Appendix: Memorandum from the Parliamentary
Commissioner for Standards
Mr John Barrett MP, Rt Hon Sir Alan Beith
MP, Rt Hon Sir Menzies Campbell MP, Ms Sandra Gidley MP, Mr Paul
Holmes MP and Mr Richard Younger-Ross MP
Introduction
1. This memorandum reports on my inquiry into
allegations against six Members in respect of certain payments
they accepted as tenants on the Dolphin Square estate. The Members
are Mr John Barrett, the Member for Edinburgh West, Rt Hon Sir
Alan Beith, the Member for Berwick-upon-Tweed, Rt Hon Sir Menzies
Campbell, the Member for North East Fife, Ms Sandra Gidley, the
Member for Romsey, Mr Paul Holmes, the Member for Chesterfield,
and Mr Richard Younger-Ross, the Member for Teignbridge.
The Allegations
2. The matter was first raised publicly in a
report in the Daily Telegraph on 30 May 2009, which 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." [161]
The report said that, following the sale of the Dolphin Square
estate in Westminster in 2005, all tenants had received offers
of a lump sum in exchange for moving out or paying a higher rent,
and that the new owners 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."
3. Around the time of this report, between 29
May and 10 June 2009, six Members wrote to me to ask me to rule
on whether their decisions in respect of the offers from the new
owners had been appropriate.[162]
I can only accept a Member's self-referral in exceptional circumstances
and with the authorisation of the Committee on Standards and Privileges.
Following receipt of the first of these letters I submitted the
matter to the Committee on Standards and Privileges, which authorised
me to undertake an inquiry into each Member who decided to refer
themselves to me.
Relevant Rules of the House
4. The Code of Conduct for Members of Parliament
provides in paragraph 9 as follows:
"Members shall base their conduct on a consideration
of the public interest, avoid conflict between personal interest
and the public interest and resolve any conflict between the two,
at once, and in favour of the public interest."
5. And in Paragraph 14:
"Members shall at all times ensure that their
use of expenses, allowances, facilities and services provided
from the public purse is strictly in accordance with the rules
laid down on these matters, and that they observe any limits placed
by the House on the use of such expenses, allowances, facilities
and services."
6. The relevant rules would appear to be those
set out in the Green Book published in April 2005. Mr Speaker,
in the introduction, noted the following:
"Members themselves are responsible for ensuring
that their use of allowances is above reproach. They should seek
advice in cases of doubt and read the Green Book with care. In
cases of doubt or difficulty about any aspect of the allowances
or how they can be used, please contact the Department of Finance
and Administration. The Members Estimate Committee, which I chair,
has recently restated the Department's authority to interpret
and enforce these rules."
7. Arrangements for the Additional Costs Allowance
are set out in Section 3 of the Green Book. The scope of the Allowance
is set out in Paragraph 3.1.1 as follows:
"The additional costs allowance (ACA) reimburses
Members of Parliament for expenses wholly, exclusively and necessarily
incurred when staying overnight away from their main UK residence
(referred to below as their main home) for the purpose of performing
Parliamentary duties. This excludes expenses that have been
incurred for purely personal or political purposes."
8. Paragraph 3.6.1. deals with the documentation
to be supplied by Members to the Department. This includes:
"Any documentation relating to changes to
these arrangements".
My
Inquiries
GENERAL EVIDENCE
9. This section reports on information I sought
and received relating to the general arrangements for Dolphin
Square tenants receiving offer letters from the new landlords
of Dolphin Square in 2005-06.
10. I wrote to the six Members concerned, between
4 June and 10 June 2009, to invite their comments on the allegations.[163]
I said that in essence, the allegations against the Members concerned
were that they each received a payment or payments from the landlords
of Dolphin Square in return for giving up certain rights as a
tenant; that they received this benefit on account of a tenancy
supported by rental payments which were in whole or in part paid
from the Additional Costs Allowance, and that this arrangement
may, as a result, have led to claims on that Allowance which were
not necessarily incurred or may otherwise have favoured their
personal interest over the public interest.
11. I asked the Members about the particular
circumstances of their Dolphin Square lease, including the time
they resided or had resided there, whether, and if so when, they
had moved accommodation within the Square, the amount of their
rent at the time when the landlord made the offer, the period
over which they had made claims for the property against the Additional
Costs Allowance, and whether they had claimed for the full rent
or a proportion of it over that period; the offer which the landlord
made to them, including the nature of any rights they were asked
to forgo, and the options open to them in responding to that offer,
together with any documentary evidence they might have about the
offer; the consideration they gave to the offer, whom they consulted
(including the House authorities), what advice they had received,
what decision they had come to and what payments they received,
together with any documentary evidence in relation to that, and
whether they had supplied to the Department of Finance and Administration
documentation in relation to any changes in their arrangements;
why they considered that their decision was in the public interest
as opposed to their personal interest; if they had accepted a
payment from the landlord on entering a new arrangement with an
increased rent, whether they had claimed against the allowances
for the increased rent, and if so whether they considered that
they had claimed for expenses that were not wholly, exclusively,
and necessarily incurred; and if they had accepted a payment from
the landlord in return for giving up succession rights, what they
had done with it. I also asked those Members who had told me that
they had moved, why they had decided to do so.
Dolphin Square: the Background
12. Sir Alan Beith replied to me on 15 June,
providing me with evidence about the general position in relation
to the Dolphin Square flats. He also provided me with specific
evidence in respect of his own actions, which is discussed in
detail beginning at paragraph 93 below.[164]
Sir Alan said that the flats had been run by the Dolphin Square
Trust, a non-profit making body, which had "held down
the rents to tenants to a level below market rents, at no cost
to the taxpayer." When Westminster City Council had decided
to sell the head lease of the complex, Sir Alan said that there
had begun a period of several years of uncertainty about the future
of the Dolphin Square tenancies, "during which it was
not feasible or prudent to carry out decoration or improvement".
Sir Alan enclosed a Dolphin Square Trust press release of
10th November 1999 and a letter from the Leader of Westminster
City Council dated 1 February 2002 which he said would give me
some idea of the controversy, difficulties and uncertainty which
had prevailed over that period.[165]
The offers made to Dolphin Square tenants
13. Sir Alan said in his letter of 15 June that
when the head lease of Dolphin Square had been acquired by new
owners, after long negotiations with the trust, offers had been
made to tenants. The objective of Dolphin Square's new owners
had been, Sir Alan said, to secure vacant possession of as many
flats as possible so that they would be re-let at higher rents
after improvements. Sir Alan sent me with his letter documents
which had been sent to him in October 2005 which set out the options
for tenants.[166]
Sir Alan also sent me a copy of a report prepared by a firm of
solicitors, who were retained to advise all Dolphin Square tenants
on the offers made to them by the new owners.[167]
14. The advice from the solicitors described
a situation in which current Dolphin Square tenants had three
options, which I summarise below:
- 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.
15. Sir Alan said that "The fact that
this option [Option B] was available was the result of
intense negotiation by the Dolphin Square Trust." Sir
Alan noted that that Dolphin Square rents were inclusive of heating,
water and service charges.
16. The legal advice provided to tenants by the
firm of solicitors may be summarised as follows:
i. Tenants would be seriously disadvantaged if
they did not accept one of the offers.
ii. Option A: Cash and Go could be attractive
to tenants who were "looking to leave Dolphin Square within
the first few months of 2006."
iii. Option A: Cash and Stay might be an attractive
offer to tenants who were looking to leave Dolphin Square "in
around spring 2007", and might still be an attractive
offer for tenants looking to move out after then.
iv. The solicitors said that they had "no
doubt" that an "Option B Lease" "was
the most advantageous offer" for tenants who saw themselves
continuing to live in Dolphin Square for the medium to long term.
In both security of tenure and certainty over future rent levels
it was a considerable improvement on current tenancy rights, even
for Rent Act protected tenants (if there were any).
17. Sir Alan drew my attention to what he called
the "clear statement" contained in the advice
of the advantages of accepting Option B (and refusing the cash
offer), particularly security of tenure and certainty about the
rent.
18. Sir Alan said 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.
19. In June and July 2009, I continued to exchange
correspondence with the six Members about their individual circumstances.
This correspondence is described in detail beginning at paragraph
46 below.
Advice to Members from the House authorities
20. Ms Sandra Gidley wrote to me on 15 July in
relation to the advice given to Members by the House authorities.
[168] She said
that she had discussed the matter with a number of people who
had lived in Dolphin Square at the time of the offer. Ms Gidley
said that none of them had taken any advice but "it was
clear that all had made a similar judgement call."
21. However, Ms Gidley told me that she had spoken
to an MP who had opted for the Cash and Stay option. She said,
"I was told that the Fees Office were asked about the
offer and that the advice received was that this was an entirely
private matter between the landlord and the tenant and had no
bearing on the ACA. This was a verbal communication and, on the
basis of this, the MP proceeded to accept the offer. I asked whether
the MP ever received anything in writing as a result of the inquiry
and was told that there was nothing at the time or later."
Ms Gidley said that she often used to talk to this MP as they
frequently caught the same bus. "Whilst I cannot recall
specific details of conversations at the time I find it hard to
believe that we did not discuss the offers as everybody was talking
about it and sharing information." Ms Gidley hoped that
this would be helpful in clarifying the advice provided, "even
though I personally did not receive this directly."
22. I wrote back to Ms Gidley on 16 July, asking
her to let me know the name of the MP she had referred to, and
saying that it might be helpful if that Member could give me witness
evidence about his or her discussion with the Department.[169]
23. On 30 July, I wrote to the Director of Operations
in the Department of Resources, asking for his advice and comments
on the correspondence I had received up to then from the six Members.[170]
I attached also a copy of the legal advice which Dolphin Square
tenants received[171]
and samples of the offer letters which they received from the
new landlords.[172]
In particular I said that it would be helpful to know whether
the Department had received an approach about the Dolphin Square
payment from these or any other Members, at the time or subsequently;
what advice had been given; the reasons for that advice; and whether
the Department had considered making any such advice more widely
available.
24. The Director of Operations replied on 14
August.[173] He said
that in the autumn of 2005 the House Service had become aware
that Dolphin Square tenants were being consulted on changes to
their tenancies, including the offer of payments by the landlord.
Discussions were held "at the most senior levels."
A decision had been taken that Members who approached the Department
for advice would be offered the following in writing:
""You recently contacted the Department
for advice about changes to your tenancy agreement at Dolphin
Square. I can offer guidance as set out below.
"I understand the position to be that Members
who are residents of Dolphin Square have recently been offered
monetary compensation to buy out their existing tenancies. You
will appreciate the potential awkwardness of the situation whereby
public money (Additional Costs Allowance) has been used to meet
past rental costs either in part or in full. The Department has
consulted the Clerk on this matter and is able to offer the following
guidance to those who are considering accepting the offer:
a) Where the rent has been paid wholly from the
Additional Costs Allowance (ACA), Members are advised against
taking the cash offer and retaining the proceeds because it would
be inappropriate to gain a personal benefit when the rent has
been paid wholly from the public purse. If a Member does want
to accept the cash offer and pay it over to the House, or set
it against future rental payments in the current financial year,
this can be arranged.
b) Where the rent has been paid partly from ACA
and partly from private funds, we would advise Members that they
could retain a proportionate part of the cash offer, if they so
wish. It would be for the Member to decide on how much to keep.
The House would be happy to receive the balance.
c) Where the rent has been paid wholly from private
funds, we would advise Members that it would be appropriate to
keep the cash.
d) Where a Member has in the past had rent paid
from the ACA, but this has not been the case since April 2002,
we consider the Member to fall into category c, above.
This guidance is only about what is appropriate
in terms of the compensation offered and the use of public money.
The Department is not able to offer advice about which option
is the best for Members in other respects."
25. The Director also told me that the Department's
records indicated that two Members had approached the Department
and that both were sent the above advice. The Director pointed
out that neither the Green Book nor any other guidance specifically
covered "buy-outs" of this nature. He said he
was confident that no advice had been offered by the Department
other than that set out and on request from Members themselves.
26. Mrs Joan Humble, the Member for Blackpool
North and Fleetwood, sent me a letter on 20 August.[174]
She said that she was writing to me following a conversation
with Ms Gidley about advice given by the House of Commons Fees
Office to Members of Parliament who were tenants at Dolphin Square
when the ownership of the block of flats changed hands. She said
she understood that I was looking at the advice given to MPs at
the time. Mrs Humble said that she had told Ms Gidley that she
(Mrs Humble) had sought advice from the Fees Office about the
offer made by the new owners to all the existing tenants of Dolphin
Square. Mrs Humble said she had been told in a telephone conversation
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. Mrs Humble said she had
asked for confirmation that the arrangement had nothing to do
with the Fees Office and her claims under the Additional Costs
Allowance. Again she said she had been told that it was an entirely
private matter and the analogy was used with MPs who moved to
other flats or sold homes, made a profit on the sale, and bought
new properties using the allowances available. Mrs Humble had
then acted based upon that "clear advice" from
the Fees Office.
27. My office wrote to Mrs Humble on 20 August,
saying that I appreciated that her conversations with the Fees
Office happened several years ago but asking whether she recalled
the name of the person in the Fees Office who had given her advice
about Dolphin Square, and also (even approximately) the date on
which the conversation had taken place.[175]
28. Mrs Humble wrote back to me on 24 August,
saying that she did not recollect being given a name by the man
she spoke to in the Fees Office about her lease at Dolphin Square.
[176] She had simply
rung the number for enquiries and advice and spoken briefly to
a man "who seemed to be already aware of the issue and
who stated very clearly that it was a private matter." Mrs
Humble believed that she had spoken to this individual two or
three weeks before signing the new lease. This lease began on
19 April 2006 and so she assumed the conversation had taken place
towards the end of March 2006.
29. On 26 August my office drew this exchange
to the attention of the Director of Operations in the Department
of Resources, and asked for his comments on it.
30. On 3 September, I received a letter from
the Director of Operations.[177]
The Director set out the sequence of events that led to guidance
being given by the then Department of Finance and Administration
in respect of Dolphin Square. He said that the position was that
"the offer to Dolphin Square tenants became known to staff
of the House around October 2005, including to the then Clerk
of the House." In early November that year "authoritative
advice became available to staff in the Department."
The Director said that this had been in the form set out in his
letter to me of 14 August 2009.[178]
On 22 November 2005, in response to specific requests, letters
were sent to two Members residing in Dolphin Square with the guidance.
Neither of these Members, said the Director, was the subject of
my inquiry.
31. In the Director's view, this matter was "arguably
not one for a scheme of allowance rules, which this Department
has responsibility for, but rather a wider question of propriety
and perhaps ethics." He was clear that the advice referred
to above had been promulgated to staff in the Department who dealt
directly with Members. No guidance other than this had been offered
to Members from November onward about the propriety aspects of
accepting the offer from the Dolphin Square landlord. The Director
then said that when the issue first surfaced in October "a
more general conversation may have taken place with one or two
Members pending the clarification which arrived in early November."
32. In his letter the Director also noted that
Mrs Humble recalled a telephone conversation in March 2006 with
a member of the Department during which she had been told that
how she responded to the landlord's offer was entirely a matter
for her. The Director told me "We have no record of that
conversation. It is not clear to me why such advice would have
been given when the authoritative guidance was readily available.
Some three and a half years later it is, of course, difficult
to be certain of the precise exchange at the time."
I sent a copy of this letter to Mrs Humble on 23 September. [179]
33. On 7 September I wrote to each of the Members
concerned, attaching copies of my letter of 30 July to the Department
of Resources and of the Director's replies of 14 August and 3
September.[180] I said
to each of the Members that it was my understanding that they
fell into category (a) of Members described in the advice, in
that, throughout the relevant period (except while Parliament
was dissolved), their Dolphin Square rent had been paid from the
Additional Costs Allowance. I noted that the advice said that:
"Where the rent has been paid wholly from the Additional
Costs Allowance (ACA), Members are advised against taking the
cash offer and retaining the proceeds because it would be inappropriate
to gain a personal benefit when the rent has been paid wholly
from the public purse. If a Member does want to accept the cash
offer and pay it over to the House, or set it against future rental
payments in the current financial year, this can be arranged."
I told each of the Members that if they wished to give oral
evidence on any aspect of this matter, they should let me know.
34. My detailed correspondence on this and others
matters with individual Members following this letter is set out
below, beginning at paragraph 46.
35. On 18 September Mrs Humble wrote to me, re-iterating
that she had been told very clearly by the Fees Office that "my
dealings with my new landlord were entirely my own private concern".
[181] The
conversation she had had with the Fees Office in 2006 "was
unique and the detail important in helping me reach a decision".
At no time had she received any other advice on the rules,
their interpretation or guidance of a more general nature. Mrs
Humble also commented: "I do wonder how the written guidance
referred to in [the Director of Operations'] letter sits
with the long-standing practice of Members of Parliament claiming
mortgage interest payments from the Additional Costs Allowance,
then selling these properties and keeping all the profits from
the sale."
36. On 23 September I sent the Director of Operations
the further letter from Mrs Humble.[182]
I invited the Director, if he wished to do so, to send me any
further comments about the reported conversation, and to let me
have any views he might have on the comparison which Mrs Humble
made between the written guidance referred to in his letter of
14 August and the practice of Members retaining profits on the
sale of houses whose mortgage interest had been paid for from
the Additional Costs Allowance.
37. I wrote to the Director of Operations on
2 November, drawing his attention to a number of responses from
Members to his letter of 3 September and seeking his views.[183]
On 9 November I received a letter from the Director of Operations.[184]
In this he told me that he could only re-iterate the instructions,
set out in his earlier letters to me, that his Directorate received
on the nature of the guidance to be offered and the manner in
which it should be disseminated. He acknowledged Mrs Humble's
letter of 18 September[185]
and told me that "her points are very fair."
He also said that he had checked the Department's telephone log
for all the Members who had referred themselves to me and there
were no records of any conversations about the Dolphin Square
tenancy buy-out. He said: "This supports the thrust of
the evidence submitted by them, subject to the points made above."
The Director also made a number of points in relation to issues
raised by individual Members, which are set out below in the relevant
sections.
38. On 11 November I wrote to the Director of
Operations, asking him to identify the source and nature of the
instructions received by his directorate on the nature of the
guidance to be offered to Dolphin Square tenants about the offers
in respect of the leases.[186]
I wrote to the Director again on 17 November, telling him, in
respect of the advice he had told me he gave to two Members which
was in accordance with the formal guidance he had prepared, that
I did not propose to take evidence from those Members, since I
had no reason to doubt what he had told me. I did, however, ask
him to confirm his statement and, if it were available, to let
me have any record the Department held of that advice having been
given.[187]
39. In his letter to me of 17 December, which
covered this as well as other matters, the Director of Operations
recalled that he had said in his letter of 14 August that, when
guidance was being developed for Members on the Dolphin Square
offers, discussions were held at the most senior levels, and in
his letter of 3 September that the then Clerk of the House had
been aware of the position.[188]
He continued, "On 1 November 2005 two Assistant Directors
in the Operations Directorate received a memo from the Head of
Department … in respect of Dolphin Square. This memo was
copied to me at the time. [The Head of Department] had
consulted the Clerk of the House and the Speaker in drawing up
the memo. The memo included within it substantive guidance as
set out in sub-paragraphs (a)—(d) of my letter of 14 August.
It is also my very clear recollection that the instruction to
my staff and me was that the guidance was to be made available
to Members who sought advice; it was not to be promulgated other
than on request."
40. The Director then re-iterated that Departmental
records showed that two Members had sought written advice after
1 November and that he had sent identical letters to both on 22
November. The text of the letters had been reproduced in his letter
to me of 14 August. "To the very best of my knowledge,
no other Members were sent such written advice and Departmental
records would appear to confirm this." The Director said
that he held electronic versions of both letters as well as signed
photocopies. The Director also attached signed copies of the two
letters as requested.[189]
41. On 17 December I wrote to the Director of
Operations, asking him to send me a copy of the memorandum from
his Head of Department (the Director of Finance and Administration)
of 1 November 2005 which was copied to him at the time.[190]
On 6 January 2010, the Director of Operations sent me the 1 November
2005 memorandum,[191]
which I copied to all Members concerned on 7 January along with
the letter sent to two Members on 22 November 2005. [192]
Having set out the facts (which make no reference to the buying
out of succession rights), the 1 November 2005 memorandum said
that the Green Book did not cover the Dolphin Square offer in
specific terms, and that it would not be reasonable for it to
do so. There were "so many possible permutations of rental
arrangements", and each kind had to be looked at on its
own facts and judged against the principles of normal financial
governance, including propriety, regularity, accountability, transparency
and value for money. The memorandum continued: "On grounds
of propriety it would not seem to be appropriate for Members to
accept cash and keep it personally in circumstances where the
rent had been paid wholly from the ACA. It would amount to a personal
windfall entirely attributable to rights earned with public money."
42. The memorandum also included a "line
to take" with Members who sought advice, which said that,
where the rent had been paid wholly from the Additional Costs
Allowance, "We should advise Members against taking the
cash offer and keeping the proceeds themselves, on the ground
that it would appear inappropriate to gain a personal benefit
when the rent has been paid wholly from the ACA," and
that "If a Member does want to accept the cash offer and
pay it over to the House, or set it against future rental payments
in the current year, this can be arranged". Where the
rent had been partly paid from ACA and partly privately, "Members
can with propriety retain a proportionate part of the cash offer
if they wish. The decision on what was the appropriate proportion
would be for the Member, as DFA would not have the relevant information.
The House would be happy to receive the balance." Where
the rent had been paid wholly from private funds, the line to
take was that tenants were free to accept or reject the offer.
43. The 1 November 2005 memorandum also said
that if Members were "unhappy with this advice, please
let me [the Director of Finance and Administration] know."
The memorandum said that it was possible, for example, that "other
aspects will emerge when we start giving advice." If
Members wished to challenge the advice, the memorandum said that
the matter could be "put formally to Mr Speaker, with
the possibility that the Members Estimate Committee will consider
it at his request."
Registration
44. I have considered whether Members who accepted
an offer from the new owners of Dolphin Square had an obligation
to register that payment in the Register of Members' Interests.
I consulted the Registrar. Her advice is that no registration
obligation arose in the circumstances of this case. She has stated
that Members are required to register any material benefit which
in any way relates to membership of the House. In this case, she
notes that the offer appears to have been made to all eligible
tenants in Dolphin Square. There is no evidence that the company
was influenced in any way by the fact that some tenants were Members
of Parliament. She does not consider, therefore, that the offer
could be held to be related to their Membership of the House.
45. I turn now to the particular circumstances
of the six Members with whom this memorandum is concerned.
