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These notes refer to the Parliamentary Standards Bill as introduced in the House of Commons on 23 June 2009
PARLIAMENTARY STANDARDS BILL
EXPLANATORY NOTES
INTRODUCTION
1. These explanatory notes relate to the Parliamentary Standards Bill as introduced into the House of Commons on 23 June 2009. They have been prepared by the Ministry of Justice in order to assist the reader of the Bill. They do not form part of the Bill and have not been endorsed by Parliament.
2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
3. A background to the Bill as a whole and a summary of the Bill is provided below. Commentary on each Part is then set out in number order, with the commentary on the various Schedules included in the section to which each relates.
BACKGROUND
Outline of the current system of MPs’ allowances
4. Allowances for MPs have been set by a series of resolutions approved by the House of Commons over many years. The first allowances schemes related to stationery and travel. The scheme has grown over the years and the matters for which allowances are claimable have similarly expanded.
5. In January 2008, the Review Body on Senior Salaries (“the SSRB”) produced a Review of parliamentary pay, pensions and allowances 2007 (January 2008) Cm 7270-I. That report made a range of recommendations concerning the way in which MPs’ allowances should be paid. The House considered the SSRB report on 24 January 2008, resolving to accept some of the recommendations and referring others
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to the Members Estimate Committee. The Members Estimate Committee published its report on the review of allowances on 25 June 2008. 1 It described its report as a “root and branch review” driven by the objectives of adequately equipping MPs and “to meet public expectations for clearer audit and transparency”.
6. The House of Commons debated this report on 2 July 2008, accepting some of the recommendations but not others, and tasked the Advisory Panel on Members’ Allowances with setting out the conclusions of the House of Commons in a revised system of allowances. The Advisory Panel’s work was contained in a January 2009 report of the Members Estimate Committee. 2 On 22 January 2009, the House resolved that the revised system of allowances should govern all expenditure on MPs’ allowances for claims on or after 1 April 2009 and empowered the Members Estimate Committee to make such modifications to previous House resolutions relating to MPs’ allowances “as are necessary to ensure that they are consistent with the provisions in the Green Book”. 3
7. Also on 22 January 2009, the House resolved to accept the arrangements for audit and assurance of MPs’ allowances set out in the report of the Members Estimate Audit Committee to the Members Estimate Committee (contained as annex 3 to the January 2009 report). 4 Amongst other things, the Members Estimate Committee recommended that the current limitation on the scope of the audit by the National Audit Office should be removed. The effect of this is to bring about full scope audit, the same level of audit provided by the National Audit Office for other public sector bodies.
8. The current system of allowances is set out in The Green Book: A guide to Members’ allowances (“the Green Book”). The allowances scheme is designed to ensure MPs are able to work effectively in Parliament and in their constituencies. It provides support for employing staff, servicing MPs’ offices, overnight stays away from home while on Parliamentary duties, communicating with constituents, House stationery and postage, and travel.
9. The Green Book sets out certain principles, derived from the MPs’ Code of Conduct, which MPs are to adhere to when making claims against parliamentary allowances. The principles are as follows.
a) Claims should be above reproach and must reflect actual usage of the resources being claimed.
b) Claims must only be made for expenditure that it was necessary for a Member to incur to ensure that he or she could properly perform his or her parliamentary duties.
c) Allowances are reimbursed only for the purpose of a member carrying out his or her parliamentary duties. Claims cannot relate to party political activity of any sort, nor must any claim provide a benefit to a party political organisation.
d) It is not permissible for a Member to claim under any parliamentary allowance for anything that the Member is claiming from any other source.
e) Members must ensure that claims do not give rise to, or give the appearance of giving rise to, an improper personal financial benefit to themselves or anyone else.
f) Members are committed to openness about what expenditure has been incurred and for what purposes.
g) Individual Members take personal responsibility for all expenses incurred, for making claims and for keeping records, even if the administration of claims is delegated by them to others.
h) The requirement of ensuring value for money is central in claiming for accommodation, goods or services - Members should avoid purchases which could be seen as extravagant or luxurious.
i) Claims must be supported by documentary evidence, except where the House has agreed that such evidence is not necessary.
10. Parliamentary oversight of the Green Book is currently provided by two House of Commons committees: the Members Estimate Committee and the Committee on Members’ Allowances. The Members Estimate Committee has the same membership as the House of Commons Commission, and is chaired by the Speaker of the House of Commons.
