Clause 2 — MPs' salaries

Hydrofluorocarbons Limitation – in the House of Commons at 6:45 pm on 30th June 2009.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester 6:45 pm, 30th June 2009

I beg to move amendment 69, page 1, line 17, at end add 'of 3 July 2008.'

The amendment would take further the implementation of the recommendations of Sir John Baker. It would remove the requirement for the House to pass further resolutions in order to amend MPs' pay, which would become entirely a matter of statute. Although it incorporates the resolutions passed on 3 July 2008, I am advised that it involves no issues of retrospection. It retains the flexibility built into the Baker recommendations of a review by the Senior Salaries Review Board at the start of each Parliament.

My reason for tabling the amendment is clear enough. Along with allowances, the pay of MPs has been a source of enormous controversy almost every time the House has considered it. To the public, it looks like MPs voting themselves a pay rise from taxpayers' pockets; it looks like trotters in the trough. There is always a pressing reason, too, for the Government to wish to vary an SSRB recommendation, which can cause even more controversy and require even bigger adjustments to be made later.

That was partly why Sir John Baker was given the task of devising a system

"to make recommendations for a mechanism for independently determining the pay and pensions of MPs which does not involve MPs voting on their own pay".

His report recommended annual uprating in line with public sector average earnings, with a review by the SSRB each Parliament, but that still left the difficulty of the need for a resolution of the House and the scope for Parliament to vary its conclusions in it.

The intention of the provision is to remove that scope. In doing so, it seeks to fulfil the policy objective of the democracy task force, chaired by my right hon. and learned Friend Mr. Clarke, in which my right hon. Friend Sir George Young was also involved, which concluded that pay awards should be placed in the hands of an independent body by statute.

It is curious—it can be a product only of the undue haste that comes when a Government convince themselves that they need what they have described as "emergency legislation"—that the Bill does not already contain a provision of this type. It is particularly odd that clause 2 perpetuates the setting of pay by resolution, when it has so manifestly caused so much difficulty for everybody in the past.

Even so, it is not primarily to avoid controversy that I feel that the amendment is necessary. It is necessary primarily because, as I suggested a few moments ago, the current arrangements are still wrong in principle: nobody should set their own pay—not even MPs, and the public might say especially MPs. I think that the public are right about that. Other democracies have addressed this issue and mostly have put it right by removing the right of MPs, or their elected representatives, to set their own pay. An appendix to the Baker review sets out a wide range of other countries that have taken steps similar to what I am suggesting today.

Neither does the amendment represent an effort to secure increases in pay by the back door. I am not a supporter of a sharp pay adjustment for MPs; I think that there is a vocational element to the job, which should be reflected in the pay that we receive. If one takes that view, however, it also means that the full costs borne by MPs in the performance of their duties should be met by allowances, however unpopular that may be to the public. That is why Sir Christopher Kelly's investigation will be so important and why the way in which he presents his report, however difficult, will be crucial for the future of the allowances system.

This is emergency legislation and it, including the amendment, will need to be reviewed. I think that that will be best done by a sunset clause, which I have not yet had an opportunity to table, but I hope will be tabled in the other place [Interruption.] I am pleased to hear that a sunset clause has been tabled by my colleagues. The arrangements in my small amendment would be able to be reviewed on that basis, prior to the expiry of the sunset clause.

I believe that a review will eventually be needed for a number of reasons. I have already alluded to the first—that the amendment will need to be considered in the light of Sir Christopher Kelly's recommendations. Secondly, the weighted index built into the Baker proposal may, for some unforeseen reason, become distorted. That has happened in the past, which has required making changes to indexation.

Thirdly, pensions are not fully dealt with by Sir John Baker, on his own admission, and we would be incorporating what he has said on pensions. As it happens, I have long favoured an end to the final salary scheme for MPs, starting with new entrants, and its replacement by a defined contribution scheme. In view of what is happening in the private sector right across the country, I believe that that is the only way forward.

