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I come to taxation. The new daily fee for attendance would introduce an element of income to Members and therefore in principle the SSRB recommends that the fee should be subject to income tax and, where a Member is under the pensionable age, to national insurance contributions. Although the SSRB believes in principle that the fee should be taxed, the report makes it clear that it would not be possible for it to be taxed without further primary legislation. The SSRB report states:

"Membership of the House of Lords is neither an employment nor an office".

Therefore, under current legislation, allowances or expenses paid to Members are not subject to taxation. In coming to this view, SSRB consulted Her Majesty's Revenue and Customs. I can report that the House authorities have independently confirmed that position directly with HMRC. HMRC confirmed that membership of the House of Lords is neither employment nor an office and that issues of taxation do not arise. Members of the House of Lords who are officeholders, such as Ministers, are and will remain subject to tax and national insurance contributions in the normal way on payments of salary.

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The report says that, should primary legislation be introduced, the SSRB would conduct a further review of the level of the daily fee, taking into account,

If the necessary legislation is not forthcoming in the short term, the SSRB will in any case review the level of the fee three years from its introduction and every three years from then onwards.

On overnight accommodation, the SSRB recommends:

"Members whose principal residence is not within a reasonable commuting distance from the House of Lords should be entitled to recover the cost of one night's overnight accommodation for each qualifying attendance at the House".

The upper limit for overnight accommodation claims would be reduced from the current limit of £174 to £140. Reimbursement up to that limit would be on the basis of receipts. The SSRB further recommends that the House retain a hotel booking agent, as government departments do, to find and book hotel accommodation for Members if they so wish.

As at present, Members who have a principal residence within Greater London would not be eligible to claim the overnight accommodation allowance. Under the recommendations of the report, those Members with principal residences outside Greater London would have to make a confidential statement to the House authorities explaining why their principal residence was outside a reasonable commuting distance of London in order to claim the allowance. Members would also have to provide a signed declaration stating the location of their principal residence and explaining their criteria for designating it as such.

Lord Eden of Winton: My Lords, did the SSRB give any consideration to amalgamating the residence allowance with the attendance fee, thus vastly simplifying the whole operation? Why did it not consider putting the residence allowance and the fee in one single overall fee?

The Chairman of Committees: My Lords, I am afraid that I cannot say whether the SSRB considered that or why it came to its conclusions. There is a lot in the report and my job today is to explain what is in it, not what is not in it.

The SSRB report makes a series of six recommendations on Members' travel. These relate to vouching for expenditure on travel claims, the classes of travel for which Members can be reimbursed and travel for family members.

The report also makes recommendations on the publication of information about expenses held by the House and the frequency of publication. In line with the recommendations of the Eames report, it makes recommendations on the investigation of complaints relating to Members' expenses.

We have much work ahead of us, but the House Committee has taken the clear view that we must seize this opportunity to accept the principles of an external, independent review and to get on with implementing them. The ad hoc group, which is the subject of the third limb of the Motion before the House, will provide a further opportunity for Members to feed in to that

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implementation process before resolutions to agree a new scheme for the new Parliament are brought back to the House. Agreement to the Motion before the House today would constitute a significant step in the right direction. I beg to move.

3.20 pm

The Chancellor of the Duchy of Lancaster (Baroness Royall of Blaisdon): My Lords, I am grateful to the noble Lord, Lord Brabazon, the Chairman of Committees, for his skilful exposition for the benefit of the House of the background and main points of the report from the Senior Salaries Review Body on financial support for Members of your Lordships' House. Once again, we face today important issues for this House to consider and it is crucial that we get these issues right.

In line with the importance of our considerations today, and with the leave of the House and the agreement of the usual channels, I will be taking the unusual step of speaking twice in today's debate, now, with the other leaders of the party and non-party groupings, and then at the end of the debate, as Leader of the whole House and as a member of the House Committee, to reply to the points that noble Lords have put and to draw the debate to a conclusion. My noble friend Lord Peston asked why I was responding to the debate today. There was a discussion in the House Committee, at the end of which I was asked to respond to the debate. I said that I would be honoured so to do and am doing so today, but I must stress-

Lord Peston: I have no objection to my noble friend replying to the debate; my objection is to why the Chairman of Committees does not take back on our behalf the messages that I think some of us are going to give him.

