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Thursday 3 July 2008
Debate on motions relating to MPs Pay
Madam Deputy Speaker (Sylvia Heal): Before I invite the Leader of the House to move the first motion relating to Members' salaries, it may help the House if I set out the procedure to be followed. All six motions and related amendments are to be debated together. At the end of the debate, I will ask Members whose amendments are selected to the first motion to move them formally at the appropriate point, and then the first motion will be put. All other motions and amendments selected on Members' salaries will then be put without further debate.
The Leader of the House of Commons (Ms Harriet Harman):
I beg to I will be as brief as possible in my opening speech, and there will be no Government speech to conclude the debate to allow as many hon. Members as possible to have the opportunity to speak.
We have two debates this afternoon. The first is on Members' pay and the second will deal with two issues: the Members Estimate Committee report on reimbursement of our expenses and a resolution to prohibit the release of information held by the House authorities about Members' addresses and travel patterns.
I suggest that there are three principles for hon. Members' salaries. First, MPs should be properly paid for the work that they do to ensure that anyone can be a Member, not just the wealthy. Secondly, given that MPs are paid from the public purse, we should show the same discipline in our pay increases as we expect from the public sector. Thirdly, for the future, and following today's debate, we, like everyone else, should not determine our own pay or vote on our own pay increases.
In January, the House agreed that Sir John Baker should conduct a review and report on a review mechanism for increasing hon. Members' salaries without Members having to vote on that, and for determining the frequency with which reviews will take place and the appropriate comparator for Members' pay. I am grateful to Sir John Baker, whose report the Government published on 17 June, for his work.
Sir John's report made several recommendations. I shall list the key ones. First, the Senior Salaries Review Body should be the mechanism for periodic reviews of Members' pay. The Government agree with that. Secondly, the SSRB's periodic review should be once per Parliament. The Government agree with that. Thirdly, MPs' pay should be increased each year at the rate of the public sector average earnings index. The Government do not agree with that, and propose an alternative. Fourthly, there should be £650 a year catch-up for each of the three years 2008-09, 2009-10 and 2010-11. The Government do not agree with that and propose that it be rejected.
Simon Hughes (North Southwark and Bermondsey) (LD): Are the Government taking a different view of the Baker recommendations on pay because they believe that MPs would be paid too much?
Ms Harman: We take the view that the recommendation is not consistent with the Government's pay policy and approach to public sector pay. Later, I will set out our approach to the current position.
I have tabled a series of motions, which will allow the House to vote for Sir John's proposal for a comparator or for the Government's proposal. They will allow hon. Members to vote separately on whether to accept or reject the three £650 catch-ups.
Sir John Baker's comparator proposal is opinion motion No. 1, the Government's proposal is opinion motion No. 2, and Sir John Baker's £650 catch-ups is opinion motion No. 3. Both the opinion motions on Sir John's proposal and the Government's proposal provide for arrangements for future, independent reviews of hon. Members' pay. Both the Baker and the Government motions provide that: the SSRB should remain the independent body, which conducts reviews of hon. Members' pay; those reviews should occur once in each Parliament, and that the outcome of those reviews should be implemented without the need for further debates or votes in the House. In both opinion motions, those arrangements are set out in paragraphs 2 and 3. Whether the House chooses the Baker or the Government proposals, that should be the last time we have such a debate or vote in this House.
Mr. Oliver Heald (North-East Hertfordshire) (Con): The Leader of the House knows that I sit on the Committee on Standards in Public Life. It may be for Members' convenience to know that the Chairman has written to the Speaker—the document is in the public domain—welcoming the decision to have a genuinely independent mechanism for setting Members' pay and also supporting the Members Estimate Committee report.
Ms Harman: I thank the hon. Gentleman for that helpful information. That view is shared in all parties. It is the Government's view and that of the public that we should not have to set out own pay and that there should be a proper, independent and fair mechanism to do that. Whether hon. Members vote for the Baker proposals or for the Government proposals, the review mechanism will be established.
Jim Sheridan (Paisley and Renfrewshire, North) (Lab): I understand where my right hon. and learned Friend is coming from in that, if we accept Baker's recommendations, it could upset or throw a bad light on the Government's pay policy for this year. However, what will be the position in subsequent years? Do we know what the Government's pay policy will be next year and the year after that?
