The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, I wish to make a Statement on future financial provision for Members of this House.
In my view, we need fundamental change. None of us wants to live through again what we lived through in the last Parliament. In a House in which the overwhelming majority of Peers have always acted on their honour, we found ourselves severely criticised. All too often, that criticism was fully justified. The parliamentary expenses regime was opened up to public view, and the public saw a system that was badly broken. Difficult questions were asked, abuses were uncovered, apologies have been made and prosecutions are pending. We could not let this continue, and I pay tribute again to the contribution made by the noble Baroness, Lady Royall. Once problems were uncovered, she acted decisively, and the House is indebted to her.
We received a report from the Senior Salaries Review Body. Building on that report, my noble friend Lord Wakeham was invited to lead an ad hoc group to consider, consult and advise on the implementation of a new system of financial support. The group has now submitted its proposals to the House Committee, and its report, entitled Financial Support for Members of the House of Lords, is now available in the Printed Paper Office.
The Wakeham group supported the SSRB’s idea of combining the current daily subsistence and office costs allowances into one daily allowance. I agree with that. But the group suggests an alternative option, a simplification of the SSRB’s approach to overnight allowances by combining that, too, into one single daily allowance, payable on attendance on each sitting day. If this were done, it would mean the abolition of the expenses regime as we know it, and in future, payment for staying overnight, taxis, meals, secretaries and research assistants would all come out of that single payment. How much Peers spend on each item would be entirely up to them. There would be no extras, no small print. The single payment would be the end of the matter.
Under the current scheme, the maximum some Members may claim per day they attend is £334. The SSRB suggested that this should be £340. If we create a single uniform daily allowance, it should be set at a figure less than these two totals. I recommend £300. This is 10 per cent less than the current maximum and 12 per cent less than the figure recommended by the SSRB. Furthermore, there will be a lower rate at which Members can claim. I suggest that this should be 50 per cent lower at £150.
This is not a salaried House. Attendance will remain the key basis for the allowance—that is what the public expect. But in order to contribute effectively to the work of the House, Peers are often involved in preparatory and other work outside the Chamber and cannot attend, for example, for long periods in Committee. However, I believe that many will consider a lower rate appropriate, for example for Peers who are able to attend the House for only part of a sitting on a particular day.
We are rightly all under scrutiny for our use of public money and the public expect Members of the House to set the same high standards for themselves as they do for others. Some may feel they do not wish to ask for any payment at all. Based on provisional statistics, last year 13 per cent of those who attended the House did not claim any allowances. I hope that they will continue not to. The Wakeham group proposals cover a number of other important issues, including travel arrangements for Members. Its proposals will continue to recognise the additional costs faced by Peers who travel from long distances.
Axing through the current complex structure of expenses would represent radical change, but I believe that that would be right. It also holds other advantages. It would be cheaper to run than any more complex arrangements, less bureaucratic and less expensive to comply with, simpler to police and far harder to abuse. The controversial rules on so-called “second homes” would quite simply be swept away. There will be no more accusations of addresses of convenience, and no more juggling of utility bills and claims forms. If you come to Westminster and work in Parliament, you will be able to claim the allowance. If you do not, you will not.
This will mean a reduction in the amount that some Peers have claimed in the past. But in the present economic climate we cannot protest against a reduction. Indeed, in my own view, with a new system, levels of payments should be frozen for the life of this Parliament. I accept that this is a scheme that will not be welcomed by all, but it will be broadly cost-neutral compared with the existing scheme. The existing expenses regime is discredited. It lacks credibility and the public have lost confidence in it. This new plan means the end of the second homes fiasco. It means the end of expenses in the House of Lords. It means a new system that is direct, transparent and accountable. It means that we are making a significant step towards winning the public’s confidence again.
So, what next? The House Committee will meet soon to discuss the details of this proposal. Before the Summer Recess, I will table resolutions for the House’s approval. This House has suffered greatly from the faults of the previous system and the misbehaviour of a small minority. Ultimately, it is a matter for the House if it wants to make this change. The Government’s view is that we need clarity, simplicity and reform—and that the time for reform is now. I hope that your Lordships will agree, and I commend this Statement to the House.
