Consideration of IPSA's Estimate 2011-12

11 SCIPSA 18

Independent Parliamentary Standards Authority Resource Estimate for 2011/12

1 Introduction

1.1 As provided by Schedule 1 to the Parliamentary Standards Act 2009, for each financial year the Independent Parliamentary Standards Authority (IPSA) must prepare an estimate of the IPSA’s use of resources and submit it to the Speaker’s Committee for the IPSA. The Committee must review the estimate and decide whether it is satisfied that the estimate is consistent with the efficient and cost-effective discharge by IPSA of its functions. Before deciding whether it is satisfied, the Committee must consult HM Treasury and have regard to any advice given. This is the second Estimate prepared by IPSA and the first for a full year of operation.

1.2 IPSA is a new body, which has been fully operati o n al for less than a year. It has been established to be independent of both Parliament and Government. IPSA is responsible for both regulating and operating systems for the payment of MPs’ salaries and expenses. IPSA’s aim is for the expenses system to be fair, workable and transparent.

1.3 The central consideration in determining IPSA’s operational costs is that public money has been, and continues to be, spent carefully and prudently. Given its regulatory role, and independence, IPSA bears additional responsibilities in relation to MPs’ expenses over and above those that have existed in previous years . Nevertheless, IPSA’s operating costs during the past year and its proposed Estimate demonstrate that the combined costs of the new scheme and its administration cost significantly less to the public purse than the preceding combined arrangements under the House of Commons.

2 IPSA Estimate 2011/12

2.1 The Estimate (summary attached at Annex) includes provision for a resource requirement of £ 17 2 . 09 8 m:

- £ 16 5 . 735 m relates to the direct payment of MPs’ pay, staffing costs and expenses;

- £6 . 3 6 4 m relates to the administration of IPSA’s operations and the Compliance Officer function.

2.2 In addition to this resource requirement, t he Estimate also includes a provision for £ 2.602 m capital. Of this, £ 1.602 m (rounded) relates to budgetary provision for rental deposit loans that are provided for in IPSA’s MPs’ Expenses Scheme. The remaining £1 . 0m of the Capital budget relates to the design and development of IT systems to support IPSA’s work; to the implementation of proposed changes to the e xpenses scheme; and to improvements in the expenses process.

2.3 The Estimate is in three parts. Part I of the Estimate includes the Ambit, which sets out the purposes for which the resources are required, states how IPSA will account for the Estimate, and sets out the amounts sought in resource and cash terms. Part II, which is further divided i nto Subheads A and B , sets out IPSA’s requirement for resource expenditure and capital provision. Part III provides the reconciliation between the resource requirement and the cash requirement.

Subhead A: MPs’ pay, staffing costs and expenses

2.4 Subhead A of the Estimate includes a resource requirement of £ 16 5,735 m. Of this figure, £49. 1 9 8 m relates to the payment of MPs’ salaries, £ 74 , 750 m relates to the payment of MPs’ staff salaries, and £ 41 .7 87 m relates to the payment of MPs’ expenses ( including a potential £4.4m for the cost of contingency claims under the Scheme , £1.576m for advances payments and £0.11m for insurance and training ).

2.5 IPSA is required by the Parliamentary Standards Act to pay MPs’ salaries. The level of MPs’ salaries is currently determined by the Senior Salaries Review Body and following a resolution of the House of Commons on 21 March 2011 the estimate does not make any allowance for an increase in present salaries. The budget for 2011-12 is of £49.198 m , which includes an increase of £0.031m arising out of changes in the London Area Living Payment (LALP). The budget does not include additional remuneration provided to MPs who are also Government Ministers in respect of their Ministerial duties. This additional remuneration and any associated expenses incurred purely on Ministerial duties are not paid by IPSA; they continue to be paid by the appropriate Ministerial departments. The Exchequer- funded contribution to the Parliamentary Contributory Pension Fund will continue to be provided for by the House of Commons and accounted for through its Estimate. The Estimate also includes provision for paying the salaries of the Chair man and deputy Chair men of Ways and Means, the Chairs of Select Committees and the Panel of Chairs .

2.6 IPSA is required to prepare a n MPs’ expenses scheme and to pay expenses to members of the House of Commons in accordance with that scheme. This does not include the cost of MPs staff salaries which are dealt with separately. The budget for 2011-12, assuming an unchanged scheme from that published on 26 July 2010 , would be £ 43.879 m. This is split between £2 6 . 875 m for the capped element of the expenses scheme including accommodation and office rent costs ; a further £ 14.404 m for uncapped expenses, largel y travel and subsistence costs and £2.6m for advances to M Ps .

