The Operation of the Parliamentary Standards Act 2009

Written evidence from
Michael Rush, University of Exeter and Philip Giddings, University of Reading

Introduction

1. MPs’ pay and expenses have long been matters of controversy and are always likely to be so, notwithstanding the introduction of independent reviews in 1971. Even though ‘pay’ and ‘expenses’ are conceptually distinct – a point recognised in the first he first such review, [1] it has never been possible to separate the two entirely in the minds of the media or the public or indeed Members themselves, as evident in the frequent use of the envelope expression ‘remuneration package’. That fact has to be kept in mind when considering issues relating to expenses, as has been underlined in the recent expenses scandal.

2. Nonetheless, this memorandum will focus primarily on expenses rather than pay, drawing on lessons that can be learned from the development of expenses, overseas experience, and the expenses scandal. In doing so it draws on research carried out over a number of years by the authors, separately and together, evidence presented to the Committee on Standards in Public Life in 2009, [2] unpublished written evidence presented to the Parliamentary Commission for Standards in May 2011, and our recently published book, Parliamentary Socialisation. [3]

Lessons from the development of MPs’ pay and expenses

3. The history of MPs pay and expenses falls into three phases:

· Pre-1911: no pay, and expenses met by the member, a patron, supporters, or the Member’s party.

· 1911–71: MPs paid a salary, part of which from 1912 was treated as an allowance to meet expenses and was tax deductible. Indeed, it was possible for Members to claim expenses up to the full parliamentary salary against tax. From 1924 MPs received financial assistance with travel and, due an historical anomaly, free telephone calls in the London area. And in 1969 a secretarial allowance was introduced.

· 1972– : following the first report of the Top Salaries Review Body (TSRB, now the SSRB), a distinction was drawn between the MP’s salary and the expenses incurred in carrying out parliamentary duties, laying the foundations of the present system. These allowances were extended in scope and levels in the ensuing years.

4. The conceptual distinction between pay and expenses is crucial for two reasons. First, it has allowed successive governments to limit Members’ pay increases, whether as part of an incomes policy or because it was thought politically desirable. Second, it thus enabled successive governments to increase allowances separately from any consideration of pay as such. However, despite the conceptual separation of pay and expenses, the two sometimes became entangled, a point we shall return to later (see para. 14)

5. In 1967 the late Sir Bernard Crick wrote: ‘Clearly a member should be able to draw on public funds, or be reimbursed from them, those essentials he needs to do his job properly: secretary, office, postage, telephone and travel.’ [4] The TSRB, in its first report in 1971, implicitly endorsed this view and additionally recommended a subsistence allowance to cover the costs of working away from home, applicable to most Members. [5] However, notwithstanding consideration of increasing the level of existing allowances or introducing new ones, there was no systematic review of expenses between 1971 and the aftermath of the expenses scandal in 2009–10. In the meantime, the scope and level of expenses, though subject to independent review by TSRB/SSRB, expanded in an ad hoc fashion. Like Topsy, they just ‘growed’ – epitomised by the transmogrification of the subsistence allowance into the Additional Costs Allowance.

6. The 1971 TSRB Report also firmly rejected the practice of MPs being expected to meet a substantial proportion of their expenses from their salaries through tax relief and the practice of some overseas legislatures of making all or part of the salary tax free in lieu of an expense allowance. [6] It did so on the grounds that MPs with alternative sources of income would be unfairly advantaged by such an arrangement.

Lessons from overseas

7. On five occasions the TSRB/SSRB has had information gathered about the pay and allowances provided in a number of other countries. [7] The countries covered varied, but usually included members of the EU, Australia, Canada, New Zealand and the United States. Such comparisons are complicated by variations in the constitutional provisions and institutional arrangements of the countries concerned. This is most obvious when looking at the United States, with its separation of powers between the Congress, the President and the judiciary. It also applies to other states and the differences between federal and unitary systems, bicameral and single chamber legislatures, and geographical size. Failure to take account of such differences can result in facile comparisons being made, especially by the media and sometimes by politicians. Nevertheless, used with appropriate discrimination, data from other states are useful for comparing pay and what support is provided, enabling judgements to be made about where British MPs come in the pay and support international league tables. They do not, however, usually provide detailed information about the operation of support systems and allowances, nor the policing of them.

