House of Commons - Mr David Laws - Standards and Privileges Committee

Mr David Laws - Standards and Privileges Committee Contents

Mr David Laws

Introduction

1. We have received a memorandum from the Parliamentary Commissioner for Standards reporting on his investigation into the conduct of the Rt Hon David Laws MP. Mr Laws wrote to the Commissioner on 31 May 2010, following press coverage of his claims for accommodation in London. The allegation made was that Mr Laws rented accommodation from a partner from June 2001 and continued to do so after the rules were changed in 2006 to prohibit explicitly such an arrangement.

2. In referring himself to the Commissioner, Mr Laws said:

The key issue was my claims for London living post the 2006 rule change which banned payments to family members and partners.

I have already stated that I will pay back in full my claims from 2006 to 2009, but I also request that you should look at this issue for the same period. The issue is that because I wanted to keep my sexuality secret, I was having a close relationship with someone who I was denying publicly to be a "partner" with. We made no claims as partners (e.g. for travel etc), and our financial arrangements and assets were separate. Essentially we presented ourselves as being friends and not partners.[1]

On 4 July 2010 Mr Laws drew attention to allegations that there were issues about the level of some of the claims, and asked the Commissioner whether it would "be sensible for me to widen my self-referral to ask you to consider the level of claims over recent years".[2] The Commissioner responded that a second self-referral was unnecessary and that he would examine matters relating to the arrangements made by Mr Laws as a lodger.[3]

3. The Commissioner initiated his inquiry on 3 June 2010, before the Committee had been formed. The Committee agreed to its continuation at its first meeting on 27 July 2010. The Commissioner's memorandum is published in a separate volume of this Report, as Appendix 1. We have also received written evidence from Mr Laws, which is at Appendix 2.

Issues identified by the Commissioner

4. In the course of his investigation, the Commissioner identified the following issues:

i. Did Mr Laws correctly identify his property in Somerset as his main home for the purposes of his claims for his London home?

ii. Was the landlord with whom he shared two of the London homes his partner under the terms of the Green Book rules and, if so, what were the consequences for the legitimacy of his claims (a) after July 2006 and (b) before July 2006?

iii. Did Mr Laws subsidise his landlord's costs by claiming for more rent than was reasonable for the accommodation?

iv. Did Mr Laws gain benefit above his legitimate costs for himself and his landlord in the claims he made for his other (non-food) costs: (a) council tax, (b) utilities, (c) repairs, insurance and security, (d) telecommunications, (e) building and maintenance, and (f) other items?

The Commissioner's findings

FINDINGS OF FACT

5. The Commissioner has set out a series of factual findings. These are summarised below.

Mr Laws owned a substantial house in Somerset from 1999, on which he had a mortgage. On his election in 2001, he designated this as his main home, and this designation remained until 2010. Mr Laws had a mortgage on this property, which was increased in 2007.
Mr Laws lived with his landlord in London in a flat owned by the landlord, on which there was a mortgage, from 2000-2007. Mr Laws claimed for the cost of rental and other services from the ACA.
In July 2007, Mr Laws and his landlord moved to a second London property. This was financed in part by a gift of £99,000 from Mr Laws. Mr Laws remortgaged his Somerset property to provide this sum. Rental costs, utilities, council tax, phone, cleaning service and maintenance and repairs were claimed against this property, as they had been for the previous property. Mr Laws also contributed substantially to other costs which he did not claim against Parliamentary allowances.
With the exception of his claims for rent, Mr Laws' monthly claims against each heading were under the threshold for which invoices and receipts needed to be submitted.
Throughout the period, Mr Laws deposited a series of rental agreements with the House authorities. Mr Laws and his landlord did not take professional advice on these agreements, and based the rental amounts on information in estate agents' advertisements and on the internet.[4]

