CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1484 – i

COMMITTEE ON Members’ Expenses

The Operation of the Parliamentary Standards Act 2009

Tuesday 13 September 2011

Professor Sir Ian Kennedy and John Sills

Evidence heard in Public Questions 1–66

USE OF THE TRANSCRIPT

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Committee on Members’ Expenses

on Tuesday 13 September 2011

Members present:

Adam Afriyie (Chair)

Guto Bebb

Cathy Jamieson

Mr Edward Leigh

Mr Nick Raynsford

Joan Walley

Stephen Williams

________________

Examination of Witnesses

Witnesses: Professor Sir Ian Kennedy, Chair, IPSA and John Sills, Director of Policy, IPSA, gave evidence.

Chair: Good afternoon and welcome to the first public meeting of the Committee on Members’ Expenses. I will explain how we are going to proceed, to put things in context, and then I shall leave you, Sir Ian, to introduce anyone else who has come with you.

Our intention is to have a very calm, open-minded and thorough examination of the whole system of payments to Members, taking into account pay, pensions, expenses and allowances-the whole gamut. We see this as a kind of once in a generation opportunity to map out the system which both will be seen as fair and would reconcile several aims in the area about public confidence as well as value for money. What we are planning to do is report later in the year, somewhere before Christmas, with a set of recommendations for any changes that may be necessary. Today is the scene-setting exercise and that is why we have invited you in, Sir Ian, to give us an update on what has been going on over the last year in operating under the Act.

We are cognisant that you have a board meeting on 20 September where you will be talking about things with regard to the future and perhaps policy changes. We are conscious of that so we will try to restrict the questioning to the past rather than ask at this stage what is going to happen in the future. Maybe later in the inquiry we will call witnesses from IPSA again, but it may be we do that in writing. Certainly we are going to have a few other oral sessions and a lot of other written evidence coming in before we draw conclusions later this year.

With that, Sir Ian, can I hand over to you to introduce the person who is with you and then we will get into some fairly calm Q and A about where we are so far?

Professor Sir Ian Kennedy: Thank you, Chairman. On my right, as the nameplate suggests, is John Sills. I have two colleagues behind me, Ron Whitley and Mark Anderson; they support us in IPSA.

Q1 Chair: Thank you very much, indeed. If I can open up, it is about 18 months since the start of the new payment system and I am wondering how well you think IPSA have done in implementing the aims of the Parliamentary Standards Act?

Professor Sir Ian Kennedy: Thank you. May I just interject that when I heard you say that we, the board, will be meeting on the 20th to contemplate changes, that is not the case. On the 20th, there is a regular board meeting at which we will be receiving a range of recommendations that have to do with our project for IPSA. We will be, as you know, conducting what has now become a regular-if a year and a half can produce regular-review, an annual review, which we intend to consult upon at the end of November-December. If it is the case that your Committee is able to report by then, that can be part of, if you like, a mutual understanding of what needs to be consulted upon, but we can iterate in the interim.

In response to your question, I am grateful that your Clerk let me have a copy of what your intended questions might be. I was pleased to get it yesterday afternoon. I did map out for you some kind of introductory statement that will take five minutes if you will allow me to say that in response to your question, which I read as an opening question.

Chair: Yes, certainly, provided the focus is on the operation so far.

Professor Sir Ian Kennedy: Absolutely.

Chair: Lovely, please do.

Professor Sir Ian Kennedy: You are kind, thank you. Before the last election, and thus before IPSA’s scheme of costs and expenses came into operation, I made a speech to the Haldane Society as the newly appointed Chair and I made a series of points that apply now just as they applied then. If you permit me, Chairman, I will remind you of them-they do speak to what we have been doing over the last period of time.

First, I lamented the scandal over expenses and the damage done to Parliament and the public’s confidence in MPs. As Alan Duncan said during the debate on the Bill, "For more than 30 years we have worked under a system of remuneration that would never have stood up to scrutiny in the commercial world. There had been invented" he said, "an allowance scheme that was less than acceptable, lacked any transparency and was corrosive to public trust". You will recall that Frank Field during that debate called the second home allowance "a disaster waiting to happen".

Secondly, I pointed out that Parliament, in creating IPSA had consciously replaced self-regulation with external independent regulation, as regards MPs’ costs and expenses.

Thirdly, the independence of IPSA was seen as critical on all sides. It ran, as is seen, through the debate on the Bill. I warned, however, that IPSA’s independence was fragile as the Act gave the regulated the power to control the budget of the regulator through SCIPSA, the Speaker’s Committee, albeit with a leavening of lay members. This, I warned would create tensions and had to be managed in a careful, mature way. I also warned that independence meant that Sir Christopher Kelly’s recommendations, which at the time were endorsed by all party leaders, would be given due regard but that IPSA would make up its own mind.

Fourthly, I said that IPSA would introduce a system-this extends even further to the point you raised, Mr Chairman-that is fair, workable and transparent. Fair in that, for example, we rejected straightaway calls for the banning of employment of family members; and subsequently, we adjusted the rules on family accommodation and travel even though our consultation told us the general public was reluctant to see their taxes spent in this way when many others who work away from home do not enjoy this support. Workable in that the system is a standard online system used by a wide range of organisations. Transparent in that even before a statutory duty as to transparency was laid upon us by the subsequent Act, we were encouraged by all that transparency is a crucial element of the scheme. Andrew Tyrie put it as follows in the debate, "The use to which allowances are put should be subject to full transparency as much as is practicable under the law". He went on, "Otherwise the public will continue to believe that we misuse allowances once we get them".

I have left until last the two most important points. First, the real issue for IPSA is not just costs and expenses; it is the answer to what I called in that speech "the big exam question." How much money from the public purse does a 21st-century legislator and elected representative need to do the job? I argued, as Andrew Tyrie did in the debate, that IPSA must be given the power to set pay and pensions-the whole remuneration package, rather than just deal with costs and expenses. The powers to do so were subsequently given to IPSA, so that now we are in a position to recalibrate, if you will, the relationship between costs, expenses, pay and pensions.

Setting MPs’ pay is the task we are now giving our attention to. This is a big question that demands a thoughtful and deliberate discussion, informed by history. The sooner we get on to addressing it, in my view, the better, while of course continuing to evolve the scheme of costs and expenses. As you, Mr Chairman, said during the debate on the Bill, "We need a debate about the role of an MP and what should be paid for". I could not agree more. That is what we are keen to move on to. You MPs must lead that debate; that is not for us to say. IPSA can then address the question of the proper remuneration for that role.

Lastly, what is IPSA here for? It is clear from the debate on the Bill and what has followed that the purpose most commonly identified as crucial is the restoration of the public’s confidence in Parliament and MPs. Alistair Carmichael was very specific: the purpose of the Bill is restoring confidence in the House and its operation. This accords with the remit of any regulator in the public sector to act in the public interest as it sees it. We are a regulator. We see the public interest as being to assist in the restoration of confidence and, commensurate with that, to enable MPs to go about their business. The success that we have so far achieved in so short a space of time in helping to restore confidence, despite, even over the last few days, continuing echoes of previous misconduct, is to be celebrated. It should be particularly celebrated by MPs. It sets the context in which we can embark on a considerate and mature discussion of pay and pensions.

Q2 Chair: Thank you very much for that opening statement. I will just go back to the question I asked: how well do you think IPSA has done in implementing the aims of the Act, some of which you have come back to there? Do you think IPSA have done a reasonably good job over the last 18 months? Would you like to expand on that a little bit?

Professor Sir Ian Kennedy: It would be wrong to appear complacent but I think the views of those who have looked at us carefully are that we have made significant and steady progress.

Q3 Chair: Are there any specific areas in which IPSA have found it difficult or challenging to implement the aims of the Act?

