The Operation of the Parliamentary Standards Act 2009

Written evidence from Bill Cockburn CBE TD, Chairman,
Senior Salaries Review Board (SSRB)

MEMBERS’ SALARIES

You wrote to Gabrielle Kann in the Senior Salaries Review Body secretariat on 19 September asking for written evidence from the SSRB on the criteria which it believes should be used to set the salaries of Members of the House of Commons, together with any other observations it wishes to make on Members’ salaries and expenses. I am replying on behalf of the SSRB; although we have not met since receipt of your letter, I have consulted my colleagues and sought to reflect their views in what follows.

The SSRB has advised on Members’ salaries, expenses and pensions on many occasions since it was created in 1971, but by virtue of the Parliamentary Standards Act 2009 (as amended) these are now matters for the Independent Parliamentary Standards Authority (IPSA). IPSA must consult the SSRB (among others) before preparing or revising an allowances scheme or determining Members’ salaries and may delegate to the SSRB its function of reviewing a determination (but not its function of deciding whether or not to make a new determination). Although salaries and allowances are often mentioned together, the SSRB has long argued that they are entirely separate and one of the principles it has adopted in successive reviews is that a clear distinction must be made between salary and reimbursement of expenses.

The SSRB is an evidence-based, independent, advisory body which conducts reviews and produces reports when requested to do so. It has, in effect, a standing mandate from the Government to review and report each year on the pay of its four main remit groups, namely the salaried judiciary, senior civil servants, senior military officers and certain senior NHS managers. It also receives specific mandates to review the pay , and sometimes other conditions , of further groups. In the past these groups have included Members of both Houses of Parliament, Members of devolved assemblies, the Mayor of London and Members of the London Assembly, tribunal judges, chief executives of executive non-departmental public bodies and, most recently, police and crime commissioners.

When the SSRB carries out a review, whether annual or ad hoc, it first seeks to gather evidence from all those with a relevant interest, for example the employing organisation if there is one, any trade unions or other bodies representing members of the remit group and those members themselves. Sometimes it will commission research from its own secretariat in the Office of Manpower Economics or from external advisors. It then weighs the evidence and draws up its recommendations in accordance with its standing terms of reference (a copy of which is attached to this letter) or any specific terms of reference for an ad hoc review.

Thus each SSRB review represents the views of the current membership of the SSRB at the end point of that review, in the light of all the evidence received during the review. Of course the membership of the SSRB changes over time. It is a part-time body which convenes as necessary to carry out specific tasks and members normally serve two three-year terms. But more importantly, the evide nce on pay and related matters is also likely to change, as i s the broader social, economic and labour market context.

I hope it will be clear, given this explanation of how the SSRB works, that the SSRB may revise its previous views when we come to reconsider an issue. When IPSA consults us about a future determination of Members’ salaries, we shall need to gather and consider evidence , and form our recommendations in the normal way, taking account of the terms in which IPSA consult us. Since we have not considered Members’ salaries and expenses in detail since 2006-07, we do not have recent evidence on which to base fresh views or recommendations.

The evidence, background research, considerations and recommendations of the SSRB as constituted in 2006-07 are set out in the two volumes of our Report No. 64 on the Review of parliamentary pay, pensions and allowances 2007 (Cm 7270). That report explained the principles we followed in paragraphs 1.20 1 . 22 (reproduced in Appendix B to this letter). The SSRB subsequently continued to apply those principles in giving evidence to the Committee on Standards in Public Life in 2009 and in responding to IPSA consultations in 2010.

The report also contained a package of recommendations on pay, pensions and allowances which the SSRB intended to be taken together and I therefore hesitate to single out those on Members’ salaries. However, for ease of reference, the key recommendations on Members’ pay were the following:

Recommendation 1: We recommend that for 2007 the salaries of MPs be increased by a further 1.9 per cent of the salary payable from 1 November 2006, taking the new salary to £61,820, and that this increase be backdated to 1 April 2007.

Recommendation 2: We recommend that, instead of the existing annual uprating mechanism, the pay of MPs be uprated on 1 April each year, beginning in April 2008, by the average percentage increase in base salary of the senior civil service (SCS), or of Pay Band 1 of the SCS if that figure is identified separately.

