Friday, May 22, 2009



What annoys me most about the scandal of MP’s allowances is the hypocrisy. “How can I be criticised, I have kept within the rules?” Fair enough! Or is it? MPs are not the only people who keep within the letter of the rules but use them in a way that could not have been intended, in order to rip off the taxpaying public. Mr Brown and a succession of Treasury Minister constantly describe such action by other people as “unacceptable tax avoidance”. How can it be unacceptable to Mr Brown for you and I to keep within the letter, rather than the spirit of the rules, but so acceptable for his friends to do so that he rewards them with government jobs?

I heard an even more astounding “justification” from an MP on the radio recently. Successive governments have given MPs such minor pay rises that they exploit the expenses rules to bring their earnings up to what they believe to be a more appropriate level. That is not keeping within the rules, it is abusing the rules. I do not know what the appropriate level of pay for an MP is, principally because I am unclear what the average MP does. £61,820 – roughly two and a half times average wage – does not seem particularly low to me. Logically the right pay for a job is the amount that will attract a small number of properly qualified applicants so that there is a choice in who to appoint. Vacancies for MPs generally seem to attract several hundred applicants, which suggests, if anything, that £61,820 is wildly excessive.

What does an MP do to earn his money? Those who have watched Parliamentary TV will know that only between 2½ and 5% seem to take part in, or even listen to, most debates. Of course they have to be at Westminster because when a vote is called most of them turn up and vote in ignorance of the arguments and, I suspect, in ignorance even of what they are voting for (or against). Voting simply involves walking through the door that their whip points them to. I have attended several Parliamentary Committee hearings. The impression that I get is that it is fairly unusual for all of the members of a Committee to be present throughout its hearings. I am told that an important part of the job is dealing with constituent’s problems. Over the years I have written to my MP perhaps half a dozen times. On each occasion my letter has been forwarded to the appropriate Minister and the Minister’s dismissive response sent back to me with a compliment slip. Accordingly none of the people who have been my MP seems to have regarded dealing with my problems as even warranting their getting personally involved. Being an MP seems to me an unskilled job with not very onerous responsibilities. No wonder there are so many applicants anxious to do the job for £61,820.

But back to hypocrisy. MPs are office-holders. Such people are taxed in the same way as employees. I set out later what that is. Office-holders in general, I mean, of course, not MPs. Because in 1984 the then Chancellor, Nigel Lawson, decided to exempt from tax completely the “overnight expenses allowances” of MPs. Overnight expense allowance is defined as “an allowance expressed to be in respect of additional expenses necessarily incurred by the Member in staying overnight away from the Member’s only or main residence, for the purpose of performing parliamentary duties (a) in the London area or (b) in the Member’s constituency” (s 292, ITEPA 2003).

There are some interesting points here. The first is “necessarily incurred”. That is a well interpreted phrase in tax law. It means an expense that would have to be incurred by each and every holder of the office, even one who lives next door to the Houses of Parliament. The second is “overnight expense”. This does not have its normal day-to-day meaning. It has been defined by parliament to mean “rent or mortgage interest, hotel expenses, utilities and communications charges, furnishings, maintenance, service agreements, cleaning and insurance and subsistence”. The third is “for the purpose of performing parliamentary duties”. In 1984 parliament sat from 12.00 until it finished business, often late into the night when transport home was not available. However Tony Blair changed that. It now seems normal to sit from 11.30am to around 5.00 or 6.00pm. Accordingly it is hard to see how it can any longer be “necessary” for an MP to stay in London overnight for the purpose of performing parliamentary duties.

I live in Brent North, about 12 miles from Westminster, or around 30 minutes by tube. The first train leaves at 5.35am and the last train back leaves Westminster at 00.31. Accordingly I cannot see any possible way that my MP can “necessarily” need to stay in London overnight to perform his parliamentary duties. Like me, most of the residents of Brent North work in London. We have no difficulty in commuting back and forth each day. Yet in 2007/08 my MP claimed overnight expense allowances of £15,079 (roughly 65% of the maximum overnight expenses allowance of £23,083). If you are wondering what your MP got you can find out at

An MP also gets a travel allowance. In 2007/08 mine got £4,501 (£3,952 for regular travel between his home/constituency and Westminster and £549 European travel). A Transport for London annual travelcard between Brent North and Westminster, allowing travel 24/7, currently costs £1,472! (It would have cost a bit less in 2007/08). However the good news (for taxpayers) is that the travel allowance is not tax-free; only the part of it that constitutes a “business journey” is tax-free. The bad news is that it is the House of Commons Fees Office, not HMRC that decides what is the cost of business journeys, and last Friday’s Times noted that “last year the man in charge of checking MP’s expenses declared that he had virtually no ability to scrutinise their claims beyond a “common sense” test”.

An MP of course has duties to perform in two places, his constituency and Westminster. That is different from most people who may occasionally carry out duties in two places but do not regularly do so. But the MP’s situation is not unique. A manager in commerce can be responsible for, say, his company’s factory in Manchester and also have regular duties at the company’s head office in London. He is in an identical position to an MP. So how does his tax position compare with an MP’s?

The tax rules on travel and subsistence were thoroughly overhauled by Gordon Brown in 2003. In other words they are rules imposed on the rest of us (but not themselves) by the will of most of the current MPs. So how do they reflect this “two places of work” problem that applies to MPs? What do they allow the non-MP with two places of work to claim against tax in relation to his overnight stay in Manchester (if he lives in London) or in London (if he lives in Manchester)? The answer is, not a penny; nothing at all. What about the travel from Manchester to London? Again, nothing at all – unless the manager pops into the Manchester factory first, in which case the travel becomes tax deductible. Fair? Or hypocritical for MPs to vote themselves huge tax-free allowances but to deny any tax relief whatsoever to the ordinary man in the street in the same position as an MP? You judge! The justification for the non-MP’s tax treatment is that phrase “necessarily incurred” that I mentioned earlier. Every person who takes the job knows that it carries duties in both London and Manchester. Accordingly the travelling costs are not an expense of carrying out the duties; they are an expense incurred to put the manager in a position to carry out his duties and as such are not tax deductible. Are MPs not expected to realise when they take on their job that it has duties in both places, or do they know full well but choose to give themselves privileges that they deny to others? You decide!

Robert Maas


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