INDIVIDUAL MEMBERS
Mr John Barrett MP
46. Mr Barrett wrote to me on 29 May to say that
in 2006 he had received £11,234 from the owners of Dolphin
Square to give up certain rights on his lease.[193]
He had allocated that sum to pay amounts directly related to his
position as a Member. In the light of the current interest in
all financial issues relating to Members he wished me to look
into his position.
47. I wrote to Mr Barrett on 4 June to say that
the Committee had authorised me to undertake an inquiry.[194]
I asked Mr Barrett about the particular circumstances of his Dolphin
Square lease.
48. In his reply of 22 June [195]
Mr Barrett said that while the sum paid for expenses and allowances
to Members must always clearly be used in accordance with the
rules, "the sum paid to me and others in similar circumstances,
from the developer, was not an allowance or expense and the use
of such sums is not clearly defined in the rules. At all times
I believe I have acted within the spirit of, and fully complied
with the rules …"
49. Mr Barrett told me he had moved into an unfurnished
flat in Dolphin Square in 2001, the year he was elected to Parliament.
During the following six years he had stayed in a flat that did
not receive any improvement, decoration, modernisation or upgrading.
He said that he did not claim for, or spend any amount on redecoration,
upgrading or improvements. Mr Barrett said that at the end of
this time, and after he had been re-elected for a second term,
he had started to look around, as he had planned to move into
a flat which had been decorated or upgraded. As well as looking
at flats outside the Square, the landlord indicated there were
other flats in a better condition that he could move to, at an
increased rental level. He had always claimed the full amount
of rental against the ACA, except for the period during which
Parliament was dissolved.
50. Mr Barrett told me that when the ownership
of the property changed hands he had been offered a lump sum in
exchange for giving up his rights to his short assured tenancy,
and he had accepted this offer. Mr Barrett said that the gross
amount paid was £11,234 and the net amount received was £8,175.This
had been arrived at after the deduction of one month's rent, a
deposit and other small charges connected to producing the inventory.
The rent had been reclaimed and the deposit returned when he left
the flat.
51. Mr Barrett said that in the summer of 2006,
he had moved to an "improved" flat in Dolphin
Square and had continued to charge the full rental level. Mr Barrett
said that the rental level of the new flat was not related to
the lump sum he had received in May of that year. Mr Barrett had
stayed there until the summer of 2008, when the landlord had informed
him of a new increased rental level for the flat that, he told
me, would have been well above the level of allowances provided
by Parliament. He had therefore moved out to his present address.
Mr Barrett told me that he had considered the landlord's offer
carefully and discussed it with his wife. "I took no professional
advice and did not consult the House authorities."
He had received the payment previously mentioned and had informed
the Department of Finance and Administration that he would be
moving address and supplied them with a copy of his new lease.
Mr Barrett said: "My decision to move was made before
the payment was received as I had planned to leave my original
flat, and move into slightly better accommodation. The accommodation
I have always lived in, in London, is relatively basic compared
to my family home and after six years, my decision to move was
based on the desire to live in a flat which was not so run down.
Had there been no windfall I would still have moved."
52. Mr Barrett said that when he had received
the "windfall" he had decided to use it for a
range of payments and costs, "which I have incurred as
a direct result of becoming an MP." This included additional
living costs in London, which were either not covered by expenses
and allowances, or which were covered, but were not claimed for.
Over the eight years, since being elected, he had estimated these
costs to be on average about £2,000 per year and after paying
Capital Gains Tax of £1,475 on the "windfall",
Mr Barrett used the remainder of the payment to cover some of
these costs. Mr Barrett said that these included approximately
£1,000 for furniture for the flat, which was not reimbursed
by Parliament in 2001, the year the flat was first furnished,
as the allowances would not cover the initial costs of furnishing
a one bedroom flat and rent, council tax, insurance, utility bills
etc.
53. When Parliament was dissolved in 2005 there
had been a £1,300 payment for rent which had not been reimbursed,
as the allowances did not cover this, "but this rent was
only due because I was an MP and there was no option but to pay."
When the next election was called the payment, Mr Barrett said,
would be £1,600 and he had set aside an amount for this.
Mr Barrett said he had not claimed food or subsistence costs for
staying in London in the year 2008-09. In previous years this
was over £2,000 per year and he was not currently claiming
the £25 subsistence allowance, which again would be over
£2,000 for the current year.
54. Mr Barrett said he no longer claimed the
mileage cost for using his car on Parliamentary duties in the
constituency and he had used the windfall for this. This amounted
to £750 - £1,000 each year for the last two years. He
continued: "Other costs, which are as a direct result
of being an MP and are not claimed by me include the fee I pay
to an accountant each year to deal with returns which are exclusively
as a result of being employed as an MP. This has been in the region
of £300 per year over the last eight years. There are a number
of other similar costs and I have used the windfall from the developer
for this purpose."
55. Mr Barrett said that the items detailed above
had totalled over £13,000 and "I would not have incurred
any of these costs had I not been an MP." He had not
taken professional advice and "assumed that the windfall
was exactly the same as for those MPs who have sold properties
purchased using the allowances to pay their mortgage interest
under the allowances scheme. My understanding was that their windfall
was subject to capital gains tax and they would then use their
own judgement as to what they would spend the balance on."
In Mr Barrett's judgement, it had been reasonable to use the
windfall to cover some of the costs that he had had to pay because
of his job as an MP and that to use the developer's money, (instead
of the taxpayer's money in some cases), was the right thing to
do. Some of the figures Mr Barrett had quoted had, he said, been
estimates, "but they are all conservative ones and the
amount I quoted earlier of £2,000 per year over the last
eight years, a total of £16,000 is, I believe fair and accurate."
56. I wrote again to Mr Barrett on 25 June[196]
to ask him the amount of rent he was paying for the unfurnished
flat he took on in 2001, and the amount of rent he subsequently
paid for the improved flat to which he moved in 2006; the exact
nature of the rights which he surrendered in return for the payment
from the landlord, including any information he had been given
about the new rent which would be charged on the flat against
which the offer was made; whether there was any connection at
all between the offer made for the surrender of his shorthold
tenancy rights, which I understood was made in October 2005, and
his considering a move to another flat in Dolphin Square, or whether
the timing was coincidental; which items he considered he might
have claimed against parliamentary allowances but had in fact
chosen to purchase without making a claim, together with any receipts;
the claims he had actually made against his ACA in each of the
financial years in which he had deployed his windfall for items
he would otherwise have claimed from the allowance; and whether
he was aware of any advice prepared by solicitors for residents
of Dolphin Square in connection with the offer from the new landlord,
and if so, whether he had acted on the advice it offered to tenants
in his position.
57. Mr Barrett replied on 16 July.[197]
He said that on 9 August 2001 he had started to lease an unfurnished
flat at Dolphin Square at a rate of £12,780 per year. This
rent, he said, had increased by £325 in the second year and
another £357 in the third year. In 2006 he had moved into
his second flat in Dolphin Square. Mr Barrett said that this had
cost £1,538 per month and was "a larger and much
nicer flat." Mr Barrett told me that he had left when
he was informed that the new rent would be increasing and moved
to a flat away from Dolphin Square in August 2008 at a rent of
£1,666 per month.
58. Mr Barrett said that he had been supplied
at the time with a document detailing the rights he was giving
up. "It was my understanding that I would give up all
existing rights and move on to a yearly lease. I am not presently
aware of the exact nature of these rights, but at the time they
were detailed in a legal document which was supplied to me by
the landlord."
59. Mr Barrett said that "A number of
factors played a part in my decision to move. The most important
one was that [the original flat in Dolphin Square] was
fairly run down and while there were few options and property
was quite scarce when I was elected in 2001, a few years later
there was now more of a choice in the market and having lived
in London for a few years I was more aware of the options available.
Secondly, having lived in the one small flat for a number of years
I was looking for somewhere nicer to stay."
60. Mr Barrett said that the ACA budget for renting
a flat "provided enough provision for staying in somewhere
better which would also allow my family to visit for the weekend
if I decided to stay in London and not travel the 400 miles back
to Edinburgh every weekend." This had only ever been
possible in his second Dolphin Square flat. It was no longer possible
in his current smaller flat outside Dolphin Square nor had it
been possible in Mr Barrett's original Dolphin Square flat. Mr
Barrett said that the windfall had not made him move immediately
and he had stayed in the original flat for some time after the
offer had been accepted.
61. Mr Barrett said that the figures for the
amounts he could have claimed, but chose not to, were in his previous
letter and he had not kept receipts for those amounts. One of
the reasons he had decided to end a number of the claims was "that
it avoided me having to keep receipts for everything and fill
in a number of claim forms, which I appreciated would have to
be 100% accurate, or there would be a danger of problems arising
from any errors."
62. Mr Barrett said that all of his claims for
each year "since the windfall and up to the current year
have been for items which were allowable under the ACA rules.
When I accepted the 'windfall' it was added to my total
income which was then spent. It is impossible to detail exactly
what income was spent on what expenditure, but the totals as detailed
in my previous letter, show that a range of costs incurred directly
relating to my employment as an MP, which would not have happened
otherwise, exceed this total."
63. Mr Barrett said that since his previous letter,
he had given this further thought and "there are another
range of items I would never have considered keeping receipts
for, which amount to approximately another £1,000 per year,
such as prizes for local events, schools, fairs and gala days,
supplying wreaths for remembrance services, taking constituents
to lunch or dinner after they have visited Parliament etc. A very
conservative estimate of these amounts would be £1,000 per
year, or another £8,000 since I have been elected."
Mr Barrett said that whether or not he had received the windfall
he would have accepted these were all costs he would have accepted
himself. "I am only detailing these costs now in this
way in reply to the question of 'where was the windfall spent?'
and to make it clear that it is a smaller sum than the extra
costs incurred by me, since being elected. I would however add
that personally, I do not believe that the windfall and the detailed
items of spending above are in fact directly linked in this way."
64. Mr Barrett said that his understanding, at
the time, and from discussions with other MPs since then, was
that advice from the House was that this was a private matter
between the landlord and the tenant and that "we had to
make our own judgement as to what to do." Mr Barrett
said that "all allowances and expenses must be clearly
used in accordance with the rules, but this payment was not an
allowance or an expense and the use of such amount was not clearly
defined within the rules."
65. With regards to legal advice, Mr Barrett
said that he did remember being told that a firm of solicitors
was working on behalf of the landlord and would not be in a position
to give legal advice to the tenants, but they could give information
to clarify the proposals. He said that he had received "a
large amount of paperwork at the time from [the solicitors],
The Dolphin Square Tenants Association and was informed of meetings
that would be held by a number of groups, but I did not attend
any of the meetings or take any legal advice as it looked like
a fairly straightforward proposal to give up my rights to the
flat I occupied at the time."
66. From speaking to colleagues recently, said
Mr Barrett, it appeared that "those who did ask the House
Authorities for advice were given a range of answers and that
while I supplied a new lease to the Fees Office with the new rental
level and the new terms and conditions on it, the Fees Office
confirmed at each stage that everything was in order every time
I submitted a new lease for approval."
67. I wrote again to Mr Barrett on 20 July.[198]
I enclosed copies of the offers which were made to tenants at
Dolphin Square in autumn 2005, one referred to as Cash and Go,
the other as Cash and Stay. I asked Mr Barrett to let me know
whether those were the offers he had received and if so, which
of the two he had accepted. I also enclosed a copy of the report
prepared by the solicitors to which I had referred in my letter
of 25 June, and asked whether that was the document he had seen
and whether he had taken any account of their advice in reaching
his decision.
68. Mr Barrett replied on 4 August.[199]
He could not say for sure whether he had seen the documents but
confirmed that he had accepted the Cash and Stay offer. He also
supplied me with two further examples of significant costs incurred
as a result of being a Member of Parliament which he could have
claimed for but had decided not to. These were costs for telephone
calls from his mobile and land line, and for keeping one room
of his house as an office.
69. On 7 September, as explained above, I wrote
to Mr Barrett attaching my correspondence with the Department
of Resources and asking for his comments.[200]
I also sent him a letter on 23 September with a copy of Mrs Humble's
letter of 18 September.[201]
70. On 8 October I received a letter from Mr
Barrett, who told me that there were a number of other issues
that he believed required further clarification.[202]
In previous correspondence he had been asked for and had given
details of how he had spent the payment from the landlord. He
had detailed sums well in excess of the landlord's payment, all
of which had "directly related to my employment as an
MP I believe that this detail is important as for me it proves
there was no personal benefit from the transaction."
71. Mr Barrett said he had not been given the
advice as detailed in the 3 September letter to me from the Director
of Operations, which, he said, clearly stated that only two members
living in Dolphin Square had been given the advice in November
2005. Mr Barrett continued: "When the Department of Finance
had the address and lease details of all those Members living
in Dolphin Square at that time, why was this advice not then given
to people, like me, when the department was giving the same advice
to others who lived at that address?" Mr Barrett asked
"if the Department failed to pass on this advice, when
it was aware that others were staying at the same address, the
Department clearly failed to carry out a basic function of communication
to ensure that all Members received the same advice. This was
not the case and different Members received different advice,
or no advice at all."
72. Mr Barrett noted that the Director had stated
in his same letter of 3 September that arguably this was not a
matter for the scheme of allowance rules. He continued: "There
is no mention of such payments in those and this payment was not
an allowance, therefore I cannot see how it can be covered by
such rules." Mr Barrett said that a number of MPs over
the years had sold properties and kept the profits from those
sales, and that others had been offered payments from landlords
to vacate premises, when those properties had been paid for by
the allowances. "For many years those matters were considered
private arrangements and at no time have MPs been asked to refund
the amounts involved. Is it not the case that this is a similar
situation and that those who lived in Dolphin Square are in exactly
the same position as the many MPs I referred to?"
73. Mr Barrett said he had "a great deal
of sympathy with" Mrs Humble, who had asked for and was
given "exactly the advice that this was not a matter for
the Fees Office and that she was not advised to follow any course
of action". Mr Barrett said that he had acted in exactly
the same way as Mrs Humble, although he had not contacted the
Fees Office. He could not see why, if there had been any doubt
at the time about how MPs were acting, the advice given to two
MPs was not then made available to everyone else. Mr Barrett reiterated
that "the information I was asked for and gave in earlier
correspondence also confirms that I did not profit from this transaction."
If he had wanted to profit from the allowances he would have bought
a property when elected in 2001 and sold it when he stood down.
74. I wrote to Mr Barrett on 8 October, telling
him that I was copying his letter to the Department of Resources,
since some of his comments related to the advice they had provided.[203]
I noted that Mr Barrett had said in his letter that Members in
the past had been offered payments from landlords to vacate premises.
I told Mr Barrett that it would be helpful if he could identify
the cases in which he believed that had happened. I wrote to the
Department on the same day.[204]
75. On 15 October Mr Barrett wrote to me, saying
that he did not have any specific details of any individual cases,
but—as with the gains made from property sales over the
years—while he had no specific information regarding any
individual's specific case, he had "heard a number of
conversations stating that this has in fact happened."[205]
76. On 19 October I wrote to the Director of
Operations in the Department of Resources, enclosing Mr Barrett's
letter of 15 October, together with a copy of my letter to him
of 8 October about his suggestion that Members in the past had
been offered payments from landlords to vacate premises.[206]
I noted that Mr Barrett did not have any specific details of individual
cases.
77. Mr Barrett wrote to me on 28 October, expressing
his view that what MPs in Dolphin Square did was to sell a lease
for a property in the same way that many property sales in England
were in fact the result of leases being sold, rather than the
freehold, of which he had more experience in Scotland.[207]
Mr Barrett said that "This would again place those who
sold their lease in a very similar position to the many MPs who
have sold properties over the years, when that property was leasehold,
rather than freehold."
78. Mr Barrett said that much information given
by the Fees Office had been incorrect and that Members often relied
on the advice "given to other Members over a period of
time to establish the correct procedure to follow." In
this case, Mr Barrett said, it was well established that properties
sold, or leases sold, were in fact private matters, and that Members
should make their own arrangements to deal with this.
79. I wrote to the Director of Operations in
the Department of Resources on 29 October, now enclosing Mr Barrett's
letter of 28 October and noting his comparison of the payment
he received to a payment a Member might receive in selling a leasehold
property.[208] I asked
the Director to take into account Mr Barrett's further points
in preparing his response to my letters of 12 October [209]
and 19 October.[210]
80. In responding to Mr Barrett's specific points
in his letter to me of 9 November, the Director of Operations
in the Department of Resources told me that Mr Barrett's comments
about inconsistent guidance from the Department on the Dolphin
Square lease offers were perhaps covered in his [the Director's]
letter of 3 September.[211]
He noted that Mr Barrett had not contacted the Department about
this matter. In this context, the Director said, "I must
confess to being puzzled by the final paragraph in his [Mr
Barrett's] letter of 28 October. If I understand it correctly,
[it is that] information from the Department is often incorrect
such that Members, like himself, rely on advice received 'second-hand'
from other Members."
81. On 11 November I also wrote to Mr Barrett,
enclosing an extract of the Department's letter of 9 November,
which responded to the points Mr Barrett had made.[212]
I said that I was asking the Department to let me know the source
of the instructions to use the guidance on the offer, to which
the Director had referred in his letter. [213]
82. On 12 November Mr Barrett wrote to me, saying
that he could give a clear example of such contradictory advice
from earlier this year, when the lease on his flat ended.[214]
When his current lease expired in August 2009, Mr Barrett said
he had asked the Department if the £1,250 monthly cap on
leases would apply to his lease renewal. Mr Barrett said he was
told "categorically" that it would. As Mr Barrett's
current lease was about £5,000 above that level per year,
this would have meant him moving out of his current flat or paying
the £5,000 out of his own pocket. He continued "I
was then advised by colleagues that this advice was wrong and
that I could stay, as the cap did not apply to lease renewals.
Had I accepted the advice given, it would have had serious consequences
and it was the 'second hand' advice he [the Director
of Operations] refers to in his letter, which actually saved
the day."
83. Continuing, Mr Barrett told me that, after
further contacts with the Department, they had confirmed that
the advice from colleagues was correct and their advice was wrong.
The lease had then been renewed and the entire amount was now
covered from allowances. Mr Barrett agreed with the Director's
comment that there was no record of contact with Mr Barrett on
this matter on the Department's telephone log, "as I did
not contact the Department for advice about the Dolphin Square
lease, but it is worth noting that the above detailed example
of poor advice was from face to face conversations and would not
be logged, unless the staff member wrote down the details of our
conversation following our meeting."
84. Mr Barrett wrote a second letter to me on
12 November.[215] In
this he said that he believed that the information provided in
his other letter of that day, along with other evidence previously
discussed and detailed in other correspondence, threw into question
the advice given to those two Members who did ask for and were
given advice at the time regarding the Dolphin Square lease. He
said: "It cannot be assumed that the advice given to those
two members was in fact correct advice, just because it had been
given to them by the Fees Office. In concluding your deliberations
it might be worth establishing whether or not that advice was
in fact correct. As my other letter points out, the advice given
to Members is not infallible and from our previous discussion
and correspondence there appears to be an assumption that those
who received advice followed the correct procedure, whereas it
is clearly possible that the opposite is the case."
85. On 17 November I wrote to Mr Barrett, telling
him that I would, as he had requested, copy both of his 12 November
letters to the Department.[216]
I told him that I thought that I now had sufficient evidence to
bring my inquiry to a conclusion. I told Mr Barrett that I did
not, therefore, propose to invite the Department to comment on
his discussions with it in respect of his current lease. I also
told him that I had considered whether I should extend my inquiry
by asking the two Members concerned about the advice referred
to in the Department's letter, but that I did not believe I had
been given sufficient grounds to suggest that the Department had
provided me with false or inaccurate evidence on this aspect of
their contacts with Members. I said that I would, however, ask
the Department to confirm what they had told me.
86. With the letter I wrote to the Director of
Operations in the Department of Resources on 17 November, I enclosed
the two letters of 12 November from Mr Barrett, together with
a copy of my reply of 17 November.[217]
I noted that I did not propose to ask the Director to comment
on what Mr Barrett had said about the discussions he had with
the Department about his current lease.
87. As noted above (paragraph 41) on 7 January
2010 I wrote to Mr Barrett, copying to him correspondence relating
to the source and nature of the instructions received by the Directorate
of Finance and Administration about the Dolphin Square offers.[218]
88. Mr Barrett replied to me on 20 January. [219]
He observed that the memorandum from the Director of Finance
and Administration dated 1st November 2005 "clearly states
in paragraph 3 that the Green Book does not cover this specific
situation and that of a personal windfall. This is certainly the
case, but he does not then confirm that the existing, and current,
custom and practice over many years is that when a windfall is
received from a sale of a property paid for entirely from the
ACA, the windfall is retained by the member. This has applied
to many sales over the years and currently a number of MPs are
in the process of selling property paid for by ACA—for which
no advice regarding the windfall is currently being issued. I
would therefore contend that both types of windfalls should be
treated in exactly the same way."
89. Mr Barrett said that the memorandum stated
that the Department "should advise members" on a course
of action, yet, he commented: "…although copies of
all leases for Dolphin Square were in the hands of the Department
of Finance and Administration and they were aware of everyone
who was residing at Dolphin Square at that time, advice was only
given to two members and not circulated to everyone. I have detailed
in previous correspondence that I have had previous experience
of advice which has been given to Members which has then proved
to be incorrect and if acted upon would have cost me several thousand
pounds. Since my last correspondence I have been given further
incorrect advice regarding my current tenancy, relating to the
winding up allowance, which if acted upon would have again had
a significant financial impact in excess of a thousand pounds.
Only after discussion with colleagues was I able to take the correct
course of action."
90. Mr Barrett said he mentioned this, as it
could not be assumed that all advice given to Members by the Department
was factually correct and "using the experience of colleagues
for guidance has in the past been the source of helpful and accurate
advice to many Members. In the case of Dolphin Square windfalls
many colleagues, including myself, believed we were acting correctly
at all times." He also said that the memorandum "clearly
states that the windfall can be set against future housing costs
by the Department, but it does not make clear if the entire windfall
was used to partly offset other costs directly resulting from
employment as an MP, as was my own case, as to whether this was
also acceptable. As someone who used more than the entire windfall
for such directly associated costs, I am still not clear as to
whether there exists any advice on this at all."
91. In conclusion, Mr Barrett told me that he
continued to believe that at all times he had acted within the
guidance and rules set out in the Green Book "and that
it made sense to use the windfall for a number of costs, some
of which could have been claimed from a range of allowances, and
therefore saving on the public purse."
