Wednesday January 16, 2008

NEWS RELEASE

HARRIET HARMAN ANNOUNCES GOVERNMENT'S DECISIONS ON REVIEW OF PARLIAMENTARY PAY, ALLOWANCES AND PENSIONS

Leader of the House of Commons Harriet Harman QC MP today set out the Government's response to the triennial review by the Review Body on Senior Salaries after publication of its report to the Prime Minister.

Ms Harman issued a Written Ministerial Statement (attached), providing a summary of the Government's position on the main recommendations of the Review Body. Specifically, the response to the SSRB on MPs' pay is consistent with the outcomes sought elsewhere for public sector employees.

Ms Harman said: "Government has had to take difficult decisions over the past year to stage pay awards in the public sector. Because of that, inflation has remained low, allowing the Bank of England to keep interest rates low.

"We have to ensure that, in the public sector, awards remain consistent with the continued achievement of the inflation target of 2 per cent.

"In support of the Government's goals for the whole economy, the principles sought for pay in the public sector should also apply to MPs."

Ms Harman is today tabling resolutions for debate in the House of Commons next Thursday, January 24, which would give effect to the Government's proposals. 

She said: "Under the current procedures of the House, the process of determining pay, pensions and allowances rests with MPs. Many of us believe that it is unacceptable, and we know that the public do not accept, that we should vote on our own pay and pensions.

"That is why I have today announced in my written ministerial statement a review of the procedures for setting MPs' pay and pensions in the future, with a view to examining options that find objective criteria for pay determination within a framework that does not require Members to vote. I am grateful to Sir John Baker, chairman of the Review Body, for agreeing to undertake this important work."
 

WRITTEN MINISTERIAL STATEMENT
Review Body on Senior Salaries
(Report on Parliamentary Pay, Pensions and Allowances 2007)

The 2007 Senior Salaries Review Body (SSRB) Triennial Review of Parliamentary Pay, Pensions and Allowances, was published today. The Government has considered the SSRB report and will today table motions that will be debated in the House on 24th January. The Commons will debate and vote on resolutions to express their views.  Final implementation of any opinion on pay is dependent on the Common's agreement to an additional resolution.
This debate and decision will take place in the context of the current public sector pay policy.  MPs and Ministers are paid by the public purse.  The Government is committed to ensuring that public sector pay awards remain consistent with the continued achievement of the inflation target of 2 per cent. The Government believes that the principles that apply to public sector pay deals should also apply to MPs to entrench economic stability by holding down inflationary expectations and helping to maintain the economic stability we have seen over the past decade.

This statement sets out a summary of the Government's position, which proposes that changes to MPs' pay and pensions are consistent with the outcomes sought elsewhere in the public sector

The Government believes that there should be a clear, transparent and independent mechanism for setting the pay and pension of MPs.  It is inappropriate that MPs should vote on their own pay and pensions. The Government therefore intends to examine options that find objective criteria for determining the appropriate comparator used for MPs' pay awards within a framework that does not require MPs to vote in future years, and accordingly has asked Sir John Baker, CBE the retiring chair of SSRB to conduct a review and make proposals on options for consideration.  It would be a significant constitutional reform for MPs to be explicitly removed from the process of voting on and determining their own pay and pensions.  In some other countries, elected representatives' pay and pensions are determined entirely independently of the legislature. We hope to draw on this international experience so as to find a suitable mechanism that will work within our parliamentary system.  We intend this work to be completed so that the House can resolve it before the summer recess.

The Government is tabling a motion in relation to MPs' pay for the year 2007/08 and seeking the House's support for Sir John Baker's review.  There will be separate motions on pensions and allowances. 

House of Commons

MPs' Pay

The position on MPs' pay is as follows:

The Government believes the SSRB recommendation on pay for 2007/08 should be staged, with 0.84% increase backdated to 1 April 2007 and a further 1.06% backdated to 1 November 2007.  This would give a 1.9% increase across the year 2007/08 and a final salary of £61,820.

With respect to pay for future years, the Government considers that MPs' pay in the future (including 2008/09) should be determined by a mechanism that is independent of MPs' votes and therefore does not propose taking forward the SSRB recommendations pending Sir John Baker's review of both the appropriate comparator and mechanism for determining MPs' pay. 
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SSRB has also recommended increasing the London Supplement from £2,812 to £3,500, backdated to 1 April 2007.  The Government does not accept this proposal.

Ministers' salaries

Ministers' pay is set under the Ministerial and Other Salaries Act 1975.  SSRB recommends that the salaries for the Prime Minister, Ministers and other office holders in the Commons should increase more than the salary of MPs.  The Government does not accept the proposal and believes that Ministerial salaries should increase at the same rate as MPs.

Severance pay

SSRB makes recommendations to change severance pay for Ministers who leave office.  The recommendations are that Ministers or other office holders who are reappointed to a salaried Government or parliamentary post within three months of leaving office should keep a pro rata severance payment and the balance repaid. SSRB recommends abolishing the age bar of 65 that currently applies to severance payments.

