I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following: Government new clause 71—Parliamentary standards: Membership of Speaker’s Committee.

Government new clause 72—Parliamentary standards: Transparency etc.

Government new clause 73—Parliamentary standards: MPs’ salaries.

Government new clause 74—Parliamentary standards: MPs’ allowances scheme.

Government new clause 75—Parliamentary standards: Allowances claims.

Government new clause 76—Parliamentary standards: MPs’ code of conduct relating to financial interests.

Government new clause 77—Parliamentary standards: Investigations.

Government new clause 78—Parliamentary standards: Enforcement.

Government new clause 79—Parliamentary standards: Relationships with other bodies etc.

Government new clause 80—Parliamentary standards: Further functions of the IPSA and Commissioner.

Government new clause 81—Expiry of provisions of the Parliamentary Standards Act 2009.

Government new clause 82—Parliamentary standards: Consequential amendments.

Government new clause 83—Resettlement grants for MEPs.

Government new clause 84—Parliamentary standards: Parliamentary pensions.

New clause 87—Duty to offer advice to Members on claims—

‘In section 6 of the Parliamentary Standards Act 2009 after subsection (2) insert—

“(2A) There shall be a duty on the Chief Executive Officer of IPSA and his staff to offer advice to Members on claims prior to formal submission and to promote best practice.”’.

Government new schedule 6—Parliamentary Standards Act 2009: substituted Schedule 2.

Government new schedule 7—Parliamentary Standards Act 2009: new Schedule 4.

Government new schedule 8—Parliamentary standards: consequential amendments.

Government new schedule 9—Parliamentary and other pensions.

Amendment (a) thereto, in paragraph 1(3), after ‘Service’, insert

‘and persons the IPSA considers to represent those likely to be affected by the scheme.’.

Government amendment 133.

There are a lot of new clauses and new schedules in this group, but on this occasion I have a better explanation for that than is often the case, and it is as follows. The Committee will recall—in technicolour—how important it was for us to reach agreement before the summer on what became the Parliamentary Standards Act 2009, in order that the Independent Parliamentary Standards Authority established under that Act could be in place and operating from the beginning of the forthcoming financial year, which starts on 1 April. Meanwhile, the Committee on Standards in Public Life, under Sir Christopher Kelly, was meeting, and as I explained in my evidence to Sir Christopher and his colleagues, we accepted that the committee might well make some recommendations that would require amendments to be made to the 2009 Act. That has, indeed, happened. Members will also recall that the leaders of all three main parties—indeed, effectively, of all the parties represented in the House—said they wished Sir Christopher’s report to be implemented in full. These new clauses and new schedules seek to do exactly that.

Before I come on to discuss briefly the details of these many new measures, let me also say that the major part of the recommendations made by Sir Christopher Kelly will be implemented not so much by legislation, but by the powers and duties of IPSA. Sir Ian Kennedy and his IPSA members have already got a consultation under way on the form of allowances, and much else besides. I know that they are making themselves available for such consultation and that many Members have attended the open meetings that Sir Ian has held, but I urge Members who wish to make a response to do so by the close of the consultation on 11 February.

The report contained 10 recommendations requiring further primary legislation, as they relate to the structure and functions of IPSA, which are governed by the Parliamentary Standards Act 2009. I shall now go through the recommendations, discussing first those relating to the status and enforcement powers of the compliance officer and then dealing with those relating to the new arrangements for determining Members’ pay and pensions. A great debate took place—the shadow Leader of the House will recall it, because he was a participant—both in this Chamber and literally below it, in the cross-party consultations that were held downstairs, about where the investigator of complaints against the schemes that were to be enforced by IPSA would be situated. The debate was about whether the investigator would be part of IPSA, whether his role would be separate from it but alongside it—detached from Parliament—or whether he would be within the House.

I shall not go back over the rather tortuous debate that took place, but I can tell hon. Members that we ended up with a Commissioner for Parliamentary Investigations who, in a way, straddled both the House and IPSA. The 2009 Act also made provision for the Parliamentary Commissioner for Standards—currently Sir John Lyon—to be double-hatted, if the House wished, with the commissioner appointed under the original Act. Sir Christopher and his colleagues said that they wanted there to be a separation; they proposed that decisions on the financial code of conduct should be returned to the Commons so that that would become entirely a Commons matter, while compliance in respect of the system that they proposed should be operated by IPSA which would be separate and removed from the House.

That is what we are proposing. There will be a compliance officer, but we then need to consider who appoints the compliance officer. One of the reasons for the length of the provisions before us is that, as the Committee will readily recognise, it is often one thing to describe in prose what one wants to do—as Sir Christopher and his colleagues did—but it is an often more complicated matter to set it out in legislation that can be enduring and clear. For that reason, some of the new clauses and new schedules are extensive.

The Justice Secretary has explained that the compliance officer will work with IPSA. Those of us who are not up-to-date with all this would understand from what he said that we will also have a parliamentary commissioner who will deal with non-pay, non-money and non-allowance matters. If that is so, what are the limits to what the parliamentary commissioner might take a look at?

The role of the parliamentary commissioner is to enforce the various codes—Standing Orders—that the House has established to deal with, for example, declarations of interest. That is the most obvious example, but included in that would also be examples of advocacy in the House—cases where somebody has been taking money from a particular organisation or individual to advocate a cause and has then failed to disclose that—and many other matters. The enforcement of the rules about allowances, for example in respect of office costs, travel and accommodation, is plainly a matter for IPSA and therefore would fall to the compliance officer.

We have separated the two roles, as set out in the group of amendments. The Committee will note that new clause 70 provides for the appointment of a compliance officer and that one of new schedules sets out in more detail how that officer would be appointed and how he or she could be removed.

Further to the intervention from my hon. Friend the Member for Worthing, West (Peter Bottomley), will the terms of reference of the Standards and Privileges Committee and the Parliamentary Commissioner for Standards then be constrained, so that it will not be possible to refer the matters to which my hon. Friend referred to them?

It is subject to any advice that we get from those at the Table, but the responsibilities of the John Lyon figure and the Standards and Privileges Committee are entirely a matter for the House, full stop. These changes do not deal with that. What is in the tin will be on the tin. This is about the Independent Parliamentary Standards Authority and its responsibilities to establish and administer schemes for the payment of pay, pensions and allowances and to ensure that there is proper compliance with those schemes not only by Members of this House but by the chief executive officer and staff of the authority. So, there is a separation.

Somebody has to appoint the compliance officer. It was implicit and partially explicit that since the compliance officer had to be separate from the House, the appointment of the compliance officer could not be made by it. The question was then, “Who else could appoint the compliance officer?”

rose—

I will give way in one second.

Various suggestions were made informally, including that we could perhaps ask the Judicial Appointments Commission to appoint the compliance officer. I should say, given that I am responsible at arm’s length for the Judicial Appointments Commission and have a role in the appointment of members of the judiciary, too, that we did consider that option seriously but decided that it was not appropriate to give the JAC an one-off responsibility for a position that, although it has to follow principles of natural justice, is, at best, quasi-judicial rather than judicial.

The solution on which we landed was that the IPSA board would appoint the compliance officer. There is nothing unusual about that, and Sir Christopher Kelly explicitly drew a parallel between the compliance officers of the Department for Work and Pensions who deal with benefits and those of Her Majesty’s Revenue and Customs who deal with tax. Those departmental compliance officers are certainly not subject to any sort of elaborate arm’s length appointment procedure, as in this case, but, as we all know when we take up complaints about benefits, they can still operate at arm’s length from those who are responsible for the day-to-day administration of the benefits system.

We also pointed out to Sir Christopher—it was, frankly, merely an omission from his scheme—that, these days, if there is an appeal against a decision by a compliance officer in DWP or HMRC, it goes to a first-tier tribunal. Appeals on tax used to go to the commissioners, but they now go to a first-tier tribunal. They can then proceed up to the appeals tribunal and, if there is a serious point of law, to the senior courts. We are proposing exactly that arrangement for decisions reached by the compliance officer in terms of parliamentary standards. I think that must be right.

The schedule sets out how the compliance officer will be appointed and the powers to remove him or her from office are very tightly constrained. Once appointed, the compliance officer will be an independent office holder who will not be accountable to IPSA for the decisions that he or she might take. Kelly, whose recommendations we are seeking faithfully to implement, did not want an arrangement by which the compliance officer was appointed by some other third party. I commend to the Committee where we have landed on that point.

In new clause 87 tabled by the right hon. Member for Hampshire North-East, one issue—

North-West. It was a 50:50 chance.

I did not do badly. The right hon. Gentleman used to represent Ealing; that is the problem.

Ealing, Acton.

I am not quite as old as the right hon. Gentleman, but I am getting on that way.

The terms of new clause 87 are linked to concerns about how even-handed the compliance officer and the appeal system will be. Many colleagues have raised questions informally with me, as I am sure they have with other Members of the House, about what will happen if a Member runs into difficulty not because of any malfeasance or failure on their part but because of maladministration by IPSA, its chief executive or staff. The answer is that the compliance officer will be able to investigate complaints not only against individual Members, but against the authority and its offices.

I am still slightly unclear about something, perhaps because I have not picked up some of the nuances of earlier interventions. Will there still be an overlap between what the compliance officer does and the work of the Select Committee on Standards and Privileges? Or is it envisaged that issues that are directly within IPSA’s ambit will be matters entirely for the compliance officer, and that the Committee will therefore deal only with other issues? A failure to create such a separation will lead to overlap and ever more confusion, which will not be very helpful and will be very expensive for the taxpayer.

Day by day, those responsibilities will not overlap, but there must be the overlap that I am describing. I think that the Committee accepts that. Without that overlap, the system could be subject to outrageous abuse. That is unlikely, given what the House and Members, whether they have transgressed or not, have been through in the past year, but one can ever be surprised. If there were such an abuse—a serious fraud, which might involve police prosecution—the case would go to the compliance officer and a civil sanction might be imposed, as might a requirement to repay money. However, if the abuse were particularly outrageous, the compliance officer might decide to refer the case to the Standards and Privileges Committee, with a view to the relevant person being expelled or suspended from the House. There is no rule here, any more than there is a rule in real life, that says that if one transgresses criminal law or a statutory code, the only consequences that will follow will be those related directly to the transgression of that law or code. If one transgresses criminal law and the case is serious enough, one might go to prison, but one might also lose one’s job. Police officers who transgress the criminal law and the disciplinary code may lose not only their liberty and their job, but, in extreme circumstances, their pension as well. When I was the Home Secretary, I had to take decisions on such matters. The measures I am outlining will run parallel to such systems. I hope that that satisfies the hon. Gentleman. We do not propose that there should be second-guessing, or two parallel systems of enforcement.

No one would claim that these are easy things. It seems clear from what the Secretary of State has just said that nothing in today’s proceedings on the Bill will alter the parliamentary commissioner’s responsibilities in any way. If some of the things that the parliamentary commissioner is now responsible for will fall to the compliance officer, there is clearly an opportunity for overlap or double dealing. I suspect that we can expect the compliance officer and the parliamentary commissioner to ensure that that does not happen; they will reach an agreement.

Another issue that the Secretary of State has just raised relates to crime. A provision in new clause 79, which appears on page 662 of the amendment paper and is entitled “Parliamentary Standards: Relationships with other bodies etc”, states:

“The powers conferred by sections 9 to 9B (and Schedule 4) may be exercised…even if…the member is or has been the subject of criminal proceedings in relation to that conduct…whether or not convicted.”

I hope that he will explain at some stage how the two things can go along together. I do not object to that, but it should be done explicitly.

Colleagues will know—it is a well-trodden path—that if someone was convicted of a serious offence, they would normally come within the automatic disqualification. Let us say that the penalty imposed by the criminal courts was less than the 12 months in prison that would require automatic disqualification. Let us say that someone was acquitted in a criminal court but the facts had been admitted and the acquittal rested on a technical matter, or that the facts had been admitted but the extent of the mens rea—the individual’s guilt—was challenged and the jury decided on balance to acquit them. The jurors are saying that the person is not guilty, according to the criminal standard of proof; they are not saying that the person is innocent.

They are not saying that the person is guilty either.

No, they are saying that the person is not guilty, according to the criminal law. As happens very often in employment law, an acquittal will not exempt the individual from appropriate proceedings under employment legislation and the contract of their employment, because the standard of proof is lower, as everyone who has ever employed anyone knows. However, I do not anticipate that this will be a huge problem in practice.