11. The functions of the Members Estimate Committee are: to codify and keep under review Commons resolutions and the Green Book; modify those provisions in the interests of clarity, consistency, accountability and effective administration, and conformity with current circumstances; and consider appeals against determinations by the Committee on Members’ Allowances.
12. The functions of the Committee on Members’ Allowances are: to advise the Members Estimate Committee on the discharge of its functions; advise the Speaker, the Members Estimate Committee and the Leader of the House on the development of the arrangements concerning MPs’ allowances; approve practice notes on MPs’ allowances; and determine (subject to an appeal to the Members Estimate Committee) the application of the rules as may be referred to them by Members.
13. The scheme set out in the Green Book is administered by the Commons Department of Resources, often referred to as the “Fees Office”. As set out in the Standing Orders, if an MP’s expenses claim is refused by the Fees Office, the MP may appeal to the Committee on Members’ Allowances. The MP may make a further appeal to the Members Estimate Committee.
Recent and ongoing developments concerning MPs’ allowances
14. There have been a number of recent developments concerning MPs’ allowances.
15. By motion dated 30 April 2009, the House has agreed that staff who work for MPs should be employed by the House “as a personal appointment and managed by the hon. Member”. The House asked the House of Commons Commission to consider how the transfer can be made and to make recommendations by 29 October 2009. 5
16. The Committee on Standards in Public Life (“the CSPL”) has launched a review of MPs’ expenses, publishing an issues and questions paper on 23 April 2009. 6 The CSPL asked for submissions of evidence, with a closing date of 5 June 2009 and intends to hold public meetings in June and July.
17. The Speaker of the House of Commons announced a series of interim measures connected with MPs’ allowances to take effect immediately without pre-empting the work of the CSPL. 7 These interim measures relate to second homes, capital gains tax, the status of couples both of whom are MPs, mortgages, and staffing.
Outline of the current system of salaries for MPs
18. MPs have received a regular salary since 1911. For many years, these salaries were set by the House of Commons by resolution, although since the 1970s the SSRB has advised on the level of these salaries.
19. The origins of the current system lie in the Government’s response to the January 2008 SSRB report Review of Parliamentary Pay, Pensions and Allowances 2007. In response to this review, the Government announced that it considered it “inappropriate that MPs should vote on their own pay and pensions.” 8
20. Sir John Baker, retiring chairman of the SSRB, was accordingly asked to conduct a review. He was asked to “make recommendations for a mechanism for independently determining the pay and pensions of MPs which does not involve MPs voting on their own pay”. 9 His report, published in June 2008, recommended that MPs’ pay should be uprated annually in line with the Public Sector Average Earnings Index, with a review by the SSRB each Parliament.
21. The current system for MPs’ salaries is set out in the Commons resolutions of 3 July 2008. The House resolved that MPs’ salaries are to be increased annually through an uprating formula. Rather than using the Public Sector Average Earnings Index, the uprating formula is derived from the increase in a package of salaries for certain public sector workers. The increase in salary is achieved by the SSRB notifying the Speaker of the House of Commons of the percentage increase. The SSRB must also conduct a more general review of MPs’ salaries in the first year of each new Parliament.
22. These salaries are separate from what an MP might additionally receive by virtue of holding ministerial office, as provided for in the Ministerial and other Salaries Act 1975.
Outline of the current mechanisms for regulating standards in the House of Commons including the registration and declaration of MPs’ financial interests
23. The Code of Conduct for MPs, which is based on the seven general principles identified by the Committee on Standards in Public Life, includes requirements for MPs to register and declare interests in the Register of Members’ Financial Interests. The function of administering and applying the Code of Conduct is presently split between the Committee on Standards and Privileges, the Parliamentary Commissioner for Standards (“the Standards Commissioner”) and the House of Commons itself.
24. The current version of the Code of Conduct was agreed by the House of Commons in July 2005. 10 The purpose of the Code is to provide “guidance on the standards of conduct expected of Members in discharging their parliamentary and public duties”. It sets out the public duties undertaken by MPs, as well as the seven general principles identified by the Committee for Standards in Public Life. 11
25. Amongst other standards, the Code requires that MPs must “ensure that their use of expenses, allowances, facilities and services provided from the public purse is strictly in accordance with the rules laid down on these matters, and that they observe any limits placed by the House on the use of such expenses, allowances, facilities and services”. MPs must also fulfil the requirements of the House in respect of the registration of interests in the Register of Members’ Financial Interests.