Ms Harman: The Government's approach to dealing with the danger of inflation and wanting to ensure that interest rates remain low and that the economy remains on a stable course is reflected in our view that public sector pay increases should be consistent with 2 per cent. We have urged public sector unions and negotiators to accept three-year deals. I will say more about that shortly.
Mr. Christopher Chope (Christchurch) (Con): Will the Leader of the House give way?
Ms Harman: Perhaps it would assist the House if I made some progress. I will take interventions if I have not dealt with points that hon. Members wish to raise. I ask hon. Members to let me simply set out the position and, if I have not answered a question, I will give way. May I do that?
Mr. Chope: Yes.
Ms Harman: Thank you.
Let me consider the comparator—the index to which MPs' pay should be pegged in future. Sir John's preferred option is the public sector average earnings index, but the Government do not accept that for two reasons. The main reason is that, this year, it would result in an increase of 3.5 per cent., which does not reflect our view that public sector pay settlements should be consistent with the achievement of the consumer prices index inflation target of 2 per cent. Secondly, we believe that our proposal for basing our increase on a basket of public sector employees' salaries is preferable—that is, making the comparator for Members' salaries the median of the increase in the pay settlements of a basket of 15 public sector work forces. They include judges, doctors, teachers and civil servants in Her Majesty's Revenue and Customs, the Home Office and the Ministry of Defence. Our opinion motion No. 2 sets out the 15 public sector work forces who would form the comparator.
Sir John Butterfill (Bournemouth, West) (Con) rose—
Ms Harman: I can deal with all the points as I go along, but it would probably be better for hon. Members to hear the line of argument and the information on the Government's view. However, I will give way to the hon. Gentleman as chair of the pension fund.
Sir John Butterfill: Does the Leader of the House also agree that the Government's proposals and, indeed, those that they made to Sir John Baker when he was preparing his report, have been rejected out of hand in Sir John's subsequent report?
Ms Harman: I would not say that those proposals have been rejected out of hand. They were not Sir John's preferred option—I make no bones about that. We have tabled Sir John's option and published the report. Everyone can see what Sir John said about his preferred option. Although the Government accept a considerable amount of what Sir John proposed in his review and are grateful for his work, we do not accept the comparator and the catch-up, because we believe that they are not consistent with the approach that we want the public sector to take on pay. If I may, I will develop the argument on that.
Our opinion motion No. 2 sets out the 15 public sector work forces who would form the comparator. That mechanism would be understandable by the public, who would see our pay connected to a group of public servants, and would deliver 2.25 per cent. this year. That is lower than the first year of the current three-year settlement for nurses of 2.75 per cent., but higher than the settlement received by salaried doctors and dentists. For future years, the terms of the motion would ensure that Members' salary increases were consistent with our approach to the rest of the public sector.
Let me turn to the catch-up payments in opinion motion No. 3. The Government do not accept Sir John's recommendation that Members' salaries should be increased by an additional £650 each year for the next three years. MPs do important work, which is the foundation stone of our democracy. We do not hear about this in the media, but over the past five years our pay has fallen behind inflation. The Government do not reject the catch-up because we think that MPs are overpaid—far from it—but only because it would not be consistent with the approach that we are taking to the rest of the public sector. Combined with Sir John's comparator, the annual £650 catch-up would bring our annual pay increase to 4.55 per cent. On that basis, we reject it.
Let me turn to the amendments on the Order Paper. Amendment (d) to opinion motion 1, which stands in the name of my hon. Friend the Member for Manchester, Central (Tony Lloyd) and of other hon. Members, would have the effect of implementing the Baker comparator, but limiting the increase to hon. Members' salaries to no more than 2.75 per cent. this year, 2.3 per cent. next year and 2.25 per cent. in 2010-11. Amendment (d) would then provide for the increases forgone under the Baker comparator to be paid from 1 April 2011, in addition to the increase that year due to the average earnings index. That would amount to an increase of approximately 6.7 per cent. in 2011-12. That is not consistent with the Government's public sector pay approach and we ask the House to reject it.
Amendment (a) to opinion motion No. 1 stands in the name of my right hon. Friend the Member for Islwyn (Mr. Touhig) and of many other hon. Members.