Under new clause 75, an MP who is dissatisfied with IPSA’s decision to refuse a claim can ask the compliance officer to conduct a review, having first given IPSA reasonable opportunity to conduct its own review. There could be an appeal against that decision as well. So the Member could go all the way and appeal against a refusal by the authority. I hope that, in practice, such appeals will be few and far between.

Under new clause 87, which appears on page 665 of the amendment paper, the right hon. Member for North-West Hampshire (Sir George Young) wishes to add a new subsection to section 6 of the Parliamentary Standards Act 2009 that states:

“There shall be a duty on the Chief Executive Officer of IPSA and his staff to offer advice to Members on claims prior to formal submission and to promote best practice.”

Aside from the inevitable drafting problems, which can always be resolved, I hope that the right hon. Gentleman will not push that new clause to a vote, given the undertakings that I am providing. I understand exactly what he wants to achieve.

Ultimately, this is a matter for the House, but we are concerned to ensure that, if possible, the members of IPSA embrace what we are attempting to achieve and that it is practical in terms of their administration. They will certainly offer guidance in any event. I can think of cases from my own experience—they are nothing whatever to do with questionable expenses, but with straightforward matters that relate to the running of my office—where I have phoned someone in the Department and said, “Is this in line with the rules? I can’t find it anywhere in particular,” and they have said, “Yes,” and then paid it, or they have paid it for a number of years and then said, “We don’t think that it should be paid anymore,” at which point I say, “I’m now in a slight difficulty. Do you think that you could think again, and by the way, here is the paper trail?” There is no fiddle; we must know where we are. Contrary to what is often thought outside, we do not have our own compliance officers. Assiduous Members of Parliament are busy, and we are trying to run what amount to small businesses, while abiding by what will be increasingly complicated, as well as very public, rules.

I recognise that, as the Secretary of State rightly says, all of us are busy, though I am sure that we will all have learned the lesson that all the forms and applications for expenses and allowances must be completed by us, and that we should not rely on office staff to do that. We all know that there have been some terrible abuses, but where an open and transparent claim has been signed off, the biggest concern and the aspect that has aroused the anger of many Members of Parliament on the grounds of natural justice has been the attempt at retrospection—a very successful attempt under Sir Thomas Legg—going back some years.

I have always said that the rules were far too lax and that, in many ways, Members cannot complain. None the less, the issue that arises, which my right hon. Friend the Member for North-West Hampshire (Sir George Young) has tried to address, is the need for some sort of clearance process. That would apply if we had a compliance officer. If an open and transparent claim is made and accepted, surely it is wrong that many years later a Member should be expected to repay or more importantly, even if repayment is made, should be seen to have committed wrongdoing, where in fact there has been openness, transparency and the opportunity for clearance. Does the Secretary of State not see that there would be great benefits from putting in place some sort of clearance process that would avoid such problems in the future?

I accept entirely the burden of what the hon. Gentleman says. The issue is how to achieve that. Let us suppose that in such a case, the authority says, “We shouldn’t have agreed this amount for training or for cleaning,” and the Member says, “Sorry, but you did, and I did this in good faith”—there was no trickery, and on the face of it, the claim was entirely consistent with the rules. One of the things that we need to consider between now and Report is how to ensure that there is a clear power available to the compliance officer, to the first-tier tribunal and so on, to say, “There has been a technical transgression here. We accept now that the authority is right to say that there was an error, but this was nothing whatever to do with the Member, so we are not requiring any repayment.”

This may be helpful to the Minister. New clause 73(2) and (3) deal with MPs’ salaries. It is probably better if I do not read out both, but subsection (2) states:

“The first determination under section 4(4) of the Parliamentary Standards Act 2009 does not have to come into effect before 1 April 2012.”

Presumably, subsection (3) states how matters will be determined until then, but I am not sure that the meaning is obvious to everyone listening to our debates or even to everybody in the Chamber.

I have been through those provisions in some detail. Indeed, I did so when they were draft provisions, and I suggested to parliamentary counsel that the wording be made clearer. It is now clearer than it was, although the hon. Gentleman does not have the benefit of having seen the earlier drafts. IPSA does not believe that it has the capacity to set up—[Interruption.] Yes, I thought that that was the case, but I am very grateful to the Whip, as ever, for giving me instructions. IPSA, for very good reason, does not believe that it has the capacity to undertake and implement a major review of parliamentary salaries before 1 April 2012, and I am very grateful to the Whips, as ever, for keeping me in order. In the interim, the existing arrangements, which are based on the July 2008 decision of the House, will apply. They will apply until the provisions before us come into force.

The hon. Gentleman will note that subsection—

Six?

There is some very odd numbering in new clause 73, and that is something that I had not noticed before. It goes (1), (2), (3), (4), (5), (6), and (7), and then (2) and (3), but anyway, new clause 73(2), on page 657 of the amendment paper, indicates that the key provisions in the new clause would not come into force until 1 April 2012.

New schedule 9 would provide for IPSA to make pension schemes for MPs, and for the Minister for the Civil Service to make pension schemes for Ministers and certain other officeholders, such as the Leader of the Opposition. That contrasts with the current arrangements, whereby the Leader of the House determines pension arrangements through regulations.

Can the right hon. Gentleman tell the Committee what discussions took place with the trustees of the parliamentary pension fund and others before these amendments were tabled?

I cannot say precisely what discussions took place with the trustees. However, I can tell the right hon. Gentleman about conversations that I have had, particularly with my right hon. Friend the Member for Islwyn (Mr. Touhig), on behalf of the chairman of the trustees, who is currently indisposed through illness. I hope to give the Committee some comfort about two key issues that the trustees have raised with me.

The first issue relates to accrued rights—that is, the rights to a pension that Members have already accrued. These provisions are silent on whether IPSA could change accrued rights peremptorily, and there is some anxiety about that. That is no part of our intention, nor that of IPSA. The Committee will be aware that section 67 of the Pensions Act 1995 sets out the requirements that have to be followed if there are proposals to change accrued rights. If a so-called protective modification is to be made, the informed consent of the Members affected is required. Since what we are seeking to do through the whole IPSA arrangements is to put Members of Parliament in no better and no worse a position than members of the public in ordinary employment, we accept that there should be a similar protection for accrued rights. Discussions have taken place about how that might be done. Officials are considering whether, for example, provisions for Members’ pensions should hook in with the provision in the 1995 Act, which might be the most sensible way of doing it.

The second issue, which relates to trustees, has been raised by several Members, including my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). I have been to Ellesmere Port many times—[Interruption.] No, it was not briefly at all. There is a huge petrol refinery there, and when we almost ran out of petrol in September 2000, and I was Home Secretary and therefore to blame, I made it my business to visit all the refineries in the country to try to avoid a similar crisis happening again. That is why I know my hon. Friend’s constituency intimately.

The provisions as drafted give IPSA the right to appoint whomsoever it wishes as trustees. There is provision in the Pensions Act 2004 that at least one third of trustees of any pension scheme should be representative of the members of the scheme. We propose to look at that to see whether such a provision could be brought in as an amendment on Report.

I accept what my right hon. Friend has said about the 1995 scheme in relation to accrued rights; that would be a sensible mechanism to develop. On his second point, under these provisions IPSA appears to have the power to remove a trustee from the fund. Under the 2004 Act, there are circumstances in which the trust body collectively can effectively dismiss a trustee. Can we be sure that my right hon. Friend does not intend to go any further than the requirements of the 2004 Act?

It is not our intention to do that. I cannot be absolutely certain that the wording does not take it further—that is why we are actively examining the matter. We will consult very quickly and come back with modifications, which I hope will accommodate the Committee’s wishes.

The hon. Member for Ellesmere Port and Neston (Andrew Miller) did not read out paragraph (1)(3) of new schedule 9, which states:

“The IPSA may, after consulting the Minister for the Civil Service… remove a trustee of the fund”.

It then refers to paragraph (3), of which sub-paragraph (4) states:

“No provision of a scheme under this paragraph is to be construed as restricting the powers of the trustees under paragraph 2(1).”

Now is not the time to become discursive about what that may or may not mean, but I know of no pension scheme, outside the civil service, where the Minister for the civil service can be the only person who comments on a proposal to dismiss one or all trustees. I am therefore grateful to the Justice Secretary for saying that he will think more about the matter.

Point taken.

One of the amendments would remove the sunset clause, which I never wanted in the first place, so I am delighted to recommend it. I do not think that that will require further amendment.

The Committee is grateful to the Secretary of State for his lucid explanation of a rather complicated series of amendments, which seek to implement the Kelly recommendations.

Two months ago, there was some confusion in the Government as it was not clear that we would get the changes before a general election. Immediately after the report was published, all the party leaders said that it should be implemented in full. Although most of it was about the arrangements for IPSA, which are its responsibility and not ours, important proposals were designed to strengthen it, which the Committee on Standards in Public Life identified as requiring primary legislation. However, that was not mentioned in the Queen’s Speech and, when cross-examined on the matter, the Prime Minister looked somewhat baffled. Then there was confusion, with half the Government claiming that no new legislation was necessary and the other half promising to do everything that was necessary.

The Leader of the House appeared to take both positions at once. At business questions on 19 November, she conceded that some of the proposals would require legislation. She then said that they could be introduced “next Session”, but subsequently seemed to backtrack by suggesting that no legislative changes were necessary

“because the power in question already exists under the Parliamentary Standards Act 2009.”—[Official Report, 19 November 2009; Vol. 501, c. 136.]

We are therefore grateful for the smack of firm government from the Secretary of State, who has decided that we need to make progress this afternoon and in this Session.

As we have said throughout, it must be right for us to do everything in our power to ensure that the next Parliament can start with a clean sheet. While the Government still have a monopoly on the House’s time, it is up to them to ensure that we get through all the reforms that are needed to allow the next generation of Members of Parliament to do their jobs, without being associated with the bad practice that has left the current Parliament so badly discredited.

The amendments deal with the concerns that Kelly raises in his report about the remit and structure of IPSA. As he says, the new regulator “bears the scars” of the haste with which the Parliamentary Standards Bill was expedited through Parliament last summer. Many voices in both Houses urged caution at the time. Although we agreed with the Government on the need to demonstrate our commitment to urgent reform, it was inevitable—as my hon. Friend the Member for Rutland and Melton (Alan Duncan) said at the time—that we would need to revisit the Bill at a future date.

Given that Parliament spent a great deal of time last July trying to sort out some of the constitutionally challenging aspects of the Bill—particularly those to do with privilege—it is right that we return now to look more closely at the role and responsibilities of IPSA.

Much of what is before us has our unconditional support. We agree that the sanctions regime should be toughened, as it is in new clause 74, which would give IPSA the power—which the House exercised a few moments ago—to dock money from the resettlement grant for serious breaches of the allowances regime.

We wholeheartedly endorse the move to give IPSA responsibility for determining and administering our pay and pensions, for which we have consistently called, to ensure that MPs no longer have a hand in our own remuneration. We should note that, despite a newspaper article last week, asserting that colleagues could be awarded a backdated pay increase by IPSA, that is not possible under new clause 73, which states in proposed new section 4A(5) to the Parliamentary Standards Act 2009 that a salary determination

“other than the first determination”

may have retrospective effect. I doubt whether Sir Ian Kennedy would oblige in any case, and I shall return to pensions in a moment.

We accept new clause 76, which will return to the House responsibility for maintaining the Register of Members’ Financial Interests and the code of conduct. As we warned at the time, giving IPSA responsibility for those matters could result in privilege disputes, which would be an unwelcome distraction from IPSA’s main tasks.

We support new clause 71, which appoints lay members to the Speaker’s Committee for IPSA, which is an example of good practice. Their input to the Committee’s deliberations will be helpful to broaden the base of experience and viewpoint.

We also welcome new clause 72, which gives additional statutory duties to IPSA to carry out its functions and to support Members in their parliamentary roles in an

“efficient, cost-effective and transparent”

manner.

A number of colleagues raised legitimate concerns about IPSA’s running costs during the debates last summer. Sir Ian Kennedy’s consultation document gives us an idea of how IPSA will operate, including on pre-scrutiny and permission giving, scrutiny of claims, appeals, post-claim audits, regular audits of staff working practices and office set-ups, and administration of a loan scheme for MPs, to which we will today add responsibility for paying and setting MPs’ salaries, and administration of pensions. IPSA will also run a very substantial property empire if the proposals for renting accommodation for MPs go ahead.

