Select Committee on Members Estimate Committee Third Report


4  Costs of running MPs' offices

The current system

111.  The Incidental Expenses Provision (IEP) provides reimbursement of costs mainly incurred for office accommodation in constituencies, and for equipment and supplies in the constituency and Westminster. From 1 April 2008, a maximum of £22,193 could be claimed each year. In addition, up to 10% of the staffing allowance can be transferred to IEP each year. The IEP replaced the Office Costs Allowance following the SSRB review in 2001.

112.  The Department of Resources has told the Committee that:

  • 75% of the IEP is spent on general running costs such as office rent, utilities, stationery and office equipment
  • 82% of Members spend over 80% of their allowance
  • 45% of Members transfer money into the IEP from their Staffing Budget to meet necessary costs
  • 22% of Members do not claim for a constituency office—either using their home or having no constituency office
  • 78% rent constituency offices, some through a commercial arrangement and others via their local association on commercial terms—about half are tied in some way to party-affiliated bodies
  • the majority of Conservative and Liberal Democrat Members rent from their local association and a minority of Labour Members do so
  • the average cost of renting an office is about £5,800 per annum. Renting commercially is around £1,000 pa more expensive than renting from the local party although this is not necessarily like for like.

SSRB proposals

113.  The SSRB recommended three changes to the IEP:

114.  The SSRB said, "To summarise, we have recommended a new approach to the reimbursement of an MP's office costs based on actual expenditure, to be abated to the extent MPs make use of the free office accommodation and facilities provided for them on the Westminster estate. We have endorsed the existing mechanism for sharing the costs of new security standards recommended by the police. We have reduced the amount included in IEP for communication because MPs have already decided on a separate communications allowance. With these changes we believe the IEP is better described as 'Other Office expenditure' and we recommend maximum expenditure under this heading should be set at £13,839 to be abated by £2,500 for each member of an MP's staff based on the Westminster estate."[25]

The Committee on Standards in Public Life

115.  In its 'Principles to govern a review of MPs' allowances', the Committee on Standards in Public Life said:

"MPs should, in line with other public servants, be given the means to undertake the duties for which they have been elected"

"Wherever practical or economic, such resources should be centrally procured"

"There should be no cross-subsidisation between resources provided to enable Members to undertake their parliamentary duties and party political activities. Preserving this boundary is vital to public confidence in the arrangements and it should be strictly policed. Where premises or staff are shared, it should be possible to demonstrate that such cross-subsidisation is not occurring, and the arrangements should be subject to occasional audit".[26]

The Scottish Parliament

116.  Office costs in the Scottish Parliament "are complex …..and funded from a number of different sources".[27] The current arrangement does not separate staff costs from office costs. The recent review recommends that "all constituency members should be entitled to financial support for a local office up to a maximum level of £15,000 per annum."[28] It also examines in detail the situation where elected Members share constituency offices or hire them from political parties. In the latter case, the review recommends that an independent valuer's opinion on the rent agreed with the party political organisation should be provided "to certify that the rental proposed does not exceed a fair market rent for the property concerned".[29] MSPs should not be entitled to claim expenses for using their homes as offices. The Scottish review also recommends the central provision of equipment, furniture and office supplies for MSPs' local offices.[30]

Views expressed by Members

117.  The main issue raised by Members in relation to the IEP is the liability for income tax on office equipment. HMRC explained this to us as the interaction of two different tax systems—the rules on income tax apply because the payment is made to the Member but he or she can claim capital allowances on the items acquired.

118.  There seemed to be support among Members for constituency offices to be funded centrally, though some would prefer to retain the option of renting their own office and claiming that against the IEP. Those who supported the central funding of constituency offices regarded the 800 sq ft maximum recommended by the SSRB as unduly restrictive.

119.  Members also told us of a wide variety of experience about constituency offices. These ranged from Members with island or large rural constituencies who needed two offices to ones in cities where they could not afford to maintain an office near enough the city centre to be readily accessible to constituents. It was not automatic that the constituency office was also the place in which surgeries were held.

Advice from the Department of Resources

120.  The current cost of funding constituency offices is £2.8million a year. The SSRB costed their recommendation at an additional £0.65 million. The Department of Resources estimate that providing constituency offices for all 646 Members on the size recommended by the SSRB (800 sq ft or 75 sq m) and of sufficient quality could cost about £6 million.

121.  The Department of Resources suggests it would be feasible for the House, working with a professional and independent firm of surveyors, to define and then operate criteria which would allow Members to obtain suitable constituency offices and provide value for money to the taxpayer. For example, the "type three" office is exemplified by the Valuation Office as:

"Converted former house usually just off town centre. Good quality conversion of Georgian/Victorian or similar house of character. Best quality fittings throughout. Self contained suite in size range 50 sq m-150 sq m, with central heating and limited car parking".