Professor Sir Ian Kennedy: I think the largest challenge is the understanding of what IPSA is about-by everybody, not only MPs but the wider world. We have had meetings when it has been put to me that the responsibility of IPSA is, and I quote, "client care" or "customer care", but as an independent regulatory body set up by Parliament we do not have customers or clients, just as I doubt the FSA regards Barclays as its customer. If we have any clients, and if the definition of a client is someone who can, as it were, go somewhere else and is paying for the service, then the client is the taxpayer. The challenge to us has been to persuade that although we provide services, we do that within the framework of a regulatory system that we have been required, asked, invited to establish. We do try to provide as good a service as we can, and we are constantly seeking to improve it, but we do it against a background of being an independent external regulatory body.

Q4 Chair: The NAO report was published in May. Was there anything in there-obviously you have already been to the Public Accounts Committee-that you would say surprised you? Is there anything in there that was surprising to IPSA to read in that report?

Professor Sir Ian Kennedy: Well, obviously there were some things that pleased us, namely, that we were judged to have been making-

Q5 Chair: Any surprises?

Professor Sir Ian Kennedy: I will get to surprises. I wanted to put in what I was pleased about first. If I were to mention surprises, perhaps the only surprise that really registered significantly with me was that of the survey of MPs I think it was close to a third were really rather in favour of the old system and could not understand why there was need for a change.

Q6 Chair: The final question from me, and then I will hand over to Nick who will ask some questions on public confidence, is: in view of the aims of the Act-you kind of touched on this in your opening statement-do you think it would have been better or easier for you if from day one the pensions and salaries had been within your remit?

Professor Sir Ian Kennedy: Of course, it was not for me but for the House and the other place to determine what our remit was, but I always thought, and made representations to the then Minister, that merely giving an external regulatory body one bit of the jigsaw, without being able to embrace the totality, ran the risk of getting things skewed. If you seek to introduce an appropriately rigorous system of costs and expenses, it might have implications in other parts of the remuneration forest that need also to be addressed. The inability to do that was a disadvantage initially, which has now been rectified.

Q7 Mr Raynsford: You rightly stressed the importance of restoring public confidence. Could you tell us how you measure that and how you define it?

Professor Sir Ian Kennedy: It is best to begin by remembering we should not be ahistorical. Why are we asking the question about public confidence? The answer was: because trust had gone through the floor, confidence was eroded and we were in a bad place. Any movement away from that would, in my view, redound ultimately to the benefit of MPs, and I saw my job as seeking to contribute to the restoration of confidence in MPs so that the first conversation on the doorstep is not about expenses but about something else.

The first step is to put in place a system that is rigorous, transparent and can, over time, enable one to demonstrate that MPs are absolutely living within this regime, their claims are legitimate, and so on and so forth. To measure confidence-to respond particularly to your question-we have done three consultations involving the public, asking them where are they prepared to see us in terms of introducing this or that rule. Very often there has been antipathy against certain things and we have had to debate whether we follow or lead in that context. We have also done surveys of the public, we have done a YouGov poll and the NAO did its own poll. What we have seen is a gradual improvement in the attitude of the public in their sense that the expenses regime is robust and gives them assurance and, therefore, that politicians are more to be trusted.

Q8 Mr Raynsford: This may not be an entirely fair question, but given you have said that it was an awful place previously, would you not expect it to be almost automatic that there would be a gradual recovery as that receded into the past and people began to forget some of the abuses that did unquestionably take place?

Professor Sir Ian Kennedy: If I may say so, it is a very interesting question about the notion of forgetting. We thought perhaps with over 200 new MPs and with, if you like, the absolution of a new election-but there are still MPs from the old system still appearing before court. The echoes are there and some in some places do not want us to forget, for good reason, those echoes-if you can remember an echo. I think the idea that you could take for granted that there is nowhere to go but upwards was a pretty risky exercise. One had to introduce and make, what I called at the time, a clean break, a demonstration that something was going to be introduced that was not the same as before, which was rigorous, robust, transparent, and so on.

Q9 Mr Raynsford: I am trying to get at whether you think you have played a part in that restoration, or is it just a process that would have happened in any case?

Professor Sir Ian Kennedy: I do not know how you disaggregate the various causative elements but, Mr Raynsford, I would like to believe that over time we have provided a stabilising influence.

John Sills: Can I add something there? I think when we had the YouGov poll, around 60% of the public said that they thought having the new regulator would make the whole system better. There is a kind of confidence there, I think.

Q10 Mr Raynsford: Can I turn now to the question of the balance between public confidence in Parliament and assisting and helping and supporting Members of Parliament do their jobs as well as they can? You have, of course, both of these objectives and sometimes there are tensions between them. How do you try to resolve those and how do you try and get the best on both sides?

Professor Sir Ian Kennedy: I think the simple answer is: with difficulty. It is important to remember that we are an external, independent, regulatory body whose statutory mandate is not-it could have been expressed as such, but it is not-to support MPs. It is to have regard to the principle that we should support MPs in the execution of their parliamentary duties. That notion of having regard to the principle, I think, reminds us, as it should remind everyone else, that in that process of having regard we have to take account of the public interest as well. We seek to gauge in the way we just discussed, as well as how we are or are not supporting. In some areas, such as the second home allowance and what Frank Field described as that whole toxic area, we have judged the public interest as being such that no change should be made. In other areas where we have received representations about cash flow problems, which I know the Chairman was anxious to point to and which we understand, we introduced loans, advance payments against high ticket items. All of these are responses that were intended to make the system more simple to operate and more congenial to the needs of MPs, notwithstanding how different MPs are, Edward Leigh being as different in his constituency as you are in yours.

Q11 Mr Raynsford: Finally, can I come back to your expression of surprise that a third of MPs in response to the survey felt they would be happier with a system of self-regulation. This may be again a slightly unfair question, but approximately a third of MPs are new MPs. Maybe they were commenting on what they saw in the early months of this Parliament, in terms of coping with the system you had introduced?

Professor Sir Ian Kennedy: It is an interesting observation, which I have no capacity to verify. We can do the arithmetic and see if we can find out whether that is the case but I don’t think it is.

Chair: We are going to move to questions on transparency and links to public confidence now. Can I hand over to you, Cathy?

Q12 Cathy Jamieson: Thank you very much. Thank you, Sir Ian, for coming along this afternoon to answer questions. I want to focus a bit on that whole issue of transparency-one of the key principles. I have some experience of that from my time in Scottish Parliament and how important that was in building confidence in a new system. The first question I wanted to ask is: is there a tension between the method of claims publications implemented by IPSA, on the one hand, and improving public confidence in Parliament, on the other hand?

Professor Sir Ian Kennedy: There is a duty laid upon us in the 2010 Act to be transparent. How do we translate that into what we do? We take the view that, first of all, it is right and proper that anyone in receipt of public funds should render an account as to how those public funds have been used. That seems to me to be a given. The best way of empowering MPs to contribute to the restoration of confidence is to get rid of the mysterious and dark system that prevailed before, where it was not clear where any of the money went-I overstate that to make the point-and to introduce a system where you were able to identify to taxpayers where the money has gone. Then we published that, and we did an analysis of how frequently we ought to publish it, both in terms of cost and in terms of the effect the publication might have on people’s perceptions of what is going on. We settled on a two monthly cycle, as a one monthly cycle would have been too expensive, we thought, in terms of value for money. Leaving it for a longer period ran the risk of it attracting attention whenever it came out. It would continue to be a story when our ambition was to make the publication of claims so routine that it no longer attracted a great deal of attention.

I can illustrate where we have come on that journey. Forgive me I think I have the facts somewhere-Mr Chairman, we will make sure you have all this data; this is what I have been able to accumulate overnight. In December 2010, the visitors to the website about claims were close to 14,000 people on the first cycle of publication. On the last cycle of publication in September, the number of visitors was 190. Now that is telling a story about routinisation and recognition that these claims are legitimate, as they are-99.7% of those claims are legitimate-and we are saying that most of the 0.3%, are administrative errors, and so on. That message, the more it gets across, means that there is a system in place. We can see it is working and, therefore, we do not have to have the same vigilance locally or nationally. We can move onto other things.

Q13 Cathy Jamieson: Just to press that issue of definition of transparency, you mentioned that people should be able to see where the public money has gone. Has that been a definition over the past 18 months?