THE COMMISSIONER'S CONCLUSIONS

6. The Commissioner has found that the designation of the Somerset property as Mr Laws' main home in 2001 was correct but that, over time, Mr Laws came to spend more time in London. Mr Laws was in breach of the rules from April 2005 in continuing to identify his Somerset property as his main home, despite the fact that substantially more time was spent in London than in Somerset, and that the "gravitational pull" was towards London. As the Commissioner says "if this finding is accepted, it follows that from April 2005 none of Mr Laws' claims for the London properties was acceptable under the rules, since they were claims made on what were in fact his main homes."[5] However, the Commissioner has also considered further matters arising from the claims "partly in case the Committee should come to different conclusions and partly because these other questions related to the allegations which caused Mr Laws initially to refer himself to me."[6]

7. The Commissioner found that "[...] I am in no doubt that any reasonable person properly seized of all the facts would conclude that Mr. Laws' landlord was his partner for the purposes of the prohibition against leasing from a partner, introduced for the first time in the July 2006 Green Book".[7]

8. The Commissioner also found that although there was no specific prohibition on leasing from a "partner" before the July 2006 Green Book, nonetheless Mr Laws' claims on the London property from 2001 to 2006 were not above reproach. The lodging agreements sent to the department gave a false impression of the relationship between Mr Laws and his landlord. The Commissioner noted:

I consider Mr Laws mistaken in thinking that the prime purpose of any agreement was simply to identify the location and state what the rent was. It was also to identify what the rent bought and the terms on which the transaction was made. Mr Laws' rental agreements fell down in both these respects.[8]

The Commissioner says:

I conclude, therefore, that Mr Laws' conduct was not above reproach because he submitted to the Fees Office from 2001 lodging agreements which gave a false impression of his relationship with his landlord and of their shared use of the landlord's successive London properties. I come to this conclusion on the basis of the standard expected of Members at the time and not any subsequent raising of the bar. Even in 2001, it would not, in my judgment, have been acceptable to seek to make claims supported by misleading documentation. The result was that the Fees Office had no opportunity to challenge or advise Mr Laws about the particular nature of his claims in the light of his circumstances. Mr Laws' wish to maintain his personal privacy cannot, in my view, justify—although it may explain—such conduct.[9]

9. The Commissioner has found that Mr Laws made a number of other breaches of the rules:

Mr Laws claimed for higher rent from his Parliamentary allowances for his use of the two London properties than was justified either under the terms of the lodging agreement, or as a reflection of the true arrangement he had for living with his partner in these two properties;[10]
Mr Laws wrongly claimed some £2,000 for building work in the second property, which should have been covered by the rent charged;[11]
Mr Laws' claims for his phone in Somerset and his mobile telephone could not be covered by the Additional Costs Allowance. Although in principle both could have been claimed under the allowance for office expenses, the Commissioner noted that Mr Laws in fact had insufficient headroom in this allowance.[12]

10. The Commissioner concludes:

324. I consider that Mr Laws' breaches of the rules in respect of his second home claims were serious. I have no evidence that Mr Laws made his claims with the intention of benefiting himself or his partner in conscious breach of the rules. But the sums of money involved were substantial. He made a series of breaches. Some of them continued over a number of years and despite specific and clear changes made to the Green Book. But it is to Mr Laws' considerable and personal credit that, when his living arrangements came to public attention in May 2010, he immediately and publicly accepted that his claims from July 2006 had not been above reproach. He resigned from the Cabinet before referring himself to me. He made early repayment of £56,592 to take account of all his claims from July 2006 to July 2009, making no allowance for the fact that, had he arranged matters differently, he could legitimately have claimed for overnight stays away from his main home.[13]

The Commissioner also notes "Mr Laws has emphasised that all his actions were motivated by his desire first to keep his private life and his sexuality secret, and second to provide value for money for the taxpayer."[14] However, he concludes:

I believe there was a conflict between [Mr Laws'] private interest in secrecy and the public interest in him being open and honest in relation to his expenses claims. I recognise and have very great sympathy with Mr Laws for the difficulty of the decision he had to make in resolving that conflict, because it affected all aspects of his life as he had presented it over many years. But it was, in my view, a decision which he had to make under the Code of Conduct and one which he should have straightaway resolved in the public interest, either by being open with the House authorities about the relationship with his landlord, or by making no claims at all against his accommodation allowance and accepting the ever-present risk that the relationship would anyway come to public attention, as, eventually, it did.[15]

