The Operation of the Parliamentary Standards Act 2009



1. An Inquiry into the operation of the Parliamentary Standards Act (PSA) 2009 by the Committee on Members’ Expenses was announced on 19 July 2011. In particular, the Inquiry is to consider how to ensure:

· Value for money for tax payers.

· Accountability.

· Public confidence in Parliament.

· The ability of Members to fulfil their duties effectively.

· Fairness for less well-off Members and those with families.

· That Members are not deterred from submitting legitimate claims.

2. The Clerk to the Committee wrote to Sir Ian Kennedy, Chairman of the Independent Parliamentary Standards Authority (IPSA), on 27 July, elaborating on the points above and asking about IPSA’s plans for addressing the issues of MPs’ pay and pensions.

3. Sir Ian and IPSA’s Policy Director, John Sills, gave oral evidence to the Committee on 13 September. This written evidence builds on that evidence and addresses issues which were raised at the 13 September session.

4. We welcome the opportunity to engage with the Committee and to submit this evidence, which, we hope, will be helpful to the Committee in making its assessment. There will be a further oral evidence session on 25 October in which the Committee will be able to follow up any points made in this submission, and IPSA will be able to comment on matters raised with the Committee and any emerging findings that the Committee wishes to share with us.

5. We argue in this submission that IPSA is meeting its statutory duties and is achieving its objectives to create and implement an expenses scheme which is fair, workable and transparent. There is more for us to do, and the submission describes some of our plans. Against this background, we argue that it is now time to move on from costs and expenses to address the wider question of an MP’s remuneration package: what does a 21st century MP need in order to fulfil his or her parliamentary functions?


6. The MPs’ expenses scandal had a profoundly damaging impact on public confidence in Parliament. In November 2009 the Speaker of the House of Commons gave the annual lecture to the Parliamentary Studies Association and Hansard Society. In his speech he addressed the "expenses debacle" as follows:

"It is a cruel paradox that at a time when MPs have never worked harder, their standing has rarely been lower. Let me be brutally honest about what has occurred. I cannot think of a single year in the recent history of Parliament when more damage has been done to it than this year, with the possible exception of when Nazi bombs fell on the chamber in 1941. The difference is that the physical wreckage then was done by dictators whereas responsibility for the reputational carnage inflicted this year lies with the House... We have to make it crystal clear that we will dynamite the past arrangements, practices and, crucially, cultures that allowed the expenses disaster to take place and will do so with as much vigour as Guy Fawkes intended to apply here in 1605."

7. The situation that the Speaker described was the background against which IPSA was created by the PSA 2009, as amended by the Constitutional Reform and Governance (CRAG) Act 2010. What was clear throughout the debate in both Houses was the recognition that in the face of a collapse in public trust, it was essential to restore public confidence in the payment of MPs’ costs and expenses. It was further recognised that to do so, it would be necessary to move away from self-regulation to external, independent regulation.

8. As Baroness Royall, opening the Second Reading debate in the House of Lords, said:

"The fundamental purpose of the Bill is to replace the self-regulation of expenses, allowances and financial interests with a system of independent, transparent and robust regulation... We have a duty in this House to help the Commons implement a new system that can restore public confidence in the propriety of MPs and the process that governs their expenses and financial interests."

9. IPSA has taken that need to restore public confidence as a primary consideration. Its regulatory role defines and determines its work. The legislation gave IPSA four regulatory functions:

· The preparation and maintenance of a scheme of rules to govern the payment of expenses and costs.

· The publication of claims.

· The determination of MPs’ pay.

· The setting of a scheme for MPs’ pensions.

10. The powers regarding the scheme of expenses and costs and the publication of claims came into force immediately. The powers on MPs’ pay were commenced in May 2011 and those on pensions are expected to be commenced in October 2011, following Parliament’s support for the motion which was debated on 17 October.

11. IPSA’s responsibility, as an independent regulatory body, is to determine a framework of rules for the payment of MPs’ expenses and costs which has regard first and foremost to the public interest, and thus a concern for value for money in the use of public funds. The legislation does not itself specify what constitutes the public interest: that is for IPSA to determine, taking into account the views of the public and others, including MPs, as well as the intentions of the legislation and the fundamental principles which underpin the scheme. These principles, which were mainly drawn from the recommendations of the Committee on Standards in Public Life’s (CSPL’s) report on MPs’ expenses and allowances (November 2009) can be found at Annex A of this note.

12. The legislation also sets out two general duties for IPSA. The first is that IPSA should have regard to the principle that it should act in a way which is efficient, cost-effective and transparent. The second is that it should have regard to the principle that members of the House of Commons should be supported in efficiently, cost-effectively and transparently carrying out their parliamentary functions. In both cases, IPSA must "have regard to the principle". This is important because it requires IPSA to make a judgement about how and the degree to which it supports MPs and ensures its own cost effectiveness in the light of what it considers to be the public interest. While being called upon to exercise its judgement, IPSA must present its annual budget estimate to the Speaker’s Committee for the Independent Parliamentary Standards Authority (SCIPSA). This Committee must review IPSA’s estimate and decide whether it is satisfied that the estimate is consistent with the efficient and cost-effective discharge by IPSA of its functions.

13. Thus the legislation creates an unusual relationship between the regulator and the regulated, which calls for careful stewardship. So far, IPSA has been able to pursue its functions in a way that has been judged efficient and cost-effective, as the following section demonstrates.


C1. The scheme of expenses and costs and publication of claims

14. In March 2010 IPSA introduced a scheme of expenses and costs, to be implemented from the beginning of the new Parliament, which it intended to be fair, workable and transparent. If these goals were achieved, then the prospect of restoring public confidence would be enhanced. The scheme of rules came into effect the day after the 6 May 2010 General Election. Publication of claims began in December 2010.

15. Some minor adjustments were made to the scheme in July 2010, following a short consultation. These ironed out some anomalies in the rules that had appeared when they were put into operation. In the autumn of 2010, we began a full review of the scheme and its impact, learning from evidence from our on-line claims system, from the experience of advising on the rules and assessing applications for contingency funding, and from the wide range of discussions that we had with MPs and their staff. Following this initial work, we consulted on a range of issues in January and February 2011. New rules, the Third Edition of the Scheme, came into force on 1 April 2011. We are required by the legislation to review the scheme regularly and currently intend to do so annually.

