Before we begin the debate, it may help the House if I indicate that there will be a single debate on the various motions in the name of the Leader of the House on salaries, pensions and allowances, and on all the amendments selected. A selection list has been placed in the No Lobby. The debate will take place on the motion about to be moved by the Leader of the House on “Members’ Salaries (Expression of Opinion)”. At 5 pm, if the debate has not concluded, I will call on the movers of any amendments selected to the first motion to move their amendments formally. I will then call subsequent motions and amendments, as necessary, which will be moved formally.
I beg to move,
That, in the opinion of this House, the system for determining the salaries of Members of Parliament should be reviewed, in particular with a view to removing the need for final decisions on salaries to be subject to approval by this House; and that—
(1) the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, should be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members’ Salaries (No. 2))—
(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and
(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007;
(2) from 31st March 2008, the resolution of 10th July 1996 relating to Members’ Salaries (No. 2) should cease to have effect.
With this we shall consider amendments (f), (g), (d) and (c) thereto, and the following motions:
That the following provision shall be made with respect to the salaries of Members of this House—
(1) the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, shall be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members’ Salaries (No. 2))—
(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and
(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007;
(2) from 31st March 2008, the resolution of 10th July 1996 relating to Members’ Salaries (No. 2) shall cease to have effect
and amendment (a) thereto,
That this House endorses in principle Recommendations 7, 8 and 9 of the report of the Review Body on Senior Salaries on parliamentary pay, pensions and allowances (Cm 7270-I) a copy of which was laid before this House on 16th January, relating to the Parliamentary Pension Scheme, and endorses the change to the Scheme rules outlined in Recommendation 6 if it can be implemented in conjunction with changes identified by the Trustees which produce sufficient offsetting savings to be cost neutral.
That this House notes the recommendations made in Chapter 5 of the report of the Review Body on Senior Salaries on parliamentary pay, pensions and allowances (Cm 7270-I) a copy of which was laid before this House on 16th January; and is of the opinion that—
(1) recommendations 20-22 relating to an increase in staffing allowance should be implemented, subject to the decisions of the Members Estimate Committee with regard to their timing and administration;
(2) recommendations 17-19, 23-28, 30 and 31 (relating to reimbursement of unreceipted expenditure, audit, central funding of constituency office costs, Incidental Expenses Provision, partners’ travel, Communications Allowance, Resettlement Grant, Winding-up Allowance, and nomenclature of allowances) be referred to the Members Estimate Committee for further consideration following consultation with the Advisory Panel on Members Allowances.
and amendments (b) and (a) thereto.
Although the issue of MPs’ pay, pension and allowances is a thorny one, I hope that there will be agreement across the House on at least four things: that MPs should be properly paid for the important work that they do; that MPs should be reimbursed for what they spend doing their job, as are people in any other line of work; that as MPs are paid from the public purse, we should show the same discipline in our pay increases as other public sector workers; and that, like everyone else, we should not decide on our own pay and should not vote on our pay increases.
I am grateful to Sir John Baker and the Senior Salaries Review Body, whose report the Government published last Wednesday. With its 34 recommendations, it provides the context for today’s debate. Let me deal first with the issue of allowances or, as the SSRB rightly calls it, parliamentary expenditure. The report makes a number of recommendations about parliamentary expenditure. They include proposals on expenditure on offices, communications expenditure and expenditure on travel.
Many of the proposals raise complex issues, including the proposal for a central system for funding constituency offices and a corresponding reduction in the incidental expenses provision. We therefore propose that they should be referred for further detailed consideration to the Members Estimate Committee, which is chaired by Mr. Speaker and includes Members drawn from across the House. The Committee will have the advice of the advisory panel on members allowances. I am sure that the Members Estimate Committee will be interested to hear hon. Members’ views on the SSRB’s recommendations.
There is one SSRB recommendation on Members’ expenditure that I hope that the House can accept today: it suggests that given the big increase in casework that many hon. Members have experienced, staffing expenditure should be increased to allow for the payment of the equivalent of three and a half members of staff, up from three.
On pensions, the SSRB proposes that the pension for future Prime Ministers and Lord Chancellors be no greater than the pension provision for Secretaries of State. The Government agree. Furthermore, the Prime Minister and the Lord Chancellor both agree that that should apply not only to future holders of their office but to them personally. On the SSRB proposals on pensions for future Speakers, as retired Speakers are not in the same position as retired Secretaries of State, we do not propose that the House change the pension arrangements for future Speakers.
On severance pay, the SSRB makes recommendations to change severance pay for Ministers, so that if they are re-appointed to a salaried Government or parliamentary post within three months of leaving office—the period that is covered by severance pay provisions—they will be entitled to keep only a pro rata severance payment, and should return the rest. We accept that recommendation.
I next turn to the question of MPs’ pensions. The SSRB has proposed the introduction of a new optional one-sixtieth accrual rate. The Government accept that proposal in principle and are prepared to introduce it, if and when the change can be made as part of a cost-neutral package. The SSRB makes a number of recommendations on parliamentary pensions. They include a 50:50 sharing between Members and the Exchequer of future increases or decreases in pension cost pressures, and restricting the underlying Exchequer contribution to the scheme to a maximum of 20 per cent. of payroll. The SSRB also recommends that there be a review of parliamentary pension provision if the costs rise significantly, such that the 20 per cent. cap on the Exchequer contribution is likely to be breached.
The recommendations are consistent with the approach being taken in public sector pension schemes generally. The Government propose that the detail of the arrangements be worked up in consultation with the trustees of the parliamentary pension scheme, chaired by the hon. Member for Bournemouth, West (Sir John Butterfill), to whom we all owe a debt of gratitude. Chairing the parliamentary pension scheme on behalf of all hon. Members and the House is unsung but important work. Once the detail has been worked up, any changes on pensions will have to be brought back to the House for decision.
On MPs’ pay, there are three issues that the Government have put before the House. First, this year—April 2007 to April 2008—we should not vote ourselves a pay increase that is higher than that for the rest of the public sector. Secondly, we should rescind the 1996 measure that instituted the mechanism for increasing MPs’ pay in line with the average increase in pay bands in the senior civil service. Thirdly, in future we should not vote on our own pay increases at all; that should be decided on independently.
On the point about rescinding the 1996 resolution, might it not be sensible to keep the measure in place until the Baker review and the Members Estimate Committee have reported? The 1996 resolution could be scrapped when the new recommendations are introduced.
It is really an earnest of our good intent that we propose to scrap the existing mechanism, but we do not expect the current situation to drift on; we expect there to be a new comparator and a new mechanism. The review is due to report to the Prime Minister in May. The issue will be back before the House before the recess, and there will be an opportunity for the House to decide. Our concern is that we should clear the decks now, at this vote, showing the House’s intention that we move forward to a different system. If we leave the current system in place, it can always continue. We should make the decision on April 2007-08 pay, but in future we will do it differently, with a comparator and a new mechanism. That is what we are asking the House to decide on.
There are amendments on that point, and I shall address them in more detail later in my speech. I will take interventions, and I do not mean not to answer hon. Members’ questions, but may I deal first with what the Government propose and the Government’s response on the amendments? If there are any points that hon. Members wish to take up or which they are not clear about, I shall take them at the end. Perhaps we can proceed on that basis.
Since 1996, MPs’ pay has been increased in line with the average of the increases to the maxima and the minima of the pay bands in the senior civil service. Over the past two years, this has meant that MPs have had below-inflation pay increases—2.2 per cent. in 2003, 2 per cent. in 2004, 2.8 per cent. in 2005, 2 per cent. in 2006, which was staged, and this year 0.66 per cent. The question of our pay increase for 2007-08 needs to be seen against that background, and also against the background of our strong commitment to our public services and those who work in them; in the context of our determination to sustain a strong and growing economy that can withstand global financial turbulence; and alongside the approach to pay that the Government are taking for the public sector as a whole. We ask the House, in the motions that are before it, to stage the 2.56 per cent. recommendation made by the SSRB and which we accept, but to stage that increase so that it amounts to 1.9 per cent. in value across this year.
For the same reasons that I have just set out, we do not accept the SSRB proposal that Ministers’ pay should increase faster than that of other hon. Members. For future years, we propose that we do not have votes on our own pay again. The public find it unacceptable, we know that it is inappropriate, and some other legislatures in parliamentary democracies are able to do it differently. For example, MPs in New Zealand do not vote on their own pay increases.
The right hon. and learned Lady and I have been in the House a long time. In the past, we have set links, but the problem is that when that link produces a reasonable pay increase, the Government say, “We can’t afford it and it blows a hole in public sector pay policy.” Whatever the mechanism, we have ultimate responsibility for our pay increases. If we create a link and the result is that we get, say, a 3 per cent. pay rise, will the Government say that that is too much in the context of public sector pay? Unless we are prepared to implement whatever the link results in, we end up with the problem of having to vote on our own pay.
On these matters, the House is sovereign. It is possible for the House to decide on a framework, with primary legislation if necessary, to set the arrangements for making those decisions in future. The question is what mechanism would be appropriate, and what degree of independence would be appropriate. Of course, the House can always revisit any primary legislation and change it, but we are asking Sir John Baker to produce a proposal that sets up a comparator and a mechanism so that we will not have to vote on our pay in future.
So that the Leader of the House hears the same argument from both sides of the House, may I point out that there is a deal that can be struck? Does she agree that it is right and proper that we are no longer in the invidious position of having to vote for our own pay rises—even the massive pay increase of 0.6 per cent. for which the media gave us great credit last year? The other side of the deal that we need to hear is that the Government will keep their paws off the recommendation of any independent review. We need to hear from all those on the Front Benches that it is the intention of the House to move forward on the New Zealand and Australian systems, which link pay to a registered scale and take the politics out of the situation.
Hon. Members will have seen the terms of reference that the Government set out for Sir John Baker, and it is precisely to identify proposals that would put into practice the sentiments expressed by my hon. Friend that we have asked Sir John to conduct that review and report to the House.
I will, if I may, press on with my speech. I know that many hon. Members want to catch Mr. Speaker’s eye. All interventions are on the same points, and I will deal quickly with as many as I can at the end of my speech.
I am grateful to Sir John Baker for agreeing to the Prime Minister’s request that he will review the way other countries deal with the matter, look at our constitutional position and legal framework, and make proposals that I will bring back to the House for us to debate and vote on before the House rises for the summer recess. I know that colleagues are concerned about the timing of the publication of the Baker review and any consequential votes. I will ensure that the report is published at the earliest opportunity. If the House agrees to this approach, I will return to the House before the summer recess with proposals for a way forward.
Will the right hon. and learned Lady comment on the concern that a number of Members feel that a review that is taking place by the man who headed up the SSRB is not the independent review that Members would like, and not the fresh thinking in this area that would have been brought about by bringing in somebody else? Can she explain why the Government turned to Sir John Baker to hold the review?
Sir John Baker is entirely independent. He also has a great deal of experience, and if any fresh thinking is needed, I know that, as part of his review, Sir John would look forward to receiving it.
Let me assure the House that the terms of reference for the Baker review are designed to focus on identifying a pay comparator, coupled with a mechanism for setting pay, should that comparator become non-viable in the future. The review is not invited to propose structural changes to the parliamentary pension scheme.
It is extremely important that we are clear on the timetable for the review. It is the view on both sides of the House and also in the Government that the issue should be finally resolved before we rise for the summer recess. That will require the report to be published preferably by the end of May, and at the latest by the middle of June. The House is looking for an assurance, or even a guarantee, that it will be published, debated and voted on before we rise for the summer recess.
That is what we have said. My right hon. Friend is right. We need a clear timetable, not least because today we are asking the House only to vote on our pay increase for April 2007-08. We will therefore need a new comparator and a new mechanism. We have asked Sir John to report to the Prime Minister in enough time to enable the Government to consider the report and hon. Members to consider the report, debate it and make a decision before the House rises in the summer. I accept my right hon. Friend’s point.
It is within the remit of the Members Estimate Committee to deliberate on any comparator for Members’ pay and any mechanism for setting it in the future. However, to avoid having two identical twin-track reviews and a duplication of effort, and bearing in mind that hon. Members would want to give evidence and outside bodies would be expected to be consulted as part of the process and they would not want to give evidence to two identical parallel inquiries, the most advisable way to proceed would be for the Members Estimate Committee to consider the matter and to present a memorandum to Sir John Baker’s review. The view of the Members Estimate Committee would then be clear to the House and the two systems would be working coherently. That is a matter for the Members Estimate Committee, which, as the House will know, is chaired by Mr. Speaker.
I was fairly clear about the timetable until a moment ago when my right hon. and learned Friend said that the report would be completed “as far as possible”. Can we be clear that it will definitely be completed by June and debated and voted upon—not as far as possible, but the whole report?
The Government’s clear intention is that we should come back to the House with any proposals for change that arise from the Baker review before we rise for the summer. That is the timetable that we have set forth. I know that there is criticism about the time that the Government took to publish the SSRB report and to bring it to the House for debate, so I understand the worry that the timetable might slip. That is one reason why we have made it absolutely clear, by proposing that we abolish the 1996 mechanism, that we are determined to have change and that we have a clear timetable for that change, which will be in the hands of the House and which the House will vote on before it rises for the summer.
The right hon. and learned Lady and I have the privilege of serving together on the Members Estimate Committee, which is the House of Commons Commission wearing another hat. I am not convinced by her argument that it would be too time consuming or unnecessary duplication if the Members Estimate Committee was given the authority to carry out a review, admittedly in parallel, but possibly talking to different people and involving different experts in the House from those to whom Sir John may have access. I do not propose that we set ourselves limited terms of reference; we would have the power to range far and wide. The right hon. and learned Lady is right. The Members Estimate Committee could do this in any case. My amendment merely seeks to give it slightly more moral authority and a guarantee that whatever we produce will be debated in the House. If my amendment is passed, we would have the right to bring our review forward for colleagues’ consideration. If not, we could publish many memorandums until we were blue in the face but we would have no automatic right to have them discussed.
There will be an opportunity for hon. Members to consider Sir John Baker’s proposals and the Government’s response, and any proposals of, or conclusions reached by, the Members Estimate Committee. I just want to be sure that we do not set forth today on a twin-track and duplicated exercise. The Members Estimate Committee will undoubtedly be important in this exercise, because it comprises senior and experienced Members, such as the right hon. Gentleman.
The Committee is made up of Members of exceptional distinction and is drawn from those on both sides of the House. Of course it makes sense for that Committee to give all the help that it possibly can, based on its wisdom and experience, to the John Baker review, but I do not want to duplicate the Baker review. It is right that we have an independent element in the review as to how we should, for the future, set our pay independently. The Members Estimate Committee will have a big contribution to make to the review and hon. Members will expect it to do so, but I do not ask the House to support the right hon. Gentleman’s amendment because it would result in duplication.
I am confident that Sir John Baker would like to produce an independent and good report that would inform the House. It may be absolutely perfect, but there is considerable speculation that early drafts of the SSRB report were provided to Downing street and sent back, not once but twice, so there are doubts about the independence of the process. May we have guarantees, please, about the independence of this particular process?
We expect the process in future to be independent. How we change from the current system of the SSRB to a future system will be a matter for the House to consider when we vote on the matter before the House rises for the summer. The hon. Gentleman makes an important point about independence and he can make proposals on that for the review.
I will make this the last intervention for the time being. Some years ago my hon. Friend proposed that we should have an independent pay-setting system, which was rejected by the Government. Had we accepted his proposal, we might not be in the situation that we are in today. As he had such foresight, I will allow him to intervene now.
My right hon. and learned Friend is very kind. Is it not desirable that, whatever formula the Baker review comes up with, it is comprehensible to the outside world? One reason why we have got into such difficulties in the past is that we have come up with arcane formulae, usually linking us to civil service grades that have eventually been abolished, as a result of which we have found ourselves back in the same old situation. When she talks to Sir John Baker, will she invite him to link our fortunes with those of some of our humbler constituents so that the outside world can understand his recommendations?
There are two problems with the current linkage. First, it was incomprehensible to the outside world. No hon. Member could easily explain it to their constituents. Secondly, we had no independent mechanism for dealing with a situation in which a comparator became non-viable, and we were linked to a civil service pay structure that changed, so while civil service pay went up, our pay went down, which is obviously unacceptable.
Amendment (c) in the name of the right hon. Member for Penrith and The Border (David Maclean) suggests that the Members Estimate Committee should be asked to bring forward proposals for having salaries determined by an independent body appointed by the House. Clearly, those would be worthy of consideration, and I know that Sir John Baker will be happy to receive submissions from Members. I hope that hon. Members will accept that we should await the outcome of Sir John Baker’s review before deciding on the future comparator and the mechanism for MPs’ pay. I assure the House that the terms of reference for the Baker review are designed to focus on identifying a comparator coupled with a mechanism should that comparator become non-viable. It is not invited to propose structural changes to the parliamentary pension scheme.
I am very grateful to the right hon. and learned Lady, who has been exceptionally courteous.
If we on the Members Estimate Committee can be trusted with the enormous task of sorting out some of the allowances anomalies identified in Sir John Baker’s report, why can we not be given—legally, or with the approval of the House—the official task of coming forward with proposals on pay and linkage? I do not mean a full-scale review. We could use the experts at the House of Commons Library and the Fees Office, and the director of resources, and we could get a lot of input from colleagues. Given that we are trusted to sort out the allowances, why can we not make such proposals?
