Introduction
Referral
1. In May 2009, a national newspaper alleged
that at least thirteen Members of Parliament had received "windfalls
worth thousands of pounds to give up their right to cheap rent
in a deal that led to taxpayers paying substantially more for
their second homes." The newspaper report stated that,
following the sale of the Dolphin Square estate in Westminster
in 2005, all tenants had received offers from the estate's new
owners of a lump sum in exchange for moving out or paying a higher
rent, and that the new owners had also offered £5,000 "to
give up the right to pass the tenancy on to family." It was
claimed that "Many MPs accepted the windfalls and stayed
in the flats while the taxpayer picked up their higher rental
bills."[1]
2. Between 29 May and 6 June 2009, six Members
wrote to the Parliamentary Commissioner for Standards, asking
him to rule on whether their decisions in respect of the offers
from the new owners had been appropriate. In accordance
with established procedures, the Commissioner sought the approval
of the Committee for him to accept the self-referrals. The Committee
agreed that the Commissioner should undertake an inquiry into
each Member who decided to make a self-referral. The six Members
who did so were: John Barrett, Sir Alan Beith, Sir Menzies Campbell,
Sandra Gidley, Paul Holmes and Richard Younger-Ross. As well as
taking part in the Commissioner's inquiry, all six Members gave
oral evidence to this Committee and all but Sir Alan submitted
written evidence, which is published in full with this Report.
The Commissioner's findings
3. The Commissioner sent us a report of his investigation
on 17 February.[2] In his
report, the Commissioner has set out his findings of fact for
each of the six Members, and each will be considered separately
below.
4. The Commissioner was told by Members that
the Dolphin Square flats had been run by the Dolphin Square Trust,
a non-profit making body, which had held down rents to a level
below market rates.[3]
Many Members found the flats a useful and low-cost place to stay
when in London. Each of the six Members who self-referred claimed
Additional Costs Allowance (ACA) which covered all or (in one
case) part of the cost of their rent at Dolphin Square, except
for periods when Parliament was dissolved.
5. In 2005, Westminster City Council sold the
head lease of the flats, and a long negotiation ensued.[4]
In October of that year, letters were sent to all tenants making
them a number of different offers. The aim of the new owners appears
to have been to encourage existing tenants, many of whom were
on long leases which guaranteed advantageous terms, to give up
their right to those terms. The Members who self-referred received
the offers from the new owners, and each decided to accept a payment.
The amounts accepted varied, as did the rights and benefits in
exchange for which the payments were offered. The six Members
used the payments in a variety of ways, although none decided
to pay any of the money received to the House. The facts of each
case are examined in more detail in later sections of this Report.
6. The three offers are summarised in the Commissioner's
memorandum, as follows:
- Option A, "Cash and
Go" version, which would involve the current tenant being
paid a sum of money by the new owners of Dolphin Square, who would
secure vacant possession of the flat;
- Option A, "Cash and Stay" version,
which would involve the current tenant being paid a sum of money
by the new owners of Dolphin Square, and staying in their flat
at a higher rent, on an assured shorthold tenancy, with no security
of tenure on expiry of the fixed term;
- Option B, a fixed term lease that could run until
June 2034, starting with a rent the same as the current rent but
gradually increasing year on year.[5]
The Commissioner was also told that a separate offer
of £5,000 was made at the same time to those long-standing
tenants who, it was believed, might have a right to pass the tenancy
on to their children.[6]
7. Solicitors retained by the Dolphin Square
Trust sent advice to tenants of the flats. The advice explained
the three main offers being made to tenants, and gave indications
about which offer tenants might find most beneficial, depending
on their future plans.
8. The House of Commons service, and specifically
the then Department of Finance and Administration, was aware at
the time that the Dolphin Square offers were being made to Members.
The Commissioner has been told that a decision was taken to prepare
advice, which would be given to any Member staying in Dolphin
Square who asked for guidance on what to do about the offered
payments. This advice was produced on 1 November 2005, about three
weeks before the deadline for tenants to respond to the offers.