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It would implement the Baker comparator, but limit the increase to hon. Members' salaries for the current year to no more than 2.3 per cent. Amendment (a) would then provide for the 1.2 per cent. forgone from the Baker comparator to be paid from 1 April 2009, in addition to the Baker comparator increase that year due to the average earnings index. That would amount to an increase of approximately 4.7 per cent. in 2009-10. That is also not consistent with our public sector pay policy and we ask the House to reject it.
Finally, amendment (e) to opinion motion No.1, which stands in the name of my hon. Friend the Member for Manchester, Central, would have the effect of ensuring that Members' pensions entitlements would be the same as they would have been if the Baker pay proposal had been implemented in full. The parliamentary pension scheme bases pensions on a Member's salary in their last 12 months of service. A principle of public service pensions is that pensions are based on pay that people have received and contributions that they have made, not the pay that they would have received if circumstances had been different. Accepting amendment (e) would create a precedent. If we allowed that approach for MPs, it would be more difficult for the Government to resist the same approach from elsewhere in the public sector. We therefore ask the House to reject amendment (e).
Let me turn to amendments (b) and (a) to opinion motion No.3. Amendment (b) to that motion, which stands in the name of my hon. Friend the Member for Manchester, Central, would have the effect of delaying until 2010 the three separate £650 catch-up payments proposed by Sir John, although the full amount of £1,950 would be paid in one go in 2010, rather than being spread over the preceding three years. Again for the reasons that I have explained, that is not consistent with the Government's approach and we ask the House to reject amendment (b).
Amendment (a) to opinion motion No. 3, which stands in the name of my right hon. Friend the Member for Islwyn and of many other hon. Members, proposes to accept the Baker catch-up payments of £650, but delay their start date by one year. Even though the catch-up would be delayed, starting next year rather than this year, catch-ups are not consistent with the Government's approach to public sector pay, as I have said. We therefore ask the House to reject amendment (a). The combined effect of the two amendments standing in the name of my right hon. Friend the Member for Islwyn would be an increase of about 5.7 per cent. next year, which would be the combination of the deferred indexation increase and the catch-up of £650.
Although the Government have a clear view on the different elements of the Baker proposals, it is for the House to decide these matters. I hope that the Government position will be supported, for the reasons that I have explained.
Mr. Chope: The terms of reference that the right hon. and learned Lady gave Sir John Baker were to"ensure that the independent mechanism takes account of the Government's policy on public sector pay and its target for inflation".—[ Official Report, 23 January 2008; Vol. 470, c. 56WS.
Is that not exactly what he did? If she is saying that he did not comply with those terms of reference, should she not have referred the report back to him, so that he could comply with them?
Ms Harman: I make no criticism of the work that Sir John has done in his review. When a review is commissioned, the Government remain entitled to put forward their response and to tell the House and others whether they agree with its findings, having considered the arguments. We are then able to put forward our view, and that is what we are doing.
Simon Hughes: I understand the Government's position. They took a similar position when they asked somebody to advise on nurses' pay in England, but then rejected that advice, and when they asked somebody to advise independently on police pay, when they also rejected that advice. What is the right hon. and learned Lady's advice today for those of us who have consistently said that if we ask an external body to recommend, we should follow its recommendation, and who voted accordingly on nurses' pay and police pay?
Ms Harman: We are making an alternative proposal to that which Sir John Baker has put forward. We are also proposing to the House that after today, when the SSRB, which we propose as the mechanism for independent review, reviews the issue in the first year of the next Parliament, it will not be for the Government, or indeed any hon. Member, to vote on whatever proposition is put forward, which will instead be notified to the Speaker and implemented. As I have said, this is the last time that the House will be able to vote on propositions that are put forward, before the Government take a view and then seek to win support in the House.
I hope that the Government position will be supported, but whatever the House decides, I should like to take this opportunity to say that the overwhelming majority of hon. Members carry out their duties with probity, energy, dedication and commitment. The media reporting that includes expenditure on the salaries of our staff and on our office costs and which says that they are part of our salary is misleading and often malicious. After today, when we have, as I hope, established the independent review mechanism and reformed our system of allowances, I hope that we will be able to get on with our work in the interests of our constituents, of this country and of our democracy, free from the innuendo and misrepresentations about pay that have hung over this House for too long.