2. 7 IPSA has now completed its first annual review of the Scheme, following an extensive consultation on possible changes. It published its proposed changes to the Scheme on 2 5 March 2011, and these took effect from 1 April 2011. The budget therefore takes full account of the changes to the Scheme. The exact increase in expenditure will depend upon on decisions by individual MP s . The Estimate assumes the maximum uptake which would add an additional £ 1. 8 53 m to the steady state budget for 2011-12. Of this figure, £0.031m arises out of the changes in LALP referred to in paragraph 2.5 above; £1.262m arises out of changes to the capped element of the expenses scheme, and a further £ 0. 56 0 m fr om the uncapped element.

2.8 However, the total expenses budget decreases as a result of two reductions in provision. T he uncapped budget includes a contingency fund to cover urgent requirements which do not fit into the rest of the Scheme but which are required to allow MPs to fulfil their parliamentary duties. For 2011-12 this has been reduced by £3m to £4.4m. The budget for advances to MPs has been reduced by £1.024m from £2.6m to £1. 576m The total expenses budget for 2011-12 therefore decreases by £ 2.202 m (i . e. An increase of £1.8 53 m less the £0.031m LALP increase which is charged to the MPs’ salaries budget and less the reductions of £3m and £1.024m) from £43.879m to £ 41. 677 m .

2. 9 IPSA also provides MPs with a budget for the costs of employing staff, including salaries and employer contributions to National Insurance and to pension schemes. IPSA has also proposed changes to this part of the expenses scheme and the expected budget for 2011-12 is £ 74 . 750 m. This represents an increase of £2. 832 m over the steady state budget , uprated to take account of the fact that the 2010-11 budget covered only 11 months , and adjusted for national insurance increases.

2. 10 To assist MPs, IPSA may borrow sums to cover the deposits that may be due when they enter into property rental arrangements for their constituency office and secondary accommodation. These loans will be repayable in full to IPSA in due course. MPs may also take out an advance to assist with cashflow. These advances are due to be repaid by the end of the Parliament. As such, the sums are accounted for as resource within Subhead A although there is no net resource cost over the life of Parliament .

2. 11 The following analysis shows that, overall, the IPSA expenses scheme has cost the taxpayer significantly less than the previous arrangements. The proposed changes in the scheme will mean that budget totals will rise. Even i f MPs spent up to their maximum budget ceiling on all categories of expenses , the scheme in 2011-12 would not cost as much as the previous House of Commons Scheme. In practice it is most unlikely that this would happen and we expect actual expenditure in 2011-12 to be similar to the level in 2009-10. Eventually the impact of inflation will mean that the IPSA scheme will cost more than the previous scheme in cash terms but in real terms it is always likely to be more cost effective.

Overall Budgeted Expenditure relating to the Scheme

 

 

 

 

 

IPSA Scheme

 

Previous Scheme

2010-11

2011-12

 

 

 

Capped Costs (eg. accommodation,

35.8

26.9

28.1

Constituency Office rental etc.)

 

 

 

 

 

Uncapped Costs (eg. travel, disability)

7.2

7.0

7.6

 

 

 

MP's Staffing Costs (including pensions)

73.6

71.2

74.75

 

 

 

 

 

 

TOTAL

116.6

105.1

110.45

Notes

1. Assessed on a steady state full year basis and excludes any forecast of winding-up expenses. As previously noted 2010-11 is not a steady state year and the IPSA budgets for 2010-11 set out in this table have been adjusted to show what they would have been for a full twelve months.

2. No adjustment has been made to the previous schemes’ figures to account for inflation in 201 0 /11 .

3. Where expense budgets are capped, the figures for both schemes assume the maximum will be claimed.

4. The IPSA b udget for 2011-12 also make s provision for the costs of the contingency fund of £ 4 .4m to meet exceptional costs required to fulfil Parliamentary duties but this has not been included in the comparison . No allowance has been made for the cost of deposit loans and advances because these are not a net resource cost.

5. Subhead B: IPSA’s Operations

2.1 2 Subhead B of the Estimate includes a net resource requirement of £ 6 . 3 6 4m including a non-cash requirement of £0.835m. This figure represents the cost of running IPSA as an organisation, including staff costs of £3.39m, IT and accommodation. The costs and associated overheads also include the costs of a Compliance Officer and supporting staff as provided for in the Constitutional Reform and Governance Act 2010.

