Conclusions and Recommendations |
172. Following the expenses scandal of 2009, Parliament
was right to establish an independent system of payments for MPs'
costs which would prevent abuses. The aims which the new system
was intended to achieve were the right ones, including independence,
value for money for the taxpayer, transparency, increased public
confidence in the payments system and enabling Members to perform
their parliamentary duties on behalf of their constituents and
thereby Parliament to function effectively.
173. However, the new system was agreed upon, legislated
for and implemented in haste, leaving a number of major issues
unresolved, and the inherent problems have been made worse by
some of the decisions of IPSA's board. Eighteen months after the
new system came into operation, it is clear that many of the aims
which were set out for the new system are not being realised.
In our review we have considered each of those aims in turn, examining
the extent to which they have been realised and how they could
be realised more effectively. Our recommendations therefore arise
directly from the aims set out in 2009.
Independence and primary purpose
174. At the heart of the problems is the fact that
the legislation nowhere sets out what the purpose is of the payments
scheme, and therefore of IPSA.
We agree with the CSPL that the purpose of the scheme is "to
ensure that MPs are properly supported to do their jobs".
Obviously IPSA must also have regard to other factors, such as
the current financial stringency and public confidence, and it
must make its own independent decisions as to what constitutes
"proper support", but a scheme to cover MPs' costs and
expenses cannot have any other primary purpose than enabling MPs
to do their jobs for the benefit of their constituents. Instead,
IPSA states that its purpose is to pursue "the public interest"
(which the Act does not refer to) and that (as the Act does provide)
it is merely to "have regard" to the principle of enabling
MPs to do their jobs.
175. Moreover, the Act makes IPSA both the regulator
and the service provider, which is unsatisfactory because a regulator
should not be regulating itself. The NAO found that IPSA was the
only independent regulator for a legislative body which also had
responsibility for processing and validating claims; everywhere
else, even where a scheme's rules are determined independently,
administration of the rules remains the responsibility of parliamentary
staff. There is
a good reason for this, which is that parliamentary staff are
more likely to administer a scheme in such a way that it does
not impose undue burdens on MPs, while independent regulation
and transparency can ensure that they do not allow abuses to flourish
or succumb to pressure. As noted above, the CSPL's fundamental
principles include independence in determining the details of
the scheme and in audit and assurance, but not in administering
176. The problem is not just weaknesses in the legislation
but also a number of serious errors by IPSA's board. As discussed
earlier, implementing the new system very quickly was an achievement,
but some of the recent changes to the scheme illustrate the magnitude
of the initial errors. In particular:
- IPSA's board ruled out direct
payments, with the result that for a time MPs were spending an
average of 50% of their post-tax pay on costs for which they had
to await reimbursement. Now IPSA regards direct payments as the
- A claims system was adopted which was suitable
for standard expenses but entirely unsuitable for the much more
complicated costs and expenses necessarily incurred by MPs.
Even the most basic adjustments to make it easier to use, such
as reducing repetitive inputting, have been made only fairly recently.
Consequently IPSA outsourced much of the scheme's administration
to MPs and their staff, taking them away from their work for constituents.
- IPSA paid too little attention to MPs' need for
advice on the implications of its rules.
- The initial rules on accommodation and travel
ignored MPs' caring role in respect of dependent children aged
five or over.
- Separate budgets for office rents and other office
costs created unnecessary inflexibility.
- Parliamentary duties were so narrowly defined
that an MP could not claim for travel outside his or her constituency
even when the journey concerned a matter before Parliament.
177. IPSA has made some changes to the scheme, but
we do not regard them as sufficient. We believe the status quo
is untenable, for the following reasons: the administration of
the system does not provide value for money; MPs are being hindered
in carrying out their parliamentary duties and deterred from making
legitimate claims, to the detriment of their constituents and
the democratic process;
transparency is not achieving its purpose of enabling the public
to make informed judgments about the costs incurred by individual
MPs and to make valid comparisons between them;
and MPs with families or without independent means are being placed
at a disadvantage,
with long-term consequences for the future composition of the
Independent determination of the payments system
for MPs' costs and independent regulation of it are fundamental
and should continue. (Recommendation 1)
The Act should be amended in accordance with the
CSPL's recommendation to provide that IPSA's primary duty is "to
support MPs efficiently, cost-effectively and transparently in
carrying out their parliamentary functions". It would continue
to be IPSA's role to determine what assistance for MPs was necessary.