Fourthly, I am not absolutely sure that the indexation scheme being proposed by Sir John Baker as the basis for law by resolution is necessarily the best one. I would have favoured UK average earnings rather than public sector earnings as the basis, which would include the private sector. With a linkage to public sector earnings, it could be argued that MPs would receive disproportionate protection in a downswing, as now. Vice versa, of course, we would benefit disproportionately when UK Inc. is doing particularly well. These are all issues to which we can return when the sunset clause, which I hope is built into the Bill, takes effect.

My final reason for suggesting an eventual review is that even if this amendment were made, there would still be some discretion left to Parliament through the vote on estimates. The only technical way of removing pay completely from the grasp of the House of Commons would be to pay MPs from the Consolidated Fund in the same way as the Speaker or judges, for example, are paid. The Government would then be unable to control the remuneration through votes on estimates, but that is a bigger issue and is not for now; it can be clarified as part of a later review.

In the meantime, the amendment will do at least something to restore public trust by removing the opportunity for MPs to vote on their pay, which is, along with allowances, one of the big issues that have triggered a sense of loss of trust between MPs and the people who put us here. The amendment would ensure that pay is dealt with in accordance with the spirit of Sir John's recommendations and with the intentions of the Government as set out yesterday, with those of the democracy task force, on which I served, and also with the wishes of my own Front-Bench team. I very much hope that the Government will feel able to support the amendment.

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Photo of Alan Duncan Alan Duncan Shadow Leader of the House of Commons 7:00 pm, 30th June 2009

I commend my hon. Friend Mr. Tyrie on tabling the amendment. It has considerable merit, being both ingenious and uncontentious. It contains a lot of sense and I hope that the Government will see fit to accept it.

The purpose of the Bill is to set up an independent Fees Office designed to administer and set allowances. In its current proposed form, it is designed to administer—that is to say, pay—salaries. In the long term, we want to ensure that everything that is paid to Members of Parliament, be it pensions, salary or allowances, is determined by an outside body rather than by ourselves. As the Bill stands, it goes only some way towards doing that, but the amendment would take us a marginal step further in the direction of having an outside body determine our salary. Crucially—and sensibly, at this awkward time—as well as removing Members from the process, it would prevent the Executive from inevitably attempting to intervene to reject the recommendation of the SSRB or to amend it. As such, it would introduce a measure of automaticity into the way in which our pay is adjusted and prevent the contentious political shenanigans that bedevil this issue.

The two resolutions in question are the one that was passed on 3 July last year and the accompanying money resolution. The amendment would entrench the adjudication of any increases that follow. It would link our pay to a package of comparators, including public service workers—in the NHS, school teachers, the armed forces and the civil service, including HMRC—and it would also introduce an annual review. In making that link, it would not only remove many of the contentious arguments about how much we should be paid, but prevent the political intervention that normally follows.

We should be realistic and accept that the regime set up by the amendment would be an interim measure. The Bill does not allow for the external assessment and setting of our pay, so the amendment would be in place until the primary legislation was amended. If in future we were to bolt on to this Bill a broader responsibility to consider the entire pay and rations of Members of Parliament, and potentially Ministers, this interim regime would be replaced by giving IPSA responsibility for setting our pay, allowances and pension.

The amendment would set up an effective, depoliticising and interim regime that would do much to improve the basis on which our pay is set, and as such it is entirely in the spirit of the Bill. I urge the Committee to support the amendment.

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Photo of Richard Shepherd Richard Shepherd Conservative, Aldridge-Brownhills

My hon. Friend Alan Duncan used the word "automaticity" about our pay: I take an entirely different view, of course. It has been a historic function of a self-governing Parliament to set its own pay and be responsible and accountable to those who send us here. I remember the voices of Enoch Powell and Michael Foot arguing that very point: what we do will ultimately always be judged by the electorate. We should not have some independent outside authority setting our pay.

We have had many comparators over the year, and we know who they are. It is true that the Government, in the exigencies of the economic situation, say that it is not an appropriate time to increase pay, but in my mixed constituency—it is not a wealthy one—the amount that we currently receive is not greatly challenged. The whole point of the Bill is to address those issues that are seriously challenged—the construction of an expenses system that was beyond the understanding of most of us who have been here for 30 years. We had no idea that furniture could be bought—that had been added on to the system.