16. We are now embarking on the next annual review of the scheme. We do not envisage major changes this time, although we do plan to consult on a number of issues concerning MPs’ staffing which will flow from the review which we have undertaken over the summer and into the autumn. We will, of course, also take into account the findings of the Committee on Members’ Expenses Inquiry.


17. IPSA intends its scheme to be fair both to MPs and to the interests of the public and the tax payer. A scheme that allows MPs to conduct their parliamentary functions effectively and safeguards public funds will have achieved this goal.

18. The National Audit Office (NAO) conducted a value for money study into the payment of MPs expenses and costs in the summer of 2011, reporting on 7 July. Amongst other things, it concluded that:

· There had been an increase in public confidence regarding MPs’ expenses during the last year and that IPSA had significantly contributed to this improvement, which had been achieved in an impressively short period. (55% of the public thought the situation had improved.)

· The new scheme safeguarded and controlled public funds more effectively than the predecessor scheme.

· IPSA had demonstrated convincingly that there was no systematic abuse of the new scheme by MPs to date.

· The new scheme paid out some 15% less in 2010-11 than was paid out in 2009-10. This amounted to around £14.5 million less than before.

19. There were other findings concerning the service provided to MPs and IPSA’s internal costs which are addressed below. These headline findings, which were broadly endorsed by the Public Accounts Committee’s report of 23 September 2011, demonstrate that the central objectives of the new scheme have been achieved, in a short space of time.

20. The scheme provides a robust framework for the claiming of expenses and business costs by MPs. It is intended to provide MPs with the support they need to conduct their parliamentary functions and budgets have been set at levels which we judge to be sufficient to perform those functions. As fairness is one of the key criteria used in devising the scheme, we were conscious of the need to ensure that MPs should not have to fund legitimate costs from their own resources (we return to this later) and that the rules did not put up obstacles to the diversity of representation in Parliament.

21. While the development of the First Edition of the rules was strongly influenced by the CSPL recommendations, as well as the views expressed by the public and MPs in an extensive consultation, there were areas where IPSA exercised its independent judgement about what best met the public interest. It did so on the basis of evidence-based analysis. An example is the employment of family members as MPs’ staff. CSPL recommended, and continues to recommend, that this should be prevented. We saw no evidence that the employment of family members had been widely abused, and we also saw evidence that employment of family members can be beneficial – for example, in a constituency office, helping MPs to keep in touch with the local community when they are in Westminster. Our judgement was that it would be wrong to stop the employment of family members already contracted to work for the MP and that for new MPs, employment of a single "connected party", with appropriate safeguards, such as transparency about their employment, was justified.

22. It became clear as we reviewed the scheme that certain aspects of the rules were not operating as we would wish in terms of fairness and of supporting MPs in their parliamentary functions, and a number of changes were made to the scheme following consultation in early 2011. Amongst these were:

· Changes to the rules about family accommodation, allowing MPs to claim extra funding for dependent children up to the age of 16, or 18 if in full time education. The previous limit was 5 years of age. These changes are mirrored in the rules about family travel, where an MP can claim for travel by a spouse or partner if he or she is travelling with their children.

· A narrower definition of the London Area, which allowed a further 31 MPs to claim accommodation expenses.

· A supplement to the London Area Living Payment of £1,330 (raising it from £3,760 a year to £5,090) for MPs with constituencies outside Greater London, to help them with the costs of travelling into Westminster.

· A widening of the definition of "extended travel", so that MPs could claim for travel outside their constituencies where it concerned a matter before Parliament.

· Allowing MPs to decide for themselves when they need to claim for a hotel or taxi after working late in Parliament.

23. Some other changes are shown below when we consider workability.

24. Although many MPs, in the NAO’s survey of MPs in May 2011, did not acknowledge the beneficial effect of these changes to the scheme (which had only been in place since April); we are confident that the majority of the concerns that MPs had made known to us were addressed by the changes to the rules.


25. Transparency is both a statutory duty and lies at the heart of IPSA’s role as a regulator: the publication of MPs’ expenses claims, as well as the annual publication of their overall spending, is central to that transparency. The key benefits of transparency are as follows:

· Publication of expenses claims and annual costs allows members of the public to judge for themselves whether public funds are being spent appropriately.

· The fact that claims, including those which are not-paid or part-paid, are going to be published is likely to act as a deterrent to making inappropriate claims.

· The public will be able to see that the expenses and business costs incurred by MPs are legitimate costs arising from the performance of their parliamentary functions. In time this should build public confidence further.

26. We have now published a full financial year’s worth of MPs’ claims for expenses and costs, covering 124,230 claims with a value of £16.2 million. In July 2011 we also published MPs’ overall spending, broken down into the main categories of spending. The public was able to see, from these annual figures, that by far the largest category of spending is on staffing, followed by the costs of renting and running a constituency office. Together we describe these as "business costs". Other, more direct expenses are essentially the costs of working from two locations: accommodation, travel and subsistence. All of these costs have to do with the support of MPs’ parliamentary functions.

27. Anyone who looks at the annual costs across a range of MPs will see that there is considerable variation in the way that MPs carry out their duties. This will depend on the location of the constituency, its social make-up, the different responsibilities that an MP may have or take on, their personal views on the role of an MP, and so on. In this way, publication of these costs may provide a helpful insight into the role of MPs in this day and age.

28. IPSA publishes MPs’ expenses claims on a two-monthly cycle. The first batch of expenses, for May-September 2010, was published in early December 2010. Thereafter, two months’ worth of expenses are published with each cycle. When IPSA first published claims for expenses, there was considerable media interest and controversy. 14,370 unique visitors visited the expenses website over the following week. By the time the annual spending figures were published in July 2011, the comparable figure had fallen to 1,007. This reduction demonstrates that the routine publication of claims, in an open and understandable form, is one of the best ways to show the public that they are routine business costs incurred properly.

29. The two month cycle was chosen as it was sufficiently frequent to illustrate the routine nature of the claims, it captured recent developments and it was cost effective. Nonetheless, we are keeping the options under review. Our paramount concern is to achieve a degree of transparency which delivers the benefits outlined in paragraph 25.