Mrs. Theresa May (Maidenhead) (Con): Like the Government, the official Opposition will not be offering a wind-up speech today, in order to give more hon. Members the opportunity to speak. Also, I will speak only briefly on the motions and amendments before the House.
The House has an opportunity today to take an important and historic decision on the way in which it is run and the way in which Members of Parliament are remunerated. This decision could start to restore the broken trust between the people and their politicians. Sadly, too many people have felt for too long that MPs have their snouts in the trough. I will not go into the way in which the media have encouraged that view, but I
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have said in previous debates on this issue that they need to look at the way in which they report expenditure on our members of staff, for example, as being part of our own salaries. That gives most people a totally distorted picture of the situation of Members of Parliament.
It is true, however, that people are concerned about what they see in relation to our expenses and allowances—which we will be debating later—and about the fact that we decide on our own levels of pay. Notwithstanding the fact that, over the years, Governments of various colours have urged and exercised restraint on pay—indeed, the Leader of the House has urged us to exercise restraint again today—there is still a feeling that MPs should not be able to set their own levels of financial reward. I share that feeling, as does the Conservative party. Indeed, more than a year ago, we proposed that MPs should stop voting on their own pay and start looking into ways in which that could be undertaken.
We welcome the principle of the proposal put forward by Sir John Baker for a mechanism to determine the level of pay at the start of a Parliament, and for decisions on annual pay changes thereafter to be made by the same outside body, the Senior Salaries Review Body, rather than by this House. As I have said, I welcome the principle of the Baker review, but I also agree with the Government that we should adopt a different index for determining those annual pay increases. The measure proposed by the Government would give a lower increase than that proposed by Sir John Baker, based on the current known figures, but I support it because it is preferable as a measure for determining annual pay increases to that proposed by Sir John.
Mr. John Spellar (Warley) (Lab): Did we not get into this difficulty in the first place by being linked to pay rates rather than to earnings? Modern management often looks at lower basic rates, but then looks at performance-related payments to determine the overall package of earnings. Will this proposal not lead us straight back to the problem that we have had before, which led to the big disparity that the Baker review has rightly identified?
Mrs. May: One of the important things that we shall be able to do today is to take this whole issue away from the House, which is crucial. If I understand the right hon. Gentleman correctly, he is suggesting that the Government's proposal relates to earnings rather than to increases in earnings. In fact, it relates to annual increases in earnings, albeit for a different and very particular group of workers, as identified in the proposal.
Mr. Spellar: If the right hon. Lady is basing her policy on that, I am afraid that she is basing it on a misapprehension. The Government's proposal relates to settlements, and settlements are rates rather than earnings. This has been a consistent problem with public sector pay—first with increments and subsequently even more with the senior civil service—because so much emphasis is now placed on performance-related pay. Indeed, the SSRB's latest report on senior salaries adds another 1 per cent.—up to 8 per cent. of total salaries—to the performance pot. Settlements and earnings are quite different things. This is how we got into this problem, with our link to the senior civil service; the rates have stuck, but the earnings have gone up. [ Interruption.]
Mrs. May: Hon. Members are suggesting that I should just accept that, because the right hon. Gentleman, who chairs the Speaker's advisory panel on these matters, knows what he is talking about. However, I am going to continue to disagree with him on this matter. The Government have brought forward a proposal that relates to increases. I acknowledge that it does not include bonuses—it excludes that opportunity—but it is entirely reasonable. The House should be willing to recognise that we need to set an example and to send out the signal that MPs are willing to look at their pay and put into place a different structure for the future. I therefore support the Government's proposal for a different index.
Sir John Butterfill: Has my right hon. Friend not studied in detail Sir John Baker's recommendations? In particular, paragraph 39 of his report states:
"I conclude that an approach to uprating based on a basket of comparators cannot satisfy the criteria set out in paragraph 32 above."
That is the whole principle behind the proposals. On that basis, does my right hon. Friend totally disagree with Sir John Baker's recommendations?