In short, the processes being developed in IPSA are extremely wide ranging and likely to require a large staff to implement. We need to ensure a proper balance between the necessary checks and scrutiny of claims and value for money for the taxpayer. The Government have so far not provided costings for the likely extra administrative impacts that the proposals will have on IPSA. A money resolution was made earlier, but no figures were attached to it. Will the Secretary of State give an estimate of the additional costs of the proposals before the Committee?

We have no concerns about new clause 81, which repeals the sunset provisions originally included in the Parliamentary Standards Act 2009. They were originally included because of the extraordinary haste with which we dealt with that measure, but the opportunity to return to the matter now, afforded to us by Kelly, allows us to put those concerns to rest.

I welcome those measures, but I shall now turn to the Government proposals that merit further attention, and it would be useful if the Secretary of State responded to some of the points I am about to make. New clause 70 and new schedule 6 introduce the most radical departure from the 2009 Act by scrapping the external Commissioner for Parliamentary Investigations and replacing him with an internal compliance officer. That relates to recommendation 44 in the Kelly report.

The Committee on Standards in Public Life was concerned about the confusion that would be caused by having a Parliamentary Commissioner for Investigations examining financial wrongdoings, and the Parliamentary Commissioner for Standards looking at cases in which Members have, for example, breached the code of conduct, unless that breach related wholly to expenses or the rules on financial interests. Of course, the Committee has a point. However, does new clause 79 create an equal source of duplication? That was mentioned in earlier exchanges. Proposed new section 10A(3) of the 2009 Act states:

“Nothing in section 9 to 9B (or Schedule 4) affects the disciplinary powers of the House of Commons.”

I think I understand what the Government are aiming at, but the proposal means that Members who breach the rules can be submitted to the disciplinary processes of the House, including possible suspension, and then be liable to be turned over by IPSA for the same offence. That strikes me as double jeopardy, and I wonder whether the Government think that desirable.

On top of that, we have IPSA’s compliance and enforcement regime, which, as envisaged by the proposals, raises some rather profound issues. Under schedule 2 to the 2009 Act, the commissioner for investigations was to be appointed by Her Majesty, with the terms and conditions to be determined by Mr. Speaker. However, under new schedule 6, the compliance officer, as the Secretary of State said, will be appointed by IPSA, with terms and conditions to be determined by IPSA. Indeed, proposed new schedule 2(9) to the 2009 Act will allow IPSA staff to double-job with the role of the compliance officer for up to six months if there is a vacancy.

Before, we had a proper firewall between the investigator and the day-to-day administration of IPSA, but that has now gone. This is important because, in my experience of cases in which Members have been accused of a financial misdemeanour, sometimes the source of the error can be traced to misdirected advice from the Fees Office, as the Secretary of State mentioned. Two recent Standards and Privileges reports underline this. In one, the Parliamentary Commissioner for Standards notes that the Department of Resources was forced to conclude that “in retrospect” advice given to one Member was “flawed” and that the Member

“cannot be blamed for taking the advice he was given”

In another, the Committee is more scathing, concluding that

“the House authorities’ failure to act on the deadline they had themselves set for”

the Member

“to bring his second home arrangements within the revised rules was equally serious and that it allowed a highly unsatisfactory state of affairs to continue for far too long. This failure does not absolve”

the Member

“of his responsibilities, but it is something that causes us great concern”.

The Government may be proceeding on the basis that IPSA will so efficiently administer the new regime that such misunderstandings will not recur. I think that that would be a heroic assumption. In the provisions on “Investigations”, in new clause 77, in proposed new section (9)(6), we see that, in the event of an investigation, the compliance officer will be asked to prepare a statement of his original findings which may include

“findings about the role of the IPSA in the matters under investigation”.

As the Bill is drafted, the compliance officer will therefore be asked to pass judgment on either the rules or the people within the organisation by which he is employed. Moreover, proposed new section (9A)(1) states:

“IPSA must determine procedures to be followed by the Compliance Officer in relation to investigations”.

However, that would begin to compromise the independence of the current system. At present, the Parliamentary Commissioner for Standards follows his own rules, rather than those provided by the House, but under the Bill we would have a compliance officer appointed, employed and thus constrained by IPSA. That is exactly what the Commissioner for Standards warned against in evidence to Kelly.

The committee dismissed the concerns by citing the satisfactory working of “similar compliance roles” in HMRC. That is not the best comparison. In HMRC, the adjudicator works as a referee holding HMRC to account on behalf of its customers—the taxpayers. That is the normal role of a compliance officer in the financial services industry. But this is not what we are asking of this compliance officer, who would be holding the customers to account on behalf of the regulator, even in situations where the regulator itself had erred.

This debate is taking place against the backdrop of Legg and Kennedy and the appeals, some of which have already leaked into the public domain. As has been demonstrated by the press reports, the interpretation of the rules is a complex task. In some cases, the Fees Office, Members, Legg and Kennedy have all reached different conclusions about the same case. However hard IPSA tries to remove any ambiguity from the new regime, the rules will never be codified and there will always be grey areas. That is why we all thought back in July that it was so important to have an external investigator who has the independence to come to a final, considered judgment.

I wish to make one further point about the compliance officer. Although the original Act stipulated a role for a Parliamentary Commissioner for Investigations, the position was not advertised or appointed at the same time as those of Sir Ian Kennedy or the other members of IPSA. It may be that the Government were envisaging that John Lyon would take over both roles in the future. Whatever the reason, the idea of a Commissioner for Parliamentary Investigations was quietly dropped after Kelly. As things stand now, IPSA will not be able to appoint the new compliance officer until after Royal Assent has been given to this Bill. Given that IPSA aims to be fully operational by the beginning of the next Parliament, do the Government think that they will be able to fill the compliance officer post in time? If not, what will be the procedure for complaints?

We also left hanging in the air the question posed by my hon. Friend the Member for Worthing, West (Peter Bottomley) about dual mandates. Unless something happens to the rules within the House, it will still be possible for a constituent to make a complaint to the Parliamentary Commissioner for Standards at the same time as a complaint is being considered by the alternative route. Those consequential issues need to be addressed.

In fairness to the Secretary of State, he has tried to address some of the issues that I have just been talking about by tabling new clause 75, which gives MPs the right to appeal to a first-tier tribunal. That is a welcome step, but the first time the tribunal finds against the compliance officer, as it could under new schedule 7, there is a risk that the whole compliance system could be compromised.

Does the right hon. Gentleman agree that the practice that applies to pension funds outside this place should equally apply to us, and that Members should have the right to appoint a proportion of the trustees, just as members of any large scheme elsewhere have?

The hon. Gentleman makes a forceful point. I can see no reason why there should be a disparity between this scheme and the schemes that he has just mentioned.

There is also a degree of confusion—which the Secretary of State might be able to resolve—about exactly when pensions will move into IPSA’s competence. In the written ministerial statement from the Leader of the House on 10 December, the Government said that they would bring forward legislation

“to give IPSA the power to set, as well as to administer, the MPs’ pay system, after consulting the Senior Salaries Review Body. The powers for both pay and pensions would therefore take effect in 2011-12”.—[Official Report, 10 December 2009; Vol. 502, c. 35WS.]

I understand the need for IPSA to consult the SSRB before making its first determination on pay, as set out in proposed new section 4A(7), but does it follow that pensions would therefore take effect in the same year? And where in the Government’s amendments do they set out when IPSA should start determining the structure of MPs’ pensions? As drafted, new schedule 9 seems to take effect immediately after Royal Assent is granted, rather than in 2011-12.

Before I finish, I wish to make one final point on the general scope of this debate. Today, we are focusing on building in improvements to the disciplinary regime by, among other things, strengthening the Members code of conduct. But, despite the behaviour of members of the Government being of just as much public interest as that of Members of this House, we are going to make no change whatever to the second code of conduct—that relating to Ministers.

The policing of Ministers lags far behind the policing of the House in terms of transparency, independence and reprisals. At present, the ministerial code is overseen by the Prime Minister, who can decide whether to refer a matter to his independent adviser and whether to publish any report. Neither procedure has ever been invoked, even though there have been several opportunities to do so. In the past, the adoption of tougher measures in the code of conduct for Members has led to pressure being applied to representatives in other institutions—for instance, Members of the European Parliament and peers. I hope that today’s debate will allow us to return soon to the issue of the ministerial code of conduct, so that greater accountability can be introduced into the system.

Will the right hon. Gentleman give the House some clarification on that point? The Government appear not to intend to make the kind of changes to the ministerial code that I would welcome. Will he make a commitment on behalf of the Conservative party that, if it were to form a Government in the near future, it would make such changes?

Any new code of conduct would be the property of an incoming Prime Minister, who would devise his own code of conduct and guidance. I think I am right in saying that a previous Conservative Prime Minister was the first to publish the code of guidance for Ministers. If the hon. Gentleman wants a categorical assurance, however, he will have to wait until a later occasion.

We welcome the Government’s decision finally to bring forward these amendments for debate, and I hope that the Secretary of State will respond to the substantive issues that I have raised. We all want to see a new system up and running by the time of the next Parliament, but, in achieving that objective, we should be able to ask legitimate questions about how the new regime will be run, how it will work and how much it will cost. These are the questions that will be in the minds of our constituents, and it is right that we should have answers to give them.

I shall start at the point with which the right hon. Member for North-West Hampshire (Sir George Young) ended. I shared his frustration and sense of disbelief when Ministers told us, following the publication of the Kelly report, that no statutory changes would be required as a consequence. The fact that we now have before us in the Government’s name 15 new clauses, four new schedules and an amendment in order to implement Kelly shows that we were absolutely right to express such impatience. At last, we have the opportunity to put these measures on to the statute book. The Liberal Democrats have taken the view, as have others, that it was important to implement the Kelly recommendations in full and as promptly as possible. That is what this process is about.

Is not a consequence of the Government’s dithering over the need to introduce statutory provisions the fact that the new clauses and schedules have arrived very late in the day for us to scrutinise, to ensure that they are as effective as possible?

My hon. Friend is absolutely right. They arrived very late in the day, as did this Committee sitting. Last week, we did not even know that it was going to happen, despite the fact that we had repeatedly pointed out that the number of Committee days available were insufficient for the House’s needs. Now we have our debate, however, and let us not decry the fact that we have amendments—albeit late in the day—and a day in which to discuss them.

I intend to raise certain points, not to criticise the proposals but to ask for amplification on some of them, and to ask the Secretary of State to look more closely at the implications of others. My general position is that we will support amendments of this kind, although there are some detailed considerations that it will be proper for us to raise.

My first point relates to a matter that the Lord Chancellor touched on in his speech—the question of who will appoint the compliance officer.

Quis custodiet ipsos custodes?

Indeed. There is a problem with who the compliance officer will work for and the status of the officer. The Lord Chancellor has considered the matter and come to the conclusion that he would prefer the compliance officer to be a creature of IPSA. My feeling is that that could raise complications, particularly in the context of the legal appeal process that is now incorporated in the Government’s proposals. I ask the Lord Chancellor to consider carefully what would happen if the compliance officer’s position were challenged in court—as I suspect it will be—on the ground that they are a person adjudicating on the actions of IPSA while being complicit in those actions. The level of independence necessary to prevent such a challenge is insufficiently illustrated in the appointment procedure.

The status of the compliance officer is a little confusing at the moment. The only thing that we learn from the details of the new schedule is that the officer will not be an officer of the Crown. By definition they will not be an Officer of the House—nor should they be—so it is a little difficult to know exactly where they will lie in the great firmament. It is important that we at least attempt to get an answer to that question. I know that my hon. Friend the Member for Cambridge (David Howarth) has suggested informally that the Judicial Appointments Commission might be a vehicle, and the Lord Chancellor mentioned it in his speech. I think that my hon. Friend would be the first to agree that it is an imperfect answer, but it may be better than all the other imperfect answers that have been brought forward. However, we may need to consider the matter again.

rose—

Perhaps the Lord Chancellor can enlighten me.

I will not invite you to declare an interest from the Chair in this matter, Mr. Gale, although I could. The provision is perfectly innocent. There is one class of Member—we are all elected as Members of Parliament. However, as the hon. Gentleman will recognise, some time ago the House decided that it should make additional payments to Chairmen of Select Committees and Public Bill Committees and other office holders. It also determined that there should be different levels of payment for different levels of responsibility. We have sought to replicate that in the new clause, to ensure that in setting pay, IPSA takes account of decisions of the House about such Members.

I was quite sure that that was the Lord Chancellor’s intention, but I do not know why that is not considered to be covered by the term “different offices or positions” and why the new clause has to mention “different classes of member”, which is an expression that inevitably rankles and one that I would not entirely encourage the use of.

