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House of Lords Hansard
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House of Lords: Allowance
27 March 2018
Volume 790

Motion to Approve

Moved by

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That—

1. (1) The Resolution of 20 July 2010 relating to the House of Lords allowance is amended as follows with effect from the beginning of 1 April 2018.

(2) For paragraph 1(3) substitute—

“(3) The amount of the allowance payable to a Member in respect of a day of attendance in the year beginning with 1 April 2018 should be—

(a) £305, or

(b) if paragraph (4) applies, £153.

(3A) In relation to the year beginning with 1 April 2019, and each subsequent year beginning with 1 April—

(a) any formula or mechanism included in the IPSA determination for the year as a result of section 4A(4) of the Parliamentary Standards Act 2009 (adjustment of MPs’ salaries) should be treated as applying for the purposes of adjusting for that year the amount of the allowance payable to a Member of this House, and

(b) accordingly, the amount of the allowance payable to a Member in respect of a day of attendance in that year should be—

(i) the amount obtained by applying the formula or mechanism to the amount payable by way of allowance (under paragraph (3) or this paragraph) in the previous year, or

(ii) where no formula or mechanism is included in the determination, the same amount payable by way of allowance (under paragraph (3) or this paragraph) in the previous year.”

(3) After paragraph 1(4) insert—

“(4A) In paragraph (3A)(a) “IPSA determination” means a determination under section 4(4) of the Parliamentary Standards Act 2009.

(4B) Any fraction of a pound in an amount obtained under paragraph (3A)(b)(i) should be rounded up to the nearest pound if the fraction is 50p or more, but otherwise should be disregarded.”

(4) In paragraph 2(1) for “Accordingly, the” substitute “The”.

2. In respect of a day of attendance before 1 April 2018, the Resolution of 20 July 2010 relating to the House of Lords allowance continues to have effect without the amendments made by this Resolution.

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My Lords, the Motion in my name proposes changes to the current and future rates of the daily allowance that would come into effect from 1 April. It follows the agreement of a report by the commission, which has also been put to the House for agreement. The current system was introduced in 2010 and was rightly considered to be a more direct, simpler and more transparent system, as well as being much easier to administer than the previous, discredited expenses system.

The daily allowance rates of £300 and £150 have been fixed since their introduction in 2010, and the House made a conscious decision at that time that this should remain the case until the end of the 2010 to 2015 Parliament. No decision was taken about how the scheme would operate after that Parliament, and rates have remained the same. I believe that, after almost eight years of the rate being frozen, the time is now right to introduce a modest uprating. While freezing the rate during that time was justified in line with public sector wage restraint and expenditure more generally, it is clear that, unless some means of providing a modest uprating mechanism is introduced, over time the amount of the daily allowance will reduce significantly in real terms.

The question then arises of what uprating mechanism should be used. I believe that the method that the Independent Parliamentary Standards Authority has used to determine annual increases in MPs’ pay for the last few years, in line with the independent ONS figures for average increases in public sector pay, is a sensible method which we should apply to the level of the daily allowance, beginning this year and for subsequent years. I am pleased to confirm that the commission agreed to my proposal that an initial uprating should be made to the daily allowance from 1 April 2018, in line with this year’s IPSA increase to MPs’ salaries of 1.8%, with subsequent annual upratings being pegged to subsequent annual IPSA determinations. Initially, this would result in a new rate of either £305 or £153. The result would be a modest and sustainable adjustment to the rate which I commend to the House. I also welcome the commission’s endorsement.

The overall cost of such an uprating in terms of the impact on the House of Lords estimate would be approximately £339,000 per annum. This can be accommodated within the current financial plan, which reflects overall savings year on year in the total running costs of this House, and means that we would continue to fulfil our important role at a rate that represents good value to the taxpayer. If IPSA were to change its method of determining future upratings, the commission would, of course, want to reconsider this approach. I beg to move.

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My Lords, I thank the noble Baroness for her comments. This seems a sensible and appropriate approach to an uprating mechanism. As she pointed out, Members of your Lordships’ House have not seen any increase in allowances since 2010. To have an automatic annual increase on the same basis as Members of Parliament seems an entirely fair and appropriate way to proceed. She will understand that issues and anomalies remain that colleagues across the House will seek to address. They have not been addressed today, as she commented. However, the approach to the uprating mechanism is entirely appropriate. On a personal level, I thank the noble Baroness as I have raised this issue for a number of years, and without her personal commitment I do not believe that we would have seen this uprating at all.

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My Lords, I, too, congratulate the Leader on securing this settlement. It is modest but it protects the current level of allowances after years during which they have fallen and provides the basis of a regular uprating in the years to come—and it is closely linked to what happens in the Commons. In the current environment, I simply do not believe that a more generous settlement was politically possible, so it is very much to be welcomed.

In my view this does not mean that we have anything like a satisfactory approach to allowances. The noble Lord, Lord Strathclyde, produced a simple political fix when he introduced the current system, and, while it has met what I am sure were his objectives—namely, a system which survived without inviting much adverse comment—it is by any logical perspective deeply flawed. In the past 10 years, I have seen my allowance in effect doubled—I lived in London when the Strathclyde measure was introduced—and then, when I moved last year to north Yorkshire, halved again. These changes have borne no relation to my participation in the affairs of the House.