Mrs. May: I hoped that I had made it clear that I do not totally disagree with Sir John's proposals. I agree with the principles behind his proposals, and with the mechanism that he has proposed—namely, the review that should take place in the first year of a Parliament, followed by automatic annual increases in pay on the basis of some measure. I disagree with two aspects of his proposals. The first is the index that should be adopted. The second is the issue of the catch-up payments over the next three years. That is why I do not agree with those hon. Members who have tabled amendments seeking to delay the implementation of the principle of the Baker review while ensuring that we receive the full proposed increase, albeit at a later date. I believe that we should now take the decision to accept that it would not be right for the House of Commons to continue to vote on our pay, and I hope that that view is shared across the House. We should also accept that a sensible mechanism has been proposed, and I hope that that view is shared across the whole House as well.
In recognition not only of the Government's present public sector pay stance but of our responsibility as Members of Parliament to send the right signals to our constituents about the approach that we are willing to take in recognition of the concerns that they have expressed about our pay and costs, it is right that we should not take the uprating that Sir John Baker has proposed through the catch-up payments over the next three years. When restraint is being encouraged for others by the Government, it is right that Members of Parliament should be willing to accept such restraint for ourselves and to say that we will not vote on our own pay in future.
We should start that process off by showing, in this final vote, that we are willing to stand up and be counted and to exercise the restraint that we are encouraging in others. That is why I do not support the amendments that have been tabled today, and why I support the motion that sets out the Government's proposals on the index and the mechanism that are to be used.
Simon Hughes (North Southwark and Bermondsey) (LD): We are now having the debate that we all knew we had to have, and I take a very simple view on this matter. I expressed that view to the Leader of the House in an earlier question. We have had this nonsense year after year for all the time that I have been in this place—25 years, the same length of time as the Leader of the House. We are now rightly saying, "Let's stop this annual game of trying to work out what we think we can get away with in our pay increase. Let's have an independent system." That has been agreed, which is a blessed relief.
We have asked two lots of people—the Senior Salaries Review Body and Sir John Baker—to give us a comparator and a starting point. Effectively, they have both come back with the same answer, saying, "Here is a comparator that we have worked out, having looked at lots of alternatives and rejected them, and here is a starting point."
I should like to remind colleagues of what Sir John Baker said on the uprating mechanism. He said that it should meet certain criteria, including that
"it must be easy to understand, independent and authoritative, transparent and not capable of manipulation; it should be sustainable over a number of Parliaments...it should be based on pay comparators and not price comparators...It should reflect movements in earnings and not settlements."
He rejected linking us to the civil service, for very good reasons, and rejected an approach based on another suggested basket of comparators. He came to a view that he recommends indexation. He could not have been clearer about that. He drew on the work of the Senior Salaries Review Body and suggested that the public sector average earnings index was the right comparator. He says:
"I am sure, having considered and discussed the options extensively, that this is the best solution. It meets all the criteria in paragraph 32 above and I believe that, if implemented, it would be likely to last for many years... Other public sector workers may argue that it is unfair if MPs' pay is automatically indexed to earnings while they have to negotiate",
but he concludes that it will provide the safest, most secure and most appropriate long-term comparison. Otherwise, he says, we will be in the same debate again, because we will either go ahead or fall behind the average public sector wage and we will not have what we want, which is the break between this debate and an annual recurrent questioning of the issue. I am clear that—for myself no more than anyone else—we really must get into a system that has an objectively assessed basis from the beginning and an objectively assessed comparison thereafter.
Let me put this point directly to the Government, as there is no other way of putting it. Of course, Governments have a pay policy and will always have a pay policy, but we cannot predict what it is going to be. Some of us have taken the consistent position that if we ask for independent advice about public sector pay, we should follow it—whether it be for nurses, the police or whatever. There is no logic in taking one view and then not adopting the same view for ourselves.
Somewhat more personally, let me say that it is easy for the Government to say, "Hold back, everybody", because everyone in the Government is paid significantly more than anyone else here. I make that as a practical household point. Nobody in the Government will be affected in the same way as people who are not in the Government. That is obvious. I think there are only two other people in the House who get top-up salaries other than the Back-Bench MP salary.
