost (and many new MPs in 2005 found this difficult) then it is hard to see any sensible objection.

211.  The suggestion has been made that the House of Commons might buy or build an accommodation block for MPs. In one of the most densely populated, expensive and mature property markets in the world this is clearly neither a feasible nor affordable option. Even the alternative of the House going out onto the open market and renting flats in which to billet MPs would entail substantial new expenditure in developing and maintaining property management expertise, with no guarantee of any saving to the public purse. MPs currently handle the interface with landlords without complaint, and with an incentive to drive a good deal, so it seems better to let them continue.

212.  The more contentious question is whether it is reasonable to permit MPs to use their accommodation allowance to pay mortgage interest and buy a flat, which has been allowed since 1985. Although we have received some representations suggesting that this should stop, these seem largely to be personal opinions based on "gut instinct" and no one has built a convincing argument as to why, logically, it should not be permitted. Indeed in a hugely challenging housing market like central London's it is hard to see the sense of closing off the largest source of supply, thus leaving over 600 MPs to trip over each other in a scramble for a limited supply of rented housing. In terms of cost to the public purse it is often the case that mortgage interest (capital repayments of a mortgage cannot be claimed—only interest) works out cheaper than rental. So no argument about cost to the public purse bears scrutiny.

213.  Indeed the only real point of debate is the question of any capital gain on the value of the property if and when it should come to be sold. Property values can go down as well as up, and some MPs who left Parliament at the 1992 general election—after a property crash—faced losses. The property market is currently looking rocky once again, so the same could happen. An MP who chooses to buy not rent is taking a risk. Even if it pays off, by the time Capital Gains Tax is paid in consequence of an MP owning two properties, the public purse effectively gets a rebate against some of the money it has paid out in allowances. It may not be far fetched to suggest that the public purse even benefits from MPs buying rather than renting flats.

214.  Recently controversy has attached to the use of the accommodation allowance for the purchase of household items like furniture and electrical goods, and for home improvements like new kitchens and bathrooms. In both cases what is acquired remains the permanent property of the Member. We can see that new MPs setting up home in either a rented or purchased flat need a modest dispensation to use their allowance to equip it, but it is hard to see any justification for such purchases continuing indefinitely at the public's expense. As for repairs to the home, where needed, we believe that these should be claimable but not capital improvements. The HMRC distinction between repairs and capital improvements could be used as a guide.

215.  We recommend that, with immediate effect, Members should no longer be able to claim reimbursement for furniture and household goods or for capital improvements.

216.  We have not received any comments about the situation where two Members claim Additional Costs Allowance while living together in the same second home. During our review, the Parliamentary Commissioner for Standards has been considering some individual cases. The Committee expects that a revised Green Book will contain clearer rules about the maximum amounts which can be claimed in such circumstances.

OPTIONS FOR THE FUTURE

217.  On the basis of our study of these issues, and the evidence we have considered, we identify three future options for paying accommodation costs MPs incur in working away from home:

Option A—Adding accommodation costs to salary

218.  This idea, which we identified in our "issues paper", has attracted both strong support and firm opposition. It would be the most straight-forward way of addressing the question. Although it is often assumed that it would be unpopular with the general public, this may not necessarily be so. It would doubtless attract the wrath of a cynical media, but contributors to letters columns, phone-ins, blog sites, leader writers and even a viewers' panel convened by the BBC Politics Show, have advocated it as the clear-cut solution. It is also, on the basis of the clear evidence we have received, the normal way other employers in other sectors would cover ongoing accommodation costs of this kind—and identifying solutions analogous to practice in other walks of life was one of our objectives. Hence we have identified this option.

219.  Two considerations would need addressing: taxation and pension. The current ACA of £24,006 is untaxed. We have consulted HMRC as to whether accommodation expenses could be written off against tax if ACA were added to salary and have been told unequivocally that they could not. So if the current maximum value of the ACA were to be maintained then the £24,006 would have to be "grossed up" to allow for 41% tax and national insurance—i.e. by £40,688, taking the MPs' salary to £102,508 before any consideration of Sir John Baker's recommendations or even a cost of living increase effective from 1 April 2008. In fact, the current ACA is not claimed to its full limit so, to be cost neutral, the actual uprating should be limited to £33,500, bringing the salary to approximately £95,300. This would inevitably attract much comment although there would be no overall impact on the public purse: it would recover the 41% as tax and NIC revenue.

220.  The second consideration would be the impact that incorporating ACA into salary would have on MPs' pensions. Although the benefits of the Parliamentary Contributory Pension Fund are grossly misreported and exaggerated, we can see no justification for increasing the PCPF in line with this rise in salary. So we would propose that this extra element of salary, covering accommodation costs, should not be pensionable leaving only the core salary—the reward for doing the job—counting towards the pension. This would require a change to the pension scheme which might possibly necessitate primary legislation.

Option B—An Overnight Expenses Allowance, comprising a £19,600 maximum budget for accommodation and £30 per day for subsistence

221.  The £4,200 subsistence allowance (140 days x £30) would operate on the same basis as the Per Diem in Option C below. MPs would claim it in daily blocks of £30. There would be no requirement to account for itemised expenditure: it would be claimed at a settled rate. But MPs would have to be able to demonstrate at audit that they had worked away from their only or main residence on the number of days they had claimed for, over a year. The £19,600 accommodation budget (140 days x £140) would be a maximum annual "budget" against which a Member could claim reimbursement of expenses necessarily incurred by the Member in staying overnight away from the Member's only or main residence, for the purpose of performing parliamentary duties.