122.  The Department also notes that there have been some concerns raised about the use of premises of political parties or other affiliated bodies, mainly that there may be some cross-subsidy from Parliament into the parties themselves. Members are already required to submit to the Department of Resources an independent valuation of the market rent of such premises, which is then used as the basis for reimbursement of costs. This system could be extended so that in future the valuation is provided by a surveyor engaged by the House, not the Member. This would provide additional reassurance to the public about the proper use of public money. Ensuring that rental valuations of political party or similar premises used as constituency offices are provided by independent surveyors engaged by the House would reduce the risks of individual cases becoming contentious in future.

Opinion of the Committee

123.  In addition to running offices at the House of Commons to support their work in Parliament, the costs of which are borne by the House administration, the vast majority of MPs also now operate and staff professional offices in their constituencies. With the ever-growing workload and the increasing expectations of constituents, these local offices have grown in importance as the first point of contact for many members of the public.

124.  Typically the constituency office will handle much of an MP's casework and correspondence on behalf of individuals, the MP's constituency diary, local communications, media relations and local issue management; it will organise and often accommodate MP advice surgeries, host local meetings, and even when the MP is away in London in the week local staff will receive and help members of the public in person and on the phone. House of Commons offices, by contrast, typically handle MPs' research and the preparation of their parliamentary and committee work and their involvement in national and international issues. When an MP only has an office at Westminster, this covers both constituency-related work including casework and preparation for parliamentary business and committees etc.

125.  In its 2001 report the Senior Salaries Review Body recognised more explicitly than previously the need for MPs to resource a constituency office and recommended a reshaping of allowances to that end. Despite that, the quality and suitability of accommodation being used as constituency offices varies enormously, depending in no small part on the commercial property market in the particular constituency. MPs with seats in and near London, and in other cities or economic hotspots, need to expend much or all of their office allowances just to cover rent and business rates. The support of the MP's local political party, for example offering space in its offices, is sometimes necessary just to make a constituency office possible. In other areas, by contrast, the IEP budget goes much further.

126.  In the Hay survey of Members, we were told that the IEP is the allowance which MPs find to be the most under strain, and we note that 45% transfer money into the IEP from their Staffing Budget to meet necessary costs. 78% rent constituency offices, either commercially or through their local party—55% are tied in some way to party-affiliated bodies. Twenty two per cent of Members do not claim for a constituency office—either using their home or having no constituency office, whether from choice or because they cannot afford one.

127.  The 2007 SSRB report recognised the anomaly of MPs facing widely differing rental costs from a "one size fits all" allowance, and recommended as a solution that constituency offices should in future be procured directly by the House at their actual cost to a common standard of accommodation. We welcome and endorse this proposal. We note their recommendation that 800 square feet is an appropriate size and believe they have got this about right, but we do not believe this could be rigidly applied as a maximum—a judgement would have to be made depending on what might be available in the particular place at the particular time an office is needed. To this end we propose that the House should retain the services of surveyors to assist with the process of office procurement, rather than leaving it to MPs to find their own surveyors.

128.  We found considerable support among Members for constituency offices to be funded centrally, though some would prefer to retain the option of renting their own office and claiming that against the IEP. Our view is that it would make sense to run the two systems alongside each other for the foreseeable future, not least because trying to migrate all Members onto the central procurement system at the same time would be impractical. As leases come to an end, or new offices need to be found, or new Members are elected, it would make sense to use the new procurement model.

129.  Currently the average cost of renting an office is £5,773 per annum. Renting commercially is around £1,000 pa more expensive than renting from the local party, but this is not necessarily always comparing like for like. The SSRB suggested reducing the IEP by £5,000 and then paying the actual costs of renting the office. This seems to us to be well-judged, though there is also a case for also paying the business rates centrally where the rent is paid centrally.

130.  We recommend acceptance of the SSRB proposal that constituency office lease or rental should be met in full by the House recognising that in some constituencies office costs are higher than can reasonably be met out of the current Incidental Expenses Provision; that this should be limited in size and standard under detailed criteria to be drawn up by an independent chartered surveyor; that the scheme be run under the guidance of such a surveyor employed by the House; that the scheme be phased-in over a period of time; and that Members who choose not to make use of the new scheme can continue to claim for constituency office costs under the Incidental Expenses Provision or its successor.


25   SSRB, para 5.37. Back

26   CSPL principles, 19-21. Back

27   Scottish Review, para 6.1. Back

28   ibid para 6.9, recommendation 36. Back

29   ibid para 6.24, and recommendation 43. Back

30   ibid paras 6.33 to 6.36, and recommendation 51. Back


 
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