Lord Strathclyde
My Lords, I am grateful for the broad welcome given by the noble Lord, Lord Hunt of Kings Heath, and the noble Baroness the Convenor of the Cross Benches. I understand why the Leader of the Opposition could not be in her place today, and I am glad that the noble Lord stood in for her in such an excellent manner.
I think the whole House should thank my noble friend Lord Wakeham and congratulate him on the work that he did. He took on an immensely difficult task after the debate that we had last December. It was not clear to me that anyone would be able to find their way around this particular maze, with so many different groups of people wanting different things and dissatisfied with what was being presented. It is a real credit. He did not manage to find his way through alone, though; he did so with the help of a group of individuals from all sides of the House who no doubt helped and encouraged him in his work.
The noble Lord, Lord Hunt, asked some specific questions, particularly about how long I anticipate this process will take and when the new regime will come into force. It is important that we move quickly to the new regime. The House Committee will therefore meet very soon and take a view on resolutions that will be proposed by me. If they are agreed they will be brought to the House. I hope that this will be done in the course of the next few weeks—certainly before the Summer Recess, because I envisage the new regime coming into force on 1 October. The current regime will continue until then.
We will need resolutions, in part to allow the authorities of the House to take them into account when they are creating the new system. I do not believe that anything I have said about the new system will give the authorities in the House of Lords any concern at all about being able to administer the scheme effectively, efficiently and more cheaply than was envisaged under the scheme proposed by the SSRB.
Turning to the points made by the Convenor of the Cross Benches, I recognise that some will be concerned about a net reduction in the amount of money they receive. As the noble Lord, Lord Hunt of Kings Heath, said, this is not a perfect system—nor does it try to be. It tries simply to iron out the worst of the difficulties that we have seen in the current system and the proposed scheme, and it has taken all those things into account.
The noble Baroness was right about all the changes that have taken place during the past 12 months. We have a new code of conduct, a new independent Commissioner for Standards, and we are reviewing the attendance allowances. For the House of Lords, it is a positively revolutionary pace.
The noble Baroness mentioned taxation. That is not a matter for me; it is up to HMRC and the Treasury. However, if the previous scheme was without tax, there must be compelling arguments for this scheme also to be without tax, given that many of the expenses which Peers have are very similar.
The Clerk of the Parliaments has discretion to allow some additional expenses for disabled Members. Nothing in the Wakeham committee report seeks to change that, and there is no reason why it should not continue. The Clerk of the Parliaments has in the past demonstrated an ability and willingness to look favourably on people who need those additional expenses, and I am sure that he will want to continue to do so.
Lord Wakeham
Perhaps it might assist the House if I said a word as chairman of the ad hoc committee. In carrying out our work, we stuck firmly to our remit, which was to stay within the principles and architecture of the SSRB report. However, is my noble friend aware that we found it a complex task to come up with a final solution, which is why we floated the idea of an alternative that would be simpler and cheaper to administer and easier to explain to the outside world? Therefore, I very much support my noble friend’s Statement. As a member of the House Committee, I shall certainly support his proposal.
Lord Strathclyde
I have already said how grateful the House should be to my noble friend. He has come up with an immensely useful and helpful report. It is now in the Printed Paper Office and I hope that noble Lords will take the trouble to read it.
Lord McNally
Clearly the noble Lord is not going to be sensible about it. Let him go on.
Lord Tomlinson
Is the noble Lord aware that there was unanimity in the Wakeham committee right up to the point of our last meeting? At that meeting, the idea of a flat-rate allowance was introduced. As a result of that discussion, I entered a footnote of reservation to the Wakeham committee report, because I do not think that considering that flat-rate allowance fitted with the mandate of the House, which was to work within the structure and architecture of the SSRB report. There was no such reference in the SSRB report, hence my note of reservation. The particular reasons for there being dissent also in the detail will come out in the debate, but let it not be said that the idea fitted in with the architecture and the principles of the SSRB report. That is why there is a note of reservation.