The amendment would turn away from something very fundamental to the purpose of this House. We are the central authority and the representatives of the people. That is why we have the concept of the sovereignty of Parliament. In all my years here, I have argued that the sovereignty of Parliament is a shorthand for the sovereignty of the people. We have become some sort of sleek agency that outsources and has specialists coming in to tell us what is appropriate. At the end of the day, the House can still vote down all the recommendations that are put to it. If it does so at the behest of the Government Whips, that is a matter of judgment.

My hon. Friend Mr. Jenkin yesterday made reference to the American system, which experiences the same difficulties. In the US, they have an even greater impediment than we do. As I understand it, the salaries of federal employees cannot be greater than those of the elected representatives. If we put our salaries up to £120,000, we would fear a revolt in the homelands, because people would think that that was excessive. We tend, therefore, to be very timorous, and that is the dilemma that elected members in the US faced. They could not hire people to work in the federal service because they had so suppressed their own wages. That happened under Reagan, and eventually something had to be done about the representatives' salaries. After investigation and adjudication, they came to the conclusion that they should not set the rate for themselves, but set it at the end of a session. So in this country we would set the rate at the end of a Parliament not for the existing Members, but for those who form the next Parliament. Some of those who set that pay would stand at the election, and would therefore face the critical judgment of the electors as to whether the rate was excessive.

We should not be swept away by fads or crazes, or set every quango in existence over us. We are representative of something far greater than ourselves. This is Parliament. It is 800 years old. It came about because we were trying to restrain the authority of the monarch. Now we want to make this place subservient again. It is suggested that we would be better validated if a quango authorised our affairs. No: we should take the responsibility. We should face our electorate, and I suggest that it should be done at the end of a Parliament in order to benefit the next Parliament. That is why there is not universal consensus on my hon. Friend's proposal. The automat—I cannot even say it; it sounds like a launderette—the automaticity is ghastly.

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Photo of Richard Shepherd Richard Shepherd Conservative, Aldridge-Brownhills

My hon. Friend says that it is fantastic. That tells us what is happening to Front Benchers.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons, Opposition Whip (Commons)

As a Front Bencher, I am now not sure whether I want to speak after all.

Mr. Shepherd gave a passionate exposition of the sovereignty of Parliament, but nothing in the amendment alters that. Given that Parliament can pass statute, the statute that we are attempting to pass tonight can be revisited by Parliament at any time, and given that we have that sovereignty, we can decide that it is in the current interests of Parliament and the body politic for the judgment to be passed to an external authority to be implemented by that external authority. We are perfectly entitled to make that decision and, because we have sovereignty, to do it in the way that has been proposed.

I believe that the amendment builds on the public trust that is being sought through the creation of an agency to deal with our expenses and allowances, and given that salaries are so intertwined with expenses and allowances, it seems to me to be an important step forward. Mr. Tyrie pointed out that there would subsequently be a sunset clause debate, which means that it will be possible to revisit any imperfections in any of the legislation that is being rushed through now if the Government accept the sunset clause. However, I think that at this stage we should focus on the financial aspects of the Bill, and that the Government should respond positively to the amendment.

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party

I was impressed, to a degree, by some of the arguments presented by Mr. Tyrie, but I am not fully persuaded that we should tie the reference in clause 2(1) to a single set of resolutions of the House. After all, a number of Members who seem to support the amendment said earlier that part of their problem with the Bill was that it would pre-empt the Kelly review. Many said that Kelly would examine issues much wider than the issue of the allowances scheme. It is true that some of the questions that Kelly has asked and some of the answers that have been submitted touch on considerations relating to such matters as salaries, and on how there might be a recalibration between the two.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

May I point out to the hon. Gentleman that pay is specifically excluded from the terms of reference set by Sir Christopher Kelly for his review?