Professor Sir Ian Kennedy: One of the working principles is that in the context of public money, IPSA should render an account for how it uses public money and so should everyone else.

Q14 Cathy Jamieson: Could I move onto another area in relation to this? I think it is important, as you have accepted, that the public are able to get information, but it is also important they are able to make meaningful comparisons, perhaps between MPs. You have explained why you chose to publish data on a bi-monthly basis. However, in terms of the normal cycle of expenditure, an MP might make a large claim and in one particular bi-monthly cycle would be at the top of any league table, but over the course of the year they would be paid perhaps less than a colleague. What importance has IPSA placed on ensuring that data can be meaningfully compared between MPs, and that MPs themselves to know where they are in the scheme of things and whether they are perhaps out of kilter with their colleagues?

John Sills: I think one of the important things obviously is that we have just published the annual figures, so you can get that sense of the whole picture from that. I think that is very important. In terms of it being every two months, I think it depends on who is looking at it. A lot of people will know that two months clearly is not going to be typical of the whole year for everybody, so I think we have to rely on that summit stone. It is possible to work out the cumulative amounts as well, clearly. I think you can do that, but I think the key thing is the fact that once a year we will publish the whole thing. That has just come out, as you know, and I think that has been very helpful for people to see that.

Professor Sir Ian Kennedy: Can I add a gloss to what John said because we are not insensitive to the kind of matters that you are hinting at or raising? Let us take for example a very small item-a toilet roll. It is a perfectly legitimate thing to claim for and should be claimed for, and we have said on the record that claims should be made as that is what the money is there for. Nonetheless, if the Barnstaple Bugle-if I can use that as a colloquial term-seeks to make something of it then that will happen, so not so much disaggregating as aggregating up to a degree might be another way of responding. We have already been thinking of ways of getting generic headings like office costs, and so on, where you do not have to itemise each one but we can find a way whereby we can itemise it. Bear in mind-this goes back to something that, Mr Chairman, you will be interested in as well-we do not operate in a vacuum in this context, because we are subject to audit by the National Audit Office to make sure that our systems are themselves able to demonstrate how money is spent. If we had massively aggregated things, where we did not inquire within that aggregation what is happening, the NAO would be displeased with us and our accounts would be qualified.

Q15 Chair: Do you look at the local media coverage when you are making your assessment of the impact that the publications routine may be having on the reputation of MPs and Parliament?

John Sills: Yes, we do. Our communications colleagues in particular follow local media as well as national. Ian talked about how at national level the interest appears to have dropped, but we are very aware, as we talk to MPs a lot, that at local level that is not always the case and that the smallest things can be followed up. Yes, we are aware of that. I think the other point is it is still only 18 months into the system. What will it be like in three years? Will the local media still be following it to that extent?

Professor Sir Ian Kennedy: Particularly as one sought to move the agenda on to what we regard as the more important parts of the jigsaw to pay attention to.

Q16 Cathy Jamieson: I think Sir Ian answered part of the next question that I was going to ask in relation to that tension between having aggregated up some amounts in order to make it meaningful, but at the same time disaggregating in such a way as to get that transparency, so I won’t pursue that particular point other than to ask: in formulating the schemes, what consideration did the IPSA board give to publishing the receipts to support the MPs’ claims, and, why did you arrive at the decision that you took?

Professor Sir Ian Kennedy: This was a matter of some lengthy deliberation by the board. There was a significant value for money consideration that had we demanded receipts, and published them thereafter, the estimate was it would have cost about £1 million to SCIPSA’s administration costs, whereas the way we currently publish costs £250,000. Now that in itself is a large sum, and I can explain in supplementary memoranda why that cost is as it is, but it is a significant saving. Furthermore, we of course sought the advice of many, including the Information Commissioner, whose office advised that the scheme we had in place for verifying, and so on, was such that the publication of receipts would not be a necessary further piece of assurance.

John Sills: I think also, if you look at what we do publish, there is quite a lot of detail there. I think it is not unlike the Scottish system, in fact. Certainly, as a citizen I look at it and think, "Well, what more would I need? What value would be added by spending this extra million pounds?"-most of which is the cost of redaction, by the way. You will know from the House of Commons data there is a huge amount of redaction that has to be done if you publish receipts.

Q17 Mr Raynsford: You rightly touched on value for money a moment ago, Sir Ian, Can I ask you what criteria or what targets IPSA set itself as regards to value for money and what comparators did you use in setting those criteria or targets?

Professor Sir Ian Kennedy: I noticed that question in the material that was sent to me and I confess I am not entirely sure that I can understand it or answer it off the top of my head here, though I certainly will address it later. In terms of what I understand to be value for money, it appears to be a very simple proposition in bureaucratic terms: what are the objectives and how in financial terms you have met them in the most efficient manner. In fact, to me, value for money is a very complex notion. It depends on who is doing the valuing, because what you spend your taxpayers’ money on may be valued by MPs, IPSA and the public in different ways. The public may, for example, think there is more value to be gained from the money by doing this rather than that. That complex notion of who sets the values, in other words, goes back to the conversation about what is supporting MPs or having regard to the principle of support. What does that mean? That is something that we have been significantly concerned with.

That said-it is clearly an intellectually challenging argument that we are still having-we used, if you like, the NAO’s approach, which has to do with the capacity to show savings over time and to demonstrate that you are doing whatever you are providing increasingly efficiently. The NAO’s report described what we had done so far, and I quote, "as a useful starting point for further cost savings". In terms of costs per claim, IPSA is almost identical to the average of other UK legislatures, "An impressive achievement at the end of its first year". It went on to say-this is, I think, very important in the context of VFM-that our setup was a major achievement. The Office of Government Commerce said that we had achieved the impossible. Public confidence had increased-that is value for money as valued by the constituency, namely the public. We safeguard public funds more effectively than they had been safeguarded before-value for money. There is no systematic abuse-VFM again. Claims are paid with a high degree of accuracy-in other words, no mistakes. Again, I think it is 99.3% of claims are paid accurately. All of those are indicators to us of value for money.

Q18 Mr Raynsford: The reason I asked the question is that, as you quite rightly have said, value for money is a complex issue, but very obviously if one was simply measuring terms of the overall cost to the public purse, one could achieve a supposed reduction by refusing claims, which would not necessarily deliver value for money if the consequence was that MPs were either inhibited from doing their job properly or having to meet the costs out of their own pocket. Presumably, that might have some adverse effect on their ability to do their job, or their willingness to do their job. This is why the issue is complex, in my view, and I just wondered what thought you had given to that.

Professor Sir Ian Kennedy: I am not sure I understand your opening proposition you would save money by refusing claims. It is not in my gift to refuse claims if they are legitimate and they are within the rules. I think the number of claims-John will have the figures to hand-that are not paid are infinitesimally smaller than the ones that are paid. We have learned over time about claims being made. I can tell you a story, Mr Chairman, which I think illustrates the early days. Someone had a claim and was not quite familiar with an online system yet and so pressed the send button, but just in case pressed it again and again and again, so in fact, probably four or five claims were being made. Clearly that is an administrative error that we have to get through. Having got beyond that and beyond administrative errors-we still have some, but for the most part we seek to help people to make the claim properly and then they are made and paid-we have no interest in getting between MPs and their legitimate entitlement.

Q19 Mr Raynsford: But some MPs do say that they feel inhibited from making claims.

Professor Sir Ian Kennedy: That is a different question and, if I may say so, an important question for us. I have said on the record many times that the money is there, voted by SCIPSA to us. It is there for MPs to claim. When I went before SCIPSA last time, which was quite a lengthy process, it was put to me on three separate occasions that I should reduce the amount of money that I was asking for the payment of costs and expenses on the grounds that last year I think close to £30 million had not been claimed. I undertook to take that back to the board, although the board were vehement that that would not be the case. This was our calculation of what MPs were entitled to and this is what we were going to ask for, and we continued to ask for it; we did not resile from that position.