Conclusions

11. Mr Laws has cooperated with the Commissioner's investigation, and submitted a memorandum in which he says that he understands and accepts the Commissioner's key judgments, including that on the "partner" rule, and accepts that he made an error in not ensuring that his claims were "above reproach".[16]

12. Mr Laws told us that he believed at the time that his situation "was consistent with the rules, as well as offering good value for money to the taxpayer". His assessment of the value for money of the arrangements was based on the view that if his Somerset home been designated for ACA purposes he would have been able to claim the maximum permitted amount. Alternatively, as Mr Laws notes, he could have been open about his relationship, and not only have claimed allowances, but partner benefits such as travel and death benefits. The Commissioner notes:

I believe it is right to recognise that Mr Laws' ACA claims were below the maxima provided by the allowance—and increasingly so in the later years—and I recognise his evidence that, had he claimed for his Somerset property, and had he wished to do so, he could have claimed considerably more.[17]

13. There is no dispute that from July 2006 the prohibition on renting from a partner meant that Mr Laws' arrangements were impermissible, whether or not they were good value for the taxpayer. Before 2006, the arrangements might have been permissible, if the Somerset property were indeed Mr Laws' main home. Mr Laws told us:

I did not re-designate my main home in 2004/05 because I believed that to do so would be likely to raise questions about my relationship with my landlord. I also did not want anyone to conclude that I was re-designating for financial gain. The fact that the Green Book said that the main home will "normally be a matter of fact", and that that my Somerset home was the only home I owned, reinforced my conclusion at the time that my designation was reasonable. Finally, I did not think I could be criticized for designating in a way that clearly provided better value for money to the taxpayer.[18]

14. We note these arguments. However, we also note that in 2004-05 Mr Laws was apparently concerned about public perception of the designation of his main home, before such matters were generally in the public domain or a matter of public comment. The Commissioner also questioned Mr Laws about the motivation for keeping claims below the receipts threshold:

JL Can you help me on the reasons you gave me in your letter of 20 July for keeping your claims below the receipts threshold—which was because you did not want your landlord's name on the bills sent to the Department? I am trying to work out how that protected your privacy.

DL I didn't want to send in bills with his name on. It was an aspect of my secrecy. After the receipts threshold changed I reduced my claims below the threshold. So I didn't claim for my mobile costs or the costs of my Somerset landline, which were legitimate expenses, although claimed under the wrong heading.

JL Can you help me on why you felt that was going to work?

DL Until then the relationship had been private for a very long time. I had supplied lodging agreements but these were not supposed to go into the public realm. I felt that if I didn't have to supply information, I didn't see why this situation couldn't continue.

JL Surely redactions would have protected information like phone numbers?

DL But FOI was only just on the horizon. I was worried about anyone identifying that we lived in the same property.

JL But couldn't anyone in the Department have worked out who you were living with simply by looking at your rental agreements?

DL Yes, but they wouldn't have put it into the public domain. [19]

If Mr Laws could trust the Department of Resources not to release the name of his landlord, it is not clear why he should have been so concerned that other invoices would have been revealed.

15. In evidence to the Commissioner, the Director General of the Department of Resources said:

In his letter to you of 14 January, Mr Laws argues that his "gravitational pull" from 2004 was to his London home; that he probably ought to have designated London as his main home, and that the Department would have accepted such a designation. It is certainly the case that the Department could well have accepted that Mr Laws' main home was in London from 2004 if all the facts had been known to us. I note, however, your own advice to the Standards and Privileges Committee that what the Committee called a "value for money" test should be applied when other considerations did not provide an unambiguous answer as to which home should be designated as a second home. In Mr Laws' case, the designation he made appears to offer greater value for money, and this might have been seen as a relevant factor at the time if the issue had been seen as finely-balanced.[20]

The Director General's advice was given before Mr Laws' interview with the Commissioner. In that interview Mr Laws said that "in 2009-10 I spent 191 nights in London, 134 in Somerset and around 40 in neither". He considered this was the general pattern before 2009-10 and that his arrangements "started to tilt to London in 2004-05".[21] We see no reason to depart from the Commissioner's finding that from April 2005 Mr Laws' main home was in London, not Somerset. The Green Book stated clearly "If there is any doubt about which is your main home, please consult the Department of Finance and Administration." Mr Laws failed to take advice.