IPSA's current administrative role should be carried
out by a separate body, so that IPSA is not regulating itself,
and the Act should be amended to permit this. The best arrangement
would be for that separate body to be within the House of Commons
Service, both because such a body would avoid imposing undue burdens
on MPs and because it would benefit from the economies of scale
of being part of a larger organisation in areas such as human
resources and IT. Independent regulation by IPSA and transparency
would ensure that it did not replicate the deficiencies of the
old expenses system. (Recommendation 3)
Value for money for the taxpayer
178. The cost of administering the system of payments
for MPs' costs has risen by millions of pounds, even when the
indirect costs of the old system are added to the direct costs.
The NAO calculated IPSA's cost per claim as just under £16,
with 38% of claims being for less than that average processing
cost. As well
as IPSA's own costs, the system has imposed considerable extra
work on MPs and their staff, taking them away from their parliamentary
duties and causing a proportion of the taxpayer's expenditure
on MPs' staff under the scheme to be wasted.
179. The sums paid out to MPs were less in 2010/11
than in the final year of self-regulation following the reforms
of 2009, but the NAO indicated that, given MPs' view that they
are subsidising their own work, it could not conclude that the
reduction was a genuine efficiency improvement.
From our own experience we are certain that it is not. Value for
money must be assessed in terms of the effectiveness of IPSA's
expenditure in enabling individual MPs and therefore parliamentary
democracy to function effectively and not simply in terms of the
level of that expenditure.
180. The NAO asked IPSA to consider several points
arising from comparisons with other legislatures and organisations:
risk-based validation and monitoring, more direct provision of
business resources and centralised procurement contracts.
As discussed above, direct provision and centralised procurement
contracts would require a careful balance between the advantages
of centralisation and the disadvantage of lack of flexibility,
and that balance is more likely to be achieved by an administrative
body within the House Service than by IPSA. If that balance were
achieved, direct provision and central purchasing would allow
MPs to spend more time performing the duties for which they were
elected and offer the taxpayer a significant saving.
181. The most important contributor to high costs
is the complexity of IPSA's scheme. We consider later how the
scheme and its administration might be simplified.
The body administering MPs' expenses should implement
a more risk-based and therefore cost-effective approach to validation,
as recommended by the NAO. (Recommendation 4)
The body administering MPs' expenses should extend
its use of direct payments to cover as near to 100% of transactions
as possible. (Recommendation 5)
The body administering MPs' expenses should make
more extensive use of its capacity to purchase and provide centrally.
182. The purpose of transparency in the payments
scheme for MPs' costs is to enable the public to judge whether
the details of the scheme and its administration and regulation
are fair and effective, to make informed assessments of whether
the costs claimed by each MP are justifiable and to make well-founded
comparisons between MPs. IPSA has published a great deal of information,
but that has not been shaped by an assessment of what the purpose
of such publication is. Consequently it has not assisted the public
to make meaningful judgements of MPs and comparisons between them.
In particular, IPSA's policy of bi-monthly publication of claims
allows meaningless comparisons and misrepresentation by the media.
Our recommendations below seek to make IPSA both more transparent
and more effective in achieving the purpose of transparency.
183. IPSA's decision to publish individual claims
without the underlying receipts means that the system is open
to the perception of abuse.
IPSA should improve its system of publication
- Creating an enhanced scheme
of annual publication of claims, which would be searchable and
facilitate comparisons, and would include the underlying receipts
(subject to safeguards relating to personal details and security);
- Begin developing and implementing a cost-effective
system of real-time publication of claims, or at least publishing
on an accruals basis (reflecting when the costs were incurred),
and immediately ceasing the misleading bi-monthly publication.