30. We publish a good deal of detail on each claim, but not the receipts. There are two main reasons for this. First, we do not consider that the receipts would add any significant value to the detail already available. Second, the cost of redacting sensitive personal detail is a major operation (as it was in the House of Commons) and we estimate that it would cost at least £1 million a year to publish claims accompanied by receipts, as opposed to the £250,000 it is currently costing. The extra cost would not constitute value for money for the tax payer. Moreover, our judgement was endorsed by the Information Commissioner, who said, in a statement to the Daily Telegraph:

"We welcome the greater transparency that has been built into the reformed expenses system under IPSA, meaning that much more information will be routinely published than under the old system. Given the cost and time for individual redaction, we can understand IPSA’s decision not to publish itemised receipts." [1]

31. Transparency applies to IPSA, as well. We have our own publication scheme, which includes publishing IPSA Board minutes, and the remuneration and expenses of IPSA Board members and senior executives.

Workability of the scheme

32. We want the scheme to be understandable and as supportive of MPs’ working practices as possible, bearing in mind that any set of rules will have rubbing points, given the variety of approaches taken by MPs to the job of an MP. Our experience of the first year of the operation of the rules was that many MPs required more flexibility in the way they could manage their budgets. We also found that IPSA was at risk of being drawn into micro-management of some MPs’ activities, particularly in relation to office costs, making judgements about what was and was not in support of parliamentary activity that were properly left to the MP. Following consultation, we made two significant changes to the scheme to allow MPs greater discretion:

· The budgets for Constituency Office Rental Expenditure (CORE) and General Administrative Expenditure (GAE) were merged, to give MPs more flexibility in funding their parliamentary activities.

· The majority of the prescriptive rules about what could be claimed under office costs were removed, giving MPs more discretion. A small number of proscribed items of expenditure remain.

33. We have also given MPs greater flexibility in making claims for residential accommodation by removing the internal cap on rent within the accommodation budgets. The overall limit has not changed. The change means, for example, that if the rent includes a charge for utilities, the previous rental limits can be exceeded, while the MP stays within the overall budget limit, which allows for "associated" costs like utilities and council tax.

34. We made these changes because we judged that there was greater public confidence in and understanding about MPs’ expenses and costs. The change in approach would help MPs carry out their parliamentary functions while not damaging that confidence. We see this as an evolutionary journey. We will continue to identify ways to allow MPs greater control and discretion as we judge that the public is thereby better served.

35. Concurrently, some MPs call for more rules, and more detailed rules, so as to remove any potential uncertainties. We believe that this is impractical and that a degree of uncertainty, or the need for judgement, is intrinsic in any system of rules. We further believe that MPs should be entitled to exercise such judgement and that concern over adverse comments will diminish as public confidence in the system grows.

C2. MPs’ Pay and Pensions

36. IPSA’s other two regulatory functions will occupy centre stage over the next year. It is our intention to conduct a thorough, evidence-based review of pay and pensions at the same time. On the assumption that we will shortly receive the powers to determine the pension scheme, it is our intention to continue the research that we have already begun, with a view to consulting formally in the spring of 2012. That will allow decisions to be taken by the end of 2012, with any new arrangements coming into force from April 2013 at the earliest.

37. The issue of resettlement grants for MPs who lose their seats will be considered as part of the review of MPs’ pay. We will consult in the annual review of the scheme about a possible interim solution to cater for the possibility of an earlier-than-expected general election.

38. To begin our work on MPs’ pay, we recently commissioned YouGov to conduct a public opinion survey as part of one of its Omnibus surveys, to test public understanding. The survey’s results can be seen at Annex B. They show that a majority of the public have a good understanding of the current level of MPs’ pay. They also broadly take the same view on comparable professions that has informed previous reviews, by the SSRB, of MPs’ pay. There is currently little appetite for any system of differential levels of pay, to take account of factors like the number of years served or the costs of living in London. The findings of this survey give us a helpful baseline for further work in engaging the public. As with expenses and costs and the publication of claims, it is our judgement of the public interest which will inform our decisions on pay and pensions.

C3. Accountability, value for money and IPSA’s cost-effectiveness

39. It costs £6.4 million annually to run IPSA. In the 17 months that IPSA has been operating it has produced two budget estimates for approval by SCIPSA, its annual accounts have been approved by the NAO without qualification, it has been subject to a NAO value for money study and the consequent report by the Public Accounts Committee. The operation of the legislation that created IPSA is now being considered by the Committee on Members’ Expenses.

40. There is a cost in time and resources of this scrutiny, but as a transparent and accountable organisation we welcome the opportunity to demonstrate that we are acting in the public interest and doing so in a cost-effective manner, continually looking for ways to improve value for money.

41. IPSA’s formal accountability is to SCIPSA through its budget estimate, which SCIPSA must agree and lay before the House. SCIPSA must decide whether the estimate is consistent with the efficient and cost-effective discharge by IPSA of its functions. It may modify the estimate if it is not satisfied, consulting HM Treasury. To date, after detailed and lengthy scrutiny, IPSA’s estimates have not been modified, although a portion of the estimate for the MPs’ expenses scheme has been reserved by the Committee and would require a supplementary estimate by IPSA to be released.

42. IPSA is in no way complacent: we believe that it has delivered good value for money for the tax payer since its inception, but there is more to do. Value for money is concerned with achieving that which the taxpayer most values, through the best use of the public money available. Progress has been made on the key outcome for IPSA – restoration of public trust through the prevention of abuse and the proper control of public funds – as paragraph 18 above outlined. The question then becomes, has this public trust or confidence been achieved cost effectively? We believe that it has been, and SCIPSA, after deliberation, has endorsed that by approving the estimate.

43. In order to secure its independence, IPSA needed to be a stand-alone organisation, not located on the Parliamentary estate. This required investment in premises and other infrastructure to create a functioning organisation. The establishment of IPSA also had to be carried out at high speed so that a new expenses scheme was up and running at the start of a new Parliament. This was achieved. IPSA’s implementation programme was praised by the Office of Government Commerce [2] :

"At the time of the first Gateway Review, in October 2009, the task looked well nigh impossible: to deliver accommodation, IT, systems and processes to a new organisation, and to staff it up ready for full operation... as the new Parliament gathered after the General Election – but with no certainty about the date of the Election... Eight months later, the impossible has been delivered... The opposition of some has not gone away, and the inevitable teething troubles of a new organisation have given the naysayers grounds on which to base their complaints. But this has been a success story, and deserves to be recognised as such."

44. Start up costs were £4.4million in the first year. These comprised the infrastructural investment and the cost of the implementation team and other staff needed to ensure effective operations in the early days of the organisation. The staffing complement has now fallen to 60, from 89 at its peak.