Members’ remuneration—our pay—is different from the reimbursement of expenditure. As far as ensuring public confidence in how we go forward is concerned, it is right that the Prime Minister has asked for there to be an independent external review. Of course, the Members Estimate Committee can decide what it does; of course it can decide to consider the issue mentioned by the right hon. Gentleman and propose a memorandum to the Sir John Baker review. It does not need a resolution of the House for that; under the leadership of Mr. Speaker, the Committee can do what it sees fit. However, I urge the House against mandating the Committee to carry out an exactly parallel review to the one that the Government resolution asks to be done independently.
Amendment (f), in the name of the hon. Member for North Devon (Nick Harvey), would have the effect of implementing SSRB recommendations 2 and 3, so that MPs’ pay would be uprated for 2008-09 onwards by the increase in base pay of the senior civil service and MPs would receive a £650 supplement for 2008-09, with the proviso that the award would be staged to ensure that MPs’ pay for 2008-09 increased by only 1.9 per cent.
Amendments (g), in the name of the hon. Member for North Southwark and Bermondsey (Simon Hughes), and (d) in the name of the hon. Member for Christchurch (Mr. Chope), would both leave the current system in place. In the case of amendment (g), that would be until such time as a new system had been agreed. I have already outlined the Government’s reasons for not accepting the SSRB’s proposals on Members’ pay. However, we are seeking to rescind the existing arrangements so that we clear the decks and the House can resolve the issues as soon as possible and before the summer recess.
Incidentally, the 1.9 per cent. proposed for 2008-09 in amendment (f) would extend the 1.9 per cent. that we ask the House to accept for April 2007-08 until April 2008-09. That is not what the Government propose for the rest of the public sector. I hope that the hon. Members who have tabled the amendments will withdraw them; if they do not, I ask the House to vote against them.
I turn to amendment (a), on Members’ allowances, in the name of the hon. Member for Cities of London and Westminster (Mr. Field). He has proposed that the Members Estimate Committee look into recommendation 29 of the SSRB report which suggests an immediate increase in the London supplement from £2,812 to £3,500; henceforth, he also proposes that it should be adjusted in line with the public sector average earnings index. I realise that the hon. Gentleman has a long-standing concern over the issue and that he submitted evidence to the SSRB on that point. However, the Government reject the proposal because the London supplement is not, like other allowances, a reimbursement for costs—it is part of taxable income.
I turn to amendment (b) on Members’ allowances, tabled by the hon. Member for North Southwark and Bermondsey. Although we support the intention—namely, that the increases in staffing allowance should take effect from 1 April this year—and although I think I can say that that would already be the broad intention of the Members Estimate Committee, it is difficult to be certain at this point that all the necessary systems would be in place by then. It therefore might be wiser not to specify a date. However, the intention of the amendment is accepted: 1 April for the start of the increase for the salaries of Members’ staff.
I hope that the House will support the Government’s position on this year’s pay. It keeps us within the pay discipline that has applied to others in the public sector. I also hope that the House will agree that we should finally put an end to the inappropriate practice of MPs voting for their own pay.
I cannot say that I relish speaking in this debate; like many right hon. and hon. Members—and, it would now seem, the Government—I believe that there has to be a better way to determine the pay of Members of Parliament. However, we are where we are. Whatever the proposals for the future, we must address the proposals brought forward by the Government on the back of the SSRB report.
First, I want to comment on the Government’s handling of the report; that has been raised in interventions by a number of right hon. and hon. Members, and it informs us about the Government’s attitude to the issue. That is part of the reason why right hon. and hon. Members are concerned about the Government’s unwillingness to give an absolute guarantee that decisions on the new mechanism will be taken before the summer recess. The Government sat on the report for a considerable period. Indeed, I almost felt for the Leader of the House when in business questions every week she kept being asked when the report was coming forward. Each week, she tried to find different language—“shortly”, “very shortly” and “imminently”. She was desperately trying to find a way of explaining what was happening.
Then there was a farcical situation; the reason given for not publishing the report for Members—[Interruption.] My hon. Friend the Member for Buckingham (John Bercow) anticipates what I am about to say. We knew that the Leader of the Opposition and the leader of the Liberal Democrats had received copies and believed that certain others had also received some, yet we were told that Members could not have copies because they had not been printed. That announcement was met with howls of derision, and that showed how poor the response had been.
The issue was not only about Government dithering; crucially, while they were sitting on the report and not allowing Members to see it, they were leaking details to the press. The Prime Minister went on the BBC to explain the Government’s position and what he wanted MPs to vote on, yet we had never seen the report. The whole thing was a farce, and it is against that background that a number of interventions have been made on the Leader of the House about expectations about the Government’s intentions for the introduction of the new system.
I support the Government’s desire to introduce a new system; indeed, my right hon. Friend the Leader of the Opposition called for one some time ago. However, we need to be clear that the Government will bring it in before the summer recess—that should be an absolute, rather than the Government’s intention. The Leader of the House determines the business before the House, and it is up to her to say whether that debate will take place before the summer recess.
The right hon. Lady is right to be critical of the process since the report was handed to the Government six months ago in July; there have been leaks since then. If her party is in future responsible for receiving any reports—
If her party is in future responsible for receiving any reports from any independent body—on pay, staffing or anything to do with this building—will she undertake that they will be published at the same time as they are received? In that way, they could be simultaneously available to the Government of the day and the public and there could be proper and equal consideration. Such an undertaking would be welcome; we would bank it for an eventual sunny, or rainy, day.
I refer the hon. Gentleman to the sedentary intervention from the Leader of the House. I hope and expect that in future the system will be such that there will be no question of the Government receiving some report and being able to sit on it for a considerable period. In future, I hope that such a process will be independent. That is what we should all strive for in respect of the future determination of MPs’ pay.
To avoid the right hon. Lady falling foul of her own charge of dithering, will she take this opportunity to make it clear that should she be in the happy position of becoming Leader of the House at some point in the distant future, it would be her intention to honour the independence of the review body and keep her sticky hands off any recommendation that came forward in respect of Members’ pay or allowances?
I am happy to say to the hon. Gentleman that it is my intention that this House finds a way of determining Members of Parliament’s pay that does not require the current process whereby we all have to vote on our own pay. There should be some way of doing that without the need for debate. I will therefore be supporting the Government’s proposals on the review.
As regards my right hon. Friend’s continuing double act with the hon. Member for Reading, West (Martin Salter), the point is not whether we have an independent mechanism for recommending pay but whether the recommendation is implemented. When we have had recommendations from independent mechanisms in the past, the Government have tended to say, “That’s too much—we’re going to whip our Front Benchers to vote against it”, and that is the end of it. What we want from both sides is an undertaking that if such a mechanism is established—I think that most of us are in favour of that—the Government do not interfere to try to prevent a recommendation from being put into effect.
My right hon. Friend describes what has happened in the past, notably the Government whipping Front Benchers to vote against proposals. The whole point of the current review is to find a mechanism by which Members of Parliament’s pay can be determined without the requirement for a vote in the House of Commons.
I am exceptionally grateful to my right hon. Friend, who has been generous in giving way.
I am gravely concerned by my right hon. Friend’s replies to my hon. Friend the Member for Stratford-on-Avon (Mr. Maples) and the hon. Member for Reading, West (Martin Salter). What I want to be clear about is this: does she believe that there should be an automaticity about this process so that when the independent recommendation is made it immediately comes into effect? Surely the Government’s position is that they are in favour of an independent recommendation as long as the proposed figure is low but not if it is high.
That is certainly my hon. Friend’s interpretation of the remit that has been given to the review body. I ask him to wait and see what proposals the review puts forward on the mechanism that is to be set up. My aim, and that of the Leader of the House, the Government, my right hon. Friend the Leader of the Opposition, and, I hope, other Members of this House is to find some mechanism that avoids Members of Parliament being asked to vote on their pay and which enables MPs’ pay to be determined separately from the political environment within the House of Commons.
I should like to comment on a couple of the principles that the SSRB report sets out on MPs’ pay, on which I hope that everybody would agree. It says:
“Pay should not be so low as to deter suitable candidates, or so high as to make pay the primary attraction of the job”.
I hope that we can all agree that that should indeed be the aim, whatever the mechanism. None of us wants people from different walks of life—nowadays, that includes people working in public sector jobs such as the head teacher of a secondary school—to be deterred from becoming a Member of Parliament because of the pay differential. Similarly, the SSRB makes several references to the fact that although there are of course always large numbers of people wanting to become Members of Parliament, pay should not be set at a level at which it attracts people to the job. People should want to do this job for other reasons than simply the pay level.
I am listening carefully to what the right hon. Lady is saying about MPs’ pay. Another part of the background to this is the disproportionately high salaries for Ministers and something that has disfigured this House and will continue to do so—the growing disparity in pay even between Back Benchers, with people on an extra £15,000 a year for chairing Select Committees and Public Bill Committees. How many of us are still on basic pay? That pay difference is very threatening, and it diminishes the number of principled resignations by Ministers. In the longer term, there should be a greater closeness between the salaries of Back Benchers, who do a lot of difficult work, and Ministers. I never thought that I would be guilty of avarice, but I am.
I would make two comments in response to the hon. Gentleman. First, I support the alternative career structure of Committee Chairmen, because it means that Members of Parliament are able to get on and able to do more than just the job of being an MP without having to curry favour with their Front Benchers to get on to the Front Bench. It is right that the House has that separate career structure. Secondly, as for how many MPs are on the basic pay rate, I can tell him that, with the exception of one or two, members of the shadow Cabinet are certainly on that basic pay rate.
I have told the hon. Gentleman that I am not giving way.
The SSRB says that most of what are known as allowances for MPs
“are in fact mechanisms for the reimbursement of expenditure actually and necessarily incurred by MPs in order to do their jobs.”
I will return to that important statement in a few minutes.
I am going to take my life in my hands and make some comment about the media’s approach to MPs’ pay.
On a point of order, Mr. Speaker. Could you, to aid the House, give an indication of how many hon. Members have said that they want to speak and whether that means that we are short of time, which I accept is a constraint on the right hon. Lady in taking interventions?
As for the Government's motions, let me first say that I will indeed support the Government’s proposal on pay. Although it does not follow the recommendations of the SSRB, which set out the reasons for its recommendations, I believe that at a time when others in the public sector are having restraint forced on them in terms of their pay, Members should also show restraint and should not use the fact that we can vote on our own pay to vote ourselves a higher increase than the Government propose in line with that restraint. I would urge right hon. and hon. Members to exercise similar restraint and support the Government’s proposal.
Similarly, I will support the proposals on pension arrangements. The SSRB has come forward with an attempt at a solution on the issue of retained benefits, which offers a way out for colleagues whose contribution rate exceeds what is necessary to achieve the pension available given their retained benefits. It is important that that is looked at, albeit that the Government motion asks for that to be done in a cost-neutral way. I think that there is merit in the proposals put forward by the Conservative party’s democracy taskforce, chaired by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), to consider different pension arrangements in future, after the next election. We need to be very wary and aware of the circumstances in which many people in the private sector find themselves in terms of their pension arrangements.
As I said, I welcome the Government’s intention to find another way to set MPs’ pay. However, I would say to the Leader of the House that, although it would not be right to question the independence of Sir John Baker, I question the fact that he is undertaking this review given that, in the past, he has referred to the issue and given some hints as to what he thinks might happen. Surely the task should be done by somebody who comes to the issue with a fresh face and fresh thinking.
The Leader of the House made a number of references to a comparator, and a mechanism if the comparator no longer appears to be valid. It is up to the review to decide what the mechanism for choosing MPs’ pay should be, and it may be that that does not involve a comparator. The Government should give the review the ability to undertake wide-ranging thinking on the issue. On that point, I support the proposal of my right hon. Friend the Member for Penrith and The Border (David Maclean) that the House should undertake a review through the Members Estimate Committee because there will be value in the House having a range of proposals that it can look at when the time comes; it is perfectly valid for the House to already have done some thinking on the matter.
I want to comment on why the issue of whether MPs vote on their pay has resonated so much with the public, and sadly, it is because many voters no longer trust politicians. They have a jaundiced view of politicians and are consistently given the view by the media that all MPs have their snouts in the trough. That is a disappointing representation on the part of the media because it damages this House, politics and our parliamentary democracy if people feel that they are not able to trust politicians. There are, of course, other ways in which trust in politicians is damaged, such as Governments not delivering on their promises, and other factors, but we should be concerned about the image of MPs portrayed by the media.
I suspect that that would blast through the Government’s pay policy in no uncertain terms. I am tempted to say that it would be better if I did not refer in this House to any sort of support for Jeremy Paxman, given what he has said recently.
The way in which MPs’ pay is reported in the press is an important issue. We consistently see the misreporting of the amounts of money that MPs “earn” in this House by the addition to our basic salaries of the budgets that we have to pay for our staff and in order to run our offices. Indeed, only last week The Daily Telegraph set out a table that included average staff salaries and average expenditure on offices alongside average travel expenses and the average additional costs allowance, under the heading “MPs’ Gravy Train”.
We must find a way to get away from that image, so that people understand the difference between pay that a MP receives, in the way any other employed person receives a salary or wage, and the money necessary for us to do our job for our constituents. The SSRB has proposed a change in terminology. This issue is important, and I support the proposal that the MEC should consider the arrangements for allowances. This matter is one that the MEC should take on board when it considers the SSRB’s specific proposals on allowances.
With regard to perception, is not another problem the substantial incomes that some Members—not most—receive from outside the House? She mentioned career development in the House, and that is great, but surely career development outside the House is something different. Should we not have a system where there is a relatively generous allowance from the House, less whatever income is derived from outside?
I will say only this to the hon. Gentleman: I have always taken the view that my job as a Member of Parliament is a full-time one. I choose to undertake my role in that way in order to give my constituents the attention that I feel I should.
The Leader of the House did not refer to allowances apart from the increase in the staffing allowance, which I also support. However, she made no other reference to the SSRB proposals on allowances. In a sense, it was right that she did not, because the matter is being referred to the MEC, but I wanted to comment on it. I know that it is difficult—we are all different Members with different sorts of constituency, and our experience is different. It is difficult to use the experience of just one Member to look at the issue, but I wonder to what extent the SSRB understands the issues relating to allowances.
It is important for the MEC to consider carefully the implications of the proposals. For example, on the issue of incidental expenses provision and office accommodation, I can see the SSRB’s argument that Members who keep staff in the House effectively get rent-free accommodation, whereas Members who have staff in constituency offices have to pay the rent for those offices. It says that it will attempt to balance that situation out, but it also proposes penalising MPs who have staff on the House estate. That will not create a level playing field. Moreover, the SSRB talks about an average rent probably being about £6,000 a year, and says how it should be possible to use that sum to rent an office of 800 sq ft. I had a very quick look at the website of one estate agent in Maidenhead yesterday and discovered that a 600 sq ft office would cost £12,000 per annum, not £6,000. The MEC has to consider that issue carefully.
I agree with almost all that the right hon. Lady is saying, but there is concern about allowances, some well judged, some ill-judged. If we are saying that there should be an independent procedure for determining salaries, surely there should be some independent element in the consideration of allowances.
I have some fairly fixed views on allowances and what should happen to them. I would prefer to see the additional costs allowance abolished and made part of salary so that Members could make decisions. There are lots of issues related to that concerning what is taxable and the impact on pensions, but we should make some significant changes to allowances. I want to make two more brief points; I am conscious that a number of hon. Members want to speak in the debate.
I am grateful to my hon. Friend for that.
The SSRB made a proposal relating to the audit of allowances, which I assume will be part of the MEC’s consideration of such matters. I chair the House of Commons Audit Committee, and the House must consider that issue seriously. I am not sure that the SSRB’s proposal is necessarily the right way forward, but the MEC will need to look at it and consider it carefully. On resettlement grants, the SSRB does not quite understand what is likely to happen if such grants are not suddenly made available to hon. Members who retire, or resign from their seats. Willie Hamilton is the name that comes to mind—the individual who stood for a seat that he was not going to get in order to qualify for a grant. The SSRB has perhaps not quite understood the full implications of what they are proposing.
I support the Government’s proposals on pay restraint, and I encourage other Members to do so. Albeit with concerns about Sir John Baker doing it, I support the concept of a review to find another mechanism for determining MPs’ pay, but there is value in the amendment of my right hon. Friend the Member for Penrith and The Border, suggesting that the House should consider that issue as well. This is an opportunity for us to change the approach taken to how we deal with our pay and the view that the public have of MPs. I hope that all hon. and right hon. Members will grasp that opportunity and, in due course, make changes that enable us to present a better image, with, I hope, the assistance of the media through their accurate reporting on what is done with regard to MPs’ pay and budgets.
Let me begin where the right hon. Member for Maidenhead (Mrs. May) ended, with an exhortation to the media. I have no great hopes of ever winning the battle with the media, but it is nevertheless right and proper to establish a process in which the public have confidence. The public view of how we are paid is not the same as the media’s. Re-engaging with and retaining the confidence of the public matters to every Member of Parliament.