For reasons which are not clear, it was decided not to send the
advice out proactively to Members who were tenants in Dolphin
Square.[7]
9. The DFA's advice is reproduced in full in
the Commissioner's memorandum. In summary, it stated that there
was "potential awkwardness" in accepting the payments
because of the use of "public money ... to meet past rental
costs either in part or in full." It advised Members who
had claimed the whole of their rent from ACA to pass on to the
House any money they decided to accept, because it would be "inappropriate
to gain a personal benefit." Arrangements could be made to
set the amount against future rental payments. Members who had
claimed only a part of their rent would be advised that they could
keep part of the payment.[8]
10. In the event, none of the six Members who
have self-referred sought advice directly from the DFA. The records
of the Department suggest that only two Members did seek written
guidance and that they were sent the advice on 22 November; neither
of these Members has self-referred.[9]
11. Some of the self-referring Members have told
the Commissioner that they sought advice from other Members living
in Dolphin Square. Ms Gidley told the Commissioner she had spoken
to such a Member, Mrs Joan Humble, who said she had received very
different advice from the DFA. Mrs Humble wrote to the Commissioner
to say that she had contacted the Department, to seek their advice
about the offered payments. She had been told in a telephone conversation
with a member of staff in the Department in March 2006 that any
renegotiation of her lease, including the offer of a buy-out from
her previous tenancy agreement, was an entirely private matter
between her and the new landlord. She also said that during the
conversation the analogy had been drawn between the offered payments,
and profits made by Members selling property bought with the help
of ACA. Such profits were, and still are, allowed to be retained
by the Members concerned.[10]
The successor to the DFA, the Department of Resources, has told
the Commissioner that there is no record of such a conversation
and that it is "not clear ... why such advice would have
been given when the authoritative guidance was readily available."[11]
However, another Member later wrote to our Chairman, stating that
he too had been advised by the DFA that the offer was a private
matter between him and his landlord.[12]
12. The Commissioner has set out the relevant
rules of the House. He points out that the rules relating to Members'
expenses deal primarily with the propriety of Members' claims
against allowances. The detailed rules are not therefore readily
applicable to the receipt of payments. However, more broadly,
the Code of Conduct states that Members must avoid conflict between
their personal interest and the public interest, and "resolve
any conflict between the two, at once, and in favour of the public
interest."[13] We
agree with the Commissioner's view that the question of whether
or not the Members should have accepted the offer made to them
as tenants of Dolphin Square and kept the proceeds is primarily
an ethical rather than a technical question.[14]
The Speaker's introduction to the Green Book, published in 2005,
notes that "Members themselves are responsible for ensuring
that their use of allowances is above reproach."[15]
13. The Commissioner concludes that the sums
Members received under the buy-out scheme, although not themselves
claims on allowances, resulted from the payments made to them
from the public purse to cover, in whole or in part, the cost
of their rent on their flats in Dolphin Square. Because the use
of public funds had created the situation in which the offer of
payment would be made to each Member, the Commissioner judges
that the public purse should have been the beneficiary of the
payments, if Members accepted them. Therefore, Members who accepted
the payments and did not pass them on to the House of Commons
"were in breach of the Code of Conduct because the decision
of each Member to accept and keep these financial offers had the
effect of putting their personal interest above the public interest,
contrary to the Code of Conduct for Members of Parliament."[16]
The Committee's approach to this
inquiry
14. The Committee starts from the premise that
the personal circumstances of the six Members who referred themselves
to the Commissioner differed and their decisions at the time they
accepted the payments were their own decisions, taken for their
own reasons. We therefore reach a separate conclusion in respect
of each Member.
15. There are, however, two central questions
which can be asked in each of these cases. These are:
- How did the Member seek to
apply the principles set out in the Code of Conduct when reaching
a decision and subsequently?
- Did the public purse benefit or lose out as a
consequence of the Member's decision?