92. On 21 January I wrote to Mr Barrett, saying
that I thought I had taken this as far as I needed in order to
conclude my work on this matter, and that I would therefore incorporate
his letter in the evidence for the inquiry and in preparing the
factual sections of my memorandum. [220]
Rt Hon Sir Alan Beith MP
93. Sir Alan Beith wrote to me on 30 May to say
that, following press and public interest in Members renting flats
in Dolphin Square, he had decided to refer to me the decision
he had taken in 2006-07 so that I could rule on whether it was
appropriate.[221]
He had refused an offer from the new landlords of Dolphin Square
of £28,000 (which Sir Alan subsequently corrected to £48,030)
[222] to give up his
tenancy either by leaving or by taking a new tenancy at a higher
market rent without any security of tenure. He had decided that
it would be "better value for the tax payer"
if he stayed in the unmodernised flat on the protected terms,
and renewed the kitchen. He was offered and accepted £5,000
to give up any succession rights that might arise under the tenancy,
and set aside this money for redecoration of the flat, which could
otherwise have been claimed from the allowance. He said he was
not liable to capital gains tax on this sum.
94. I wrote to Sir Alan on 4 June and asked him
about the particular circumstances of his Dolphin Square lease,
in similar terms to my letter of the same day to Mr Barrett.[223]
95. In his reply of 15 June[224]
Sir Alan said that he must re-iterate that the Daily Telegraph
article was "wholly wrong in implying that I had accepted
a payment in return for giving up a favourable rent, thereby increasing
costs to the taxpayer. As I indicated in my earlier letter, I
rejected an offer of £48,030 which, if I had accepted it,
would have had this effect. I accepted a payment of £5,000
to give up any succession rights for other members of my family:
there was no public interest in retaining these rights, since
the flat was rented to enable me to do my job as a Member of Parliament."
96. Sir Alan said he had rented a flat in Dolphin
Square since 22 December 1975 and had moved into his present flat
in 1993. He had always claimed the rent from the Additional Costs
Allowance. In October 2005 he had received an offer of £48,030
from the new owners to accept Option A. Sir Alan commented, "If
I had taken this option and remained in the flat, the rent would
have risen immediately to £22,880 per annum on a shorthold
tenancy, as opposed to £14,441 per annum if I retained my
then existing terms."
97. Sir Alan drew my attention to the clear statement
in that advice of the advantages of accepting Option B (and refusing
the cash offer), particularly security of tenure and certainty
about the rent. Because he had decided to reject the cash offer,
Sir Alan said he did not explore with the Fees Office whether
they would, in the event of him accepting it, recommend that it
should be repaid to the House of Commons (net of Capital Gains
Tax). "It appears from what is now known about other cases,
and from the continued acceptance that Members can retain capital
gains on property for which the mortgage interest has been claimed
from ACA, that they would not have advised repayment. I did not
have any wish to make a personal profit from this situation and
saw no reason why I should do so, and this confirmed me in my
decision to reject the cash offer and retain the below-market-
rent arrangements."
98. Sir Alan said that a separate offer of £5,000
was made to those long-standing tenants who, it was believed,
might have a right to pass the tenancy on to their children. He
said that there being "no conceivable public interest
in my retaining that right, I was happy to surrender it and set
aside the £5,000 for redecoration of the flat."
This was planned, Sir Alan said, to take place after other refurbishment
was completed, in the long recess of 2008, "but unfortunately
I found myself in hospital with a heart attack in July 2008 and
the planning of that decoration work did not go ahead. I intend
that it will be done in this year's long recess. Under the rules
as they were at the time, this redecoration work could have been
claimed from the ACA, if I had not chosen to fund it from the
cash payment."
99. Sir Alan considered that the decisions he
had made were in the public interest, because they ensured more
favourable rent terms, and in the case of the £5,000, met
a cost which could otherwise have been claimed from the allowance.
He had taken the view that for him to accept the £48,030
cash offer, although it would have been in his personal interest,
would have been against the public interest. Sir Alan also mentioned
his wife's involvement in funding their London accommodation.
His wife [Baroness Maddock] was an active Member of the House
of Lords and was able to claim an overnight allowance for those
nights when she was in London in order to attend a House of Lords
sitting. She "normally claims only half that allowance.
Despite the fact that there is no entitlement to this allowance
during August and September, we normally work on the basis that
throughout the year she contributes a fixed monthly sum—currently
£600—which I deduct from my rent claim."
Sir Alan said he had not asked his wife to contribute this sum
during a period when she used part of her allowance to contribute
to the cost of renewing the kitchen. This was, he said, at a
time when there was no prospect at all of the landlord renewing
the 1960s kitchen, because the policy was to concentrate on improving
the vacated flats of people who had accepted the cash offer. Sir
Alan continued "We have never 'double-claimed' from
our allowance—we each claim for costs we have individually
met. My wife is, of course, subject to and complies with House
of Lords rules in respect of allowances she claimed."
100. I wrote to Sir Alan again on 18 June.[225]
I noted from the terms of his lease dated 10 January 2006, a
copy of which he had sent me, that he was required to redecorate
the whole of the interior every seven years. I asked him when
he received the £5,000; when the flat was last decorated;
whether he expected that the full amount of £5,000 would
be required to cover all the necessary redecoration; what was
the other refurbishment to be undertaken before the 2008 summer
recess, when it was carried out, and how it was paid for; whether
he had any documentation or other evidence in relation to the
plans he had for refurbishment in the long recess of 2008, such
as builders' quotations; whether, instead of retaining the £5,000,
he had given any consideration to surrendering the money to the
Fees Office and claiming for the redecoration of the flat as and
when the work was carried out; and whether he had consulted the
Fees Office at any stage about the options which were put before
him by the new estate owners. In my letter I also noted that in
return for the £5,000 he had surrendered the extended succession
rights but retained the standard succession rights. I said that
I assumed therefore that the surrender did not affect the rights
of his wife to take over the tenancy in the event of his death,
but asked him to confirm that. I also asked Sir Alan to let me
know, for each financial year from 2005-06, the total outgoings
on the flat which were claimable against the Additional Costs
Allowance; the claims he had actually made against the ACA; and
the amounts his wife had contributed towards the total outgoings.
101. Sir Alan replied on 9 July.[226]
In his letter he said that he had received the £5,000 in
January 2005.[227]
The sitting room and bedroom had been previously decorated in
2001-2. The kitchen, passage, toilet, bathroom and small spare
room had not been redecorated since the time that he had moved
into the flat. He had expected that the full £5,000 would
probably be required to cover the complete redecoration of the
flat which the lease required. The other refurbishment undertaken
before the 2008 summer recess involved the re-tiling of the kitchen,
for which his wife paid. "Redecoration could not go ahead
until this messy work had been completed." It was redecoration,
not refurbishment, of the flat which had been planned for Autumn
2008. Sir Alan had been taken into hospital unexpectedly, which
had disrupted his plans to meet and obtain an estimate from the
decorator. Sir Alan said he had been instructed thereafter to
take at least six weeks off work, and he and his wife had left
London for Northumberland as soon as he was fit to do so. He had
"no reason at all to believe that the Fees Office would
seek payment to them either of the £5,000 or, indeed, of
the £48,030 which I had refused. It was not the House policy—and
is still not the House policy—to recover capital gains on
property on which mortgage interest is claimed, and I assumed
that the same policy would cover these circumstances."
He had not been aware at the time of any colleague being asked
for such payments (despite the cash offer arrangements being publicised)
and "we now know that in at least one case where advice
was sought, the retention of a much larger Dolphin Square payment
and its use to part finance a mortgage was approved by the Fees
Office."
102. The £5,000 payment arose, in Sir Alan's
view, from his tenant/landlord relationship. It was important
to recognise that the lease created obligations which were part
of that relationship, and for which the House authorities took
no responsibility. For example, Sir Alan said, a Member giving
up or losing his seat could not claim from the Fees Office for
the redecoration which the lease required when the flat was vacated.
The lease also created other obligations such as carpeting and
window cleaning which were no longer claimable from ACA. As to
why he had surrendered the extended succession rights but had
retained the standard succession rights, Sir Alan said that his
first wife had died and he had re-married in the period since
he had taken out the original lease on the flat. Prior to changes,
it had been the practice of the Dolphin Square Trust at their
discretion to allow spouses to take over a flat in the event of
their partner's death. This understanding could not be relied
on under new ownership, and the Dolphin Square Trust negotiated
for the company to allow joint leases for spouses already resident
in the flats; Sir Alan and his wife took up the opportunity and
the lease was now joint.
103. Sir Alan said he was not sure what I meant
by "total outgoings on the flat which were claimable".
He could have claimed household items and other services up
to the limit of the allowance. "If you mean outgoings
which I actually spent but did not claim from ACA, these included,
for example, bedding, household materials, re-tiling of the kitchen,
re-upholstery and other items for which I have not kept records
because they were not the subject of a claim. Much of this expenditure
was contributed by my wife, in addition to the £600 a month
towards the rent which, as I explained in my earlier letter, she
has paid except during the period when she was contributing to
the kitchen and refurbishment costs."
104. Sir Alan said his actual claims were available
from the Department of Resources and he gave me his authority
to refer to them. He had noted one error in ACA when he unintentionally
claimed twice over for a television licence, which was not picked
up by the Fees Office at the time, and he had repaid this sum.
105. On 7 September, as explained above, I wrote
to Sir Alan attaching my correspondence with the Department of
Resources and asking for his comments.[228]
I also sent him a letter on 23 September with a copy of Mrs Humble's
letter of 18 September.[229]
106. Sir Alan replied on 14 September, expressing
his concern that on several points my letter of 7 September did
not reflect the information he had already submitted.[230]
Without seeking to prejudge my conclusions, he said that he would
like to be sure that we agreed on the facts of the matter. He
asked for my assurance that, before submitting anything to the
Committee, I would make clear a number of points, or clarify for
him where his summary could be mistaken:
- He did not "fall into
category (a) of Members" whose Dolphin Square rent was
fully paid from the ACA, as his earlier correspondence had made
clear;
- The advice given by the Fees Office, to which
I referred, was never given to him or published to Members: it
was given to only two Members;
- That advice was framed in relation to Members
who chose to accept monetary compensation to "buy out
their existing tenancies". He had refused the monetary
compensation offer, which amounted to over £48,000, because
he did not wish to have the favourable terms of his existing tenancy
bought out. Because it would have led to higher rental costs,
he believed that it would not have been in the public interest
for him to do so. The only compensation he had accepted was for
the loss of children's succession rights, in which there was no
public interest. Even if there were any basis for retrospectively
applying advice of which he was not aware at the time, the advice
would have to have been advice relating to the circumstances he
had described, not the advice given to someone who intended to
accept monetary compensation to have a tenancy bought out. He
said it was worth pointing out that the decision he took was to
preserve the terms of his existing tenancy as far as the new landlord's
offer permitted, accepting only the removal of rights which did
not accord with the objective of limiting the cost to public funds;
- The correspondence from Mrs Humble provided further
support for his submission that many Members, knowing that the
Fees Office made no claim on the substantial capital gains which
Members could make through the use of ACA to pay mortgage interest,
did not believe that the Fees Office would seek the reimbursement
of compensation paid for changes in tenancy terms. Although his
own case did not fall into this category, he held the same view
about the £5,000 which he had received in respect of succession
rights;
- It had been and remained his intention that he
should make no personal gain from any aspect of his tenancy arrangements,
and the £5,000 had always been set aside to defray costs
such as redecoration which would otherwise have been claimable
from the ACA, or to meet liabilities arising from the terms of
a tenancy whose sole purpose was to provide him with reasonable
accommodation to carry out his parliamentary duties in London,
since his home and constituency were over 300 miles from London.
107. On 22 September I wrote to the Director
of Operations in the Department of Resources, enclosing Sir Alan
Beith's letter of 14 September and my letter of 7 September. [231]I
asked the Director for his comments on Sir Alan's letter, and
in particular on Sir Alan's view that the Department's advice
to Dolphin Square tenants, described in the Director's letter
of 14 August, was framed exclusively in relation to Members who
chose to accept monetary compensation to buy out their existing
tenancies. I noted Sir Alan's remark that the advice did not relate
to his circumstances since he had accepted only compensation for
loss of children's succession rights in which, in his view, there
was no public interest. I asked the Director whether he considered
that the Department's advice encompassed the £5,000 received
by Sir Alan in recognition of him giving up his children's succession
rights or whether he considered that different considerations
should have applied. I also drew the Director's attention to Sir
Alan's remark that he did not fall into the category of Members
whose Dolphin Square rent was fully paid from the ACA. I said
I took this to be a reference to the arrangements described in
his letter to me of 15 June, which set out the involvement of
Sir Alan's wife in funding the Dolphin Square accommodation, it
would seem partly at least from her allowances from the House
of Lords. I noted that in that letter, Sir Alan said that he and
his wife normally worked on the basis that she contributed a fixed
monthly sum—currently £600—which he deducted
from his rent claim. I asked the Director if he could tell me
whether, and to what extent, Sir Alan's claims against the ACA
had been abated to reflect the contribution made by his wife and
whether he considered that this would have affected the category
in which Sir Alan's circumstances would seem to fall in respect
of his rented property, namely moving him from category (a) to
category (b) or indeed to a new category and to different advice.
108. The Director of Operations in the Department
of Resources responded to some of Sir Alan's points in his letter
of 9 November.[232]
The Director said that, in respect of Sir Alan's ACA, he could
confirm that adjustments to the amount claimed were made by Sir
Alan. However, the precise details were "less straightforward
than a monthly £600 abatement".
109. On the more general points made by Sir Alan
in his letter of 14 September,[233]
the Director confirmed that Sir Alan was neither given nor did
he seek advice. It was also the case that the Department's guidance
was not published to Members. The Director also concurred with
Sir Alan's "fair observation that Members might well have
considered the capital gain made on a property purchase funded
in part through the ACA analogous to that of the tenancy compensation."
110. In my letter of 11 November to the Director
of Operations in the Department of Resources, I asked the Director
to provide me with further clarification about how the ACA claims
for Sir Alan had been abated to reflect his wife's share.[234]
I said that I was principally interested in the rental payments.
I asked the Director, if it was not a simple 50-50 split, for
a brief explanation of how the costs were apportioned, and to
know whether the apportionment varied over time.
111. On 11 November I wrote to Sir Alan, enclosing
an extract of the Department's letter of 9 November, which responded
to the points Sir Alan had made.[235]
I said that I was asking the Department to let me know the source
of the instructions to use the guidance on the offer, to which
the Director had referred in his letter, [236]
and that I was also asking them for clarification about the rental
abatement to reflect the share held by Sir Alan's wife.
112. Sir Alan wrote to me on 18 November, saying
that he could provide me with details, should I require them,
of his wife's contributions to the rent of the flat, which had
varied over the period since they were married but had, over the
whole period, worked out at an average of around 30%.[237]
Sir Alan said that the share held by his wife was a tenancy,
not a mortgage on a property, so there had been no question of
a share being held. Sir Alan said the contributions were made
voluntarily "because it seemed reasonable to us that my
wife's allowances for attending the House of Lords should make
some contribution to the costs of the flat which we share, whether
rental or other costs." Although Sir Alan's wife had
begun contributing soon after they had married, she did not become
a joint tenant until the new lease was agreed in 2006.
113. Sir Alan and his wife had taken up the offer
to make the tenancy joint at no cost because, in the event of
Sir Alan's death, his widow could otherwise have faced eviction
from the flat. This had not been the case under the Dolphin Square
Trust tenancy, because the Trust's declared policy was to grant
continuing tenancies to widows in such circumstances. Sir Alan
reiterated that the approach of him and his wife to these matters
was "guided by our desire to keep down the cost to public
funds of having adequate accommodation for our duties in London.
We refused a very large cash benefit, which we could have kept
under the then prevailing rules and interpretations, in order
to retain very favourable rental terms." The cash offer
was made because the new landlord knew that a much higher rent
could be charged on Dolphin Square flats in the market conditions
at the time.
114. Sir Alan and his wife had set aside the
£5,000 "succession" compensation to meet
costs incurred under the lease such as decorating which, at the
time, could otherwise have been claimed from allowances. In both
decisions, therefore, they had been motivated by a desire to keep
down the cost to public funds, and this they had achieved. He
continued, "Each of us, as a result, has been able to
limit our accommodation expenses to well below the permitted level
taking the relevant period as a whole."
115. Sir Alan then said: "I think it
is important to stress that any conclusion which treated the £5,000
as a capital gain and sought recovery of it would have to be applied
consistently in all cases where any kind of capital gain had been
realised, including gains from the sale of a property on which
mortgage interest had been paid out of the ACA."
116. At his request, I interviewed Sir Alan on
24 November.[238] Sir
Alan began by reading out a statement. In this he said that he
had voluntarily referred to me the terms on which he retained
his rented Dolphin Square flat when his integrity was called into
question in a "seriously misleading newspaper article",
and he had chosen to submit to me his belief that he had acted
properly, in the public interest, without any intention or outcome
of personal gain. Sir Alan described as "completely false"
the allegations that were the subject of my inquiry.
117. Sir Alan said it was important to recall
the context of his decision over the Dolphin Square offer. After
a long period of serious uncertainty about the future of Dolphin
Square, the new landlords had made offers which gave him the following
options:
- to give up the flat, receive
a payment of £48,030, and (he said) use the money towards
a mortgage on a flat elsewhere. He had always been opposed to
the system under which the House paid mortgage interest, which
was why he had relied on rented accommodation for the whole of
his 36 years as a Member of Parliament. "If I had wished
to make personal profit, I would obviously have been able to do
so if I had used the mortgage system over a very long period of
rising property prices." An alternative version of that
option would have been to give up the flat, receive the £48,030,
and find another rented flat. Given that he had a secure tenancy
with a below-market rent (which included heating and water rates),
he could not have obtained such accommodation without "significant
extra costs";
- to accept the £48,030 and a new tenancy
of the flat. This would have been an insecure shorthold tenancy,
with an immediate rent increase from £13,825[239]
to £22,880 per annum; that would have had the effect of favouring
his personal interest while adding substantially to his ACA claims;
- to retain the very advantageous secure tenancy
and below-market rent, thereby keeping costs down to the taxpayer,
while accepting the £5,000 for revocation of succession rights—in
Sir Alan's case his children's succession rights—to use
for the costs of redecoration, which was an obligation under the
tenancy. There was no public interest in his retaining succession
rights, and no loss to the taxpayer in his decision to give them
up. This was the option he had taken.
118. A further possibility would have been to
take the third option—accepting the payment for revocation
of succession rights—but to make a payment to the Fees Office
of the £5,000, less an amount to recognize his wife's contributions
to the rent, and a further amount for the periods in which general
elections had taken place. Sir Alan told me "I had no
reason whatsoever to believe that the Fees Office would have expected
such a payment, and I knew that many Members had decided to accept
sums even larger than the £48, 030 I had been offered, and
used the money to take up a mortgage." Sir Alan said
that other Members had made very substantial capital gains on
properties financed by the payment of mortgage interest, without
being asked to make any payment to the House authorities. My
correspondence with the Director of Operations confirmed, in Sir
Alan's view, that no advice was given generally to Members on
this matter, and that the advice which was formulated, but not
circulated, related to tenants who had accepted payment for their
tenancies to be bought out. Sir Alan said that he had not been
in that category. Mrs Humble's evidence showed, Sir Alan said,
that some Members received different advice on the issue.
119. Sir Alan considered that if it were to be
concluded that the £5,000 payment was a payment which the
Fees Office were entitled to recover in part, then the same principle
would have to be applied to all those who had accepted larger
payments to give up their tenancies, and to all those who had
made capital gains from the sale of properties on which mortgage
interest had been paid from the ACA. He continued, "It
seems obvious that the House authorities had no expectation that
such payments would be made or would be required. The Report
of the Committee on Standards in Public Life has since excluded
the possibility of recovering such capital gains on mortgaged
property prior to the date of its report."
120. Sir Alan said that he very much welcomed
the recommendation of the Kelly Committee to end the system of
payment of mortgage interest to finance accommodation for Members.
"My whole approach to my own case has been governed by
my opposition to that system."
121. Concluding his statement, Sir Alan said
that, in his decision to remain at Dolphin Square on a secure
tenancy and at below-market rent, refusing a large cash offer
to give up the tenancy and retaining a small payment for succession
rights to pay for redecoration, he had kept down the costs to
the ACA, prevented unnecessary additional cost to the taxpayer,
and did not in any way favour his personal interest over the public
interest.
122. Sir Alan then confirmed that he had been
a tenant in Dolphin Square since December 1975 and had been in
his current flat since 1993. He confirmed that his wife, Baroness
Maddock, had, for the past 10 years or so, contributed an average
of 30 per cent of the rent charged, from House of Lords allowances,
and that he had claimed for the rent from House of Commons allowances:
"we both met the costs". On one or two occasions
Baroness Maddock did not contribute to all the rent. "For
example, at one time my wife's contributions were dedicated to
the refurbishment of the flat—an option which was not available
from the landlord. And she did not contribute in the quarter which
included the General Election. But otherwise I always deducted
her contribution from my claim." Sir Alan said his wife's
current contribution was £600 a month, representing 40-50
per cent of the rent.
123. Sir Alan said that if he had accepted the
principal payment offered, which was £48,030, the rent overall
would have increased substantially, initially from £14,441
a year to £22,880 a year. Sir Alan also confirmed that he
had been offered £5,000 to buy out the succession rights
of his children. He had accepted this offer and received the payment
in January 2006. It was Sir Alan's view that there was no public
interest in retaining these succession rights and that they related
to the tenant/landlord relationship which created obligations
for which the House took no responsibility. Sir Alan said that
he had set aside the sum he had received to meet the cost of redecorating
his flat, which otherwise he could have claimed at the time on
his allowances. Sir Alan confirmed that he planned the redecoration
for the summer of 2008, after tiling work on the kitchen, but
that his health problems meant that his redecoration plans had
to be deferred to the long recess just passed. This redecoration,
Sir Alan said, "…is the sort of task you do in the
long recess, because it would be difficult to sleep in the flat
while the work was taking place."
124. Sir Alan said that he had not consulted
the House authorities in advance of accepting the £5,000.
He believed that the position was analogous to Members making
capital gains on the sale of their ACA-funded properties. I asked
Sir Alan why he believed that accepting the principal offer (in
his case, about £48,000) was not in the public interest.
He replied that it would have led directly to a very large increase
in rent. The tenancy would have become insecure: he would have
transferred to a shorthold tenancy with the duration at the landlord's
whim. "But the primary reason was that there would have
been a very large increase in rent—and to what end? So that
I could receive a very large sum of money. That would have been
exactly the case to which the allegations were directed."
