We would like to respond briefly to the articles in the Mail on Sunday and other media covering the flat we use in London. Like any other employment which requires people to work away from home, living expenses can be reclaimed fromI reprint their statement, partly because I'm sure few others will do so, but also because it highlights the problems which surround this second home allowance. It is quite clear that the have broken no rules and sought clearance for the arrangement, yet they face vilification in the press. I make no pretence of understanding the accounting arrangement they have gone through so I am not going to to comment on it one way or the other, but those who are critical should remember the fact that it has been sanctioned by the Fees Office. If criticisms are to be made, they should be directed at the House of Commons authorities.
Parliament up to a prescribed limit. In the late 1990s, we took advice from our solicitor and accountants about our likely inheritance tax liability, as so many families do. As a result of the advice given to us, we paid off the mortgage on the flat with the proceeds of a small legacy and an insurance policy which had just matured.
We were further advised to put the flat into a Trust for which there are three Trustees (our solicitor and ourselves) who administer the Trust on behalf of the beneficiaries. We no longer own the flat and in order to meet the objectives and terms of the Trust, we are obliged to pay the full market rent which is recommended by an independent valuer/estate agent. The current rent is not £30,000 per annum
as stated in the press articles but is in fact £21,600 per annum.
Before we proceeded, the arrangement was agreed by the Fees Office and we clearly would not have gone ahead unless this had been the case. If we did not use our present accommodation, we would have to rent or buy other accommodation (for which legitimate expenses could be claimed as now) and there is, therefore, no additional cost to the taxpayer from the present arrangement.
More often than not we travel together by car off peak saving both on mileage allowance and very substantially on the high cost of rail travel. It is also a fact that we are both in the lowest quartile as far as Parliamentary expenses are concerned and we seek to use the allowances available as prudently and responsibly as possible.
The 'Second Home' allowance is something which causes huge controversy among the media and voters. What sticks in many people's throats is the ideas that MPs can make a huge capital gain from these properties and question why that gain isn't returned to the taxpayer who has paid for the property in the first place (well, the mortgage interest, to be more accurate). It used to be the case that 40% of the gain was indeed returned to the taxpayer through CGT, but with the new arrangements, MPs will benefit even further.
Those who complain the loudest, though, fail to come up with an alternative. Dormitories for MPs?! It is clearly not possible for MPs to maintain two houses - one in the constituency and one in London - on a salary of £60,000. If you think it is, then what you are arguing for is a new cadre of MPs who are rich and can afford to keep themselves from their own resources.
So what do you think an alternative to the second home allowance could be?
54 comments:
I guess you could pay MPs a salary on a sliding scale: the further away from Westminster your constituency, the higher your salary BUT no second home allowance.
I would also like to know how many MPs and Candidates are "fiddling" Council Tax. A second Home or Holiday Home is invariably classed at the local district council as 100% Council Tax payable. However single occupancy of a Home has a 25% reduction.
I know one aspiring politician who is banging on about the ills of Holiday Homes, but is only paying hypocritically, 75% CT, whilst occupying both houses with the rest of the family.
Is it any wonder we the electorate hold these people in low esteem.
Oh god, that would mean Charles Kennedy would be on a small fortune!
The case for second home allowances is valid but the Wintertons abused it by some clever accounting. Yes, if they hadn't owned a home they would have had to rent one but they DID own a home so stop lining your own pockets.
Iain, what a hoot you are. You have gone completely native. How nice for those at the trough to have you to explain to everyone else how difficult it all is.
Refundable expenses always give the incentive for those able to claim them to spend or claim the maximum.
They are based on the myth that you must pay people what they need, rather than what their work is worth to you. Needs always rise to slightly exceed what is being paid, so there is no end to it.
MPs and their apologists bleat that "if you want democracy, you have to pay for it" without ever specifying the price in an honest way, and certainly without allowing any competition over the price.
If constituents value their MP's services at £10000 pa (total, bottom line) then that is what he/she should receive, and it is the constituents who should pay for it.
What will you next query be? How SHOULD we fund the BBC?
Why can't the state buy a block of flats close to Parliament - big enough for all non-London MPs. They pay nothing for this but we pay nothing to them for these ridiculous rip-off rents.
Result - ultimately massive saving for taxpayer and less fiddling by MPs.