No part of the new clause states that there is a first class of Member, which is Labour and Conservative Members, a second class of Scottish and Welsh nationalists and anybody else, and then a third class, well below the salt, of Liberal Democrats. Attractive though that may be, it is no part of our intention.

It is very important that IPSA hears that. Of course, different parties in the House are treated differently in how financing is provided, so it is not unreasonable to draw attention to the enormity suggested by “different classes of member”.

The provision is drawn quite widely, so there is a concern that IPSA might choose to define different classes of Member or decide that Members from different constituencies are due different pay levels depending on the nature of the work that they do for their constituents. The new clause would enable IPSA to make that decision if it wanted to.

It would indeed. This may be a particularly live issue for Members representing Scottish constituencies, as it is not beyond the bounds of reason for someone to suggest that, because there are other elected Members doing casework in those constituencies, there might be a discrepancy. This is an unwise signal to send, so I ask the Lord Chancellor to look at it.

Another issue implicit in new clause 73 is the start date of salary. I would like to raise an issue of concern, on which the House should take a view in the very near future. Owing to the number of right hon. and hon. Members who have declared that they are standing down at the next election, we shall have an unprecedented turnover of Members and many new ones will enter the House. That will require a significant degree of induction in order to bring them up to speed. I have always felt that our system is too precipitate—immediately following a general election, the pantechnicon arrives at No. 10 Downing street and everything changes; we start with a new Government and a new Parliament at the earliest opportunity.

A strong argument can be made for a period of reflection to allow preparations to be made, as is normal in almost every other legislature and almost every other governmental arrangement. A period of reflection is important as new roles and responsibilities are established and new posts are taken up. However, there is an implicit bar to that happening under proposed new section 4(6), which states:

“No payment of salary is to be made to a member before the member has made and subscribed the oath”.

I am not arguing that Members should not subscribe the oath or undertake equivalent procedures in order to take their place in the House, or that Members should be paid if they are not prepared to be full Members of the House. I am simply saying that if the intention is for Parliament to assemble and for oaths to be sworn at the earliest opportunity in order to prevent any interruption to payment of the salaries of existing Members or new ones, it will work against the interests of good governance. I believe that the House should take a view on that at some stage.

The hon. Gentleman puts a delicate point, but provision is made for pay to go back to the day or day after the election. If we sign on, say, two weeks after the election, that will be within the month and it is quite likely that we will get paid. If the election were held at the end of the month, there might be a slight temporary problem, but even the present banking system might be able to tide us over.

That may be true, but I hope the hon. Gentleman will accept that there is a problem here, particularly for new Members, who may not have received any salary of any kind during the period immediately before the election, because they left their jobs in order to fight it. They then may face the prospect of being without payment for a considerable period after the election. That puts pressure on the House authorities to convene the House at an earlier time than would otherwise be the case. I do not want to overplay this issue, but I feel that there is a case for proper and careful induction of new Members, so I do not want there to be an impediment simply because of how Members are paid.

rose—

rose—

Two Members want to intervene.

I have a great deal of sympathy for the hon. Gentleman’s view that we sometimes rush things in having the Queen’s Speech about a week or eight days from the general election. What should happen is that Parliament convenes for swearing in and appointing the Speaker, but then there should be an interregnum between that time and the Queen’s Speech, allowing Ministers to master their briefs and new Members to have a proper induction.

I, in turn, have a great deal of sympathy for that suggestion, as I believe it is probably the best way of dealing with the problem. I hope that we can have discussions between the various interested parties to see if we can reach a view on that.

I was elected to the 1992 Parliament, as was my hon. Friend the Member for Thurrock (Andrew Mackinlay), and I recall that the Easter recess occurred immediately after the election; there was a gap. Practical problems have been identified, and the hon. Gentleman raises a fair point that needs looking at, especially given what IPSA is saying about setting up loan procedures and so forth. In my own case, I recall having to take out a whopping great loan from the bank—a fairly unacceptable position to be in, but there we are. The payment of salary needs looking at, but I am not sure exactly how, unless we understand what IPSA intends to do with its loan proposals.

I am grateful to the hon. Gentleman, who is absolutely right. I am simply saying that we should not assume that every Member is of independent means or has a sufficiently good credit rating to be able to borrow money at will. Some are likely to find themselves in considerable difficulties, and we should recognise that and make our arrangements accordingly.

Allow me to help the Lord Chancellor in his interpretation of the numbering relating to new clause 73, as I have now worked out how the proposed new subsections (2) and (3) relate to subsection (1)—and he has obviously done so as well. The new clause leaves those proposed subsections (2) and (3) outside the amendments to the Parliamentary Standards Act 2009, and freestanding, which may or may not be a good idea, but makes sense in terms of the architecture of that new clause.

On new clause 75, let me express the opinion that I am not sure that the introduction of civil law is necessarily helpful, as it will add a further complication. We have the criminal law to deal with actions that are serious misdemeanours on the part of Members, and I hope that it will be used appropriately. This new procedure allows the imposition of penalties for non-assistance, as it were, and then the application of a proper penalty, but introducing the concept of civil remedy as well makes life more difficult rather than easier. I am not convinced that that is the best way of dealing with what I accept is a difficult problem.

The relevant part of the related new schedule 7 —paragraph 5(4)—states:

“In England and Wales and Northern Ireland the amount is recoverable, if a county court so orders on the application of the Compliance Officer, as if it were payable under an order of that court.”

I do not understand what that means. What it says is that if a county court makes an order, it is payable as if it were a county court order. Well, yes—it would be, because that is what it is. There must be some purpose in the wording that eludes me here, so I would be grateful for some assistance.

It just means that in England and Wales and Northern Ireland, but not in Scotland, the compliance officer has to go to the county court and make an application, and that if that court agrees, it becomes payable.

Yes, if a county court makes an order, it is payable, so it does not need a subsequent provision saying

“as if it were payable under an order of that court”

It is an order of the court, so there must be some further meaning that I do not understand; it seems to me to be tautological and I do not like tautology in statute. I hope that we might avoid that, if at all possible.

My final comments—I appreciate that this is a large group of amendments and that I have already spoken to them for some time—relate to pensions. I am pleased that the Lord Chancellor has said that he will look again at the provision. I do not think that it was drafted entirely in accordance with what Kelly recommended: in my opinion, it gives IPSA a much wider role than he intended. Its proposed role in the appointment and, particularly, the “disappointment” of trustees is unhelpful, and contradicts the normal practice applying to major pension schemes outside the House. In its excessive zeal to prevent MPs from determining their pension arrangements, the measure prevents them from taking a view as members of a pension scheme—rather than as Members of Parliament—on the administration of that scheme. I hope that when we next consider the issue, a revised proposal will have been tabled after proper discussion with the trustees of the pension scheme. It beggars belief that no one thought that that was a necessary prerequisite for the clause.

I think that, in broad terms, the many new clauses and new schedules would implement what was proposed by Kelly, which is the only test to which I wish to submit them. As I have said, I think we should look further at aspects of them to ensure that they have internal logic and have been properly drafted, but I intend to support them. I hope that we shall be given an opportunity to improve them at a later stage if there are questions that remain unanswered, preferably as a result of the tabling of appropriate amendments by the Lord Chancellor.

I welcome the spirit of the exchanges that have taken place. I am sure all Members will agree that it is vital for us to resolve these detailed matters before the new Parliament, difficult though that task will be. As was pointed out by the hon. Member for Somerton and Frome (Mr. Heath), some of them will be harder to resolve than others. The hon. Gentleman also stole one of my lines. In my evidence to the Kelly committee, I recommended that all its members should read Plato’s “Republic”. I thought that that was not bad, coming from a secondary school boy. It seemed to me that this challenge had been in existence for 3,000 years and would continue, and that it was therefore important for us to try our best to give the right powers to IPSA and the compliance officer.

I, too, struggled with the issue of the way in which the post should be filled, although I accepted one of the arguments of the academic lawyers in one respect. I believe that the compliance officer should, as far as possible. be at arm’s length from the IPSA membership. I am still struggling to come up with fresh ideas about exactly what should be the nature of the beast, but I think we all understand what we are seeking to achieve.

I intervened on both my right hon. Friend the Lord Chancellor and the right hon. Member for North-West Hampshire (Sir George Young) on the issue of pensions. Before I became a Member of Parliament, I spent a good part of my time negotiating on pension funds with large companies. In the context of accrued rights, the right hon. Gentleman spoke of the situation that occurs when a company is taken over. He may recall that in the dim and distant past I tabled a private Member’s Bill, some of whose proposals were incorporated in the Pensions Act 1995. I think that he made a fair point, and I agree that issues relating to accrued rights should be dealt with separately. Rights involving benefits that people have earned here and have transferred to the scheme, and the application of those benefits to family members—the potential of death in service, for instance—must be protected, as they are in the rest of the pensions world.

I think that we have dealt adequately with the question of trustees. I am sure my right hon. Friend accepts that, except in very few exceptional circumstances, member trustees can be appointed and dismissed only by members of the scheme. The number of such trustees is, I think, a matter for discussion, and it may need to be clarified.

Last week an article was published in my local press suggesting that IPSA should be responsible for determining the sitting days of the House—on the basis of a crass misunderstanding on the part of the person who wrote to the media assuming that when we are not here we are on paid holiday. All Members throughout the House surely agree that sitting times must be determined by the House itself.

I have some sympathy with what the right hon. Member for North-West Hampshire said about informal advice. None of us has enough time—or, in most cases, enough background skills—to make some of the finer judgments that are needed for running our offices when it comes to issues such as employment law or procurement. For example, I found myself needing to renew a lease for a photocopier in my constituency office whose terms caused me to want to take advice. We currently have a mechanism for that, although people have suggested that it is not very satisfactory. I agree that that should not be a function of the compliance office, to the spirit of whose role it would be entirely contrary, but it should be possible for a Member to say to someone, for instance, “I have been confronted with the following situation. Would you advise me to enter into this contract?”

I believe that those issues can be fine-tuned in time for Report. I hope that all Members will pull together to try to ensure that we create a mechanism that does not just work in practice, but provides the degree of confidence that the public rightly demand of the systems that we put in place.

I agree with my right hon. Friend the Member for North-West Hampshire (Sir George Young) that it essential for us to put these matters on to a statutory footing, and I welcome the Government’s determination for that to be done. As my right hon. Friend said, nothing would be more damaging to the reputation of parliamentary democracy in this country than for the allowances scandal to permeate the next Parliament as it has permeated this one. These issues require urgent and definitive resolution, and, as a number of other Members have said, we owe it to the many people who will serve for the first time in the next Parliament to put the House in order, however belatedly.

I want to speak briefly on two of the new clauses. I am mildly unhappy about the proposal in new clause 73 that IPSA will not take on fully fledged responsibility for the setting of MPs’ salaries until potentially as late as 1 April 2012. I appreciate that the Secretary of State said that that was of IPSA’s own doing, but we need to recall that this whole allowances scandal started because successive Executives over about the past 30 years refused or failed to implement Senior Salaries Review Body recommendations for salary increases. We heard a lot of grandstanding by party leaders over that period—and I acknowledge that leaders of Conservative, as well as Labour, Governments have been guilty of that. We therefore allowed a system to develop under which there was, effectively, a salary supplement through the allowances system, which grew like Topsy, especially after the resolution of the House in July 2001—without an SSRB recommendation—for a hefty 40 per cent. increase in the second-home allowance.

I do not plan to delay the Committee for long, but I think it is worth going through the genesis of the changes we are discussing this evening. When the expenses abuse revelations were at their height, the then Speaker convened a meeting of the leaders of all the parties that take up seats at Westminster: the three UK party leaders, joined by colleagues from the Northern Irish, Welsh and Scottish parties, myself included. We agreed that radical action was required. We decided that, first, there should be immediate restrictions on expenses pending a review, and a Scottish National party proposal that the transparency standards operating in the Scottish Parliament should also apply to Westminster was agreed. I think that was the most important agreement at that meeting, because from now on it will be impossible to go back to the kind of secrecy that was highlighted by the hon. Member for Cities of London and Westminster (Mr. Field). We cannot go back to the days of secrecy; transparency is the key to the future. We also agreed that an independent inquiry should proceed, and that conclusions should be agreed in full. The party leaders thought that it was important that all our parties should work together, and I am seeking to reflect that in my comments.