222.  This budget would retain the tax exemption of the ACA, and it would not be pensionable income. An MP would claim reimbursement of costs incurred against categorised headings defined in a revised Green Book, and would have to produce itemised receipts for the purposes of verification, assurance and audit. This option might draw less external criticism, but is clearly overlaying a long term arrangement with detailed accounting practices which employers in other sectors would only operate for short term or ad hoc working away from home. It also retains most of the inherent weaknesses of the ACA.

Option C—A Per Diem in two parts £30 for subsistence and £140 for accommodation for a maximum of 140 days

223.  This would literally be an "allowance" comprising two daily block sums paid in respect of additional expenses necessarily incurred by the Member in staying overnight away from the Member's only or main residence, for the purpose of performing parliamentary duties. This allowance would retain the tax exemption of the ACA, and it would not be pensionable income. It would be expressed and claimed on a daily basis rather than an annual basis, and could be claimed for a maximum of 140 days. There would be no requirement to account for itemised expenditure: it would be claimed at a settled scale rate, but MPs would have to be able to demonstrate that they had worked away from their only or main residence on the number of days they had claimed for, over a year. This would give more control, accountability and transparency than employers in other sectors would secure in a long term arrangement, but that may be a reasonable balance for the advantage of operating an untaxed allowance.

224.  Considering these three options, we have weighed the advantages and disadvantages and conclude that option A (expenditure on overnight expenses to be combined with salary—this would be taxable but not pensionable and would add approximately £33,500 to salary) is not to be recommended to the House. Option C (a per diem rate for overnight expenses with two flat rate components, one to cover subsistence (about £30) and the other to cover accommodation (about £140)—based on a maximum of 140 nights in London each year) has also been carefully considered but is not recommended to the House. While we recommend option B in paragraph 225 below, if the House does not accept this option but approves the remainder of the report, the current ACA will continue but without Members being able to claim for furniture, household goods or capital improvements.

225.  We recommend that the Additional Costs Allowance be adapted into an overnight expenses allowance, comprising a £19,600 maximum budget for accommodation (excluding furniture, household goods and capital improvements) but operating on the basis of itemised reimbursement and a flat rate of £30 for daily subsistence.

THE LONDON ISSUE

226.  The Senior Salaries Review Body (SSRB) raised the question of the eligibility of Members living within commutable distance from Westminster to claim the Additional Costs Allowance. The regional media has also drawn attention to this issue. The only MPs currently ineligible to claim the allowance are those representing inner London constituencies. These Members receive instead a "London Supplement", at present set at £2,912, which unlike the ACA is taxed. MPs for outer London constituencies may choose either to receive the Supplement or to claim the ACA. The SSRB pointed out that changes to normal sitting hours, with late nights now only on two days a week, and improved public transport, mean there is a case for revisiting the principle that outer London Members should be entitled to claim the ACA. Members outside London, but within commutable distance, receive no financial support with their subsistence costs unless they choose to run a second property—thus creating a perverse incentive.

227.  We have considered the SSRB report and the proposals made in respect of the Scottish Parliament, which drew a 40 mile ring around Holyrood, and have concluded that change is needed both to the eligibility for an accommodation allowance, and the London Supplement.

228.  We recognise that habitual late finishes on Monday and Tuesday nights, combined with early starts the next morning, continue to justify accommodation expenses being covered for two nights a week, but that the same case cannot be made in respect of Wednesday or Thursday nights. So we see a case for a phased introduction of a "half rate" accommodation allowance for MPs in those seats, enabling them either to take hotel rooms on Monday and Tuesday nights, or to retain modest or shared flats.

229.  We recommend that new MPs elected to the next Parliament to represent constituencies in outer London should be eligible to claim half of any overnight expenses allowance; and all MPs representing those seats should be restricted to claim half the standard rate from the start of the following Parliament.

230.  Inner London MPs are in the position of having to live and work in the centre of the capital city, often staying late into the evening for parliamentary votes. The only financial recognition for this is the payment of London Supplement, currently set at £2,916pa. This is paid with salary and is taxable. The SSRB recommended that it rise to £3,500 from last April but this proposal was neither put to the House nor referred to this Committee. The Baker review has re-asserted the need for such an increase, proposing £3,623 from 1 April 2008.

231.  Living and working in London year round incurs a cost that other MPs do not encounter. Our review of levels of London weighting—a supplement to pay for many London workers—for a range of public and private bodies suggested strongly that the London Supplement is at the lower end of what is currently being paid. The average London weighting now is around £4,000pa.

232.  The present sitting hours of the House means that Members usually need to remain within the parliamentary precinct until around 11pm for two evenings a week when the House is sitting, at which point they have to travel home. In most other walks of life such extra and unsocial hours would usually lead to some recompense: for example, the payment of a part-day subsistence rate and the reimbursement of late night travel costs. Sums of £5-6 are typical for part-day subsistence and recognised by HMRC as not incurring a profit element. A journey of six miles or so after 10pm by taxi in London costs around £25. Taken together the additional net cost amounts to about £2,100, or £3500 before tax.

233.  The Committee considers that the extra costs of living and working in London, combined with the unsocial hours on at least two days a week, should be reflected not in salary but in a London costs allowance.

234.  We recommend that, instead of the London Supplement (which Sir John Baker recommended should be increased to £3,623), the extra living costs and working unsociable hours in London should be reflected in a new London costs allowance consolidated into a taxable amount of £7,500 for MPs who do not or are not eligible to claim the Additional Costs Allowance.


39   The Green Book, paras 3.3.1, 3.3.2 and 3.10.1. Back

40   SSRB, paras 5.54 and 5.55. Back

41   SSRB, para 5.56. Back

42   CSPL, principle 17. Back

43   Corporate Officer of the House of Commons v Information Commissioner and Others TLR 22 May 2008. Back

44   Scottish Review, para 4.46 and rec 14. Back

45   Peter Luff MP. Back

46   Norman Baker MP. Back

47   Chris Mullin MP. Back


 
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