Your comment about the Fees Office approving the scheme seems to me to miss the point. I understand that many MPs get very heated when any suggestion is made that their expenses should be more carefully regulated. They claim that they should all be regarded as 'Honourable' members who can be trusted to behave in appropriate ways. It does not seem appropriate to me to treat the regulations of the Fees Office rather as one treats the detail of tax law. There one has a duty as a citizen to minimise one's obligations by any arrangement that is within the law. But we surely do not consider the loose regulations of the Fees Office as a kind of challenge to MPs to maximise their personal benefit within the letter of the rules. We were asked to expect them to behave with discretion. And we were asked to do so by the MPs themselves. That is why dodges with trusts and tax avoidance are actually more shocking than foolishness with one's children. It shows that the culture of many MPs is one that sees the expenses regime as a something to push to the limit with as much cleverness as possible. That is why they should not ask us to treat them as 'Honourable' members, and why we should not be so foolish as to do so. My proposal is simple. Pay all MPs a flat £150,000 a year but make them all entirely responsible for their own expenses, on the assumption that the tax authorities would allow any expenses that were wholly and necessarily incurred in their duties, against the same effective checking regime that the rest of us are required to meet.
The London home should remain the property of the House of Commons; in cases where an MP pays more than the maximum allowance it should be jointly owned with the House of Commons.
When the MP leaves the House, the property should be sold at its market value with the (now former) MP having the option to buy it before it is placed on the open market. In cases where the property was jointly owned by the MP and the House, the MP would keep the same proportion of the value of the property as he originally contributed.
Makes no sense Trumpeter - the further away from London you are, the cheaper your house is. If you live in Dundee, you can buy the whole town for £50. The MP for Dundee should get less, not more.
The answer is that MPs should stay in a hotel and get a per diem living allowance. Spend more than that and it's for their own account. This is exactly what private companies do.
The per diems in private employment are not generous. About £30 a day, IIRC. Not enough to support yourself in central London if you're used to House of Commons-style fat-cattery, but perfectly enough to pay for lunch from Pret-a-Manger (£6) and a main course and a drink in a decent hotel. If they need their laundry done and the per diem doesn't cover it they can always pop out to Sketchley like the rest of us. Why should MPs get more than that?
I have to say Iain there is a bizarre and misplaced air of entitlement here emanating from the Westminster village. "Dormitories for Ms!?", you expostulate, as though this were somehow a ludicrous idea. Well, Why is it exactly? Seems perfectly reasonable to expect them to stay in hotels and to support their expenses with receipts. Conrad Black is facing prison for diverting his employers' funds to his own benefit for no good reason - why should the rules be different for MPs?
This attitude smacks of that scam councils run whereby they give themselves parking permits covering all residents' parking zones on the grounds that they are useful to council employees going about their jobs. They'd be jolly useful to me going about my job so why can't I have one too?
When MPs have rejoined the rest of us proles in the matter of their expenses, we can then have a look at their pensions.
In what way is the Wintertons claiming this allowance worse than Gordon Brown claiming this allowance?
£17,000 seems like a lot of money for someone who has free London accommodation and has been pocketing similar sums for 25 years.
When exactly will we finish paying his mortgage?
The solution? Scrap the 2nd home allowance, together with the white goods allowance (did you know about that one), and get Parliament to purchase a couple of blocks of decent one-bedroom flats with security, car-parking and 24-hr concierge service near Westminster - all expenses paid by the Fees Office direct to those providing the services, not via the MPs.
These flats would be available to all those whose constituencies are outside London, and to any London MPs whose principal home is outside, say, the limit of the Underground.
No time would have to be wasted on finding accommodation, worrying about security, maintenance, registering expenses, etc. At GE time, MPs would be required to empty their flats at the same time as they have to empty their offices.
Of course, it might make meeting your lover a bit less covert and confidential, tough.
Iain's bang on the money - what stiks in the craw is the notion that MPs profit - in a rising property market - from the increase in the value of their second homes. In a falling market, which we may be going to experience, the opposite would be the case - MPs would lose money and be looking for someone to make up the shortfall.