Following this meeting, there were regular follow-up meetings, chaired by the Justice Secretary and the Leader of the House. I cannot remember how many meetings there have now been since that inaugural meeting, but the figure is about six or seven. Given the justified levels of public opprobrium about the expenses abuses, it was absolutely right for the political parties to work together to expedite these changes as speedily as possible. Everybody has in the back of their mind a concern that rushed legislation might be bad legislation, and it has to be said that a variety of hoops have had to be jumped through at a variety of stages to get us to where we are now, but, by working together, we are finally getting close to finding a fix for the problems facing us.

These meetings were the driving force behind the creation of the parliamentary standards authority. I am pleased that it was an SNP proposal that the agency should be designated as “independent”. That argument was persuasive; clearly, even Westminster parties are open to persuasion on independence, at least sometimes. We therefore now have a body called the Independent Parliamentary Standards Authority—because independent it must, of course, be.

Initially, IPSA was empowered to deal only with expenses. Pay and pensions were not included in the initial legislation, for reasons we completely understand. That was to be put right at the earliest opportunity, however. We have heard from the right hon. Member for North-West Hampshire (Sir George Young) of the confusion about how quickly that might proceed, but we are here today and that is very much to be welcomed because, together with other improvements, including those relating to compliance, we are now moving ahead on the pay and pensions issues. That is key, because parliamentarians should not be responsible in any way for their own pay and pensions, or for setting their own expenses levels.

The Justice Secretary is well aware of my disappointment that the gold standard operating in the Scottish Parliament for compliance was not emulated in legislation dealing with MPs transgressing in this House. There is an irony in this. The Westminster Chamber legislated for the creation of the Scottish Parliament and set the rules under which it would operate, including criminal sanctions when Members of the Scottish Parliament transgressed the rules. However, Members of this House—Members of the Conservative and Labour parties—did not agree that that same high, gold standard of criminal sanction should apply to Members of Parliament in this Chamber in the future. That is totally beyond me. The SNP believed, and continues to believe, that criminal sanctions that can apply to MSPs should also apply to Members of this House. Notwithstanding that shortcoming, I believe that creating an IPSA with real teeth is vital, and that is what is being completed by these provisions. MPs have forfeited any credible right, as have the UK Government, to determine pay, expenses and pensions—that was forfeited some time ago.

The right hon. Member for North-West Hampshire and the hon. Member for Somerton and Frome (Mr. Heath) raised some important and commendable points about compliance officers and some other queries, but I have no reason to doubt that the Justice Secretary will continue his collegiate approach before Report so that things can be smoothed and ironed out. For that reason, I shall be supporting the progress of these provisions today.

I often agree with the hon. Member for Moray (Angus Robertson), but I do not agree with him on a number of points today. For example, why should MPs not be responsible on these matters? For most of my time in Parliament, it has been perfectly reasonable for Members of Parliament to say what their pay arrangements should be. The fact that they have not always adopted what I thought was sensible is probably more my fault than that of my colleagues. It is clear to me that MPs’ pay arrangements should be set before a new Parliament, should come into effect at the beginning of it and should not change during the Parliament, irrespective of whether it lasts for six months or for five years. That would be a far more elegant and sensible arrangement than the current one of wondering whether there should be increases each year or other kinds of conventional things. Even if the arrangement is not conventional, if we know what the terms are when we get elected, that should do us until we again come up for election or deselection.

The second thing that the hon. Gentleman said that I would not mind taking him up on was his comment about the gold standard of criminal sanctions. Criminal sanctions ought to be for criminal offences, and the standards that we ought to be meeting are lower than that; we ought to be meeting the reasonable expectations of Members of Parliament, not just expectations relating to “beyond all reasonable doubt”. I hope that Martin Bell, with whom I served on the Standards and Privileges Committee, will not mind my saying that that is one of the areas where he and I failed on a number of occasions. If I were to allocate some of the “blame”—that is probably the right word—I would say that the House authorities or past occupants of the Speaker’s Chair did not do what they might have done when Elizabeth Filkin was the Parliamentary Commissioner for Standards. I doubt whether compliance officers, whatever their responsibilities, can carry the same weight as a good Parliamentary Commissioner for Standards. Therefore, I put it to the Secretary of State that if he were able during the passage of this Bill to find a better expression than “compliance officer” to balance the “Parliamentary Commissioner for Standards”, that would be a good thing. We know what is understood by “compliance officer” and what the responsibilities will be, but it is not an elegant title.

Plainly we cannot go on having final salary pensions where—this will not apply to me as I have reached 65— any increases in the salary of someone who has been in this House for 25 years and is between 60 and 65 are still multiplied by their years of service. Any sudden increase of 30 per cent. in the pay of such a person in recognition of various parts of an MP’s job would multiply through all their previous years of service, even though their actual pay would have been much lower. Members of Parliament ought to have a way of expressing in public, whether just to IPSA or in this Chamber too, that we think that we ought to move on to an average salary system at best. By all means, let us keep what we have got in the past—I declare that I have the full limit—but we ought to be able to say clearly that we need a reasonable compromise between not putting people off coming into Parliament and not maintaining this kind of gilt-edged, gold-plated standard pension. It may have been good at a time when our pay was very low but if IPSA is to do its job, the pay will not remain very low for very long. I do not see where in the IPSA proposals we can reach the stage where it is possible for IPSA to recommend that part of any significant change in MPs’ pay should be non-taxable and non-pensionable.

Non-taxable?

Non-taxable and non-pensionable. The idea of bringing in a receipt for every small bit of spending is one of the mistakes into which the House and those who have been invigilating its affairs have fallen. I examined my spending for two weeks, keeping the receipts for two weeks. If I buy 80 items in Lidl in Worthing for £120, two of which are relevant to my office expenses, I am supposed to put in the list of all 80 things—the details of everything other than those two things either will or will not be redacted—so that I can get back some money that I have spent on batteries, CDs and so on. Such an arrangement is bizarre. I shall not go into the detail of all the other allowances, but one element that I hope IPSA will consider is having part of the pay being non-taxable and non-pensionable.

The Secretary of State has been very kind to the Committee, although I do not think that he understands all this all the time—I am sure that he understands much of it much of the time. I hope that the Leader of the House does not mind my saying that this is an incredibly complicated result of a suggestion that we did not need primary legislation. We may not have needed it, but this is quite a lot to have to digest quite late in an afternoon when many of the other experts are not present.

Is my hon. Friend aware that a number of colleagues on both sides of the House have ceased to claim legitimate allowances because they are so frightened of the reputational risk of getting something wrong?

I am. That is a reminder that this House should not just be for those who are well-off and those who are poor, both of whom can come to this place and not have too much of a worry. It also should not just be for those who are flashers and those who are church mice; we should also include those who are normally embarrassed if they are seen without their clothes on. We need to try to ensure a reasonable spectrum.

Many MPs who stay here for some time move through inexperience and poverty, and end up reasonably comfortable—they may have grown out of their family responsibilities and their housing costs will probably have reduced. All I can do is tell hon. Members what it was like for my first 22 years here. I had two dependent children when I got elected and I had a third child when I had been in Parliament for seven years. When my wife was working less than part-time, I very nearly had to leave Parliament because I did not want to go either crooked or broke. I hope that IPSA will take that kind of thing into account.

May I end by discussing something that is not contained in these provisions? In my early years, I shared a large room in Old Palace Yard. One of my colleagues married his secretary—she was a competent secretary and she was a good wife afterwards, Why should such a person have to lose her job in those circumstances? What if I had married her, so that she could go on working for him? I was not free to do so—[Laughter.] The wife of a Member of Parliament can be elected to this place and get their own pay through the taxpayer, so what is so different about the person who gives support as a spouse? I offer Pauline Ashley as probably one of the best examples. She gave devoted service to Jack Ashley’s constituents and a great deal of help to Jack. I can think of many other such examples—I shall not name any involving those in the Chamber—where the same thing has applied. This was a bad suggestion and I hope that IPSA will throw it out. Obviously, one needs to justify the work that the family member is doing, but a blanket exclusion is wrong.

Thank you for calling me, Mr. Gale. I apologise for not having been here at the start of the debate because of a meeting of the House of Commons Commission. I wish to contribute a few remarks in my capacity as a trustee of the parliamentary contributory pension fund. I know that the Secretary of State indicated during earlier exchanges that he acknowledges the need for further thought to be given to the specific measures proposed, but I am anxious to ensure that the trustees’ concerns are articulated in this debate.

We all accept that the world has changed, that the coming into being of IPSA means that there is a need for some change in our pension arrangements and that it will be necessary to make some legislative changes to give effect to such change. However, I am concerned at the speed with which these arrangements have appeared, at the lack of any consultation and—far more so—at the way in which they sit very uncomfortably, to my way of thinking, with the fact that during the latter part of last year the Government commissioned from the Senior Salaries Review Body a fundamental review of MPs’ pension arrangements. To the best of my knowledge that body completed its work by the end of last year, as it was asked to do. I do not know whether it has yet submitted its report to the Government—the trustees have certainly not yet seen it. I would have thought it made a great deal more sense for that report to have been delivered and for its recommendations to have been assimilated and taken on board before we made the sort of changes that are anticipated and provided for in these new schedules and other add-ons to the Bill.

In particular, the trustees have a concern that serving Members of this House should have confidence that the pension benefits that they have already built up in the fund to date cannot be taken away without their consent. As drafted, the Bill does not provide that protection, because it is giving to IPSA huge additional powers that, in the past, this House and its Members, as members of the pension fund, have held. Although under the current fund structure the power is exercised by the Leader of the House, that takes place only through regulations. The Leader of the House has to bring to the Floor of the House, for consideration by the members of the scheme, any changes that are wished. In future, according to these arrangements, IPSA could, in the extreme, simply make a scheme that removed the entitlement to all or any of the benefits earned in the fund by any or indeed every member. Although we would all hope, obviously, that IPSA would never take such a course of action, one has to ask whether it makes sense to give it the power to do so.

The Kelly report made two recommendations on MPs’ pensions. The first was on the independent determination of MPs’ pensions and the second was on oversight of the administration of parliamentary pensions. The Bill goes well beyond that and gives IPSA substantially greater powers over the structure of the fund—the power to determine how it is administered goes well beyond the oversight and scrutiny recommended by Kelly and gives the authority control over the management of the fund, the application of its assets and the constitution and proceedings of the funds’ trustees, as well as the power to determine, with Treasury consent, the rate of the Exchequer contribution, without consulting the Government Actuary.

Although, in a sense, those powers replicate the existing arrangements by vesting with IPSA the powers that are currently vested in the Leader of the House, the difference, of course, is that the Leader of the House has to bring these matters to the House for its consent. We need proper and detailed consideration of whether it is right for IPSA to have these extensive new powers that go far beyond what was recommended in the Kelly report. I think it would be better to leave vested with the trustees some of the powers that they already have. I do not think we should undermine the objective of MPs’ pensions being influenced by an independent body, but the arrangements as proposed today go too far.

For example, IPSA has the power to appoint a trustee body without any member representation on it. I do not think anybody would take exception to the idea that IPSA should nominate a member of the board of trustees, but to give it the power, in effect, to remove the trustees and to appoint its own board of trustees seems to me to be going much too far. Is there any other pension fund anywhere that could be subjected to such a degree of interference? It would be unlikely, in practice, that IPSA would ever do so, but the measure goes too far in terms of the sweeping powers that it gives the authority.

The legal structure of the fund is highly complex and the detail is largely set out in 1993 regulations, which are regularly amended. I think that the wholesale transfer of powers to IPSA, as proposed by the Bill, will in effect empower IPSA to rewrite the rules of the fund and could jeopardise the ability of the trustees properly to manage it. I welcome the fact that the Secretary of State has said that there will be further consultation with the trustees, but as the Bill is drafted all Members should be deeply concerned at what is being proposed. We frequently say that we want our arrangements to be comparable to those elsewhere and those in the real world, but my concern is that these proposals go to lengths that no other pension fund anywhere would expect.

Although I have a lot of sympathy with what the hon. Gentleman has to say, does he not understand that it is not a matter of whether the pension fund is working well and whether the trustee arrangements provide an arm’s length between Parliament and the taxpayer? The issue is the perception that we are enriching ourselves. As my hon. Friend the Member for Worthing, West (Peter Bottomley) rightly said, a lot of MPs’ spouses do a fantastically good job and provide tremendously good value to the taxpayer, but none the less there is a perception of our own enrichment. The changes therefore apply not only to employing spouses and issues to do with our salary but to our pensions. We have a different and rather more generous pension scheme than many others, even in the public sector. The public perception means that IPSA needs to have its tentacles across this matter, and that is no reflection on the ability or otherwise of the trustees who have done their work in this regard over the past few years.