When publishing claims, IPSA should make a clear
distinction between (a) costs commonly regarded as personal, such
as accommodation and travel, and (b) office and staff costs. The
latter would not be described as "expenses" in any other
profession, and should not be so described by IPSA, which should
publish them separately from other costs. (Recommendation 8)
When publishing "not paid" and "part-paid"
claims, IPSA should classify each one in respect of the reason
for non-payment; and it should review whether publication of such
claims increases or reduces public confidence in the payments
system and Parliament. (Recommendation 9)
184. The responses to the NAO's survey question indicated
that public confidence in the system of payments for MPs' costs
had increased. It is reasonable to attribute some of this to the
fact that there is an independent body (IPSA) running the payments
system and that it has ensured that there is no systematic abuse
of the system, as well as to the impact of an election and the
imprisonment of several former MPs.
Independent determination and regulation of the system is essential,
as we have indicated above.
185. However, increased public confidence in the
payments system does not necessarily translate into increased
public confidence in Parliament and MPs. That is partly because
public confidence in Parliament and MPs depends on a wider range
of issues, but in our view it is also partly because of the impact
of IPSA's system of bi-monthly publication on the reputations
of individual MPs and thereby on the House itself.
Members' ability to fulfil their
186. The claims system introduced by IPSA's Board
is obstructing MPs in fulfilling their duties and thereby impeding
the effective functioning of Parliament. The NAO found that 85%
of MPs considered IPSA's system was such a burden that it hindered
them in doing their jobs,
and the percentage was the same in our survey.
187. Nothing better illustrates the IPSA Board's
attitude towards its task and towards MPs than its online claims
system, which imposes major costs on MPs for the sake of a relatively
minor saving in its own administrative costs (estimated by IPSA
itself at about £150,000).
Requiring 650 MPs and a similar number of their staff, instead
of a handful of skilled IPSA staff, to master the electronic system
and enter data was an inefficient use of a public resource. It
is here that the absence from the legislation of a specific requirement
that IPSA must assist MPs to perform their parliamentary functions
has been especially damaging.
188. IPSA's rules on staff, together with its diversion
of the time of MPs' staff towards operating the claims system,
have reduced the staffing available to MPs in the face of a well-resourced
Executive. In particular, under the old system, MPs could transfer
funding (or "vire") between their office and staff budgets,
and a large number did so, enabling them to operate more effectively
to the benefit of their constituents and with no loss of accountability.
This practice is permitted in the Scottish Parliament.
An alternative would be to provide a single office and staff budget
so that each MP could make his or her own decision on the most
effective use of resources, given that each constituency is unique
in its geography, demographics and transport.
In order to use publicly-funded resources more
effectively, IPSA should offer MPs the option of submitting claims
in paper form only, allowing IPSA more efficiently and in a more
controlled way to enter the data into their online system. (Recommendation
IPSA should merge the office and staff budgets.
Impact on Members with families
189. The role of an MP inevitably puts a strain on
family life. The payments system introduced by IPSA appears to
have exacerbated those strains, as indicated by our evidence from
Dr Madan and by the views of MPs gathered by the Hansard Society
In particular IPSA removed additional provision for accommodation
or family travel in cases where MPs had dependent children aged
five or over.
190. The accommodation and travel rules for MPs with
children aged five or above have since changed. However, it is
likely that this will lead to accusations of "special treatment"
for such MPs and individual MPs being singled out in the media
for receiving a benefit which is not available to the public at
large. In fact the provision reflects the unusual circumstance
of being required to live and work in two separate places, and
recognises the impact of this on family life.
Impact on Members without independent
191. The NAO found that many MPs are subsidising
the cost of their work, and paying out a substantial proportion
of their post-tax salary before receiving reimbursement, causing
serious cashflow problems for some.
IPSA's Board had apparently made no assessment of these problems
before the NAO brought them to its attention.
192. This situation risks creating a two-tier House
of Commons: MPs with independent means can bear some or all of
the costs of fulfilling their parliamentary duties, whereas those
without independent means are forced to make claims and risk reputational
damage as a result of the local and national press placing them
higher in rankings of costs claimed.
Deterring MPs from submitting
193. The NAO has clearly demonstrated that MPs are
being deterred from submitting legitimate claims.
Beyond stating that MPs should claim what they are entitled to,
IPSA's Board has failed to address this issue and its impact on
whether the objectives set for the payments system are being achieved.
Some of the reasons why legitimate claims are deterred are within
IPSA's control, such as its unwillingness to give advice on whether
specific claims are within the rules or not, the method of claims
and reimbursement and the nature of its publication arrangements.
