Consideration of IPSA's Estimate 2012-13

12 SCIPSA 07A

Independent Parliamentary Standards Authority Resource Estimate for 201 2 /1 3

1 Introduction

1.1 As provided by Schedule 1 to the Parliamentary Standards Act 2009, for each financial year the Independent Parliamentary Standards Authority (IPSA) must prepare an estimate of the IPSA’s use of resources and submit it to the Speaker’s Committee for the IPSA. The Committee must review the estimate and decide whether it is satisfied that the estimate is consistent with the efficient and cost-effective discharge by IPSA of its functions. Before deciding whether it is satisfied, the Committee must consult HM Treasury and have regard to any advice given. This is the third Estimate prepared by IPSA.

1.2 IPSA has been established to be independent of both Parliament and Government. IPSA is responsible for both regulating and operating systems for the payment of MPs’ salaries and expenses. IPSA’s aim is for the expenses system to be fair, workable and transparent.

1.3 The central consideration in determining IPSA’s operational costs is that public money has been, and continues to be, spent carefully and prudently.

2. Construction of the Estimate

2.1 To date, estimates have been based on the maximum which MPs could claim under the budgets in the MP’s Business Costs and Expenses Scheme. In a change to that approach, for 2012-13, the estimate is based on the previous outturn.

2.2 The 2011-12 annual accounts suggest that expenditure for the year will be around £147m. In 2012-13, there are new areas of expenditure arising out of the 4th edition of the Scheme. This totals £14.2m and includes increases in MPs’ staffing budgets, central provision of legal costs insurance, additional expenditure on the pay and pensions review and review of MPs’ accommodation, plus a new Subhead C which provides ring fenced funding for renewal of the IPSA board appointments (£0.1m). In addition, the estimate will include AME provision on Subhead D of a further £1m. This suggests an outturn for 2012-13 of at least £162.2m.

2.3 In addition, it is prudent to allow for the possibility that up of expenses might be higher than occurred in 2011-12. The revised estimate is based on the levels of take-up of budgets experienced in the first half of 2011-12 and assumes that MPs’ staff salaries and pensions will reach 95% of the aggregate budget maximum and other business costs and expenses will reach 87%. This adds a further £14m bringing the total to the £176.0m shown in the estimate.

3 IPSA Estimate 201 2 /1 3

3 .1 The Estimate (summary attached at Annex A ) includes provision for a resource requirement of £1 76 . 0 m , broken down as follows:

· £ 16 8 . 861 m relates to the direct payment of MPs’ pay, staffing costs and expenses;

· £ 6. 0 39 m relates to the administration of IPSA’s operations and the Compliance Officer function .

· £0.1m is a ring fenced budget to support the renewal of ordinary members of the IPSA Board when their initial terms expire in January 2013

3 .2 In addition to this resource requirement, t he Estimate also includes a new subhead for Annually Managed Expenditure (AME) ) . In accordance with the "Clear Line of Sight" reform of government accounting, AME of £1 .000 m is now required to provide for any provisions and impairments which may arise from the IPSA accounts. There is provision for £ 2. 167 m capital , of which £ 1. 707 m relates to budgetary provision for rental deposit loans that are provided for in IPSA’s MPs’ Expenses Scheme. The remaining £0 .460 m of the Capital budget relates to the design and development of IT systems to support IPSA’s work; to the implementation of proposed changes to the e xpenses scheme; and to improvements in the expenses process.

3 .3 The Estimate is in three parts. Part I of the Estimate includes the Ambit, which sets out the purposes for which the resources are required, states how IPSA will account for the Estimate, and sets out the amounts sought in resource and cash terms. Part II, which is further divided i nto Subheads A ,B C and D , sets out IPSA’s requirement for resource expenditure , capital provision and AME . Part II also provides the reconciliation between the resource requirement and the cash requirement. Part III shows the statement of comprehensive net expenditure & reconciliation table.

Subhead A: MPs’ pay, staffing costs and expenses

3 .4 Subhead A of the Estimate includes a resource requirement of £ 1 6 8 . 861m. Of this figure, £48.636 m relates to the payment of MPs’ salaries, £ 86.162 m relates to the payment of MPs’ staff salaries, and £ 3 4 . 5 m relates to the payment of MPs’ expenses ( including a potential £ 2 . 5 m for the cost of contingency claims under the Scheme and £0. 535 m for the cost of legal insurance s ).

3 .5 IPSA is required by the Parliamentary Standards Act to pay MPs’ salaries. The level of MPs’ salaries is determined by IPSA, which has extended the current pay freeze for a further year until April 2013 . The Estimate also includes provision for paying the salaries of the Chair man and deputy Chair men of Ways and Means, the Chairs of Select Committees and the Panel of Chairs .