Baroness Royall of Blaisdon: My Lords, I have no doubt that the noble Lord, Lord Brabazon, will take back very strong messages, as indeed I shall, but I should stress that at the end of the debate I will be replying as Leader of the House. It is incumbent upon me to do so. To begin with, however, I want to set out the Government's position on the SSRB's report.

The Government's role in relation to the system of allowances in your Lordships' House is clear. First, the Government meet the cost of your Lordships' House, which is a highly cost-effective House. The SSRB's report points out, for example, that the total cost of financial support for Members of your Lordships' House in 2007-08 was £18.4 million, compared to a total cost of MPs' salaries and allowances of £159.5 million, so that the direct cost of Members of this House is just 11.5 per cent of the cost of Members of another place. Members' expenses also comprise a relatively small proportion of the costs of this House. At 15 per cent of the total annual running costs, Members' expenses are considerably less than items such as buildings depreciation and capital charges, which together comprise 43 per cent of the total costs. Some might regard this House as already legislating at a very low price; it certainly is a bargain.

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Secondly, in connection with the Government's role in relation to the system of allowances in this House, the Government have a responsibility to seek improvements to the system and to help resolve any difficulties, just as they did on MPs' expenses. Thirdly, and as a result of that role, it was the Government in the shape of my right honourable friend the Prime Minister who-at the request of the House Committee of your Lordships' House-formally referred the issue of financial support to the SSRB and who, with the Lord Speaker, received the SSRB's report last month.

My right honourable friend the Prime Minister made clear the Government's position on the day of publication of the report, when he made two particular points. First, he stated clearly that the Government accepted the SSRB's report. Secondly, he stated that the Government-in precise terms, that I, as Leader of the House-would work with other Members of your Lordships' House,

Lord Barnett: My noble friend has just told us about the relevance of our costs and the agreement of the Government on that. However, has she noticed that in Annex A of the report the Prime Minister has added to the terms of reference, asking that they should consider reducing costs?

Baroness Royall of Blaisdon: My Lords, I did indeed notice that. The Prime Minister has many responsibilities in relation to the finances of the country, and most people would think it right and proper that he should ask the SSRB to consider that. Having said that, what is important in these matters is value for money-and the House gives extraordinary value for money.

I am aware that there has been a wide range of responses to the SSRB's report, beyond the responses of the Government and the main political parties. I am particularly aware of the breadth of the responses from all Members on both sides of your Lordships' House-everything from keen espousal of the report to outright rejection of it and virtually all points in between. I am sure that today we will hear representation of the various views during our debate.

However, a substantial number of Members of your Lordships' House, having read the report itself-rather than either the speculation which preceded it or the even more extraordinary supposed reporting of it on publication-judged it to be better than was predicted and the sound basis for a new system of financial support for Members of the House. I know, too, that many Members from both sides of the House have a range of concerns about what is being proposed. I have listened to and read in detail the comments that have been made to me and in other ways, including meetings of Back-Bench Members. I know as well that leaders of the other principal groupings in the House have taken similar extensive soundings. I look forward to hearing their remarks shortly.

I do not wish to usurp Members' own remarks to the House by setting out those concerns in detail, but they cover many aspects of the SSRB's report, including the current and future diversity of the House; taxation, accommodation and travel issues; the practicality of a

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number of the proposed arrangements; and the timing of future reviews. In particular, several Members are concerned about what they see as a proposed system that is far from simple, how overbureaucratic the proposed system seems and the staffing and resource implications for the House. Many Members believe that there is a need for a clear and simple system which not only this House but those beyond it can grasp. It should be simple for the House to understand and run, and simple for the public to comprehend and approve.

There are a substantial number of issues here to be considered. In addition to the 26 specific recommendations put forward by the SSRB, there are other issues detailed in its report which the SSRB itself has asked the House to consider and make decisions on. That is the value of the establishment of the ad hoc group: to consider, consult and advise on implementing proposals for a new system of financial support for Members of your Lordships' House in the wake of the publication of the report. This is entirely in line with the response of the Government, set out by my right honourable friend the Prime Minister, and that is what is set out in the Motion from the House Committee which is before us today.

The Motion asks the House to approve the principles and architecture of the SSRB report, and to establish an ad hoc group of Members of your Lordships' House to consider, consult and advise on the implementation of the new financial system of support for Members. It might be helpful for me to give an example of what is meant by these distinctions. Some of the most critical recent media coverage of Members of this House has centred on Members' primary residences. The House has acknowledged publicly that at present there is, in effect, no meaningful definition of "primary residences" in force. The principle involved here is that the House should be a diverse House, for instance by comprising men and women from all parts of the United Kingdom. The architecture of that principle would be in providing a proper definition of a primary residence to allow those Peers whose main home is outside London to attend the House. The practicalities of that-the issues for the ad hoc group to consider following the SSRB report, which includes a definition and criteria for a primary residence for Members of the House-would be precisely what such a definition should be.