Maybe the second home allowance should be redrawn to be set against aggregate costs to the MP over the time they hold the seat . Thus, if they buy a property which increases in value, and the increase in value is greater than the mortgage interest they paid, then there is no cost and therefore no allowance paid. If the MP pays rental, then that is paid out of the allowance. Of course, the devil will be in the detail - but teh principle is clear - that teh taxpayer should not add to the profit that may be made, but equally, no MP should be out of pocket by the necessity of having to maintain a second home. That seems equitable, doesn't it?
Re the Wintertons, they appear to have played exactly by the rules - and taken the trouble to check it out in advance. So technicallythey are in the clear.But common sense - and any sense of morality - says that 'double bubble' is taking the mick from the poor bloody taxpayer - so maybe the second housing allowance should be paid per house or flat, not per MP. So that would take care of the Wintertons, and for the Balls / Cooper combo for good measure.
In my humble opinion, MPs have a duty, within reason, to minimise their cost to the taxpayer, not take advantage of every loophole to line their pockets. That's what ordinary taxpayers find hard to stomach.
Let the Government buy/build an Hotel for the MPs use whilst in London on Government/Parliamentary or Constituency business. Those that prefer to rent or buy alternative accommodation could do so at their cost.
So who are the Wintertons paying rent to Iain? Themselves in the form of a trust which holds a property they already own. Only they aren't paying the rent, we the taxpayers are. Seems like a nice scam if you can get it. Saying it is legal Iain does not make it moral. Seems to me you are in danger of going over to the other side. Can we expect full disclosure if you ever make it into Parliament?
It amuses me how when they are down, scratch someone on the right and they want a state solution, business going bust the state must give tax breaks or a bail out. MPs profiting from the increase in value of the second home they have to buy, nationalise it. They bought a home the value of property increased. The value of their property went up. They made some money. Isn't this just the way the free market operates? I thought you would be celebrating such a great example of the way the free market works. God you're sloppy thinkers.
Iain - glad to see you defend the Winterstons. In this particular case they seem to have acted legally and sensibly - which at the minute is above average for MPs!
Judith's suggestion of the a block of government owned apartments definitely has merit - I was thinking the same myself. Might be a little claustrophobic - so many MPs in one place - but it would save a lot of hassle and money for the taxpayer.
I could be mistaken, but I think the suitably grotty little flats in Vandon Court on Petty France were originally built with the purpose of housing MPs – perhaps the walk from St James to the Palace was considered excessive?
What tosh and nonsense, you might just as well be a MP talking like this ."It is clearly not possible for MPs to maintain two houses - one in the constituency and one in London - on a salary of £60,000"
It is quite possible to live within easy travelling distance of Westminster on a salary of £30,000.... millions do it. It is also possible to live anywhere in the UK away from London on £30,000 a year.... even more millions do it. Throw in perks such as the ordinary man could only dream of and it is clearly quite possible.
MPs do not consider themselves to be normal people do they ?
Iain - I can't believe you think the Wintertons are justified in doing this - in my book it's worse than Conway's deception.
They used the housing allowance to pay off their mortgage on their London property - fair enough, that is an MP's right.
But then they put the property in a trust for the purposes of avoiding Inheritance Tax, so their children can profit. The trust staus means that if they wanted to continue to live in the property, thay had to pay rent to the trustees.
So they claimed from the Parliamentary allowance AGAIN to cover their expensive rent, thus the taxpayer are paying twice, just so they can avoid paying tax for their children.
It's entirely against the spirit of the rules, & completely unnaceptable. Cameron should remove the whip from both.
Wintertons are Tory aristocracy. Removing the whip from them would require exceptional cojones.
Is quite incredible that Cameron would bite the Political Class but who knows - I guess even Peter Oborne would rather be wrong than right in this case.
my local labour mp (i hear), has a nice little scheme, his sister buys the house, and he rents it off her, the rent is paid for by the HofC....
lovely jubbly doubles all round...
Anonymous @ 5.41pm said...
Iain - I can't believe you think the Wintertons are justified in doing this - in my book it's worse than Conway's deception.
Iain. I thought you to be above average intelligence and from your past blogs in tune with popular opinion.
I am afraid on the issue of MP's allowances you are way way off beam.
They say they do not own the flat - it is in the hands of a Trust and two of the trustee's are the Wintertons.
Iain. When they sell the flat - as they will when they lose their seats - the money will be paid to the Trust.; So who benefits in the long run? The Wintertons, of course.