125. Asked whether it would have been different
if acceptance of the money had led to no extra call on public
funds, Sir Alan said "That possibility had not occurred
to me. It is not what happened." As to whether it would
have been different if he had left the flat and found somewhere
else to stay at the same rent, or lower, Sir Alan said that he
was being asked to make a judgement about circumstances that did
not exist. He told me "The public interest is primarily
engaged by the financial detriment. It is engaged by the fact
that I could get a financial gain by imposing a detriment on the
taxpayer or on the House. That exacerbated the case. It would
not only have led to higher costs but to personal enrichment for
myself. It was blatantly and manifestly contrary to the public
interest, which was why I didn't do it."
126. Sir Alan said that he saw "some
force" in the argument that accepting the principal offer
was not in the public interest because the Member would have benefited
from a payout which came to them only because of a tenancy sustained
by rental payments made from the public purse. "But it
would have to have been applied to the gains on a mortgaged property
too. It was open to the House to decide in both categories what
was in breach and what was in the spirit of the rules. What both
have in common is that the financial gain is created by the payment
of rent or mortgage interest."
127. The succession payment (of £5,000)
did not, in Sir Alan's view, raise any issues of public interest
because no additional costs would have arisen. The sum was such,
Sir Alan said, as could be applied to maintaining the flat. Most
of this could have been claimed from the allowances, until the
new rule on redecoration was introduced. The Dolphin Square lease
required tenants to redecorate every seven years. "The
£5,000 helped me to deal with those obligations." Asked
whether it would have still been acceptable if he had been offered
much more for the succession rights, Sir Alan said that it would
be difficult to maintain that, say, £20,000 was the right
figure. But £5,000 was, he said, close to the cost of redecorating
the flat over that period, rendering it clean at the end of the
tenancy, and ensuring the existing rooms were carpeted. These
things were part of the conditions of tenancy. He had never claimed
against parliamentary allowances for carpets, but could have done
so.
128. Sir Alan acknowledged that one could argue
that, like the offer to relinquish succession rights, the principal
offer to Dolphin Square tenants related to the tenant/landlord
relationship, which created obligations for which the House held
no responsibility. But, Sir Alan said, "…set against
it there would be the detriment of the greatly higher rent, and
the scale of the payment in the principal offer, which was beyond
what could be absorbed by the maintenance and other decorative
costs I was talking about."
129. Sir Alan acknowledged that since the House
paid the rent, the public interest was "in a sense"
engaged, in that he would not have had or needed the flat but
for the fact of being in the House and representing a distant
constituency. Sir Alan said that he would not have had the finance
to take on the flat otherwise. "But if the tenancy was
not there, the obligations would not exist. It is a fairly remote
argument. I rest my argument on the fact that the sum of money
relates closely to the obligations I had to meet, which in turn
generated costs some of which could be met from the allowances."
130. I asked if he thought there was a distinction
between a rented property - where the person had no interest in
the capital value of the property and where the only contribution
to the capital value was through the rent which was being paid—and
an owned property—where the person had an interest in the
capital and had contributed to that value either through their
initial deposit or through their mortgage repayments, or both.
Sir Alan replied that the latter could be recognised as a capital
gain arising from public funds.
131. Sir Alan said that if he had bought a property
in his early days at the House, with say a mortgage of £25,000
and a deposit of £4,000, as he had had the opportunity to
do, his mortgage interest would have been paid throughout the
period and by now he would have paid off the mortgage. He would,
he said, have a property "vastly in excess of the debt
I held." The increase in the value of his deposit could,
in Sir Alan's view, be computed—but the rest was only there
because the House paid interest on the loan.
132. By contrast Sir Alan said he had received
a very small payment from the tenancy. No rights were surrendered.
It would be "perverse" to ask for repayment if
repayment was not required on very large capital gains on property
for which the House had funded mortgage interest. "You
would have to take account of any rent not paid from public funds
in calculating liability to repay." Sir Alan later commented
on this section of the note of the meeting: "The public
purse did benefit, potentially, because of the use of the money
for costs which could have been met from the ACA." Sir
Alan did not feel uncomfortable with accepting the £5000,
for the reasons he had given me. He said, "Some people
were given advice from the House authorities that they were right
to accept the payments. And some people were taking large sums
as a basis for setting up a mortgage. So there was no basis to
feel uncomfortable."
133. Sir Alan said that he had explained why
it seemed right to him to take the £5,000. He was not enunciating
a general principle. It seemed to Sir Alan a proper use of money
to carry out obligations which could be met by further claims
on the allowances. He said he was satisfied that this was a good
purpose to use it for. The £5,000 Sir Alan received in January
2006 in respect of his flat was "still there. It is not
in a separate account."
134. Sir Alan explained that he had been unable
to carry out the work to his flat in the summer of 2008. He had
been taken to hospital from the flat in the week before he was
due to see the decorator. After 2008, Sir Alan said, the next
opportunity to do the work had been in the long recess of 2009.
Sir Alan and his wife had had the decorator in to do the bedroom,
bathroom, toilet and passageway to the kitchen. That left the
sitting room and small bedroom or storeroom. It had cost £2,765,
leaving some for the remaining redecoration. If the rest of the
£5,000 was not used up on that work, Sir Alan said, he would
renew the toilet floor covering.
135. Asked why he had not carried out the work
on the flat before 2008, Sir Alan said that it would have been
"pointless" to decorate before the kitchen refurbishment
in the summer of 2006. It would have damaged the decorations.
Asked why he had not done the work in 2006 and 2007, Sir Alan
said it was not material to the issue of principle. Sir Alan and
his wife had retiled the kitchen in 2006 and replaced the 1960s
cupboards. But, Sir Alan said, there were long periods of uncertainty
about the property.
136. Sir Alan said that he could not have done
the decoration in the same year as the retiling if he had charged
it to his ACA. "But most years I claimed a lot less than
I could have done." Sir Alan said that, since he had
intended all along to meet the redecoration costs out of the £5,000,
his argument was not affected by the fact that since July 2009
he would have been unable to claim for that redecoration on the
PAAE. He told me, "it made no difference to me."
Sir Alan described as "an ex post facto argument"
the point that, by the time he had this work done, the rules
did not allow for such claims. Sir Alan said he did not know that
the House would later come to that judgement. He had used the
Dolphin Square £5,000 to meet a combination of obligations
which could have been met from the allowances and those that could
not. Those included the cost of decoration which arose from having
the property. Sir Alan said "it is difficult to use this
argument [about the impact of the changes to the rules on
redecoration] when other Members were allowed to use money
received from surrendering the tenancy to enable them to take
out a mortgage. That requires a leap of imagination."
137. Sir Alan said he found the suggestion that
"you should draw on the ACA just so that people can see
how you spend your money" very odd. Using the ACA for
the redecoration would, Sir Alan said, have been "perverse
and resulted in a higher cost to public funds." The allegation
against him was that he had claimed costs which were not necessarily
incurred, or favoured his personal interest above the public interest.
Using the ACA for these works "would have had the effect
alleged." He said it would be "straining [the]
argument" to advocate giving the £5,000 to the House
authorities and still having the work done.
138. I recalled that Sir Alan had said earlier
that if there were a requirement to repay, it would have to take
account of any rent which was not claimed from public funds. I
asked Sir Alan to clarify for me whether that would apply to his
wife's contribution which was from the House of Lords allowances.
Sir Alan said he could not, and "Neither you nor I can
adjudicate on House of Lords allowances." Sir Alan then
commented on the idea that the full rent for the flat was indeed
met from parliamentary allowances, although not wholly from the
House of Commons. He said, "If you were to assert that
principle, it ought to be applied to a wide range of capital gains
including payments when a tenancy was bought out or the profit
from a mortgage funded by the House… Even the House cannot
make claims on sums which it didn't generate or cause to be paid."
139. Sir Alan said that he had not seen the guidance
on this matter prepared by the House authorities until I had sent
it to him with the Director of Operations' letter of 14 August.
He observed that only two Members had received it at the time,
and it dated from the end of 2005. No-one, Sir Alan said, had
seen that guidance until I had found it. He had refused monetary
compensation to buy out his tenancy. "If I had seen it
[the guidance] at the time I would have asked what advice it
provided to Members in my very different position."
Sir Alan said that when he had read it "…I thought
that it took insufficient account of costs, of the need to keep
down the costs of parliamentary allowances. It was addressing
quite large gains made by giving up the tenancy which is not what
I was doing. I assume that is because whoever wrote it knew the
sums around at the time. I cannot say what was in the minds of
the people who wrote it, but they did not communicate it to me."
140. Sir Alan said that, in respect of the charge
that his accepting the payment may have led to claims on the allowances
which were not necessarily incurred or may otherwise have favoured
his personal interest over the public interest, "…that
is demonstrably not the case. The money I received was a payment,
not a repayment to the Fees Office. The money was legitimately
received and I took a voluntary course of action in the way I
used it. There was no loss to public funds." Sir Alan
regarded as "not persuasive" the argument that
he was only put in the position of receiving the payment because
of the rent payments which he claimed from the House. "At
the time the costs of the redecoration could have been met from
my allowances." Sir Alan said that he had accepted the
payment on the understanding that it could be used to pay for
things he could have claimed, and that "There was no loss
to public funds."
141. Sir Alan wrote to me on 25 November following
the interview, providing more precise details of the timing of
the work on the flat, "…although it is my view that
the timing has no bearing on the issue, which, is, as you stated,
whether my actions may have led to claims on the Allowance which
were not necessarily incurred or may have favoured my personal
interest over the public interest."[240]
142. Sir Alan said that he and his wife had commissioned
the main part of the work on the kitchen in May 2006, but it was
not carried out until autumn 2006. This was followed by the tiling
of the kitchen, which was done in spring 2007. In May 2007 his
wife and he were "heavily engaged" in local elections,
and his wife was elected to the Borough Council as well as serving
on the County Council and serving as a Member of the House of
Lords. At the same time Sir Alan was serving not only as Chairman
of the Justice Committee (of the House of Commons) but also as
a member of the Intelligence and Security Committee "both
of which were very time consuming". This meant that "…for
a period we simply did not have time to get estimates and organise
the redecoration that summer, and there was no urgent need to
get the work completed that year. Therefore we planned to get
the decorating done the following summer, a plan which was disrupted
by my admission to hospital."
143. The timetable, Sir Alan said, would only
become relevant to the issue if I were seeking to adduce it as
evidence that, contrary to what he had stated, he did not intend
to use the £5,000 for decorating and other costs arising
from the tenancy. Sir Alan continued: "I trust that you
accept my evidence on this point, and the fact that the greater
part of the decorating has been done."
144. Sir Alan wrote to me on 2 December about
what he said was a procedural issue arising from our meeting on
24 November.[241] This
was that during our discussion, Sir Alan said, I had invited him
to answer two propositions which were different from the ones
originally referred to me, and did not lead to claims on the allowance
which were unnecessarily incurred or to the favouring of his personal
interest over the public interest. The two propositions were,
Sir Alan said, also mutually exclusive.
145. He suggested that the first proposition
had been that he should have claimed the decorating costs from
the allowance in the interests of transparency, having first remitted
a share of the £5,000 to the Fees Office. This would not,
in Sir Alan's view, have benefited public funds, and the fact
that he did not choose or even think of this option clearly did
not mean that he was favouring his personal interest over the
public interest. "My concern at the time related to what
was proper and justifiable."
146. The second proposition, Sir Alan said, was
that he should have changed his 2006 decision in 2009, to reflect
the fact that the House decided in 2009, as part of the interim
provisions prior to the report of the Committee on Standards in
Public Life, not to fund redecoration expenses. Sir Alan continued:
"Had I known that three years earlier, I could have chosen
to decline the £5,000, kept the succession rights, and claimed
the decorating costs from ACA. There would be no justification
at all for requiring me not to use the money for redecoration
in 2009 because of the choice I made in 2006 on the basis of what
I knew then. It was, of course, impossible to reverse the original
decision on succession rights three years later."
147. On 3 December I wrote to Sir Alan, noting
his suggestion that the propositions I put to him at our interview
raised a procedural issue since the two propositions were, in
Sir Alan's view, different from the allegation which I summarised
in my letter to Sir Alan of 4 June.[242]
I said that the reason I had put these propositions to him was
on account of the evidence which he had given to me in response
to the allegation summarised in my letter of 4 June.[243]
Where a Member provided such a response, I said that I believed
it was reasonable for me to ask questions relating to that response
which may be seen as relevant to my inquiry.
148. In his letter of 17 December the Director
of Operations in the Department of Resources noted that in his
letter of 9 November he had been able to confirm that Sir Alan
had abated many of his Additional Costs Allowance (ACA) claims
to take account of a contribution to the rent made by his wife,
Baroness Maddock.[244]
The Director said that, in each of the years 2004-05, 2005-06
and 2007-08, the Department's records showed that Sir Alan claimed
approximately £5,000 below the Dolphin Square rent. In 2008-09,
he said, Baroness Maddock's contribution would appear to have
increased to some £7,200. However, for 2006-07 Sir Alan's
Dolphin Square rent of £14,441 was paid in full from his
ACA.
149. The Director provided me with two tables.[245]
The first summarised Sir Alan's annual rental claims, the rent
payable and the total ACA claimed, noting that the Dolphin Square
agreement would seem to run from July to June, whereas the allowances
year was April to March. The second table detailed the individual
payments made and any annotations on the claims themselves. The
Director said that "Without further information available
to me, I am unable to answer the question posed in your letter
of 22 September [246]
whether Sir Alan's circumstances were such that he fell into category
(a) or (b) as identified in my letter to you of 14 August."
[247]
150. As noted above (paragraph 41) on 7 January
I wrote to Sir Alan, copying to him the above letter among other
items.[248]
151. On 14 January Sir Alan replied, saying that
the Director of Finance and Administration's memorandum of 1st
November 2005 "…makes clear beyond any doubt that
it is advice relating to tenants who accepted an offer to buy
out their leases, leading to shorthold tenancies at higher rents:
as you know I received an offer of £48,030 to do this, and
declined it."[249]
Sir Alan said that even though the advice was not relevant to
the decision he had taken he remained "surprised" that
no effort was made to circulate it to Members who were Dolphin
Square tenants, since the Fees Office knew which Members had made
claims relating to Dolphin Square addresses. He noted that it
was not published to Members in any form, and that the Director
of Operations had written that "it was not to be promulgated,
other than on request".
152. Sir Alan said he presumed that the correspondence
about how much his wife contributed to the rent arose from my
wish to confirm what he had told me in his letter of 14 September,[250]
and in earlier correspondence, to the effect that he did not fall
into category (a)—those Members whose rent had been paid
wholly from the Additional Costs Allowance (ACA). He continued:
"I should make clear that I was never asked or advised
about sharing the costs of the flat: the decision to do so, and
the decisions on amounts contributed by my wife, were entirely
our own—this was a voluntary arrangement we made because
it seemed to us to be the correct thing to do.
I should also point out that in the year
2006-7, my wife made her contribution by paying half the cost
of refurbishing the kitchen, instead of contributing to the rent."
153. I replied to Sir Alan on 18 January, telling
him that I thought I had now taken this as far as I needed, and
that I would incorporate his letter in the memorandum I was preparing
for the Committee on this inquiry.[251]
Rt Hon Sir Menzies Campbell MP
154. Sir Menzies Campbell wrote to me on 1 June[252]
He said that in 2006 he had been offered the sum of £38,000
by the Dolphin Square holding company to relinquish his lease.
He had declined that offer and retained the protected tenancy
and protected rent to which he was entitled until 2034. Had he
accepted the offer "there would have been a substantially
increased charge to public funds from the Additional Costs Allowance."
Thereafter he had been offered £5,000 to relinquish the
inheritance rights of his spouse in his lease. He had accepted
that sum and had used it to offset costs which he had incurred
in respect of his parliamentary duties during and after his period
as Leader of the Liberal Democrats. Sir Menzies concluded, "In
the light of the public interest there is with regard to the way
Members of Parliament have used their allowances, I would be grateful
if you would consider this a formal request for consideration
of the circumstances outlined and whether or not my decisions
were appropriate to my role as a Member of Parliament."
155. I wrote to Sir Menzies on 4 June and asked
him about the particular circumstances of his Dolphin Square lease,
in similar terms to my letter of the same day to Mr Barrett.[253]
156. With his reply of 24 June[254]
Sir Menzies enclosed a copy of his lease from the landlords of
Dolphin Square, together with the documentation relevant to the
compensation offered by them in return for discharging certain
rights. He pointed out that he had been offered and had declined
the sum of £38,000 to relinquish his protected tenancy and
protected rent as a long standing tenant. Sir Menzies said he
had declined that offer because an inevitable consequence of doing
so was that his reliance on public funds from the Additional Costs
Allowance would increase, either because he would require to seek
new premises at an increased rent, or if he remained in Dolphin
Square, he would require to pay an increased rent reflecting not
protected status but market value. A third option which Sir Menzies
said he had rejected was to accept the sum of £38,000 and
use that amount as a deposit for the purchase of a property with
a mortgage which seemed likely to be in excess of his protected
rent. Sir Menzies said he had done this last because, although
he understood this then to be and still to be within the rules,
he had always had "personal reservations about the notion
of a capital gain arising in such circumstances".
157. Sir Menzies said he was offered and accepted
the sum of £5,000 in return for the discharge of certain
rights to succession mainly in favour of his wife and arising
out of his protected tenancy. No increased charge to public funds
arose as a result of that decision, Sir Menzies said. He had taken
the view that this was a discharge of a personal legal right at
market value which accrued to him personally as a result of the
tenant/landlord relationship. The right had arisen irrespective
of the funding of rent and from a contractual relationship containing
mutual obligations. "If, for example, Parliament were
to determine that MPs should no longer receive financial support
for rent I would still be personally bound by the terms of the
lease and obliged to implement the tenant's obligations under
it..."
158. Sir Menzies said he had been a tenant of
"what is effectively a bedsit apartment since approximately
1989" and during that period had made appropriate claims
for the full rent paid during that period from the ACA. Apart
from occasional visits by his wife no other person had occupied
the premises but himself since then. The rent payable was contained
in the documentation now released by Parliament and at that date
amounted to approximately £700 per month.
159. Sir Menzies had given "careful consideration
to the offer and in particular the fact that my acceptance of
it did not result in any increase in the charge to public funds.
My analysis was as set out above i.e. that this was a personal
right arising out of the mutual obligations between landlord and
tenant. I did not feel it necessary to consult the House authorities
nor did I supply them with any documentation." He had
taken the view on the foregoing analysis that there was no conflict
between public and personal interest and that he had been entitled
to view this matter as he did "since there was no increased
charge to public funds and the discharge of rights was at what
I understood and accepted was market value." Sir Menzies
told me he had used the sum received to defray expenses which
might otherwise have been charges against other allowances. He
was "confident that I have made no profit from the sum
of £5,000 since it was received."
160. I wrote to Sir Menzies on 29 June[255]
and asked him whether he had seen the advice from solicitors which
was prepared for residents of Dolphin Square in connection with
the offer from the new landlord and, if so, what account he had
taken of it. I also asked for a more detailed indication of the
items (and their value) which he considered he might have claimed
for against parliamentary allowances but which he had chosen to
purchase out of the payment of £5,000 without making such
a claim, together with any receipts, and what claims he had actually
made against the ACA in each of the financial years in which he
had deployed the payment of £5,000 for items he would otherwise
have claimed from that allowance.
161. Sir Menzies replied on 15 July.[256]
He told me that he had searched his papers but did not appear
to have any relevant documents other than those he had already
supplied to me. If advice from solicitors was sent to all Dolphin
Square tenants in connection with the offer from the new landlords
it was a "reasonable inference" that he had seen
it. Sir Menzies could not now recollect the terms of any such
written advice in the absence of a copy of it. He said that since
the landlord's offer of 3 October 2005 superseded any prior exchanges
it might be that he had disposed of the advice once he had received
and accepted the offer, but Sir Menzies said that this was "supposition"
on his part.
162. Sir Menzies said that he had no receipts
for expenditure incurred in respect of items which might have
been claimed against parliamentary allowances but which he had
chosen to pay for out of the £5,000 Dolphin Square payment.
He had not, he said, anticipated a requirement to produce them.
But he had avoided making claims for items which would under the
rules then applicable have been allowable. For example, Sir Menzies
had made no claim for petty cash for his offices either in London
or his constituency. He had claimed only once in the four years
for which claims had now been published for a TV licence. He had
rarely claimed for window cleaning, and never for the cost of
cable television supplied to his flat. "There were occasions
at night after the House rose when I took taxis to Dolphin Square
but did not claim for them."
163. Sir Menzies attached a schedule showing
his ACA claims in the four years for which publication had now
been made, together with the provisional figures for 2008-09 which
had not yet been published. He observed that with the exception
of 2007-08 he had "consistently claimed well below the
maximum allowable. I hold the unredacted claim forms and supporting
documentation and I should be happy to make these available to
you." His ACA claims had been as follows:
| Year | ACA claim
| % of maximum | Ranking out of all Members
|
| 2001-02 | £13,686
| 76 | 463rd
|
| 2002-03 | £12,098
| 61 | 570th
|
| 2003-04 | £16,450
| 81 | 423rd
|
| 2004-05 | £15,071
| 71.6 | 487th
|
| 2005-06 | £10,963
| 50.7 | n/a
|
| 2006-07 | £16,667
| 75.4 | 475th
|
| 2007-08 | £22,570
| 98 | 258th
|
164. I sent Sir Menzies on 16 July[257]
a copy of the solicitors' advice. Sir Menzies wrote back on 21
July[258] to say that
having read it he now recalled having seen it at the time. He
had no immediate comment to make on its relevance to his decision.
He noted that the advice confirmed his previously expressed view
that that the lease between himself and the landlords contained
mutual rights and obligations on both parties which subsisted
irrespective of whether parliamentary allowances were paid or
not.
165. On 7 September, as explained above, I wrote
to Sir Menzies attaching my correspondence with the Department
of Resources and asking for his comments.[259]
I also sent him a letter on 23 September with a copy of Mrs Humble's
letter of 18 September.[260]
166. At his request, I interviewed Sir Menzies
on 10 November.[261]
He made an initial statement in which he began by saying he wanted
to look me "straight in the eye and explain that [he]
had acted in good faith." He said that the explanation
he had produced in his letter of 15 July was not "ex post
facto". When the issue of the Dolphin Square payment
arose he had considered all the aspects and had come to "a
considered and careful conclusion." Sir Menzies said
he had felt that there was no additional charge to public funds;
he had turned down £38,000 but regarded the smaller payment
as a part of the contract between himself and the landlord, which
arose irrespective of the nature of funding. If the House of Commons
had resolved that no further support for claims for second homes
would be offered, Sir Menzies said that he would still have had
rights and obligations as set out in his rent agreement.
