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Unfortunately, we are in the middle of a financial crisis and public sector pay freeze, which is the same situation as that which led to the introduction of an allowance scheme to avoid putting up the pay of MPs

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and inexorably on to the disaster we have witnessed. One way out would be to accept the good sense of Sir John Baker's view, which is:

"We need the best MPs, although ideally a lot fewer of them-450 should do it".

The solution may indeed be far fewer MPs who are properly paid, because, as Sir John went on with words that apply equally to this House,

That leads us rather neatly into the needs of the second Chamber.

The remit for the review stated that the SSRB should have regard to schemes operated in comparable circumstances by other institutions. Mr Cockburn and his colleagues seem to have gone out of their way to obscure the comparison of remuneration levels here with those in other countries, but they provide enough information to make it possible for us, as my noble friend Lord Strathclyde has done, to calculate the numbers ourselves. It is clear that in the Upper House remuneration league, we are in the relegation zone.

The report describes the vital nature and scale of the work we undertake, and states that one of the objectives is to help to ensure that no Members of the House are prevented or deterred from playing their part by their financial circumstances. Having stated the objective, the review body then proposes that the amount paid to a large section of this House should be substantially reduced. The proposal that the day subsistence and office costs allowances should be combined and rounded up to £200, with the 40 days allowable for office costs in the Recess removed, is sensible. But although some Members, mainly those living in or close to London and spending little on office costs will be better off, a great many others who claim the overnight subsistence allowance will be big losers.

I shall make two observations at this point. Like my noble friend Lord Strathclyde, I am astonished that not a single woman is included among the 10 members of the review body. Perhaps that is why they believe that MPs and Peers should have no family life and be content with a one-bedroom flat. Like the recommendation that Peers should be allowed to travel first class on the grounds that they need to work but should dispatch their spouses to the crowded standard-class carriages, or worse, to share standard-class sleepers, it is just petty and small-minded, but underestimates the contribution made by spouses and the sacrifice they make all the time so that their partners can contribute to public life. It is the kind of attitude that will discourage many who could contribute from doing so.

Secondly, secretaries will still have to be paid and office expenses met. I am in favour of the simplicity of a single allowance, but it will be misrepresented as pay. The report misleads by saying that a Peer attending all sitting days would receive a net income of around £30,000 a year, ignoring travel and overnight accommodation. I would wager that Mr Cockburn does not include his secretary's pay and office costs in any statement of his own net income.

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I return to the overnight subsistence allowance where the changes are likely to have devastating consequences for many Peers. It is not just that the upper limit of £176 originally set by the SSRB itself is being reduced to £140, but other changes which mean that most Peers will only be able to claim a fraction of that amount. In order to illustrate the effect of those changes, I must beg the indulgence of the House by describing my own situation, which is probably not untypical. I spend four and, when the House sits on a Friday, five days a week in the Lords except for a couple of weeks in February when I am on holiday. I serve on two demanding committees that sit on two and sometimes three days a week and involve reading a vast quantity of paper. In recent years, I have served on the joint pre-legislative scrutiny committees on two important Bills, and I have taken part in the proceedings on a number of other Bills. If my party is returned to government, I will be invited to stay long hours to ensure that its majority is maintained. I travel from my home in Wales, which has been my principal home for more than 30 years except for the eight during which I was a Cabinet Minister when all Ministers were deemed to have their main home in London. Last year, in total and after paying office expenses, I received about £32,500 for my contribution to the work of Parliament and to maintain a home in London. I do not believe that the leader writers, journalists and broadcasters who are so free with their criticisms would undertake my workload for less, or-dare I say it-make a more valuable contribution.

As I own our home in Wales, our small house in Battersea, which I paid for with the aid of a mortgage which has been paid off, is in my wife's name. Under the existing rules I have been able to claim up to £174 per night spent away from the main home,

Although Parliament sits for an average of only 150 days a year, we have to maintain the London house for a full 12 months. I do not believe that I or others like me should be deprived of family life for five months out of 12 while we lodge in a club, hotel or one-bedroom flat. My wife and I both contribute to the family expenses and I have been paying all the costs that would be recoverable under the rules now proposed. Under those rules-I am not sure that every noble Lord will have taken this on board-I and others are to be denied any overnight subsistence, by the words,

If my understanding of those words is correct, anyone in my position will get nothing. There must be a strong case to amend the rules to accommodate family situations of this kind.