I speak as chair of the parliamentary Labour party. I have no doubt that some colleagues will dissent from what I am about say, but I know that hon. Members of all parties feel that we need to move forward in the spirit of the motion that the Leader of the House has tabled. I congratulate her, because she has put a great deal of effort into listening to the range of views that have been expressed, especially those in the parliamentary Labour party. She has devised a package that we can support. Obviously, there are matters of emphasis that we need to get right today to ensure that when the matter reverts to the House in the middle of the year, we get everything right for the future.
There appears to be general agreement that it is right and proper for the Members Estimate Committee to consider allowances. It is important to establish the fact in the public mind that allowances are not Members’ pay. Members spend money in the course of their professional lives and reclaim it as expenses, as happens in many other walks of life. The Members Estimate Committee should consider the matter properly, and we should not simply be forced to go on the defensive because external bodies make representations about it. The reference to the Members Estimate Committee is right, with the exception that the Leader of the House made—again, it has general support—that we should increase the number of full-time equivalent staff to 3.5.
Those of us who met members of the police force yesterday, and those of us who represent public sector workers—indeed, all hon. Members—know that MPs racing against the Government’s public sector pay policy would be viewed with concern. Hon. Members in different parties may have different views on the validity of pay policy. However, we, as Members of Parliament who can set our salary today, must recognise that the public have views on public sector pay. We are, in a sense, bound by that. The 1.9 per cent. annual pay increase, leading to the 2.56 per cent. year on year increase, is right and proper and we should accept it.
Like me, the hon. Gentleman met members of the police yesterday. Many hon. Members are concerned about altering the pay structure, though I support breaking the ability to vote on our pay. The police reached an agreement in arbitration, but then it was changed—and it is that breach of trust that colours many hon. Members’ views today. We are worried that putting one system into abeyance but not replacing it could lead us down a dangerous path.
I shall leave the hon. Lady to discuss police pay on another occasion. On our pay, the public should have confidence in what we do. Members of Parliament should also have confidence in the process, and I want to consider the new mechanism shortly. However, for this year, it is right to keep within the guidelines that the Leader of the House has proposed, which exist for others in the public sector.
The hon. Gentleman’s comments are rather perverse. We criticise Government actions on the police—a no-strike deal was an integral part of an arbitration process—but we are now almost trying to make two wrongs into a right by ignoring the independent board’s recommendations on our salaries. Surely we should defend the notion of implementing the findings of an independent board properly, rather than simply grandstanding on police pay.
I do not know who is grandstanding. The hon. Gentleman may be the one who needs to explain to his constituents that there are two wrongs. I presume from that that he would like to push his pay above the public sector norm. That is for him to discuss with his constituents. I shall simply deal with the specific issue of our pay.
The genuine action is the request to Sir John Baker to institute a review for the long term. The important points have already been established in exchanges in the House. I hope that the Leader of the House will take on board the legitimate concerns that have been expressed about the timetable, and about independence. I know from my conversations with her that she believes those matters to be of the utmost importance.
The timetable matters, because if it were to slip and the process lasted beyond the summer, all hon. Members would be unhappy. That would echo the delays in the publication of the SSRB report, and that is unacceptable. It would be equally unacceptable if there were no adequate timetable for consultation with hon. Members and consideration of Sir John Baker’s recommendations. We need to examine the details and ascertain whether they achieve what we all want.
We must ensure that genuine independence emerges from the process. Independence is a two-way street. Independent recommendations have been mentioned. We are not seeking independent recommendations but an independent mechanism; there is an important distinction between them. We need a mechanism that we believe to be independent and that we respect as being independent of Members of Parliament. It must also be independent of Government. Those of us who have been in the House under Governments of different complexions know that the heavy hand of—I shall not name individual Ministers, so let us say that it is the heavy hand of the Treasury that bears down on us. The mechanism should be independent of Members of Parliament, the Government and the Treasury. That is the prize that we must seek. In the past, I believed that I had voted for that independence—which was then, alas, snatched from us. We must ensure that we now establish genuine independence, which will not be subject to pressure from any side.
I am not sure where the ambiguity lies. The Leader of the House made it clear that Sir John Baker will be asked to report specifically on the mechanism, which will begin to have an impact from 2010-11 onwards. I believe that that is the precise timetable—but perhaps I am missing the point. That is my understanding, but others may say that it is defective. My right hon. and learned Friend the Leader of the House is not attempting to dissent from my interpretation.
My colleagues want to be assured that the timetable is robust and includes adequate scope for consultation and consideration of Sir John Baker’s proposals, and that those proposals will establish a robust and independent mechanism. There is a major prize to be gained by all hon. Members, because for the first time, we will be in a position to tell the public that Members of Parliament are not engaged in some ignoble process of fixing their salaries. Our salaries will be determined for us, as happens to people in different walks of life who have no direct control over their pay. Some hon. Friends may argue that we should have a negotiating process, and that otherwise we would perhaps be ceding something that we would never cede on behalf of our constituents. However, establishing independence is vital, and we now have a chance to grasp that nettle.
The other point that I want to establish is as follows. There is an element of uncertainty to the process, because we are moving the necessary decision making from our debate today, which normally would have been conclusive, to the debate in June, or thereabouts, on decisions that we cannot yet precisely anticipate, because we cannot anticipate what Sir John Baker will do. There is inevitably an element of risk in that process. There is, however, a fail-safe, because the House has the capacity to reject, either in whole or in part, any recommendations that Sir John Baker comes up with. In that sense, it is better to ask Sir John to review those mechanisms independently, rather than keep the process within the confines of the House. In the end, if part of the process is about generating longer-term public confidence in what we are doing, as well as confidence among Members of Parliament, an element of externality in relation to our own pay will inevitably be necessary.
The hon. Gentleman says that the House may choose to reject Sir John Baker’s recommendations, but if we accept the Government’s proposal to abandon the 1996 resolution, we are left with absolutely nothing. Is that not a good illustration of why we should keep the 1996 resolutions until such time as we can agree on alternative proposals?
No, that is not right, for this reason. I understand the hon. Gentleman’s point: if we get rid of the 1996 mechanism today, there will be nothing in place until we see the report. However, it will be in the gift of the House at that stage to delete all Sir John’s recommendations and substitute the 1996 mechanism—or, indeed, anything else. It would be beyond belief that the House would be left with no mechanism at all for paying Members of Parliament. That decision is in the gift of all hon. Members, in all parts of the House, and I assure Opposition Members that I will want to go for my summer break from this place in the knowledge that there is a pay structure around which my future is secure. The hon. Gentleman’s fears on that point are therefore unfounded.
In conclusion, I am grateful to the Leader of the House for the work that she has done. The package before us has already generated support throughout the House. It is important that we move forward from that. The timetable will inevitably cause concern if there is even a remote suggestion of slippage, so we cannot allow for any. That timetable must allow for proper consultation with hon. Members before we take a vote. That vote must establish, once and for all, a mechanism independent not only of Members of the House, but of the Government and the Treasury. If we can do that, at last we will have done something worthy of the House and of the British people.
We might find this debate a bit embarrassing, but it is one that we properly need to have. It is good that it has been entered into in a spirit of openness and engagement, among the different points of view throughout the House. This will of course not be the last such debate, by definition. There will be at least one more debate when the Government’s review commission comes back, and that review will not deal with staffing and office issues, which we will come back too. To think that the issue will fall off the agenda is therefore wrong. None the less, it is important now to give a steer in the right direction.
I have never had a big problem with the principle that public sector workers—I have always considered myself to be a public sector worker in this job, paid by the public to do a job for the public—could and should have their wages or salaries assessed and decided by an independent process. However, if one takes that view—I am very comfortable about that—it should be a consistent view across the public sector, not a “take it here and leave it there” view. That is why, when we have referred Members’ pay to the Senior Salaries Review Body in the past, I have always taken the view that we should automatically adopt what it recommends. That is why the question to the Leader of the House and the shadow Leader of the House about whether Governments in future will adopt what is recommended—to which I shall return—is so important.
Colleagues and I have not only taken the view that I have set out, but have in recent months taken the view that when an independent body said that nurses in England should be paid without staging, that should have happened. They are public sector workers of great importance and should not have received a staged pay increase when the recommendation was that the increase should be paid all in one go. Likewise, we took the similarly clear view that when police pay negotiations went to arbitration and were decided, the arbitrated amount should have been implemented.
That is a consistent view, and I am sad that the Government have been inconsistent. Of course I understand the constraints of keeping inflation down and ensuring that the economy does not get out of control; but that will not be significantly impaired if we have mechanisms to take it into account, so that we can come back and recommend certain increases, whether for nurses, the police or Members of Parliament. I would have been happy had the Government said, “Here’s the SSRB—we’re just putting it on the table and asking you to vote on it.” That would have been a perfectly satisfactory outcome.
I am listening to the hon. Gentleman with great interest, and I must confess that I agree with him very much. Matters related to pay are painful, but equally, do they not go to the heart of what it means to be a sovereign Parliament? If we deny sovereignty in relation to our pay, difficult matter though it is, will it not then be rather difficult for us not to have sovereignty taken away or denied in other matters?
That is why I have found pay uncomfortable, but never a matter that we should say it was not our responsibility to deal with. If we are a sovereign Parliament, this matter must go somewhere, and it ends up coming to us. That is why constitutional issues are raised when the Leader of House says that, with wide support, she has asked Sir John Baker to examine whether we can have an independent mechanism. Some countries have managed to address those issues. My guess, anticipating the second Baker report, is that he will make it clear that although we can, as it were, make the process independent in future, we will not be able to take away from ourselves the right to retrieve it if we want to. I cannot see that that would be possible or compatible with the constitutional position of the UK Parliament, so the hon. Gentleman—my parliamentary neighbour—is right.
My second general point is that whatever the case, people would obviously prefer a system even more independent than the current one—and I support that, too. That means a process that examines what the best comparator should be, and then triggers it automatically. But here lies the rub: if we go down that road, when the report comes from the new body—not the Baker review, but whichever body it suggests setting up—or when the formula is worked out saying that we will be compared to pensioners, the average wage, the average civil servant or whatever, the Government must undertake automatically to implement that. The question that, with respect, I would say that the Leader of the House and the shadow Leader of the House ducked was whether they could guarantee that either the Baker report, when it comes, or any future reports issued as a result of the process that Baker recommends, would come without Government interference. Bluntly, unless we receive that assurance, we will be back where we were.
That is why I asked the right hon. Member for Maidenhead (Mrs. May) the express question that I did. Unless the report is published to the world on the day it is published to the Government, it will always be open to the Government to hold it to themselves, to spin, to leak and generally to prepare the ground—as they have done this time—before we can see the blessed thing. That is unacceptable, not only from the point of view of Members of Parliament but for all my constituents, and anybody else who takes an interest in public affairs.
It might be helpful if we clarified what is being proposed; otherwise we might be going down a blind alley. As I understand it, the Government are asking Baker to examine the next couple of years and then to consider a mechanism that would, in effect, be an automatic indicator, which the Department of Finance and Administration would get from the national statistician or whoever else and would then implement. The other body would deal only with that mechanism, should there be a situation similar to the one involving the civil service pay link breaking down, and should there need to be a reassessment and a new indicator. I hope that I have got that right. If so, some of the concerns that are being raised by the hon. Gentleman—although not all of them—will be addressed. We are not talking about a report coming back; we are talking about an indicator, and that matter is in the public domain.
I understand the right hon. Gentleman’s point, and I hope that that is where we are likely to get to. I hope that we adopt a system with a trigger that is set externally, without anyone having to look at it all again, except if the comparator did not work, for some reason. However, that has not been proposed here, and it is not mentioned in either of the Government’s written statements. Therefore, it is a deduction that might have come from informed conversations with the Leader of the House or from elsewhere. We do not know that yet, however, because the Baker report has not come back to us. However, I am assuming that that is the road that we are going down. Such a system would reduce some of the risk of Government interference, for exactly the reason that the right hon. Gentleman gave. I accept that.
We are getting into some real complications. It might seem straightforward to say that we will invent an independent mechanism to take care of the matter, but the fact is that there is no reliable comparator for the work of a Member of Parliament. It is a job that requires no formal qualifications, and there is an over-supply of people who want to do it. All that we are saying is that we want the judgment—it will involve a judgment, not a technical comparator—to be made by someone else. What we cannot work out, however, is who that should be.
There lies another rub. The hon. Gentleman is right. I believe that it is better for us to accept the Government’s proposal for this year. That would involve us asking our colleagues to accept pay restraint for this year in line with other public sector workers, and I support that course of action. However, we should not then leave a blank sheet—a carte blanche—thereafter. It might not be as easy as some might think either for Sir John Baker to come up with a report that commands the confidence of the House and of the public, let alone of the press, or for us to agree on what we should do.
I heard what the Leader of the House said earlier. Of course she wants us to be able to get on with this. The chair of the parliamentary Labour party, the hon. Member for Manchester, Central (Tony Lloyd), also expressed his proper concern that we should ensure that we did the work between the end of May and the end of July. It all got a bit vague, however. The written statement referred to the end of May, but it could be the beginning of June, and it is likely to drift on. I therefore urge colleagues at least to give us the protection of having a system in place for next year, so that we can do the job that the hon. Member for Cannock Chase (Dr. Wright) alluded to, and get this right. It might not be easy to find a comparator, although we could look at the New Zealand experience.
My preference is therefore for the amendment tabled by my hon. Friend the Member for North Devon (Nick Harvey), the right hon. Member for Penrith and The Border (David Maclean) and others, which would at least lock in a system for next year and set a top whack of 1.9 per cent. so that nobody would think that we were building a system that would give us a great bonus. That would give us a safety net while we work these things out.
I agree with my hon. Friend that it could be difficult to find a comparator that works year on year. That is why I am attracted to the idea of establishing an appropriate base level. I am not sure whether we have arrived at that point or whether the matter needs further work. We then need to establish a simple uprating mechanism that the general public will understand. It must relate not to some grade in the civil service but to something as simple as the old-age pension or some other average denomination that will enable the public to understand why the salary of Members of Parliament has risen.
I absolutely agree with my hon. Friend, and I see the hon. Member for Sunderland, South (Mr. Mullin) nodding in agreement as well. He has taken a strong view on this matter. My hon. Friend the Member for Sheffield, Hallam (Mr. Clegg) has argued that his preferred option would be the state pension, because it is simple and because everyone out there knows what the state pension is—[Interruption.] I am not saying that it was his idea. The hon. Member for Sunderland, South has argued that case, and I am saying that my hon. Friend the Member for Sheffield, Hallam also supports that argument. He also supports the proposal that we look at the matter independently to find the best simple comparator that will work, if such a thing exists. Obviously, the pension is a front runner among the options, but there might be others. In the end, we must choose something that a tabloid newspaper, the woman in the street or anyone else can understand, and that we can justify and explain in a sentence without having to give a lecture on the subject.
The point that the hon. Member for Somerton and Frome (Mr. Heath) has just made is exactly right. Where all this has gone wrong in the past is that the independent bodies that have been set up to assess what we are worth have, from time to time, awarded us—or recommended—whopping increases that are utterly out of line with what is going on in the real world. That has happened under Governments of both persuasions, and they have quite rightly felt obliged to intervene and put a stop to such madness. My fear is that the Baker review might end up doing the same thing. It might be terribly independent, but if its recommendation is wholly unrealistic, we are going to find ourselves back where we started.
I share that view entirely; the danger is that what has happened in the past might happen again. If there is a recommendation for a low increment, the Government might say, “Yes, thank you very much”, but if there is a recommendation for a high increment, for whatever reason, the Government could intervene and say, “No, thank you very much. Not now.” That cannot be acceptable.
I do not think that the hon. Member for Sunderland, South (Mr. Mullin) is right. The reason that a whopping great increase, as he put it, is recommended every so often is that increases have been suppressed by the Government for the previous four or five years. That is what has happened on every occasion. If we had a mechanism, for example, for implementing whatever increase had been applied every year to public sector salaries—2 or 3 per cent., or whatever—this issue would never arise. We would never have a really bad increase, and we would never have a really big one. I think that we, and the public, would be satisfied with that.
The two points of view are not contradictory, but I agree with that argument. The report makes it clear that, in the past, there have been recommendations for a catch-up and that, because they were so big, the Government have not implemented them. Unless we have a regular annual increment, we shall always find ourselves in that position.
I also strongly support—and urge Members to support—the idea that the Members Estimate Committee, under Mr. Speaker, should also do its work on this matter. I do so for two reasons. One is that the House, with all its experience of what it all means, can look at the matter. The other is that the staff of the House, who have all the experience of administering the system, can give the benefit of their wisdom and experience and all the money that we have paid them over the years. It would not be inconsistent for us to have an independent review as well as doing our own work on the matter. I absolutely support the view expressed in the amendment tabled by the right hon. Member for Penrith and The Border that we should give authority to the Members Estimate Committee to do a parallel piece of work, so that we can have that in front of us as well.
Let me carry on for a minute. I might come to a natural point at which the hon. Gentleman can intervene.
I support the Government’s recommendation on pensions. Other Members might want to elaborate on that subject, but I do not propose to do so now. My final point is on staffing, offices and allowances, and I shall start where the right hon. Member for Maidenhead started. I want to say, as explicitly as she sought to do, that this does not involve money that we are given to allocate either to ourselves or to others. It is not an allowance that I can choose to spend or not. Money goes from the taxpayer into the Fees Office, and from the Fees Office directly into the bank accounts of our staff, without our touching it. All that we do is agree how much of the total amount available should go to them.
