Photo: Tudor Barker via Flickr
Yesterday, the Independent Parliamentary Standards Authority (IPSA) published its package of measures on pay and benefits for MPs. The headlines are:
- a one-off salary increase to £74,000 pa, which IPSA reckons is 9.26%, but I make it 11.4% and everyone else seems to think it’s about 11% – I’ve given IPSA the benefit of the doubt here and called it a 9% increase from here on
- new pension arrangements, bringing MPs’ pensions in line with those elsewhere in the public sector with increased member contributions, so reduced taxpayer contributions
- scrapping the “resettlement payments” that meant MPs got a big pay-off when they left office (but keeping a smaller loss-of-office payment for MPs who stand for re-election and lose)
- reform of MPs expenses, including the removal of the allowance for evening meals.
We (voters) need IPSA to work because otherwise the danger is that we go back to the system in which MPs set their own pay and make their own rules for claiming expenses. This was an important opportunity for IPSA to demonstrate that independent, non-political administration of MPs’ pay and expenses can work and be credible. They have blown it.
IPSA’s argument is that we should not focus on the pay rise but look at the package of measures as a whole. If we look at the package as a whole, IPSA argues, we would find that it is incontrovertibly fair and sensible, and we would see that it only makes sense viewed as a package, rather than taking any element in isolation. “This is a package, a package of reforms,” IPSA chair Sir Ian Kennedy said. “You cannot unpick it. You can’t say that bit we like and that bit we do not.” It’s an argument that succeeds brilliantly in being both arrogant and condescending.
Let’s look at what’s in the package, other than the pay rise. First, there’s pension reform. Bringing MPs’ pensions in line with other public sector pensions, and reducing the taxpayer burden, are both good ideas. But other public sector employees have had their pensions reformed, in part to reduce the taxpayer burden – you may recall there were strikes over it – and yet I don’t recall anyone saying a 9% pay increase was a reasonable way to offset the detrimental impact of those changes.
Then there’s those “resettlement payments”. An MP leaving office at election time – whether they were stepping down or had lost their bid for re-election – received a grant of between £50,000 and £100,000 (depending on age and length of service) with the first £30,000 being tax-free. Of course these should be scrapped. It’s outrageous they ever existed at all. They’re not even being completely ditched – MPs who stand for re-election but lose will get a loss-of-office payment capped at six months’ salary. This is a perk that most people don’t get when their contract isn’t renewed – which is the closest normal-world analogy I can think of to failing to win re-election. I can’t think of any good reason why we should compensate for the reduction of this perk by way of a huge pay increase.
Finally, we have the reform of expenses. It is completely right and proper that MPs are able to claim back expenses they legitimately incur in the course of doing their job. We should expect these to be substantial as long as we expect our MPs to function in multiple workplaces (Westminster plus often more than one place within their constituency), to travel frequently between them while staying for several consecutive nights in each and working, effectively, seven days a week. We also want MPs to maintain offices and even have some staff to help them manage what is a very demanding job. There might well be some difficulty in determining which expenses are legitimate and which are not – particularly when it comes to accommodation – but, fundamentally, we are talking about reimbursing for expenses incurred, not topping up income. Taking expenses away should not require balancing with adding to the salary – the two are not supposed to be connected.
IPSA insists that the pay rise is not intended as compensation for the loss of other benefits – that it does, in fact, stand on its own as a defensible decision. I find it hard to marry that with Sir Ian’s insistence that the package cannot be unpicked.
What other arguments is IPSA using to defend its decision? Well, there’s the one about how the IPSA package will not cost the taxpayer any more than the current arrangements. This is both underwhelming (leaving things exactly as they are also won’t cost any more) and misses the point. The problem with giving MPs a 9% pay rise isn’t that it will increase the cost to the taxpayer – it is that it is inherently unfair.