167. Sir Menzies said that the money went into
his account and that it was used up in whole or in part by not
making claims for elements that were at the time legitimate, such
as petty cash in London and in the constituency. £250 per
month was allowed for petty cash, but Sir Menzies said that he
had never made claims for this. Sir Menzies added that there
was also: his TV licence, for which he claimed only once in four
years; window cleaning, then a condition of his tenancy, but for
which he only claimed once or twice; his home phone, for which
he did not claim; his office in his home, for which he never claimed
for the heat and light; and taxis: "I often did not claim
for these, in effect through indolence".
168. Sir Menzies referred me to the schedule
showing the level of his claims.[262]
"You will see that I am rarely above number 400 in the
'league table'—except when I had substantial renovations
made to my flat. After twenty years I thought these were justified.
I had the authority of the Fees Office to proceed."
He explained that the succession right on his flat was a personal
right he was giving up. There was no question, he said, of an
additional charge on public funds. The money released was applied
to expenses which he was otherwise able to claim for.
169. Sir Menzies told me that he had seen Mrs
Humble's letters and had no reason to doubt her account. "It
was credible and consistent with the sort of advice that was being
given. If I had made an enquiry it is reasonable to suppose that
I might have been given the same advice. But there were large
numbers of Members in Dolphin Square and no effort was made to
issue general advice on this."
170. Sir Menzies said that he had accepted the
£5,000 "because it was the discharge of a personal
right. A parallel might be the capital gain from the sale of a
property." Concluding his opening remarks, Sir Menzies
noted that Sir Thomas Legg had not sought the refund of this payment,
nor had the Speaker authorised him to do so.
171. Sir Menzies confirmed to me that, in the
autumn of 2006, he had been offered £38,000 by the new Dolphin
Square holding company to relinquish his lease on his flat there.
He declined that offer and so retained his protected tenancy:
his own tenancy and rent were protected until 2034. But Sir Menzies
had accepted £5,000 to relinquish the inheritance rights
of his spouse. He had acted in this way because he considered
this a private matter with no detriment to the public purse, and
because it gave rise to no increased charge on public funds. Sir
Menzies had used the sum he received to defray expenses which
he could otherwise have claimed against other allowances. He did
not think it necessary to consult the House authorities and so
was unaware of their views on this matter. Sir Menzies enjoyed
a personal right which he had been invited to discharge in return
for market value, the value which the landlord placed on that
right.
172. When asked whether that argument also applied
to the principal offer which he had rejected, Sir Menzies replied:
"That offer was for a substantially greater sum. That
would have resulted in an increased charge to public funds. If
I had accepted the payment I would have had to pay a market rent
in Dolphin Square; or I could have moved to another rented property
or I could have used it to pay for a deposit on a property. I
would have received a much larger sum of money."
173. Sir Menzies continued that the right to
compensation did not exist at law. Nothing in his lease, he said,
entitled him to £38,000. It had been, in his view, compensation
for giving something away, not for the discharge of a legal right.
It was designed to persuade people to give up something they could
have held on to.
174. Outlining the background, Sir Menzies said:
"The premises had begun to show their age, but in view
of the tenants they had I was not surprised that the terms offered
by the trustees contained protection of that kind for them. Some
of the tenants had limited means."
175. Sir Menzies agreed that the principal offer
raised the question of a conflict between his public and personal
interest. There could, he said, have been three possible consequences
of the payment of the principal offer sum, each of which would
have increased the charge on public funds. Sir Menzies could
have stayed but paid a market rent; he could have moved to a flat
elsewhere and paid more, or he could have used the reimbursement
of mortgage interest to acquire a property.
176. On the question of the principle involved,
Sir Menzies told me "Let us say that if there is no public
loss, that is persuasive that no public interest is involved."
He had never considered taking the £38,000 in the principal
offer and trying to move to a cheaper flat. "It would
have been impossible to get a cheaper flat. I doubt I would get
even a bedsit in SW1 for less. I have just one room plus a bathroom
and kitchen."
177. Sir Menzies recalled that he had been in
the House since 1987. If he had had a 20-year mortgage with interest
paid by the taxpayer, it would have been paid off by now. "If
I had been inclined to maximise value for my personal financial
benefit then I could have done so. But renting was convenient
and Dolphin Square was convenient. It suited me. My room is the
size of a small hotel bedroom, but that is all right because my
wife came down only a little."
178. It would, in Sir Menzies' view, have been
wrong to decide to take the opportunity to move elsewhere in London
and pay more for that flat, although the ACA would have allowed
him to put in a larger claim within the ceiling. He said that
there would in that case have been additional cost to the public
purse which was not justified. This relationship between landlord
and tenant was, said Sir Menzies, either a private matter, "in
which case it is no business of the House; or in the alternative,
if it is not, I say that I am serving the public interest."
He said he had been offered the £5,000 because of his status
as a tenant. The funding he had received from the House could
have been withdrawn at any time. If he had lost his seat the mutual
rights and obligations of landlord and tenant would have continued.
"The House was not in the position of tenant; the House
had no interest in the lease and the House would not have stood
behind me."
179. Sir Menzies said he had obtained value for
the discharge of a legal right. If he had kept the right, he would
have retained an advantage. "The succession rights were
personal to me. They did not belong to the House. I paid rent
on the basis of the agreement I had entered into." Sir
Menzies had assumed the £5,000 was market value, but he could
not ask around to find out. "I suppose I could have held
out for £10,000 or £15,000—but there were no comparables."
180. In Sir Menzies' opinion, he told me, it
would be incongruous if the gain from a mortgage were to be permissible
but not that from this secondary right. "I started with
the inhibition that I would not take out a mortgage. I did not
want to enter the property market in this way. It was my inhibition—not
that of others." It was "incongruous that this
is where it has brought me, while others have acquired valuable
assets in a rising property market."
181. Sir Menzies said that he did not think he
could see any distinction between a Member benefiting financially
from a property on which parliamentary funds had met the rent
and in which they had invested no capital, and a Member benefiting
financially from capital appreciation, having had their mortgage
interest paid but having themselves made a capital contribution
to the property.
182. Neither would it make a difference, Sir
Menzies told me, whether the rent had been paid in part or in
full from public funds. Asked whether payment of rent from public
funds should make a difference, Sir Menzies said: "Perhaps
I spoke hastily. It was a novus actus. I was influenced
by the relative size of the sums. I can't remember my thought
process very clearly, but I thought £38,000 was too much
and £5,000 was not enough to raise a question. The payment
was for a discharge of my right under the lease."
183. On the question of the Department's advice,
Sir Menzies observed that there was a "conflict with the
credible accounts given by Members about the advice received,
and what the Director says would have happened had I asked for
advice. Let us remember that the performance of the Fees Office
has been under review. It may be that the individual Mrs Humble
spoke to decided to go his own way."
184. Sir Menzies then said that Dolphin Square
was spoken of as if it were "a luxurious block. It is
not. It is a 1930s Cubitt building—it doesn't compare with
luxury apartments in other parts of London."
185. Asked why he had not claimed against his
allowances for the costs on which he spent the £5,000, Sir
Menzies replied: "I didn't keep receipts. I am not very
good at writing everything in a notebook. It was more convenient
to do it this way. For example, if I was taking account of the
use of the phone at home I would have to have had two bills."
When asked whether it was not a disadvantage that there was no
audit trail to show how the money was spent, Sir Menzies said:
"Well, it depends if you accept my word." There
were, he said, quite a few expenses directly relevant to being
an MP which never appeared among the published expenses. "We
are down here for 30 weeks of the year; we are not just sent here
for three days at a time. Many people do not understand that."
186. Sir Menzies denied that he had used some
of the £5,000 to defray some of the costs of the office of
Leader of the Liberal Democrats, but he said that "…whereas
the Leader of the Official Opposition has a car and so on, the
Leader of the Liberal Democrats has no salary above his salary
as an MP. Chairs of Select Committees get more: about £14,000.
We rely on Short money to fund the office. I didn't use the money
to pay for the Liberal Democrat leadership, but I had greater
parliamentary expenses." He did not personally profit
from the £5,000. It was legitimately spent on things he could
have claimed. MPs had other expenses which they incurred in the
course of their work but for which they could not claim. "For
example, we are at the top of every charity subscription list.
Other expenses are paid but not these. Some expenses are 50:50
parliamentary/party political. The distinction is not always clearly
drawn. For example, the Communications Expenditure. We are preparing
an Annual Report in my office just now. It can be hard to see
where the line is drawn."
187. Asked for his view of the argument that
since it was solely his parliamentary allowances that generated
this payment, he could properly be reproached for not having paid
it over to the Fees Office, Sir Menzies responded: "I
accepted it in good faith. I was offered the payment because I
was a tenant. The funding of the rent was a different matter in
my view." He continued that there was "an incongruity".
It was "no secret that substantial numbers of Members
were living in Dolphin Square, and only six referred themselves
to you. It would have been straightforward for the Fees Office
to ascertain who was in Dolphin Square at the material time and
to take the opportunity to issue general advice."
188. As noted above (paragraph 41) on 7 January
I wrote to Sir Menzies, copying to him correspondence relating
to the source and nature of the instructions received by the Directorate
of Finance and Administration about the Dolphin Square offers.[263]
189. Sir Menzies replied on 21 January, saying
that the letter sent to two Members of the House on 22 November
2005 clearly dealt only with the situation where monetary compensation
has been offered to "buyout existing tenancies",
and did not appear to cover the situation where a sum had been
tendered to compensate for the discharge of legal rights, which
was the position in his case.[264]
He also said that the Director of Finance and Administration's
memorandum of 1 November 2005[265]
was consistent with the letter to two Members of 22 November 2005,[266]
in that it referred to the buying out of tenancies "and
makes no reference to legal rights."
190. Sir Menzies also observed that "no
explanation is offered as to why the purported advice was not
circulated to all Members who were known to the Fees Office to
be Dolphin Square tenants as would have been clear from their
claims against the ACA. If this matter was thought significant
it is difficult to see why this was not done."
191. I wrote to Sir Menzies on 25 January 2010,
telling him that I thought I had taken the matter as far as I
needed and that it would be right to bring it to a conclusion.[267]
I said that I would now, therefore, include his letter in the
Memorandum I was preparing for the Committee on Standards and
Privileges.
Ms Sandra Gidley MP
192. In her letter, which I received on 8 June,[268]
Ms Gidley said that in 2006 she had been offered approximately
£18,000 from the Dolphin Square holding company to relinquish
her lease. Ms Gidley said that she had accepted this sum, declared
it to the Inland Revenue and used a proportion of the money to
cover moving costs and pay deposits on her next flat. It had been
clear that the rent on the Dolphin Square flat would rise to an
unaffordable level and there was no option to move to a smaller
flat within Dolphin Square. Ms Gidley said that she had moved
to a rented, furnished flat with a lower rent which was more sustainable
in the long term. Her thinking at the time was that, "…if
I kept the money, I was acting no differently to those MPs who
had bought property, used ACA to pay mortgage interest, and then
sold at a profit and kept said profit." Ms Gidley asked
me if I would consider her letter a formal request for consideration
of the circumstances outlined and whether or not her decisions
were appropriate to her role as a Member of Parliament.
193. I wrote to Ms Gidley on 8 June and asked
her about the particular circumstances of her Dolphin Square lease,
in similar terms to my letters of 4 June to other Members.[269]
194. In her reply of 29 June[270]
Ms Gidley said that these events occurred in 2006 and she had
since discarded some of the paperwork she had at the time, as
she had regarded the matter as a closed one. Ms Gidley noted that
my letter quoted from the Green Book. Unfortunately, she said,
"whilst the Green Book covers what is permissible under
the expenses rules it does not deal with the situation that inhabitants
of Dolphin Square found themselves in when offered a payment to
surrender their tenancies."
195. The background to Ms Gidley's particular
set of circumstances, she said, was that she had first moved into
Dolphin Square in July 2000. The first flat was, she said, "very
tiny and noisy so I moved to a larger, better located flat in
October 2002. During the final year I was there my rent was £4,625
a quarter (equivalent to a monthly rent of £1,542) and I
felt that this was at the upper limit of what was affordable.
The full rate was claimed against the ACA." Ms Gidley
recalled that "had I stayed, and not accepted any payment,
the rents would still have risen at a rate greater than inflation.
From memory, the 'fair rent' scheme did not apply to my
tenancy and the landlord would be entitled to apply for an immediate
update and this could be reviewed every two years. Whilst there
was some protection with staying in the Square and signing something
called Option B the projected rents still represented a significant
increase on what I had been paying."
196. Ms Gidley said that as she felt that this
was "unsustainable" she rang the Main Office
at Dolphin Square and asked whether there was any chance that
she could move to a smaller flat within the complex. "I
had always found Dolphin Square very convenient as a number of
colleagues lived there and it was handy for sharing taxis after
a late vote etc. I was told that moves had been frozen and the
only way that I could proceed was to go through the offer process
and then move." At the time, Ms Gidley told me, they
made it very clear that there was no option to keep her protected
lease and then move within the Square at a later date unless she
was prepared to pay the higher rents that would then be in operation.
Ms Gidley said that she had then decided to investigate other
rental options in order to compare rents and see what was available
as there "seemed to me to be little point in moving if
I could not find an acceptable flat at a lower rent. Ultimately
I moved to a slightly smaller flat half a mile away in …
The rental for this was £1,517 per calendar month."
197. Ms Gidley said that this might not
immediately seem like a large saving but there were a number of
points that needed to be borne in mind: "The rental agreement
was fixed for two years and over a period of time this represented
a substantial saving; the flat was furnished, so the only extra
expenses I would have to incur would be rates, utility bills etc.;
the flat also had its own laundry facilities so I did not have
to incur laundry bills; the flat was also on good public transport
networks. This reduced the cost to the public purse as there is
little need to use taxis when attending engagements."
198. In effect, "because of the future
financial implications of staying at Dolphin Square",
Ms Gidley felt she had "little choice" but to
accept the offer of £18,751 to surrender her tenancy. In
effect she had to sign a Deed of Surrender, relinquishing the
rights to her tenancy and she also had to offer full vacant possession.
199. Ms Gidley said that other options available
at the time included Option B which was to stay in Dolphin Square.
She believed that there was also another option which would have
enabled her to stay for an extra year but would have offered her
a similar cash amount for leaving after a year. As her rent would
still have increased in the short term she did not feel that this
"was an option that was open to me". Ms Gidley
said that the Fees Office were aware of the move because
she had to provide a new rental agreement, but no moving costs
were borne by the tax payer. She had had to put down various deposits
for the flat she was moving into, and this was approximately equivalent
to 10 weeks rent. Ms Gidley had funded this herself and also the
purchase of a few small items she needed for the flat when she
moved in. The only claims she had made for the new property were
rent and utility bills.
200. Ms Gidley said that "the offer was
obviously the subject of much discussion with colleagues and the
consensus seemed to be that this payment was a property related
offer, payable for giving up certain rights as a tenant. I certainly
believed that there was no difference between taking money under
these circumstances [and] a Member of Parliament downsizing
his ACA funded flat and using the profit for whatever purpose.
In short, the rules do not deal with this sort of situation."
201. Ms Gidley said that in effect the public,
and what could be perceived as private interests, did not conflict
as the rent paid for under the ACA had actually decreased and
she had funded the costs of the move and the deposits. Ms Gidley
said that there had been no mechanism for paying money back and
if this money should have been returned to the Fees Office she
believed there would then be a "question mark over every
MP who has made a personal profit on an ACA-funded property transaction
and questions would need to be asked whether it is a matter of
public interest that those monies should be returned. Indeed,
if I had left Dolphin Square and refused the payment the taxpayer
would have borne some of the moving costs."
202. It was almost impossible, Ms Gidley told
me, for her to say how she deployed the money from Dolphin Square.
She had paid the moving costs and deposits and the rest of her
money went into the bank. "I did not account for it in
a separate credit line! I can also recall buying a new computer
and camera at the time—which are used for parliamentary
purposes but were not claimed against any allowance." Ms
Gidley said that "In reality I regard this as an entirely
separate matter but it is the case that there have been a number
of parliamentary related costs, over the years, that I have funded
from my own purse."
203. Ms Gidley listed some of the costs. She
had moved office in 2002 and the IEP ran out in January of that
year. For two months she had paid all the office costs out of
her own purse—"to the tune of over £2,000."
During the 2005 election Ms Gidley had had to fund her rent
out of her own pocket; the Dolphin Square tenancy agreements were
not such that Members could easily end and restart a tenancy when
there was an election. This sum had been over £1,500. During
the years 2006-07 and 2007-08 Ms Gidley had paid over £330
per month, out of her own salary, into her staffing budget. The
total had been nearly £8,000. Ms Gidley frequently paid
staff intern costs out of her own pocket. She had funded the costs
of defending a politically motivated legal case in 2005. This
had cost her over £3,000. In addition she regularly supplemented
budgets for office stationery etc. There were also "a
number of incidental expenses related to being an MP"
of £100 to £200 a month.
204. I wrote again to Ms Gidley on 1 July[271]
enclosing a copy of the legal advice prepared for tenants, and
asked whether she had seen that advice and considered it at the
time, and whether Option A: Cash and Go was the offer she had
accepted. I asked, in view of her statements that the "fair
rent" scheme did not apply and that under Option B the projected
rents represented a significant increase on what she had been
paying, whether the offer made to her under Option B was materially
different from that made to other Dolphin Square tenants. I also
asked whether she had consulted the Fees Office about the offer
which was made to her by the new estate owners before she decided
to accept it, and if so, with what result.
205. Ms Gidley replied[272]
on 14 July. She said she could recall seeing a copy of the Report
to the Residential Tenants of Dolphin Square produced by the advisers.
She said that some of the information therein was duplicated in
the offer booklets which were later produced. She said that she
did not read the document fully and that the reason for this was
worth putting into context. "Over the period of several
months Dolphin Square Tenants had received many large documents
from a range of interested parties and it was impossible to keep
up with them and the day job."
206. Ms Gidley had taken the Cash and Go option.
She had wanted to reduce her rent and had not been allowed to
move to another flat in the Square. She said she believed she
had also been made an offer under option B. The terms would have
been similar but the financial breakdown I had provided seemed
to be for a flat with a lower rent. Ms Gidley said that there
had been a wide range of properties in Dolphin Square and about
24 pricing bands and her rent had been in one of the most expensive
bands. Ms Gidley said "I did not consult the Fees Office
about the offer itself. As I said in my earlier letter I did not
see any difference between taking the money from this offer and
a colleague with an ACA funded mortgage profiting from a property
move."
207. On 7 September, as explained above, I wrote
to Ms Gidley attaching my correspondence with the Department of
Resources and asking for his comments.[273]
I also sent her a letter on 23 September with a copy of Mrs Humble's
letter of 18 September.[274]
208. Ms Gidley wrote to me on 12 October, saying
that she had no reason to doubt Mrs Joan Humble's account of events
and that she believed Mrs Humble "would have made a different
decision if she had been given the advice which the Fees Office
claims was issued." [275]
Ms Gidley reiterated her view that "I regarded this
unexpected payment as falling into the same category as a Member
profiting from a property sale. Given that the advice from the
Fees Office has significant implications on all MPs with a mortgage
(if followed through to a logical conclusion) I am surprised that
the advice was not issued more widely at the time." Ms
Gidley said that the Director of Operations in the Department
of Resources had not answered my question with regard to whether
any consideration was given to making the advice more widely available.
Neither did the Director comment on the analogies that were drawn
between this payment and profit from a house sale, the mortgage
interest of which had been paid by the ACA. "There cannot
be one rule for rentals and one for house owners."
209. Ms Gidley said that the Director of Operations
had claimed he was confident that no advice was offered by the
Department other than that he outlined. Ms Gidley said the Director's
"confidence appears to be misplaced and he has not outlined
which members of staff the information was communicated to, how
it was communicated and what mechanism was in place to make sure
the staff had actually read it. Shouldn't there be an audit trail
available for this?"
210. Ms Gidley said that the situation was somewhat
ironic "as I intentionally rented a flat as I was uncomfortable
with the idea of personally profiting from a property funded by
the taxpayer. The Dolphin Square offer caused me a personal dilemma
as I had planned to move anyway." As part of the money
had been paid in tax and part of the money was used to fund her
move to a lower rental flat Ms Gidley had felt that the overall
burden on the taxpayer was lessened. If she had refused the payment
or stayed in her flat either of these options would have cost
the taxpayer several thousand pounds more overall.
211. On 19 October, I wrote to Ms Gidley, saying
that in view of the references in her 12 October letter to the
Department of Resources, I was copying it to them for any comments
they might wish to make.[276]
The same day I wrote to the Director of Operations in the Department,
enclosing a copy of the letter of 12 October from Ms Gidley and
noting that she had raised the following issues: why the advice
from the Department had not been made more widely available; the
analogies drawn between these payments and profits from house
sales; and the suggestion that there should be an audit trail
for the dissemination in the Department of the advice that the
Department had prepared.[277]
212. Ms Gidley sent me an email on 3 November,
referring to "the advice 'given' by the Fees Office."
She said that she "had not appreciated that this advice was
only issued on the 22nd of November, which was only three days
before the final deadline for making a decision with regard to
the lease" [278]
Ms Gidley continued, "Some MPs may well have made a decision
and already signed by that date although I have to say that I
waited until the final day before signing,"
213. I wrote to the Director of Operations in
the Department of Resources on 4 November, enclosing the email
of 3 November from Ms Gidley.[279]
I asked the Director to take account of Mrs Gidley's latest point
in relation to the timing of the guidance the Department prepared
in responding to the various comments made by Members.
214. In his letter of 9 November, the Director
of Operations in the Department of Resources said that Mrs Gidley
appeared not to have contacted the Department in 2005 about this
matter.[280] However,
he confirmed that the managers of the relevant sections were aware
of the position on the Dolphin Square offers "and an 'audit
trail' is available."
215. On 11 November I wrote to Ms Gidley, enclosing
an extract of the Department's letter of 9 November, which responded
to the points Ms Gidley had made.[281]
I said that I was asking the Department to let me know the source
of the instructions to use the guidance on the offer, to which
the Director had referred in his letter . [282]
216. As noted above (paragraph 41) on 7 January
I wrote again to Ms Gidley, copying to her the Director's response
to my questions about the instructions received on the Dolphin
Square offers.[283]
217. Ms Gidley replied by email on 21 January,
noting the memorandum from the Director of Finance and Administration
and the Director of Operations' remark that it was his "very
clear recollection that the instruction to my staff and me was
that the guidance was to be made available to Members who sought
advice: it was not to be promulgated other than on request".[284]
218. Ms Gidley said that she was "surprised
that this instruction was not also in writing and was communicated
verbally and I am very curious to know the reasoning behind this
decision." Ms Gidley then noted that the 22 November
2005 letter to the two Members referred to the "potential
awkwardness" of the situation whereby public money (ACA)
had been used to meet past rental costs either in part or in full,
as well as stating that "it would be inappropriate to
gain a personal benefit when the rent has been paid wholly from
the public purse".