Recommendation 3: We recommend that for three years, beginning in April 2008, MPs’ salaries be increased by £650 a year, in addition to the increase resulting from the proposed uprating mechanism, in order to achieve a more sustainable relationship between the remuneration of MPs and relevant public sector comparators.

Recommendation 4: We recommend that, subject to the adoption of Recommendations 1 to 3 above, future reviews of parliamentary pay, pensions and expenditure should henceforth normally take place at four-yearly intervals (rather than every three years as at present).

Recommendation 5: We recommend that with effect from 1 April 2007 the salary supplements paid to chairmen of Select and Public Bill committees should be increased in April each year by the same percentage as the overall increase in the MP’s salary resulting from our recommendations on MPs’ pay.

Most of these recommendations have been overtaken by subsequent events , including the House’s Resolution of 3 July 2008, repealed earlier this year, which required the SSRB to calculate the annual increase in Members’ salaries as the median increase of 15 specified groups of public sector workers . However, the most important from the Committee’s point of view may be recommendation 3 which refers to "relevant public sector comparators". When it carried out the review which led to the 2007 report, the SSRB commissioned consultants to carry out job evaluations of a sample of 30 Members and to identify public sector jobs of similar weight. In practice those Members’ jobs varied significantly in weight, and the comparators were chosen from jobs which fell within the range of job weight scores for the sample of Members. At that time the SSRB chose to look only at public sector comparators because, as it put it in the report: "we believe MPs are quintessentially public sector workers" and:

"Many of those who work in the public sector, especially at more senior levels, appreciate the social value of what they do. Similarly, the factors that arguably partially compensate MPs for a salary below that of their public sector comparators … also go some way to offsetting higher private sector salaries. We therefore gave less priority to the private sector comparators of MPs. They are informative but not directly relevant for our purposes." (Paragraph 3.15, p. 16)

It is important to note that in 2007 the SSRB did not recommend a simple read-across between the salary for Members and the average of the comparators, after allowing for the relative value of pensions. The key passage in the report states:

"Having considered all the evidence, we believe there are some non-financial benefits of being an MP compared to other jobs which go some way to compensating for a lower salary and which help to ensure that there is little or no difficulty in recruiting sufficient suitable candidates to stand for election. There does not appear to be a problem of retention. We heard no evidence to suggest that MPs are leaving the Commons because of inadequate pay. However, we do believe it would be reasonable to move MPs’ total remuneration closer to the average of the public sector comparators identified by [SSRB’s consultants] while recognising that there are special features of the MP’s position. We believe this will help to head off any incipient problems with recruitment and ensure that MPs’ relative pay position in the public sector is sustainable conceptually and in practice." (Paragraph 3.19, p. 17)

I must stress that these were the SSRB’s views in 2007 based on the facts and evidence available at that time. If today’s SSRB were to be asked to review Members’ salaries, it would need to take fresh evidence and would not necessarily adopt the same approach of identifying public sector comparators; if it did use the same approach, it might not choose the same comparators; and even if it did stick with the same comparators, it might not come to the same conclusions about where Members’ salaries should be set in relation to those comparators. Much has happened since 2007, not least a major recession, and there is currently a two-year public sector pay freeze for those paid over £21,000 a year, so the whole context would be different.

Similarly, if IPSA were to consult the SSRB again on expenses, SSRB would need to take and consider fresh evidence before making recommendations.


Appendix A

SSRB standing terms of reference

The Review Body on Senior Salaries provides independent advice to the Prime Minister, the Lord Chancellor, the Secretary of State for Defence and the Secretary of State for Health on the remuneration of holders of judicial office; senior civil servants; senior officers of the armed forces; very senior managers in the NHS [1] ; and other such public appointments as may from time to time be specified.

The Review Body also advises the Prime Minister from time to time on the pay and pensions of Members of Parliament and their allowances; on Peers’ allowances; and on the pay, pensions and allowances of Ministers and others whose pay is determined by the Ministerial and Other Salaries Act 1975. If asked to do so by the Presiding Officer and the First Minister of the Scottish Parliament jointly; or by the Speaker of the Northern Ireland Assembly; or by the Presiding Officer of the National Assembly for Wales; or by the Mayor of London and the Chair of the Greater London Assembly jointly; the Review Body also from time to time advises those bodies on the pay, pensions and allowances of their members and office holders.