45. The NAO study calculated that IPSA had an administrative cost per claim for expenses and costs of £15.96. It noted that this had fallen from an average cost in 2010-11 of £30 (and a peak of £40), but this was nonetheless higher than the amount claimed in 38% of cases. On the surface this may still look high (although it is comparable with the administrative bodies of the devolved governments in the UK). But it is a cost which includes a share of the regulatory functions and the necessary overheads that come with independence. Thus the figure is not comparable with typical costs of an in-house payroll and expenses function, be it in the private or public sector. The cost per claim, if we take from the study what the NAO called the direct costs, is £6.95. This is higher than around 22% of claims.

46. We continue to look for ways to drive down costs and are committed to making savings of 5% each year on existing operations to 2015. Indeed, in our budget for 2011-12, compared with 2010-11, on a like-for-like basis [3] , we have reduced staffing costs by 16% and operational costs by 10%. We will be reviewing all our areas of significant spending, benchmarking against other organisations where possible. We are also continuing to look at ways of streamlining our business processes, both to reduce cost and to reduce the administrative burden on MPs and their staff. This will include looking at ways to reduce the number of claims for small amounts, where the process of aggregation can combine assurance with simplicity.

C4. Support to MPs

47. IPSA’s Corporate Plan, published in August 2011, in emphasising our duty to act in the public interest, concentrates on one of our primary aims: to determine and manage the provision of financial support to enable MPs to carry out their parliamentary functions, without undue burden, but in parallel with achieving increased public confidence. This reflects the legislative requirement to have regard to the principle of supporting MPs in efficiently, cost-effectively and transparently carrying out their parliamentary functions. It means that we will provide the most appropriate service to MPs, in the context of the available resources and our judgement of the public interest. That is our duty as an independent regulatory body.

48. IPSA has a set of key performance indicators which include a strong focus on the service that we provide to MPs and their staff. These include the following:

· We now have a target of processing at least 95% of reimbursed claims within 10 working days. We reduced this from 12 working days. In fact, at present claims are being processed, on average, within 6-8 working days, as our processes become more streamlined and efficient.

· We have a target of payroll accuracy levels of over 99.75% in any one month. Currently the performance is 99.91%.

· We aim to resolve over 90% of correspondence items within five working days. The most recent performance reported is 95.4%.

49. We acknowledge that there were difficulties in the operation of the scheme in the early months as both IPSA and MPs and their staff adapted to new rules and processes, including the on-line claims system. Some payments were delayed, often because insufficient documentation was available. The process of registering documents for the first time proved difficult in some cases. While we sought to minimise difficulties, some transitional problems were bound to occur. We believe that much of this is now behind us. We continue to work with MPs to identify further improvements to the claims system.

50. Cash flow was a problem for some MPs, particularly in the weeks immediately after the election. We responded to this by allowing MPs to claim for "big ticket items" like computers and office equipment in advance on production of an invoice. Within a month, we had brought in an interest-free loan facility of up to £4,000. 263 such loans have been made to MPs. We introduced direct payments for office and residential rental payments in November 2010 and extended the scope of the payment card from travel to council tax and utilities. We have just this month announced a further package of measures which will help with cash flow, including the Trainline facility, which will have the added benefit to MPs of providing IPSA with all the information needed for reconciliation of payments and for publication. We estimate that MPs can now cover up to 71% of their costs through either direct payments or the payment card. We will look at ways of increasing this coverage further.

51. The spending figures for 2010-11 show that the majority of MPs were able to operate within the budget limits set for staffing, office rentals and general administrative costs. We established contingency arrangements for MPs who were not able to stay within budget limits for good reasons. On staffing this may have been due to very high levels of casework stemming from the social make-up of their constituency, or existing contractual arrangements with staff. On rentals, pressure may have been put on budgets where there was a shortage of suitable office space in town or city centres. On general administrative costs, some new MPs with high start-up costs faced difficulties. The latter has been addressed for the future by adding a start-up budget of £6,000, but for MPs over the past year, contingency arrangements funded the excess costs where necessary.

52. The contingency arrangements have therefore acted as a safety valve, allowing necessary flexibility in budgets while maintaining appropriately tight overall control of spending. In 2010-11, approximately £700,000 of contingency funding involving 140 MPs [4] was agreed by the Contingency Panel, although in the event, not all MPs spent up to the limit of what had been agreed. So far, in 2011-12, around £500,000 has been agreed. The reason why the amount agreed this financial year is almost as high as last year is because MPs with the same staffing or rental arrangements as before have been able to make a fast track application for funding, in order to minimise the bureaucratic process.

53. The issue of the time taken by MPs and their staff in making expenses claims is dealt with at paragraphs 66-70 below.

54. We will continue to develop the services that we provide to MPs in an evolutionary manner, balancing simplicity and ease of operation against assurance and transparency. Our approach will reflect the NAO’s requirements, as our auditors, for a clear account of the deployment of public funds. We have no wish to be placed in the position that the old Fees Office faced in its last year, when it did not prove possible to identify where very significant sums of public money had been spent.


55. Questions D1-D7 below are taken from the letter from the Clerk to the Committee to Sir Ian Kennedy, dated 27 July. These are broad questions, mostly based on the terms of reference of the Inquiry (see paragraph 1 of this submission). Some elements of the questions have been covered in this submission already, in section C. We do not repeat the answers in those cases.

56. The day before the 13 September oral evidence session, IPSA received a brief from the Clerk to the Committee outlining 40 questions that the Committee proposed to ask the following day. Those questions are set out at Annex C to this submission. In Annex C, where the issue has already been covered in sections C or D of this submission we simply make a reference to the relevant paragraphs of the submission. Where the question is not covered, an answer is provided. The answers reflect what was said at the evidence session on 13 September, but where it is helpful to elaborate, we do so.

D1. How does IPSA define value for money in relation to Members’ expenses, and how does it seek to achieve it?

57. A definition of value for money and a discussion of IPSA’s own costs are covered in paragraphs 39-46 above.

58. In relation to the spending on the expenses scheme, including staffing costs, IPSA, in framing its first estimate in May/June 2010, sought to ensure that budgets were sufficient for MPs to pursue their parliamentary functions, but not excessive. They were based to some extent on historical precedent and on advice from the SSRB about the number of staff needed to support the average MP. Costs overall were budgeted to be £11.7 million lower than under the House of Commons scheme.