219. Ms Gidley commented that "It would
be difficult to quibble with this statement were it not for the
fact that it is/was widespread custom and practice for Members
to purchase a property using an interest-only mortgage. In these
cases there have never been any perceived problems with Members
trading down and realising equity in their property. I struggle
to see the philosophical difference between the two situations."
220. Ms Gidley then noted the statement in the
Director of Finance and Administration's memorandum about the
propriety of Members taking the cash in circumstances where the
rent had been paid wholly from the ACA. Ms Gidley commented: "If
this principle is all important I do feel that all Members should
have been issued with this general guidance as the 'judgement'
affects a much wider cohort of MPs than those who lived in Dolphin
Square. The only difference between Members profiting from a property
funded by a mortgage paid for using ACA and Dolphin Square tenants
accepting the payments is that Members with a mortgage made their
arrangements in the full knowledge that they would directly, financially
benefit from a future property sale. Dolphin Square tenants could
not have foreseen the potential payout. I therefore do not see
why they should be subjected to a different set of principles,
compared to those who have, with the approval of the House, profited
from a taxpayer-funded mortgage."
221. I replied to Ms Gidley on 25 January, telling
her that I thought I had taken this as far as I needed and that
it would be right to bring this matter to a conclusion.[285]
I said that I would include her email in the Memorandum I was
preparing for the Committee on Standards and Privileges.
Mr Paul Holmes MP
222. I received a letter from Mr Holmes on 10
June.[286] He said
that in 2006 Westminster Council had brought to an end the 70-year-old
Housing Trust at Dolphin Square by selling its share to an American
property development and management company. Mr Holmes said that
"This commercial company set about turning the 1,000 flats
into a commercial venture and offered all tenants varying degrees
of compensation." The company also reduced maintenance
and security staffing, and increased rents to commercial levels.
Mr Holmes had accepted £9,440, upon which he had immediately
paid Capital Gains Tax.[287]
Mr Holmes said that he had then moved out of Dolphin Square to
a cheaper temporary let some miles away across London. "After
six months—and having found nowhere cheaper in the vicinity
of Westminster—I moved back to a smaller, cheaper flat at
Dolphin Square. Only in 2008-09 has the rent I pay begun to approach
commercial levels for the first time in the eight years I have
been an MP."
223. Mr Holmes observed that ACA rules allowed
MPs to use the money to pay interest on a mortgage and later sell
that property "at great personal profit." He
said that he had never, in eight years, set out to do this. "No
one in 2001 knew that a 70-year-old Housing Trust would be closed
down some years later by the actions of Westminster Council. The
windfall payment from an American Property Company seemed to me
to be exactly the same as the windfall payments I received many
years ago when the Halifax Building Society turned itself into
a bank and paid money out to its members." Mr Holmes
said he would be grateful if I would consider his letter a formal
request for consideration of the circumstances outlined and whether
or not his decisions were appropriate.
224. I wrote to Mr Holmes on 10 June and
asked him about the particular circumstances of his Dolphin Square
lease, in similar terms to my letters of 4 June to other Members.[288]
225. In his reply of 3 July[289]
Mr Holmes said that in March 2006 he had been renting a one bedroom
flat in Dolphin Square, at a monthly rental of £1,198. "I
had occupied this flat since October 2001. Dolphin Square had
been built and run as a Housing Trust since the 1930s, offering
lower cost rented accommodation than would otherwise be found
in Central London/the Westminster area, for those who had to work
in the area. For me it was very convenient as it was 20 minutes
walk from Parliament and I was able to move in quickly as a complete
stranger to London."
226. Mr Holmes said that by the time he became
a tenant, rents were still lower than the usual market rents in
the area, but were nearer to commercial prices than they had been
for earlier or longer standing tenants. Tenancy agreements by
2001 were he understood different in other ways to earlier ones—not
including for example the right to pass tenancies on to children
and including a requirement that the flat was not the tenant's
main residence but only occupied for a limited number of nights
or days per year. The flats were very basic; kitchen and bathroom
fittings in his flat were for example basic and elderly. Communal
corridors and access ways were shabby and in need of decoration
and recarpeting. He could of course, at any time in 2001, 2002,
2003, 2004, 2005 and 2006 have moved to higher rental, more upmarket
flats in the Westminster and wider area. He did not do so and
thereby cost the taxpayer between £2-3,000 less per year
(£10-15,000 over 5 years) in rental than he could have chosen
to do so. He could, alternatively, at any time have bought a
property (using ACA to pay mortgage interest, legal fees, moving
fees and so on), a property which he would later be able to sell
at a large personal profit. Mr Holmes commented that "The
majority of MPs follow this option."
227. However by 2006 Westminster Council had
sold out its share in the Housing Trust to a USA based Property
Development Company. This ended a 70 year old Housing Trust—an
eventuality which no one could have foreseen when he had moved
to Dolphin Square in 2001. Mr Holmes said: "This company
came with a 'bad press' about their intentions and what
they had done when they took over a similar block of flats in
Paris. They offered a payment to all tenants to either leave or
to stay but with rents increasing to commercial levels. A third
alternative was to stay with rents at a lower than commercial
level for 10 years (and, as I say, tenants of longer standing
than I, had much more favourable rents and tenancy agreements)."
The company, said Mr Holmes, had reduced staffing, maintenance
and security, and they did he commented, "try to further
change the ownership arrangements for the flats (allegedly so
they could start to sell rather than rent them), a legal move
they abandoned only very recently immediately prior to a court
case."
228. Mr Holmes said that the company had reduced
"casual parking" to seven places for 1,000 tenants
and visitors and doubled the charge. He said, "Their payout
was therefore also compensation for considerable inconvenience
to existing tenants, changes in tenancy agreements, reductions
in staffing, security and maintenance, as well as to allow for
future more commercial rent levels." Mr Holmes said he
had decided that the takeover by the company in 2006 was "a
good time to move to more satisfactory accommodation".
He accepted their terms (£9,950 on which he paid £460
Capital Gains Tax) and moved out "with no intention of
returning."
229. From April 2006 to September 2006 Mr Holmes
took a temporary short term let at another location in London
at £1,000 per month. Mr Holmes said that this saved a total
of £1,188 over six months, compared to his previous rent
level at Dolphin Square. However having spent the summer of 2006
looking at alternatives that were close to Westminster Mr Holmes
could find nowhere that was as convenient and/or not at a much
higher rent. With his temporary let running out and the new Parliamentary
year approaching he said he therefore moved back to a smaller
and cheaper flat at Dolphin Square. From September 2006 to September
2007 Mr Holmes rented a smaller one bed flat at Dolphin Square,
for £1,083 per month. He said that this saved £1,280,
plus rent inflation, over 12 months, compared to his previous
rent level at Dolphin Square.
230. From September 2007 to September 2008 Mr
Holmes' rent at Dolphin Square increased to £1,245 per month,
"which with normal rent inflation was more or less exactly
where it would have been had I still been at [the original
flat at Dolphin Square] on the old rental terms." Over
two and a half years following moving out of his original Dolphin
Square flat, Mr Holmes said he therefore paid approximately £2,500
less rent than if he had stayed at the original flat. Mr Holmes
calculated that there were removal and legal costs which would
not otherwise have been incurred, which totalled £688.06
in all, reducing the rent 'saving' to about £1,800. There
were also rent overlaps between moving out and into the other
location in London in April 2006 (£439) and back in September
(£830) reducing the "saving" on rent from April
2006—September 2008 to about £530. "Only since
October 2008, some two and a half years later, has my rent increased
beyond the old level I was paying at [the original Dolphin
Square flat]. However even if I had been paying higher rent
from April 2006 I would reiterate that I and any other MP could—legitimately
and entirely within the ACA rules—have moved to a more expensive
rental at any point in any year from 2001 to June 2008."
231. Mr Holmes said, "…I clearly
never set out to use the ACA in order to make a personal profit.
I have only ever used it for the purposes prescribed—to
allow me to live in London while discharging my duties as an MP."
He had not sought advice about the landlord's offer in 2006
as it seemed clear to him that:
"a) Taxpayers' money was not involved. I
received an 'unexpected
and unplanned for windfall gain' from an international property
developer in exactly the way I had received a 'windfall gain'
many years earlier when the Halifax ceased to be a mutual and
became a bank, paying out to private mortgage holders and depositors
like myself as a result. This unexpected gain had not been planned
for in the way that those MPs, legitimately, using ACA to pay
a mortgage plan to make a personal gain upon sale of that property.
"b) I moved out to a cheaper flat and then,
through force of circumstance, back to an initially cheaper flat
at Dolphin Square."
232. Mr Holmes enclosed documents relating to
the money he had received from the new owners, along with other
documents relating to his moves. He described how he had deployed
the £9,439 that he received from the new owners. "I
paid this into my bank account where it largely cleared my overdraft,
an overdraft that included approx £6,200 I had to personally
pay (over and above IEP), to set up my constituency office from
scratch in 2001-02—including installing security measures
as recommended by the police; which also included the nearly £1,000
I had to pay on a useless and empty Dolphin Square flat during
the 2005 General Election, when ACA cannot be used even though
the flat only exists purely and simply to allow me to carry out
my parliamentary duties in London. An overdraft which also included
various utility, phone bills and other running costs, which I
have had to pay out of my own pocket in various years when the
IEP provision has run out around Feb/March leaving a shortfall
on the running costs of my very busy constituency office in Chesterfield."
233. Mr Holmes also noted that during 2009-10
he would have to pay out the best part of another month's rent
on his London flat during the next General Election, "even
though Parliament is not sitting and I will be campaigning in
Chesterfield whilst the London flat I only rent because of being
an MP sits empty and useless!"
234. I wrote again to Mr Holmes on 8 July[290]
enclosing a copy of the legal advice prepared for tenants,[291]
and asked whether he had seen that advice and considered it at
the time, and whether Option A: Cash and Go was the offer he had
accepted. I asked whether Mr Holmes had any documentary or other
evidence to help substantiate his recollection that the payment
offered reflected a reduction in service levels. I also asked
him whether in his judgement, had he chosen to remain in Dolphin
Square rather than accept the offered payment and move out, the
rental payments which he would have paid for his apartment would
have been more than those he had actually incurred. In that context
I drew his attention the solicitors' advice that a new lease under
Option B was the most advantageous offer for tenants who saw themselves
continuing to live in Dolphin Square for the medium to long term.
235. Mr Holmes replied on 20 July.[292]
He said that as far as he could recall the documents I had copied
to him may well have been the same as the ones he was originally
sent at the time. Mr Holmes said he did not see himself staying
at Dolphin Square for the "medium to long term"
as referred to in the Option B lease offer. His permanent home,
and his family, were in Chesterfield. Accommodation in London
was purely to provide him with somewhere to live whilst he was
an MP. Whilst a convenient 20 minutes walk from Westminster, the
flat was very basic, the communal areas to the flats were shabby,
the view from his window was of the back of another block of flats
and of a "concrete canyon" side road. "This
side road acted as a sound funnel from the main road by the River
Thames so that whenever my window was open there was a constant
roar of traffic—even in the early hours of the morning."
236. Having visited the flats of other colleagues
which were in more modern blocks and even closer to Westminster,
he had been thinking of moving after he was re-elected in 2005.
The proposed takeover by the new owners, "who were heralded
by a bad press from both the media and the newsletters circulated
by the Dolphin Square Residents Association, prompted me to indeed
move in April 2006, under the Option A: Cash and Go terms."
237. However, having moved to a temporary let,
Mr Holmes told me, he had been unable to find anywhere close to
Westminster and as affordable by the end of that summer and so
he moved back in September 2006 to a smaller, cheaper flat "but
with a better view and masked from road noise" at Dolphin
Square. If he had in fact "seen [himself] staying"
at Dolphin Square for another two or three years, then he could
simply have taken the Option A: Cash and Stay offer. He would
have received the same windfall of money from a private company
but without the inconvenience of moving out. He noted that in
the advice document to tenants it stated that "In some
respects [the new owners'] AST tenancy is onerous and quite
different to what you have been used to in Dolphin Square."
Also whilst the new owners "did not openly state that
they would reduce service levels for all tenants, by reducing
Porter/Security staff from approx 12 to 2, reduce the hot water
temperature, reduce internal and external maintenance, all but
completely remove casual parking facilities etc etc—this
is nonetheless what they have done and what was predicted of them
…"
238. For 18 months after leaving the original
Dolphin Square flat he said he had paid less rent than if he had
stayed in that flat. For another 12 months he said, he paid a
rent level that was virtually identical to what he was paying
back in March 2006, even allowing for the usual annual increase
that would have been levied on his original flat at Dolphin Square.
"For two and a half years therefore I paid less or equal
to what I would have paid had I stayed in [the original Dolphin
Square flat]. Only since October 2008 has my rent increased
beyond the original March 2006 level."
239. Mr Holmes said that there had never been
any requirement that he or any other MP stay in a rented property
that they first occupied because it was cheaper than moving elsewhere.
"…in any and every year from 2001 to May 2009 I could
have moved to a more expensive (larger, better fitted, nearer
to Westminster etc), rented property. Similarly in any and every
year from 2001 to 2009 I could have chosen to use my maximum allowance
to pay the mortgage interest on a property I could later sell
at a large personal profit. But I never chose either of those
options."
240. On 7 September, as explained above, I wrote
to Mr Holmes attaching my correspondence with the Department of
Resources and asking for his comments.[293]
I also sent him a letter on 23 September with a copy of Mrs Humble's
letter of 18 September.[294]
241. Mr Holmes replied to me on 8 October, saying
that, like Mrs Humble in her letter of 18th September, "I
simply do not understand how [the Director of Operations in
the Department of Resources'] private, unpublished and therefore
unknown guidance to those who rented, can possibly be reconciled
with the clear, public and still standing policy of his Department,
that the great majority of MPs are allowed to 'gain a personal
benefit' from the use of public funds." [295]
This, he said, was the case even where their purchase of a second
home or property had entirely or in part been financed by the
deliberate and planned use of the ACA with the full knowledge
and co-operation of the Department.
242. Mr Holmes said he could also not understand
why, having formulated this private opinion (which applied one
unpublished rule to the minority who rent and another, public,
rule to the majority who buy), the Director did not circulate
it to all the MPs who rented at Dolphin Square. "This
is a considerably larger number than the six who have self referred
to you, but it would have taken little more than half an hour
to skim through the records to see who they all were."
243. He then said he repeated his previously
made points. It never occurred to him to "seek advice"
as this buy out/compensation package involved funds from an American
property development company, not the taxpayer. The new landlord's
tenancy conditions were, he said, as the advice to tenants noted
at the time, "more onerous and quite different to what
you have been used to in Dolphin Square." The new owners,
he said, had indeed "drastically reduced porters and security
staff numbers, reduced grounds and flat maintenance, sold off
car parking spaces and so on." As the majority of MPs
were "openly allowed to make a very large personal profit
… out of using ACA to help buy a property, it seemed clear
that there was no restriction on my accepting a compensation package
of this kind."
244. Mr Holmes said he had never set out to make
a personal profit from the use of ACA—as shown by virtue
of the fact that he had rented a flat in London for the eight
years he had been an MP, "rather than indulging in taxpayer
assisted property speculation." No one could have foreseen
in 2001, when he began to rent at Dolphin Square, that a few years
later Westminster Council would end a 70-year-old Housing Trust
by selling out their stake to a commercial property developer.
He had moved from his original Dolphin Square flat and into a
cheaper flat and then to another cheaper flat. For some two and
a half years after he moved out of the original Dolphin Square
flat he had been paying less (18 months) or the same (12 months)
rent as a result of moving. "There is in any case absolutely
no rule regarding use of ACA which states that once renting a
property an MP cannot move to a more expensive one, as long as
they keep within the ceiling allowed for in the ACA."
245. On 12 October I wrote to the Director of
Operations in the Department of Resources, enclosing the letter
of 8 October from Mr Holmes.[296]
246. In his response of 9 November, the Director
of Operations in the Department of Resources noted Mr Holmes'
suggestion that the guidance itself was 'private' and 'unknown'.[297]
The Director said that it was neither. He said: "Four
years have passed but the Department still holds internal correspondence
on this matter." The Director recalled that two Members
had requested and received this guidance as reproduced "word-for-word"
in the Director's letter to me of 14 August. He noted that
Mr Holmes had later pointed out that "it never occurred
to [him] to seek advice".
247. On 11 November I wrote to Mr Holmes, enclosing
an extract of the Department's letter of 9 November, which responded
to the points Mr Holmes had made.[298]
I said that I was asking the Department to let me know the source
of the instructions to use the guidance on the offer, to which
the Director had referred in his letter.[299]
248. As noted above (paragraph 41) on 7 January
I wrote to Mr Holmes, copying to him correspondence relating to
the source and nature of the instructions received by the Directorate
of Operations in the then Department of Finance and Administration
about the Dolphin Square offers.[300]
249. Mr Holmes responded to me when I sent him
the factual sections of my draft memorandum, asking him to comment
on their factual accuracy.[301]
He confirmed that my summary was an accurate factual account
of our correspondence, and then continued: "However with
reference to the Department of Resources' point … that "it
never occurred to me to seek advice"....no of course
it did not … There was no doubt in my mind — and absolutely
nothing in the Green Book in 2005 or 2006 to say otherwise, as
the Director of Operations admits … Neither was there anything
to say otherwise in the Green Book in an edition as late as the
revised edition of July 2009 ! … I accepted an entirely unforeseen
windfall from a property company and moved to a cheaper flat.
It was two and a half years before my rent increased beyond what
I was paying in my original flat. … Nothing in the published
guidance and common practice of the 'Green Book' led me to believe
that I should not accept this windfall and only your research
four years later has uncovered the secret and highly contradictory
'advice' on this."
Mr Richard Younger-Ross MP
250. Mr Younger-Ross wrote to me on 29 May 2009.[302]
He said he had been offered and accepted £9,000 from the
Dolphin Square holding company to relinquish all future claims
on his tenancy. He had used that sum to offset costs he had incurred
in respect of his parliamentary duties. Mr Younger-Ross asked
if I would consider his letter a formal request for consideration
of the circumstances outlined and whether or not his decisions
were appropriate to his role as a Member of Parliament.
251. I wrote to Mr Younger-Ross on 9 June and
asked him about the particular circumstances of his Dolphin Square
lease, in similar terms to my letters of 4 June to other Members.[303]
252. On 30 June Mr Younger-Ross replied to me.[304]
He said he would answer my questions as best he could. However,
he said, proof of some items was difficult as he had not kept
all documents to which I referred, as they did not relate to
IEP or other parliamentary claims. Mr Younger-Ross said that he
had not used any parliamentary allowances for personal purposes.
All expenses claimed in respect of Dolphin Square were permitted
by the rules. He had moved into his current flat in August 2001,
and the rent for the first year was £12,870 including heating
and hot water. The term was for three years, renewable. The Trust
had a restricted rent policy which he had understood would be
maintained until 2034. Dolphin Square was very popular with MPs,
and its low rents had been and continued to be of particular benefit
to Members who wished to remain working in London after leaving
the House or who hoped to be elevated to the Lords. This benefit,
he said, had been accepted for a long time by the House authorities.
His lease agreements were lodged with the House authorities; he
took this as acceptance of that benefit and his rights in it,
which could potentially last long after he had left Parliament.
His tenancy was renewed in June 2003, and under this his combined
rent and service charges were:
2001-02: £12,870
2004-05: £13,771
2005-06: £14,203
In 2006-07 this had been due to increase to £14,678.
253. He received a total sum for giving up his
various rights associated with the tenancy of £8,031, on
which he paid Capital Gains Tax. A new lease was then agreed with
the new company on 24 November 2005, which set the rent and service
charge at £14,820 for 2006-2007, rising to £15,561 for
2007-2008 and around £18,700 for 2008-2009. He considered
this a breach of the understanding he had been given on future
rent rises, but with the General Election less than a year away,
he felt that the cost and disruption of a move to alternative
accommodation would be excessive. However for 2009-10 he refused
to pay a 3.5% rise and secured the rent/service charge at £19,140.
The increase in the rent was agreed and paid by the Fees Office.
254. In considering the offer he had looked at
the Green Book and spoken to a number of people "including
parliamentary colleagues at both ends of the House",
but he could not recall any specific conversation with the Fees
Office. He had spoken with an official in the Department with
whom he would usually discuss any issues. Mr Younger-Ross said
the official "could not recall whether or not we spoke
on this matter, but does recall discussing the matter with other
MPs and referring the matter 'up the line' for a policy
decision. He has emailed [the Assistant Director] to ask
if a record of such a decision exists. I will come back to you
as soon as I have a reply. Certainly I was never informed of any
guidance on the issue."
255. In his reasoning at the time Mr Younger-Ross
said he had taken into account that MPs were permitted to use
the ACA to pay interest on mortgages, though capital repayments
were stopped in 2001. "MPs also can and do take out interest
only mortgages in the certainty that over time prices will rise
and they may keep the profit. This the House has and does allow
them to do and it is considered entirely legitimate." MPs
had also to his knowledge moved homes and kept the profit. They
had also sold up, moved, re-mortgaged and then claimed more from
the ACA.
256. Mr Younger-Ross continued, "If all
of this is accepted, as I understood it to be when I was considering
this decision, then giving up the benefits associated with a rental
agreement for a cash payment must also logically be accepted.
Certainly there was no intent to make a profit." If it
was not acceptable, he said, then the profit from any property
bought using the ACA must also be repayable, as indeed must any
extra value to any property due to ACA payments being used to
refurbish or modernise a property. He had received a total sum
of £8,031, on which he paid Capital Gains Tax, for giving
up his various rights associated with the tenancy. In considering
his decision he also considered the increased level of rent he
would be asked to pay. In deciding whether to give up his rights
he had first considered whether he wanted to remain in Dolphin
Square. "I was not convinced that I would like the new
regime and the changes it would bring. I decided I would want
to move, which meant I considered that the rent increases would
not be of significance."
257. However, his intention to move was "very
sadly frustrated." In July 2006 his mother died, followed
within four months by his wife's mother and father. Early 2007,
therefore, was not an easy time and Mr Younger-Ross' wife and
he could not face the strain of a move. "It was therefore
my intention to move to a more modern property, certainly with
more space, and therefore at a higher rent, but still within the
guidelines and limits. Such moves are accepted by the Fees Office.
