John Barrett, Sir Alan Beith, Sir Menzies Campbell, Sandra Gidley, Paul Holmes and Richard Younger-Ross - Standards and Privileges Committee Contents


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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