8. One important point is very clear from international data. If it were decided to abandon the system of allowances for MPs and adopt instead a substantially increased salary with tax deductible expenses (or expect MPs to take second jobs), the United Kingdom would be the exception to the general practice, especially in comparable countries, such as Australia, Canada, France, Germany and Italy. Of these only France has a tax-free element in the parliamentary salary, but there is also a range of allowances.

Lessons from the expenses scandal

9. This section of our evidence is based on research undertaken for our book, Parliamentary Socialisation, in which one of the topics we address is MPs’ conduct and ethical standards. It also reproduces written evidence we submitted to the Parliamentary Commissioner for Standards in May 2011.

10. Our research focused on two questions. First, how do newly-elected MPs learn how to function as Members of Parliament? Second, to what extent are MPs socialised into particular attitudes and norms of behaviour in performing that role? To answer the first question we examined the experience and behaviour of the 1992 and 1997 intakes of new MPs, but to answer the second we extended our research beyond the 1992–97 and 1997–2001 Parliaments and compared their attitudes and behaviour with those of longer-serving MPs.

Changing the rules and the expenses scandal

11. In our exploration of Members’ attitudes to ethical standards and behaviour we paid particular attention to how those standards are acquired and how they affected Members’ behaviour. We note at the outset that the introduction of the Register of Members’ Interests in 1975 and the ban on paid advocacy in 1995 were directed at conflicts of interest. Both resulted in specific rules or sets of rules to deal with a particular problem, which were subject to periodic review and modified if necessary. The impact of the ban on paid advocacy is clear: in 1975, 15.8 per cent of MPs (excluding ministers, the Speaker and Deputy Speaker) registered employment as advisers or consultants; in 1985 the proportion had nearly doubled to 27.7 per cent; and in 1995, after the appointment of the Nolan Committee but before it had reported, to 41.6 per cent. By 2005, however, it had fallen dramatically to 11 per cent. Attitudes towards conflicts of interest had changed because the rules had changed.

12. However, there is a crucial difference between the conflict of interest issues of the early 1990s and the expenses scandal of 2009: the former applied to a minority of MPs, though most came from one party and it was a substantial minority; that arising out of MPs’ expenses applied to the overwhelming majority of MPs across all parties. What they have in common is that the scandals they gave rise to were caused by a lack of appropriate ethical norms rather than a flouting of them.

13. It is true, of course, that the House authorities, especially the Fees Office, had produced increasingly detailed advice on the expenses and allowances available to MPs, both by offering all newly-elected Members one-to-one interviews with an official from the Fees Office and the production in 1987 and subsequently of a detailed guide, known as The Green Book. Successive editions of the latter became more and more detailed and explicit, particularly after the adoption of the Code of Conduct and the Guide to the Rules. But in contrast to paid advocacy, the rules on expenses changed, but behaviour did not – a potentially dangerous gap.

14. Thus whereas rule changes with regard to conflicts of interest and paid advocacy led to change of attitudes and behaviour, in the case of expenses they did not. Why was this? Why did this potentially dangerous gap emerge? A major part of the explanation appears to be that allowances have developed in a piecemeal fashion, a new one introduced here, an existing one extended in scope there. Furthermore, although Members’ salaries were subject to regular reviews by the Senior Salaries Review Body (SSRB), successive governments were often reluctant to accept the SSRB’s recommendations for salary increases, but less reluctant to allow increases in expenses and allowances. In addition, governments were vulnerable to cross-party backbench rebellions on salaries and allowances and from time to time encouraged MPs to see allowances as a more acceptable means of increasing their remuneration. Thus, when, in 2001, the SSRB proposed an increase in the Additional Accommodation Allowance (ACA), the government offered only token resistance to a backbench amendment to increase the allowance by a massive 46.1 per cent, ostensibly to bring the ACA in line with allowances paid to members of the House of Lords. The vote was not whipped; indeed, some ministers and opposition frontbenchers voted for and some against, while others did not vote. [8]

15. In addition, as more allowances were introduced and others extended, the rules governing their application became more complex and these too developed in a piecemeal fashion, epitomised by the use by the Fees Office of the ‘John Lewis list’. The latter vividly illustrated what can be described as a ‘culture of entitlement’

MPs, ethics and socialisation

A process of osmosis

16. In her book, The Ethical World of British MPs, Maureen Mancuso concluded that ‘...ethical standards are instilled as if by osmosis.’ [9] Mancuso’s research was conducted between 1986 and 1988 and, twenty years later, was replicated by Nicholas Allen, [10] who came to a similar conclusion. After examining the expenses scandal, so did we.

