House of Lords: Allowance

Baroness Smith of Basildon Excerpts

Tuesday 27th March 2018 Lords Chamber

[The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)]

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.

[Baroness Smith of Basildon (Lab)]

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.

[Lord Newby (LD)]

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.