House of Commons - Members Estimate Committee Written Evidence


Annex A

14.  THE RESETTLEMENT GRANT: PROPOSALS TO CHANGE THE AGE BASIS ON WHICH THE GRANT IS BASED

  1.  The Resettlement Grant is intended to assist Members in "adjusting to non-parliamentary life" when they leave the House at a General Election. Under operational rules approved by the House, it is paid to the Member once he or she has met any outstanding liabilities to the House, suppliers and staff. This is usually about two months after the election. The grant is a varying proportion of final salary, based on age and length of service (see Table A).

SSRB RECOMMENDATION

  2.  The SSRB recommended that Resettlement Grant eligibility be restricted to Members defeated at a General Election and those whose seats are abolished by boundary changes. The grant would be paid at the rate of one month's salary for each year of service to a maximum of nine months' salary. The overall rationale appears to be that if an MP has made a choice to leave, then little or no post-election re-adjustment will be necessary.

  3.  We have compared Resettlement Grant eligibility at the two previous General Elections with the new conditions suggested by the SSRB:

    —  99 Members left the House at the 2001 General Election, receiving an average of 62% of final annual salary (about £3.2 million). 21 of these Members were defeated, with an average length of service of 8.5 years. Under the SSRB recommendation, only these 21 Members would have qualified for the Resettlement Grant, receiving an average of 48% of final salary (about £0.5 million).

    —  136 Members left the House at the 2005 General Election, receiving an average of 64% of final annual salary (about £5.3 million). 45 of these Members were defeated, with an average length of service of 8.6 years. Under the SSRB recommendation, only 49 Members would have qualified for the Resettlement Grant, receiving an average of 60% of final salary (total of £1.7 million).

  4.  No two election results are the same, but generally the SSRB recommendation could be expected to reduce eligibility drastically and for those still receiving the grant to reduce the amount marginally.

ADJUSTING TO NON-PARLIAMENTARY LIFE

  5.  The SSRB report references anecdotal evidence of "difficulties faced by MPs of all ages in obtaining new employment." According to a survey of the Association of Former Members of Parliament[7], almost half of defeated and deselected ex-Members take more than three months to find alternative employment. When a large number of seats change hands, as in 1997, the average time taken to find new employment increases.

  6.  The recent submission to the Baker review and survey of Members have shown concern about the future composition of the House and that it might be drawn too strongly from those of independent means. If the House wishes to continue to draw from all parts of society, care must be taken to ensure that being an MP is financially feasible for those without independent means, both during their career and at the end of their service.

ANALOGY TO REDUNDANCY PAYMENTS

  7.  The SSRB notes that redundancy payments are not normally payable to those who retire or resign, but they fail to recognise that Members often do not know when the next General Election will be held. Even if they decide to leave the House at that time, plans and preparations are necessarily affected by uncertainty. Is it fair to treat them as normal leavers?

  8.  Withdrawal of the Resettlement Grant from Members standing down would be difficult to manage. When a similar system to that now proposed existed, it is said that Willie Hamilton, after retiring from his Fife Central seat in 1987 stood for South Hams, knowing that he was certain to lose and therefore receive the Resettlement Grant. Limiting eligibility to defeated Members only may also slow the natural process of renewal in the House, encouraging Members to continue standing until death or defeat instead of departing gracefully.

  9.  The SSRB recommendation would also prevent Members who have been deselected from receiving the grant, although they also say that the "level of the grant should reflect its purpose and the analogy of redundancy payments." Denial of the chance to defend their seat is arguably as much a redundancy as defeat at an election, and a logical system would pay out to both or neither.

  10.  From the General Election after next, Members will only be able to draw their pension from 65, or from 55 with an actuarial reduction (example reductions: at 60, less 25%; at 55, less 42%). Whenever they choose to receive their pension, Members may take a lump sum payment of up to 25% of total value.

POSSIBLE SOLUTIONS

  11.  The SSRB report touches on genuine issues, including the difficulties faced by Members with young families. The SSRB suggest that the current system for calculating the grant is inadequate, but its "one-size-fits-all" approach does not appear to solve the real problems inherent in the system. Instead by re-ordering the calculation table it can be made better to reflect the parliamentary cycle and the turnover of Members (see Table B). Table B is ordered around a few fresh propositions:

    (i)  Completed years of service—The current range is between 10 and 15 years of service. This means that only Members who have served in three Parliaments actually fall on the calculation grid and they are likely to cluster together. Anecdotal evidence suggests that two Parliaments away from their profession puts Members returning to the job market at a disadvantage and using blocks of four years would ensure that the Resettlement Grant available reflects this, as well as attempting to relate such payments to the rhythm of what are usually four-year Parliaments.