Ethics and socialisation

17. Our research into the attitudes and behaviour of newly-elected MPs at Westminster found that they were subject to significant levels of socialisation and that over the period of a Parliament and more their attitudes and behaviour moved closer to those of their longer-serving colleagues. Some of these attitudes were driven largely by party, but in areas such as ethics they appeared to apply regardless of party. For example, an analysis of ACA expenses in 2004–05 shows that four out of five Conservative and three out of four Labour MPs entitled to claim received 75–100 per cent of the ACA and with little difference between the various intakes.

MPs and the Code of Conduct

18. In a later study, Allen reported: ‘MPs are fully aware of the Code’s existence, but judging by the responses of those interviewed most MPs rarely consult it...Some MPs never consult the Code’. [11] He went on to quote a senior select committee chair: ‘Once you’ve seen it, there’s no need to return to it’. He reported that another said: ‘I’ve no idea what the Code says, I’m entirely indifferent. I’ve never read it’, adding for good measure, ‘It’s balls and it’s bullshit.’ [12] Overall, nine of Allen’s 38 interviewees admitted to never having read the Code. Some believed the Code was solely concerned with outside interests and, not having such interests, felt no need to read it.

19. This attitude towards the Code is further illustrated by the widespread reaction of MPs to the expenses scandal. Rather than examining the ethical implications of the revelations, they mounted two defences. First, they argued, expenses had been ‘within the rules’ and approved by the Fees Office; and, second, that successive governments had encouraged MPs to maximise their use of allowances, in effect treating them as part of their salary. Similarly, in August 2009, after the expenses scandal had been in the news for some months, MPs were asked who they blamed for the erosion of their reputation: half said MPs themselves, but 64 per cent blamed the press and 20 per cent the Fees Office.

20. Such reactions suggest not so much that MPs lived in an ethical vacuum but rather that they lived and may still live, largely in an internalised ethical world, not totally but significantly at odds with that of the general public. Comparative evidence indicates that this MP-public gap is not unique to Westminster: a Canadian study describes it as a ‘worlds apart’ syndrome. [13]

21. Our research suggests that, until very recently, underlying ethical values have been largely taken for granted because of the increasing efforts invested by the House authorities and the parliamentary parties in helping newly-elected MPs learn how to do their job – how to do things at Westminster and how to deal with constituency matters. However, after the 2010 general election and in the aftermath of the expenses scandal, the House authorities provided induction sessions on the Code of Conduct and the Guidance to the Rules. And in the particular context of expenses, the Independent Parliamentary Standards Authority sought to make much clearer the detailed information and advice to MPs provided on its website on what may be claimed and the procedures involved. The acid test here is not whether IPSA, the House authorities or outside observers consider the position is clearer but whether MPs themselves find them so and therefore have confidence in them. This is a matter on which further research is required.

Changing ethical attitudes and behaviour

22. Our research shows that rules can change behaviour, but changing attitudes is a longer-term process. The unusually large intake of first-time MPs in 2010 [14] may speed up a change in attitudes, though how far they will be affected by socialisation is a moot point.

23. We conclude that clarifying and modifying the Code and the detailed rules in the light of experience is to be welcomed and may indeed directly affect and determine ethical attitudes and behaviour, but time and experience are the main driving forces. We therefore make three recommendations to the Committee.

24. First, to underline the significance of the Code, we recommend that after each election MPs should be required to sign both a commitment to the Code and rules and a declaration that they have read them. This is no different from the requirement often made of members of the public that they accept terms and conditions in the purchase of some goods or services. It may not bring MPs and the public closer together, but it would place them on a similar footing.

25. Second, we recommend a review of how new Members (including those elected in by-elections) are made aware of ethical standards, as well as the specific rules on expenses. It follows that special attention should be paid to communicating to all Members any changes which are in the rules and procedures, including any actions or changes which are required on their part.

26. Third, without clearer information about how well ethical standards are understood by those who have to use them, it is difficult to decide what further measures may be needed. We therefore recommend that the Committee commission an independent survey of MPs into the effectiveness of the work done by IPSA and the House authorities to communicate to all Members and their staff appropriate ethical standards, particularly with regard to expenses.

September 2011