I sympathise with what the hon. Gentleman is saying, but I said categorically at the outset that I accept that the world has changed and that the Kelly report made two recommendations on pension arrangements. Specifically, IPSA will have a say in what we get out of the scheme and what we pay into it. I am not trying to resist that at all. The hon. Gentleman just used the expression “IPSA needs to have its tentacles across this matter”. I am not resisting that—I am merely resisting the idea that IPSA should delve its tentacles into these matters in an attempt to run the whole thing. It is possible to hit the right balance but, as the Bill is drafted, the Government have failed to do that. I would welcome it if they would get into a meaningful dialogue with the trustees so that on Report we can arrive at some arrangements that will take account of the points that the hon. Gentleman is making while leaving a viable pension arrangement with a scheme that will have the same sort of autonomy and power to organise its own affairs that any other pension fund would take for granted.

I shall be very brief. I want to start by apologising to my wife Fiona, my son Alistair, my other son James and my daughter Charlotte. I wish, on reflection, that I had made a great deal more money before I got into this place. If I had private wealth, I would not need to rely on the taxpayer to fund my excellent staff, my travel and the cost of my office. If I did not have to rely on the taxpayer to do those things, I would not fear the knock at the door from the media, the investigators or the new compliance officers. I and my family fear that knock at the door. We fear the reputational risks that now go hand in hand with being a Member of Parliament.

Let me conclude my opening remarks by saying that over the past nine months I have seen many good and decent colleagues have their careers needlessly destroyed to sell a few newspapers. The loss of those colleagues to public life will be sorely felt by their constituents and this country.

IPSA is going to take over the management and control of our pensions. I recognise that I will get an extremely good pension from having been a Member of Parliament—it is one of the best pensions in the public sector—but there should be a recognition that my colleagues and I make one of the largest contributions to their pension of any public sector worker. I think that the only comparable public sector group that makes such a significant contribution is firemen and fire officers. Yes, our pension is generous, but it is not as generous, when set against other pensions, as the press would have our electorate believe.

I thank all right hon. and hon. Members who have contributed to this important debate. I hope that its conclusion on Report will be provisions in the Parliamentary Standards Act as amended that will ensure that the new system of parliamentary pay, allowances and pensions command the respect of the public—that is fundamental—and enable Members of Parliament to do their duty without harassment or undue penalty to them or their families. Let me pick up the remarks of the hon. Member for Broxbourne (Mr. Walker). He made a generous and heartfelt apology, probably not for the first time, to his wife and children for his eccentricity in choosing to put himself in the public firing line, and I think that his position will be echoed in the experiences of Members on both sides of the House.

It is worth recalling that there was a great fight to have Members of Parliament paid at all; I think it was the Liberal Government of Asquith who first provided for their payment. The right hon. Member for North-West Hampshire (Sir George Young) and I have been in the House for more than three decades, and certainly when I came to the House 31 years ago, the pay was lousy.

I was at the Bar at first, which was fine, and then I became a special adviser, which was also fine, but then I had to be found outdoor relief when I was peremptorily dismissed as a special adviser because I had become a parliamentary candidate, and I did not have a particularly good job in those two years. I thought about going back to the Bar but, as colleagues who have been in that noble profession will know, although I might have earned quite a lot of money, I would have received virtually nothing from ever difficult solicitors. Granada Television offered me a job as a researcher, and even that was better paid than the pay I “enjoyed” when I became a Member of Parliament.

I was fortunate, because I was able to earn a bit of extra money through journalism—quite a lot in due course—and I had a wife who had embarked on a sensible and stable career, but notwithstanding the beginning of Short money when I went into the shadow Cabinet in 1987, my office costs had to be subsidised out of my family’s income every year until I became a Minister. Every year, the Fees Office would approach me with an estimate of what I had to pay it, not because I had over-claimed and had to repay, but so that my staff in Blackburn and in the House could be paid and so that other costs could be met. Yes, the House went too far in correcting that situation, but we are all anxious—I am sure that Sir Ian Kennedy and his colleagues at IPSA are taking this on board—that the situation should not revert to that which obtained before, when a lot of people were actively prevented or put off from coming to the House.

I worry that future generations of very good people will be put off, partly by public scrutiny. We all have to accept such scrutiny because the House signed up with great alacrity to the Freedom of Information Act 2000; indeed, it was the House itself that demanded that Parliament should be included in that Act. Ever compliant with the wishes of the House, I, as the sponsoring Minister, said yes to that. I worry that future generations will also be put off by the overall remuneration, which is a worry for us all. It is the people of the country, rather than the people in the House, who will suffer if we cannot attract into politics people of quality and assiduity, whatever their social background, monetary wealth or lack thereof.

When I first came to the House, there was no secretarial allowance at all, and the pension for MPs had been introduced only the year before. However, will my right hon. Friend reflect on the comments of several Members in this debate, at least since I came into the Chamber, who seem to blame the Fees Office for much of what has occurred and what has been exposed in recent months? I believe that, on the whole, the Fees Office did a useful job and gave good advice, and we should be careful not to transfer the blame from ourselves on to officials who have given very good service over the years.

I have had the benefit of being in the Chamber for the whole debate and I do not think that there has been any personal criticism of members of the Fees Office. Everybody understands that a system that was not fit for purpose developed and that officials in the Fees Office did their best. Some completely impersonal general points about the experiences of Members have followed from that, one of which was that if a Member has made a complete disclosure to the Fees Office about an item of expenditure that they believed to be consistent with the rules, and if the Fees Office, after proper examination, then said that it was consistent with the rules and paid the Member, it is a little hard, to say the least, if subsequently there is a retrospective judgment that the Member should pay back that money. That would be even harsher in future, when the rules will be much clearer.

Let me go through the points that have been made in the debate. I thought that the right hon. Member for North-West Hampshire was cavilling at the beginning, when he was tweaking my tail about Kelly and legislation. I could have been cavilling in advance, by tweaking his tail about the fact that we would not have needed some of the legislative changes if the House had stuck to the original proposals that I put forward rather than those that he persuaded it to accept. I hope that we can conduct the rest of the debate in the spirit in which it proceeded after he had read out that cavilling stuff, which was no doubt put in there by Andy Coulson just to prove that the right hon. Gentleman is as partisan as the next person. I have to say that that act is not very convincing.

Is that the kind of advocacy for which the right hon. Gentleman would not have been paid very much if he had practised it before coming to Parliament?

I would not have been paid at all for that, but I thought that I should offer the right hon. Member for North-West Hampshire a gentle rebuke for departing from his usual ecumenical approach.

I shall now come to a variety of issues raised by the right hon. Gentleman and other right hon. and hon. Members. He talked about the possibility of double jeopardy under new clause 70 and new schedule 6. Double jeopardy applies where someone has been through a criminal trial and is tried again for the same offence. There is double jeopardy: if someone commits a criminal offence, there can be consequences in respect of their employment. If someone in a position of trust with their employer commits fraud, even if it is not against their employer, and it is drawn to their employer’s attention, they are unlikely to continue to be employed. There cannot be a rule to say that someone who has committed fraud against the building society that is nothing to do with his employer—let us say that it is a building firm, not a building society—cannot be drawn to the attention of the employer and has an absolute right to continue in that employment, notwithstanding the fact that it is plain that he was a fraudster from beginning to end. We all understand that, and the truth is that if someone egregiously breaks IPSA’s rules, leaving aside whether he or she is prosecuted, other consequences are bound to flow from that, aside from any general reputational damage.

On the firewall between IPSA and the compliance officer, as the right hon. Member for North-West Hampshire knows, there was a lot of discussion about the architecture. The direct responsibility for administering the scheme of allowances and paying them—and, I accept, giving day-to-day guidance and advice—rests not with the authority qua the authority, but with the chief executive officer and his or her employees. The only job that IPSA has to do in respect of the compliance officer is to make the appointment. We have discussed whether there can be any alternative ways, possibly to dismiss the compliance officer, but on very limited grounds.

Once appointed, as schedule 6 makes clear, the compliance officer is appointed for a fixed term of five years and then they go. So having been appointed, no purpose would be served by their toadying to IPSA in the hope of getting a further term, because no further term is permissible. That is sensible, and it is certainly something that Sir Christopher Kelly wanted.

The right hon. Gentleman implied that the system could fall down if the compliance officer was asked to pass judgment on the people who appointed him. In a sense, it is not the first time that people in a judgmental, quasi-judicial position may be asked to do that. He or she will be appointed by IPSA. He or she is a separate, independent officer. Yes, it is very unlikely that he or she will pass judgment on the authority itself. He or she may well pass judgment on the chief executive officer and his or her staff. That is his or her job. I do not think for a second that the system will break down.

Let us bear in mind the fact that the tribunal is run by entirely independent judges who are appointed formally by the Queen or me, but on the recommendation of the Judicial Appointments Commission. It is entirely independent, and we can go all the way up the judicial tree. So the right hon. Gentleman was right to raise the concern, but I do not accept it; I do not think that things will work out that way.

On pensions, about which there has been a lot of discussion, I accept and have said that there should be the same protection on accrued rights as for anyone else. I quite understand where the hon. Member for North Devon (Nick Harvey) was when I was opening the debate. I referred to provisions in the Pensions Act 1995, which provides protection for accrued rights, whereby they can be changed only with the active consent of beneficiaries or potential beneficiaries. Our officials are looking closely at whether we can introduce such provisions on Report, and I will write to the relevant spokespeople, as I normally do, when I have draft clauses or proposals.

The Secretary of State is now paying 12 per cent., but in addition, for the next three months, he will be making backdated payments equivalent to £200 a month, because we changed our pension scheme on 1 April last year and the changes are coming into force in the last three months of this tax year.

Ah, that saves me a letter, and I am very grateful to the hon. Gentleman for that information.

I think that I satisfied the hon. Member for Somerton and Frome (Mr. Heath) on the point about different classes. Although I had not thought about those different classes—class 1 parties, the main ones; class 2, the territorial ones; and class 3, the Liberal Democrats—I am warming to the idea, and if the general view in the House is that I should move a manuscript amendment on that, I would b happy to comply.

Can the Secretary of State tell the House when IPSA will assume responsibilities for running our pension scheme?

That will be done by order.

He has not got a clue.

No, I have got a clue. I have got lots of clues, the first of which is that it will happen during the next Parliament, but I promise the right hon. Member for North-West Hampshire that my right hon. Friend the Minister of State will deal with that when he handles the next set of amendments. [Interruption.] Oh, here is the answer: 2011-12. Even Homer nodded.

The hon. Member for Cities of London and Westminster (Mr. Field) spoke about MPs’ pay and asked why new clause 73 explicitly provides that the first determination would not come into force until 1 April 2012. I want to make it clear that, until then, the decision of the House of July 2008 will apply. There is an automatic regulator of our salaries: the House has said by resolution that any recommendation of the Senior Salaries Review Body will be implemented. An agreement has already been reached for 2010, so the 2011 pay increase will arise from the SSRB and it will come from IPSA thereafter. It is proposed that there will be a first determination, which will be the equivalent of the quinquennial review that the SSRB carries out, for example, in respect of judicial salaries, and the frequency of further determinations will be a matter for IPSA thereafter.

The hon. Member for Worthing, West (Peter Bottomley) proposed that a flat salary, fixed at the beginning of a Parliament, should apply irrespective of whatever happened thereafter. That has certain attractions and would certainly mean that every Member of Parliament carefully checked the inflation rate. Over a normal Parliament, if the Bank of England’s target had been stuck to, one’s salary would have been eroded by a compound 10 per cent. He and the right hon. Member for North-West Hampshire were sitting in the House—I was a hired hand—in the 1975 period, when inflation rose to 27 per cent., through no fault of the Labour Government. It then rose again to 22 per cent. in 1981, through every fault of the Conservative Government, including the doubling of VAT. Leaving aside the cause, the fact is that inflation was very high under both parties; that was difficult; and a fixed, flat salary would have caused all sorts of problems.

I will not return to that point now. Will the Secretary of State kindly say what will be the arrangements for the staff of Members of Parliament, whether there will be guidance, and whether we will know the change in scales by April, when many of our staff will be expecting an annual review?

The arrangements for members of staff will be a matter for the Parliamentary Standards Authority. I cannot anticipate what it will say. Meanwhile, one of the good things that has happened in recent years is that scales are now laid down. Members of staff must have contracts of employment and so on. That is a dramatic change from the ramshackle arrangements that existed years ago, when MPs themselves had to run the PAYE schemes, as those of us of a certain antiquity will remember.