16. We now turn to the other breaches of the rules.

THE NATURE OF MR LAWS' RENTAL AGREEMENT

17. Mr Laws' memorandum states that his rental agreements were drawn up from publicly available templates, and were simply designed to record agreed rental levels. They were not designed to obscure the actual circumstances of his tenancy. However, it is clear from Mr Laws' own evidence that the rental agreements did not set out the actual arrangements on which the property was shared, which, as the Commissioner said, might have no exact equivalent. Mr Laws based his assessment of market rents on Assured Shorthold Tenancies, rather than on the lodging agreements which he had submitted to the department. We agree that in reality Mr Laws' living arrangements were more advantageous than the bare terms of the agreements. Nonetheless, if the Department had been aware that the arrangement was between close associates, it might have looked more closely, or at least referred the matter to the Advisory Panel on Members' Allowances. We consider the rental agreements submitted between 2003 and 2008 were misleading and designed to conceal the nature of the relationship. They prevented any examination of the arrangements that in fact pertained over the entire period.

18. We note that in evidence to the Commissioner, Mr Laws defended his decision not to seek advice in order to protect his privacy:

Mr Laws did not believe that, even if he had produced a more accurate agreement, the Department would have questioned it. He commented, "They said I could have asked a senior member of the Department. They then said they would have felt obliged to seek advice from a Committee of the House. That was precisely why I didn't ask; I was very keen not to reveal information about my sexuality—not least to MPs from other parties."[22]

19. We return to the issue of whether Mr Laws' arrangements were "above reproach" later in this report.

THE LEVEL OF MR LAWS' CLAIMS FOR RENT AND BUILDING WORK

20. As we have noted, the Commissioner has found Mr Laws' claims for rent to be higher than reasonably justified. There is disagreement between Mr Laws and the Commissioner's independent property adviser as to whether Mr Laws significantly over paid on the rent for each of these two properties. Mr Laws states that "my landlord and I fixed the rental levels between 2004-2009 by taking 50% of the observed market rents for similar properties" in the area. The principal reason for this disagreement is because by using this method Mr Laws based the level of rent on an Assured Shorthold Tenancy (AST) rather than on a lodging agreement, which will not command such high rents.[23]

21. The Property Adviser gave evidence on both the level of payment for an AST, and for a lodging agreement. The adviser's initial figures for an AST were based on calculations assuming that rental levels in the area tracked the national index, although the advisers warned that this was not necessarily the case. When the figures were challenged by Mr Laws the advisers reconsidered their estimates for the AST rental levels. They also produced figures for similar properties which had been available locally at the time. The rent paid by Mr. Laws was above 50% of the AST rent identified for similar properties available in the locality from 1 April 2003 to 31 December 2004, and from 1 March 2008 to 31 July 2009, but below the figures charged for similar properties between 1 January 2005 and 30 June 2007. [24] We note the adviser's view that some of these properties were larger than those rented by Mr Laws.[25]

22. The adviser also revised the estimate of the AST rental which might have been achieved for Mr. Laws' landord's properties. On this estimate, Mr Laws' claims were in most months significantly above the market rate. These differences ranged from roughly £80 a month to nearly £230 a month, although in 2007-08 the rent paid by Mr Laws was less than the AST figure calculated by the Property Adviser.[26]

23. While the evidence relating to the AST was altered as a result of Mr. Laws' comments, the adviser considered that the original estimate estimates of market levels of rent for lodging agreements were correct. If this is the case, between April 2003 and March 2008 the actual rent paid exceeded the market rents due under a lodging agreement for a similar property by between £209 and £370 per calendar month.[27]

24. We also note the adviser's view that the market would not have demanded contributions towards building repairs and maintenance. Mr Laws has told us:

I accept the Commissioner's ruling on my claims in respect of the £2,000 costs of necessary repairs and maintenance work in 2007/08. The Commissioner has accepted that these costs were "a comparatively minor contribution to the full works", but his view is consistent with his ruling on the issue of lodging agreement rental levels versus AST rentals.[28]

25. Mr Laws contends that the payments were lower than they would have been had he claimed on his Somerset home, or made other permissible arrangements. In our view, it is inappropriate to judge whether the claims on property A are appropriate by reference to potential payments on another property, which is not in fact claimed for.