Select Committee Chairs supplements

SSRB recommends that the salary supplements paid to chairs of Select and Public Bill committees should be increased by the same percentage as the overall increase in MPs' salary. The Government accepts this principle and propose that the supplements be increased in line with the increases in MPs' salaries.

Pension

In respect of pensions, the SSRB has proposed the introduction of an optional 1/60th accrual rate.  The Government accepts this proposal in principle and is prepared to introduce it when the change can be made as part of a cost neutral package.
SSRB makes a number of recommendations aimed at limiting the cost to the taxpayer of Parliamentary pensions.  These include the 50:50 sharing between members and the Exchequer of future increases or decreases in pension cost pressures, and restricting the underlying Exchequer contribution to the scheme (other than in respect of the deficit identified at the last valuation) to a maximum of 20% of payroll.  The SSRB also recommends that there should be a review of parliamentary pension provision if the costs are rising significantly such that the 20% cap on the Exchequer contribution is likely to be breached.  These recommendations are consistent with the approach being taken in public service pension schemes generally and the Government accepts them. The Government proposes that the detail of the arrangements should be worked up in consultation with the Trustees of the parliamentary pension scheme so that it can be taken into account by the Government Actuary in his 2008 valuation of the scheme.

The SSRB recommendations on MPs' pensions apply also to Ministers' pensions and the Government position on these is as set out above.
SSRB recommends that future holders of the offices of Prime Minister, Lord Chancellor and Commons Speaker are covered by the parliamentary pension and severance arrangements that apply to Secretaries of State rather than the pension arrangements that apply now.  The Government accepts this recommendation with respect to Prime Ministers and Lord Chancellors.  The Government does not propose to implement this recommendation with respect to future Commons Speakers, as it considers the position of Speaker to be substantially different to that of a Prime Minister or Lord Chancellor.

Allowances

SSRB recommends that the Staffing Allowance ceiling should be altered to allow an increase from the equivalent of 3.0 to up to 3.5 full-time (equivalent) members of staff recognising that the amount of case work for many MPs has increased.  The Government accepts this proposal.

The SSRB makes several recommendations on changes to parliamentary allowances including those on:
  o Staffing expenditure
  o Expenditure on offices
  o Communication expenditure
  o Expenditure on travel
  o Compensation for leaving office
  o and a range of other matters

Given the detailed nature of the proposals, the Government proposes that they should be referred to the Members Estimate Committee to examine in light of observations by the Advisory Panel on Members' Allowances.
House of Lords

The SSRB proposes that increases in pay for Lords Ministers are aligned with that of increases in Commons Ministers' pay in accordance with current practice.  The Government accepts this recommendation.  It is proposed that Lords Ministers' pay will be increased by 1.95% for 2007/08 in line with the proposed increase in MPs pay, and that from 1 April 2008, increases in Lords Ministers' pay will be made via the same mechanism as for MPs and other Ministers.

Recommendations on MPs pensions will also apply to Lords Ministers' pensions - the Government's position is as for Ministers within the Commons.  The age bar that currently applies for severance pay will also be abolished for Lords Ministers as for Ministers within the Commons.

Additionally, the Government agrees on the proposal to continue the existing salary arrangements for the Leader of the Opposition, Opposition Chief Whip, Chairman of Committees and Deputy Chairman of Committees. Related to this, the Government accepts the SSRB recommendation which seeks to peg the salary of the Lord Speaker on a 'mark time' basis pending the next review of parliamentary pay or reform of House of Lords.

Until recently the Lord Chancellor was head of the judiciary as well as Speaker of the House of Lords, and is entitled in legislation to a salary £2,500 higher than the Lord Chief Justice. Given the post no longer now has those functions, the SSRB recommends that where the post of Lord Chancellor is held by someone who also holds another ministerial post, that person should receive only the salary for the ministerial post. The Government accepts this recommendation.

The SSRB made three recommendations on Lords allowances: on the extension of the Spouses', Civil Partners' and Children's Travel entitlement to include a named partner; for reviews of the definition of parliamentary business for the purpose of the subsistence allowance; and for a review of IT support for Members. These recommendations should be considered in the first instance by the House Committee.

Notes:

In July 2006, the Prime Minister commissioned the Senior Salaries Review Body, chaired by Sir John Baker, CBE to conduct a further triennial review of the pay, pensions and allowances of MPs, Ministers and Peers. The outcome of the review (Report No 64) is published today, January 16, 2008 as Volume 1 (Cm 7270-1): Report and Volume 2 (Cm 7270-2): Independent studies on pay and allowances, and pension

The SSRB report will be available at the following website address:

http://www.ome.uk.com/review.cfm?body=4

For current Ministerial and other salaries, see annexe A (attached)

For more information:

Media inquiries: contact 020 7276 0594/0207 7276 1196

Annexe A

                                                Salaries 2007/08

House of Commons           

House of Lords    

SSRB Report
Written Ministerial Statement

For further information please visit the OME website