Now, the National Audit Office in the report that you will be familiar with, does speculate as to a number of reasons why claims are not made. Either the item is small, and in addressing Ms Jamieson I sought to address that for the future, or another reason may still be the notion that claims might attract some kind of adverse attention. That is the climate that we are seeking to evolve out of. I cannot with a magic wand-neither you nor I believe in the magic wand school of public policy-make all that go away, but I can say that in a year of doing this system, grinding it out, and demonstrating time and time again that there is nothing here that is other than legitimate, we will get to the point where claims will be made.

Q20 Guto Bebb: I was just going to ask about how the scheme operates. Has IPSA made any assessment of the cost incurred by MPs and their offices in actually administering the scheme in terms of the data entry and so forth? Because you made the comparison with the Welsh Assembly system that your cost per transaction was equivalent, but in the Welsh Assembly, for example, most of the data entry is undertaken by the bureaucracy involved in paying out the expenses of Welsh Assembly Members, not by the individual Assembly Members.

Professor Sir Ian Kennedy: John, you visited the Welsh Assembly or did other colleagues?

John Sills: No, but-

Professor Sir Ian Kennedy: You can speak to that and then I will come back to the more general point, if I may.

John Sills: Yes. The NAO obviously tackled this issue and attempted to put a figure on the amount. I think there are one or two points here. One is obviously that part of any MP’s job partly is going to be about rendering an account of the public money spent. It is not a core part of the job, but it is part of the job. What we have tried to measure, which is the easy bit for us to measure, is how much time the MP or their staff are spending on the system itself. We have had figures for that; they have been around for some time. I think it was something like 15 minutes a day, an hour or two a week, that kind of thing, but that is just on the system. Obviously other things need to be done as well, and the NAO figure has actually pulled all of those together, I think. To the extent that, yes, we have looked at it, it is what we can see on our system.

Professor Sir Ian Kennedy: Forgive me, Mr Chairman, I was going to say that what John said is right, and this goes back to the point about tensions between the application of the Act and the impact it may have. It is right and proper that we all should render an account. The question is: how can that be so achieved so as not to be such a burden on MPs that it detracts from the other things they do? That is a continuing challenge and conversation. In the figures that are put about, one of the things that are missing a comparative figure from what the previous system cost, when one had to collect all the pieces of paper and go, find and make enquiries of the Fees Office, and so on. That has its own cost; no one has quantified that and I have not the remotest idea, therefore, what the comparator would be. Second of all, one has to be alert to the notion of double counting here, because after all, part of the money paid out by IPSA is for staff and part of the role or responsibility of staff may well be to do that.

Q21 Mr Leigh: Can I look at some of the key facts in the NAO report? It says that £15.86 is their estimate of the cost to IPSA of dealing with each item claimed. That seems very large to me. Are you happy with that sum?

Professor Sir Ian Kennedy: It also says-

Mr Leigh: First of all, is it accurate and, secondly, are you satisfied that it is costing so much to administer each claim, some of which are quite small?

Professor Sir Ian Kennedy: I would rephrase it. It is costing that much. It also says that the cost per claim has come down £24 per claim over the period of time that the study embraced. Secondly, of course, it is inevitably the case that we have to drive it down further. We have set ourselves a target of 5% per annum reduction in our administrative costs in the first year. That was pursuant, Mr Chairman, to the Treasury memorandum after the election, of 25% over five years. We in the first year achieved savings of 10%, so, Edward, we are not complacent; we would seek to make it less.

Q22 Mr Leigh: Have you done any comparative studies with the private sector, say FTSE 100 companies, of how much it costs to administer each claim?

Professor Sir Ian Kennedy: I am not sure what you would be comparing. Bear in mind-

Mr Leigh: Well, some of the claims are quite similar; for instance, travel. In many businesses you have to live away from home. It is not an entirely dissimilar claim and I just wonder. If you have not done any comparative studies, then fair enough, but-

Professor Sir Ian Kennedy: I was making a slightly different point to what one would be comparing because a FTSE 100 company system operates in its own context. We operate in the context of being a regulatory body that has to set its own regulatory framework and then operate within it, and that is, of course, expressed to a degree in the cost. John, do you want to add something?

John Sills: Yes. I think, as I understand it, that £15 loads all of the costs of IPSA, so not just the service provision but actually the regulatory side as well. Going back to what Ian said earlier, I think our costs are roughly similar to the other Governments in the UK at the moment, but clearly we are looking at all sorts of ways to try and get those costs down. That is a major objective.

Q23 Mr Leigh: It says in the key facts that 38% is the proportion of claims MPs submit that are for less than IPSA’s average processing costs for each item claimed. Do you not you find that rather worrying?

Professor Sir Ian Kennedy: The NAO reports that in the first year we made steady and good progress. It then sets out challenges for the next year, which we will seek to achieve.

Q24 Mr Leigh: Yes, but still, we are still left with the NAO fact that 38% is the proportion of claims MPs submit that are for less than IPSA’s average processing cost. That cannot be an efficient way of handing out public money, I would have thought. It suggests that we have very heavy administrative costs for each sum of money disbursed.

Professor Sir Ian Kennedy: I think John has already suggested to you that those costs are loaded with all the other costs of IPSA, they are not just the in and out, pay and rations costs. We can come back to you-

Q25 Mr Leigh: The costs incurred in running IPSA in 2010-11 are £6.4 million. Will you remind us what the annual costs of the old Fees Office was in its last year, please?

Professor Sir Ian Kennedy: No one, to my knowledge, can satisfactorily put a figure on that.

Q26 Mr Leigh: Can you attempt a figure?

Professor Sir Ian Kennedy: After our first appearance before the SCIPSA-the day before we appeared there-a letter was written to the Speaker from the old Fees Office saying that the costs of administering the old scheme were £2 million, which was a figure that we did not understand, but it went on to say that the services provided were in no way comparable to the services provided by IPSA, the regulatory role was different, IPSA had a regulatory role and could not take advantage of the parliamentary estate, and so on and so forth. Immediately, I wrote to the Speaker asking for that figure to be explored, a joint committee to be set up between SCIPSA-

Mr Leigh: Well, perhaps we could do further research on that, then.

Professor Sir Ian Kennedy: Believe me, we have tried to do research. It has ended in the inability to track down any sensible figure.

Q27 Mr Leigh: It says again in key facts that £14.5 million is the annualised reduction of expenses paid to MPs compared to the last scheme. Given that there are only 650 MPs for £14.5 million, that is a very large reduction in the income paid to MPs, is it not?

Professor Sir Ian Kennedy: Well, first of all, it is not income, except in one sense. Second of all, of course, we are not talking only about 650 MPs. We are talking about 2,700 staff as well, because the money goes to pay them.

Q28 Mr Leigh: I know we are not looking into the future here, but have you done any estimate taking into account the salary paid to MPs and the expenses under the old system compared to the new system? Have you made any estimate of the average cut in the salary and expenses of MPs? Is it possible to do so? Would that inform your report on MPs’ pay and pensions?

Professor Sir Ian Kennedy: There has not been any cut in salaries.

Q29 Mr Leigh: I know there has been no cut, but in the expenses there has.

Professor Sir Ian Kennedy: With respect, Edward, you said cuts in salaries or expenses. There were no cuts in salaries because salaries are agreed and they are paid into an MP’s bank account. In terms of the expenses and costs, the business costs and expenses that are paid, it is an entirely new scheme, an entirely different scheme, pursuant to different rules, so it is comparing apples and pears. It is fair to remind ourselves in that context that when the National Audit Office looked at the last year of the accounts of the Fees Office, it was unable to do anything other than qualify the accounts. As to £3.4 million1 of taxpayers’ money, it was not even able to discover where that had gone.

Q30 Mr Leigh: Another key fact is that £2.4 million is the estimated cost of the time MPs and their staff spend dealing with expenses, according to our survey of MPs. Is that a figure that makes sense to you? Does it worry you?

Professor Sir Ian Kennedy: Well, John has already expressed a view that we have tried to analyse that figure and we are still in some disagreement with the NAO as to where that figure comes from. I have already said that it is right that MPs should have to render account. I have already said that rendering of accounts should not divert them from other duties beyond that which is necessary. We still do not have a handle on what the cost is, but when I come back, or colleagues come back, we will seek to dilate on that, Edward. As I say, I am trying here today not to descend into too many matters of detail, not least because I have not been sufficiently briefed on all the matters of detail that might appeal to you. Mr Chairman, those are the grounds on which I agreed to come.