The only criterion that guides us is the sum of the allowances."
What proportion Members spend on rent or mortgage was "entirely
a matter for us." Paying 100% of the allowance on mortgage
or rent had clearly been deemed "beyond reproach".
Another consideration at the time was the amount of money
he had necessarily been spending over and above the IEP limit
on maintaining his parliamentary offices. Many MPs he knew dipped
into their own pockets to subsidise their offices, although some
did not.
258. Mr Younger-Ross said he was "100%
committed to providing the best service I can for my constituents.
I try to cover nine surgeries a month touring Teignbridge, and
I encourage people to seek my help. I have over 13,000 names now
on my database as having asked for my help. I also have the fourth
largest constituency by voters spread over 660 square miles, making
it also geographically large." In round terms, Mr Younger-Ross
believed he had spent around £15,000 of his own money over
the last eight years supporting his work, and "some of
this has been set against tax." This £15,000 was
in addition to other costs he regularly incurred, such as "support
for volunteer helpers, my annual Christmas card, contributions
as the MP to local events causes or charities, entertainment of
constituents etc. None of these have been claimed for or set against
tax. In my work, and in taking the lease on Dolphin Square I do
not act in the hope of making a profit; I would have bought a
flat had that been my intent."
259. His considerations and discussions with
peers had led him to believe that he could "with honour
keep the payment from Dolphin Square. It was not a payment from
the taxpayer, and in taking it I was conscious that it would help
me maintain a high level of service for my constituents."
He had concluded that there would be no additional cost to the
taxpayer over and above what he was entitled to claim for living
costs wholly exclusively and necessarily incurred, but that he
could use the developer's money "for the good of my constituents".
260. On 8 July I wrote to Mr Younger-Ross enclosing
a copy of the solicitors' advice prepared for tenants on the various
options open to them at that time.[305]
I asked him whether he saw this advice and considered it at the
time; whether Option A: Cash and Stay was the offer made to him
which he decided to accept. I also asked him to provide the documents
on which he based his estimates of the combined rent and service
charge for 2007-08 and 2008-09. In addition I asked him to confirm
that he did not use the £8,031 from the Dolphin Square holding
company on items which otherwise he would have claimed from his
parliamentary allowances.
261. On 27 July Mr Younger-Ross replied,[306]
confirming that he had seen the solicitors' advice to tenants
and that he had opted for Option A: Cash and Stay, which the advice
had said might be attractive to tenants leaving after the spring
of 2007. He said that the initial rent under the new arrangement
was an 0% increase on the predicted Dolphin Square Trust rent
for 2006-07 and only 5% for 2007-08, which proved the advisers'
point. The figures he had given for 2007-08 and 2008-09 were based
on actual rent paid and not on forecast.
262. Mr Younger-Ross said that none of the costs
he had referred to in his 30 June letter were claimed on ACA;
there would not have been sufficient capacity in his ACA to do
so. He hoped that it would be confirmed to me that at least one
MP was told by the Fees Office they could keep this payment.
"However, even if this is not the case, I have had it
confirmed from the Fees Office that profits from a property sale
could be kept and that this advice has not changed, and that a
new mortgage could be taken out and increased payments for interest
claimed. This is certainly what I was advised when first elected
in 2001."
263. Mr Younger-Ross said that the Dolphin Square
payment however was not a simple "profit" as
it was received for giving up benefits that were personal to him,
not to the House, and the acceptance of liabilities such as a
twelve month lease, which again was personal to him. "An
election in June 2007 would have cost me over £11,000 in
rent for a flat I may not have had a use for if I had lost that
election!"
264. Mr Younger-Ross asked, if "such
payments should not have been accepted, why did no one advise
MPs known to be accepting the offer? The Fees Office certainly
had knowledge of the new leases, as I sent them mine in 2006.
They would also certainly have known the payment I received, as
my details were included in an article in the Mail on Sunday that
year!"
265. On 7 September, as explained above, I wrote
to Mr Younger-Ross attaching my correspondence with the Department
of Resources and asking for his comments.[307]
I also sent him a letter on 23 September with a copy of Mrs Humble's
letter of 18 September.[308]
266. Mr Younger-Ross wrote to me on 30 October,
saying that he found the Director of Operations' letter of 14
August "very surprising and flawed."[309]
With regard to paragraph a) of the letter, Mr Younger-Ross
said that no Member elected before 2005 would have wholly paid
for the rent from ACA, for all Members with flats in Dolphin Square
paid for the period of the 2005 election. He did not see how
"paying the money to the House of Authorities for them
to add this to a members' ACA is significantly any different than
accepting the payment, if that payment is then used for interest
payments on a mortgage or even for furniture that becomes the
property of the member with no tax paid on it."
267. Mr Younger-Ross then asked why the Director
did not explain why his department said that an MP selling the
'lease' on a property he bought was substantially any different
from a Member being paid for giving up a 'lease'. The Department
had "consistently said that the former is acceptable.
Why does his letter not confirm this? I have asked his department
this question and I have received no reply." Mr Younger-Ross
noted that the Director had said that two Members sought and were
given advice. Mr Younger-Ross said the Director " provides
no evidence of this. Has he advised you who those Members were
and have you been able to confirm with them what [the Director
said] to them?"
268. Mr Younger-Ross said that Mrs Humble had
"clearly contradicted what [the Director] said
in his penultimate paragraph [of the 14 August letter]. I
understand at least one other Member was given this advice, that
it was 'their' money. As Members rely on the advice given
from their colleagues, this advice would have become the perceived
view of the Fees Office. This would be taken as it logically fits
with what MPs with mortgages were told." The Director's
letter of 14 August, Mr Younger-Ross observed, also made no reference
to an MP giving up rights. Mr Younger-Ross said he had given up
the right to keep the flat until 2034. If he had stood down at
the next election, this would have been of great benefit to him.
The Director did not explain why other Members who told the Department
they had decided to take up the offer were not given the advice
given to two Members.
269. Mr Younger-Ross said that in the Director's
second letter (of 3 September) the Director had stated that, "I
am clear that the advice referred to above was promulgated to
staff in the Department who dealt directly with Members".
Mr Younger-Ross asked, "If this is the case why was
a member of his [the Director's] staff unable to clearly
recall this advice when I spoke to him in May this year? He had
to ask."
270. Mr Younger-Ross said that the Director had
said that "this 'authoritative' advice would have
been given to Members from November 2005 onwards. However Members
knew of a proposed offer months before as the Trustees and Tenants
Association kept tenants abreast of developments to sell the leasehold
of the Square, indeed the proposal for a buy out was known before
the summer recess. The [solicitors'] 'Report to the
residential tenants' was sent to residents in early October.
This detailed the options." The offer document was dated
October 3rd 2005 and he had to return it by November 24th 2005.
Although he had "no clear recognition of speaking directly
to the Fees Office", it was in Mr Younger-Ross's view
"highly likely that some MPs discussed this with the Resource
Centre staff before the November 'guidance'."
271. Mr Younger-Ross noted that the Director
had said in his 3 September letter that "the offer to
Dolphin Square tenants became known to staff of the House around
October 2005." Mr Younger-Ross said that the Director
did not say "how this became known to them. I assume that
it would be through a Member. If so who was that Member and are
they one of the two written to on November 22? Why, when Members
sought to change the lease in early 2006, was the 'advice'
not given then?"
272. Finally, Mr Younger-Ross said that "…it
is said that by raising our rent we have cost the exchequer more
than if we had stayed." Mr Younger-Ross had, he said,
indicated in his earlier letter that he had intended to move.
"What I should have added at that time is that had I stayed
on the lower rent, I would have used that allowance over a few
years to replace the fitted carpets that came with the flat in
2001 and to improve both the inadequate bathroom and kitchen,
the latter of which is very poor. All this would have been a reasonable
use of the allowance under the Green Book at this time."
273. In my letter of 2 November to the Director
of Operations in the Department of Resources, I invited
the Director's comments on issues covered in Mr Younger-Ross's
letter, including the analogies Mr Younger-Ross drew with a Member
selling a lease on a property and the advice which the department
may have given to Members in relation to the Dolphin Square offer.[310]
274. In his letter of 9 November, the Director
of Operations in the Department of Resources confirmed that Mr
Younger-Ross had recently sought answers to certain questions
from staff of the Department.[311]
But the Director said that "with your investigation ongoing
it would have been wrong for them to have responded." He
recalled that the Department had records going back to
2005 of its actions on this matter. He said however that he was
"not at all surprised that very recently a member of my
staff on the telephone helpline 'was unable to clearly recall'
the Dolphin Square guidance available four years ago. Dolphin
Square was an isolated and complex matter that applied only to
a very small number of Members and the advice itself promulgated
only to two Members."
275. The Director continued that he had checked
the Department's telephone line database and no calls had been
recorded from Mr Younger-Ross during the relevant period about
his Dolphin Square tenancy. The Director said that this was not
conclusive as the Department did not log all calls, "but
it supports [Mr Younger-Ross's] recollection that he did
not contact the Department." The Director noted that
Mr Younger-Ross had mentioned discussions that he (Mr Younger-Ross)
believed others had had with "Resource Centre"
staff. The Director said: "If by this he means at the
Members' Centre in Portcullis House, I must respectfully point
out that this did not open until 2008."
276. On 11 November I wrote to Mr Younger-Ross,
enclosing an extract of the Department's letter of 9 November,
which responded to the points Mr Younger-Ross had made.[312]
I said that I was asking the Department to let me know the source
of the instructions to use the guidance on the offer, to which
the Director had referred in his letter. [313]
277. Mr Younger-Ross wrote to me on 17 November,
saying that with regard to the answers he had sought from the
Department, "not only have they not replied but they have
not even acknowledged my enquiry." [314]
Mr Younger-Ross noted that the Director had said that the Director
was "not at all surprised" that a member of his
staff could not "clearly recall" the advice given
at the time. Mr Younger-Ross said that he found this "surprising
as the issue was clearly aired in the Mail on Sunday at
the time, October 2006 if I recall."
278. Mr Younger-Ross questioned the Director's
"assertion that the lack of a phone log 'supports
[the Director's] recollection that he [Mr Younger-Ross]
did not contact the Department'", as the Department
"did not log calls." Other Members, said Mr Younger-Ross,
"clearly do remember speaking to his Department and that
[the Director] seems unable to answer."
279. As noted above (paragraph 41) on 7 January
I wrote to Mr Younger-Ross, copying to him correspondence relating
to the source and nature of the instructions received by the Directorate
of Finance and Administration about the Dolphin Square offers.[315]
280. On 15 January 2010 Mr Younger-Ross sent
me a letter, noting the 1 November 2005 memorandum from the Director
of Finance and Administration and saying that he (Mr Younger-Ross)
found it "hard to believe that the Speaker approved their
[the Department's] actions. He [the Speaker] would
have known how MPs profited from their mortgages." [316]
281. Mr Younger-Ross observed that the Department
had said "that it would appear inappropriate to gain a
personal benefit when the rent has been paid wholly from the ACA".
Mr Younger-Ross said, "However, many Members, if not
most elected since '97, have interest-only mortgages. Therefore
the benefit they will receive on selling the property will have
been gained `wholly' from payment of ACA. In fact it is worse
because they may have used ACA to improve the property as well!"
282. Referring to the 1 November 2005 Memorandum's
reference to "a personal windfall entirely attributable
to rights earned with public money", Mr Younger-Ross
commented: "Is this not the case with a mortgage? It is
not, however, the case with the buy out, for the buy out was for
rights until 2034, given on taking up the tenancy. This is not
directly related to the ACA payment. Nowhere in the memo does
he [the Director of Finance and Administration] say do
not tell Members unless they ask."
283. I wrote to Mr Younger-Ross on 18 January,
telling him that I had noted the points he had made and that I
thought I had now taken this as far as I needed and that it would
be right to bring this matter to a conclusion.[317]
Findings
of Fact
Dolphin Square: the Background
284. A number of Members lived in flats at the
complex known as Dolphin Square SW1. The head lease of Dolphin
Square was owned by Westminster City Council until 2005, when
it was sold to new owners. The Members who are the subject of
this inquiry (all of whom referred themselves to me) were tenants
of Dolphin Square in the autumn of 2005. At that time they had
lived in Dolphin Square flats for periods ranging up to 30 years.
The rents had been from the beginning of their tenancy either
completely or partly (in the case of Sir Alan Beith) paid out
of the Members' Additional Costs Allowance, with the exception
of periods when the House was dissolved.
The offers made to Dolphin Square tenants
285. During the autumn of 2005 all Members subject
to this inquiry received offers of a payment from the new owners
of the Dolphin Square head lease, in return for which they would
give up certain rights as tenants of their flats. As existing
tenants of Dolphin Square they each received formal offers and
legal advice on their options.
286. One of the offers would involve tenants,
in return for a lump sum payment, surrendering their current tenancy
of the flat and giving the new owners of Dolphin Square full vacant
possession of the flat. This was described in a report from a
firm of solicitors retained to provide advice to tenants as Option
A: the Cash and Go version.
287. Another of the offers would involve tenants,
in return for a lump sum payment, surrendering their current tenancy
of the flat and immediately being granted a new lease. This was
described in the report from the firm of solicitors as Option
A: the Cash and Stay version. The solicitors' report
observed that this lease would be at a higher rent, with no security
of tenure on expiry of the fixed term.
288. The lump sum which was offered varied according
to the length of each person's tenancy.
289. There was also another offer, which was
described in the solicitors' report as an Option B Lease. The
report said that this would involve tenants receiving a fixed
term lease that would run until June 2034, starting with a rent
the same as the current rent but gradually increasing year on
year. There would be no lump sum payment to tenants.
290. Tenants who enjoyed rights of succession
to various family members were simultaneously but separately offered
£5,000 by the new owners to relinquish those rights.
291. The solicitors' advice on Option A: the
Cash and Go version included the comment that "If you
are looking to leave Dolphin Square within the first few months
of 2006, this could be attractive to you. Beware however that
if you accept this offer, you may not change your mind or accept
a different offer later, unless [the new owner] gives you
permission."
292. The solicitors' advice on Option A: the
Cash and Stay version included the comments that "If you
were looking to leave the Square in around Spring 2007 this offer
may be attractive to you" and that "In some respects
the [the new owners'] AST tenancy is onerous and quite
different to what you have been used to in Dolphin Square"
and that "If you were looking to move out of the Square
after, say, Spring 2007, this still might be an attractive offer
for you."
293. The solicitors' advice on the Option B Lease
included the comment that "In our view there is no doubt
that for those of you who see yourselves continuing to live in
Dolphin Square for the medium to long term, this is the most advantageous
offer for you to accept. It gives you the right to live in your
flat with certainty until June 2034, and possibly beyond …
In terms of security of tenure and certainty over future rental
levels, the Option B Lease is a considerable improvement on your
current tenancy rights."
Advice to Members from the House authorities
294. Neither the Green Book nor any other available
guidance specifically gave advice on offers of the sort made
to Dolphin Square tenants. None of the Members who are the subject
of this inquiry sought the advice of the then Department of Finance
and Administration about whether they should take up the offers.
295. In early November 2005, a decision was taken
by the House authorities that Members who approached the Department
of Finance and Administration about the offers would be offered
guidance in writing. This guidance was based on a memorandum produced
by the then Director of Finance and Administration on 1 November
2005 following consultation with the Clerk of the House and the
Speaker. The memorandum was based on the offers to buy out a
Member's tenancy rights. It made no reference to any offer in
respect of buying out a Member's succession rights. The memorandum
noted that: "On grounds of propriety it would not seem
to be appropriate for Members to accept cash and keep it personally
in circumstances where the rent had been paid wholly from the
ACA. It would amount to a personal windfall entirely attributable
to rights earned with public money." The guidance which
was produced from this memorandum included a warning about the
"potential awkwardness of the situation whereby public
money (Additional Costs Allowance) has been used to meet past
rental costs either in part or in full." The nature
of the guidance depended on the individual circumstances of the
Member involved. In cases where the rent had been paid wholly
from the Additional Costs Allowance (ACA), the guidance said that
Members were to be "advised against taking the cash offer
and retaining the proceeds because it would be inappropriate to
gain a personal benefit when the rent has been paid wholly from
the public purse." The guidance continued, "If
a Member does want to accept the cash offer and pay it over to
the House, or set it against future rental payments in the current
financial year, this can be arranged." The guidance
made no specific reference to cases where the existing tenancy
terms were retained.
296. The House authorities did not circulate
this guidance generally to Members, or specifically to Members
who were known to be tenants in Dolphin Square at the time. On
22 November 2005, however, in response to specific requests, letters
containing the guidance were sent to two Members living in Dolphin
Square, neither of whom is the subject of this inquiry.
INDIVIDUAL MEMBERS: THE ARGUMENTS
297. The details of the arrangements of each
of the six Members subject to this inquiry are set out above,
beginning at paragraph 46. Below I outline the arguments made
to me by each of them.
Mr John Barrett MP
298. Mr Barrett accepted an offer of £11,234
from the new owners to give up his rights to a short assured tenancy
in Dolphin Square. He had accepted the Cash and Stay offer. In
the summer of 2006 he moved to an improved flat in Dolphin Square,
before moving out of the complex in the summer of 2008. The rent
for his protected flat in Dolphin Square had been £13,462
a year in 2004. The rent for the flat he moved to after accepting
the Cash and Stay offer was £18,456 a year in 2006. The rent
on his flat in 2008 was £19,942 a year.
299. Mr Barrett argues that he appropriately
used his payment from the new owners to meet a range of costs
which he had incurred as a result of becoming a Member, but which
could not be claimed against allowances, such as the cost of furnishing
the flat in 2001, and rent while Parliament was dissolved. He
had, he said, also used it to meet costs he could have claimed
against allowances but did not, such as food and subsistence costs
for staying in London and mileage for using his car in his constituency
in the last two years. Mr Barrett also says that he used the money
to cover a number of other significant costs, including work related
phone calls from his mobile phone and land line, and the costs
of keeping one room in his constituency house as an office, for
which he has made no claims since being elected in 2001. Mr Barrett
calculates that the cost of these items totalled over £13,000.
He believes that these details of costs are important as they
prove there was no personal benefit from the transaction.
300. Mr Barrett says that he believes his position
in accepting the money from the new owners was the same as that
of a Member who made a capital gain on a property where the mortgage
interest had been met from parliamentary allowances. He believes
that what MPs in Dolphin Square did was to sell a lease for a
property in the same way that many property sales in England are
in fact the result of leases being sold, rather than the freehold.
This would, in his view, place those who sold their lease in a
very similar position to the many MPs who have sold properties
over the years, when that property was leasehold, rather than
freehold.
301. Mr Barrett says that his understanding is
that the advice from the House was that the new owners' offer
was a private matter between the landlord and the tenant and that
Members had to make their own judgment as to what to do. The Department
had confirmed that everything was in order every time he submitted
a new lease for approval. Mr Barrett argues that the Department
should have provided its advice on the offer to all Members living
in Dolphin Square at that time, and not just those who contacted
the Department. Mr Barrett contends that much of the information
on allowances provided by the Department has been incorrect.
302. The Director of Operations at the Department
notes that Mr Barrett had not contacted the Department about this
matter and says he is "puzzled" by Mr Barrett's
remarks about the Department's advice.
Rt Hon Sir Alan Beith MP
303. Sir Alan Beith refused an offer of £48,030
from the new owners of Dolphin Square to give up his tenancy in
return for a lump sum payment. Sir Alan considers that to have
accepted that offer would have been in his personal interest but
against the public interest, because it would have led to substantially
greater costs to be met by the ACA. Sir Alan says that he decided
that it would be better value for the taxpayer if he stayed in
the unmodernised flat on the protected terms, and renewed the
kitchen. He was offered and accepted £5,000 to give up his
children's succession rights to the tenancy, and says that he
set aside this money for redecoration of the flat, which had been
required in his lease. Sir Alan's evidence is that this work was
delayed by his illness in 2008. In the summer of 2009 redecoration
was carried out in parts of the flat at a cost of £2,766.
He plans to use the remainder of the £5,000 on further redecoration
and other work to his flat.
304. Sir Alan's view is that there was no public
interest in his retaining the succession rights. The public interest,
in Sir Alan's view, is in these circumstances primarily engaged
by financial detriment to the public purse.
305. Sir Alan also points out that his wife Baroness
Maddock, an active Member of the House of Lords, makes contributions
to the costs of the flat out of her overnight allowances for attending
that House, and a fixed monthly sum is deducted from Sir Alan's
ACA rent claim. These contributions are, Sir Alan says, made voluntarily
because it seems reasonable to Sir Alan and his wife that such
allowances should make some contribution to the costs of the flat
which they share, each claiming for costs they have individually
met.
306. Sir Alan also argues that the payment arose
from his tenant-landlord relationship, which included obligations
for which the House authorities took no responsibility. Sir Alan
notes that others had made very substantial capital gains on properties
financed by the payment of mortgage interest, without being asked
to make any payment to the House authorities. He also contends
that the advice on Dolphin Square drawn up by the Department of
Finance and Administration in the autumn of 2005 was framed for
the guidance of Members who chose to accept monetary compensation
to "buy out their existing tenancies", rather
than those who were offered payments to give up succession rights,
as he was.
307. The Department confirms that the guidance
was not published to Members, and concurs with Sir Alan's "fair
observation that Members might well have considered the capital
gain made on a property purchase funded in part through the ACA
analogous to that of the tenancy compensation."
Rt Hon Sir Menzies Campbell MP
308. Sir Menzies Campbell refused an offer of
£38,000 from the new owners of Dolphin Square to give up
his tenancy in return for a lump sum payment. In Sir Menzies'
view, if he had accepted the offer, that would have led to a
substantially increased charge to public funds through the ACA,
providing him with a benefit to the detriment of the public purse.
309. Sir Menzies accepted £5,000 for surrendering
his wife's extended succession rights to his flat, and says that
he used the sum to defray expenses which he had incurred in respect
of his parliamentary duties. He says that the sum went into his
account and was used up in whole or in part by not making claims
for costs that were at the time legitimately chargeable to the
House.
310. Sir Menzies argues that no increased charge
to public funds arose as a result of his decision. He contends
that, had he been inclined to maximise value for his personal
financial benefit, then he could have done so, but chose not to.