59. The NAO, in its value for money study, noted that:

"We found that through its detailed rules, budget limits and evidence requirements the Scheme provides a strong basis for controlling public money and promotes regularity... we found that the interaction of the Scheme rules with IPSA’s actual validation activities in the first year had enabled it to re-establish control over spending on MPs’ expenses."

60. While we have introduced more discretion into the rules and are streamlining our validation processes, we consider that the mechanisms that are still in place will be sufficient to retain proper control of costs.

61. As noted in paragraph 18, expenditure on MPs expenses and costs in 2010-11 turned out to be £14.5m lower than in the previous year on a like-for-like basis. This would not necessarily constitute value for money if the objectives of the scheme (including having regard to the need to support MPs in their parliamentary functions) were not being achieved; but as we have argued above, we consider that the overall objectives of the legislation and the scheme are being met. The Public Accounts Committee has noted that the reduction in spending would not be an efficiency if it were the result of MPs not claiming for legitimate costs. We agree that it is important that MPs should claim for the costs incurred in undertaking their parliamentary duties. We do not have any quantitative evidence on the failure of MPs to claim for legitimate expenses and costs, although it appears that many told the NAO that this was the case.

62. IPSA is also addressing longer term value for money issues in a number of thematic reviews. At the moment we are conducting an in-depth review of MPs’ staffing requirements. In 2012-13 we plan to conduct a review of MPs’ accommodation. This may cover both office and residential accommodation. The accommodation issue was raised by the CSPL and IPSA consulted on it in preparing the First Edition of the scheme. Immediate solutions are not required, but a review next year could yield lessons in time for the next Parliament.

D2. How does IPSA assess public confidence in its expenses scheme?

63. We intend to survey the public annually so that we can discern any trends in the public mood. We also gauge public opinion through regular consultation, which includes on-line surveys. We will be consulting the public during the annual review of the expenses scheme later this year.

64. In November 2010, a YouGov public opinion survey showed that 59% of the public agreed that "The new independent regulator for MPs’ expenses will make sure MPs are only paid legitimate expenses". 13% disagreed. 63% agreed that "The money it costs to monitor MPs’ expenses claims is worth spending", with 11% disagreeing.

65. The NAO also commissioned a survey of public opinion in May 2011 and found that 55% of the public thought that the situation with MPs’ expenses had improved.

D3. What measures are IPSA planning or considering to reduce the administrative workload imposed on Members and staff, and to cut its transaction costs?

66. We consider that it is part of an MP’s parliamentary functions to render an account of how he or she has spent public funds. IPSA’s on-line claims system and its arrangements for publication of claims allows that to happen.

67. The NAO, in its value for money study, calculated the cost of MPs’ and their staff’s time taken up in claiming for their expenses. It estimated the annual cost to be £2.4 million. The NAO also calculates that MPs submit, on average, 226 claim lines a year and 16 hours per month of MPs’ and their staff’s time (combined) is spent on making claims. This would imply that each claim line takes 51 minutes to make. The NAO’s calculation includes not only making the claims on the on-line system, but all the preparatory work in assembling claims, time taken in making purchases and following up the claims with queries.

68. IPSA is able to measure the amount of time spent by MPs and their staff on the on-line system, actually making the claims. This amounts, on average, to 4 hours a month per MP. On average each MP is responsible for just under 19 claim lines per month. So this implies that each claim line submitted takes on average under 13 minutes online. That contrasts with the 51 minutes that MPs estimate each claim takes. Therefore, there is a disparity of 38 minutes per claim between overall time taken and time spent actually submitting the claim.

69. It is reasonable to assume that a fair amount of the activity preceding the submission of a claim would also have taken place under the paper-based House of Commons system. Therefore the cost of any additional activity involved in using the new system would not be the full amount of the NAO’s calculation. We have seen no detailed analysis of the cost to MPs and their staff of the previous system, but venture to suggest that the process of purchase, the collection of relevant papers and receipts and the frequent conversation between MPs and members of the old Fees Office was not inconsiderable. Only if this process is understood and taken account of can any reasonable estimate of any additional burden be made.

70. Furthermore, the figure of £2.4 million represents an opportunity cost, not an additional cost to the tax payer. It is the cost of rendering an account for the use of public funds – an important aspect of an MP’s parliamentary functions – and amounts to less than 2.5% of an MP’s time according to the NAO’s calculations.

71. Nonetheless, we are committed to reducing the administrative burden on MPs and their staff where it is consistent with maintaining public confidence in the system. We have just announced a new package of time-saving measures, including the Trainline facility and simpler processes for mileage claims. We have also invested a good deal of resource in helping MPs and their staff to become more familiar with the system, which will help to reduce the time they take making claims.

72. We will continue to work with MPs and their staff to identify further improvements to the system and are actively exploring other opportunities for introducing direct payments. We are also developing a "user survey" so that we can gather evidence from a wide range of MPs on what further changes they would find helpful.

D4. Does IPSA consider that its schemes have placed less well-off Members and those with families, at a financial or reputational disadvantage by its expenses scheme?

73. The implication of this question would seem to be that MPs without independent or alternative incomes do not have the option to fund their expenses from their own resources and thus have to subject their claims to publication, with a negative impact on their reputation if the media takes issue with any of their claims. Likewise, with regard to families, MPs who claim additional accommodation or travel costs run the risk of being criticised for doing so, with a possible impact on their family’s privacy.

74. It is important that MPs should feel able to claim for all their legitimate parliamentary costs. The available funding allows for this. Publication of claims, by demonstrating routinely that the claims being made are legitimate costs, should in time boost public confidence in the expenses system. This cannot be an overnight transition, but IPSA will play its part in communicating to the public the legitimacy and necessity of MPs’ expenses and costs.

75. References to "less well-off" MPs takes us to larger questions of remuneration and in particular, MPs’ pay. As noted in paragraphs 36-38, a review of MPs’ pay is under way.

76. We noted in paragraph 22 that the rules on family accommodation and travel were altered for the Third Edition of the scheme, to help ensure that MPs are able to accommodate dependants who need routinely to stay with them in both the locations in which they work – London and the constituency (if outside the London Area).

77. Probably the main financial difficulty faced by some MPs under a reimbursement scheme is cash flow. We have described the measures we have taken to ameliorate these problems, such as advances, interest free loans and more use of direct payments and the payment card, in earlier paragraphs. We will continue to look at how we can reduce further the amount of payments that initially have to be made by MPs themselves, where it is cost-effective to do so and where the public would understand that this is appropriate assistance.