Q31 Mr Leigh: The last key fact is that 91% is the proportion of MPs who believe that under the new system MPs have to subsidise their own work. Can you write to us with your estimate of the transfer of costs from IPSA to MPs’ offices associated with the administration of the scheme? Is that possible to do?

Professor Sir Ian Kennedy: We will reflect upon that, but we also reflect upon the fact that by introducing loans of up to £4,000 immediately the scheme began and then introducing the advance payment against vouchers, against-

John Sills: Against big ticket items, so against invoices, yes.

Professor Sir Ian Kennedy: Big ticket items, so that there is, in our view, now no need for MPs to be spending their own money to the degree that is referred to there. That was an initial problem that has faded away. Some 77% now of the money that is allocated for costs and expenses is dealt with-

Q32 Mr Leigh: Before I finish this round of questioning, because we have had this conversation many times, Sir Ian, and I do not want to weary you, but I think for the sake of the record it is important that we have your response to it. As you know, I have argued with you consistently that a more transparent, fairer and more open system would be to pay MPs a flat rate taxable allowance to deal with their accommodation. I just want to give you the opportunity in open session to reply to that point of view, that discussion we have had many times in the past.

Professor Sir Ian Kennedy: I reply to it now, as I have said to you and bore you to the same degree that you have never bored me, Edward, by saying a reversion to the system of allowances that prevailed under the old scheme, where there was not accountability and not transparency, is simply not on anybody’s agenda. To develop, to evolve to a situation where what are currently disparate groups of money can be aggregated together so that one has larger budgets, is something we have already done as regards the CORE and general office expenses. We have pushed them together so they are now a larger element. That is the evolving direction of travel we are on, but they should be, at the same time, accompanied by the need to render an account and the publication. We are pushing in a sense, Edward, at the same door.

Chair: Thanks very much. I think Stephen just has one more question in this area, then we will move on to the next section.

Q33 Stephen Williams: Just as a supplementary to Edward’s questions about this £6.4 million cost of running IPSA, you effectively have 650 cost centres-that is each Member of Parliament and all the costs that go with them; I assume that is how you account for us in your own internal accounting-so that is £9,846 per cost centre. Now, if you were running payroll and accounting services in the private sector, I do not think you would have any business at that sort of level because you would have probably four or five employees-the Members-a rent charge, electric bill, phone bill, one or two other things. I used to do this. It is one of the simplest accountancy jobs you could possibly imagine to do 650 times over with a £9,846 fee. I think many high street accountants would-could-do it a lot cheaper than that.

Professor Sir Ian Kennedy: Mr Williams, I understand the point. It does not exactly grasp the fact that we are not a call centre or pay centre, although our Director of Operations, like yourself, ran such a thing so he does also know what he is talking about in that regard. All I can say is that those figures, which do not take account of the 2,700 staff as well, who are around the country-you have to add that number in-have been examined on, might I say, quite a large number of occasions by other bodies. This includes the body that by legislation we render an account to so as to have our estimate agreed. They have been found to be such that our estimate has been agreed. Now, we can, of course, rehearse that again here. I am not going to do it this afternoon because I do not have all the stuff at my fingertips, but I do say that we by legislation render an account to SCIPSA. We have done so and the Treasury and SCIPSA both approved our estimate. They were interested in the same matters. The National Audit Office commended our value for money, although it said that we had work to do. The PAC will produce its report. At some point there has to be a point at which I say, "Can you possibly refer back, see the arguments and if there is then a question we will come back to you?"

Chair: Thanks very much, Sir Ian. We are now going to just examine briefly the issues around the independence and accountability of IPSA moving on from value for money. I wonder if I can hand over to Guto to pick up that section.

Q34 Guto Bebb: Moving from the direct detailed questions to a more open question, to whom is IPSA accountable?

Professor Sir Ian Kennedy: I am tempted to ask, how long do you have? This is a deeply difficult question. Of course, it is an external, independent, regulatory body. Accountability really consists in a variety of devices that, taken together, produce accountability. One such device is the scrutiny that we are subjected to, quite properly, by the Speaker’s Committee, SCIPSA; another is the NAO, which audits our accounts; so both internally our responsibility for public money and externally what we spend on ourselves and what we allocate and the efficiency with which we do that is subject to scrutiny and approval or disapproval. Our estimate can, of course, be denied or changed. Then, of course, we are scrutinised by others in other places, all of which contribute to some notion of being held to account. Ultimately, we are accountable to the public at large.

Q35 Guto Bebb: I was going to come on to that. In view of the fact that IPSA was established as a result of public disquiet about the previous MPs’ expense scheme, in what way then is IPSA accountable to the public? How would you describe the accountability that you have to the general public and the general taxpayer?

Professor Sir Ian Kennedy: Well, when you create an external regulatory body, and I have chaired a number, there is this anxiety first of all if you are in the public sector-I have never worked anywhere but the public sector-the money you receive is taxpayers’ money, so you would expect to be regulated by within Government, or within a Department, or here by SCIPSA. That is always uncomfortable but you have to live with it. You also need to be able to have such a relationship with the public at large, the taxpayer who is responsible for the money you dispense or disburse. You have to find a way by which you render an account to the public of what you are doing. That is what we do by publishing what we do, by consulting, by a variety of ways of transparency in publishing our claims and so on and so forth. By that token we are seeking to persuade the public that we are acting in its interests.

Q36 Guto Bebb: In view of the fact that you mentioned the website as a means by which you are accountable to the general public, were you disappointed that even on the initial run of expense claims the number who logged on were only, what, 140,000 you mentioned?

Professor Sir Ian Kennedy: 14,000.

Guto Bebb: 14,000? That puts it in context. I was giving you a tenfold increase.

Professor Sir Ian Kennedy: Disappointment or pleasure is not really relevant. It is really a measure to us of how-this was Mr Raynsford’s question-and whether we or circumstances have conspired slowly to take the temperature out of this issue. I like to think that, subject to today and whatever flows from it, the temperature is reducing. There are more important things to wrestle with. I think your Chairman has identified them absolutely properly, namely the issue of pay, which raises its own question-what does an MP do, as it were? That is categorically not a job for us. That is categorically a job for you, once you have determined what it is that you feel that you bring to the party. Our job is to look carefully at what a modern 21st century legislator and elected representative needs from the public purse to do that job, your having articulated the job. We have seen my reference to Alan Duncan that for 30 years we had a system of remuneration that was not fit for its purpose. We need to get to the next step.

John Sills: I think also on our website we do publish a lot about IPSA and that includes board minutes, so you can see what the board has been discussing. In the near future we are going to start publishing board papers as well. The inner workings, if you like, of IPSA are there for the public to see.

Q37 Guto Bebb: How do you think that the balance between IPSA’s accountability and your independence as a body is currently working out?

Professor Sir Ian Kennedy: Well, independence is not something that drops down from the sky and indicates where the lines are. Independence in the public sector in particular is something you negotiate, in that there are certain principles you cleave to and will not surrender, but on the other hand if we are persuaded that an MP or member of staff or member of the public thinks that this is better done in that way, we listen. We are not forsaking our independence; we are actually exercising the independence. Independence is absolutely critical, so that we can make tough decisions that may not endear us to the outside world, as well as make tough decisions that may not endear us, from time to time, with yourselves.

Q38 Guto Bebb: Moving on to the media, then, obviously IPSA have been operating now for 18 months. How important has the media perception of IPSA been to yourselves as an organisation?