As to the amendments, I can see the attractiveness of saying, "Hang on a minute, people; let us be careful; let us not implement this now", but a proposal that says, "Not now, but catch up next year", or "Not now, but catch up later" is, bluntly, a bit of a deception and not as honest and straightforward as going straight for the proposal before us now. Obviously, it is a less bad option than not linking into the independent system. Moving slowly towards that remains preferable to not moving to the independent system at all. I accept that and I understand that that is why the hon. Member for Manchester, Central (Tony Lloyd) and the right hon. Member for Islwyn (Mr. Touhig) are proposing amendments. I hope that colleagues will have the straightforward common sense to say, "Let's grasp the nettle, accept the independent report, accept the overwhelmingly strong argument that Sir John Baker gives and solve the problem", rather than have it coming back just before and just after a general election or at any time in the future.
Tony Lloyd (Manchester, Central) (Lab): The House certainly owes Sir John Baker a considerable measure of gratitude for setting out, as he intended to do, an "independent, objective and robust" process, which removes MPs for ever from it. What we have to do today is ensure that we remove ourselves indefinitely from that process by whatever mechanism.
Public confidence in Members of Parliament relies on our grasping the nettle—of taking this House by our own hands—but it also depends and MPs' confidence depends on the Government taking themselves out of the process. As Sir John says in paragraph 10,
"if MPs are prepared to relinquish their control over their salaries, then the Government also has to forgo any possibility of directly seeking to intervene in the process".
The problem with the Government's position today is that their motion will not achieve that.
Sir John is clear that any settlement should reflect movements in earnings rather than settlements. He goes into that at great length in paragraph 32 and he later makes it very clear that the problem with the SCS—senior civil service—index is that it is open to manipulation by the Government, which is one reason why he rejects the validity of that index for the short or longer term. Wherever we get to today, we must get back on to the Baker track.
Other Members may disagree with my proposals. Frankly, it is a matter of individual judgment on what is effectively a free vote for Opposition Members and Back Benchers. People will disagree over the rate at which we should adopt the Baker review proposals, but we should all certainly accept the Baker index and the Baker reference point as the starting point for our salary.
Sir Michael Spicer (West Worcestershire) (Con): I have very cordial relations with my opposite number, but may I ask him what is so special about the next Parliament? Sir John makes the point on the first page of his report that there is no right time for MPs to have their pay altered, so why is the next Parliament likely to be any better than this one?
Tony Lloyd: The hon. Gentleman anticipates exactly what I was coming on to say, so let me continue with my explanation of why I tabled the amendment. One justification may be regarded as a nuance, but before the Baker proposals come into operation, there will have been a general election. That gives every Member the opportunity to face their own electorates in the light of the offer by Sir John Baker. There will be an electoral test, which is not a trivial point and represents a specific advantage.
Let me explain another reason. If Members look at the figures that I have chosen for the uprating of pay this year, next year and in the first half of 2010, they will find that they are identical to the figures applied to nurses and other public health workers. This is a time of restraint in public pay; whether or not Members agree with that, it is a reality. It is also a reality that people up and down this land are feeling the impact of the belt-tightening that is inevitable when energy and food prices increase. In that context, there is an expectation that MPs should look at their own role, which is exactly what my right hon. Friend the Member for Islwyn (Mr. Touhig) has tried to reflect in his amendment—the need to recognise that now is not the right time to rush straight into the full Baker proposals. What we are discussing is the extent to which we need to operate through restraint and in the light of the test of a general election.
Mr. Kevan Jones (North Durham) (Lab): Does not my hon. Friend's amendment basically push payments into the next Parliament? In one case, for example, a payment of £1,950 is pushed into the next Parliament, along with the main implications of the Baker review. New Members will be elected, having had no say in this whatever, and my hon. Friend's crazy suggestions for pensions would give retiring Members a cash bung that they had not earned.
Tony Lloyd: Under any independent system, MPs will have no say over their salaries, irrespective of whether they are new or old Members. That is the whole point of what we are trying to achieve today. My hon. Friend thinks that my proposals on pensions are crazy, but the one group of people who will lose out in any period of restraint are those who either choose to retire or who are forcibly retired at the next election. The second part of my amendment is designed to protect those who will leave at the end of this Parliament.
Sir John Butterfill: I am a little puzzled by the hon. Gentleman's proposals on pensions. I am not at all sure—I have not yet had the opportunity of taking legal advice—but I doubt whether his amendment would work legally. It might well require an amendment to the parliamentary pensions legislation, but it would certainly need an order to be made. As it stands, it cannot work. As currently presented, it is incompetent.
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