Stop making a damned fool of yourself Iain. The gravy train has now pulled into the Station and the time has come for all MP's to get orf it and climb aboard the Tebbit Train _ as he advocates in the Mail today ie. pay them less!
Iain Dale said... It is clearly not possible for MPs to maintain two houses - one in the constituency and one in London - on a salary of £60,000. If you think it is, then what you are arguing for is a new cadre of MPs who are rich and can afford to keep themselves from their own resources.
Nonsense. Completely false alternatives. In fact it is you, Iain who are arguing for a new cadre of rich MPs - you are encouraging the Derek Conway ("we aren't paid enough") delusion.
Have one set of rules across service personnel, MPs and civil servants, police etc who have to move around because of their government jobs.
But on the face of it, claiming actual rent up to an appropriate limit is the way to go where there are no married quarters. And no doubt members of any of these groups would rather rent from family than strangers. If it is a fair rent for the property, should we care?
Free market?
Man in the pin factory don't fool yourself. There is just as free a market in MPs wages as there is in BBC licence fees.
Convert one of the London prisons into a hostel for MPs. Most of them look as though ought to end up in prison anyway.
Of course we then have to send the prisoners somewhere. Perhaps we could close down the Scottish Parliament and use their building.
not all of us require laws to keep us in check. surely they just need to consider what my namesake would think of their actions.
Of course it's possible. Most people manage with a wage of £25K or less and one home so why can MPs not manage two homes on more than double that? You're living in a dream world if you think that £60K is not an unimaginably huge amount of money to most people.
This is going to run and run.
One of the things that exercise me is a move for deciding what is justified - in some case and I have no idea how many - from "conscience" to "compliance".
I think the same problem is at the root of some of the Lab finance problems. Legal does not mean right - but, yes, it is a devil of a one to judge.
I've started a series of guest posts from all political viewpoints looking at how the system can be run better in the future - with the aim of moving the debate from heatr to light. The series looks like running at one a day for at least a fortnight.
Anyone wanting to make a contribution is more than welcome.
Link below.
Matt Wardman
I've got some dusty memory that the civil service aren't allowed to benefit from housing allowances. So rent/short term lease would be refunded, purchases/mortgage interest would not.
"If criticisms are to be made, they should be directed at the House of Commons authorities."
If you truly believe that you are unfit for public office. No wonder Conway is a pal.
Rent Allowance, just like ex-pats.
Iain, irrespective of their statement, the HOC allowancs are not supposed to help protect you from Inheritence Tax liability.
I've heard that it's fun to stay at the YMCA - perhaps a few MPs could stay there instead of buying second homes.
This shows the rules in an unedifying light, and possibly does not reflect well on the Wintertons' sense of propriety (but then nor do some of their jokes), but it is nothing like the Conway case. It is difficult to know whether the motive was really tax planning - if it was, there is nothing wrong with that - or to continue getting the allowance once there was no need for a mortgage. But the point is that the system is that the public purse pays for second home expenses (rent or mortgage) so it's difficult to get too worked up about it if people claim it. This is entirely different from employing most of your family when the purpose of those allowances is clearly to get staff to do real work - this allowance is meant to provide an economic benefit to the member (in the sense that providing a moderately comfortable lifestyle in London is obviously an economic benefit, however it is dressed up).
An interesting point for tax nerds (I'm only an amateur tax nerd myself) is whether they paid CGT when the flat was put into trust. Unless they are saying that for tax purposes it was one or other of the MPs' first home, and yet for expenses purposes it was/is a second home, I think it is likely that they would/should have done (but I am suspicious they haven't said so). The other general tax nerd question is whether this housing allowance is taxable at all - by normal tax principles it should be unless the property is used "wholly and exclusively" for parliamentary purposes which seems most unlikely. I fear there might be some special tax concession operating in this regard. Someone can no doubt tell us the answer as to whether there is.
I think the solution is clear. Add whatever this allowance is worth to their base salaries, but have a reverse London MP weighting as they don't need two bases. Possibly an intermediate allowance for MPs in outer London and easy commuting distance from their constituencies. Make sure the pensionable salary is only the inner London MP rate of salary. At the same time ensure that all travel and other cash expenses are as rigorougly policed as in the best run private sector organisation (by a department answerable to the House itself so not to compromise the House's independence), on a proper reimbursement/receipts basis.