The sum that we are talking about is currently £90,505 a year, and that is meant to pay for the salaries and national insurance contributions of three people. Some of us employ more than three people, however, and it does not take a genius to work out roughly what people are paid. They are not paid huge sums for the job that they do, given the importance of their job of looking after constituents such as yours, Madam Deputy Speaker, and mine, who come to us with evictions, housing and benefit crises on a daily basis. They need to be decently looked after. That is why I absolutely support going down the road, as the Government recommend, of an increase of half a person in the potential number we can employ—taking it to three and a half people, as it were. As it happens, I employ four people at the moment and others who assist.
Let me add another postscript. It is not proposed that the three and a half people should be paid at the same rate as now, because the increment provides for a few thousand pounds extra over the current arrangements. For the record, the recommendations are that for three and a half staff employed outside London the total staff bill should be £96,630, which would go up to £102,650 when all the staff are in London.
I hope that colleagues will vote for my amendment (b). The Leader of the House was good enough to say that she intends the proposals to come into effect from the beginning of the new financial year, which I accept, but I want us to lock that in so that we can plan ahead, knowing that in the new financial year we will be able to pay for three and a half staff with funds provided from the taxpayer via the Fees Office. That is not unreasonable—[Interruption.] For London, yes.
I am a bit nervous about the London dimension, partly because of my geographical position. My staff do not work exclusively in the constituency; some just work in the Palace of Westminster. I am a bit nervous that whoever reviews the position is going to get in an awful mess and perhaps be unfair, not to me but to my staff. It does not work so neatly for Members in my geographical position, who are just outside the Greater London authority area.
I absolutely understand that. That is why I support the proposal that the administration of this matter, including its interpretation, should go to the Members Estimate Committee, as recommended in the motion. The proposal should be subject to that process, but it should not be subject to a delay in respect of the year to which it applies. There is no significant difference between the hon. Gentleman and me. The decision should apply from 1 April, but the details of definition need to be worked out fairly.
The hon. Member for Cities of London and Westminster (Mr. Field) rightly identified that all the recommendations bar one have been dealt with. Three relate to staff and we are asked to agree to them, while we are asked to refer the rest to the MEC and other deliberative bodies. One, however, has been dropped and eliminated. I declare an interest in the matter, but I cannot help it because I am an MP representing an inner-London constituency.
Presently, inner-London MPs and outer-London MPs may opt for a London allowance in line with many other London public sector workers, as opposed to an alternative that in theory is more generous. The Senior Salaries Review Body report says under the heading of “London Supplement” in paragraphs 5.58 and 5.59:
“The Supplementary London Allowance…which is currently set at £2,812 is payable to MPs with inner London constituencies who are not eligible to receive ACA and to MPs with outer London constituencies who do not claim for expenditure under the ACA.”
It goes on to say that comparable circumstances were looked into and it concludes:
“We believe that the London Supplement should be increased to reflect the extra living costs found in London and therefore recommend that the London Supplement be increased to £3,500 and henceforth…in line with the Public Sector Average Earnings Index”.
That must surely be included in the basket for consideration; it is nonsense to take that out altogether as if it were not a serious issue. It is an issue for Greater London MPs of all parties. I hope that colleagues will vote accordingly and that the Government will accept it.
My hon. Friend the Member for Cities of London and Westminster (Mr. Field) and I gave written and oral evidence to the SSRB on that point. The hon. Gentleman quoted the recommendation of £3,500, but if he reads the supporting evidence he will find that KPMG suggested that the comparator should be £4,000. We are asking not that that be put into effect—the hon. Gentleman has made that point—but for the appeal process and for it to go to the MEC. That must be right. If the SLA is pay, the additional cost allowance must also be pay; the Government cannot have it both ways.
Whether or not MPs represent Orkney and Shetland or the Cities of London and Westminster—the two most extreme examples—it must be right that all the issues are referred to the body. It cannot be right for the Government to be able to take one out and throw it away.
Although I may have been called extreme at certain times, I am sure that the hon. Member for Orkney and Shetland (Mr. Carmichael) has not been called that on too many occasions. I appreciate that the Leader of the House is also an inner-London MP, representing Camberwell and Peckham. She made the statement and it has been put that somehow the London allowance is simply an issue of pay, but in our view it is a small compensatory allowance that makes a contribution—only a small contribution—towards the otherwise un-reimbursed expenditure entailed in making a main home, as opposed to a second home, in central London. That is why we feel that this matter should go to the MEC. The option of taking an ACA is not open to us 26 Members, but for those who are not entitled to an ACA or who choose not to take it in preference for a London allowance, there is comparability. We hope that the Leader of the House will take notice and ensure that recommendation 29 goes to the MEC.
I ask colleagues not only to vote for that but to bear in mind that it is completely illogical to have recognised that relative office costs as well as relative staff wages in different parts of the country should be reflected in the allowances and not to apply the same to Members of Parliament who live in central London or inner London. I emphasise that we are not voting now for any extra expenditure on anything; we are voting only for these matters to be looked at, which is surely the responsible thing to do.
The proposed process will look at the additional costs allowance, which has been the most controversial allowance for parliamentarians. It allows MPs who do not live locally to claim for a second home or a second place to stay. Of course nobody would expect you, Madam Deputy Speaker, to go back to the west midlands every night or others to go back to Scotland or Wales, so there must be a process for recompense. That is perfectly proper. My personal view is that for outer-London MPs, the current situation is no longer justified—
Well—[Interruption.] I will give way to the hon. Gentleman, whom I respect, but I am saying only that the current position needs to be reviewed, which is the clear implication of the report. None of my outer-London Liberal Democrat colleagues claim it; though some Members claim it when they live very near to the borders of inner and outer London. I am simply asking for it to be reviewed because, in my judgment, that is what has brought the House into the greatest disrepute, so it needs to be sorted. That is all; I am arguing no more than that.
I apologise for my intemperate reaction to the hon. Gentleman’s remark. I do not know when he last tried to get down to south Croydon but I can tell him that it takes a heck of a long time, due to the Government’s totally inadequate transport provisions. It is a fact that one can get to Reading quicker than one can get to south Croydon. If he pursues this argument, it will not stop at outer London: the whole of the home counties will have to be included. He might find that he will have some difficulty carrying people with him.
I respect the hon. Gentleman, as he knows, and I have been to Croydon, including south Croydon, many times. All that I am saying is that this has been the most criticised area of our allowances. To quote the report, it says that
“we are concerned that it is in the area of ACA that the greatest scope for abuse is thought to exist.”
All that I am arguing is that the matter should be looked at and reviewed. I will not give way further, as I do not want to wear colleagues’ patience; I want to carry them with me.
In relation to the point made by the right hon. Member for Maidenhead, the current proposal allows the Willie Hamilton election campaign grand finale to start again. At the moment, rightly or wrongly, colleagues have a final-year compensation amount when they finish their service as MPs. Under the proposal, an MP would get that payment only if their constituency was abolished or they had been defeated. So when they came to their natural retirement age, they would have to find a seat that they did not want to fight and that they absolutely hoped that they would not win—what would happen if they did would be a different question. Clearly, that is nonsense. The resettlement grant and the issue of compensation on leaving office need to be looked at.
The last issue is that of offices and staff location, which was raised by the right hon. Member for Maidenhead. This is only a suggestion, but I support the idea that there should be an assessment of how much space we need—it might be 800 sq ft or it might not. Having done that, there would be a process to pay for that separately, and the costs would be different in different parts of the country. We would probably need a system in which a similar person, company or body would do that assessment in Orkney and Shetland and in London, to avoid unfair comparison. Rather than the same outcome, there should be a standard process of evaluation of what is a fair and reasonable cost.
If we spend our time saying how important Parliament is, we must all assume that we are entitled to have at least one or two people working for us here as part of our job. If people ring the House of Commons and get a voice on an answerphone, that is not a satisfactory service. We cannot be in our offices when we are in the Chamber, in Committee or doing other things. We must have a system that allows MPs to have staff in the Palace of Westminster, as their base, without penalty, as well as staff in their constituency, where they are also needed. Those are important matters, and my request is that all, not some, should go for independent assessment.
In relation to salaries—I end where I began—we should move down a road of an independent process, but not assume that the Government will suddenly change the habit of a lifetime, speed through, come up with a wonderful solution and leave it to us to decide without interfering. We must put in place a system that protects us next year. Consistent with public sector pay restraint, however, it should give us only a limited increase next year, as we accept a limited increase this year.
I shall concentrate my remarks largely on pay, because the section on allowances has in the main been referred through the Members Estimate Committee to our panel. We wish to evaluate those suggestions properly without preconceptions.
I agree with the comments of the right hon. Member for Maidenhead (Mrs. May) that it would be much easier to deal with questions of allowances if elements of the media did not endlessly misrepresent them as part of our income. That is acknowledged in paragraph 1.12 of the SSRB report:
“Some observers are quick to conclude that an MP is paid too much, particularly when looking at the headline total of salary plus expenses.”
I also counsel Members that so-called transparency is no magic solution. The situation in Scotland has demonstrated that only too clearly, to the extent that one MSP was attacked for spending money on coffee in his constituency office.
The matter of pensions will be considered elsewhere, and the hon. Member for Bournemouth, West (Sir John Butterfill) is in the Chamber and will no doubt comment on that. I am concerned, however, about reference to so-called gold-plated schemes compared with other public sector schemes. We as MPs have a high contribution rate, much less security of tenure and later retirement. We do not have the early retirement enjoyed by many of the uniformed services—I hasten to add that those schemes are provided for understandable operational reasons. At the same time, however, we abrogated the option of retirement at 60 on the grounds that that example would be followed by those in the wider public sector. Unfortunately, they have not found that example particularly inspirational.
To return to pay, the basic facts are rightly outlined by the SSRB in paragraph 3.2, which records that the evidence given on Members’ behalf by the advisory panel showed that
“MPs’ pay had not kept pace with the Average Earnings Index since 1997, and had failed to match the Retail Prices Index since 2003.”
The PricewaterhouseCoopers study—which, admittedly, involves some difficulties—showed that the gap between MPs’ pay and that of private sector comparators had also grown.
As paragraph 3.18 of the SSRB report explains, unlike the annual increases of many in the public sector, ours is an actual earnings increase. Why? Because we do not have the increments, performance pay or other forms of pay progression that are common and, indeed, increasing in many parts of the public sector. That is why the mechanism that linked us to certain pay bands became so unsatisfactory in the end.
I must say in parenthesis, and partly in mitigation, that I only became chair of the advisory panel after the last election. I was astonished that anyone would agree to be linked to someone else’s pay rate rather than their earnings: I had thought that that was in chapter 1 of the shop stewards’ manual. Members will recall, however, that we did get a cycling allowance out of the last settlement.
The SSRB report acknowledges the problem, but I find it disappointing that the board did not want to address it earlier. The report states quite openly that it
“did not wish to distort the senior civil service pay system simply to produce a more appropriate result for MPs”,
although it seems to have been content to distort our pay system as a consequence. As we all know, we received only 0.66 per cent. last year. That is worth repeating, just so that the public get the message loud and clear.
The basic facts are these. If our salaries had kept pace with the retail prices index in the last five years, we would have not our current salary of £60,675 but a salary of £64,418. If our salaries had kept pace with average earnings, we would be on £66,170. If our salaries had kept pace with the public sector average earnings index, we would be on £67,684. The problem has been exacerbated in the last three years, with increases of 2 per cent., 1 per cent. plus 1 per cent. staged over the year and, most notoriously, 0.66 per cent. last year.
The SSRB has acknowledged part of the problem, and we should be grateful to it for that. It has taken on board not just the comments of the advisory panel, but those of many individual members who not only followed our evidence but made inquiries in their localities about the pay enjoyed by directors of services in their local councils, head teachers in some of the larger schools and so on. At least in my experience, many were slightly surprised by the change, and the rate of change, in those jobs over the last few years.
Unfortunately, the SSRB proposes to remedy that by means of a mechanism that I still find confusing. It talks of linking us to the average percentage increase in the base pay of the senior civil service, by which, it says that
“we mean the amount by which the average base salary of all SCS members increases year on year as a result of individual performance awards.”
It then states that the amount
“excludes non-consolidated bonuses for which SCS members are also eligible.”
That sounds to me like an unnecessary complication, possibly containing the seeds of further difficulties in the future. It would have been much simpler, even within that indicator, to take a straightforward figure, namely the amount by which senior civil servants’ take-home pay rises during the year. I hope that Sir John Baker’s further study will take that into account. We should also ask him to examine the question of remedying the considerable shortfall.
It also concerns me slightly that the report does not really capture the life and work of Members of Parliament, although, as we know, the subjects are very much intertwined.
I was going to deal with that later, but I shall do so now. There are two elements that we need to disentangle. One of them is the extent to which, for a variety of reasons, we have fallen behind comparators in earnings, and therefore the extent to which there needs to be catch-up in order to establish the proper base. The second element is how we decide what the increase will be year on year in the future—what mechanism might we put in place to prevent this matter from having to come back before the House. I urge that they are treated as two separate issues. We do not need to say, “This is the comparator we are dealing with to look at what should be the base figure”, and to be for ever tied to that particular group. It might be the case that we are tied to that group, but we might instead look at a basket of groups and at an average increase. The two issues are not integrally linked, and it would be a mistake to link them as we would then be back in the situation of having reports and analysis, all of which become arguable, debatable and, ultimately, votable.
Let me return to the issue I was addressing. The PWC report states boldly that the evaluation results do not take account of the extensive working hours of a Member of Parliament. It says that it assumes that we work a normal professional working week. I remember a good colleague of mine who was an Australian Senator and who then entered the private sector saying to me, “The big difference between full-time in this game and in the private sector is weekends.” I think all Members will understand that comment. I do not say that we work every hour of every day of the week, but there are always pressures on us to do so. That is underestimated and misunderstood.
I am delighted that the right hon. Gentleman has raised the number of hours that the overwhelming majority of Members work, particularly when the House is sitting which is for more than half the year. Including time spent travelling to and from my constituency, I estimate that I spend an average of 85 hours per week on parliamentary and constituency work when the House is sitting. That is more than twice the normal working week in this country.
Some Members used to be trade union officials. I remember people saying, “You should be paid the average wage of the members.” As I was negotiating for Fleet street at the time, that was not so bad, but my response always used to be, “Would that be with overtime at premium rates?” I do not say this by way of complaint, but Members should look at their hourly rate.
Our job has a high level of input, and there have been changes that have increased that. One of them is the increase in our case load. Another is the increase in the number of campaigns that are directed at Members, and which require either correspondence or attendance at meetings. In the past, many examples have been given of the increase in mail, but I am sure that all Members will have experienced an exponential increase in e-mail, even over the past 18 months—and not just the standard correspondence on issues, but many more constituents e-mailing about individual cases and problems.
Has my right hon. Friend’s office noticed that whereas organisations used to send us hard copies of material, they now tend to e-mail it so that it needs to be run off? As that might happen 20 or 30 times a week, that also has to be fitted into our time and our staff’s time.
My hon. Friend is right. The PWC report misunderstands the situation when it says that problems of work load are to some extent within MPs’ own control. There is an element of truth in that, but it underestimates some of the pressures that MPs are under.
As I was saying in reply to the hon. Member for Buckingham (John Bercow), we should try to disentangle these elements. The Government motion helpfully provides the opportunity to do so. The first such element is the baseline for our calculations. The SSRB says that we are some 10 per cent. behind, although that is if everything is taken into account. Our basic salary is 14 per cent. behind, even on the SSRB’s comparators, and we are 15 per cent. behind on total cash. The figure needed to catch up is somewhere between where we are and £66,742. Interestingly, that figure is only a little above what we would have received had we kept pace with average earnings.
I must take slight issue with the comments made by my hon. Friend the Member for Sunderland, South (Mr. Mullin). He said that some past increases had not been connected with the real world. In fact, those past recommendations were designed to catch up with changes that had already taken place in the real world.
Up to a point, Lord Copper. When my right hon. Friend was saying how far we had fallen behind, he drew the line at 1997. In 1996, we voted ourselves a 26 per cent. increase, at a time of 3 or 4 per cent. inflation. It is that kind of thing that gets us a bad name.
My hon. Friend is quite wrong. That increase reflected several years during which, for a number of reasons—it was often because of the pay policies, under all Governments—we had fallen seriously behind comparable public and private sector jobs in the outside world. He is right to say that those large leaps do not favour us—as has been said, moving in line with the other indices would be a much better way of handling things—so we possibly come to the same conclusion, but we do not necessarily have the same view of the history.
What do we need to do to resolve the situation so that we do not have to discuss this issue in the future? We have talked about the question of catching up. We need an index by which pay will be automatically uprated without a confirmatory vote. We must be clear that this is not about a review body examining various indices and coming up with recommendations. The situation should be—I think that there will be broad support in the House for this—that on, or shortly after, 1 April each year the Department of Resources, the old Department of Finance and Administration, would contact the Office for National Statistics or whatever the appropriate body to say that we are linked to such an indicator and detail the increase in the past year, and there would then be an automatic uprating. I do not care what the indicator is. It could be the retail prices index, the average earnings index, the public sector average earnings index or even the Chicago grain index. In a sense, that is less relevant than the fact that it needs to be something that the public understand and that is therefore clearly in the public domain and is not influenced by our particular actions. The public sector average earnings index might be the better one to use to try to provide a greater and clearer linkage.