Even if the rules are amended, Peers owning or renting houses as second homes in London will still have their allowances slashed. Allowable running costs are to be confined to council tax, utility bills, ground rent, insurance, service charges and approved security measures. There is nothing for repairs, maintenance, cleaning, duplicate telephone or internet services or the simple fact that running two homes costs more than twice as much as running one. Then if I attend for 123 days, as I did last year, I will get 123-150ths of

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that heavily confined list of costs, assuming that the ownership rules would allow me anything. Bizarrely, as has already been pointed out, many Peers who rent one-bedroom flats will be able to claim more than those of us who own houses.

The review body acknowledged that there would be Peers who had organised their personal affairs on the assumption that they could use the current allowance system to offset the cost of keeping second homes in London, and that the proposed changes would significantly reduce their annual income. It therefore proposes a transitional arrangement ending after five years. If my situation is at all typical, noble Lords in that position will find their night subsistence allowance cut by around a third in year 1 and by well over two-thirds by the sixth year. That will be pretty devastating for Peers who have organised their personal financial affairs under rules established by the same SSRB that now proposes to tear them up. We will face uncomfortable choices, which may well include selling one or other of our homes or giving up our parliamentary work.

It may be said that if older Peers such as me are forced out, that would be a good thing. The trouble is that younger Peers will find themselves in the same situation. If the country wants an effective second Chamber it is hugely important that younger Peers are able to serve without hardship or the possession of large personal wealth. The need for accommodation that caters for family life is even more important in the case of that younger generation.

We will hear in the debate of other consequences of this review, particularly from those who are not wealthy but have served with distinction both in the Commons and in the Lords who will now face real hardship as a reward for long and continuing years of public service. The need for transitional arrangements is accepted by the review body. I do not believe that five years is long enough; it needs to be quite a lot longer.

The conclusions of the review fail to meet the criteria of fairness. The combined consequences of Kelly and Cockburn will be deeply damaging for our system of parliamentary democracy. They will cause some of the most able members of both Houses to withdraw while discouraging others from coming forward, make membership of the Commons impossible for those with outside employment and the knowledge and skills that they used to bring to it, make membership of both Houses far easier for those with money than for those without, and create a Parliament in which talent is discouraged by low pay and the inability to lead a normal family life. I fear that long after the scandal that stimulated these reports has been largely forgotten, the names Kelly and Cockburn will be remembered for the devastation that they will have wrought. The nation will pay a heavy price for the weakened and undervalued Parliament that they will have created.

If, as I hope she can, the noble Baroness who is to wind up, and whose leadership has earned the respect of the whole House, will confirm that in accepting the phrase "the architecture and principles" we are not also accepting the gargoyles-the really damaging proposals-and that there will be sufficient flexibility

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in interpretation to produce a fair and workable set of arrangements, then, although still anxious, I will feel able to accept the Motion. I will then place my trust in the sagacity and skill of the ad hoc committee.

4.20 pm

Lord Peston: My Lords, when I started to read the SSRB report I did not expect to agree with it. However, I did expect it to be of high quality and of the standard of an evidence-based Lords' committee report; it would summarise all the evidence and back-up the statements made in reference to specific evidence received; it would state clearly at the beginning the central questions and analyse them appropriately; and only then would it go on to conclusions and recommendations, the latter being coupled with arguments explaining why it is reasonable to believe that the outcome would be better than what currently prevails. The SSRB has published a report which meets none of these requirements. If this was a Lords' report, no clerk in this House would allow it to go forward. How then the House Committee can come to your Lordships with the Motion on the Order Paper is beyond me. If ever a report was largely ad hoc and not based on discernable principles, it is this one. As for architecture, I find it impossible to discern what it can mean in this context.

As the SSRB could not provide any fundamental principles, I propose to do the job for it. On the day when the world's greatest economist has died, I shall start with the relevant cost concept which, to quote my noble friend Lord Lipsey, is, in the case of a London home, the opportunity cost of the home, and the interest foregone is central to that. Any true economist would argue that this is the most logical basis for an allowance. The phrase "opportunity cost" appears once in the report and is then totally ignored.

There are three distinguished economists on the SSRB-all males, of course-each of whom knows that it is fundamental to economics that expenditure and costs are not the same things. However, this report treats them as equivalent. For example, anyone who owns and lives in a flat in London which could be rented out, say, for £1,000 a month, incurs a cost of £1,000 a month even though no expenditure is involved. Anyone who comes to your Lordships' House having given up a day's work where they could earn money-as in my glory days when I used to earn £1,000 a day-that is a cost because it is an opportunity foregone; it involves no expenditure. How the three economists on the SSRB could have signed this report is beyond me.