Then get rid of any accrual from the next Election onwards for final salary pensions and put in place a reasonably generous stakeholder pension arrangement.
It's not rocket science is it?
A government fiddle designed to benefit Members of parliament subsidised by the taxpayer. Innit?
On second thoughts, I jettison my idea and join those who argue for an MPs' hostel in central London. That just leaves the question of who will finance the little flats in and around Victoria Street where they install their mistresses.
£60,000 is much less than twice £30,000, because of higher rate income tax.
I don't want to stick up for the MPs though. Reduce their salaries to those of senior academics (as I have said before) and see how they like it. London has plenty of relatively low-cost hotels and B&Bs where the MPs could stay for four nights a week during the short periods when parliament is not in recess.
Sorry to say that I'm disappointed in this post. £60,000? That is a fortune to millions of people. Even if that were split between a couple it would be a pretty decent standard of living.
As for per diem expenses, wasn't a point raised a few months back about how MPs got ridiculous lunch expenses to cover the cost of eating in London restaurants?
This whole thing is a sham. I'm fast becoming disillusioned with the Party. If Cameron has to battle with the likes of this he has no chance. Poor man - was doing so well.
There are too many people on the gravy train. Career politicians with not enough time in the real world. Gone native? Of course they have.
We should convert Chelsea barracks into accomodaion for them. If it was good enough for Britians finest (soldiers) it shoud be good enough for the ones who send them to war.
There is a lot of confused thinking going on .
It is a fact that from the nature of the job nearly all MP's will need to maintain a place in their constitiency and a place in London ie in Westminster or very close . It would be impossible to do the job without it . Whether or not the flat/house in London is fully or partly paid up or mortgaged is irrelevant . The capital cost needs to be funded as well as the running costs . There is also the opportunity cost ie the theroretical alternative use of the money tied up . Effectively ,the MP is putting the building at the disposal of the government just as GP's put their surgeries at the disposal of the NHS . GP's receive reimbursement of the costs of doing so including a recognition of the capital costs, regardless of whether they have paid of the original building costs or not .
No reimbursement of surgery costs = no surgeries . Geddit?
As for the inheritance tax angle , so what ? More of a comment on the stupidly low threshhold of this tax than anything else.
What is difficult to take is the insulting unbelievable arrogance of Conway and sons. They could not even be bothered to make a half hearted attempt at pretending to do the the job like any half competant chancer would.
He still denies he did anything wrong. He just forgot to keep/fake the evidence. An administrative oversight.
MPs should be paid £100,000 pa. It would allow them to live what most of them would regard as a privileged lifestyle and therefore would make them lees vulnerable to bribery and corruption. It would attract a better, often more talented, selection of candidates. It might allow them to pay more attention to their jobs rather than to writing books or giving after dinner speeches. It might also allow them to pay off a few of the debts amassed during their campaigns to become MPs!
Iain, the Winterton's may not have broken any rules, and they might be acting within the letter of the law, but they decided to pay off their mortgage to avoid paying inheritence tax.
Fair enough, and sensible really - especially as inheritence tax is a pernitious tax on death - which should be abolished (but that is another story).
But, the point is that, unlike a man in private employment, it is the tax payers who are subsidising the Winterton's tax avoidance scheme.
And that is the difference - it is the costant use of public money to subsidise MPs.
On the upside, at least they are not claiming two lots of expenses - which in theory as two seperate MPs they are entitled to do.
In the grand scheme of things, this is a non story. but the damage is the perception which is that MPs have their noses well and truly in the trough.
Personally, I feel sorry for the Wintertons. I also think this is another nail in the coffin of the current system.
The 'buy some flats in London' aregument is appealing, except that many MPs have own (main) home in London and claim for a second home in the constituency. Many MPs have wives and kids in London, so how wold that work? The glats thing wouldn't work - sadly.
Not sure what the answer is.
I know one 'honourable' member (a Lib Dem as it happens) who refuses to buy a house and profit from it, so he rents a small flat in London - which the fees office pay for.
off course people - if Inheritence Tax was scraped, then this situation would never have arisen!
OK, I have now read all the posts, and lots of the posts are not thought through:
1. MPs need a base in London and in the constituency, and therefore the tax payer has a moral obligation to ensure that these costs are covered. The relatively modest (by London standards at least) salary would not support two homes.