Lord Strathclyde
The noble Lord is right that it did not fit into the SSRB’s original report, but that is why my noble friend’s committee chose to offer it up as an alternative—as I understand it—in the light of its discussions. If the noble Lord reads the document, as I have done, he will see a remorseless logic that took the committee from where it started to its providing this idea as an alternative. It is an alternative taken in the round, looking at the bureaucratic costs, at each Peer being treated equally and at the end of the expenses regime, which I have found attractive.
Lord Dholakia
I welcome the Statement from the Leader of the House, for three separate reasons. The first is clearly spelt out—the system itself is simple to operate. It removes the complexity of the present system, which has resulted in adverse publicity in the media. Also, it has the least resource implications for administering the system. I have two questions. First, will the noble Lord explain whether there will be a built-in review procedure? The last thing that we should ever do is to determine the allowance applicable to us; we should allow an independent element to determine that. Secondly, will he establish some system of monitoring, given the concerns raised in the past about young people, women and people from ethnic minorities in the prime of their careers? Would the type of review that we are suggesting take those factors into account so that such people are not inhibited from becoming Members of this House?
Lord Strathclyde
My Lords, I thank my noble friend Lord Dholakia for his broad welcome. It was important to hear a senior member of the Liberal Democrat Benches on what is, after all, a House matter and I welcome his words. I have not at this stage recommended a built-in review procedure. It is my personal view that the level that we set should be the one set for the rest of this Parliament. Last week, we saw in the Budget proposals for freezing public sector pay and many other aspects, as well as cuts in the public sector more generally. I think that it is a sensible approach to freeze these amounts. As for a system of monitoring, I should emphasise that one reason why I have recommended this proposal is that it is for the interim period between now and when we potentially pass legislation for a future reformed House. That is another reason why it is attractive. Between now and then, I am sure that many people will monitor those who arrive in your Lordships’ House—new Peers. There are reasons why people from ethnic minorities and those raising a family may find the certainty of the new arrangements rather more attractive than the old expenses regime.
Lord Campbell of Alloway
My Lords, I do not want to challenge in any way the recommendations of my noble friend the Leader of the House but, for clarification, was the proposal of my noble friend Lord Wakeham accepted by the committee or was it not?
Lord Strathclyde
Oh yes, my Lords, the proposal was made by the committee in the report. The noble Lord, Lord Tomlinson, explained his position extremely well; he put in a reservation because he felt that the proposal did not fit the mandate of the committee when it was originally set out.
Lord Low of Dalston
My Lords, the Leader of the House made reference in outlining the scheme, which he supports, to an upper and lower level at which the flat rate might be paid. Could he give some indication of what criteria would be used to determine when the upper or lower rate was appropriate? If it is to be based on period of attendance—half day versus full day, as I have seen suggested—how would half a day and a full day be defined and how would attendance be validated?
Lord Strathclyde
My Lords, the noble Lord asks an extremely sensible question, one which is not entirely easy to deal with. There is a perception among those outside this House that a few minutes’ attendance reaps the benefits of large sums of money. In my experience, both as a former Chief Whip and as Leader of the House, I regard these abuses to have been exceedingly small; nevertheless, there is that perception. I am also aware that there are some Peers who, because of the nature of their outside work and for other reasons, do not spend a great deal of time in the House. It was felt in the discussions that I had that we should offer an alternative—a lower sum of £150.
Ultimately, it can only be up to the judgment of each individual Peer where and how they make that claim. A Peer may spend only half an hour in the House on a given day but, if they spent the morning reading and preparing for a complicated Committee stage on the next day, how are we to judge whether that time was well spent? In the end, all these claims will be made public. I hope that, with the co-operation of the House Committee and the House authorities, we will be able to make these claims known electronically on a rolling basis so that it will be easy to attach contributions to the amount of money claimed. That will create an internal accountability, which will be useful to Peers and public alike.