I am not keen on a link to just one small part of the civil service, because organisational and structural changes could take place, which would then have a significant effect on us. There is one possible attraction of being linked to the senior civil service, because in my experience, senior civil servants always seem to have done well in finding ways through the pay policies of both Governments. However, in general, we would be better considering a basket of agreements and taking the median or another average. I believe that that is the offer that has been made to the police. I hope that Sir John Baker will take that on board. I also hope that when we come back to the matter before the summer recess, we ensure that that is clearly understood.
Is there not a concern that irrespective of whether we use a basket or some level of comparability, particularly one that involves public sector pay, where, directly or indirectly, we have all had an influence, the media will still raise their hue and cry whenever a figure is announced? Even if one of those independent mechanisms were properly implemented and all the concerns raised in this debate were addressed, the issue would still become a media hue and cry. Therefore, it is for us, as Members of Parliament, simply to bite the bullet and to drive forward the right sort of pay package, given that we believe in the idea of a sovereign Parliament. I have a lot of sympathy with everything that the right hon. Gentleman is saying, but I fear that we would be back to square one the moment such a mechanism comes into play.
A sovereign Parliament would make a decision before the recess that our pay increases should be linked to a particular indicator. At some stage in the long distant future, if that broke down, something would have to happen to it.
In a sense, there is a mechanism to deal with failure, and we have had one failure with the links to the senior civil service. That mechanism is that Sir John Baker should consider forming a new body. We must make it clear that such a body should not be designed to make endless reports on pay but to deal with any failures in the system.
There is an unspoken question about who will decide whether there has been a failure. Will it be the House of Commons and the MPs, or the Treasury? Nothing is perfect about any form of pay-setting. However, such a solution would get rid of many of the problems and difficulties that we face, particularly when we have to vote and argue about our pay. That is a particular problem if it is linked to a factor over which we do not have any direct influence, whether it is an index based on prices or earnings—that is why I have suggested a fairly wide index.
It is important that a clear message goes back from all parties, including the Government, that the increase should be implemented according to the percentage increase that has taken place. That is why the mechanism is so important, as it effectively takes the decision out of the hands of Government and puts it into those of the Department of Resources—which used to be known as the Department of Finance and Administration—which will operate under the directions of a resolution of the House.
My final point has been made by a number of other hon. Members, but it is worth reiterating. This has dragged on too long. The SSRB was commissioned to produce the report in July 2006. It reported in July 2007 and we are debating the report in 2008. I urge the Leader of the House and the Deputy Leader of the House, when she replies, to be clear and explicit that the timetable for the report will be that it should be received, published, debated and voted on before the summer recess.
Again, this is a question of timing, which is essential. May I ask the right hon. Gentleman the question that I asked the hon. Member for Manchester, Central (Tony Lloyd)? Does the right hon. Gentleman have any insight about when the measures will all be implemented? Does he know when the Government intend to implement them? Has he been given any commitments that we have not yet been given?
There were a number of indications from the Leader of the House that she hopes to get the report received, published and voted on before the summer recess. I want the report to be received by the end of May, as a preference, and by the first week in June as a necessity. It should be published at that stage and debated and voted on during the end of June or beginning of July.
There are two issues that we must disentangle. The first is the question of the next two years. I understand—the Deputy Leader of the House can confirm this when she sums up—that Sir John Baker will be asked to produce a report on the next two years and then a mechanism, or, in other words, an index, to take us beyond that period.
Yes, but a mechanism can be twofold. The first element is the need to deal with the immediate issue, which also deals with the question of catch-up. The other element would be an automatic linkage that would operate once we had established the base. I hope that Sir John Baker’s report will separate those two strands and establish the base, after which we can consider the rate of future increases. That will allow us to get back to representing our constituents, legislating and debating the issues facing the country. I think that hon. Members of all parties do that job rather well.
It is a privilege to follow the right hon. Member for Warley (Mr. Spellar), with whose speech I agree entirely.
All colleagues have begun their contributions by congratulating Sir John Baker and the SSRB on the report that has been produced, but it has been noted already that one or two little difficulties remain, especially with those parts of the report that deal with allowances. I suspect that more difficulties will be highlighted as the debate goes on.
May I suggest, in the nicest possible way, that the SSRB has not grasped some of the intricacies of our allowance system? The result is that there are difficulties with what is being proposed in the report. I cannot comment on behalf of the Directorate of Resources—what used to be called the Fees Office—but I suspect that its excellent staff would encounter enormous difficulties in implementing and enforcing some of the recommendations that the report makes about constituency offices, space allocations, costings and incidental expenses provision—IEP—changes for some colleagues.
The proposals are almost unenforceable. We cannot have transparency in our allowances if we cannot devise a system to enforce the changes, or understand what the SSRB is recommending. The Leader of the House is therefore right not to implement the recommendations verbatim and to refer them to the MEC. That Committee is supported by the Advisory Panel on Members’ Allowances that is chaired by the right hon. Member for Warley, and it will be able to sort out what amounts to a bit of a mess in the SSRB report.
Who are the dangerous men and women on the MEC who have been given that responsibility? They are exactly the same people as those who make up the House of Commons Commission. They meet at the same time, but the agendas are different: sometimes a person is a member of the MEC, at others a member of the Commission.
The MEC is chaired by Mr. Speaker. Its next most distinguished member is the Leader of the House, followed by the shadow Leader of the House, the hon. Members for Middlesbrough (Sir Stuart Bell) and for North Devon (Nick Harvey) and myself. The MEC does not leak, so I cannot reveal what we discuss, but I can say that we meet regularly. The Leader of the House has entrusted us with making sense of that bit of the SSRB report that deals with allowances and, in conjunction with the right hon. Member for Warley, that is what we will try to do.
We will be served by some incredibly clever people in the Directorate of Resources. I have had the privilege of serving on the MEC and the Commission for two years, slightly longer than the Leader of the House. When I say that, I am not being arrogant: I simply mean that I have had the privilege of seeing more papers produced by the men and women in the Directorate of Resources than she has. I have been delighted by their excellence, and can say that the MEC is exceptionally well served.
If the House gave the MEC authority to produce its own suggestions for a suitable pay and allowances mechanism, we would rely heavily on the Directorate of Resources staff, and we would look to the Library’s research department for background information. We would also lift some stuff from the SSRB report, given that much of the relevant work has been done already and makes sense. It is possible that we could produce some reasonable suggestions for the House’s consideration.
If the recommendations in any memorandum, report or little review that the MEC might prepare turned out not to be sensible, colleagues would be very quick to bin them and our names would be mud. However, I believe that we could produce some sensible suggestions, as we might be able to consult hon. Members of all parties more thoroughly than the SSRB.
I will leave it to my hon. Friend to convince the House that the Committee should be given that task, too. I think that our burden will be fairly heavy as it is. There will also be a heavy burden on our officials, who will have to help us untangle some of the allowances difficulties created by the SSRB report. We would probably be at maximum capacity if we took on the responsibility that my hon. Friend mentions, in addition to having to reach a view on a mechanism for determining MPs’ pay, so that we did not have to vote on the issue every other year.
I have not set out terms of reference. I would say to the House, “Trust us.” We on the MEC and the House of Commons Commission do not need to tie our hands with terms of reference. We want to bring forward proposals on an independent mechanism for the House to consider. We would not tie our hands with principles that I think are wrong. The right hon. Member for Warley commented on some of the principles that the SSRB set out on page 7 of volume 1 of the report. The SSRB says that it is tied to the fundamental principle that
“Pay should reflect levels of responsibility rather than workload”.
On page 16, the SSRB reassess MPs’ work load, which it says has increased steadily. We accept that that is the case. Expectations of what MPs can achieve for their constituents are rising, and e-mails come in all the time. The work load is increasing. It goes on to say:
“To some extent the problems of workload are within MPs’ own control.”
With all due respect, it has confused work load and hours. Our work load is increasing all the time, but our hours have stayed fairly static, at 60, 70 or 80 a week. I could reduce my work load. I could, on Armistice Sunday, refuse to go to the service in Carlisle in the morning and the one in Penrith in the afternoon. I could refuse to do Saturday surgeries, and could refuse to go to council meetings on a Friday night. We could reduce our time commitment to 40 hours a week, but would that be the responsible, sensible thing to do? Would it be serving our constituents if we refused to do all the things that we have to do that take us 80 hours a week when the House is sitting and 60 hours a week when it is not?
When I first came to the House in 1983 there were stories about some of our illustrious predecessors, from both sides of the House, who did not believe in holding surgeries. There is a wonderful story—perhaps it is apocryphal—about a Member who would telephone his constituency association and say, “I shall be making my annual visit to the constituency in March. Please lay on the cocktail party.” Those days died out 20 or 30 years ago, and rightly so. The service that we are now expected to give is heavy. There is no shortage of people who are willing to become MPs and take on a work load of 60, 70 or 80 hours a week, but I believe that the pay should reflect that burden.
In the second section of the report, the SSRB and PricewaterhouseCoopers set out some comparators. On page 17, the total package for MPs—our total reward, including pensions—is compared to that of a head teacher, a police superintendent, a senior civil servant at grade 1, a county council second-tier executive, an armed forces colonel and a director of a health trust. Our salary comes out as 90 per cent. of theirs; in some cases, it is 83 per cent. When the comparison is with those in small companies, the figure is 58 per cent. However, that is on the assumption that we are doing a 40-hour week, as many people in those professions are.
Can anyone imagine the outcry if the House or the Government had said to doctors, “We’re going to fix GPs’ salaries, and there’s going to be an assumption that they’re doing only 40 hours a week”? We know that they work excessively long hours—60 or 70 hours a week—and their pay reflects that. Conversely, could we say to the chief executive of a small district council, who, it seems, is on £81,000, “We’ll pay you £81,000, but dear chap, you’ll no longer work 40 hours a week; it’s going up to 70”? There would be an outcry.
So I believe that the SSRB has misled itself from the beginning in fixing as a fundamental principle that it does not consider the hours that MPs work or take the work load into account. If that were taken into account in a review, we may come out with slightly different comparators.
Does my right hon. Friend accept, as he will hear when I speak later in the debate, if I am able to catch the Speaker’s eye, that the situation is rather worse than that? The costs, as assumed by SSRB, of our pension scheme, as assessed by Watson Wyatt, contain a number of fundamental and serious factual errors by Watson Wyatt.
My hon. Friend is respected in all parts of the House for the tremendous amount of work he has done in chairing our pensions committee. No one can speak with more authority on House of Commons pensions than he can. I hope his words will carry weight in all parts of the House.
I quote the examples from the report not because I want us automatically to link our salaries to them, but to show where I believe the SSRB has slightly misdirected itself. I hope that if we on the MEC can do a review, we would not tie our hands in such a way, we would consider the work load and the hours that we work in addition to the other factors, and we would look at a basket of comparable jobs in the public sector and the private sector, and not limit ourselves to the basket that is included in the report. There is a range of other comparators that could be included in the basket. From what I have seen of the staff of the Fees Office and the Directorate of Resources and the expert researchers in the House of Commons Library, I believe that we could come up with recommendations as good as, if not better than, those that Sir John will produce.
And there will be something else. Sir John will make his recommendations to the Government. That is fair enough, and I accept entirely the assurances of the Leader of the House that the Government will not sit on the report for six months this time; it will be brought quickly to the House. If we, the Members Estimates Committee, had given the stamp of approval to bring forward proposals to the House today, we would be reporting to all Members—to the House. At some point it would be up to the House collectively and all Members to grasp the nettle of what we had proposed. If all colleagues thought that what we proposed was nonsense, it would soon be binned. If they thought it was right, we could go ahead with it.
I know that my amendment refers to an independent pay review body. I am not tied to that. I had to submit my amendment rather hastily. If I were to redraft it, I would refer to an independent pay mechanism. That is what we must seek to achieve—a mechanism that could be linked to a basket of salaries or something else, and which would be uprated each year by the Fees Office. The Directorate of Resources would look at the comparators and the mechanism and automatically adjust it. If at some future date it went all askew, the House would have to grasp the nettle and do something about it. Any independent pay review should report to the House, not the Government. That takes the Government’s hand out of the matter.
I will support the Leader of the House this afternoon on her motion of expression of opinion. I have no wish to rock the boat on that. However, I beg those on the Government Front Bench to accept my amendment and let the MEC have a go at producing proposals. I know that the Leader of the House said that we could produce a memorandum. We do not need the authority of the House to produce a memorandum, a document or a review. The MEC can do that, but we do not have the automatic right to have it considered on the same day as Sir John’s report. It could sit on the shelf in the Vote Office. Yes, we could take the guts out of it and table it in an amendment, but as the MEC is chaired by Mr. Speaker, we cannot have an amendment advocated in the House by a Committee of which the Speaker and the Leader of the House are members.
I seek a commitment from those on the Front Bench. I would happily withdraw my amendment. I do not particularly want a vote on it, but I know that a head of steam has built up from colleagues on both sides because what I am proposing is reasonable and innocuous. If we produce a memorandum or a document of some sort—we are not in the business of an alternative review; I am not rubbishing Sir John at all—please let us have it considered at the same time as Sir John’s report, as an alternative. That would remove a difficulty for the Government and for everyone else, except perhaps myself given the work load of the MEC in producing this.
My right hon. Friend is about to finish and he has not touched on a subject that has not been raised certainly while I have been in the Chamber, and that is the mileage allowance. Sir John Baker’s report recommends that the mileage allowance should remain as it is. Bearing in mind the dramatic rise in motoring costs in recent times, and the diversity of need for a motor vehicle between those who represent large constituencies many miles from London and those who live in urban areas, is it not time that a more rational, responsible and realistic mileage allowance was agreed?
My hon. Friend has for some time been raising the question of the mileage allowance of which he has long experience, and I will let him speak for himself on that matter. I would not like to incorporate it into my amendment. I could say facetiously that if he got a quad bike it would be a lot cheaper to run, but one gets a little more abuse as well.
I end by reassuring all hon. Members, particularly Government Members, that I will vote for the Leader of the House’s motion even if she votes down my amendment. I do not particularly want to force a vote, but many colleagues expect me to do so. If I can have the assurance that the Leader of the House will bring forward our MEC memorandum and allow it to be considered, debated or voted on when Sir John produces his no doubt excellent independent report, I would not wish to force the matter to a vote. I have signed some other amendments, but I accept the Government’s and the Opposition’s exhortations that we should stick with the pay norms that they recommend.
That is a simple request. I am not out to damage the Government or to harm the Opposition. My amendment is innocuous and straightforward, but it is a chance to give the MEC the opportunity to sort out our pay just as we have been given the responsibility of sorting out our allowances.
It is a pleasure to follow the right hon. Member for Penrith and The Border (David Maclean) who, along with his fellow members of the Members Estimate Committee and the Commission, puts much time and effort into representing our interests. I am also grateful to my right hon. Friend the Member for Warley (Mr. Spellar) for setting out so very clearly the facts regarding hon. Members’ salaries in recent years and their context.
I support the position outlined by my right hon. and learned Friend the Leader of the House. It is certainly right that we should be consistent with what we have asked public sector workers to take by way of salary increases over the past year. I wish Sir John Baker and the MEC well in carrying out their further reviews. They will need to grapple with a number of issues that will no doubt in due course attract well-reasoned representations from hon. Members.
I should like to seek clarification from my right hon. and learned Friend on one issue. If we support the proposal to increase the staffing allowance immediately, will the MEC still be able to consider automatic uprating of the salaries of members of our staff? I want to draw particular attention to chart 3 on page 33 of volume 2 of the review, which shows that 19 per cent.—almost one in five—of MPs passed on less than 80 per cent. of their staffing allowance to their staff, and less than half of staff received bonuses. The ceiling on staffing allowances is uprated in April each year by the increase in the average earnings index, but staff pay is not automatically increased. The report notes the evidence given by staff representatives that many MPs do not pass on the annual uprating.
The SSRB report concludes that the House authorities should consider issuing a notice to MPs in March to remind them of the opportunity for uprating. I think that a rather weak way of addressing the issue, especially at a time when, as my right hon. Friend the Member for Warley so ably set out, we are looking for an automatic uprating for ourselves; what is sauce for us is sauce for our members of staff as well.
I turn to another staff allowance matter, which will be referred to the MEC. Recommendation 19 is about the “Staffing Allowance”; it states that it should be renamed “Staffing Expenditure” and that the “Temporary Secretarial Allowance” be renamed “Temporary Secretarial Expenditure”. The SSRB says:
“it would help to avoid misunderstanding or misrepresentation if allowances were renamed to make as clear as possible that this is not money which in some way augments MPs’ salaries, but indeed is expenditure necessarily incurred to do the job their constituents and the nation expect of them.”
I share the pessimism of my hon. Friend the Member for Manchester, Central (Tony Lloyd): changing the names may not change how such matters are covered in the press. However, we should recognise that when the package is described as a gravy train, that is not only a matter of concern to MPs; it is not very nice for the staff to be described as being on the gravy train. They do a fantastic job for us. We have talked about the long hours that we work, but they often put in hours well in excess of what they are contracted to do. We should pay attention to that in the months ahead, as we sort these matters out.