2. Many MPs have their main 'family home' in London, and the second 'funded' home in the constituency. Therefore, hostels/hotels won't work for a great many of MPs
3. One possible solution is to say that the accommodation allowance may not be used to purchase a property, but merely to rent one. The rent should then cover a suitable standard of accommodation as befits the MPs individual needs. If the MPS wishes to 'top it up' to live somewhere posher then they do so from their own salary.
Alternatively, any profit the house makes when it is sold should be returned to the fees office
We have to be carefull a bit, as I am starting to get concerned that many really good people who might make excellent MPs will simply not bother. Many MPs already take substantial pay cuts when they enter parliament (although some crap ones treble their salary), and my concern is that we are currently persuing a vendeta against the collective body of MPs which will prove a disincentive and put people off going into politics.
What astonishes me about these cases - Conway and the Wintertons - is that we're talking about professional politicians here. These people, you'd think, would have some appreciation of the political implications of their decisions.
Conway seems to be a crook, pure and simple. He has stolen taxpayer's money and presumably, now that he's been found out, doesn't care one way or the other what we think about it. He knows damn well that he's a wrongdoer. Fair cop, etc.
The Wintertons, on the other hand, are astonished that taxpayers are incandescent about their misuse of public funds. Perleezz!! They are either even more than Conway or so stupid that they shouldn't have been elected in the first place.
Iain
You say that no-one else will publish the W's statement. The BBC have.
http://news.bbc.co.uk/1/hi/uk_politics/7226278.stm
Yes, that's right, the BBC that you are always saying in biased etc etc, has published it in full. Hope you acknowledge this - when they are fair you should be too.
Any compensation for politicians simply invites this kind of crassness and corruption. All MPs should be fully responsible for their staff, accommodation, and expenses.
This would ensure that MPs would either have substantial outside interests or have a private income to cover these necessities. No one would pursue a career in politics, it would rather be something to cap a career for business owners, retired officers, etc. No Parliament full of people who intend to live off of a government salary for 30 years, MPs would only serve a short time, and one would be ensured that the vast majority of members have had great success in the real world before entering politics.
Boris Johnson should be the model of how MPs do their job - mixing it with several other outside pursuits to ensure that they are still in touch with the real world and acutely feel the impact of the decisions that they make. Career politicians who don't pay the high rates of tax, don't need to abide by the various regulations of business or land ownership, and simply suckle at the teat of the state are destroying the entire English speaking world. You'd also get far fewer obnoxious Marxists elected!
I agree with the various people who are calling for MPs to be housed in flats. They should be given free accomodation at the same level as undergraduate students, and an office, but no "home allowance" at all. I'd argue for higher salaries (I, Asquith, personally introduced payment for MPs when I was prime minister, in the face of Tory opposition, so that people of modest means could have a voice in Parliament) but less "expenses" etc.
And if they think they're too good for a block of flats, they shouldn't be given anything. They are only paid out of the public purse because it is necessary for them to serve us properly, so they shouldn't be given any more than they legitimately need.
Anonymous 10.02
If rent is paid to a landlord in an ‘arms length transaction’ie not to one's trust fund, there would be no capital cost or opportunity cost either.
Adrian yalland 10.45
If the MPs have their main home in London, what’s the problem- let the HoC pay rent on the constituency home.
Iain, you say you don't understand the financial arrangements they have put in place so let me try and clarify them for you.
The trust they have set up to avoid paying IHT owns a house which they legitimately bought and then transferred into the trust for purposes of tax avoidance. This trust now receives rent of over £20,000 a year, paid for through our taxes. That £20,000 a year (presumably rising with the level of rental inflation) is money which will be reinvested for their children until the day the trust is opened up to them.
The allowance is meant to be used for paying interest off a mortgage or rent, not for giving their children a tax-free inheritance.
I think MPs should just not bother going to their constituencies.
It would be much cheaper to just pay for a hotel the week before an election every four years and not spend the interim having to talk to members of the ***ugh*** public.
There's a reason these people don't live in London- they have no ambition and nothing to give to the country.
Anonymous 10:02 - I agree about the constituency house argument. I was merely saying that the flats/hotel/MPs accommodation wouldn't work as some MPs have the family house in London.
Are we expecting MPs to have the wifes and kids in studenteqsue digs?
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