Lord Phillips of Sudbury
My Lords, I hope that I am correct in understanding my noble friend as having indicated that the new scheme will be wholly divorced from the actual expenses incurred by Members of this House in coming here and undertaking their duties. I think that that is right—the noble Lord is nodding. Therefore, his remarks vis-à-vis taxation assume a more important light. I go back to what he started by saying, which is that this House and, indeed, the other place came under a great deal of unwelcome public scrutiny over the expenses arrangements and that the trust in both Houses was severely dented. Some may think that those wounds are not entirely healed. Would it therefore be acceptable if the noble Lord and, indeed, the noble Lord, Lord Wakeham, and his group were to work on the basis that, whatever arrangements are come to vis-à-vis taxation, we have to accept that the allowance will now leave some Members of this place with substantial remuneration—that is to say, a return well in excess of anything incurred by way of expenses—and that it surely cannot be acceptable that this place, of all places, should expect a privilege in tax terms over any other citizen of this land? For us to say that it is much simpler to claim the entitlement and be done with it is fair enough, but that surely cannot satisfy the test that every other person has to live by, which is that, in terms of the tax charge, they can claim only those expenses actually incurred.
Lord Strathclyde
My Lords, my noble friend is entirely correct to point out that the reason why we are even discussing this is because trust has been dented, not just in this House but substantially in another place. Both Houses are, in their own way, trying to find their way through this to come out at the other end with a greater understanding between the public and Parliament, so that we can try to rebuild that trust. My noble friend is also entirely correct to say that this is a move away from the expenses regime. We are not asking Peers to demonstrate what they have spent. In fact, we are not hugely interested in what Peers spend their money on, in where they stay or, indeed, in whom they stay with. What we are interested in is: have they turned up? Have they made a contribution? What should the value of that be?
The SSRB suggested in its report that in due course the expenses regime that it proposed should be taxed. I take no particular view on that. I am not an accountant and it is not a decision for me. It may well be a decision for HMRC and the Treasury to take in due course. My further understanding is that, if tax were payable, that would require legislation and that, if tax were taken off, no doubt many Peers would make the case for some sort of rerating to make an allowance for taxation. These are all issues for another day.
There is another view, which I laid out a few minutes ago. We hope that there will be legislation on a reformed House. If there is a reformed, elected House, those Peers—or senators, or whatever they are—will be paid. There is then the prospect in that legislation for another independent body—perhaps IPSA itself—to look at what the recommendations should be.
Baroness McIntosh of Hudnall
My Lords, does the Leader accept that there are people around the House, including me, who may be significantly worse off under the new regime but who none the less welcome the proposal that has come from the noble Lord this afternoon? I agree substantially with the noble Lord, Lord Phillips of Sudbury. If we go ahead with this, we cannot expect to retain all the advantages of both the previous system and the new system and to suffer no change in how our tax status is viewed. The main benefit of the new proposal is that it ensures that the way in which your Lordships may be supported or remunerated—the noble Lord, Lord Phillips, suggested that it might amount to remuneration in future—bears some clear relationship to how people outside this House are paid for their services. As well as transparency and accountability, it feels at this moment as though we should be demonstrating not that we are so different from the rest of the world that we cannot be treated in the same way as other people, but that our work bears a distinct and reasonable relationship to what is done elsewhere and therefore we should be treated very similarly to people outside this House.
Lord Strathclyde
I thank the noble Baroness, particularly for her remark that she was likely to be one of those Peers who might end up with a little less money than under the old regime but still felt that this was the right way to go. That is a very sensible conclusion to come to. It also puts us on a different footing from the expenses regime. Some Members of this House will take some time to appreciate the difference in the change that has taken place. Expenses will no longer be claimed. There will be an allowance, depending on attendance. The noble Baroness is right: that brings the relationship to the general public closer. There was a time, perhaps many years ago, when the fact that Peers were unpaid and received an element of expenses was justifiable. As the years have gone by, that has become increasingly difficult to justify, which is why we need to make the change.