On the central questions, the most important one-the noble Lord, Lord Crickhowell, has made the same point-is how any proposals on allowances will affect the work of your Lordships' House in scrutinising legislation, in holding the Government to account and in publishing major committee reports. The SSRB takes it for granted that what it proposes can do no harm. I say "takes it for granted" because it makes no effort to address the question directly and offers no relevant analysis. Moreover, it proposes to replace a simple system that works and causes us to work-what the noble Lord, Lord McNally, called cheap and cheerful-with an extremely complicated system which

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places greater burdens on Peers in just trying to understand how to use it and reduces the allowances available to a great many noble Lords.

However, a more worrying question is whether noble Lords will carry on working for this House under the new regime in the way in which they did so previously. Again slightly inverting what the noble Lord, Lord Crickhowell, said-and while it would be a terrible mischance for the country-it is at least possible that noble Lords on this side will find themselves in opposition. Having spent 10 years slogging my guts out on the opposition Front Benches at great personal cost, I do not think that, if I were the same age again, I would remotely consider it my duty. My noble friend the Leader of the House should ask, in case of the disaster that we might lose the election, who will do the work on our side.

It has been suggested that some Peers work harder than others and that it is unfair. I do not doubt that some Peers work harder, but I know of no organisation in which that sort of thing does not happen. When I was a lecturer, there was enormous variation. Some of us worked much harder; some of us worked much less. Some of us would be asked, "Can you give my lectures for me, because I've got something else I'd like to do? I'll pay you back". I still am owed several hundred hours of lecturing. I do not think that unfairness is a central question.

I would not have thought it unreasonable for Peers who have worked enormously hard in the past but do not feel able to work quite so hard now still to be able to claim allowances without having fingers pointed at them for not doing enough work. I have spent much of the past decade either chairing or being a member of a committee. At the moment, I am sorry to say, I am not a member of a committee, for the obvious reason that my noble friend the Chief Whip has not appointed me to one. But I must tell him that as a result of that, which I know will cheer him up enormously, I shall have a great deal more time to make mischief in the Chamber.

Many Members of your Lordships' House suffer from various disabilities. One of the most appalling and nastiest-I use the word advisedly-aspects of the SSRB report is a sentence stating that noble Lords who wish to claim any special sums to help them with their disabilities must provide receipts. I am not happy to be a Member of a House that would raise that for someone who suffered from a disability. My legs hurt, but it is not a major disability. However, one's spouse acts to a greater or lesser extent as a carer. What is a reasonable distance for commuting for one Peer may be very unreasonable for another. Again, the SSRB does not seem to appreciate that. Although my wife and I row all the time, we actually like to be together. A system that recognises that some of us are very old fashioned and like being with our spouses is one that we regard as reasonably normal. The SSRB states that a Member who claims for the cost of a second property in London should always declare that as not his or her principal residence for the purposes of council tax and capital gains tax. Many years ago, I thought that I had better ask the Inland Revenue about precisely the point implied in the SSRB report on capital gains tax,

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and it told me that the difference between first and second properties for Lords' purposes was nothing to do with the revenue at all, that it did not want to know about it and would I please stop bothering it about that. How, then, the SSRB has invented this doctrine now is beyond me. As the noble Lord, Lord Lawson, put it in his evidence, which home has been nominated as main home to the Inland Revenue is clearly the least important question; the matter is not a matter of substantive importance but purely a matter of ensuring that you pay capital gains tax on one of the properties.

There are two other witnesses that I should like to mention, both noble friends of mine. My noble friend Lord Donoughue, in a very brief piece of evidence to the SSRB, reflected the views of most Peers, especially in his emphasis on the value for money that noble Lords provide and the need not to set up a vast bureaucracy. My noble friend Lord Williams of Elvel was equally brief and definitive. He said that it would be absurd to ask Peers to produce receipts for London flats, rents and service charges-and I agree with him. When it was suggested that we did not work hard enough, he asked how anybody could value the contribution of an idiot who attended and spoke every day against a sage who sensibly spoke rarely. Above all, my noble friend said-and this is my position-we will have enormous difficulty devising any system that replaces the present system and that is acceptable to the House and satisfies the media. We are going to have to recognise that.

I come to what I was moaning about at the start of this debate: how we should proceed at the end of it. There are many more speeches that I am looking forward to hearing and I am certainly not keen that the House should divide on this or reject the Motion. What I would most like-which is why I raised the question of who is winding up-echoing the noble Lord opposite, is for the Chairman of Committees take our view back to the House Committee and tell it to come back with a rather more acceptable form of Motion reflecting what is said here. It need not delay the committee a long time, but it will delay it a bit. In particular, it should reflect what we are saying today. What bothers me is that I do not see, under this Motion, how very much of what we say today-and I have no idea how many speeches we will hear-can possibly affect the specific outcomes that we get.