D5. Does IPSA consider that it has taken proper account of the variation in the way Members perform their duties?

78. Yes. The experience of the last 17 months, meeting a wide range of MPs and their staff, visiting constituencies, consulting extensively, providing advice on the rules and the operation of the system, has given us a good insight into the role of MPs and the variety of approaches taken. By way of illustration of the contact that some members of IPSA have with MPs and their staff, the policy team, of four people, have made more than 20 constituency visits and have had more than 100 one-to-one meetings with MPs in Westminster. The IPSA training manager has had more than 550 meetings with MPs since May 2010. And there have been training days attended by 1,150 MPs’ staff. This face- to-face contact is just one way of gaining knowledge about how MPs and their staff conduct their parliamentary activities and manage their expenses and costs, but a valuable one.

79. Our approach to the evolution of the expenses scheme, where we are increasing discretion for MPs, within a framework of rules that retain public confidence, is precisely to allow for the variety of ways in which MPs conduct their parliamentary functions. Where capped budgets prove to be insufficient because of an MP’s particular circumstances, the contingency arrangements allow for an adjustment to budget.

80. The review of MPs’ staffing requirements will provide further evidence of the different ways in which MPs perform their duties. In this respect we will welcome advice from MPs themselves on whether there is a core set of functions which should be taken account of. There is, of course, material on this already, but an up to date view will be helpful.

D6. When will IPSA address the issue of Members’ pay? What criteria is it considering?

D7. When will IPSA address the issue of Members’ pensions?

81. These questions are addressed in paragraphs 36-38 above.

E. Future legislation

82. At the Committee’s evidence session on 13 September, the Chairman of the Committee asked whether there were any changes to the legislation that IPSA would like to see.

83. Our view is that further legislation with regard to MPs expenses or wider remuneration is unnecessary. The current legislation provides a framework within which it is possible to operate cost-effectively and work towards the full restoration of public confidence in MPs’ expenses.

18 October 2011



1. Members of Parliament should always behave with probity and integrity when making claims on public resources. MPs should be held, and regard themselves, as personally responsible and accountable for expenses incurred, and claims made, and for adherence to these principles as well as to the rules.

2. Members of Parliament have the right to be reimbursed for unavoidable costs where they are incurred wholly, exclusively, and necessarily in the performance of their parliamentary functions, but not otherwise.

3. Members of Parliament must not exploit the system for personal financial advantage, nor to confer an undue advantage on a political organisation.

4. a. The system should be open and transparent. b. The system should be subject to independent audit and assurance.

5. The details of the expenses scheme for Members of Parliament should be determined independently of Parliament.

6. There should be clear, effective and proportionate sanctions for breaches of the rules, robustly enforced.

7. The presumption should be that in matters relating to expenses, MPs should be treated in the same manner as other citizens. If the arrangements depart from those which would normally be expected elsewhere, those departures need to be explicitly justified.

8. The scheme should provide value for the taxpayer. Value for money should not necessarily be judged by reference to financial costs alone.

9. Arrangements should be flexible enough to take account of the diverse working patterns and demands placed upon individual MPs, and should not unduly deter representation from all sections of society.

10. The system should be clear and understandable. If it is difficult to explain an element of the system in terms which the general public will regard as reasonable, that is a powerful argument against it.

11. The system should prohibit MPs from entering into arrangements which might appear to create a conflict of interests in the use of public resources.

12. The system must give the public confidence that high standards of honesty will be upheld.


Summary of YouGov Survey on MP’s Pay

Sample Size: 2655 GB Adults

Fieldwork: 11-12 September 2011



How much do you think Members of Parliament are currently paid as a basic salary (that is, not including any expenses or other allowances they receive on top of their salaries)?

· Less than £40,000 a year

· Between £40,000 and £59,000 a year

· Between £60,000 and £79,000 a year

· Between £80,000 and £100,000 a year

· More than £100,000 a year

· Don’t know







Some people have suggested that MPs’ pay should be set by linking it to the salary paid to people in another comparable profession.

What kind of profession do you think would be the most appropriate to link MPs’ salaries to?

· Basic-level public sector jobs, such as nurses or teachers.

· Mid -level public sector jobs, such as senior nurses, senior social workers, deputy head teachers.

· Senior public sector jobs, such as GPs, senior army officers, or

secondary school head teachers.

· Top level public sector, such as heads of government departments and Chief Executives of local councils.

· Basic-level private sector, such as office workers or administrators.

· Mid-level private sector, such as bank managers and CEOs of medium size companies.

· Top level private sector jobs, such as a partner in a city law or accountancy firm, or senior management consultants.

· Other.

· Don’t know.












Apart from Government Ministers and the Leader of the Opposition, all other members of Parliament get paid the same basic salary.

Do you agree or disagree with the following statements?

Long serving MPs should be paid a higher salary.

· Agree

· Disagree

· Don’t know

MPs for constituencies in London should get higher salaries to reflect the cost of living.

· Agree

· Disagree

· Don’t know

All Members of Parliament should be paid the same salary, regardless of their length of service or the location of their constituency.

· Agree

· Disagree

· Don’t know










©2011 YouGov plc. All Rights Reserved




1. A year and a half on from the start of the new payments system, how well do you think IPSA has done in implementing the aims of the Parliamentary Standards Act 2009?

The answer to this question has been set out in section C of the submission.

2. In what areas has IPSA found it challenging to implement the aims of the Act?

The Chairman of IPSA highlighted at the evidence session the misunderstanding about IPSA’s role in relation to MPs, which is not one of "client care" or "customer care", but of a regulator whose primary concern is the public interest. Paragraphs 6-13 of the submission tackle this and related issues.

3. What lessons did you draw from the NAO’s report, published in May? Did it contain anything that surprised you?

The Chairman of IPSA highlighted at the evidence session the fact that the NAO survey of MPs showed that around a third of those who responded appear to favour the old system of allowances and limited publication. Figure 5 in the NAO’s report shows, for example that 32% of respondents disagreed with the statement that "the regulator should continue to publish all claims" despite the statutory duty (under the CRAG Act 2010) of transparency; and 23% disagreed that "major changes were required to the old system".

At the evidence session, Nick Raynsford MP asked whether that third of MPs might equate to the new intake of MPs. There is no evidence that we are aware of that could substantiate this.