Professor Sir Ian Kennedy: Well, the media is part of the world in which we live. It is right that we take account of it as a channel for communication to the public whom we seek to serve and reflect their interests. We therefore take account of it. We do not, as it were, seek to amend policies or do X or Y because this is the particular line being taken by the Daily whatever. We make our own minds up on that, but if there are matters in the press or the media that are incorrect, we will correct them. If there are matters where it is helpful for us to take the agenda forward, we might give an interview. I think over the 18 months plus-John will tell me if I am wrong or I will write to you, Chairman, and apologise-I think I have given three or four interviews and I have made about three speeches. This is an important job to ensure that we stay away from what was the previous enjoyment of blood lust to get on with the proper job.

Q39 Guto Bebb: With respect to that answer, have you used any external media consultants or do you have a media team within the organisation or a media officer?

Professor Sir Ian Kennedy: We do not have a media team. This is a recurring theme-why is it as an organisation IPSA has a Director of Communications and one other? The answer is that we dispense quite a lot of taxpayers’ money and there is a distinct interest in what we do with it. We have multiple audiences to serve. We have a website to operate-we have two people to do that. If I can give you some comparative figures of other public sector bodies and regulators, they usually have many more.

John Sills: Just to answer the other part of your question, before we appointed the Director of Communications we did use an external firm to help us, but once we had a Director of Communications that ended.

Q40 Guto Bebb: To follow up on one response from Sir Ian Kennedy, you mentioned that no media coverage has influenced any decision by IPSA. Obviously, the consultation process and the consultations that you undertake with the general public must have influenced the way you have developed the scheme. Clearly, that does play a part with the media or does it not?

Professor Sir Ian Kennedy: I did not follow the question.

Guto Bebb: Basically, in your response to my question you stated that IPSA had not changed their policies in response to any media pressure. Clearly, when you go out to consultation and specifically ask people to engage with you, there is a degree there of using the media in order to get feedback. Is that a clear answer in terms of use of the media to develop policy or not?

Professor Sir Ian Kennedy: Well, I guess I was always raised to the notion that you ought ultimately to trust the public to form its own view on these matters. If you ask the right question, if you do it in the right way, you will get a response from the public. Of course, one medium through which the public gets its information about what is happening is the press, but it is not the only medium. You go to any club, pub or whatever and the conversation three years ago was about you know what.

Q41 Guto Bebb: Finally, then, you would be happy to state that IPSA is independent of the media in terms of your activities?

Professor Sir Ian Kennedy: I would not have thought it is an arguable proposition that we are anything other than that.

Q42 Chair: I have just one supplemental on that. It seems to me there is a lot of newspaper coverage, and misleading newspaper coverage at times-just media coverage-of the comparisons between MPs, sometimes just factually incorrect. A lot of it is based on the publication routine that IPSA have been using. Considering one of the aims of the Act is to improve the public perception of Parliament and public confidence in Parliament, do you think that there is a role for IPSA in actually trying to put right those stories, which cause an awful undermining of things that should be seen as legitimate?

Professor Sir Ian Kennedy: Mr Chairman, it is, if I may say so, a very important question. We had a conversation like that with the National Audit Office where it was suggested by the Comptroller and Auditor General that, so far from merely publishing that the claim had been paid we, as it were, ticked the record as properly audited and within the scheme-in other words, we made some comment of approbation on the fact that the particular record was within the system rather than without. We undertook to take that away. We have always tried to avoid commenting, editorialising, on the facts, but there is absolutely no reason why we should not, in a sense, introduce some kind of post-audit approval as we go through. I know John is thinking about that. As to whether we can do something at local level if there is a misrepresentation, I think that is something that would fall within the notion of our having a duty to advance the interests of public confidence. Where we would wish to take that, Mr Chairman, is to the liaison group that we have. I undertake to make sure that that is on the agenda for next time we meet, which is relatively shortly.

John Sills: I think there is another thing that, obviously, every time there is a batch of publication, our communications team are contacted by people in the media. They take real care to make sure they know what the facts are, what the rules are, and there are always quite a lot of calls around that. We do our best to make sure that people are basing things on the facts.

Professor Sir Ian Kennedy: Mr Chairman, it is the old notion that the untruth is halfway round the world before the truth can get out. You know the problem. We do try to do our best and I will take what you say and take it to the liaison group.

Chair: Thanks very much. Joan, I am going to jump to the ability of Members to fulfil their duties effectively, which is mentioned, as Ian has pointed out, in the legislation in a slightly roundabout way. I wonder if you could pick up there.

Q43 Joan Walley: Yes. Just perhaps before we do that, if I could just go back to one point, you were mentioning just now Members’ remuneration. I just would like to bring in the issue about expenses and about allowances and to get from you a sense of whether or not you would expect any changes in remuneration, to enable that money then to be used by Members to pay for the expenses or the allowances that they have. Related to that, could you give us some idea of what allowances IPSA has introduced in the last 18 months?

Professor Sir Ian Kennedy: Everything we have done by way of the rules relating to costs and expenses is under the heading of allowances. You will notice the legislation offers a number of parameters for what the word "allowance" can mean, and we regard what we have introduced in relation to expenses and costs as within that rubric of allowances. I then went on to say that if allowances does not mean the aggregation of or the grouping together of sums of money so as to make increasingly global budgets, but rather means a reversion to the system that used to apply, which was not transparent or provided any assurances, no; as long as I am the Chairman of IPSA there is no going back to that. We have also indicated that there is a journey to be explored in terms of larger global budget.

John Sills: We have introduced one allowance. There is an allowance that we call the London area living payment for London area MPs. In the new scheme, there is a supplement available to those London area MPs who are in outer London-if you like, in the outer ring. That raises the amount they can have to £5,090 from £3,760 and the intention of that is to help with their travel costs in particular.

Professor Sir Ian Kennedy: Because they are outside zone 8.

Q44 Joan Walley: Just moving on, it would be helpful to know what definition IPSA has used in respect of the duties of Members and how you go about ensuring that the payment system takes account of the different ways in which Members perform those duties. There is quite a lot of difference between us in different parts of the country, different constituencies with different needs and so on.

Professor Sir Ian Kennedy: Absolutely. I remember having a conversation with a member of a particular party I will not reveal, where it was put to me that-this was before the scheme appeared-it was my duty to recognise that there were 650 MPs, all of whom worked in different ways, so my job was to capture the essence of an MP. I thought that there was a kind of intrinsic problematic contradiction there. We are aware that MPs work in different ways and the key that we have to do is to introduce a framework of rules, having regard to business costs and expenses, which need to be applied across the board, while giving MPs sufficient flexibility within that to employ different types of staff, different levels of staff, have different kinds of constituency office, and travel whichever way they want. I know, Mr Chairman, you may not be entirely comfortable with this idea, but from our perspective we would wish to move more to greater discretion to the MP rather than to increasingly detailed rules, because of the diversity of MPs. Of course, we can only get to that discretion when there is this growing trust and capacity not to be fearful of what might be said about what is being spent or not spent. That is the evolutionary process.

Q45 Joan Walley: In respect of that growing trust, how much time have you spent talking to MPs and visiting MPs in the last three months, or perhaps in the first few months before that, not just in the last three months?

Professor Sir Ian Kennedy: As you may imagine we do spend some time with MPs-some of my best friends are. John, you and the policy team, which is only four people, have done what in the last few months?

John Sills: Well, over the last year the four of us, including myself, have had about 100 onetoone meetings with MPs.

Joan Walley: A hundred?

John Sills: A hundred, yes.

Q46 Joan Walley: Has that been here in Westminster or elsewhere?

John Sills: No, that is in Westminster. We have also visited about 20 constituency offices and we are doing some of that now as well as part of our MP staffing review. That is just the four of us. I was in Islington the other day; that was not very difficult, but one of my colleagues was in Penzance and another went to Wales. We are trying to make sure that we get a good spread across the country, across parties, and among new MPs and returning MPs.

Q47 Joan Walley: How many hours? Have you catalogued this?

John Sills: In terms of hours, I have not measured the hours, but in Westminster, if you go to see someone, you normally talk to them for about an hour-you have to get there and back, so, yes.

Professor Sir Ian Kennedy: The Chief Executive went to Orkney and Shetland, which is further away than Islington, and spent the weekend there. That is an example of where we have tried to make sure that we are aware of the various differences. I spent time in an urban metropolitan constituency just to understand what it meant to have case load, what it meant to have communities where the assumption is you go straight to the top straight away. It is something that Mr Raynsford will be familiar with. This was in North Kensington. Then, of course, it is all reported back to the board, so we get a sense.