We have borne these questions in mind when drawing
up the conclusions and the recommendations set out later in this
Report.
16. Our overall approach when reaching the conclusions
below has been that the public purse should not have lost out
as a result of Members accepting one of the Dolphin Square offers.
We consider that Members should have sought official advice at
the time the offers were made and we are surprised that none of
the six who referred themselves did so. If Members had sought
advice in writing, they should have been advised to recognise
the contribution made from public funds to the position they were
in and to have paid a proportion of any windfall payment to the
House. However, those who kept the payment and achieved a saving
to public funds are, in our judgment, in a different position
from those who kept it but did not achieve a saving, or who added
to public expenditure. These considerations are reflected in our
conclusions.
THE PUBLIC INTEREST
17. In evidence to ourselves and to the Commissioner,
Members have put forward examples of the ways in which the money
they received from the new owners of Dolphin Square was spent
and, to a greater or lesser extent, all have said that the payments
were used to defray expenses that resulted from their positions
as MPs. Some said that if they had not used the payments in this
way, they would have been able to make claims for the amounts
under Parliamentary allowances; others said that the payments
helped to make up for costs they had incurred in excess of, or
outside of, the amounts available under Parliamentary allowances.
All deny putting their personal interest before the public interest.
The arguments advanced by each are considered in the relevant
section below.
THE PROPERTY SALE WINDFALL ANALOGY
18. In his memorandum, the Commissioner offers
a discussion of the analogy each of the six Members drew between
their own situations, and that of Members who chose to use the
ACA to help fund the purchase of a second home. Those Members
have been allowed to keep any profit arising from the sale of
such property. The Commissioner's view is that the analogy does
not hold good. Members choosing to use ACA for a mortgage may
have been able to claim the interest element of any payment, but
they "will normally have some interest in the equity of their
property, either because of their initial capital outlay, or because
of the payments they have made to the capital element of their
mortgage, or both."[17]
In addition, they must at some stage repay the loan, which means
the equity of the property is with the Member. The same does not
hold true for Members claiming for rent.
ADVICE FROM THE HOUSE AUTHORITIES
19. As noted above, advice that might have prevented
Members from taking the decisions that they took about accepting
payments had been prepared by the Department of Finance and Administration,
who, the Commissioner was told, had consulted the then Clerk and
Speaker. For reasons that are not clear, a decision was taken
not to promulgate it, although the Department held address details
for Members claiming for ACA and so could have contacted and advised
the Members living in Dolphin Square. The Commissioner has concluded
that, had Members sought advice, or had the advice had been promulgated,
all those Members should have been able to avoid the difficulties
which they now find themselves in. He has described the fact that
the advice was not given out as "deeply unfortunate"
and "regrettable." We agree.
THE POSITION OF OTHER MEMBERS
20. We are aware that other Members have received
cash windfalls. However, they have neither been the subject of
complaints to the Commissioner, nor have they sought to refer
themselves. We have no information on their circumstances and,
as the current six cases have demonstrated, circumstances are
likely to vary, substantially, from individual to individual.
In our view, it would be grossly unfair to seek to apply by analogy
the findings in this Report to the cases of other Members, in
the absence of a thorough examination of the facts in each such
case.
1 Appendix, paragraph 2 Back
2
Appendix Back
3
Appendix, paragraph 12 Back
4
Appendix, paragraph 13 Back
5
Appendix, paragraph 14 Back
6
Appendix, paragraph 18 Back
7
Appendix, paragraph 39 Back
8
Appendix, paragraph 24 Back
9
Appendix, paragraph 25 Back
10
Appendix, paragraph 26 Back
11
Appendix, paragraph 32 Back
12
Not printed Back
13
Appendix, paragraph 4 Back
14
Appendix, paragraph 327 Back
15
Appendix, paragraph 6 Back
16
Appendix, paragraph 328 Back
17
Appendix, paragraph 330 (iv) Back
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