I endorse my hon. Friend’s views on staff. Has she had the opportunity to compare the salaries that we are able to give our hard-working staff with those often given to local group assistants in local councils? Those salaries are often in the mid-£30,000s; it is totally iniquitous that because of how our allowances are put together, our members of staff based in London cannot earn as much as Labour, Conservative and Liberal Democrat group assistants out in the sticks, where the cost of living is not as high.
My hon. Friend makes her point well. I thought that she was going to make a comparison with the salaries to which our staff often move on quickly in the world outside Westminster—and rightly so. Just as there is no shortage of people queuing to become MPs, there is no shortage of people queuing to work for us in Westminster. Nevertheless, the gap between what our staff do for us and what we are able to reward them with, and what they should be able to attract, is considerable. If we are to argue that we ourselves should have automatic increases, at the very least we should say the same about our staff. If any hon. Members argue otherwise, I suggest that the system be put the other way round for them, so that they would be notified of what the salaries would be increased to—unless they intervened to have them reduced. We would see what would happen then.
I said that I would be brief. I hope that in winding up, the Minister will join other Members in saying that MPs should be praised by the media for arguing that their hard-working staff should be fairly rewarded; the concept of being on the gravy train and inflating some personal allowance is ridiculous. The hon. Member for North Southwark and Bermondsey (Simon Hughes) clearly outlined the fact that the money does not pass anywhere near our personal pockets, and rightly so.
I am sure that MPs’ pay and associated issues will continue to be a cause of lively public debate even if we successfully implement some of the proposals that we have been discussing. Nevertheless, they will provide a much better framework around which to have that debate.
We are having an interesting debate on this issue. It is perhaps not as heated or exciting as some that we have witnessed in the past, because in some respects, there is a great deal of consensus around the House.
To the extent that there is any tension or disagreement, it seems to cut to the question of the relationship between this sovereign House and the Government as it affects the matters before us. I should like to point out to Members the difference between the administration estimate—that is, the budget spending line that runs the House of Commons, employs the House staff, and is responsible for the fabric of the building and security—and the Members estimate, which we are discussing. The administration estimate is the property of this House. The House is responsible for it and it is administered by the House of Commons Commission. Members ask questions of the Commission about how those moneys are used. The Commission produces an annual report that Members can debate and lays before this House annually an estimate for the running of the House.
The Members estimate, which is the budget spending line from which Members’ pay and allowances are paid, is not the property of this House but is deemed to be the property of the Government and the Treasury. That, at least, is the theory. One might ask various previous Leaders of the House who have been responsible on the occasions of these debates on SSRB reports whether they felt that they had control over the Members estimate. There have been some memorable debates in which the Government have not had their way and this sovereign House has shown that it is indeed responsible for this line of spending. In reality, the Members’ estimate is neither fish nor fowl—it exists in a sort of limbo. Only a Minister of the Crown can propose an increase in expenditure against it. That is why expressions of opinion, whereby other Members can make suggestions, sit alongside the motion.
On the question of a mechanism for deciding pay, I have no problem with what the Government are doing. They have proposed that for the current year, 2007-08, the pay rise for Members should be staged in such a way that its value is only 1.9 per cent. over the course of the year. There does not appear to be any great controversy about that. Nobody has argued against it or tabled an amendment suggesting anything different, and the Front Benchers of all three parties have urged Members to support that restraint at this time. The Government have also concluded that it would be right to have conducted a review that attempts to produce a new mechanism that does not require MPs to vote annually on their pay for the coming year. There is a general consensus around the House that if a workable system can be proposed, that is a good idea that we would all welcome.
There is a problem, however, in relation to how the Government are going about this. In my view, the report that they commissioned from the SSRB should have been a report to this House, but because of the peculiar relationship that I have described as regards the Members estimate, it was a report to the Government, which they then sat on for more than six months. We all speculated that it must be a real hot potato, and that there must be something absolutely diabolical in the report that was causing the Government terrible political angst, which meant that they had to sit on it for six months. When the report came out I read it, re-read it and read it again, and wondered what on earth had caused the Government so much difficulty. That is the first grievance I wish to log about the way in which they have done their business.
I wish to flag up some serious misgivings about what the Government now propose. They are asking us to rescind and tear up the resolution of July 1996, which has governed how such matters are dealt with for the past 12 years. Effectively they want us to sign them a blank cheque. We have to buy a pig in a poke, leave matters with them, and they will have a review conducted by someone of their choosing who will report back to them. We all just have to relax: it will all be okay because they will see us right.
I do not think that that is a sensible or logical way for the House to proceed. That is why there is an amendment on the Order Paper in my name, and in the names of other Members who serve with me on the Members Estimate Committee, suggesting that we ought not to rescind the existing arrangement until we have seen what the review recommends, and resolved as a sovereign House what we are going to do about it, and what the arrangements should be in future. It is simply logical not to rip up the old system before resolving what the new one will be.
More specifically, the Government have made no suggestion about what MPs’ pay rate should be for 2008-09. That is why my amendment suggests that while we are waiting for a new system to emerge, we should have what is suggested under the existing system—what the SSRB recommended—for next year. It is the only proposal on the Order Paper that makes any provision for any pay rise next year.
During the course of the debate, we have heard from the hon. Member for Manchester, Central (Tony Lloyd) and the right hon. Member for Warley (Mr. Spellar) various rather more detailed suggestions about the task that lies before Sir John Baker—what he will do, what he will recommend and what might come back before the House in July. I have no knowledge of that. I have no particular problem with that state of affairs; I am not sulking because things have been said to those two eminent Members that have not been said to me, but it seems odd that we are being asked to sign up to this change when none of the information concerned seems to have been shared, through the usual channels or by any other means.
Sir John is being asked to return in July with a recommendation for a new mechanism. There is no suggestion as to when this mechanism will take effect, and it was more or less hinted in response to certain interventions that he will make some sort of recommendation for a pay rise for 2008-09. However, I am puzzled by that, because if Sir John Baker comes up with a new mechanism that will operate in future, and part of that mechanism might be the creation of a new body, when will it be created? When will it start to establish the comparators, mechanisms and so on? It will clearly not be possible to do that by July, and unless the new mechanism is determined by Sir John Baker doodling a sum on a pad, there is no possibility of any proposal of a pay rise for 2008-09 by the time we have the debate in July.
Again, we are in danger of mixing up two elements. One is the question addressed by the SSRB of the extent to which there is a need to redress the deficiency when comparison is made with the comparators—the catch-up, in other words. The other is the question of an index by which increases would come in automatically. The question of having a body to examine what happens if such an index fails is another matter. I hope that the Deputy Leader of the House will make it clear that there is no proposal to set up a permanent SSRB to report constantly, only a body that deals with the index. There are two separate issues. The hon. Gentleman could deal with one—and even with the future index—but they are separable.
Again, I am interested in the right hon. Gentleman’s comments, which sound sensible. He is a sensible man, but none of the information has so far been shared with the House. It cannot be discerned from the written terms of reference to Sir John Baker, which were published only yesterday. It was naughty to publish the terms of reference for the review after the deadline for tabling amendments for the debate. That is exceptionally bad practice.
The long and the short of it is that the House is being asked to put its faith in the Government and allow them to drive the processes forward. Clearly, some hon. Members have far more information about what is intended than others, and it is therefore difficult for the rest of us to assess whether that is a good idea. I appeal to the Deputy Leader of the House to share with the House what Sir John Baker will be asked to do. Hon. Members have suggested, for example, that he will be asked to do one thing for the next couple of years and something else for the years thereafter. Perhaps that is true, but the terms of reference do not state that.
The sooner the matter can be clarified, the better. I tabled an amendment precisely because of the vagueness and lack of information from the Government about what is intended to happen with the review and the pay settlement for the coming year. If the Government could clear up some of those matters, it might be unnecessary to press my amendment to a Division.
Sir John may be an estimable individual, and an agreeable dinner companion to boot, but, on the evidence thus far, I am sceptical about the merit of his continued involvement. Given that he made a recommendation on pay that the Government have chosen not to accept this year, is it not bizarre, to put it mildly, for the Government to imagine that he will deal with the situation next year? He might again make a recommendation that they are disinclined to accept.
The hon. Gentleman makes a good point. Inviting Sir John to undertake the review is interesting, given the difficulty that the Government seemed to experience for the past six months in digesting his previous utterance. I believe that the House should control the Members estimate, as it controls the administration estimate, and that the House, not Her Majesty’s Government, should decide to whom it remits such matters for review. I therefore support amendment (c) to the motion before the House, which provides that the Members Estimate Committee, as the only body in the House that could reasonably do the work, should examine the issues at the same time as the review.
More than six months have passed since the SSRB report was prepared. The Government had the first draft report in May. It was sent back for further consideration—whatever that means. I believe that a second draft was sent to the Government in late May or June, and that it, too, was sent back for “further consideration”. The report was then sent to the Government at the end of June or beginning of July. It would be interesting to see the correspondence, if there was any, between the Government and the SSRB during that gestation period. Perhaps we could find out through the Freedom of Information Act.
I congratulate the hon. Gentleman on the excellent and relevant speech that he is making, but will he pick up the intervention that my hon. Friend the Member for West Worcestershire (Sir Michael Spicer) made? It might be helpful for the rest of the debate if the Deputy Leader of House could indicate in an intervention that she would look sympathetically on the hon. Gentleman’s amendment (f), which I happen to support, as well as amendment (c), standing in the name of my right hon. Friend the Member for Penrith and The Border (David Maclean), who spoke to it very articulately.
As a point of principle, it would be desirable if the Deputy Leader of the House responded to the point that the hon. Gentleman has just raised. On a more practical level, it might be possible for any number of Labour MPs who must be detained on the estate to make an earlier departure, if those who have amendments on the Order Paper could be given the sort of satisfaction that we are looking for.
In the case of amendment (c) to the motion before us, standing in the name of the right hon. Member for Penrith and The Border (David Maclean), the Leader of the House came tantalisingly close to giving him what he is asking for, which is simply that any report from the MEC on pay would be considered in the House as part of the debate on any report that comes to the Government from Sir John Baker. Everybody would be saved an awful lot of trouble if the Deputy Leader of the House could move that final inch, preferably right away, but otherwise at any point during this debate—but I see no sign of her taking up my invitation now.
The hon. Gentleman is on to an important point. Every hon. Member finds the issue of voting on pay uncomfortable. We need to ensure that when Sir John Baker produces his report there are two possible alternatives before the House, so that we, as Members of Parliament, can take the best way forward, and take away the question that is so often raised, and with which we so often struggle. Surely it must be in the House’s interest, and therefore in the Government’s interest, to accept amendment (c), which I understand is signed by three members of the Commission, to which we are referring all such matters anyway.
I entirely agree with the right hon. Gentleman, and this is why. The SSRB has just sent us a detailed report covering all aspects of hon. Members’ allowances—I say “just”, but hon. Members will know what I mean; it actually sent it to us last July. There are some good ideas in that report and the motivation for making many of the recommendations in it was entirely laudable. Regrettably, however, some of them are slightly less practical than they might be, and have all sorts of unintended consequences that cannot possibly have occurred to the authors of the report.
For example, having totted up what the changes in the office rental and staffing arrangements would mean for me, I discovered that I would lose £12,400 a year from my allowances. I do not believe that it was the intention that the SSRB would have that impact on anybody’s budgeting, but it did. The SSRB ought to have some objectivity and independence; it commissioned people to look at things in markets out there in the real world, and produced a report with some good ideas, but also with some glaring anomalies, which the MEC will be required to consider. If that report is the only one before us when we come back in July, there is every risk of further complications, unintended consequences, inaccuracies, anomalies and other inconsistencies, which will put the House in a difficult position.
If that report is the only proposition before us, we will again be presented, on a “take it or leave it” basis, with something that we know to be riddled with flaws. It would make far more sense if the MEC, which can see the flaws in the current proposals on allowances, were allowed to put in its tuppenceworth on the subject of a pay system for the future, because when we hold that debate, it would benefit the House to have that alternative before us. I cannot comprehend why there could conceivably be thought to be a problem with that.
In general, there were many suggestions in the SSRB report that we can take forward. I have stressed that the MEC is only too willing to try to iron out some of the problems. We have heard from Members on both sides of the House what some of the practical problems are, and we will earnestly use our best endeavours to put them right, and to come back to the House at a later date with a workable set of proposals on which Members can take a view.
I hope that every hon. Member will support the Government’s motion to keep our pay increase in line with those for the rest of the public sector. That is essential for our self-respect. If we do that, we can then look the police and other public servants in the eye and say that what is good enough for them is good enough for us. If we do not, I fear that, as a profession, we risk sinking even lower in the public’s esteem than we are at the moment, and we would have only ourselves to blame.
On the question of linkage, I think that everyone agrees that it is a matter of perennial embarrassment to most of us that we are called upon to determine our own remuneration. In speech after speech, going back more than 30 years, hon. Members have lamented that fact and called for the matter to be taken out of our hands, yet here we are, 30 years on, and it is still in our hands. The difficulty with all previous attempts to index our pay is that they were complicated and completely incomprehensible to the outside world. The 1996 motion, for example, described an increase by
“the average percentage by which the mid-points of the Senior Civil Service pay bands having effect from 1st of April of that year have increased compared with the previous 1st of April.”
That is not very comprehensible even to us, who obviously take more interest in our pay, let alone to those in the outside world.
Another difficulty has been the one that I mentioned in an intervention on the hon. Member for North Southwark and Bermondsey (Simon Hughes), namely that, every so often, the SSRB or its equivalent has recommended an increase that was way out of line with what was going on in the rest of the world. That has happened under Governments of all persuasions, and they have felt obliged to intervene and impose, or attempt to impose, some sanity.
It is my contention that there is no need to look for a complicated solution when a simple one is available. So, in July 2001, in the hope of putting an end to this nonsense once and for all, I proposed that future increases be increased by the average of the annual awards to nurses, teachers, doctors and dentists. As it happens, if that had come to pass, we would all have done rather well, as those professions tend to do well under Labour Governments, although not all of them are prepared to admit it. However, my proposal was dismissed out of hand by the then Leader of the House, Robin Cook, with the result that we yet again find ourselves back in the same old mess.
Today, my right hon. and learned Friend the Leader of the House of Commons is proposing, with the best of motives, another review. I fear, however, that after much learned deliberation, such a review is likely to saddle us with yet another unworkable solution. In an effort to avoid going round the same old track again, I tabled an amendment—which, regrettably, has not been selected—proposing to link future salary increases to the state old-age pension, thereby permanently and irrevocably linking our fortunes to those of the humblest of our constituents.
My hon. Friend mentioned his previous proposal for a pay formula that would have resulted in our pay being linked to certain professionals who have done rather well. He now suggests that our pay increases should be linked to those of pensioners. Does he believe, however, that it would be reasonable for the Government ever to forgo the right to intervene in MPs’ pay, or for this House not to recognise its role as a sovereign body? In order that our pay increases, whatever the circumstances outside, should actually reflect what is politically possible rather than being linked to dentists, doctors or whomever— I hope that my hon. Friend will take this in the spirit in which it is given—we really need to understand that the Government have to govern, and they have to have the right to intervene wherever and whenever that is necessary.
I would hope that we could get ourselves into a position where the Government would not feel obliged to intervene every time; but perhaps we cannot, in which case we are doomed to go on having these debates every four years for eternity.
I want to make it clear that I am not wedded to any particular formula. To my pleasant surprise, I found myself in general agreement with my right hon. Friend the Member for Warley (Mr. Spellar), who is no longer in his place, when he suggested a number of different alternatives: indexing to the average increase in public service wages, for example, though he lost me on the Chicago grain index. Whatever formula we alight on has to be readily comprehensible to those outside this place. It also needs to be easily defensible so that we can look our constituents in the eye, which we have not always been able to do in the past.
We did once have a link with a certain grade of civil servant and it was suggested that our pay should go up automatically in line with that. The difficulty that has arisen is that there is now a basic increase for civil servants and then rewards for performance on top of it. That means that linking us to the base civil service increase, as we were last year, giving us 0.66 per cent., does not reflect the reality of the situation.
I am not in favour of our trying to identify yet again another civil service grade to which we can be linked, because it has got us into all sorts of difficulties in the past. On one occasion, I believe that the grade was abolished, so we found ourselves promptly back where we had started.
Let me repeat that I am looking for something that is easily defensible and easily explicable to our constituents in the outside world and that will not get us back here debating the subject every three or four years as we are today. I fear that Sir John is going to come up with something—I am sure it will be independent—that either the Government will feel obliged to interfere with or will not be viewed as credible in the outside world.
It fills me with despair to think that the first of these debates I participated in was in 1987 and that it was exactly the same as today’s: everyone was lamenting the fact that we were all here again discussing our own wages and everyone had their own complex formula for sorting it out. Nevertheless, here we are, 21 years later, going through it all again. I read the debate of 1975 and there was Edward Short at the Dispatch Box, talking about a formula linked to a civil service grade—but here we are yet again. I want to see us putting a stop to all that and doing something simple and easily explicable to the outside world. When the Deputy Leader of the House concludes the debate, I would like to hear some assurance that in their evidence to the review the Government will emphasise to Sir John the need for a formula that is simple, workable, easily understood and morally defensible.