    (ii)  Analogy to redundancy payments—Currently a Member of 64 with 15+ years' service receives 100% of salary and is almost immediately able to draw their pension. Whereas in much of the public sector pension enhancement on redundancy is at its greatest up to the age of around 53 (although this threshold will shift gradually upwards towards 58 now that the retirement age is moving to 65). We would suggest moving the 100% bracket forward to target Members who are still some years from their pension but whose prime professional years (30-50) have largely been spent in the House. We would also recognise Members less than 50 years old who have served for more than one Parliament to fulfil the "redundancy" element of this Grant.

    (iii)  Age of Member—The percentage change each year means that a Member of 51 could receive nearly 20% more than a colleague of 49 who retired at the same time. We propose the introduction of age brackets to minimise this disparity.

    (iv)  Percentage changes—In the course of our research we have found no reason for the small and irregular percentage increments in the current table. To simplify matters increments of 10% could be used.

COSTS

  12.  Cost estimates of Table B when applied to the 2001 and 2005 elections are:

    —  In 2001, compared to the actual figure of £3.2 million using Table A, Table B would have cost an additional £0.04 million (1.5%).

    —  In 2005, compared to the actual figure of £5.3 million using Table A, Table B would have cost an additional £0.32 million (6%).

A HYBRID SOLUTION

  13.  If the MEC wished to have a system which "nodded" in the direction of the SSRB it could adopt Table B (or indeed retain Table A) but decide that Members leaving the House voluntarily should get a flat rate of 50% of salary only irrespective of age and service. This would have a cost saving.

CONCLUSION

  14.  The MEC's views are requested.

    (i)  The SSRB's recommendation;

    (ii)  A system similar to now with Table B instead of Table A;

    (iii)  A hybrid as set out in paragraph 13 above.




Annex B

Cm 7270-1, PAGES 56-57

COMPENSATION ON LEAVING OFFICE

  5.60  The Resettlement Grant is payable when an MP leaves the House after a general election. It is calculated as a proportion of salary ranging between 50 and 100% of final salary, dependent on age and length of service. If an MP stands down during the course of a Parliament for ill health reasons, an ill health retirement grant is payable, calculated in the same way as the Resettlement Grant (as well as an immediate pension based on the service the MP would have accrued if he or she had continued to serve until age 65). The Table at Appendix E sets out the percentages of salary payable. The first £30,000 of the Resettlement Grant is tax free.

  5.61  We were asked to consider the operation of the Resettlement Grant in the light of age discrimination legislation. MPs are not "employed" but are elected office holders and as such the age discrimination legislation does not apply to them. However, the arrangements for the grant are contrary to the principle of the legislation and, as discussed in our last report, we believe there is a case for revisiting the structure of the grant.

  5.62  The grant is designed to assist with the costs of "adjusting to non-parliamentary life" and currently pays most to those aged between 55 and 64 who have been in the House for 15 years or more. However we heard anecdotal evidence of difficulties faced by MPs of all ages in obtaining new employment and it was pointed out that those with young families faced particular difficulties. The grant is thus designed to fulfil much the same purpose as redundancy payments. Such payments are not normally made to workers who retire or resign. Moreover, the level of payments varies according to length of service. We believe the Resettlement Grant should be aligned with those principles and therefore recommend that it be paid only to MPs who have stood unsuccessfully at a general election or whose seats have been abolished as a result of boundary changes. (MPs who are deselected by their parties, or whose constituencies are changed but not abolished would not be entitled to a Resettlement Grant unless they stood and were defeated at the next election.)

  5.63  We also think that the level of the grant should reflect its purpose and the analogy of redundancy payments. We therefore recommend that the Resettlement Grant be calculated as one months' salary for each full year of an MP's service in the House, up to a maximum of nine months' salary.

  5.64  We acknowledge that MPs may have taken decisions and made plans based on current arrangements and we therefore recommend that changes to the Resettlement Grant do not take effect until after the next general election.

  Recommendation 30: We recommend that, with effect from the general election after next, Resettlement Grant should be paid at a rate of one month's salary for each year of service as an MP, up to a maximum of nine months' salary, to MPs who lose their seats at a general election or whose seats disappear as a result of boundary changes.





7   Life After Losing Or Leaving, a report for the Association of Former Members of Parliament. School of Politics and International Studies, University of Leeds October 2007 Back


 
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