Then there’s the argument that IPSA’s research shows the public actually supports the pay package. Actually, they don’t. According to the research commissioned by IPSA, when presented with the package and told that it will be cost-neutral, 45% of respondents still said it was too generous, with 43% saying it was about right or not generous enough. IPSA claims that this suggests that the outrage of commentators is misplaced – that the public has a more “sophisticated” and “nuanced” view than they are given credit for. More adorable arrogance and condescension there – agreeing with IPSA is sophisticated; you should pity us dull plebs who disagree. Of course, the problem here is that the research respondents were only shown the whole IPSA package and not given any other options. Show them the package without the 9% pay rise – I wonder if it might get an even more sophisticated (if rather less nuanced) reaction.
And then we get to the arguments – put forward by IPSA and others – that MPs quite simply ought to be better paid. There are a number of strands to this argument, not all of which IPSA supports. There is a concern that, if you don’t pay MPs enough then only rich people would be able to stand for Parliament, and we’d be governed by an out-of-touch wealthy elite. Then there is the view that MPs’ salaries need to be set high enough to encourage the high-flyers, the captains of industry, to run for office. Why would they do so if it meant taking a huge pay cut from what they might expect to be paid in the private sector? And there is also an argument that they should be paid more simply because the job deserves it – it’s incredibly hard, involves long, anti-social hours, and if you look at what parliamentarians in some other countries get, we are ‘falling behind’.
Those first two arguments are, of course, contradictory. You can’t worry about only rich people becoming MPs and, at the same time, want to raise salaries so that more rich people become tempted to stand for election.
But, to really understand the weakness of these arguments, it’s worth knowing a couple of things. The first is that the average salary for all full-time workers in the UK is £27,000. The second is that MPs’ current salary of £66,000 puts them at the 97th percentile in terms of income for a single adult; the 85th percentile if you are in a couple and have two teenage children. In other words, just 3% of single people in the country are paid better than MPs and 15% of people in two-older-children families. Those numbers drop to 1% and 13%, respectively, at a salary of £74,000. In other words, MPs are, by any reasonable standard, already very well paid.
Let’s consider first the argument that, unless MPs are generously paid, only rich people will be able to afford to be MPs. First off, this is an argument that logically should apply to any job but is actually true for precisely none. I think it’s wrong that only rich people should be able to afford to be primary school teachers, so it worries me that their starting salary is just £19,600 and their average salary is around £28,660 – well under half the current salary of an MP. No wonder our primary schools are staffed almost exclusively by millionaires just killing time before taking control of the family oil company. Wait – the teaching, nursing, social work, cleaning and maintenance industries aren’t all staffed entirely by the super-rich? Well, that’s odd. Maybe this argument makes no sense. Maybe the 84-96 per cent of people for whom an MP’s salary would be a pay increase can afford to do the job after all. Fancy that.
That said, the view that MPs should be drawn from a wider field than just the very rich is one that I have more sympathy with than the view that we should we raise their salaries in order to be able to reach up into the very rich to recruit more of them. High pay is not a reliable proxy for the types of skills and attributes we necessarily want in an MP. Do we really want a Parliament stuffed with insufferable type-A personalities, each convinced of the superiority of their leadership skills? Why would we want to narrow the range of people who become MPs, when it is surely better to broaden it? I think I’d prefer a House of Commons made up of a representative cross-section of the UK population, rather than one packed with that tiny minority of people for whom £66k is a pay cut but £74k is just about manageable.
This is not how IPSA has viewed this, clearly. In fact, they haven’t approached this exercise in the way that an employer would at all. “Setting MPs’ pay is not like setting pay in other jobs,” Sir Ian Kennedy explains. He says it can’t be because the necessary data don’t exist to make it possible. Again, this is true of lots of specialised roles – you have to make do with the best data you can find.
If I have remembered my years-old management training on remuneration, the four things you want to consider when setting the salary for a job are recruitment, retention, incentive and reward. Are you paying enough to attract enough of the right type and calibre of applicant for the job, or are they all hoping to work elsewhere where the pay is better? Once you’ve hired them, are you paying them enough to keep them, or are they looking around for the same job but better paid somewhere else? Does the salary provide adequate incentive for your employee to work effectively and to want to do well for the employer? And is the salary fair reward for the quality and quantity of work to be done?