26. The Committee on Standards and Privileges is established under Standing Order No. 149. The functions of the Committee are to: consider specific matters relating to privileges referred to it by the House; oversee the work of the Standards Commissioner, examine the arrangements for the Register of Members’ Financial Interests and other registers of interest and to consider any specific complaints made concerning registering or declaring of interests referred to it by the Standards Commissioner; consider any matter relating to the conduct of Members, including specific complaints in relation to alleged breaches in any code of conduct to which the House has agreed and which have been drawn to its attention by the Standards Commissioner; and recommend any modification to the Code of Conduct.
27. The Standards Commissioner is an Officer of the House, appointed by the House. Standing Order No. 150 provides that the Standards Commissioner is to: maintain the Register of Members’ Financial Interests and any other register established by the House; provide confidential advice to MPs and other persons subject to registration; advise the Committee on Standards and Privileges and any MPs on the interpretation of the Code of Conduct or on questions of propriety; monitor the operation of the Code of Conduct and make recommendations on it; and “receive and, if he thinks fit, investigate specific complaints from Members and from members of the public in respect of: (i) the registration or declaration of interests, or, (ii) other aspects of the propriety of a Member’s conduct, and to report to the Committee on Standards and Privileges”.
28. At the conclusion of any investigation, the Standards Commissioner reports to the Committee on Standards and Privileges with a finding of fact and an opinion on whether there has been a breach of the Code. The Committee does not have to accept the Standards Commissioner’s conclusions and can conduct its own investigation before issuing its report to the House of Commons.
29. Standing Order No. 150(3) provides that no report is to be made to the Committee on Standards and Privileges at the conclusion of an investigation if the Standards Commissioner considers that the interest involved is minor, or the failure inadvertent and the MP has taken appropriate action. In addition, the Standards Commissioner must not report if the Commissioner and MP have agreed on how to secure “appropriate financial reimbursement” and the MP has made such reimbursement within a reasonable period of time.
30. It is the Committee, and not the Commissioner, that makes any recommendation to the House of Commons about the sanctions that should be imposed on an MP. The House of Commons is the ultimate arbiter in these matters and may choose not to accept the recommended sanction.
31. Although complaints relating to the conduct of Members are usually brought under the procedure described above, the House retains a power to deal with conduct that is not necessarily related to financial propriety (for example, disorderly behaviour or conduct wholly related to the privileges of Parliament).
32. The House of Commons has a range of disciplinary powers in the event of misconduct by an MP. The House may resolve to reprimand or admonish an MP, withhold his or her salary, or suspend or expel him or her.
SUMMARY
33. The Bill will establish a new Independent Parliamentary Standards Authority (“IPSA”) as a body corporate. The IPSA will have functions in relation to MPs’ salaries, allowances and financial interests. The Bill will also establish a separate Commissioner for Parliamentary Investigations to investigate breaches of the rules on allowances and financial interests.
Salaries and allowances for MPs
34. The IPSA is to take over paying the salaries of MPs in accordance with the relevant resolutions of the House of Commons.
35. The IPSA will also be responsible for drawing up the MPs’ allowances scheme. In doing so, it is expected that the IPSA will draw on the outcome of the current work of the CSPL in reviewing MPs’ allowances. The Bill lays out certain matters which the IPSA may include in the scheme, such as specifying the types of expenditure or the limits on the amounts to be paid. The IPSA will also take over responsibility for authorising and making payments under the allowances scheme (these administrative functions are to be exercised on the IPSA’s behalf by its chief executive).
Rules on financial interests and code of conduct
36. The IPSA will be responsible for preparing financial interests rules. These financial interests rules would include some matters which are presently covered by the MPs’ Code of Conduct. The rules would cover areas such as the registration and declaration of relevant financial interests and the “no paid advocacy” rule. The financial interest rules would be subject to approval by resolution of the House of Commons.
37. The Bill also provides that the House of Commons is to continue to have a code of conduct which incorporates the seven general principles of public life set out in the First Report of the Committee on Standards in Public Life.
Investigation and enforcement
38. The Bill will establish a Commissioner for Parliamentary Investigations (“the Commissioner”). The Commissioner will have the power to investigate any overpayments under the allowances scheme or breaches of the financial interests rules. The Commissioner will be able to initiate such investigations. An investigation may also be conducted at the request of the IPSA or after an individual complaint. An MP must provide any information that the Commissioner reasonably requires.
39. The IPSA must determine procedures for the Commissioner to follow. These must include safeguards for the MP, including that the MP have an opportunity to make representations to the Commissioner during the investigation and to the IPSA in light of the Commissioner’s report.
