---

House of Lords: Financial Support for Members

My Lords, in opening today’s debate, I should perhaps take a moment to explain the procedure that we will follow. The Motion before the House asks it to agree to the four recommendations contained in the House Committee’s report on the Review of Financial Support for Members of the House of Lords by the Senior Salaries Review Body. As I shall explain, agreement to this Motion today will not be the end of the process; ultimately, detailed resolutions to adopt the new scheme will be put to your Lordships by the Leader of the House in the spring. At the outset, it may be for the convenience of the House for me to make a general declaration of interests on behalf of all noble Lords taking part today. I claim travel expenses under the scheme and am a paid officeholder. I am sure that most, if not all, noble Lords taking part in today’s debate will have similar interests as claimants under the Members’ reimbursement scheme. Therefore, it is not necessary for noble Lords to begin their speeches with a declaration of interests. I turn to the short House Committee report before the House. The report, which was agreed unanimously, recommends that the House accepts the "architecture and principles" of the system contained in the SSRB report, with a view to the new system being in place for the start of the new Parliament next year. In order to allow Members to put forward their views on the detail of how the SSRB’s recommendations can be implemented, the report recommends that an ad hoc group of Back-Bench Members be set up, ""to consider and consult on issues in the report and advise on their implementation"." If the House agrees to the Motion today, I would hope that the House Committee would be in a position to appoint the group at its meeting tomorrow, so that it can begin work immediately. In that event, I would propose to inform the House of the appointment by way of a Written Statement. Many of the SSRB recommendations, which I will briefly outline, require careful and detailed thought about how best to implement them. For that reason, the ad hoc group of Members proposed by the House Committee will take the recommendations away and look at them in detail. The group will report back to the House Committee, which will then feed its recommendations in to the Government. As I have said, the end of the process will be in the spring, when, in the normal way, the Leader of the House will bring resolutions to the Floor of the House for agreement. Significantly, the House Committee report also proposes that the committee should be tasked with monitoring and reporting on the impacts of the new system after a year of operation. This is an important part of the implementation process. The changes recommended by the SSRB are fundamental and very wide-ranging. As thorough as the SSRB’s work has been, the impact of the new system is to a degree unknown and it will be important for us to be alive to any unintended consequences. Before I turn to the detail of the recommendations contained in the SSRB report, it may be helpful for me to remind noble Lords of the context to the recent review. In June of this year, as noble Lords will recall, the House Committee asked the SSRB, via the Prime Minister, to conduct a review of the system of financial support for Members of the House. On the advice of our Audit Committee, we took the view that the arrangements for financial support required greater clarity to reduce any risk of abuse, which might expose both individual Members and the reputation of the House as a whole. While the system had some pragmatic benefits—it was good value to the taxpayer and easy to administer—there was a need to ask an independent body to conduct a comprehensive review of our system. We decided that the best body to conduct this review was the SSRB, which had historically made recommendations on our system and has the specific remit to review parliamentary pay and allowances. We gave the SSRB the following terms of reference: ""To review options for the system of financial support for Members of the House of Lords, given its current role and composition; and to make recommendations. In conducting the review, SSRB will have regard to clarity and transparency; accountability and public acceptability; value for money; differing attendance patterns of Members; the geographical spread of the membership of the House; the financial consequences for Members in participating in the work of the House; schemes operated in comparable circumstances by other institutions"." The SSRB conducted extensive consultation in the short time available. Three open meetings were held with Members before the Summer Recess, which around 150 noble Lords attended. The SSRB held a series of additional meetings with smaller groups and individual Members, including the Lord Speaker, the leaders of the three main parties and the Convenor of the Cross-Bench Peers. In addition, noble Lords submitted a total of 121 written responses to the consultation document issued in July. The SSRB reported on 26 November. What one might call the headline conclusion of the report was a validation of the House Committee’s decision to seek a comprehensive review by an independent body. The report says: ""Having now examined the House’s arrangements for financial support as they have evolved over the years, we can only conclude that they do not meet the standards of governance, precision and transparency now demanded for the use of public funds"." The SSRB has made recommendations for an entirely new scheme. In some areas, if its recommendations are accepted, Members will no longer be able to claim allowances to the levels that they can under the current arrangements. It is important to put on record that this does not constitute any criticism whatever, implied or explicit, of those Members who have legitimately claimed allowances under the current scheme. Such Members have followed the rules as they stand and have acted entirely properly. The report makes 26 specific recommendations for a new system, which the SSRB believes would meet the necessarily high standards. I will briefly take the House through some of these recommendations. In doing so, I do not propose to address the two recommendations in Chapter 6 on ministerial allowances, or recommendation 26 on a future role for the Independent Parliamentary Standards Authority, where the recommendations of the report are addressed primarily to the Government rather than to the House. The SSRB recommends a new daily fee for attendance of £200. This fee would replace the current day subsistence allowance of £86.50 and the office or secretarial costs allowance. The new fee would be higher than the combination of those two allowances, but the current reimbursement of expenses for the "additional 40 days" office costs would be discontinued. The report recommends that the fee should be paid on the basis of attendance. The House is invited to consider and define which activities, in addition to attendance at sittings of the House or its committees, should qualify Members to claim the daily fee. I come to taxation. The new daily fee for attendance would introduce an element of income to Members and therefore in principle the SSRB recommends that the fee should be subject to income tax and, where a Member is under the pensionable age, to national insurance contributions. Although the SSRB believes in principle that the fee should be taxed, the report makes it clear that it would not be possible for it to be taxed without further primary legislation. The SSRB report states: ""Membership of the House of Lords is neither an employment nor an office"." Therefore, under current legislation, allowances or expenses paid to Members are not subject to taxation. In coming to this view, SSRB consulted Her Majesty’s Revenue and Customs. I can report that the House authorities have independently confirmed that position directly with HMRC. HMRC confirmed that membership of the House of Lords is neither employment nor an office and that issues of taxation do not arise. Members of the House of Lords who are officeholders, such as Ministers, are and will remain subject to tax and national insurance contributions in the normal way on payments of salary. The report says that, should primary legislation be introduced, the SSRB would conduct a further review of the level of the daily fee, taking into account, ""the different rates of tax payable by Members in different circumstances"." If the necessary legislation is not forthcoming in the short term, the SSRB will in any case review the level of the fee three years from its introduction and every three years from then onwards. On overnight accommodation, the SSRB recommends: ""Members whose principal residence is not within a reasonable commuting distance from the House of Lords should be entitled to recover the cost of one night’s overnight accommodation for each qualifying attendance at the House"." The upper limit for overnight accommodation claims would be reduced from the current limit of £174 to £140. Reimbursement up to that limit would be on the basis of receipts. The SSRB further recommends that the House retain a hotel booking agent, as government departments do, to find and book hotel accommodation for Members if they so wish. As at present, Members who have a principal residence within Greater London would not be eligible to claim the overnight accommodation allowance. Under the recommendations of the report, those Members with principal residences outside Greater London would have to make a confidential statement to the House authorities explaining why their principal residence was outside a reasonable commuting distance of London in order to claim the allowance. Members would also have to provide a signed declaration stating the location of their principal residence and explaining their criteria for designating it as such.