4. In view of the aims of the Act, would it not have been better if you had been able to consider pay, expenses and pensions together, as a package?

It might have been. However, IPSA did not receive the statutory powers to determine MPs’ pay until May 2011, and awaits the equivalent powers for MPs’ pensions. On the other hand, it was essential to have a new scheme for expenses and costs in place for 7 May 2010.

5. One of the reasons for establishing IPSA was to restore public confidence in Parliament. What have you defined as ‘public confidence’, and how have you sought to assess it?

This question is covered by paragraphs 63-65 of the submission.

6. Over the past 18 months, how has IPSA sought to improve public confidence in Parliament?

The Chairman of IPSA explained at the evidence session that we aimed to improve public confidence by putting in an expenses and costs system that was rigorous and transparent and which enabled IPSA to demonstrate that MPs were making legitimate claims within this system. Section C of the submission examines IPSA’s record in respect of the scheme and publication of claims. The NAO has found that there has been an increase in public confidence regarding MPs’ expenses over the last year and that IPSA significantly contributed to this. See paragraph 18 of this submission for further detail.

7. The aims set out in the Act are not only improving public confidence in Parliament but also supporting Members effectively in the performance of their duties. In what areas have you had to strike a balance between public confidence and enabling Members to do their duties effectively?

As the Chairman explained at the evidence session, IPSA’s statutory duty is to have regard to the principle that Members of the House of Commons should be supported in carrying out their parliamentary functions. He cited the need to deal with the toxic issue of mortgage interest subsidy, as a matter of public interest, although this has caused difficulties for some MPs.

Paragraphs 21-22, 32-34 and 47-54 provide examples of how IPSA is seeking to support MPs, within the regulatory framework it has established, and how it is embarked on a path of evolutionary change, which will give MPs increasing discretion in how they deploy public funds provided that it is judged to be in the public interest.

8. Given that 227 new MPs were elected at the 2010 general election who had no hand in the old system, is the current public standing of Parliament in your view as high as it should be?

It is not for IPSA to make judgements about the standing of Parliament. What it can do is to work towards improving public confidence in MPs’ expenses and costs, and, in the future, other aspects of their remuneration. If this continues to be successful then it may contribute to a wider confidence in Parliament.

9. Is there a tension between the method of claims publication implemented by IPSA on the one hand, and improving public confidence in Parliament on the other?

This is covered in paragraphs 25-31 and 73-74 of the submission.

10. What definition of transparency has been used by IPSA over the past eighteen months?

This is covered in paragraphs 25-31 of the submission. At the evidence session, the Chairman of IPSA stated that one of IPSA’s working principles was that it should render an account for how it uses public money and so should everyone else. This is what drives transparency.

11. It is important that the public are able to make meaningful comparisons between MPs. IPSA publishes data on a bi-monthly basis – therefore, an MP might make a large claim in a particular month and be at the top of the table for a bi-monthly cycle; but over the course of a year might have been paid less than colleagues. What importance has IPSA placed on ensuring that data can be meaningfully compared between MPs?

At the evidence session the Policy Director of IPSA noted that the publication of annual information for MPs’ expenses and costs would allow the public to make meaningful comparisons. That annual information also makes a clear distinction between different types of costs.

12. IPSA publishes aggregated data; that is, the combined total, or aggregate, repaid to each MP. What importance has IPSA placed on ensuring that data is disaggregated into meaningful categories?

We regard it as important that data is disaggregated into meaningful categories. The annual information for 2010-11, published by IPSA, makes a distinction between Constituency and Staffing Costs (constituency office, general administration and staffing) and Direct Parliamentary Expenses (accommodation and travel and subsistence). For 2011-12 the constituency office rental and general administrative costs will be brought together as office costs.

The report on the Annual Review of MPs’ Expenses 2011 made clear throughout that the costs incurred by MPs are for legitimate parliamentary purposes and we will continue to play our part in getting this message across. The publication of claims is an important part of this communication, as the public can see for themselves what public funds are being spent on.

13. In formulating its schemes, what consideration did the IPSA Board give to publishing the receipts to support MPs’ claims?

This is covered in paragraph 30 of the submission.

14. What criteria or targets did IPSA set itself as regards value for money, and what comparators did it use?

This is covered in paragraphs 39-46 and 57-62 of the submission.

15. What evidence do you have that IPSA has met its value for money targets?

The achievements identified by the NAO (outlined in paragraph 18 of this submission) combined with the cost savings achieved thus far (paragraphs 45-46) and the performance against KPIs (paragraph 48) are together evidence of significant progress on value for money. There is no single definitive value for money indicator.

16. What estimate has IPSA made of the transfer of costs from IPSA to MPs’ offices associated with the administration of the scheme?

This issue is considered in paragraphs 66-72 of the submission.

17. To whom is IPSA accountable?

This is covered in paragraphs 39-41 of the submission. Ultimately, IPSA is accountable to the public.

18. In what ways is IPSA accountable to the public?

The Chairman of IPSA addressed this issue at the evidence session. IPSA needs to render an account of how it has spent public money. Partly it does this through scrutiny from SCIPSA and from the NAO, when its accounts are audited. But IPSA also has its own publication scheme so that the public can see, for example, the remuneration and expenses of IPSA Board members and senior executives, and the minutes of IPSA Board meetings. As at 13 October 2011, IPSA has also answered 231 Parliamentary Questions and 210 Freedom of Information requests.

19. How well has the balance between IPSA’s accountability and independence worked in practice?

This is covered in paragraphs 8-13 of the submission.

20. In what way is IPSA independent?

This is also covered in paragraphs 8-13 of the submission. IPSA has a number of statutory duties. Thereafter it exercises its independent judgement about how to execute those duties. For example, the legislation requires IPSA to prepare a scheme of rules for MPs’ expenses and costs. IPSA must consult in preparing the scheme or reviewing it; but the content of the scheme is for IPSA’s decision alone. Likewise, IPSA will independently determine MPs’ pay, and subject to receiving the powers from Parliament, MPs’ pensions.

21. During the past eighteen months, has the media portrayal of IPSA been important to you?

As the Chairman of IPSA explained at the evidence session, we take account of the media as an important channel of communication to the public. It is the public whom we seek to serve, and whose interests we seek to reflect.

22. What regard has been paid by IPSA to its coverage in the media?

The answer to question 21 also applies here.