4.33 pm

Lord Tyler: My Lords, to avoid unnecessary repetition, I shall concentrate on one very important issue that we have to address today. I hope that all Members who value the reputation of this House have now read the address given by the Lord Speaker to the Hansard Society in the Robing Room last Wednesday, to which my noble friend Lord McNally referred. We are in grave danger of ignoring the impact on the public that we serve if we think that this report is only of internal interest and significance to this House. That would lead to the "gilded bunker" mentality to which the Lord Speaker referred. I am especially concerned that we do not continue to imagine that we can ourselves be the final arbiter of our allowance package. That was exactly how MPs got into the quagmire of scandal

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from which they have yet to emerge. I know only too well from my own experience that the public were astounded and horrified to discover that MPs regularly debated and decided their own remuneration package.

This House agreed to invite the SSRB to examine and recommend a comprehensive new allowance regime. Sadly, the board's work has been far from perfect. Maybe, given the timescale, it was impossible to achieve perfection. I do not complain that it has come up with a cost-saving package; after all, that was what the Prime Minister asked it to do, though, incidentally, not what the House asked it to do. Nor do I complain that I personally will be out of pocket; I suspect that the vast majority of your Lordships' House will be in one way or another.

I am, however, concerned that it seems to have misunderstood, or deliberately misrepresented, the role and responsibility of your Lordships' House in the 21st century. I shall take one example, to which brief reference has been made already. How does the SSRB expect those of us who want to do a good job here, and do not necessarily ourselves have the necessary experience and talent and who therefore need to employ well qualified staff to help us to do so, to pay someone only for the days on which the House sits and we attend, as in paragraph 3.12? Does the board cling to some anachronistic view of us from our aristocratic predecessors? Does it imagine that we can bring up a spare manservant, groom or ghillie from our country estate to help us out when we are in town to attend the House? It is an extraordinary idea. I hope that that in particular will be the subject of some re-examination by the ad hoc group.

Obviously there are other issues in the SSRB package that need clarification or even modification, as the noble Lords, Lord Peston and Lord Crickhowell, have said. The House Committee's recommendation of an ad hoc group of Members of your Lordships' House to examine these proposals should cause us some anxiety. It would be certain folly if we made it the final arbiter of this package, let alone if it came back for a debate, a Division and a decision in your Lordships' House. Surely it would be sensible for this detailed examination to be completed before the general election, as the Motion from the Chairman of Committees has suggested, and for a new Parliament to see in place. It would be both stupid and insensitive to leave the last word on the subject of that package to the House.

Are we obliged to go back to the SSRB, with all its defects, for that independent imprimatur? I hope not, because our experience of its lack of understanding of our role suggests that it would be better to find another independent arbiter. So what is the alternative? Clearly, it is to invite the Independent Parliamentary Standards Authority to provide the essential review and final, independent approval.

It was clearly premature of the Government, back in the July debates, to rule out any role for IPSA in determining how best to implement these recommendations. The exclusion of this House from the provisions of the Parliamentary Standards Bill can now be seen as a classic case of the "gilded bunker"

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mentality. Paragraph 7.13 of the SSRB report should be read again by all Members contributing to today's debate, and particularly by the Government.

Last week Ministers completed a drastic U-turn, with their agreement that IPSA should undertake much wider responsibilities in relation to MPs' salaries and pensions. Indeed, Harriet Harman announced no fewer than seven major changes to that Act. Again, perhaps that was an example of legislating in haste and repenting at leisure. There is therefore no reason whatever for them to resist the logic of a change here too. The recent refusal to appreciate the need for second thoughts was very ill advised. An eighth repeal of the exclusion clause would signal that we in this House recognise that our credibility and integrity are, in the public mind, still at stake.

On these Benches, we hope that the Leader of the House, in response to the anticipated acceptance today of the main structure of the SSRB package, will now agree that IPSA should be invited to examine and give the final detailed approval to the allowance regime for Peers. That was the clear recommendation in the SSRB report-number 26-and it should have been accepted by Ministers just as readily as the others. I reinforce the point made by the right reverend Prelate the Bishop of Chester. We need to demonstrate that, on this of all issues, we are prepared to take independent advice and, for our final package, to have that independent authority. Anything less will risk renewed public accusations-even more justifiable than previously-that the House of Lords is fixing its own remuneration package. That would indeed reinforce the public perception that we are legislating in a gilded bunker. Just think what that would do to our battered reputation.

4.40 pm

Lord Palmer: My Lords, I am more than aware of the contempt in which Parliament is held today. I agree with many of the comments made throughout the House but I consider the detail of the report to be, quite frankly, an insult. It is quite apparent that members of the SSRB have no idea whatever of what a working Peer does-and that work, it must not be forgotten, is done in extremely cramped conditions where very few of us have an office to ourselves.

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