I think that I entered the House a little later than the hon. Member for Sunderland, South (Mr. Mullin), but I remember that one of the very first debates that I attended in 1983 was about Members’ pay, and exactly the same issues that have been rehearsed today were rehearsed then. We sensibly decided on that occasion to link pay to a grade in the civil service. I did not think that it was particularly ambitious to link our pay to 78 per cent. of that of a principal officer—just one above the fast-stream entry grade—but, nevertheless, it resolved the problem for quite a long period.
I want to talk about two issues. One has had a lot of attention and the other has not, so hopefully I can shorten my speech. The one that has had a lot of attention is what the uprating mechanism should be. As the hon. Gentleman said, I personally think that it should be simple and comprehensible, not just to us but to our constituents. I would have thought that it should be something like the annual percentage increase in public sector pay. The Government are concerned that our pay must take account of their public sector pay policy, and that mechanism would. The Government are in one way or another negotiating if not setting public sector pay, and we would be one year ahead of it—or behind it, whichever way one looks at it. I believe that if our uprating on, let us say, 31 March every year were linked to the average increase in public sector pay over the previous 12 months, that would take the problem away.
The Government, whether Labour or Conservative or anything else, must keep their hands off this matter. When they interfere, they simply make the problem worse for themselves. They lower the increases for three or four years, which they think helps. Actually, I do not think that the press care; whatever we do, they will be unhappy with us. Whether it is 1 per cent. or 10 per cent., we will get the same bad publicity. If the Government interfere to suppress annual pay increases—I hope that the Deputy Leader of the House takes this on board—they can do it for four or five years, and then we will insist on having a whacking great catch-up increase and it will look awful. Were the increase 2.5 to 3.5 per cent. a year, or whatever the general rate of increase in the public sector was, that would satisfy us and the public, and would not create these horrendous problems. Linking it to public sector pay is the way to go, but I would be happy to consider any other index that is suggested.
I must pick up a point made by my right hon. Friend the Member for Penrith and The Border (David Maclean). This is a House of Commons matter, not a Government matter. The hon. Member for Sunderland, South said that the trouble is that the Government control the matter, but they do not. When it comes back to the House, I hope that some amendments will be tabled by Back Benchers, and that we will be allowed to vote on them. The Government do not control this; they control about 100 votes, but the rest of us can speak and vote for ourselves.
A fair amount of remarks have been made about the erosion in our pay, and I do not need to reiterate those. Had the mechanism that we had agreed been followed, however, we would now be paid between £65,000 and £66,000 a year. Were we to continue to allow the erosion of our pay relative to other people, or to the public sector, that problem would sooner or later get so bad that it would have an effect on the sort of people who get into this place. If we want to fill it with people who are either fanatics or rich, that is the way to go, but it is not sensible. There are people who would do the job for nothing—I would be happy to present “Newsnight” for nothing—but whether they are the right people is a different question. It is not the right way of qualifying for a job. We certainly do not want to fill the place up, as we did until about 100 years ago, with people who have significant other sources of income.
I want to turn to the second point. Once we have the uprating mechanism agreed, what is the starting point? Is it what we are paid now? Is it £66,000, £66,170 or what it would have been if we had had the uprating as agreed? Is it something different? I do not think that the study done for the Baker review was right. Comparing the skills that Members of Parliament bring to the job is not the right way to decide what they should be paid. We 646 Members constitute a huge variety of people. Some of us have enormous earning potential out of this place, and some of us do not. Some of us have professional qualifications, and others do not. But we all come here equal, and while we are here we are all equal, and we all need to be paid the same. Trying to compare the skill levels and the hours of work will not produce a satisfactory answer.
What we ought to do is look at what other people in the public sector are paid. I made a start with the people employed by the House of Commons Commission, all five members of which have spoken in this debate. It employs just over 1,500 people, of whom 92 are paid more than Members of Parliament. I expect that all of those people are properly paid—at one stage, when I was in the Treasury, I was responsible for civil service pay and an enormous amount of attention was given to trying to get the right pay grades to recruit, retain and motivate civil servants, and I am sure that a lot of attention is paid to their salaries. But is it right that 10 people in the Department of the Official Report are paid more than us, along with 10 people in the Department of Finance and Administration, 21 people in the Clerk’s Department—that might be more understandable—13 people in the Information Communications and Technology Department, two people in catering, six in the Library and nine in the Serjeant at Arms Department? There is a status issue. We are not just putting in hours of work, being social workers for our constituencies, or giving vent to our views on the great events of the day. Members of Parliament have some sort of status as well. We have to consider where that should place us on the public sector pay scale. I find it difficult to believe that my status, and that of all of us, in the public sector is less than 92 people who work for us for the House of Commons Commission.
I have looked at one or two other areas of the public sector—I do not pretend that there is any system to the areas that I have examined. We are paid at the low end of what a lieutenant-colonel in the Army or commander in the Navy is paid. We are paid at the low end of what a police superintendent is paid. Lieutenant-colonels in the Army, commanders in the Navy and police superintendents are often—this is certainly the case in the armed forces—bright 38-year-olds who are going somewhere. Is that the right end of the pay scale for us, or should we be paid in conjunction with a higher grade?
When we look at pay in local government, we really do find out how badly paid we are. There are 852 officers working in 34 county councils who are paid more than Members of Parliament. Our pay is the same as about the middle rate paid to what is called a third-tier manager, and the third tier does not include the chief executive. The order is chief executive, first tier, second tier, third tier. There are 1,000 officers in district councils who are paid more than us, and we are slightly higher than the top end of the second tier. The order is chief executive, first tier, second tier. Then there are the metropolitan councils, the unitaries and all the rest. Nearly 7,000 officers in local government are paid more than Members of Parliament. Is that really how we see ourselves? Is it the right place for us to be?
There are 4,000 members of the senior civil service who are paid more than Members of Parliament. I do not agree with the methodology of the PricewaterhouseCoopers study, but I was interested by the suggestion that our comparator was a grade 1 civil servant. For those of us who go back a while, that is equivalent to the old grade 3 or grade 4 under-secretary level. The average pay of grade 1 civil servants is about £71,000 a year and their average bonus is about £10,000, so we are looking at about £80,000 a year. There is a grade 1a, at which the pay is about £10,000 or £12,000 more.
It may be a bad idea to take a look at the pay scales of the judiciary, but let us look at the bottom end, level 7. The chairman of an employment tribunal or an immigration judge receives £98,000 a year. At level 6, a Land Registry adjudicator or the regional chairman of a mental health tribunal—we are not talking about the Court of Appeal or the High Court—is paid £117,000.
We will all have views on where we sit on the scale, but I think we must consider where we as Members of Parliament see ourselves in relation to other people in the public sector. I very much hope that we shall be able to choose the right level in future, and I shall seek to table amendments to that effect when the issue returns to the House. I think that we should table a series of amendments suggesting levels £5,000 apart rising from £60,000 to £100,000, because I consider the right amount to be somewhere between the two. My own view is that it is in the £75,000 to £85,000 region, but I think there should be a series of amendments on which we can vote. We will take a lot of flak once, but we will settle the issue of what the base should be before whatever uprating mechanism on which we agree comes into effect.
The hon. Gentleman got off to a pretty good start, but somewhere along the line he has gone away with the fairies. I fear that if we go down the track that he is now recommending, he will get us back into exactly the sort of trouble that we have got into in the past.
I will get us into it once. There will be one unpleasant occasion on which we settle this and then we will not have to settle it again, certainly during the hon. Gentleman’s political career and mine. It is possible that the issue will return during the political careers of some of our younger colleagues, but I think it will see us out.
If we let the editorial writers of the Daily Mail and The Daily Telegraph set our pay, we are done for.
I am sure that none of the people who write those editorials would do the job even for the pay of the chairman of an immigration tribunal, let alone for what we get.
I think that we must set our pay. I do not know whether the right level is this level or one considerably higher, but when we settle the uprating mechanism we need to settle the base from which that mechanism will operate. I believe that Members of Parliament should have a series of choices on what the level should be, and I am happy to go along with whatever the majority decide, but I think that we must settle it, because if we do not settle the base I shall not be happy about settling the mechanism. I do not think that it should start from the present level, but if that is the view of the majority of my colleagues when we have a vote I will obviously go along with it.
Would this increase cost a lot of money? I do not think that it should cost the taxpayer anything at all. I would do two things in order to pay for it. First, I would abolish the ludicrous communications allowance that was introduced about a year ago, for which there is absolutely no justification. It is £10,000 per Member, which would probably handle a significant increase. Secondly, there are far too many of us. I handle a constituency of 85,000, and the boundary commission is reducing that to 65,000 by creating an extra seat in Warwickshire. It is completely and totally unnecessary. The House could function perfectly well with 100 fewer Members, which would allow us to be paid a great deal more and to have additional staffing allowances if that became necessary.
The hon. Gentleman should pay more attention to my speeches. I had a ten-minute Bill on this subject in which I laid out exactly how that should be done. I proposed that the boundary commissions should reduce the number over a period of time: they should do so in stages every five years instead of every 15, and reduce the number by a certain amount on each occasion. I do not have my eye on the hon. Gentleman’s seat—and certainly not on my own.
My hon. Friend has introduced another element into the debate. I believe in being closely in touch with my constituents; that is a policy that I have had for all the 36-plus years I have been a Member of this House. Would not my hon. Friend’s proposal to reduce the number of Members introduce a democratic deficit, where the close relationship between a Member and his or her constituency would be eroded?
I do not think so, but this is not the occasion to debate that. I have instituted debates on the matter in the past, and I might try to do so again in future—and, if so, I would be happy to engage with my hon. Friend. Suffice it to say that I have 85,000 constituents and I do not think they have any difficulty in maintaining links with me.
I was simply offering a way of introducing a productivity gain to finance the pay increase, which is something we demand of other people. Abolishing the communications allowance would go a long way towards addressing the problem.
Let me conclude by reiterating my two main points. First, we need an uprating mechanism that does not involve annual, or even biannual, decisions, but that just happens automatically. The one I suggest is the average increase in public sector earnings during the previous year. Governments would have to agree to take their hands off, because although they might gain something for a year or two, they would lose it further into the future. Secondly, we have to set a base salary from which to operate, and I do not believe that the current salary is the right one, as there is a lot of catching up to do. We should set a salary that we think is right by looking at the pay of what we consider to be equivalent public sector posts. That should be done on a free vote of the House of Commons, with a range of salaries to choose from. I have given the salaries of some posts, and I think Members will be surprised to find that 7,000 local council officers are paid more than us and that the chairmen of immigration tribunals are paid almost £100,000 a year.
I do not want to say a great deal about the salary issue. I will support the Government’s expression of opinion, but I was very taken by the remarks of my right hon. Friend the Member for Warley (Mr. Spellar) and the right hon. Member for Penrith and The Border (David Maclean). It is difficult to find a comparator for us, because we have a unique job. No other job in the world is like it, in terms of the hours we work or the demands on us. To say that we are in charge of our own work load is to misunderstand completely our situation.
I make the point about us being unique because it is one of the reasons why we have problems with the Senior Salaries Review Body’s examination of our allowances and pay. It is also why I agree with the right hon. Member for Penrith and The Border that the Members Estimate Committee should address this matter. The only people who truly understand our job are other MPs. For other MPs to look at some of the difficulties involved would be a good way forward. I also urge the House to look at the amendment in the name of the hon. Member for Cities of London and Westminster (Mr. Field) on the London supplement.
I want to focus on London issues. As chair of the London Labour MPs, I put a detailed submission to the SSRB on our behalf. It addressed allowances primarily, but the supplement is also an important issue. According to Library figures of a couple of years ago, the differential between the rates of pay in London and the rest of the country is more than 22 per cent. It is worth noting that the differential in London weighting premiums was also higher.
My main concern is the lack of reflection in the IEP of any London element. It is self-evident that office rates in London and some other big cities are far higher than elsewhere in the country. I got the Library to do an analysis of that, which I submitted to the SSRB. The differential between London and other parts of the countries can be four times as much. Consequently, London MPs generally end up with poorer quality or much smaller premises than MPs in the rest of the country. Alternatively, they end up subsidising the cost out of their own pocket, from elsewhere in the allowances or sometimes out of party funds. A number of MPs have found that they have been unable to maintain their constituency office and have closed it down with a view to moving their staff back to Westminster. Other, newer Members never opened an office in the first place simply because they could not afford the rents.
This is not just a question of the rents, because a lot of the office running costs incurred in the constituency are met on the parliamentary estate. For example, the telephone bill for most constituency offices is substantial, but it is paid for free if the phone calls are made from Westminster. We ought to try to incentivise Members to have a constituency office. I do not want a system whereby those who decide not to have an office are penalised, but the present system has the perverse incentive of pushing people back on to the parliamentary estate, because if one does not spend one’s IEP on rent, one can spend it on other things, such as an annual report or more staff. The net result is that those who have a constituency office end up rather worse off.
A system based on a square footage allowance is the way forward, but the SSRB’s proposals are far too complicated. It is therefore right that the matter should be referred to the MEC for consideration as to how the system could be operated. It is important that our system reflects office rents separately from the remainder of the IEP expenditure and reflects the fact that rents differ around the country. I hope that the MEC examines the issue in a way that reflects those two important factors.
I am pleased both that the staffing allowance is going to be increased in respect of additional numbers of staff and that an element of London weighting will be involved. It is bizarre that London weighting was effectively abolished last time. That was grossly unfair to our staff who work in London compared with those who work elsewhere in the country. The net result was that staff ended up being paid less than the market rate—that is inevitable even on the new rates that are being proposed—or that Members employed fewer staff to meet the higher rate or our staff ended up not being looked after as well as they should have been.
There should be a London allowance to reflect realities in the labour market, but it should be payable to non-London MPs’ staff who work at the palace as well as to London MPs’ staff who work both at Westminster and in their constituency. It should also reflect the differentials in work load that some of us face, particularly those of us who represent some of the inner-city constituencies. As a result of the impact of multiple deprivation, such constituencies tend to generate significantly higher levels of complex case load than elsewhere.
I get very cross when people talk about how generous our pension scheme is. It is generous for people who work in the House for their full working life and who do not come here with prior pension arrangements. I had worked in the private sector for some 20 years prior to coming here, and I had built up a quite substantial pension pot of my own, despite the fact that Equitable Life victimised me somewhat and took a large chunk of it away. I have calculated that the byzantine way in which the retained benefits system works means that if I am able to complete service up to the age of 65, when I retire I will have paid seven eighths of my pension and only one eighth of it will have come by way of an employer’s contribution. Most pension schemes in the outside world would be far more generous to their employees than that, which is why we need to do something serious about the issue of retained benefits. The arrangements are unfair to those who come here having worked in the outside world and having built up pension arrangements elsewhere. The way in which our pensions are effectively taken off us to subsidise the House’s pension scheme is peculiar.
Overall, the Government’s proposals are fair and reasonable. It is appropriate that the MEC examines the allowance.
The hon. Gentleman has been putting the case for London and London MPs. He just said that he supports the Government’s case for putting various recommendations to the MEC. Does he therefore support the proposal that recommendation 29, on the London supplement, should also go to the MEC?
The hon. Gentleman took the words right out of my mouth. That was exactly what I was about to say. I hope that the Government will accept amendment (a), which would mean that the London supplement would be considered by the MEC, too. I hope that they will consider the proposal put forward by the right hon. Member for Penrith and The Border and will come forward with alternative mechanisms to reflect the unique nature of our job. I do not think that anything in the outside world can reflect that, as we have seen from all the SSRB studies and other contributory research. Only we understand the way in which we work. If we had two reports to consider simultaneously—one complied objectively by someone from the outside world and the other compiled by those with experience of the House—that synthesis might provide the answer for which we have been searching for so long.
It will not surprise right hon. and hon. Members that I shall start by speaking principally about the parliamentary contributory pension fund.
I want to place on record my thanks to the Prime Minister for sending me an advance copy of the report, although I received it only a week before everybody else. Because I then had to plough through some extremely complex detail about the recommendations on the pension fund and the Watson Wyatt report, it would have been helpful, and I would have been able to make an even better contribution than I am able to make today, if, as I had requested, I had been sent the embargoed copy of the report some weeks before that. That would have allowed me, the staff in the pensions unit and the Government Actuary to put together a more considered response than that which I am able to give. In the future, if I can be trusted with an advance copy, that would make it much easier for us all to have a better debate on the subject.
Unfortunately, as I have already said in an intervention, it appears that there are many factual errors in the Watson Wyatt report. Perhaps I should deal with them first, as it is important to put them on the record. In volume 2, on page 76, in paragraph 2.18, the Watson Wyatt report gives its view on how the deficit in the scheme arose. It states that it arose
“as a result of a divergence in the experience of the PCPF since the previous valuation (primarily due to lower investment returns than expected) and changes to the assumptions”—
about future benefits and so on. That is wholly inaccurate and is contradicted by paragraph 2.19 and the graph that accompanies it, which is chart 2.1. The graph shows that successive Governments took contributions holidays between 1989 and 2003. Those holidays were absolutely massive and, in the opinion of the Government Actuary, more than contributed to the current deficit. Indeed, at the time of the Government Actuary’s last evaluation, he concluded that had it not been for the contributions holidays, the PCPF would have been £5 million in surplus.