In reaching its recommendations, the Review Body is to have regard to the following considerations:

the need to recruit, retain and motivate suitably able and qualified people to exercise their different responsibilities;

regional/local variations in labour markets and their effects on the recruitment and retention of staff;

Government policies for improving the public services including the requirement on departments to meet the output targets for the delivery of departmental services;

the funds available to departments as set out in the Government’s departmental expenditure limits;

the Government’s inflation target.

In making recommendations, the Review Body shall consider any factors that the Government and other witnesses may draw to its attention. In particular it shall have regard to:

differences in terms and conditions of employment between the public and private sector and between the remit groups, taking account of relative job security and the value of benefits in kind;

changes in national pay systems, including flexibility and the reward of success; and job weight in differentiating the remuneration of particular posts;

the need to maintain broad linkage between the remuneration of the three main remit groups, while allowing sufficient flexibility to take account of the circumstances of each group; and

the relevant legal obligations, including anti-discrimination legislation regarding age, gender, race, sexual orientation, religion and belief and disability.

The Review Body may make other recommendations as it sees fit:

to ensure that, as appropriate, the remuneration of the remit groups relates coherently to that of their subordinates, encourages efficiency and effectiveness, and takes account of the different management and organisational structures that may be in place from time to time;

to relate reward to performance where appropriate;

to maintain the confidence of those covered by the Review Body’s remit that its recommendations have been properly and fairly determined; and

to ensure that the remuneration of those covered by the remit is consistent with the Government’s equal opportunities policy.

The Review Body will take account of the evidence it receives about wider economic considerations and the affordability of its recommendations.


Appendix B

Extract from Review of parliamentary pay, pensions and allowances 2007 (Cm 7270)

"Principles

 

1.20 In our last report on the review of Parliamentary Pay and Allowances [1] we set out the following principles at paragraphs 2.6 and 2.7:

"2.6 The 1996 Report set out the general principles applied by the Review Body in determining pay levels. In its evidence to us the Government commented that these principles remained a good basis for determining parliamentary pay and allowances. We consider they remain relevant, and have applied them again in this review. They are

• Pay should not be so low as to deter suitable candidates, nor so high as to make pay the primary attraction of the job;

• Pay should reflect levels of responsibility rather than workload;

• Whereas those with outside interests should not be deterred from entering Parliament, those who choose to make Parliament a full-time career should be adequately rewarded to reflect their responsibilities;

• Pay should not be augmented in an attempt to compensate MPs for job insecurity, which is not unique to MPs;

• The basic parliamentary salary should continue to be the same for all MPs;

• There should be no pay progression linked to length of service; and

• A clear distinction must be made between salary and reimbursement of expenses.

2.7 To this list we would add one further principle, to which the new disclosure rules, to be implemented from October 2004, will help give effect:

Claims for expenses should be appropriately validated, and their reimbursement should be transparent."

1.21 The principles on pay seem fundamentally sound and we see no need to change them although we should make clear that we take account of the value of MPs’ pensions in comparing the remuneration of MPs with that of other workers. This is good and normal practice in assessing remuneration and we already do it for our other remit groups (senior civil servants, the judiciary and senior military officers).

1.22 On reflection we believe the principles on expenditure should be expanded and clarified as follows:

· Expenditure incurred wholly, necessarily and exclusively on parliamentary duties should be reimbursed subject to reasonable limits (ceilings, not entitlements); and

· Claims for reimbursement of expenditure should be appropriately substantiated.

We seek to apply these principles in the following chapters."

17 October 2011


[1] NHS Very Senior Managers in England are chief executives, executive directors (except medical directors), and other senior managers with board level responsibility who report directly to the chief executive, in: Strategic Health Authorities, Special Health Authorities, Primary Care Trusts and Ambulance Trusts. The Health and Social Care Bill 2011 contains provisions on the abolition of the Strategic Health Authorities and Primary Care Trusts.

[1] Review of Parliamentary Pay and Allowances 2004, Cm 6354

Prepared 3rd November 2011