IPSA should, on request from MPs, indicate to
them whether a specific claim will be accepted or rejected; any
subsequent claim would of course be published in the usual way.
IPSA should make it easier for MPs to find out
online how much of each budget has been spent. (Recommendation
Impact on MPs' staff
194. MPs' staff have not only had to spend significant
amounts of time dealing with IPSA's claims system, but IPSA has
worsened their terms and conditions, downgrading their redundancy
terms and provision for childcare.
IPSA's procedures have also left many of them out of pocket for
long periods when they have incurred costs on behalf of their
MP, and it does not consistently reimburse such costs directly.
IPSA's initial unwillingness to meet representatives of staff
appears symptomatic of its attitude towards MPs' staff.
IPSA should establish a liaison group with MPs'
staff, and should include their representatives in consultations
on the same basis as the statutory consultees. (Recommendation
IPSA should review the overall remuneration package
of MPs' staff, and in particular redundancy pay, with a view to
ensuring that they are appropriately rewarded and that MPs are
able to retain experienced staff and provide opportunities to
interns. (Recommendation 15)
IPSA should make it a consistent practice that
MPs' staff who incur legitimate costs relating to the MP's parliamentary
duties receive reimbursement direct, and should ensure that such
reimbursement is made promptly. (Recommendation 16)
Payments for MPs' costs
195. As already indicated, there needs to be a clear
separation between, on the one hand, costs generally regarded
as personal (accommodation and travel) and, on the other hand,
office costs and staff. As regards the personal costs, to simplify
the scheme IPSA could consider extending its existing system of
196. Assuming there is a robust rationale and method
of calculation for IPSA's Outer London supplement, the travel
element could be determined in a similar way, taking account of
actual travel claims (perhaps for the period 2001-10). For the
accommodation element, it would be essential to minimise the scope
for a personal benefit to MPs and to make a significant saving
over the recent average costs in each region. There could be different
rates for those MPs with and without a second dwelling. The levels
of the supplements would of course be determined by IPSA.
197. Some legislatures elsewhere operate a system
of this sort, such as the German Bundestag.
IPSA itself has indicated that there can be circumstances in which
a flat-rate allowance is the best option: in March 2010 it stated
its "belief as a matter of principle that it is preferable
that MPs should receive expenses for costs actually and reasonably
incurred, rather than a flat rate allowance; unless the cost of
administering such a system is shown to be disproportionate to
the benefits, or the use of expenses imposes an unreasonable burden
on MPs to fund costs before claiming them back."
Indeed IPSA has not only provided such a flat-rate allowance since
its scheme began (the London Area Living Payment) but has recently
introduced a new one in the form of an extra supplement for Outer
198. A system of regional supplements could have
the advantages of: increasing transparency and contributing towards
public confidence, as a simple comprehensible system for the public;
reducing the cost for the taxpayer, by cutting the administrative
costs and by setting the initial levels lower than the current
average payments, thereby guaranteeing a reduced overall
cost; reducing the time spent on form-filling, leaving MPs and
their staff more time to carry out their parliamentary duties;
minimizing the disadvantages felt by MPs with families and without
independent means; and not deterring MPs from requesting payments
towards costs legitimately incurred.
199. Equally we recognise that there are legitimate
concerns about MPs making personal gains and about accountability
for the way in which money is spent if such a scheme were not
200. Therefore we concentrate here on securing better
information about how the current system of regional supplements
works and the impact of their wider application, in order to allow
a well-informed public debate in advance of any decision for or
against such a system being extended.
To facilitate informed consideration and public
debate about cost-effectiveness and accountability, we recommend
a. IPSA provide a detailed explanation of
the rationale for its existing London supplements (especially
the Outer London one) and make transparent its current methodology
for calculation of the rates.
b. A body independent of both Parliament and
IPSA be commissioned by the House Service to undertake a financial
cost-benefit analysis to determine whether extending IPSA's current
system of London and Outer London supplements to other regions
in the UK could provide greater value for money for taxpayers,
and an evaluation of the extent to which each of the aims for
the Act set out in 2009 would be achieved.
c. In not more than six months' time, the
House should have the opportunity to consider the merits of that
cost-benefit analysis and evaluation and to make a decision on
whether there should or should not be a system of regional supplements
instead of the existing travel and accommodation provisions. (Recommendation
201. In setting salaries, IPSA should take account
of the 1911 principle that MPs should be able to maintain themselves
"comfortably and honourably, but not luxuriously" and
the Lawrence Committee's principle that MPs' should be able to
discharge their duties "without undue financial worry and
to live and maintain themselves and their families at a modest
but honourable level."