Sir Menzies says he had taken the view that his acceptance of
the £5,000 was a discharge of a personal legal right at market
value which had accrued to him personally as a result of the tenant-landlord
relationship. Sir Menzies' view is that the lease between himself
and the landlords contained mutual rights and obligations on both
parties which subsisted irrespective of whether parliamentary
allowances were paid or not. Sir Menzies argues that either his
acceptance of the £5,000 is a private matter, in which case
it is no business of the House; or if it is not, he has served
the public interest.
Ms Sandra Gidley MP
311. Ms Gidley accepted the new owners' offer
of £18,751 to surrender her tenancy at Dolphin Square. She
had accepted the Cash and Go option. In 2005 she was paying £18,501
a year for her flat as a protected tenant. She moved to a flat
elsewhere in Westminster, at a rent of £18,204 a year, plus
utility bills.
312. Ms Gidley does not believe that the Green
Book dealt with the situation in which she had found herself.
Ms Gidley argues that her thinking at the time had been that,
if she kept the money, she was acting no differently from those
Members who had bought property, used the ACA to pay the mortgage
interest, and then sold at a profit and kept the profit. Ms Gidley
considers that the consensus among colleagues had been that the
payment was a property-related offer, payable for giving up certain
rights as a tenant. She contends that there was no conflict between
public and private interests as a result of her acceptance of
the money from the new owners, because the rent claimed from the
ACA had decreased when she moved out of Dolphin Square and she
had herself paid the moving costs and the deposits.
313. Ms Gidley expresses surprise that the Department's
advice on the offer had not been issued more widely at the time.
Mr Paul Holmes MP
314. Mr Holmes accepted £9,950 from the
new owners in return for surrendering his Dolphin Square tenancy.
He had accepted the Cash and Go option. In March 2006 he was paying
£14,376 a year for his flat as a protected tenant. In April
2006 he moved to a flat away from Dolphin Square on a six-month
temporary let for the equivalent of £12,000 a year. From
September 2006 he moved back to Dolphin Square for a first-year
rent of £12,996 and a second-year rent of £14,940.
315. Mr Holmes observes that ACA rules allowed
for MPs to use the money to pay interest on a mortgage and later
sell that property "at great personal profit."
He says that he has never, in eight years as an MP, set out to
do this. Mr Holmes contends that the payment from new owners appears
to be exactly the same as the windfall payments he received many
years ago when his building society became a bank and paid money
out to its members. He says that he does not understand how the
Director of Operations' "private, unpublished and therefore
unknown guidance to those who rented", can possibly be
reconciled with the clear, public and still standing policy of
his Department, that the great majority of MPs are allowed to
"gain a personal benefit" from the use of public
funds.
316. The Department of Resources disputes Mr
Holmes' contention that the guidance for Members on the Dolphin
Square offers was "private" and "unknown".
The Director reports that two Members requested and received
this guidance, noting that Mr Holmes had later pointed out that
"it never occurred to me (Mr Holmes)" to seek
advice.
Mr Richard Younger-Ross MP
317. Mr Younger-Ross accepted £8,031 to
surrender his rights to his Dolphin Square tenancy. He had accepted
the Cash and Stay option. In 2005-06 he was paying £14,203
a year for his flat as a protected tenant. His rent and service
charge was £14,820 for 2006-07 (£142 more than the projected
increase as a protected tenant); rising to £15,561 in 2007-08,
to £18,700 in 2008-09, and £19,140 in 2009-10.
318. Mr Younger-Ross says that he reasoned at
the time of the Dolphin Square offers that he was taking a cash
payment in return for giving up the benefits associated with a
rental agreement, which he argues must logically be accepted by
the House; Members were for instance permitted to use the ACA
to pay interest on mortgages. Mr Younger-Ross questions what he
takes to be the Department's view that an MP selling the 'lease'
on a property he bought was substantially different from a Member
being paid for giving up a 'lease'.
319. Mr Younger-Ross estimates that he has spent
around £15,000 of his own money over the last eight years
in supporting his work as a Member. The payment in relation to
the Dolphin Square lease, which was not a payment from the taxpayer,
would, he argues, help him maintain a high level of service for
his constituents.
320. Mr Younger-Ross comments that he had never
been informed of any guidance on the issue of the Dolphin Square
offers. Mr Younger-Ross notes that the Director of Operations
said in his 3 September letter that "the offer to Dolphin
Square tenants became known to staff of the House around October
2005". Mr Younger-Ross asks why, when Members sought
to change the lease in early 2006, this advice was not given to
them by the Department at that stage.
The Members' Arguments—a Summary
321. The Members have put forward a number of
arguments in support of their decisions to accept payments in
return for giving up certain rights as tenants. In summary, the
essence of these arguments is that:
- this was a private matter between
the tenant and the landlord in which the House had no interest.
(This argument was put to me by Mr Barrett, Sir Menzies Campbell,
Ms Gidley, Mr Holmes and Mr Younger-Ross);
- the succession payment was for the discharge
of a personal legal right arising from a tenant-landlord relationship
which included obligations for which the House took no responsibility.
(This argument was put to me by Sir Alan Beith and Sir Menzies
Campbell);
- the payments did not in fact necessarily increase
the call on public funds, either because Members refused the principal
offer, acceptance of which would have incurred a higher rent (as
in the case of Sir Menzies Campbell and Sir Alan Beith) or because
they made alternative arrangements which did not lead to a real-terms
increase in the rent they were paying in the initial years (as
argued by Ms Gidley and Mr Holmes);
- Members who owned properties on which they claimed
mortgage interest were allowed to benefit from any capital gain
when they came to sell their property. This was analogous to the
capital gain made by Members who accepted an offer from the landlords
at Dolphin Square. (This argument was put to me by each of the
six Members);
- the money was used either for items which could
otherwise have been claimed from parliamentary allowances (as
argued by Sir Alan Beith), or for that purpose and to meet other
costs incurred as a result of being an MP but which could not
be claimed from the allowances. (This argument was put to me by
Mr Barrett, Sir Menzies Campbell, Mr Holmes and Mr Younger-Ross.)
Conclusions
322. The issue I have been asked to resolve is
whether the Members who have referred themselves to me acted within
the Code of Conduct for Members of Parliament in accepting payments
from the new landlords of the complex in which they rented apartments
in return for giving up certain of their rights as tenants.
323. While six Members, all from the Liberal
Democrat Party, referred themselves to me, I am aware that many
more Members of Parliament live in Dolphin Square and, if they
were living there in 2005, will have received similar offers from
the landlords. My findings from this inquiry could have significant
implications for any who accepted offers from the new landlords.
324. The rules in relation to Members' expenses
deal primarily with the propriety of Members' claims against the
relevant expenses category or allowance. None of these Members
was making a claim against their allowances by accepting the offers
they received from the landlords. The rules in relation to claims
against these allowances are not, therefore, readily applicable,
as two Members have pointed out (Mr Barrett and Ms Gidley).
325. Mr Speaker Martin's introduction to the
2005 Green Book, however, makes clear that: "Members themselves
are responsible for ensuring that their use of allowances is above
reproach." The question I have considered is whether
the Members' use of allowances which resulted in them receiving
a financial benefit from the landlord was consistent with the
Speaker's injunction. I have also considered whether accepting
and retaining the offers they were made was a breach of the Code
of Conduct, in that in doing so Members put their personal interest
above the public interest.
326. While not part of the allegations against
the Members, I have considered whether acceptance of these offers
created an obligation on the Members to register the sum received
in the Register of Members' Financial Interests. I accept the
Registrar's advice that because such a payment was available to
all eligible tenants of Dolphin Square, there was not a registrable
interest.
327. 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. On that, I agree with the Director of Operations
in the Department of Resources. The Members have put a series
of arguments to me, which I shall address in the following paragraphs.
But none seems to me to obscure or detract from the clear overriding
point of principle. It was the choice of each Member whether to
rent an apartment in Dolphin Square. Once they had made that decision,
the rental costs for each Member were met in full by parliamentary
funds, through their claims against the Additional Costs Allowance
(or in Sir Alan Beith's case partly through House of Lords allowances
contributed by his wife). The payment hiatus on the Dissolution
of Parliament was well known to all Members in advance. The key
point, I believe, is that it was the payments from parliamentary
resources, sometimes over many years, which put each Member in
the position of being offered a sum of money, in effect, to buy
out their rights as protected tenants, or, in two cases where
they did not accept that offer, to buy out their succession rights.
328. The Members were, therefore, only in a position
to receive those offers because they were existing tenants of
Dolphin Square. That tenancy had been enabled by rental payments
which had been met from parliamentary allowances. In my judgement,
public funds should have benefited from the acceptance of any
offer arising from these rental payments. And, in my judgement,
public funds should have benefited to the full. Since none of
the six Members referred to me did pass that money on to the Department
of Resources, I consider that their use of the allowances which
enabled them to be made those offers was not above reproach and
was thus inconsistent with the Speaker's injunction. And I consider
that they 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. I have
no evidence that any Member did this deliberately. It was a consequence
of the actions which they took.
329. Two of the Members (Sir Alan Beith and Sir
Menzies Campbell) recognised the detriment to the public interest
from the principal offer and so rejected it. But they accepted
a lesser benefit. While that did not result in any increased burden
on public funds, nor did it result in any increased benefit to
those funds, as, in my judgement, it should have done. Instead,
the sum was retained by them to use as they judged best. I consider
that this decision had the effect of putting their personal interest
above the public interest, although clearly to a much lesser extent
than the other Members. That was because the sums were less and,
more significantly, because there was no prospect of an increased
burden of rent falling on public funds.
330. I turn now to the particular arguments which
were put to me in the course of my inquiry. They can be briefly
summarised as follows:
i) This was a private matter between the tenant
and the landlord in which the House had no interest.
I accept that the terms of the lease were a private matter in
the sense they were a matter between the Member and the landlord.
The offer from the new owners was made to these Members because,
like others, they were tenants in Dolphin Square, not because
they were Members of Parliament. The House authorities were not
a party to the leases. The Members, therefore, carried certain
obligations for which they were responsible. These were obligations
freely entered into in signing the lease. That was their decision—it
was not the House's. But it does not, in my judgement, follow
that the House had no interest in the arrangement, simply because
the House was not a signatory to the lease. Nor does it follow
that the House had no interest when Members decided to accept
an offer made to them by their landlord. Parliament provided the
funds which wholly or substantially enabled the Member to live
in his or her rented property. The parliamentary authorities should,
in my judgement, have benefited from any payments made to a Member
as a result of a tenancy which was dependent on parliamentary
funding.
ii) The succession payment was for the discharge
of a personal legal right which included obligations for which
the House took no responsibility. I recognise
the distinction Sir Menzies Campbell has drawn between the principal
cash offer, which in his view was compensation for a right which
did not exist at law, and the succession payment which, he has
argued, was for the discharge of a legal right. I recognise, too,
his view, and that of Sir Alan Beith, that the succession right
was a personal legal right in respect of the relationship between
a tenant and landlord which would continue even if public funds
no longer supported the rental payments. The continuing obligations
under the lease were also pointed out by other Members. I consider
that this argument, however, fails to give sufficient weight to
the reasons why any such rights and obligations came about. They
arose from each individual being willingly elected as a Member
of Parliament and each entirely properly exercising their choice
on the arrangements for the accommodation they would need, and
for which they would be reimbursed, in the exercise of their parliamentary
duties. They knew their continuing obligations when they took
on the tenancy in Dolphin Square. They had no expectation of the
windfall payments. The payments only came about because of the
rental payments which—except at Dissolution—were met
from public funds. Any legal right of succession only came about
because public funds supported the Member in their choice of accommodation.
I consider that all the Members should have recognised that the
offers were a potential benefit which had become available to
them only because of the payments of their rents from public funds.
The benefit, however small or large, and whatever the cause, should,
if accepted by the Member, have been made over to the public purse.
iii) The payments did not in fact necessarily
increase the call on public funds, either
where the Member refused the principal offer (as in the case of
Sir Alan Beith and Menzies Campbell) or because they made alternative
arrangements which did not lead to a real-terms increase in the
rent they were paying (as argued by Ms Gidley and Mr Holmes).
I fully accept that the decision taken by Sir Alan Beith and Sir
Menzies Campbell to refuse the principal offer protected their
tenancy and prevented their rents rising higher than would have
been the case under an unprotected tenancy. Parliamentary resources
were therefore protected from those increases on which they could
have claimed. But equally, because they retained the payments,
there was no benefit given to parliamentary funds. In my judgement,
and for the reasons explained above, there should have been. The
position was not the same, however, with the other Members. Ms
Gidley managed largely to retain the rental level (although the
sum is complicated by the fact that, while her Dolphin Square
flat was unfurnished and its utility costs were largely covered
by the rent, her replacement flat was furnished and she had to
meet the utility costs). The evidence suggests that, while Mr
Holmes's costs were kept down for the first two and a half years,
they were after that likely to be increasing at a faster rate
than would otherwise have been the case. It is clear from the
evidence that, having accepted the principal offer, three of the
Members (Mr Barrett, Mr Holmes and Mr Younger-Ross) ended up paying—and
claiming for—a higher rent than they would have had to pay
had they stayed put. This was the predicted consequence of accepting
the cash. Market rents would increase, and continue to increase,
at a faster rate than rents under a protected tenancy. It was
open to any of these Members—as to any other Member—to
move flat, pay a higher rent and claim for that rent, provided
that it did not exceed their allowance ceiling. But these four
Members also had a cash benefit. I consider that, in retaining
the cash payments, these four Members put their personal interest
over the public interest.
iv) Members who owned
properties on which they claimed mortgage interest were allowed
to benefit from any capital gain when they came to sell their
property. This was analogous to the capital gain made by Members
who accepted the offer from the landlords at Dolphin Square. I
recognise the argument, which the six Members have put very firmly
to me. But I do not accept that the analogy is sufficiently close
to justify the Members keeping the payments from the Dolphin Square
landlords. Each of the Members whose cases I have considered and
who rented from Dolphin Square had their full rent met from parliamentary
resources. In Sir Alan Beith's case, part of the rent was met
from the House of Commons allowances, and part from the House
of Lords allowance provided to his wife, Baroness Maddock. I am
not competent to judge on a House of Lords matter, but I believe
that it is right in this case to note that the rent was paid from
allowances made available from both Houses. The full cost of the
rent was, therefore, met by the parliamentary authorities, not
by the Member. In contrast, Members who buy a property—whether
freehold or leasehold—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. Those with interest-only
mortgages must still themselves at some stage find the capital
to repay the loan. The equity in the property is, therefore, held
by the Member. There is no such equity in a rented property. In
addition, the size of the rent might be assumed to take account
of the capital investment of the landlord. If so, the cost of
servicing that investment would normally be included in the rent.
And in these cases, the rent was met in full from parliamentary
resources. Given that the full rental costs (excluding those for
the Dissolution period) had been met by the House, any financial
benefit should, in my judgement, have been returned to it. I do
not seek or need to come to a view on the propriety of the practice
of Members making capital gains on the sale of their parliamentary-funded
homes, and I would not wish to defend it. That is a matter now
for the Independent Parliamentary Standards Authority and the
House. But I do not believe that the analogy is so close as to
require the same treatment to be applied to the tenants of Dolphin
Square.
v) The money was used, either for items which
could otherwise have been claimed for from parliamentary allowances,
or to meet other costs incurred as a result of being an MP but
which could not be claimed from the allowances.
While it is clearly relevant that most Members have argued that
the money went on their parliamentary responsibilities, that does
not, in my view, absolve the Member from the responsibility of
instead making the payment from the landlord over to the House.
The Green Book sets out what a Member may claim against parliamentary
allowances, and the procedures which they must follow in order
to do so. The informal arrangements which Members followed in
this case—in effect, in most cases deeming that their expenditure
could have been set against parliamentary allowances—were
neither transparent nor sufficient to establish an audit trail
which could subsequently be checked. Where Members spent or intended
to spend the money, or some of the money, on their expenses as
a Member which could not be claimed from their allowances, as
did Mr Barrett, Sir Menzies Campbell and Mr Younger-Ross, then
they were, in effect, adding an additional category to their own
entitlement which was not available through the Green Book to
other Members. I do not believe that was their intention.
331. While, therefore, I recognise the force
of the Members' arguments, separately and together, I do not believe
that they are such as to enable me to set aside my principal conclusion
that the acceptance of these offers was inconsistent with their
obligations under the Code of Conduct, and that their use of allowances
to receive and keep these offers was not above reproach.
332. I add the following concluding points:
i) It would have been wise of the Members to
have recognised that the House did have an interest in these offers
flowing from the payment of their rents from parliamentary resources.
They should have consulted the House authorities in advance. The
offer was, anyway, unusual and that alone should have been enough
to lead each Member to seek advice. It is unfortunate that the
offers were apparently the subject of much discussion among Members,
but only two appear to have consulted the Department at the time.
I am satisfied that the Department did prepare guidance against
the possibility that Members would consult them, and that that
guidance was not to accept the principal offer. I accept that
the advice did not specifically cover the case of the two Members
who rejected the principal offer but accepted a payout of £5,000
in return for the succession rights. But I think the guidance
was sufficiently clear on the principle involved. The overriding
principle which I consider applies also to these payouts was,
to quote the guidance, that "it would be inappropriate
to gain a personal benefit when the rent has been paid wholly
from the public purse." I have noted that one Member
not subject to this inquiry, Mrs Joan Humble, the Member for Blackpool
North and Fleetwood, gave evidence to me that she received contrary
advice. I note her evidence that that advice was given after the
date when Members should have made their decision. In any event,
it did not affect the decisions made by any of the Members subject
to this inquiry.
ii) It is deeply unfortunate that the Department
did not contact each of the Members who rented in Dolphin Square
at the time and give them their advice in advance of the Member
deciding on the offer. Even belated advice would have enabled
the Member to pay the money over to the House. I understand the
view that each Member is responsible for their own decisions and,
in the way that business was conducted at the time, it may have
been thought unnecessary for the Department to offer advice which
had not been asked for. I have not received clear evidence of
how such a decision not to give out the advice was made. But the
result has been that these Members, and probably others, have
made a decision which I (and the Department) consider to be contrary
to the Code and the rules. I consider that most regrettable.
iii) Two Members, Sir Menzies Campbell and Sir
Alan Beith, refused the principal offer, but accepted the much
lower offer to buy out their succession rights. I consider that
they made the right decision in declining the principal offer.
Their acceptance of the lesser offer for succession rights had
no effect on their rent. The sums they received were very significantly
less than if they had accepted the principal offer. Both gave
evidence that, as with other Members, they used it in support
of their parliamentary work. But, nevertheless, the benefit to
them accrued because of Parliament having paid their rent, and,
in my judgement, they should have passed that benefit back to
the House.
iv) The legal advice which each Member as a tenant
of Dolphin Square received was only to accept the principal offer
if they intended to move within the following 12 months. While
I need form no view on the explanation which some Members (Ms
Gidley and Mr Holmes) have given for moving on receipt of the
payment, that advice should at least have alerted the Member to
the potential poor value for money for the public purse in accepting
the money and either staying in Dolphin Square or moving when
there was no pressing reason for them to do so.
333. I conclude, therefore, that each of the
Members was in breach of the rules of the House in accepting offers
of payment from the new landlords of Dolphin Square in 2006 without
first consulting the then Department of Finance and Administration,
because the payments they accepted were the consequences of their
rents having been met for a number of years from parliamentary
resources.
334. Since parliamentary funds had met the cost
of the rent (albeit in Sir Alan Beith's case from two different
sources and accepting that Members cannot claim for costs during
the Dissolution of Parliament), in my judgement, parliamentary
funds should have benefited in full from any offer which was accepted.
The Members' use of these allowances was, therefore, not above
reproach. The effect of Members not making over these payments
to the House was to put their private interest above their public
interest, contrary to the Code of Conduct for Members of Parliament.
335. I consider that the acceptance of the principal
offer was a serious misjudgement, a misjudgement which may well
have been made by substantially more Members than the four who
referred themselves to me. I do not consider that the various
reasons the four Members gave and the uses to which they put the
funds should override the seriousness of the misjudgement. The
two Members who refused the principal offer did so, in my judgement,
commendably in the public interest. That principled refusal must
mitigate what I judge to be a lesser misjudgement in accepting
and retaining much smaller sums to buy out their succession rights.
It was unfortunate that none of these Members sought the guidance
of the House authorities. They were not alone in that. But had
they done so, these misjudgements could well have been avoided.
Equally, had the House authorities sent their guidance to all
Members who were at the time tenants of Dolphin Square, then all
those Members should have been able to avoid the difficulties
which have now come to light.
17 February 201John Lyon CB
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My individual correspondence with them is described in the section
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WE 38. This letter also contained the Director's responses to
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Sir Alan said later in the interview that at the time of the
offer, the rent had been £13,825, and it would have gone
up to £14,441 later that year. WE 65 Back
240
WE 66 Back
241
WE 67 Back
242
WE 68 Back
243
WE 10 Back
244
WE 22 Back
245
Not included in the written evidence Back
246
WE 61 Back
247
WE 19 Back
248
WE 25 Back
249
WE 69 Back
250
WE 60 Back
251
WE 70 Back
252
WE 5 Back
253
WE 10 Back
254
WE 71 Back
255
WE 72 Back
256
WE 73 Back
257
WE 74 Back
258
WE 75 Back
259
WE 21 Back
260
WE 35 Back
261
WE 76 Back
262
See above paragraph 163 Back
263
WE 26 Back
264
WE 77 Back
265
WE 101 Back
266
WE 23 Back
267
WE 78 Back
268
WE 6 Back
269
WE 13 Back
270
WE 79 Back
271
WE 80 Back
272
WE 81 Back
273
WE 21 Back
274
WE 35 Back
275
WE 82 Back
276
WE 83 Back
277
WE 49 Back
278
WE 84 Back
279
WE 85 Back
280
WE 38 Back
281
WE 86 Back
282
WE 38 Back
283
WE 26 Back
284
WE 87 Back
285
WE 88 Back
286
WE 7 Back
287
Later Mr Holmes said that he had accepted £ 9,950. WE 89 Back
288
WE 15 Back
289
WE 89 Back
290
WE 90 Back
291
WE 17 Back
292
WE 91 Back
293
WE 21 Back
294
WE 35 Back
295
WE 92 Back
296
WE 93 Back
297
WE 38 Back
298
WE 94 Back
299
WE 38 Back
300
WE 26 Back
301
WE104 Back
302
WE 3 Back
303
WE 14 Back
304
WE 95 Back
305
WE 96 Back
306
WE 97 Back
307
WE 21 Back
308
WE 35 Back
309
WE 98 Back
310
WE 37 Back
311
WE 38 Back
312
WE 99 Back
313
WE 38 Back
314
WE 100 Back
315
WE 26 Back
316
WE 102 Back
317
WE 103 Back
| 