Lord Alton of Liverpool
My Lords, one of the most attractive things that the noble Lord, Lord Wakeham, has enabled the Leader to say today is that this will be cost-neutral, because the public, as they look at this, will ask, “Will there be an increase in what Members of the House of Lords receive in the future?”. However, is one of the other attractions not the simplicity of the system? It removes some of the ambiguities that many of us have felt uneasy about in the past. In responding, could the Leader return to the question that my noble friend Lady D’Souza asked about the separation of money that is claimed for travel? That is never received by any individual Peer and yet appears in the receipts of money that is claimed by Members of your Lordships’ House. There is surely a desire on all our parts to continue to encourage those of us who come from the far-flung parts of the United Kingdom to carry on coming here; we do not want to turn your Lordships’ House into a purely metropolitan establishment that draws only on Greater London. Is it not important that we show that separation? I also ask the Leader about the position of staff. Members of your Lordships’ House have research assistants or secretarial staff who are currently supported during recess with a specific payment. What will be their position in the future?
Lord Strathclyde
My Lords, the noble Lord, Lord Alton, made a straightforward case for the attractions of this in that it removes ambiguities with which many Peers have felt uncomfortable. Although they believe that they were on the right side of the line, they felt that they still had to explain themselves and to justify the position that they had taken. At a stroke, those ambiguities are removed. It is my assessment, with a little help from the House authorities, that this is cost-neutral. Potentially, there will be an added advantage of a reduction in the cost of the bureaucracy should we have had a more complex system of expenses.
Travel expenses will continue to be paid as before, although my noble friend Lord Wakeham and his committee make one or two suggestions on the SSRB’s report. There is already a different column for the declaration of travel expenses. I agree with the noble Lord that it is sometimes unfair that, because a Peer’s travel expenses are very high because they come from the far-flung parts of the United Kingdom, that puts them at the top of the list of those who have claimed expenses. Every year, we urge the media when they report on these things to take the travel expenses firmly into account. As the noble Lord has seen, they do not always listen to what I regard as wise advice.
Staff will be paid for by Members out of whatever resources they have, including the new £300 allowance. It will be up to Members to decide how best to do that over the year. There will be no extra or additional secretarial allowance paid during sitting days or recesses.
Baroness Jay of Paddington
My Lords, perhaps I may reinforce the comment made by the noble Lord, Lord Alton, about good employment practice with members of personal staff, particularly secretaries, who cannot be laid off in terms of good employment practice for three months in the summer and then reappointed. There may be something to be looked at further than that. On a broader point, has the noble Lord considered that, in pursuing the question of House of Lords reform and the endless question of how to deal with those Members of the House who are already here, if we abandon, as he is proposing, an expenses regime, one of the issues in principle about getting people to retire or asking them to leave will be overcome because there will be no reason why, in principle, some sort of pension should not be paid to them?
Lord Strathclyde
My Lords, it is typical of the noble Baroness to raise such a deeply controversial subject in the manner that she has. Tomorrow, we will spend many hours discussing all these issues. No doubt, the question of transition will come up. The noble Baroness, with all her experience, has spotted that in terms of transition there is a real difficulty about how we move from one House to the other. I can assure her that these issues are uppermost in our minds.
Lord Marlesford
My Lords, in relation to the point on tax, which was raised by my noble friend Lord Phillips of Sudbury, the noble Lord may not be aware—although obviously the Leader of the House will be aware—that in the detailed documents attached to the Budget Statement, it is said that HMRC will have to amend the rules to enshrine the long-established practice that expenses received by Members of another place are not taxable. In other words, it is proposed to retain the system whereby Members of another place are not taxed on their expenses because, as the note says, with the arrival of IPSA the determination of expenses for the House of Commons is no longer quite the same. That is being dealt with in another place.
On the more general point, it is welcome that transparency and simplicity are important and overriding considerations. There is another consideration as to whether the taxpayer will regard £300 a day as good value for money. Is it a little bit relevant that for many professions such as doctors, accountants, lawyers and others, £300 buys about one hour of their time?