I come to principles, architecture and practicalities. I believe that the principles of the SSRB's report, which propose a system that commands public confidence and provides clear guidance to Members of this House, are absolutely right. They are enunciated clearly in the report itself. No Member of the House is prevented attending and playing a full part in the activities of the House because of a lack of financial resources. Members have the right to reimbursed against receipts for unavoidable costs incurred wholly, exclusively and necessarily in the performance of their parliamentary duties. We maintain the geographic and other diversities of the House by ensuring that Members from throughout the United Kingdom can afford to attend. We have rules on expense claims which minimise the scope for any abuse.

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Just as we have done in relation to the Code of Conduct for Members of your Lordships' House by the House's adoption a fortnight ago of the Eames report, so too in relation to expenses we adopt the seven principles on public life set out by the Committee on Standards in Public Life. We minimise administrative burdens both for Members of the House and the House authorities, while ensuring the accountability of public money. These are all matters of principle on which I believe we can all agree. I believe, too, that the architecture is right. In the modern age of greater openness, transparency, and accountability, and especially in the difficult climate this year around the issue of parliamentary expenses, particularly in the other place but in your Lordships' House too, we need to move towards a system in which there is transparency, openness and accountability.

We may not quite achieve that while this House remains unreformed. Members of the House will be aware that part of the Government's proposals for further reform of this House is to move Members of a reformed Chamber on to a salaried basis. That would have to include a comprehensive system of allowances. However, in advance of that, we need a system of financial support now for Members of this House which has an architecture in which, for example, receipts as appropriate are the norm, as they are now in relation to Members' travel; in which there is, as I mentioned earlier, a proper definition of primary residence; and in which, for instance, there are increased and improved audit arrangements. These are all matters of architecture on which I believe we can all agree.

However, I believe also that there are a number of issues about the particularities and practicalities of the report's recommendations which we need to examine, not least because the SSRB has asked us to do so. That is precisely why we need the ad hoc group I mentioned earlier. I echo the noble Lord, Lord Brabazon, the Chairman of Committees, in hoping that if your Lordships' House approves the Motion which is before us today, accepting the proposals of the House Committee, not the SSRB's report itself, a scheduled meeting of the House Committee tomorrow will be able to establish such an ad hoc group so that it can begin work on these issues immediately. Based on the work of the ad hoc group on the issues arising from the SSRB's report, there will be practicalities of a new system of financial support on which I believe we will all ultimately be able to agree-I look forward to the House doing so when it has studied the work of the ad hoc group-so as to have in place a new system of financial support in time for the new Parliament following the general election.

When I spoke earlier of the Government's response to the SSRB debate, I omitted to mention that the Government accept the two rates, as it were, mentioned in the report; that is, the daily fee and the overnight fee. I got slightly discombobulated when my noble friend questioned me and I thought it was important to put the Government's view on that on record. I know that some Members of this House are concerned that the net effect of an inappropriate or misapplied series of proposals on allowances would lead to a number of Members disengaging from this House, and returning the House to one which is largely wealthy,

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retired, male, south-eastern and narrowly based. We must guard against this. We now have a vibrant House of which we are all proud, and we must retain the wealth of our diversity.

I strongly support the Motion before us, which proposes accepting the principles and architecture of the SSRB's report; following the report by establishing an ad hoc group of Members of your Lordships' House to consider, consult on and advise on implementing a new system of financial support for Members; and reviewing that new system a year after its implementation. This will give us what it is important: a House with a system of allowances which commands public confidence, is comprehensible to the public, is accountable, transparent and subject to regular audit, and is simple and practicable. It is vital, though, that we have a House which-as it is now-is hard-working, effective and diverse; is sufficiently broadly-based and effective to hold to account the Government of the day; is a key part of the Parliament of the United Kingdom; is a House whose Members are dealt with as Members of the Parliament of the United Kingdom; is central to the British constitution; and is one of the most necessary of the checks and balances of our constitution. That is the House which we in this House and in the country beyond want and need. That is the House which, in resource terms, including our system of allowances, we must ensure that we provide.