I am very grateful to the hon. Member for Moray (Angus Robertson) for the constructive approach that he has yet again taken, and for the consistent support that we have received from him.

The hon. Member for Worthing, West queried the term “compliance officer”. It is not an elegant term, but I beg the Committee not to change it again. We could have used “independent regulator,” but the Kelly report calls IPSA the independent regulator. We could have used “commissioner,” which I would have preferred, but we have a Commissioner here. The term “compliance officer” may be prosaic, but at least it tells everyone what the person will do.

The hon. Gentleman made some strong points about whether we should move from a final salary scheme to an average salary scheme. I understand that. It will be for the PSA and the SSRB to recommend. I understand the point that the hon. Gentleman went on to make, that part of the pay should be non-pensionable and non-taxable. Personally, I do not agree with either proposition. If small businesses, which is essentially what we are for these purposes, want to offset an item such as batteries against their tax, they have to keep receipts. [Interruption.] If the hon. Member for Broxbourne is saying, “No, they don’t,” I would be pleased to hear from him.

Small businesses are allowed to claim for the cost of accountancy, and according to Sir Christopher Kelly and IPSA, Members of Parliament will not be allowed to claim for the cost of accountancy.

That is a fair point. Another point, which I thought the hon. Gentleman was going to make, but which I now make for him, is that small businesses claim under schedule D, which is rather wider because it refers to expenses “wholly and exclusively incurred” in connection with the business, rather than “wholly, exclusively and necessarily incurred”, which is the provision under schedule E, the rubric for us.

The hon. Member for Worthing, West spoke eloquently about Members who had employed members of their family. I have never employed a member of my family, but not because I regarded myself as a superior being. I see no prospect of employing a member of my family, so that may allow me to say that I think that some of the adverse publicity that members of families have received in the course of the expenses row has been very unfair indeed. Everybody knows that because of serious abuse by one Member in particular, there need to be proper controls, but if members of the public want Members of Parliament to do two jobs, which they do—representing them in the House and also being available with great frequency in their constituency and at weekends—they must accept that that produces greater disruption even than working away from home. That is true.

One of the biggest changes that has occurred in the past 30 years, or even in the past 15, is the huge increase in the constituency case loads of all Members of Parliament, and the dramatic increase in the expectations of members of the public regarding the availability of their Member of Parliament. My predecessor could go to my constituency one Friday a month for about six hours. She never had a house in the place and never wanted one. She saw eight people by appointment, did a couple of other things and was correctly regarded as a good constituency Member, because she went to Blackburn much more frequently than many Members of Parliament went to their constituencies. Those days are gone, and the allowance system and the pay need to recognise that.

I hope I have satisfied the hon. Member for North Devon, who speaks for the Members Estimate Committee, on the issue of pensions. We will also consider whether there should be a requirement to consult the Government Actuary’s Department where there is a shift in the rate of Exchequer contribution. Officials worked extremely hard and under time pressure on the provisions. They sought to replicate the existing statutory provisions under the parliamentary scheme, but I accept that those may not be entirely replicable.

With that—

I sense a peroration. The Secretary of State will recognise that a number of questions have been asked that he has not had time to answer, such as questions on the costs of the arrangements before us and about a number of areas where the amendments go way beyond what Kelly proposed. If he does not have the answers now, I quite understand. Perhaps he would be good enough to drop me a line with the answers to the questions that I put to him.

I am grateful for the intervention. There will not be much of a peroration. It is the Member for Blackburn speaking, not a latter-day Enoch Powell.

I shall answer some of the more specific questions. The hon. Member for Somerton and Frome asked about what he thought was a tautology in new schedule 7, paragraph 5(4), which states:

“. . . if a county court so orders . . . as if it were payable under an order of that court.”

That is standard form wording used in social security legislation. I reread it and I think it works.

The money resolution relates specifically to the pension provisions, which will obviously transfer a liability for pensions, but there is no net increase over and above what would otherwise have been paid. We expect the other provisions to be broadly neutral, as compared with where we were before, as IPSA will be losing functions as well as gaining ones. Overall pay and pensions will not add hugely to running costs because IPSA is already paying. A small policy function will be required, and it will use the SSRB to do the analysis.

I have dealt with the issue of delay in pay and pensions, the issue of the compliance officer being wholly separate, and double jeopardy. I was asked whether a new compliance officer could be in post before Royal Assent and before April. Subject to the approval of the Committee today, which is the equivalent of a Second Reading of the new clauses, we are exploring with IPSA whether it would have the legal basis to go ahead and advertise for a compliance officer. It is entirely a matter for IPSA, but I hope it feels able to do so. Whether that means that the compliance officer will be in post by 1 April is a moot point, but I think we can expect the compliance officer to be in post by the time there is anything to comply with and any complaint to be made. I think IPSA will be able to meet that requirement.

The right hon. Member for North-West Hampshire asked about new schedule 7 on page 668 of the amendment paper. Paragraph 1, which gives the power to make a repayment direction, states at sub-paragraph (4)(b) that a Member could be required to

“pay to the IPSA an amount reasonably representing the costs incurred by the IPSA in relation to the overpayment”.

The suggestion was that that went far further than Kelly had recommended. If the right hon. Gentleman looks at recommendation 45 on page 19 of the Kelly report, he will see that it says:

“The independent regulator’s enforcement regime should be strengthened by giving it the power to… Require the repayment of wrongly paid or misclaimed sums, with associated costs if appropriate.”

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following:

Government new clause 86—Tax status of members of the House of Lords: transitional provision.

New clause 52—Disqualification from membership of the House of Commons and the House of Lords on grounds of residence and domicile for taxation purposes—

‘(1) Subject to the provisions of this section, a person is disqualified from membership of the House of Commons and House of Lords if he does not comply with the conditions set out in subsection (2).

(2) The conditions referred to in subsection (1) are—

(a) that he was resident in the United Kingdom for the purposes of Part 14 of the Income Tax Act 2007 (c. 3) for the tax year during which he was elected or appointed and for each subsequent tax year; and

(b) in the case of a non-domiciled United Kingdom resident, that he has not made a claim to be taxed on the remittance basis in respect of the tax year in which he was first elected or appointed, nor in any of the previous 10 tax years, nor in any subsequent tax year during which he was a Member of Parliament.

(3) Members of Parliament must submit a declaration to the relevant authority indicating that they are in compliance with the conditions set out in subsection (2).

(4) A declaration under subsection (3) must be submitted to the relevant authority—

(a) within 30 days of the date of election or appointment;

(b) in the case of existing members of the House of Commons, within 30 days of the date on which this Act comes into force, and within 30 days of their election to any subsequent Parliament; or

(c) in the case of existing members of the House of Lords, within 30 days of the date on which this Act comes into force, and subsequently between 1 February and 5 April in each calendar year.

(5) Declarations must be made in accordance with arrangements made by the relevant authorities.

(6) Members of Parliament who do not submit a declaration in accordance with subsections (4) and (5) shall be liable to disqualification under this section.

(7) In sections 6 and 7 of the House of Commons Disqualification Act 1975 (c. 24), references to that Act shall be construed as including references to the Constitutional Reform and Governance Act 2010.

(8) In this section—

“appointed” means to have received a writ of summons to attend the House of Lords;

“Member of Parliament” means a member of the House of Commons or a member of the House of Lords;

“relevant authority” means—in the case of the House of Commons, the Speaker, and in the case of the House of Lords, the Lord Speaker.’.

New clause 53—Members of House of Commons and House of Lords to be treated as domiciled in United Kingdom (No. 2)—

‘Any person who—

(a) is (or is elected to serve as) a member of the House of Commons, or

(b) when this section comes into force is a member of the House of Lords, or

(c) subsequently becomes a member of the House of Lords,

is to be treated by Her Majesty’s Revenue and Customs as being domiciled, resident and ordinarily resident in the United Kingdom, and will be liable to pay United Kingdom taxes accordingly in any relevant tax accounting year in which he holds membership of the House of Commons or the House of Lords.’.

New clause 54—Deemed resignation and suspension on grounds of tax status—

‘(1) A member of the House of Lords is deemed to have resigned under section 32 if, after the commencement of this section, he makes a declaration to the effect that—

(a) he is not resident in the United Kingdom for the purposes of income tax, or

(b) in the previous 12 months he has made a claim to be taxed on the remittance basis as a non-domiciled resident.

(2) The date of a resignation under subsection (1) is the day the declaration is made.

(3) A resignation under this section comes into effect regardless of whether it would be a valid resignation under section 32.

(4) Every member of the House of Lords must make a declaration at least once every calendar year about his residence and domicile for tax purposes.

(5) A declaration under subsection (4) must state the member’s belief about his residence for tax purposes and about whether he has made a claim to be taxed on the remittance basis as a non-domiciled resident.

(6) A copy of every declaration made under subsection (4) shall be deposited with the Clerk of the Parliaments.

(7) A member of the House of Lords who fails to make a declaration under subsections (4) and (5) by the last day of December of any year is suspended from the House of Lords from the following day as if a resolution of suspension had been passed under section 31, such suspension to last until such time as the member makes a declaration complying with subsection (5).

(8) A member of the House of Lords who dishonestly makes a false declaration under this section is guilty of an offence.

(9) Anyone found guilty of an offence under subsection (8)—

(a) shall be disqualified from membership of the House of Lords, and

(b) shall be liable to imprisonment of up to five years and to an unlimited fine.

(10) The offence created by subsection (8) shall be triable on indictment only.’.

New clause 55—Tax status of members of the House of Commons—

‘(1) Every member of the House of Commons must at least once every calendar year make a declaration about his residence and domicile for tax purposes, which declaration must state the member’s belief about his residence for income tax purposes and his belief about whether in the previous 12 months he has made a claim to be taxed on the remittance basis as a non-domiciled resident.

(2) A copy of every declaration made under subsection (1) shall be deposited with the Speaker.

(3) A member of the House of Commons who makes a declaration to the effect that he believes that he is not resident in the United Kingdom for income tax purposes or that in the previous 12 months he has made a claim to be taxed on the remittance basis as a non-domiciled resident shall be disqualified from membership of the House.

(4) A member who has failed to make a declaration complying with subsection (1) by the last day of December in any year shall be treated as suspended from the service of the House until he makes a declaration complying with subsection (1).

(5) A member of the House of Commons who dishonestly makes a false declaration under this section is guilty of an offence.

(6) Anyone found guilty of an offence under subsection (5)—

(a) shall be disqualified from membership of the House of Commons, and

(b) shall be liable to imprisonment of up to five years and to an unlimited fine.

(7) The offence created by subsection (5) shall be triable on indictment only.’.

Government amendments 132 and 134.

Welcome to the Chair, Mr. Illsley. The Government have made it clear on several occasions that they support the principle that parliamentarians should pay taxes in the United Kingdom. All parties now seem to agree, and the proposed changes from the official Opposition, the Liberal Democrats and some of my hon. Friends suggest different ways of addressing this very issue.

The Government’s group of proposed changes would deem Members of this House and Members of the other place resident, ordinarily resident and domiciled in the UK for the purposes of income tax, capital gains tax and inheritance tax. As a result, they would be liable to pay those taxes on their worldwide income, capital gains and assets in exactly the same way as the vast majority of taxpayers. Moreover, they would be unable to access the remittance basis of taxation. In lay terms, they would not be able to avoid tax as a non-dom while a Member of this Parliament.

The vast majority of parliamentarians do pay full UK taxes, but there has been widespread popular concern about the exceptions to that rule. The net result of these proposed changes would mean that MPs and peers were liable to pay the same taxes as the vast majority of UK taxpayers, regardless of their actual common law status in the UK. The new clauses will come into force from Royal Assent, so they might apply to the next Parliament.

New clause 85 provides that all MPs will be deemed resident, ordinarily resident and domiciled from taking up their seat in this House upon taking the oath. Therefore, only those who are full UK taxpayers may sit and vote in this House. In the other place, all those appointed after the Bill receives Royal Assent would be aware that if they accepted a life peerage and a seat in the other place, they would be deemed resident, ordinarily resident and domiciled for tax purposes.

It is not possible to change a person’s resident, ordinarily resident and domiciled tax status part way through a tax year, so in both instances MPs and peers would be deemed to be resident, ordinarily resident and domiciled for the whole of any tax year in which they were Members. That means that they would be deemed as such from the start of the tax year in which they took up their seat and to the end of the tax year in which they stood down.