40. The IPSA will have a range of sanctions available in response to a Commissioner’s report. It may direct the repayment of allowances which have been incorrectly paid; it may direct the MP to amend his or her entries in the register of financial interests. It may also recommend to the Commons Committee on Standards and Privileges that the House should impose other sanctions, including withholding an MP’s salary for a period or suspending or expelling that MP. If the IPSA proposes to give a direction or make a recommendation, it must give the MP concerned an opportunity to make further representations to the IPSA.
41. The Bill will create new criminal offences of knowingly providing false or misleading information in a claim for an allowance, failing to comply with the rules on registration, and of breaching the rules which prohibit paid advocacy.
The appointment of the IPSA
42. There will be five members of the IPSA. Selection will be in accordance with the rules of the Commissioner for Public Appointments. The members will be appointed by the Queen upon an Address of the House of Commons. A motion may only be made only with the agreement of the Speaker for a candidate selected on merit on the basis of fair and open competition and approved by a Speaker’s Committee. Members will be removable only in response to an Address of both Houses. There will be requirements that one member of the IPSA should have accountancy experience, that one member should have Parliamentary experience, and that one member be a holder of or have held high judicial office.
The appointment of the Commissioner
43. The Commissioner will be appointed by the same process for appointing members of the IPSA. There will be a duty on the IPSA to provide the Commissioner with adequate resources and staffing to carry out the Commissioner’s functions.
The Speaker’s Committee for the Independent Parliamentary Standards Authority
44. There will be a Speaker’s Committee for the Independent Parliamentary Standards Authority charged with exercising the functions given to it under the Bill - in particular, approving the selection of persons to be members of the IPSA and the Commissioner.
TERRITORIAL EXTENT
45. The Bill extends to the United Kingdom. Because this Bill concerns the UK Parliament, the subject matter of this Bill is reserved, for the purpose of the Scotland Act 1998, and excepted, for the purpose of the Northern Ireland Act 1998.
COMMENTARY ON CLAUSES
Clause 1: Independent Parliamentary Standards Authority etc
46. Clause 1 establishes the Independent Parliamentary Standards Authority, an officer to be known as the Commissioner for Parliamentary Investigations, and a committee to be known as the Speaker’s Committee for the Independent Parliamentary Standards Authority.
Schedule 1: Independent Parliamentary Standards Authority
Part 1: Members of the IPSA
47. Paragraph 1 makes provision for the membership of the IPSA. The IPSA is to consist of five members - one chair and four ordinary members. One of the five members must be a holder of, or must have held, high judicial office; one must be qualified to be an auditor for the National Audit Office; and one must have been (but no longer be) a member of the House of Commons. Apart from this last-mentioned Parliamentary member, paragraph 1 bars from appointment to the IPSA anyone who has been a member of the House of Commons within the last five years. There is no bar on members of the House of Lords being members of the Authority.
48. Paragraph 2 makes provision for the appointment of the chair of the IPSA. The chair is appointed by Her Majesty upon an Address of the House of Commons. The motion for an Address may be made only with the agreement of the Speaker for a candidate selected by the Speaker on merit on the basis of a fair and open competition and approved by the Speaker’s Committee. Paragraph 2 also provides that the same selection and appointment process is to apply for ordinary members of the IPSA.
49. Paragraph 3 provides that the terms and conditions of appointment of members of the IPSA are to be determined by the Speaker.
50. Paragraph 4 deals with the term of office of members of the IPSA, and re-appointment to the IPSA. Members of the IPSA are to be appointed for a fixed term not exceeding five years. They may be re-appointed once only, for a term not exceeding three years.
51. Paragraph 5 makes provision for the resignation and removal from office of members of the IPSA. Members of the IPSA may resign by giving written notice to
the Speaker. They may be removed from office by Her Majesty upon an Address of both Houses of Parliament, which may be moved only by the Leader of each House.
52. Paragraph 6 makes provision enabling the terms and conditions of appointment to the IPSA to provide for payment by the IPSA of remuneration and allowances, and for the provision of a pension.
53. Paragraph 7 requires the IPSA to issue and periodically to revise a code of conduct for its members. The code must incorporate the seven general principles of public life set out by the Committee on Standards in Public Life or such other similar principles as the IPSA adopt, and must require members to disclose their interests.
54. Paragraph 8 provides that all members of the Authority are disqualified for membership of the House of Commons and the Northern Ireland Assembly.
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