3 .6 The budget does not include additional remuneration provided to MPs who are also Government Ministers in respect of their Ministerial duties. This additional remuneration and any associated expenses incurred purely on Ministerial duties are not paid by IPSA; they continue to be paid by the appropriate Ministerial departments.

3 .7 The Exchequer- funded contribution to the Parliamentary Contributory Pension Fund will continue to be provided for by the House of Commons and accounted for through its Estimate.

3 . 8 IPSA is required to prepare an MPs’ business costs and expenses scheme and to make payments to members of the House of Commons in accordance with that scheme. This does not include the cost of MPs’ staff salaries which are dealt with separately. The estimate for 201 2 -1 3 , taking into account the new scheme published in March 2012 , is £ 3 4 . 5 m . This is split between £2 4 m for the capped element of the business costs and expenses scheme including accommodation and office rent costs ; a further £ 7.4 m for uncapped expenses , largel y travel and subsistence costs , a contingency fund of £2.5m and legal cost s insurance of £0.535 m .

3 . 9 IPSA has now completed its third annual review of the Scheme, following an extensive consultation on possible changes. It published its proposed changes to the Scheme on 6 March 201 2 , and these took effect from 1 April 201 2 . The budget therefore takes full account of the changes to the Scheme.

3 . 1 0 IPSA also provides MPs with a budget for the costs of employing staff, including salaries and employer contributions to National Insurance and to pension schemes. IPSA has also proposed changes to this part of the expenses scheme . T he expected MP’s staffing budget for 201 2 -1 3 is £ 86 . 162 m. This represents an increase of £ 11.412 m in comparison to 2011-12 .

3 . 1 1 To assist MPs, IPSA may borrow sums to cover the deposits that may be due when they enter into property rental arrangements for their constituency office and secondary accommodation. These loans will be repayable in full to IPSA in due course , the cost is charged to the capital budget . MPs may also take out an advance to assist with cashflow. These advances are due to be repaid by the end of the Parliament. As such, the sums are accounted for as a balance sheet item with no net resource cost. The cash cost is however included in the net cash requirement.

3 . 1 2 The following analysis shows how the cost of the IPSA business costs and expenses scheme compares to previous years.

Overall Budgeted Expenditure relating to the MPs Business Costs and Expenses Scheme
	2010-11		2011-12		2012-13
	Estimate	Outturn	Estimate	Outturn (forecast)	Estimate
	£,000	£,000	£,000	£,000	£,000
Subhead A
MPs Salary	48,994	46,821	49,198	48,486	48,636
MPs Staff Salary and Pensions	71,206	60,746	74,750	67,143	86,162
Business Costs and Expenses	41,951	21,141	40,786	25,193	34,0 63
Winding Up expenses		76		80
Subhead B
IPSA Operational Costs	7,943	7,870	6,364	5,689	6,039
Subhead C					100
Subhead D (AME)			1,000	98	1,000
Capital	5,051	3,479	2602	573	2167
TOTAL	1 75 , 145	1 40,133	174 , 700	147, 262	178,167

Note

1. 2010-12 Estimate for MP’s business costs and expenses scheme was for 11 months. Figures have been inflated to provide a 12 month equivalent for comparison. This means that the totals do not correspond to the total estimate figure.

2. The 2011-12 Estimate includes £1.6m for MP’s advances which was treated as capital in the previous estimate and is not included in the outturn and 2012-13 estimate figures.

3. Subhead B: IPSA’s Operations

3 .1 3 Subhead B of the Estimate includes a net resource requirement of £ 6. 0 39 m including a non-cash requirement of £0.8 98 m. This figure represents the cost of running IPSA as an organisation, including staff costs, IT and accommodation.

3 .1 4 The costs and associated overheads also include the costs of a Compliance Officer and supporting staff as provided for in the Constitutional Reform and Governance Act 2010.

3 .1 5 The total budget for remuneration for IPSA’s Chair , members of the Board and lay members of the Speaker’s Committee is £0.1 3 m. As provided for by the Parliamentary Standards Act 2009, the IPSA is to consist of a Chair and four ordinary members. IPSA’s Chair is Professor Sir Ian Kennedy. The ordinary members are Sir Scott Baker, Jackie Ballard, Ken Olisa and Professor Isobel Sharp. IPSA’s Chair is remunerated at the rate of £700 per day and the ordinary members at £400 per day. The time commitment averages approximately two - three days a week for the Chair and two to three days a month for the ordinary members. It is the Speaker who ultimately determines the terms and conditions of the Chair and members.

3 .1 6 The budget also includes the remuneration and expenses for the Lay Members of the Speaker’s Committee. The Lay Members of the Committee are appointed by the House and are Dame Janet Gaymer , Sir Anthony Holland and Elizabeth McMeikan .