We acknowledge that the situation is different for incumbent Members of the House of Lords, who will be unable to resign from the House until the provisions in part 3 of the Bill come into force. As such, new clause 86 provides for a transitional period of three months during which incumbent peers can give notice in writing to the Clerk of the Parliaments that they are not willing to be subject to the deeming provision, and from that point their membership of the other place would cease.

Peers who remain Members of the House at the end of the three-month transitional period would automatically be deemed resident, ordinarily resident and domiciled for tax purposes.

The Minister is aware that we have signed up to the proposed changes, but it would be helpful to clarify the point about the ability of a Member of the other place—this does not really apply to the House of Commons—to get their affairs in order in sufficient time both to comply with the three-month rule and not to have an issue of retrospectivity over their tax. Will he explain how the marriage between the three months and the start of the tax year will work in practice?

In general, the way in which it will work is quite clear. There will be a three-month period after Royal Assent, and thereafter there will be a choice, which peers will make. I cannot pretend to be an expert on the tax affairs of every Member of the other place, but if the hon. and learned Gentleman would like to give me the details of any instances that he thinks might be caught up in that interaction, I should be very happy to address them and seek specialist advice on them.

As matters stand, I understand that one does not even have to be a national of this country to be a Member of the House of Lords; one can be a Member as a Commonwealth citizen. On that basis, some Members of the House of Lords might even originate from Commonwealth countries and never have been UK domiciled. Although this is a hypothetical matter, I can think of a number of Government appointees who might fall into that category. I want to understand how they will put their affairs in order if they wish to opt to remain in the House of Lords: what procedural mechanism will be required for that?

The hon. and learned Gentleman has put his name to these new clauses, and as such I would have hoped that he understood the purpose of a deeming mechanism. He keeps referring to people putting their affairs in order, but it is not clear whether he means their financial affairs or their status as a non-dom, or in any other way. We have chosen this mechanism of deeming someone to be ordinarily resident and domiciled for a very particular reason. There may be a perfectly good, entirely benign reason, which has nothing to do with their tax affairs, why someone might wish not to change their status in the way that he mentions. That is perfectly fine, but what is not fine is that Members of this Parliament should not be placed in exactly the same position as the vast majority of British citizens for whom this place legislates. If people are prepared to pay tax in this country, like the vast majority of British citizens, that is fine, and they have three months to put themselves in order. If they do not want to do that, that is also fine, and they can cease being a Member of Parliament. I hope that the hon. and learned Gentleman fully understands the purpose of the deeming mechanism in these provisions.

I think that I do: that is why I was hoping to encourage the Minister to clarify the position in the way that the Secretary of State clarified it when I wrote to him about this matter as soon as I saw the amendment. The key issue is whether somebody could end up being subject to double taxation. I believe that the Minister may be in a position to give the Committee some reassurance on that matter. If it is not satisfactorily covered, it provides the one opportunity that somebody who ended up being double-taxed might have to bring legal proceedings against the Government on the grounds of discrimination. As I entirely support the Government amendments, I wish to avoid that happening; that is why I want to press the Minister on this point.

Good—I am glad that at last we have managed precisely to elucidate what the hon. and learned Gentleman is about. If he is concerned about double taxation agreements, he can simply nod to tell me that that, and nothing else, is the burden of his concern.

indicated assent.

Right. In that case, the position is clear; I think that the hon. and learned Gentleman is already aware of it. These new clauses do not affect the UK’s double taxation agreements. For someone who is resident in the UK but also resident in another country or receives income from another country that is taxed in that country, the double taxation agreements exist to ensure that there is no double taxation. If no double taxation agreement is in place, Her Majesty’s Revenue and Customs will give unilateral relief that allows relief for the foreign tax paid, and the individual will be liable only to tax for the difference, if UK tax rates are higher. That means that there will not be double taxation.

It is worth pointing out that these arrangements are available to all those resident in the United Kingdom: they are not special arrangements for Members of Parliament or for peers. That is important, because the fundamental point of principle is that Members of Parliament, whether in this House or in the other place, should be subject to the same taxation arrangements as the vast majority of British citizens. I hope that the hon. and learned Gentleman is reassured and that I have clarified his concerns about the matter.

As I said, new clause 86 provides for a transitional period of three months during which incumbent peers can give notice in writing to the Clerk of the Parliaments that they are not willing to be subject to the deeming provision, and from that point their membership of the other place will cease. Members who remain will automatically be deemed resident, ordinarily resident and domiciled after that period. Once part 3 of the Bill comes into force, a peer may resign from the other place at any time if they do not wish to continue to be deemed resident, ordinarily resident and domiciled for tax purposes. New clause 86 provides that when a peer stands down from the other place during the transitional phase, they will be enfranchised. It also provides that when clause 33 comes into force they may disclaim their peerage. This is consistent with the approach we have taken in part 3 whereby those who leave the House for whatever reason may also, if they wish, disclaim their peerage.

The new provision will not apply to the Lords Spiritual, as their membership of the House of Lords is inextricably linked to their professional position in the Church. They do not take a seat after accepting a peerage—it comes with their position in the Church of England.

rose—

It is also worth reminding the House that, as I am sure that the hon. Member for Cambridge (David Howarth) is already aware, the Lords Spiritual are paid by the Church of England and taxed at source anyway.

I do not want to harp on about bishops to any great extent, as I did so last time we discussed the Bill. However, surely it is possible for a bishop to claim to be non-domiciled on the grounds of having foreign income and then take advantage of that position by being taxed on a remittance basis. I cannot understand why this provision should not apply to bishops.

Clearly, it is theoretically possible that there could be an enormously wealthy bishop who was escaping large amounts of taxation in this way, but I am not aware of any in that position. It is important to look at the facts to see why we have taken this view; obviously, all these matters are proportionate. Bishops in the House of Lords do not accept a peerage—they assume the position as a result of their profession as a bishop in the Church of England. If there were to be such a bishop who was non-domiciled and not ordinarily resident and who had these advantageous tax arrangements, then under these new clauses, they would, if they were not exempt, have to cease their profession, because the only way that they could cease to be a Member of the House of Lords would be to stop being a bishop.

I understand the hon. Gentleman’s theoretical concern, but I remind him that the Labour party is committed, in the next term of a Labour Government, to moving to a wholly elected second Chamber; in that context, this issue does not arise. I ask him to reflect on my remarks about what might be considered to be a disproportionate response to a situation in the distant future that is very unlikely to materialise. However, I am happy to consider any further representations that he may wish to make on this particular point.

The new clauses will come into force when the Bill receives Royal Assent so that they may apply to the next Parliament. Amendment 132 makes the necessary amendments to part 9 of the Bill. Amendment 134 is a technical amendment to the long title of the Bill to reflect the addition of the new clauses.

These amendments to the Bill clearly demonstrate that we are able to respond to the legitimate concerns of the public and that we are willing and able in this instance to put our own house in order. I very much hope that all right hon. and hon. Members will be able to accept them.

I have put my name to the Minister’s two principal amendments—not to the consequential ones, but they are merely consequential. That is a firm expression of my view that they come as near as possible to meeting the necessity that we have identified, and the Government have identified, to do something about this matter. I am comforted by the fact that when the Secretary of State wrote to me in reply to an e-mail that I sent to him about the details of the new clauses, he pointed out that the intention behind them is exactly the same as that of new clause 53, albeit that it is fleshed out in greater detail, as I would expect. I was always conscious that in a matter of this sort a Government amendment would be required to resolve the legal minutiae, particularly regarding an issue that concerns revenue matters.

We entirely welcome new clauses 85 and 86. They are a sensible way forward to ensuring that the public are reassured that all Members of this House and the House of Lords are treated as if they were resident in the United Kingdom—like the vast majority of people in this country—for tax purposes.

The Minister also provided reassurance—at my prompting, I am glad to say, though I am sorry if I did not prompt him at quite the right points—to clear up the transitional arrangements, which excited some comment. One or two Members of the other place raised the matter with me to try to understand what it would involve. The Minister has now explained that more fully, and I am grateful to him.

To play devil’s advocate, there is only one matter in the proposals about which I had some hesitation, although, on reflection, I can probably dispense with the hesitation. However, it is worth flagging up. There are currently provisions in the upper House for Members to take leave of absence. That enables them to go abroad to pursue their lives, professions, trades or businesses, but leaves them the option of returning and starting to sit in the House again when their leave of absence ends. I should be grateful if the Minister endorsed, in his winding-up speech, that the new provisions effectively mean that that system of leave of absence would no longer be possible if, during the course of it, the person went abroad and became domiciled there for business purposes, because he would be required to continue to be deemed UK-resident, even though he was not playing an active part in the life of the other place.

I am not too sure whether that point works, given that new clause 85 is a deeming clause. The person concerned would therefore be treated for tax purposes as resident and domiciled, regardless of the facts.

I understand the hon. Gentleman’s point. My understanding from raising the matter with the Government is that, although in future Members of the other place could seek leave of absence, as they have done in the past and still do, there would be no possibility, once the Bill was enacted, of their being non-domiciled in this country for tax purposes during that leave of absence. They would not be treated as not being domiciled in this country—they would continue to receive tax demands and be required to pay UK tax as if they were still here. Their only avenue out in those circumstances would be to resign from the House of Lords. That would mean that they could not—as they could hitherto—return to the service of the House on their return from some foreign appointment.

One could argue that that has a measure of not only novelty but—because it affects someone who is not playing an active role in the other place—unfairness. The other way of looking at it is that if one chooses to remain a Member of the other place, one must simply accept that, under the new rules, one will be deemed to be resident in this country for tax purposes until one decides to resign. As I can envisage some difficulties in adapting the provisions to take account of leave of absence, I assume that the Government have decided to ignore that. However, I ask the Minister for a rationale behind the Government’s approach to the matter. He did not provide one in his opening speech this evening, but it would be helpful if could do so because I do not believe that anyone has complained in the past of mischief in the case of a peer who has leave of absence being away from the UK or not domiciled, but perhaps the Government think that somebody has done so.

We will support new clause 85. We have signed it and, if it is put to the vote, we will back the Government. We wish it a fair passage on to the statute book. I hope that, consequently, we can bring to an end a sorry episode of constant suspicion of individuals in the other place, some of which may prove totally unfounded in some cases—

Or founded.

It may be founded or unfounded. The hon. Gentleman interrupts from a sedentary position, and I simply say to him that some people may be surprised by who decides to go and who decides to stay.

However, it is essential that the uncertainty be brought to an end. The public are entitled to reassurance that those who legislate pay tax in this country, like any other citizen. On that, we wholly support the Government. Indeed, that is why we tabled new clause 53.

I, too, welcome the Government’s movement on the subject and support the proposal. However, I fear that they have chosen the wrong method to bring about a result that hon. Members of all parties want. I ask the Government to think again about that method because it does not reach the heart of the problem.

As I understand it, the Government propose a deeming clause so that, regardless of whether a Member of the House of Lords or the House of Commons is, in fact,

“resident, ordinarily resident or domiciled”

in this country, they will be treated as

“resident, ordinarily resident or domiciled”

for tax purposes. The transitional provisions simply deal with the position of someone who might wish to resign as a consequence of being treated in that way.

I have a problem with the deeming provision. It is about domicile rather than residence. Residence is about the present and the immediate past, but domicile is different. Domicile is about long-term intentions—the place in which people are settled permanently in their own minds. It is ultimately about loyalty to one place or another. It is also true—this is relevant to the comments of the hon. and learned Member for Beaconsfield (Mr. Grieve)—that one can have more than one residence, but only one domicile.

The law of domicile goes back to an idea about personal law—law that applies to a person, who carries it around with them and is judged according to it, wherever they are. It goes back to a definition of domicile in Halsbury, which states:

“Every individual is regarded as belonging, at every stage in his life, to some community consisting of all persons domiciled in a particular country”.

The phrase “belonging…to some community” is why I think that domicile is an important matter in itself for judging whether someone should be regarded as a proper person to sit in a country’s legislature.

There is a contradiction in saying, “My long-term intention is to live in another country and to be part of another community rather than this country, in this community where I want to act as a legislator.” There is a problem with that. There are different examples, which might have different consequences, but I think they all lead to the same problem.

Let us consider a person whose father had a domicile in a different country—a domicile of origin that is not Britain. Later, when the person reaches the age of 16, the law states that, at that point and any point afterwards, they are entitled to choose a different domicile. Let us say that that person then fails or declines to change their domicile from that of their father to domicile in this country. That is not a technicality about tax, but a reality about that person’s view of themselves, and of which country and community they wish to belong.