Q48 Joan Walley: Just finally, in terms of the needs of Members and the duties of Members, how much are you seeking to define that within the current payment structure of expenses/allowances, or how much are you seeking to accommodate it within the contingency fund arrangements that you have?

John Sills: Are you saying how-I am not sure I quite got the question. You are talking about expenses and costs as opposed to salaries?

Joan Walley: I am talking about the costs of being an MP, which are part and parcel of the job.

John Sills: Yes. Well, for the contingency arrangements in the financial year just gone, there was about another £500,000 agreed, in addition to the existing budgets.

Professor Sir Ian Kennedy: Actually, in addition to 173.

John Sills: Yes, that is right. It is not a huge amount but it was an important safety valve for those MPs particularly in inner London who needed extra staff and so on. If you are in a hotspot around the country in terms of rent, there was a possibility of using it for that. If you were a starting MP and you needed more money than the office budget allowed, then you could use contingency for all of those things. It is not a huge proportion of the overall budget, but I think it is very helpful.

Q49 Chair: When Parliament was recalled recently, I take it that those costs were part of the contingency rather than part of the core office expenditure or the core travel expenditure?

John Sills: We certainly agreed to pay them. I am not sure whether they came out of contingency or travel. I think it was probably contingency, but I was on holiday at the time so I am afraid I do not know.

Professor Sir Ian Kennedy: I have already misled you, Chairman. The Chief Executive has not yet gone to Orkney and Shetland, but he is due to go.

Q50 Guto Bebb: Just a very quick supplementary on the issue of the duties of Members. Some colleagues of mine have mentioned the fact that they believe that the IPSA scheme is basically looking at us as local Members rather than Members of Parliament who legislate on a national basis. For example, the 20-mile rule in terms of your constituency can be problematic because any journey then undertaken as a result of national legislation, or the impact of decisions made in this place on our constituencies requiring travel to other parts of the country, seems to be in need of justification all the time. It almost demeans the status of an MP as somebody who legislates for the whole of the UK.

John Sills: Well, actually, you can claim for travel in relation to matters of Parliament. We widened the rules out in the new scheme because before, if, for example, a prisoner from your constituency was in another constituency, you could claim for that. Some MPs were not sure that you could, but you could.

Guto Bebb: As a local Member?

John Sills: But now, if it is in relation to a parliamentary matter, then you can claim the travel. We can confirm that with the detail in writing if you wish.

Chair: That would be helpful.

Professor Sir Ian Kennedy: Mr Chairman, I am somewhat embarrassed but I need to go relatively soon.

Chair: We are very close now. We will move on to Stephen, who will ask some questions on the fairness for less welloff Members, then we will deal with not deterring legitimate claims, and I think we are pretty much there.

Q51 Stephen Williams: Just to pick up where Guto left off, obviously each individual Member is different in terms of our working practices and our backgrounds, but also our constituencies are different. In terms of the contingency, I think you just talked about how when constituency offices are in a "hotspot"-I think was the phrase you used-contingency should be used. Should it not just be built into the system? Is it not common sense that office rents in Bangor or Conwy are somewhat different from those in the city centre of Bristol? Yet the expectation is I can rent an office for the same cost as my colleague Mr Bebb. That is not a contingency; it is basic.

John Sills: We have thought quite a lot about that. There is a London and nonLondon distinction. We looked at whether we should split it up more regionally, just as we have for residential accommodation. The advice we got on that was that it was not a good idea, but the other thing when I talk about hotspots, is they are in surprising places. It can be an area where you might expect to be relatively low rent and it turns out maybe there is not enough commercial property in the town centre. We accept that MPs need to have their offices somewhere central that people can actually get to. You can get these unusual patterns. You get real outliers that do not really fit into a capped budget, which is why contingency does its job.

Q52 Stephen Williams: Once that is established-and the boundaries are about to change-for a constituency, it should not matter who the Member is or their circumstances. The cost of having a presence in that seat is an established fact, isn’t it? It is not really contingency.

Professor Sir Ian Kennedy: Mr Williams, you should rest assured, I hope you can rest assured, that these conversations about how to fix rent and what the rents are are not decided just willy-nilly. We take advice from a whole range of advisers and come up with a scheme that we think properly allocates public money in an efficient manner. We have looked at regional variations, we have looked at all sorts of things, and what we have arrived at is a function of professional advice.

Q53 Stephen Williams: The other circumstance, Chairman, where our office practices will be different is in terms of workload. I am not going to pick on any constituency here because I will get into trouble, but quite clearly some Members of Parliament get written to more than others, some have different profiles of case work because of the demography of their seats, yet the staffing allowance we have is identical whatever the size of the electorate, whatever the demography. Some of us, therefore, need to supplement that staffing budget with volunteers, with interns, which is a subject of controversy outside Parliament. Certainly, speaking for myself, I have always tried to make sure that interns and volunteers are rewarded financially for what they do. Should there not be some budget for Members of Parliament to be able to offer internships in Parliament on a fair basis?

Professor Sir Ian Kennedy: Thank you, Mr Williams. It is a very important question. I think the answer to that is one ought to do it slightly more radically than you are proposing-not, as it were, finding ways to top up but rather having a root and branch examination of what the staffing needs are. You will know that we inherited the SSRB’s recommendation 3.5; we did the mathematics and we added in this and that and we came up with a figure. We announced last year, or at the beginning of the financial year, that we are conducting a review of staffing needs and the associated costs. We will be publishing a consultation document very soon and that will be exactly addressing the issues you raise. That is what we think is a responsible job of an external regulator.

Q54 Stephen Williams: I come now to the differences in between Members as individuals. Quite clearly, Parliament needs to represent nations and national interests; we have people from all sorts of economic backgrounds as Members. In May 2010, I came across new Members of Parliament from all parties, not just my own, who were in real financial difficulty when they were elected because of so many costs that they personally had to incur and then had to wait for reimbursement. Later on, contingency and loans came about, but nonetheless we still have a system where the Member has to claim. The Member has to spend for an amount and then has to claim it back, which is quite different from how any other business would operate. Mr Bebb here has a red folder; Sir Ian also has a red folder. Mr Bebb would have had to have bought that and claimed back for it, but I doubt if you had to do the same.

Professor Sir Ian Kennedy: Sadly, yes, Mr Williams, but your more general point is well taken. We have introduced now for incoming MPs, for the future, a £6,000 start-up, which seeks to address exactly that. If I may, because this Committee is seeking to widen the compass from what is currently the case to consideration of what might be the case, we proposed-Sir Christopher Kelly also proposed-that some thought be given to, where MPs opt for it, locating an office in some central, publicly owned place fitted out for all the necessary equipment that is required. Then the MP has it and updates it as he or she wishes. If there is a changeover, then you have an office already provided and you have the equipment so you do not have those start-up costs. When we consulted on that, there was a great deal of unhappiness from MPs for a variety of things. I think it had to do with, "I want to run my affair as I want to run it," but I think it is something that we will revisit because in value for money terms it is well worth revisiting.

John Sills: I think the other thing there is what we call in the jargon direct payments. Ian said earlier that direct payments and the use of the payment card now potentially cover up to 77% of outgoing costs. We want to get that figure even higher and we are looking at some more things that will help on that. Now, clearly, for new MPs next time around that will be really good because immediately your office rent can get paid, all those big item costs. I think that is probably the key.

Q55 Stephen Williams: I would agree then that things have got better as the scheme has evolved and the payment card can now be used for some things, but it still does not cover all items of expenditure, such as phone bill and electric bill. There are various things that in any other walk of life an employee, whether a parliamentarian or not, would not be expected to pay for personally and then claim it back.

Professor Sir Ian Kennedy: Well, yes. We can go into that. Phone bills are particularly important but there are others. Remember that the National Audit Office is also there to look into this, so we have to steer a careful course between what might be ideal without the NAO’s concern and then take account of the NAO’s concern, but we are building on those.