26. Mr Laws chose to claim ACA for his London homes. He should have taken care that the rental and other costs charged for those homes were appropriate. Due to the secrecy Mr Laws adopted, it is now impossible to establish with any certainty the extent to which the rental claimed was excessive, given the passage of time, the difficulty in finding precise comparators, and the disparity between Mr. Laws' rental agreement and the arrangements which were actually in place. Nevertheless, we see no reason to dispute the professional assessment that the amounts charged were above the market rate, and that the market would not have demanded contributions towards building repairs and maintenance.

CLAIMS FOR TELEPHONY

27. We note the Commissioner's findings that Mr. Laws wrongly claimed for his mobile phone and his main home costs, and Mr Laws' evidence:

I accept the Commissioner's ruling on my mobile phone costs and my main home parliamentary calls, and I am grateful that the Commissioner accepts that, had I been aware of these rules at the time, I could have ensured that there was sufficient headroom in my IEP budget to pay these sums.[29]

THE SERIOUSNESS OF THE BREACHES

28. As the Commissioner notes, two provisions of the Code of Conduct are particularly relevant in this case:

Paragraph 9 provides:

"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."

Paragraph 14 provides:

"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."[30]

The first provision has been in place since the Code was approved in 1996, and the second, which has been in place since 2005, is a reformulation of the original rule that "no improper use shall be made of any payment or allowance made to Members for public purposes and the administrative rules which apply to such payments and allowances must be strictly observed."[31]

29. Mr Laws judged that there was no conflict between the public interest and his personal interest. His desire for privacy meant that he did so without the benefit of any advice on:

the designation of his main home;
(pre 2006) the appropriate way to establish a market rent for his London accommodation;
the nature of his rental agreement.

While it is clear that Mr Laws could have arranged his affairs in a way which was less good value, we do not agree that the criterion of value for money should be established by comparing his potential claims with his actual claims. Having chosen to designate London as his second home, it was Mr Laws' responsibility to ensure that his claims were above reproach.

30. Although we entirely accept the Commissioner's assessment that London was Mr Laws' main home from April 2005, it is understandable that up until July 2006, when the rules and their interpretation were not subject to as much scrutiny as now, Mr Laws was able to convince himself that Somerset was his main home, given that it was the property on which he had a mortgage. However, even if that mistaken decision was explicable, Mr Laws needed to establish a proper market rent for the London property. The method used would be acceptable for private individuals seeking to set a price for an arrangement they were funding themselves; it was not acceptable where public money was concerned. If Mr Laws was reluctant to consult the Department, he could have taken advice from a property professional, who could have helped identify both an appropriate form of tenure, and a reasonable rent.

31. By denying himself the advice of the Department of Resources or property professionals over a period of more than 5 years, Mr Laws failed to ensure his claims were above reproach. In fact, even if renting from a partner had been permissible, the arrangement for Mr Laws' first property, as the Commissioner said, "represented a very good deal for the landlord. It was not a good—or reasonable—deal for the House."[32] In our view the breach of the rules in relation to the second property was still more serious, in that Mr Laws had made significant financial contributions to the purchase and upgrading of the property. Such commitments are unusual between landlord and tenant, or even between friends. In consequence he should have had no doubt that he and his landlord were "partners" for the purposes of the Green Book.

32. It is clear that Mr Laws recognized that there was potential conflict between the public interest and his private interest. By omitting to seek advice he made himself the sole judge of whether that conflict was properly resolved. It was inappropriate for him to be judge and jury in his own cause. As the Commissioner comments, it can never be acceptable to submit misleading documents to those charged with overseeing public finances. As this case shows, Mr Laws' desire for secrecy led him to act in a way which was not compatible with the standards expected of an MP.