These questions are difficult to answer when you have a job with no written job description and for which the only qualification is electability. But, to take those four factors in turn: recruitment doesn’t seem to be an issue for Parliament. Not only are there multiple candidates for each Parliamentary seat but, in most of them, there are multiple candidates to be selected as a candidate. It’s just a guess but I imagine, if you asked every one of them to list five reasons why they want to be an MP, ‘pay’ would not be mentioned by many, if any. Would increased pay make more people want to be an MP? Maybe, but do we want a House of Commons full of people who are in it for the money?
Retention doesn’t seem to be a problem, either. You don’t see a lot of MPs quitting mid-term because they’ve had a better offer somewhere else. Maybe some MPs choose not to stand for re-election because they think they’re not paid enough but I’m not too bothered by this because it’s so easy to replace them. Oh, and here’s a good example of why the pay levels of parliamentarians in other countries is of limited relevance in this debate – because no MP can say “hey, they’re getting £114,660 over in the US House of Representatives – I should go and work there.”
As I understand it, the incentive for most MPs to do a half-decent job is the prospect that they might lose the next election. Salary levels do not obviously come into it.
So, we reach the £74,000 question – what is a fair salary for MPs? Yes, it’s a difficult job demanding long hours and a wide range of skills – the same is true of lots of jobs that don’t pay nearly as much. Is it fair to expect an MP to scrape by on well over twice the national average salary, plus expenses, plus access to subsidised bars and restaurants, plus no risk of redundancy and, between elections, they can’t get fired and they don’t have to meet productivity targets or, in fact, any specific objectives at all and no one gives them performance reviews or tells them to stop arriving late or to start looking smarter…? I think so.
The problem with Sir Ian saying that you can’t find data to decide on MPs’ pay is that what IPSA actually did do was find data to help them decide on MPs’ pay. He explains it in his blogpost - they were really quite thorough and rigorous about it. I don’t like the outcome, but I have no issue with the process. There are some strong arguments in there about how, if MPs’ salaries had kept pace with public sector earnings growth since 2008, they would be on even more than the £74,000 now being proposed. If I were Sir Ian, that’s the one argument I would want to make above all the others, not the nonsense about not unpicking packages or the public supporting him when we clearly don’t. But I think this would have been a tremendously good argument to make in 2008. In 2013, the third year of a public sector pay freeze and with the rate of earnings growth applying, of course, only to those who have managed to avoid losing their jobs altogether, I find myself unimpressed.
If you were determining MPs’ salaries for the first time today, would it be reasonable to pay them £74,000? Probably. So what’s my problem?
My problem is with MPs getting more, now. At a time when everyone else whose salary comes from the taxpayer is not getting more; when many haven’t seen a pay increase in several years; when we are told that austerity and cutbacks are essential; when public sector workers have lost pension rights and other benefits with no compensatory pay rise – and many have lost their jobs; when those same workers have never had ‘resettlement grants’ or evening meal allowances to lose – when all these things are true, the idea that MPs deserve an extra 9% above what is already a pretty generous salary is hard to comprehend. Most MPs seem already to know this. Sir Ian, in his arrogance, argues that it is important for the sake of preserving an independent adjudicator that MPs have this pay rise forced on them. In fact, it is important for the sake of preserving an independent adjudicator that IPSA finds a better solution – one that doesn’t, on its own, discredit the whole independent adjudicator framework in the eyes of the general public (even us unsophisticated types).
IPSA needs to work. There needs to be a strong, credible body holding MPs transparently to account for their cost to the taxpayer. It will be difficult for Parliament to hold its own regulator to account. Which is a shame because we’re paying a lot for this standard of decision-making. According to IPSA’s published figures, its three senior managers each earn somewhere between £85,000 and £105,000 per annum. IPSA’s chair, Sir Ian Kennedy receives £60,000-£65,000 per annum for two days per week of work – that’s a full-time equivalent of £150,000-£162,5000. He probably wouldn’t do it for less. He probably thinks it’s a fair price for such sophisticated thinking. Perhaps none of them would do the job if it paid less. We should really find out.