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party

Pay, in terms of salary, is excluded, but treatment of some of the issues is not. We need only examine some of the submissions to Kelly to see that there have been suggestions that the way in which some matters are treated should be recalibrated, whether they are treated as being presumed to have been built into and covered by salaries or by allowances. For instance, a number of the submissions have touched on whether there should be a subsistence allowance. Some people say that salaries should be reviewed to ensure that such costs are taken fully into account. Some have even suggested that second homes should be presumed to be covered by salaries rather than allowances, and that salaries should be reviewed accordingly.

If, as some have said, Kelly should be allowed to return to look at the whole picture, we cannot have it both ways. We cannot say that we cannot tie ourselves or Kelly in the Bill. My fear is that, while the amendment might not tie Kelly, it might tie us in the future, and that we may be freer without it.

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Photo of Alan Duncan Alan Duncan Shadow Leader of the House of Commons

May I respectfully point out that even if Sir Christopher Kelly and his committee made recommendations about salaries, the Bill in its present form would not give IPSA the power to do anything about them? The amendment would provide an anchor, or foundation, for the salary issue, on which Sir Christopher Kelly's recommendations on allowances could fit, along with the recommendations of the Senior Salaries Review Body. If we needed to do anything about salaries in the future, there would need to be an amendment to this primary legislation in any event, which could amend my hon. Friend's proposal and do something about salaries at the same time.

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party 7:15 pm, 30th June 2009

But that would mean our agreeing that the legislation was purely temporary. I know that some have favoured a sunset clause elsewhere in the Bill, but I do not think it necessary for us to be confined in this part to a single day's resolutions rather than being covered by

"relevant resolutions of the House".

We could automatically create a situation in which we would be required to re-legislate in circumstances in which we could pass future resolutions that could take care of themselves in a fairly mature way without having to amend the Bill. One of the aims of the amendment is to make us revisit the legislation by way of more amendments than I think would be appropriate. If we are saying that we want, by virtue of the Bill and other measures, to reach a point at which we no longer spend so much time determining, deciding, debating and legislating in respect of our own salaries, why table an amendment that forces us to legislate again on the very issue of pay?

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Photo of Barbara Keeley Barbara Keeley The Deputy Leader of the House of Commons

My hon. Friend Mark Durkan has already put very well the point that I want to make. We should not pre-empt the Kelly review, we should not tie the issue of pay to a single set of resolutions of the House, and we should not agree to what we see as temporary legislation in circumstances in which we can forge for the future.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

The Minister seems to be ignorant of the fact that pay is not part of the Kelly review. Also, she seems to have forgotten that her own Secretary of State has described this as emergency legislation, which by definition is generally considered to be temporary and something to which we return in due course.

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Photo of Barbara Keeley Barbara Keeley The Deputy Leader of the House of Commons

I can tell the hon. Gentleman at the outset that we will not be accepting his amendment.

The amendment limits IPSA's power to pay Members' salaries set in accordance with the resolutions passed by the House last July, which set out the formula whereby the SSRB was to calculate the annual change in our salaries. That would mean that if in the coming months we decided to adopt new resolutions—which, given what has been said in the debate on the amendment, we may find ourselves doing—or a new way of calculating Members' salaries, IPSA would have to cease to be the payment authority. My hon. Friend the Member for Foyle made that point. As a result, it would be necessary to pass new legislation—for which some Members seem to be setting us up—to enable IPSA to pay salaries under the new regime, or to set up a new payment system within the House. That is a complicated set of options, and by that point the House might no longer have access to funds with which to make the payments.

If Members propose to ensure that the House does not seek to resile from the resolution of last July allowing our salaries to be set automatically—and there has been much discussion of the automatic nature of the current mechanism—I suggest that it would not have that effect. The amendment would not bind the House; it would only bind IPSA. It would lead to chaos and confusion—which, of course, may be the intention in some cases—if the House ever were to change its arrangements, and I urge Mr. Tyrie to withdraw the amendment.

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Question put, That the amendment be made:—

The Committee divided: Ayes 189, Noes 295.

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Division number 169 Hydrofluorocarbons Limitation — Clause 2 — MPs' salaries

Aye: 189 MPs

No: 295 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly negatived.

Clause 2 ordered to stand part of the Bill.

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