202. We believe that, whenever possible, salaries
should be set by IPSA at the start of a Parliament and maintained
for the duration of that Parliament, and would apply the same
principle to the setting of rates and maxima for any other payments
The levels of salaries and rates and maxima for
any other payments to MPs should, whenever possible, be set by
IPSA at the start of a Parliament for the duration of that Parliament.
When it examines the matter of resettlement grants
for MPs who lose their seats at a general election, IPSA should
take into account the arrangements in the Scottish Parliament
and the National Assembly for Wales. (Recommendation 19.)
The role of Parliament
203. Parliament has a duty to ensure that individual
MPs and thus Parliament itself are able to operate effectively,
for the benefit of their constituents and of the country as a
whole. That duty cannot be sub-contracted unconditionally
to a separate body. IPSA's Board has so far failed to achieve
the aims intended in setting up an independent payments scheme,
and in particular to run the scheme in such a way that MPs are
able to fulfil their parliamentary duties effectively. In December
2010 the Prime Minister said that IPSA must change or be changed,
but the revisions made by IPSA to the scheme since then have not
gone far enough.
204. Under the Act, Parliament has the option of
passing a motion praying Her Majesty to remove from office the
Chair and other Board members of IPSA.
More constructively, it has the power to amend the 2009 Act so
that IPSA operates within a different legislative framework while
remaining independent and continuing to determine and regulate
the payments scheme within that framework. Some of our recommendations
require legislative changes; others are not dependent on legislation,
but could be brought about in that way if IPSA does not act. We
believe that step should be taken if IPSA's Board has not implemented
the recommendations of this report by 1 April 2012.
205. The best way of promoting public confidence
in Parliament and in the system of payments for MPs' costs is
to ensure that Parliament is effective, and is seen to be so,
in holding the Government to account and dealing with the matters
that people care about, and therefore that the taxpayers' money
devoted to enabling MPs to fulfil their parliamentary duties is
money well spent. We believe our recommendations would increase
MPs' ability to fulfil their parliamentary duties, and thereby
contribute to the effectiveness of Parliament. We urge the Government
and Parliament to have the courage to reform the system of payments
for MPs' costs by implementing our recommendations.
294 Paras 8-13 above. Back
Para 9 above. Back
Para 51 above. Back
Para 70 above. Back
Paras 134-5, 138 above. Back
Para 141 above. Back
Paras 148-52 above. Back
Paras 122, 125 above. Back
Paras 127-31 above. Back
Paras 90-4 above. Back
Paras 117-26 above. Back
Para 78 above. Back
Para 81 above. Back
Paras 82, 111-13 above. Back
Para 129 above. Back
Paras 83-4 above. Back
Para 84 above. Back
Paras 195-200 below. Back
Paras 93-4 above. Back
Para 101 above. Back
Paras 3, 36 above. Back
Paras 93-4, 100, 103 above. Back
Paras 111-12 above. Back
Para 145 above. Back
Para 160 above. Back
Scottish Parliament, Members' Expenses Scheme, para 1.6.2 (up
to half of an MSP's entitlement to office costs may be transferred
to staff costs). Back
Paras 114, 126; Ev 102; Annex 2 below. Back
Paras 122, 125 above. Back
Paras 118, 135-6 above. Back
Para 127 above. See also para 128 above. Back
Paras 169-70 above. Back
Para 171 above. Back
QQ 347-8, 399-400; Ev 107. Back
Para 52 above. Back
IPSA, The MPs' expenses scheme (March 2010), p 60. See
also IPSA, Frequently asked questions (25 March 2011), p 8. Back
Para 48 above. Back
Paras 18, 22 above. Back
Speech to 1922 Committee, 15 December 2010. Back
Para 63 above. Back