23. Are there any aspects of IPSA’s scheme that have been influenced by the media?

As the Chairman if IPSA noted at the evidence session, the public, whom we have consulted in a variety of ways in devising and reviewing the scheme of expenses and costs, receive information from a variety of sources, including the media. We trust the public to form their own views using all the information they have at their disposal.

24. Is IPSA independent of the media?

Yes, completely.

25. To whom are Members accountable for their payments?

MPs must render an account of their use of public funds, through IPSA, to the tax payer. That account will be audited, on the public’s behalf, by the NAO.

26. Given that the Act uses the word "allowance", what allowances has IPSA introduced in the past eighteen months?

The legislation uses the word "allowances" as a generic term – they are to be "payable in respect of specified kinds of expenditure or in specified circumstances". IPSA has specified a range of expenses and costs that are payable.

The only allowance, in the sense of a sum of money whose use is prescribed only at a high level and does not require detailed publication, is the London Area Living Payment, which can be claimed by London Area MPs, or other MPs who choose not to claim accommodation expenses. For the majority of London Area MPs (and any non-London Area MPs opting for it), the yearly payment is £3,760, before tax. For London Area MPs whose constituencies are outside Greater London, a supplement, taking the payment to £5,090 a year, may be claimed.

27. What has IPSA understood by the accountability of Members for expenses claimed? Should the same compliance mechanisms apply for every claim, however small?

The answer to question 25 is relevant here. Regular publication of claims is a key mechanism for rendering that accountability. At present we judge that it is in the public interest for all claims, irrespective of size, to be published. This plays an important part in demonstrating the legitimacy of all the expenses and costs incurred by MPs in pursuit of their parliamentary functions.

28. What definition has IPSA used for the duties of Members? How did it seek to ensure that the payments system takes account of the different ways in which Members perform those duties?

IPSA does not itself define the duties of MPs. We have taken note of definitions made by others, such as the House of Commons Modernisation Select Committee in 2007. The budgets and rules for costs and expenses have been devised so that the majority of MPs’ approaches to the job of an MP can be supported. The changes in the rules in the Third Edition of the scheme, which give MPs greater flexibility and discretion in the deployment of their budgets, also helps to accommodate the variety of approaches. (See paragraph 32 of the submission). The contingency arrangements, described in paragraph 52 of the submission, are designed so that if the particular circumstances of an MP mean that he or she requires extra funding to fulfil their parliamentary duties, there is a mechanism to make a case for that funding.

29. In seeking to understand the duties of an MP, how many visits have IPSA staff paid to MPs’ constituencies?

This is covered in paragraph 78 of the submission.

30. In seeking to understand the duties of an MP, how many hours have IPSA staff or board members spent talking to Members one-on-one?

This is covered in paragraph 78 of the submission.

31. When establishing its scheme, how did IPSA seek to determine that it would be fair to less well-off Members and those with families?

Paragraphs 73-77 of the submission are relevant to this question. When establishing the scheme, the IPSA Board discussed at length the appropriate budgets for accommodation and travel, which can have an impact on families. It was also a point of principle that MPs should not have to subsidise their parliamentary functions from their own resources. Where concerns emerged that the rules were not operating as we would wish, the rules have been changed – see paragraph 22 of the submission.

32. What has IPSA done to ensure that it would not deter such people from becoming Members?

The reasons for people wanting to become MPs are numerous. IPSA seeks to have a scheme of rules for MPs’ and expenses and costs that is fair, workable and transparent. IPSA cannot presume to promote diversity of representation in the House, but it seeks to ensure that obstacles are not put in the way of such diversity. With each review of the scheme it conducts an Equality Impact Assessment (EIA). The EIA for the first annual review of the scheme is available on the IPSA website.

33. Given that the majority of MPs do not have trust funds or independent wealth, what steps has IPSA taken to improve the "family-friendly" nature of its schemes?

This is addressed in paragraphs 21-22 and 73-77 of the submission.

34. Are you able to expand on IPSA’s rationale for introducing these measures?

Changes to the scheme are based on the analysis of the available evidence. IPSA seeks to have a scheme for MPs expenses costs which is fair, workable and transparent and serves the public interest. The answer to question 32 is also relevant here.

35. What is IPSA’s understanding of the reasons why Members might not submit legitimate claims?

This is covered by paragraphs 73-77 of the submission.

36. Does IPSA believe Members are being deterred from submitting legitimate claims? Has it made any changes as a result?

The NAO’s value for money study reported that many MPs had told them that they had not submitted claims to which they were entitled. IPSA can help to address this issue by continuing to look for ways to simplify processes, increase direct payments to suppliers and by demonstrating through the routine publication of claims, that MPs expenses and costs are entirely legitimate. Moreover, IPSA has routinely stated publicly that MPs should make claims to meet their expenses and costs. IPSA resisted, for example, the call by SCIPSA at its last meeting to reduce the amount of money available to MPs, since it was based on a calculation of MPs’ needs and, therefore, should be available to be claimed.

37. If by submitting a particular claim an MP risks damaging their reputation, would you encourage the MP to submit that claim?

We cannot advise MPs on what they should consider to be their reputational risk, but we would encourage MPs to claim for expenses and costs to which they are entitled.

38. Have there been any specific measures proposed by the IPSA policy team that were rejected by the Board?

The IPSA policy team work closely with the Board to develop policy options and to provide the Board with the evidence and analysis they need to take strategic decisions. Where it helps, the policy team will make recommendations, but it is an iterative process and not a question of acceptance or rejection. This is standard policy-making practice.

39. Are there any specific issues that this Committee should consider in order to allow IPSA to do its work better?

The submission sets out what we see as the key issues surrounding the operation of the legislation.

40. Are there any specific extra powers that IPSA needs to fulfil its role better?

This is covered in paragraph 83 of the submission.

[1] Statement made on 1 December 2011. It went on to say that “FOI requests for individual receipts can be made to IPSA. They would be dealt with on a case by case basis and personal information should be redacted where necessary.”

[2] OGC Gateway Process Review 0: Strategic Assessment, 1 July 2010. Available on IPSA website under “Corporate Reports”.

[3] Like-for-like means before adding the impact of scheme changes and additional responsibilities taken on.

[4] Overall, in 2010-11, 243 claims totalling £1,124,634 was authorised through the contingency fund, but not all of this comes through the Panel. Routine claims, based on existing policy, like maternity or long term sickness cover, were assessed through the normal validation arrangements.

Prepared 10th November 2011