3 .1 7 The subhead includes provision of a further £3. 315 m for the salaries of IPSA staff. This includes £0.060m for those staff working for the Compliance Officer which were previously sh own separately in the estimate and a further £0.35m for work on developing proposals for new pay and pensions arrangements for MPs.

2.1 9 This subhead contains a figure of £0. 5 29 m relating to IT and associated support services. This includes the cost of support and maintenance for desktop and laptop PCs; printers and scanners; Local Area Network Infrastructure; secure hosting of all services, a secure remote access solution and secure web hosting; telephony services including handsets; the web-based expenses system, finance and HR systems; payroll services to support MPs and their staff; IPSA corporate functions and the cost of the web publication scheme.

3 . 18 The £0. 80 m provision for accommodation and related costs covers payments in respect of IPSA’s accommodation in Portland House. The cost comprises lease payments, service charges, an estates charge, rates, cleaning, utilities and telecommunications costs. The cost may be reduced significantly in future years if IPSA sub-lets a part of its existing accommodation, which is currently on the market. In addition £0. 08 0 m has been included for the review of accommodation scheme for MP s in 2012.

3 . 19 The total of £0. 25 m for other administrative costs includes: internal audit, legal fees, publications, office supplies and stationery , travel and subsistence and offsite storage costs.

3 . 2 0 IPSA’s Non-Cash budget of £0.8 98 m includes depreciation on accommodation and IT systems, plus an estimated notional charge for external auditing which may be levied on IPSA by the National Audit Office.

3 . 21 IPSA has allocated £0.03m for recruitment and a further £0.075m for the costs of providing training on the proposed changes to the Scheme and o n the associated changes to IT systems and internal process es .

Subhead C: Recruitment of the IPSA Board

3 .2 2 The initial terms of office for the ordinary members of the IPSA Board will expire in January 2013. At the request of the Speaker, a new s ubhead has therefore been added to the Estimate to provide a ring-fenced budget of £0.1m to support the recruitment process, including the engagement of search consultants to find suitable candidates.

Net cash requirement

3 . 2 3 The combined net resource requirement is £ 1 76 m , plus proposed capital expenditure of £ 2. 1 7 m . This is adjusted for non-cash items such as depreciation ( £0.8 98 m ) , and AME ( £1m ) and the net impact of cash advances for MPs to give a net cash requirement of £1 7 8 . 013 m .

Total Net Resource Expenditure

3 . 2 4 IPSA’s £1 76 m resource requirement for 201 2 /1 3 will enable it to fulfil its role in developing and delivering an independent system for the payment of salaries and expenses for MPs.

3.25 The Speaker’s Committee is invited to endorse IPSA’s Estimate for 2012/13.

IPSA Estimate 2012-13	Resource Costs 2011-12	Resource Costs of Scheme Revisions and other scope increases	Resource Costs Estimate		Capital
	£,000	£,000	£,000		£,000
Subhead A
MPs' Pay, Staffing and Expenses Budgets
MPs' salary	49,198	-562	48,636
MPs' staff salary and pensions	74,750	11,412	86,162
MPs' expenses budget (capped):	28,137	-4,038	24,099
MPs' expenses (uncapped and other budgets)	7,073	363	7,436
MPs’ Advances	1,576	-1,576	0
Legal Costs Insurance		535	535
Reduced Contingency Budget	4,000	-1,500	2,500
Programme Income		-507	-507
Total MPs' Budget	164,734	4,127	168,861		1,707
Subhead B
IPSA Staffing Budget
IPSA Chair & Board Members	101	29	130
SCIPSA Lay members	18	0	18
IPSA Staff	2,978	-221	2,757
Compliance Staff	188	-128	60
Policy support for pay and pension work	290	60	350
Total Staff	3,575	-260	3,315
IPSA Resource Budget
IT and Support Services	517	12	529		460
Implementation of IT consequences of scheme changes	165	-115	50
Recruitment	69	-39	30
Accommodation Review	0	80	80
Proposed scheme revisions and associated IT and Process Changes	75	0	75
Accommodation, Lease and Maintenance	759	50	809
Other Administrative Resources	369	-116	253
Total Other Administration	1,954	-128	1,826
IPSA Non-Cash Budget
Depreciation on Accommodation	245	16	261
Depreciation on IT System	495	57	552
External Auditing Charge	95	-10	85
Total Non-Cash	835	63	898
Total IPSA Operational Budget	6,364	-325	6,039		2,167
Total IPSA Budget	6,364	-225	6,039
Subhead C
Ring fenced budget for renewing appointments of IPSA Board	0	100	100
Subhead D
Annual Managed Expenditure
Provisions and Impairments	1,000	0	1,000
Total Budget requirement	172,098		176,000		2,167
Overall Total, Resource and Capital	174,700		178,167
Net Cash Requirement	172,865		17 8 , 013