33. Mr Laws has told us:

I accept that I was wrong not to have either re-designated my main home in July 2006 after the "partner" rule change, or to have asked the advice of the Department of Resources. I also accept that on the "nights spent" test, London was my main home from 2004/2005.

To conclude, I did not think that I was putting my private interest in the privacy of my personal circumstances ahead of the public interest in the scrutiny of my circumstances because I was certain that my choice of main home designation was better value for the taxpayer.

My motivation, as the Commissioner has accepted, was to protect my privacy, not to benefit financially, and indeed the effect of my decisions was to reduce the overall costs to the taxpayer.[33]

But I now accept that my claims were, as a consequence of that desire for privacy, not "above reproach." For this I apologise and accept complete and personal responsibility.[34]

We welcome this apology, and Mr Laws' cooperation with the Commissioner's thorough investigation. As the Commission notes, Mr Laws has already repaid £56,592, the sum of his full ACA claims for the period of 1 July 2006 to 31 July 2009. £6,770 of that claim was for food costs.

34. Mr Laws tells us he has also made no claims "against PAAE" (Personal Additional Accommodation Expenditure) in the last year[35]. We consider this is a matter between himself and IPSA, and have not taken it into account in the following conclusions.

Recommendations

35. The Commissioner's report indicates that the Somerset property was correctly designated as Mr Laws' main home until April 2005. Between April 2004 and June 2006 Mr Laws claimed £41,336 in ACA, of which £20,420 represented rent. The Department of Resources has informed us that the payment for the fourteen months wrongly claimed was £11,780. The Commissioner's office informs us that Mr Laws was also paid £2,248.67 telephony costs for his mobile phone and home phone. Both were wrongly claimed, in that they were set against ACA rather than IEP (Incidental Expenses Provision).[36]

36. Mr Laws' repayment already includes £6,770 of food costs, which would have been incurred whatever the validity of his other claims. We also recognize the fact that, if he had been more open, Mr Laws would have had substantial legitimate claims against his Somerset property.

37. Mr Laws' main home designation was incorrect from April 2005. However, his claims for food up until and beyond July 2006 were legitimate. Moreover, the rules on renting from a partner were not yet clear, and Mr. Laws would have been due some ACA if he had arranged his affairs properly. The evidence suggests that Mr. Laws' rental claims were excessive in comparison to market rent, but it is not possible to determine the exact discrepancy. The adviser's estimates of the market rent due for a lodging agreement over this period suggest that the maximum overpayment for rental would have been some £4,470, in addition to the £2,248 of incorrect claims for telephone usage. The total is below the £6,770 of food costs already repaid. Given this, we do not recommend repayment of these sums, which we would otherwise have done.

38. We have also considered whether there needs to be a stronger sanction than repayments. Not only has Mr Laws already resigned from the Cabinet, his behaviour since May 2010 has been exemplary. He quickly referred himself to the Commissioner, has already repaid allowances from July 2006 in full, and has cooperated fully with the Commissioner's investigation. This behaviour has influenced our recommendation.

39. Nonetheless, whatever his motives and subsequent behaviour, Mr Laws was guilty of a series of serious breaches of the rules, over a considerable time. We recommend that Mr Laws should be suspended from the service of the House for a period of 7 sitting days. As the timing of the debate on this Report is uncertain, and there is a recess approaching, we recommend this suspension should begin on 7 June, when the House resumes. Mr Laws should also apologize to the House by way of a personal statement.

1 WE 1 Back

2 WE 21 Back

3 WE 23 Back

4 Appendix 1, paras 273 and 276 Back

5 Appendix 1, para 305 Back

6 Appendix 1, para 305 Back

7 Appendix 1, para 306 Back

8 Appendix 1, para 312 Back

9 Appendix 1, para 314 Back

10 Appendix 1, para 315 Back

11 Appendix 1, para 321 (e) Back

12 Appendix 1, para 321 (d) Back