Colleagues who have lived outside London for the whole period have seen a real terms fall in their allowances of nearly 20% at a time when London accommodation costs have increased faster than the overall rate of inflation. Personally, I can see no reason why, within a slowly rising funding envelope, we should not move towards a position in which expenses start again to reflect the actual costs incurred by Members who live outside London. I think that would be a much fairer system. However, I realise that there is no consensus in the House to move in such a direction and that the overall funding available to the Lords is likely to remain tightly constrained for the foreseeable future. That being so, I reiterate my thanks to the Leader for securing the increase she has announced today.

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My Lords, I realise that I am unlikely to win the popularity stakes in your Lordships’ Chamber by the comments that I am about to make—but, having exhausted all other opportunities available to persuade those who hold offices in this House to change this system of allowances, I feel that I have no other alternative but to say a few words in this debate.

In 2010, shortly after I was introduced to your Lordships’ House, the system of allowances was changed. I have to say today that I am opposed to this Motion on two grounds. First, I am opposed to the increase; that will certainly not make me very popular. I do not believe that £300 tax-free, available to every Member of this House indiscriminately, is justifiable in terms of public opinion or the public purse. Secondly, I am opposed to it because it entrenches the discrimination that was introduced into the system in 2010.

For those Members of your Lordships’ House who have been introduced since 2010, I will remind the House of what the allowances were back then. The day allowance, which is effectively the equivalent of the £300, was £86.50. It was introduced for the majority of Members of the House, who went from £86.50 to £300 overnight. There was an office allowance—a secretarial allowance—of £75, available to all Members, and there was an overnight allowance of £174 for Members who lived outside London. That was a total of £335.50 for those Members who could legitimately claim the overnight allowance because they lived outside London and were paying sometimes up to £200 a night for a hotel in London.

In 2010, that was changed to £300 for every Member of the House, available every day that the House sat. The Members who lived outside London received a reduction of £35.50; the Members who lived inside London—even with the ending of the secretarial allowance—received an increase of £138.50. That system continues to exist today and is entrenched by the report of the House of Lords Commission that is in front of us. It was basically introduced because leaders in your Lordships’ House assumed that it was impossible to police a system that relied on the trust of Members living in London not to illegitimately claim an overnight allowance to which they were not entitled. So those who were legitimately incurring costs through living outside of London were effectively penalised because people who lived in London—it was perceived—could not be trusted. That is a shocking state of affairs: it should have been dealt with long before now.

There have been assurances again and again over the last eight years that, if there was any change at all to the allowance system, the first change would be to rectify this anomaly. The impact of this anomaly is clear: there are Members here today, in your Lordships’ House, who have moved their residence from outside London to inside London solely for financial reasons, because of the impact of the allowances scheme. People who were introduced in 2010, 2011 and 2012—because they lived outside London and because of the desire of the then Prime Minister and others to bring in more people from outside London to your Lordships’ House—have moved to London since then. There are Members here who have an incentive to move to London, when the incentive should be to increase the geographical diversity of this House: to get people here from the devolved Parliaments who have not served in Westminster and to get people here who spent their working lives in Northern Ireland, Wales, the north of England, the south-west and Scotland. This system acts as a disincentive to that objective. All the political parties say that they have that as an objective, and yet they will not take the one simple step, based on receipts, that would make a difference. So I am opposed to this report because it entrenches that discrimination: it is an unjust system and it is a disincentive to greater diversity in this House at a time when, I hazard to suggest, it is deeply needed.

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My Lords, you can agree with my noble friend on the anomaly he highlights and the unfair system that penalises those who live—and remain living—distances from London, and still be in favour of passing the Motion this afternoon. They are not mutually exclusive. It is perfectly feasible to recognise that after eight years, a modest increase in the allowance is justified whether the media mislead the public or not about your Lordships’ House, and to want to look at changes in the future. I encourage my noble friend to support what is put forward by the Leader of the House this afternoon and then to work with others on seeing whether we can have a watertight system.

There are many other anomalies. One of the things we should greatly encourage is to get the work of this House better known and better connected across the United Kingdom. One small measure in that regard would be to pay the same allowance for activities outside this House that are paid when they take place inside the House. In other words, we do not discriminate, for instance, against committees that take themselves out of London to find out how the real world lives out there.

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My Lords, I back my noble friend Lord Blunkett, and I have total sympathy with the concerns that were raised by my noble friend Lord McConnell and, indeed, by the noble Lord, Lord Newby, although perhaps he did so in a gentler way. As Members on all sides will know, I have raised this issue on a number of occasions. I pay tribute to the Lord Speaker—I hope that this does not sound too gratuitous and crawling; it is absolutely genuine—who agreed to meet a deputation of all parties and the Cross Benches, which I had the privilege of taking to him to make the arguments, including the argument my noble friend Lord McConnell made. The Lord Speaker has been working with deft diplomacy behind the scenes, and the result is what we have achieved today. It is the first step towards getting these considerations dealt with properly, and I look forward to meeting the Lord Speaker afterwards, with a deputation, to raise other issues that need resolving, particularly those raised by my noble friend Lord McConnell. I hope that on that basis, my noble friend will not vote against this. As my noble friend Lord Blunkett said, it is a small step in the right direction.

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My Lords, I am grateful to all those who have briefly contributed. I thank in particular the noble Baroness, Lady Smith, and the noble Lord, Lord Newby, for the work they have done and for their support for this approach, which has allowed us to make progress, notwithstanding the comments made by the noble Lord, Lord McConnell. I understand that this is not what many Members of the House may have hoped for, but I hope they see that we have understood some of the comments noble Lords have made and that we have tried to take a step in the right direction. I agree with the noble Baroness, Lady Smith, that this is the right thing to do at this point. I accept that it is a modest increase, but I hope that noble Lords will feel able to support the Motion.

Motion agreed.