The SSRB itself says in its report that this House,

It goes on to say:

"In the course of our review we have come to understand and appreciate the vital constitutional role played by the House of Lords. It relies heavily on the goodwill and public-spiritedness of Members who devote substantial time and effort to their work ... in the House".

I agree with those views and I believe that the Motion before us from the House Committee is the right Motion. I urge all Members of the House to support it.

3.35 pm

Lord Strathclyde: My Lords, I was delighted to be invited to speak early by the noble Lord, Lord Bassam, the Government Chief Whip. Perhaps I may also say, given that it has become controversial, that I wholly agree with the idea that the noble Baroness, Lady Royall, the Leader of the House, should reply to this debate. There is a very good reason for that. As this report was jointly commissioned by the House Committee and by the Prime Minister, it is entirely appropriate that a senior Minister should respond at the end of the debate.

As I am following the Chairman of Committees and the Leader of the House, I shall not trouble your Lordships with a lengthy speech setting out the case for accepting this Motion, as I hope that your Lordships will.

The proposal for an ad hoc committee to consider how in practice these recommendations might best be put into effect, together with the undertaking that the

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House Committee report back to your Lordships on the impact of that system in a year, offers a degree of flexibility. That is sensible. It is flexibility that I know many noble Lords feel is so clearly necessary. However, the noble Baroness has referred to the background of this report, and we all understand what that is. We all know that there have been abuses-by a small minority, certainly, but abuses no less. We know that, given the intense scrutiny of everyone in public life at present, we must show not just willingness to take independent advice but a positive readiness to accept it when it comes.

There are defects in the report, and I shall point out some, but I believe that they are matters that can be ironed out. I have confidence that the process recommended by the Chairman of Committees will ensure that this is done. I therefore join the noble Baroness in urging your Lordships to accept the Motion today.

Accepting the report must include adopting the architecture of the system-namely the structure of the two allowances and the amounts as proposed, and its key principles, such as the proposition that claims for overnight stays must be backed by receipts. I do not doubt for one moment the high sense of honour of your Lordships, but it would simply not be understood by the public if a system of receipting were rejected. However, there is no reason for that system to be even more complex than it need be.

When I first heard the term architecture, I thought of one of our great cathedrals. I accept the form of this cathedral. I also accept its scale. So I hope that this debate is not an occasion for unseemly haggling over the figures proposed. However, that does not mean that you must accept outright every decoration of that cathedral, every gargoyle and pediment. After all, some odd flying buttresses have been clamped onto this one by its authors.

There is the idea, for example, implicit in paragraph 3.13 of the report, that if a noble Baroness and her husband are travelling by train from Scotland to attend the State Opening, they must travel in separate compartments. There is the proposition that while noble Lords are permitted to travel by first class rail to enable them to work better, Peers who come from Northern Ireland-as the noble and learned Lord, Lord Carswell, who is not able to be here today, pointed out to me in a letter-cannot travel in the more spacious parts of the cabin. Many other examples come to mind, and no doubt your Lordships will be mentioning them either in this debate or in a letter to the new ad hoc committee. I believe that most of those issues can be sorted out.

These are perhaps minor details, but they are part of a picture that some noble Lords have put to me which suggests that there is a meanness of tone in parts of this report. It is not mean in terms of money. After all, your Lordships are not here for money. Our House has never been a place where people come to make money, and it never should be. Being a Member of this House is, and has always been, a tremendous honour. We should not deride that in any way.

This is an unpaid House that gives outstanding value for money, so I hope that the SSRB will not take it amiss if I say that I was disappointed by a statement

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in paragraph 2.23 that your Lordships' counterparts in Holland, Austria, Belgium and Ireland "cost significantly less". The cost of your Lordships' remuneration is £25,000 a head. In Holland, it is £46,000-nearly twice as much; in Austria, it is £96,000-four times as much; in Belgium, it is £120,000-nearly five times as much; and in Ireland, it is nearly £160,000-more than six times as much. These are just the Houses whose Members the SSRB has told the world cost considerably less than ours. In France, the cost is £110,000; in Italy, £136,000; and in the United States, £258,000. Even in Poland, the equivalents of your Lordships draw £72,000 a head on average. Dare I say that it is a little sloppy to imply that your Lordships cash in in a significantly more costly way? I believe that your Lordships do not have snouts in the trough. This report should not, and does not, change that fact but it might be a little more sensitive to the realities of life.

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