Lord Strathclyde
My Lords, what my noble friend said about taxation, HMRC and Members of another place shows how complicated this issue is. There is already a whole variety of rules for Parliament and, as the noble Lord, Lord Alton, said, if you give money to research assistants, it is almost going through individuals’ hands, and HMRC may indeed wish to take all of that into account. That is the start of a wider debate that I do not wish to continue this afternoon.
I have also wondered about the figure of £300. I am sure that some members of the public would regard that as being extremely good value, when they look at the quality of the work that they are getting from individual Peers, and others may not. It is important for us all to demonstrate that when we claim this money we are working for it and playing a full part in the legislature of which we are all members.
The Lord Bishop of Exeter
My Lords, we on these Benches have not taken a particular view on these matters beyond believing that any system should be fair, transparent and clearly good value for the public purse; but sitting on these Benches involves becoming very aware of, and developing a great appreciation for, the tremendous hard work on the part of all working Peers on all Benches. One is also aware of how much of that work continues beyond the House going into recess. Is there not a stronger case for looking again at the resourcing of working Peers out of the House’s sitting time to ensure that they are properly resourced to undertake their important public role and that no one is left unnecessarily out of pocket?
Lord Strathclyde
My Lords, the right reverend Prelate’s point about pay outside sitting days has been raised many times. This scheme will pay £300 per sitting day only, and the judgment that I and others who have looked at this matter have taken is that that amount should keep Peers going when we are not sitting. It is entirely fair enough to say that the totals do not add up to as much as full-time Peers can currently claim, but, as I said in my Statement, in today’s economic climate it is right for us who gain the most to say that we are happy to take a reduction.
Baroness Symons of Vernham Dean
My Lords, does the Leader of the House agree that a number of the questions that are being raised are dealt with in the report by the noble Lord, Lord Wakeham. We have spent a great deal of time discussing taxation. The question of additional office costs is also dealt with in the report, as are the important questions raised by the noble Baroness, Lady D’Souza, about long periods of illness. The noble Baroness’s point was not about the powers of the Clerk of the Parliaments to give additional help to noble Lords who have, for example, mobility difficulties, it was more about what happens during extended periods of illness and some of the representations that have been made in relation to them. We are starting to move into a more detailed debate.
I support, as the noble Lord, Lord Wakeham, does, the thrust of the additional element brought into this report—the alternative suggestion. Of course my noble friend Lord Tomlinson is right to say that this was not included in the principles and architecture of the SSRB report. That is why the noble Lord, Lord Wakeham, explicitly states in his report that he is moving outside the architecture and principles described in paragraphs 5.56 and 5.57. That notwithstanding, it is possible to move outside it because circumstances have changed. Clarity, transparency and simplicity are what we should aim for.
Lord Strathclyde
My Lords, the noble Baroness has been extremely helpful. As a leading member of my noble friend Lord Wakeham’s group, she has also demonstrated that there is an enormous amount of detail in my noble friend’s report. I hope that, when read in conjunction with my Statement today and with the report of the SSRB, it will make everything considerably clearer.
I accept what the noble Baroness said: perhaps I did not answer the Convenor of the Cross Benches sufficiently well when she asked about periods of illness, particularly for Members of the House who are severely disabled. I have never opposed any attempt to find a regime for a very few special cases. We are one of the few legislative assemblies to have allowed severely disabled people to play their part. I am sure that if the noble Baroness were to invite the House Committee to re-examine these issues, she would receive a positive response.
Lord McIntosh of Haringey
My Lords, my question is about the word “attendance”, which sounds very simple. I spent the past week at the parliamentary assembly of the Council of Europe in Strasbourg, where they have changed the rules. You get your hotel paid, and a smaller amount than used to be the case for subsistence. I was in Macedonia earlier this month, where the subsistence amount was the munificent sum of €28—in addition to the hotel, which they chose. Those who serve the House away from the House, such as members of the Council of Europe and the Western European Union—are they not attending the House for the purpose of this exercise?
Lord Strathclyde
My Lords, it is not envisaged that the attendance rules will be changed for Peers who are working outside the House. The current rules are clear about what can be claimed when Members are outside the House, and it is not intended that that should change.