The record needs to be corrected on the reasons why the scheme is in deficit. The Government, on behalf of the taxpayer, have been failing to make their correct and recommended contribution to the scheme. Even chart 2.1, it seems to me, contains an inaccuracy. My recollection from when I came to the House in 1983—no doubt you, too, will remember this, Mr. Deputy Speaker—is that we then paid 9 per cent. for a one-sixtieth scheme. It might be that the off-blue section of the chart, which is supposed to represent our contributions, is also inaccurate. I have not had the opportunity to check that in detail while I have been speaking. [Interruption.] I hear several hon. Members confirm that that is a fact.
Messrs. Watson Wyatt also say, on page 91 of volume 2, that the build-up of benefits above the two-thirds maximum post age 65 contributes significantly to the costs. It appears that no one has told them that in 1989 we abolished Members’ right to accumulate post-65, apart from those elected before 1 June 1989. The overwhelming majority of hon. Members, therefore, do not have the right to accumulate past 65, and the remaining few who do will be phased out. However, that has not been taken into account in the calculations.
The next error appears in paragraph 2.3 on page 72. The final bullet point of that paragraph states:
“Members can commence receipt of their pension whilst remaining an MP”.
That would be great news if it were true, but of course it is wholly untrue. Members cannot draw their pension while remaining an MP, and have never been able to do so. If it were true, the costs of the scheme would be greatly increased, but it is not true.
Indeed, in light of the Pensions Act 2004, we had to make some special arrangements for those Members aged 75 and over, of whom there are a handful. The Act meant that they were required to take their tax-free lump sum at the age of 75 and commence drawing their pension, as otherwise they would lose their right to a tax-free lump sum. The special arrangement that had to be made for them was that they would be deemed to be drawing their pension from the age of 75, even though they would not actually receive it. However, they were able to take the lump sum, with the rest being held in escrow, so to speak: even though they were not getting the money, they did get increases in line with inflation as though they were getting it, so that the final pension level was correct when they eventually started to draw it. Again, I am afraid that Messrs. Watson Wyatt are labouring under a number of misapprehensions about elements that greatly affect their assessment of the scheme’s cost.
Lastly, I invite Members to turn to page 71 of volume 2. Table 2.1 repeats incorrect assumptions by stating that the normal retirement age is 65,
“although members can continue to build up benefits after that age”.
Only a few Members can do that, but the assumption is that all can. The table also says that the maximum benefit is two thirds of pensionable salary,
“although accrual can recommence if the member is older than 65”—
another repetition of the same erroneous assumption. That seems to be quite a serious series of errors in the report’s assumptions.
I am afraid that I assume that it was the Treasury. I am by no means certain of that but, if it was, one would be entitled to be rather worried about what the Treasury knows about our pension scheme. Again, a number of the basic assumptions on which the calculations are based are erroneous.
I shall refer to that later, if time permits, but it is important to get the facts on the record. Watson Wyatt apparently bases its calculations on the accrual of one year’s pension for an MP aged 54 who serves a further two terms, which totals nine years, and who draws a pension at the age of 65. That is by no means a typical length of service for an MP. All those things mean that some of the conclusions are wrong. The report also does not take any account of the effect of retained benefits. As a number of hon. Members have said, retained benefits substantially inhibit the ability of Members to draw money from the pension scheme. My staff—in conjunction, I think, with the Government Actuary—estimate that that could overstate the pension cost by between 3 and 5 per cent., which is rather a lot. It has not taken into account Members who reach the maximum benefit limit of two thirds of pay. Again, that could overstate the pension cost by another 1 per cent.
Watson Wyatt has not made any allowance for the phasing out of the early retirement provisions. The press and the general public, who are informed by the press, do not remember that on 4 November 2004 we voted to end our generous early retirement arrangements; they were to be phased out from 2009. The Government were asking civil servants and all those in the public sector to go down a similar route, although they proposed that the date for those groups be 2013. Faced with the threat of strikes across the country, the Government backed down. We made that gesture, thinking that we were leading the way and showing that we were not frightened of making the change. We thought that we would get some credit for that, but we did not—not with the public, and not with Messrs. Watson Wyatt.
Did not the Government put that proposal to employees across the public sector in 2004 because of the same problem that the hon. Gentleman said affected us—contribution holidays had been taken by public and private sector employers over a number of years?
If all the mistakes are so obvious why, when Watson Wyatt completed its first draft, did it not go through the facts with the one set of people who ought to know them—my hon. Friend and his team in the House of Commons? Why were the factual details not discussed with him?
I share my right hon. Friend’s puzzlement. I can only hope that if Messrs. Watson Wyatt or some other distinguished firm of actuaries was asked to perform a similar operation in future, there would be such discussions. Then we could avoid difficulties. The effect of not allowing for the fact that we have no early retirement provisions is to overstate the pension cost by approximately another 1 per cent. The percentage points are really starting to add up.
Watson Wyatt assumes in its calculations that MPs’ salaries will increase by an average of 4.5 per cent. per annum. I wonder where that assumption came from, given that, since 2002, MPs’ salaries have increased by about half that—by about 2.25 per cent. a year on average, and by well below inflation. I do not entirely understand—or understand at all—why Messrs. Watson Wyatt should assume an annual increase of 4.5 per cent. when making their valuations.
On that basis, one must look with a fair degree of scepticism at the recommendations and assumptions that Watson Wyatt have made. They have also made wild errors in relation to the costs of schemes for our comparators. With reference to public sector comparators, Watson Wyatt say that the cost of the police scheme is 11 per cent. The police current employer contribution is 24.6 per cent. and police throughout the country are complaining that it is not enough, and that because of the high cost of their pension scheme, they will have to get huge subsidies from their local authorities to be able to maintain their present activity.
That demonstrates once again that the methodology and basic assumptions of Watson Wyatt are critical in this. They seem to have based their costs on a similar 1/60th accrual, on the same basis as in the calculation for an MP with the nine years’ potential service. However, a chief superintendent is likely to have a career of more than 20 years. That would result in an accrual rate of 1/30th for each year of service between 20 and 30 years. When Watson Wyatt look at our comparators, they seem to get it seriously wrong. Some of the other examples are not quite so badly wrong, but it does not give one a huge degree of confidence in the recommendations that they subsequently draw from the assumptions that they have made.
It is important to get it on the record that the parliamentary contributory pension fund—PCPF—is rather a good scheme. It is similar to a number of others in the public sector, but despite what frequently appears in the press, the cash benefits that are provided under the PCPF are not a king’s ransom. The average pension in payment to former Members in the last Government Actuary Department’s valuation in 2005, excluding what was being paid to widows, was £15,700 per annum, yet if one looks at what is published in the papers, they give the impression that MPs have to do only one or two terms here to be on £25,000 a year. The average pension in payment is £15,700 for Members who have done many more years than that.
The GAD estimates that the average pension currently in payment is around £17,000. That takes account of the pension increases in the past two years and the level of pension of Members who will have retired following the election. The average pension built up to date by serving Members is £20,100. All these figures, which are comfortable—much more so than the pensions of many of our constituents—are nothing like the allegations of gold-plated pensions that appear in the national press.
The last triennial valuation of the scheme costs by the Government Actuary’s Department increased the Exchequer contribution to 26.8 per cent. of Members’ salaries. It is being put about that that is the cost of the scheme, but it is not. It is the cost of the scheme, including the amount that the Government now have to put in to make up for the 15 years under successive Governments of contributions holidays that were taken, which created the current deficit of about £49 million.
I do not have the figures to hand, but it is a very small number. Only a minority of Members ever go the full distance. The average Member comes in at the age of 42 and leaves at the age of about 52. Very few Members will ever get to the full final salary, and that will not change much because of boundary changes and Members losing their seats. The media think that we backdated the fortieths, but we did not. I would still have to work in the House for 31.5 years to get a full pension. Only those Members who have come into the House most recently since we moved to the fortieths arrangement will not have to work more than 27 years.
As I was saying, the 26.8 per cent. headline figure of contributions for us is misleading, because it includes 8.7 per cent., which is the sum per annum that is allowed to make up the estimated deficit of £49.5 million, which has arisen entirely from the contribution holidays. That is not helped by the abolition of the tax relief, which the Government implemented early in their life. Our scheme has been affected by that just as much as anybody else’s.
That leaves an actual Exchequer contribution for future service of about 18.1 per cent., which is broadly similar to private sector schemes and other public sector schemes, which can quite often be more. For example, the civil service scheme is costing about 19 per cent. So we are not out of line with either the private sector or the public sector.
Ours is an unusual scheme in a number of respects. First, ours is virtually the only public sector scheme that is funded by Members’ contributions, investment returns—because ours is fully invested—and an Exchequer contribution. So it is unique in that. The other area in which it is unique is that it is not a final salary scheme. It is a scheme based on the salary of the lowliest Back Bencher at the time of retirement. It is true that Ministers or office holders have an additional amount of income and they pay 10 per cent. of that addition into a special account, which then effectively buys them additional years—that is the way it tends to operate—but that applies only for the period, often limited, when hon. Members are Ministers or office holders. They can be very brief careers indeed in some cases. The general public think that Ministers will retire on a pension that is two thirds of their ministerial salary. They do not and they will not, with the exception of the Prime Minister, Mr. Speaker, and, until recently, the Lord Chancellor, although that is now being reviewed. Everybody else retires with a pension that is based upon that of the ordinary Back Bencher. That is unique. When everyone outside says, “Oh, but you are on a final salary scheme,” they expect us to have a scheme that is based on our peak earnings in this place, but that is not the case.
If an MP—even those who have elected to build up at a fortieth rate, which is the newer people coming into this House—was to serve 15 years, which is rather more than the average, they would be entitled to a pension of only £22,500 compared with the enormous figures that are estimated by the media, who are extraordinarily badly informed on these matters.
Earlier, I touched on the problem of retained benefits. Those who had pensionable careers before they came to the House are not entitled to their full parliamentary contributory pension fund pension because of the restrictions imposed, although they could go back to a 1/60th scheme, which is one of the recommendations in the SSRB report. Even as we are, MPs will have paid a higher contribution rate, at 10 per cent., than that made by almost all other employees in the private and public sectors. Indeed, executives in the private sector typically pay less than 6 per cent. for far more generous schemes than are available to us.
I turn to the report’s recommendations. Recommendation 8 relates to the deficit and says that the Government contribution should be limited to 20 per cent. of the payroll. I do not disagree with that, but the Government are suggesting that if they go beyond that, we should either have a full review or any increase in costs should be shared equally between Members and the Government. For the most part, that pattern does not exist outside the House; if there is an agreement that an increase will be jointly funded, it is normally according to the same ratio—for us, that would be 20:10, or two thirds for the Government and one third for us.
Recommendation 6 is about retained benefits, and I am happy about it because it provides for an arrangement under which reduced contributions would be payable by those who could not get a full pension. That seems fair; at the moment, people are paying quite a lot of money for something that they cannot get. The review body recommends that any additional cost should be at the Government’s expense, because they have been gaining from the contributions.
The Government now suggest in the resolutions that the additional cost should be funded by other savings made by scheme trustees. It is true that we propose to make savings, as we have done before—as we did in respect of early retirement and the abolition of the public sector transfer club. We are now considering the problem of early retirement due to ill health, and think that some of the rules on what constitutes ill health need to be tightened. The Government have suggested that the two things be linked, but I personally do not think that appropriate. The trustees started to do that under their own steam. It is likely, in fact, that the savings made will cover the cost, but I am not sure that they should then immediately be grabbed by the Government so that they can avoid complying with the SSRB recommendation.
Finally, the Government ask the trustees to consider a whole range of alternatives to the current arrangements. Those include our going to a defined-contribution scheme as opposed to a defined-benefit scheme, and going to a career-average scheme. The latter would not make much difference in our case as we are already on a flat level, linked to the salaries of Back Benchers; we do not have the steep incline that occurs elsewhere.
The Government also suggest that we should consider ways of sharing the costs. The trustees are perfectly happy to consider all those proposals and come up with ideas on how they could be implemented. However, the proposals are not without their problems. For example, have Watson Wyatt told the Government that if we closed down the current scheme to new entrants and said that they would all have to be on a money-purchase scheme, there would be substantial one-off costs related to the funding of the existing scheme, because no new money would be coming in from new Members? We will need to discuss such issues in future. We will consider them; we are always ready to do so, although it would have been nice if we had been able to, together with the Government Actuary, somewhat earlier.
The speech by the hon. Member for Bournemouth, West (Sir John Butterfill) showed how the debate has gone today, with people of massive experience across the House speaking very seriously about very serious issues. I do not have the experience that he has in the matters that he discussed, but I do have the experience of being involved as a trade union activist and negotiator for the best part of four decades. Going right back to the early 1970s, I was involved in a national strike, as were some of my hon. Friends sitting in front of me. In 1972, miners were getting paid the paltry sum of £26 a week; we went on strike and ended up with the fantastic sum of £35 a week. I go from that experience to the early 2000s, when I was involved in the negotiations on the “Agenda for Change”, which covered 1.5 million workers in the health service, and single status in local government, which covered 1 million workers. I would therefore argue that I have, if not expertise, some experience in this area.
Throughout all those years, I have never seen a pay round so badly handled by a Government. Without a doubt, the Treasury has had its fingerprints over all the public sector pay deals this year, so that we have ended up in the situation in which we find ourselves, both as public servants and as representatives of millions of public servants outside. Nurses should have been given the pay that they were due, because they were covered by a pay review body, as were prison officers, who did not get what they were due either, and ultimately ended up going out on strike; now they are facing legal challenges in this House. Obviously, as a former miner I do not have a lot of time for the police, given the history between us, but on a point of principle they should have been given what their pay review body said that they were entitled to.
The key thing about pay review bodies is that they were not settled on by some sort of whim, but mainly to try to avert or resolve disputes, and they have been very successful in that. They should have been respected, but they have not been. The sad thing about where we are today is that our pay review body should be respected, but because of how the Treasury has handled the situation in the past nine months, we cannot legitimately say that we want our piece of the cake if our constituents—our fellow public servants—are denied their share of it. We therefore have no option other than to agree to the Government’s position on the 1.9 per cent.
We need to learn a lesson from this—that pay review bodies and deals must mean something. We must have a mechanism that works, but it must be simple, too. My blood ran cold when the right hon. Member for Penrith and The Border (David Maclean), in a very good speech, talked about job evaluation and comparators. When he said that we should look at responsibility, but not at work load or hours worked, I was taken back to 10 years of knocking my head against a brick wall trying to implement the single status agreement in local government, when the very same things were said, and where we have ended up with ordinary men and women facing court cases because they cannot get agreement on equal pay, and suchlike. We need a very simple mechanism, and it is not beyond the wit of people in this Chamber to achieve that.
I ask my Front-Bench colleagues to listen to what the people on the Members Estimate Committee have said and work with them, because, as was clearly shown by the hon. Member for Bournemouth, West, they have an element of expertise that the so-called experts have not shown. We are where we are, and we need to get away from it; part of that is about involving the people whom we entrust with looking after our own interests.
We have had a very good debate, in which we have seen how immensely complex the issues and systems are in connection with determining MPs’ pay and allowances. However, I am still not clear about what system was used by the people of Weymouth in 1463, when they decided to pay their Member of Parliament 500 mackerel.
My right hon. and learned Friend the Leader of the House began by setting out the four key principles that underpin the Government’s approach: MPs should be properly paid for the valuable work that they do; they should be properly reimbursed for the costs of fulfilling their responsibilities; like others paid from the public purse, they should share the same discipline when it comes to pay rises; and in future, MPs should not vote on their own pay. Throughout the House, there has been a consensus on those four principles.
Although I believe that this House can and should always set an example, it is wrong to suggest that we are setting an example in this year alone; we have been setting an example in our pay since 2002, because our increases in that period have fallen below average earnings, below the retail price index and below inflation. We are happy to set an example, but for how many years can we do so without making the life of MPs, given the work that they do, extremely difficult?
What the hon. Gentleman says is born of his long experience, but I would draw a distinction between the Government’s proposals for the system and the upshot of a formula that everyone agrees has not worked satisfactorily in recent years.
The right hon. Member for Maidenhead (Mrs. May) made an extremely sensible speech this afternoon, and we are all grateful to her for her bravery in tackling the media coverage of this issue. She emphasised the importance of getting the timetable right, and that was also referred to by other hon. Members. I would like to restate and re-emphasise the position on the timetable for this year. As the written ministerial statement said, Sir John Baker has been charged with reporting back to the Prime Minister before the end of May. That will give us two months to consider the report, to consult and to table motions in the House, so that hon. Members can think about the process and vote on where we go from here.
Will the hon. Lady confirm whether it is possible for the system emerging from Baker’s report to make a pay award for 2008-09? At the moment, only my amendment (f) provides anything for 2008-09. Will she say whether her proposal can make an award for 2008-09?
Yes. Our objective is that Baker will report, and we will then take decisions on what he proposes, which should be an appropriate independent mechanism and comparators. We will vote on those proposals. It should not, therefore, be necessary to have separate votes on numbers, as we are doing this afternoon. The numbers for 2008-09 should come into immediate effect on the basis of the decisions about the mechanisms and the comparators; they will flow from that, and be effective for 2008 and 2009.
The issue of timetabling is important. The hon. Lady said that the Baker review would be given to the Prime Minister before the end of May, and that he or the Government will then consult on that review and table motions. Who will the Government consult, and will they undertake to publish the Baker review as soon as the Prime Minister receives it, so that Members can see it in its entirety before the Government have the opportunity to do some behind-the-scenes deal?