Q56 Joan Walley: Could I just come in and ask you on what basis you feel it is appropriate to give new Members funds in advance to be able to furnish or provide the running costs of running their office but that does not apply to existing Members?

Professor Sir Ian Kennedy: They are not either/or. Mr Williams identified a specific problem of starting up, I was responding by saying we sought to address that. That is without prejudice to the fact that we introduced £4,000 loans and lots of other things. John, do you want to add to that?

John Sills: As Ian said, way back when we consulted on the issues of whether things like that should be provided, at the time I think generally people were opposed to it, but it is something we want to come back to. We are scheduled, not this financial year but the following financial year, to start to take a closer look at those accommodation issues again as part of the thematic review. I think that is an opportunity to bring those issues to the fore.

Q57 Joan Walley: If I may, Chair, I think the question is: how does IPSA expect Members of Parliament who have to provide money up front to provide that money until such time as they get reimbursed? It is now admittedly much speedier than it was originally but nonetheless it is having to put that money up front, isn’t it?

John Sills: Yes, but it is getting increasingly less. As I said, it is 77% now and we are looking to make that smaller. In time, hopefully we will cover pretty much everything.

Professor Sir Ian Kennedy: You cannot, with the greatest respect, have that conversation without a larger conversation about the total package of remuneration.

Q58 Stephen Williams: How much confidence do you have that you either are near or indeed have reached an expenses regime where an individual Member of Parliament is not financially distressed because of the nature of their job and is out of pocket because of their public duties?

John Sills: Well, I am beginning to repeat myself a bit here, but given the increasing amount of direct payments, payment card, things like that, I think that is very important because cash flow is the key issue, isn’t it? Those things-the ability to get advances on invoices for big ticket items-mean that now I think the majority of expenditures are covered. As we have just said, some are not. The Operations Director is looking at the moment at a whole suite of further improvements, which I hope we will be able to announce in the not too distant future. What I am saying is that I think the answer is yes, I am pretty confident, but there is more to do.

Q59 Joan Walley: Could I just ask very quickly how that relates to staff training, for example?

John Sills: Staff training you can claim back for. You can claim for staff training.

Q60 Joan Walley: It would be paid in advance?

John Sills: In advance? I am not sure at the moment, but we can look at things like that.

Chair: Thank you very much. We are now moving on to the final section, which is the deterrence of MPs from making claims, which is quite a big concern. Cathy, I wonder if you would pick up.

Q61 Cathy Jamieson: Yes, thanks very much. I was listening very carefully to what was said earlier. I just wonder if you are aware of the problems of MPs who are deterred from making claims and what feedback you have had during the process and what you may now choose to do in the future to ensure that people do actually claim what they are entitled to.

Professor Sir Ian Kennedy: We cannot control whether MPs put in claims, and if they do not claim we cannot pay. We have said that the money is there, MPs are entitled to it, and they should claim.

Q62 Chair: Could I just come in there? One of the most important things to any Member of Parliament is reputation-it is in a lot of other walks of life but particularly as a Member of Parliament. There are some concerns that clearly not everybody is claiming what they ought to claim. Clearly, those perhaps wealthier Members or those with trust funds are not claiming some fairly major items, and that is quite self-evident from when one looks at the numbers. I think the question behind this is whether you see that there may be a disadvantage for the less welloff and those maybe with families who are forced to claim and risk their reputations on this bimonthly basis, compared with those who then choose to protect their reputations by simply not making those claims. This is something that did not necessarily exist before.

Professor Sir Ian Kennedy: I understand the question; it is well put. I think it is better to see us in an evolutionary process, as I have said before, such that the concern and anxiety about claiming-to the extent that it is necessary to pay up front and claim rather than take advantage of the various mechanisms we have put in place to avoid that-will decrease. We hope to be in a position as soon as we can-it involves, to a degree, talking about costs and expenses as a routine matter, where MPs are behaving legitimately and we can demonstrate that, and so on-where MPs are sufficiently confident to claim. Now, if it is the case that those with more money do not claim, that is a matter for them. If it is the case, as you say, that some who are less welloff do not claim because they are fearful, there are two choices there. You either create an environment where they are less fearful, or you scrap the whole lot and just revert to what we had before, but believe you me, the FOI requests will go through the roof. The exploration of every toilet roll and every toothbrush will again be part and parcel of our daily public conversation and it will not really take us anywhere.

Q63 Cathy Jamieson: I just wanted to pursue a point in relation to this issue about how claims perhaps risk damaging people’s reputations. Could I give an example of that? Many people who have to travel a considerable distance by train, for example, may choose not to purchase a first-class advance ticket, which might be cheaper than a standard train fare, simply because of the controversy that there has been around first-class travel. Is there going to be any kind of change to look at what is the best value for money there?

Professor Sir Ian Kennedy: The standard approach across Whitehall is now that first-class travel is not available in departmental terms and so on. We are just following what Kelly said and everyone else. Putting that aside for a moment, what is it that IPSA can do to change public perceptions of MPs? Your Chairman rightly refers to, and I know that he is very concerned about, notions of reputation. Reputations, as we know, cannot be demanded and are not given by me in my gift. They are earned, and currently we are going through a process of re-earning. This conversation is not without its history and we are all re-earning that reputation, which is so important. What I would seek to persuade you of, and I may have some difficulty in doing that, is that IPSA is one of the greatest allies to that process of reearning that reputation by having a robust system with proper assurance, proper transparency, routinising, demonstrating probity, so that we can move on to more important conversations.

John Sills: Certainly, in respect of your example, if we are asked by anyone about first-class travel that has been secured in advance and so is less than the standard open ticket, we would robustly say that is completely legitimate, because it is.

Q64 Chair: Thank you very much. I am just going to ask two tidy-up questions and then I think we are there. Thank you very much for your patience and for your time today.

First, we are reviewing the legislation and we will make recommendations, if we think they are necessary, to change that legislation to ensure that the goals of the original Act, as amended in 2010, are actually met. We have tackled some of those issues today. Clearly, everyone always says we would not start from here, but I ask you to consider whether there is anything that you, the board of IPSA and the executives within IPSA, would like to see changed in that legislation-feel free to mention one or two now; alternatively, you can go away and consider it-that you think would make your job easier or make it easier to achieve the objectives as set out in the Act?

Professor Sir Ian Kennedy: I will come back and talk to you, but I will say this, Mr Chairman: the Act as regards what we do merely says, as you know, that it is up to IPSA to create a scheme-a scheme of allowances, but we have had that conversation. It then requires us to be independent, to be cost efficient and to be transparent. On all three we are on a journey, but we think we are doing relatively satisfactorily. I will now go away; there may be conversations we could have about the compliance officer and how that might interface with your own concern and others’ about parliamentary privilege. We think the parliamentary privileges matters are resolved. The original Bill I looked at with some degree of horror when I thought how would I as Chairman of IPSA manage a Bill where there was investigating functions and so on, but that fell away, mercifully. I think parliamentary privilege is not an issue. I am happy to have a conversation further. We can talk about that and I will certainly come back having consulted the board on the 20th of this month.

Q65 Chair: Thank you very much indeed. My final question is, over the years obviously the executive and the officers provide recommendations to the board. Have any of those recommendations been rejected and is that part of the minuting process of your board meetings? Have there been proposals that have then been rejected by the board that we are not aware of?

Professor Sir Ian Kennedy: They say so many things. I will come back to you if I may.

John Sills: Speaking as the Policy Director, I think policy making is an iterative process. We talk about options and choices rather than, "This is what we think, yes or no?" It is not that simple.

Q66 Joan Walley: Just quickly, on the issue of transparency, presumably board minutes are in the public domain?

John Sills: Yes, they are.

Professor Sir Ian Kennedy: They already are.

Chair: Thank you very much indeed. Thank you for your patience, thank you for your time, and thank you to members of the Committee.

Professor Sir Ian Kennedy: Thank you.


[1] Witness correction: T he figure given should have been £2.6 million.

Prepared 28th October 2011