2.1 3 The total budget for remuneration for IPSA’s Chair , members of the Board and lay members of the Speaker’s Committee is £0.12m. As provided for by the Parliamentary Standards Act 2009, the IPSA is to consist of a Chair and four other (or "ordinary") members. The posts of Chair and members of IPSA were openly advertised in September 2009, and candidates considered through an independent and open competition. IPSA’s Chair is Professor Sir Ian Kennedy. The ordinary members are Sir Scott Baker, Jackie Ballard, Ken Olisa and Professor Isobel Sharp. IPSA’s Chair is remunerated at the rate of £700 per day and the ordinary members at £400 per day. The time commitment averages approximately two - three days a week for the Chair and two to three days a month for the ordinary members. It is the Speaker who ultimately determines the terms and conditions of the Chair and members. The budget also includes the remuneration and expenses for the Lay Members of the Speaker’s Committee who were appointed during 2010-11. The Lay Members of the Committee are appointed by the House and are Dame Janet Gaymer , Sir Anthony Holland and Elizabeth McMeikan .

2.1 4 This subhead contains a figure of £0.68m relating to IT and associated support services. This includes the cost of support and maintenance for desktop and laptop PCs; printers and scanners; Local Area Network Infrastructure; secure hosting of all services, a secure remote access solution and secure web hosting; telephony services including handsets; the web-based expenses system, finance and HR systems; payroll services to support MPs and their staff; IPSA corporate functions and the cost of the web publication scheme.

2.1 5 The £0.7 6 m provision for accommodation and related estates costs covers payments in respect of IPSA’s accommodation in Portland House. The cost comprises lease payments, service charges, an estates charge, rates, cleaning, utilities and telecommunications costs. The cost of the accommodation is benchmarked against the cost of similar property in the government estate in central London and has shown itself to offer good value for money.

2.1 6 The total of £0. 41m for other administrative costs includes: internal audit, legal fees, publications, office supplies and stationery , travel and subsistence and offsite storage costs.

2.1 7 IPSA’s Non-Cash budget of £0.8 35 m includes depreciation on accommodation and IT systems, plus an estimated notional charge for external auditing which may be levied on IPSA by the National Audit Office.

2. 1 8 IPSA has allocated £0.03m for recruitment and a further £0.075m for training. The training budget makes provision for the costs of providing training staff on the proposed changes to the Scheme and to internal processes.

Compliance

2.19 The Constitutional Reform and Governance Act 2010 created the role of a Compliance Officer, which is borne on the IPSA estimate but is independent of the rest of the organisation and reports directly to the Board. In the course of 2010-11 IPSA has recruited a permanent Compliance Officer. Together with the two staff in the Compliance Office, and support costs which are cross charged from the IPSA budget the Compliance function is estimated to require £0.34m in 2011-12.

Net cash requirement

2. 20 The combined net resource requirement of £ 17 2. 098 m and proposed capital and loans expenditure of £ 2.6 m, after adjusting for non-cash items such as depreciation totalling £0.835m, equate to a net cash requirement of £1 7 3 . 866 m .

Net Resource Expenditure

2. 21 IPSA’s £1 7 4 . 700 m resource requirement for 201 1 /1 2 will enable it to fulfil its role in developing and delivering an independent system for the payment of salaries and expenses for MPs.

2.22 The Speaker’s Committee is invited to endorse IPSA’s Estimate for 2011/12.

IPSA Estimate 2011-12

Resource Costs Steady State

Resource Costs of Scheme Revisions and other scope increases

Resource Costs Estimate

 

Capital

 

£,000

£,000

£,000

 

£,000

Subhead A

MPs' Pay, Staffing and Expenses Budgets

MPs' salary

49, 167

31

49, 198

MPs' staff salary and pensions

7 1,918

2, 832

74,750

MPs' expenses budget (capped):

26,875

1,262

28, 137

MPs' expenses (uncapped and other budgets)

14,404

-2, 440

11, 964

MPs’ advances

2,600

-1,024

1,576

Training in proposed scheme changes

60

60

Employers Liability Insurance for MPs

50

50

Total MPs' Budget

16 4 , 964

771

16 5 , 7 35

1,602

Subhead B

IPSA Staffing Budget

IPSA Chair & Board Members

101

101

SCIPSA Lay members

18

18

IPSA Staff

2,978

2,978

Policy support for pay and pension work

290

290

Total Staff

3,079

308

3,387

 

IPSA Resource Budget

IT and Support Services

516

516

1,000

Implementation of IT consequences of scheme changes

165

165

Recruitment and training

25

25

Training for proposed scheme changes (internal)

75

75

Accommodation, Lease and Maintenance

760

760

Other Administrative Resources

412

412

Total Other Administration

1,713

240

1,953

 

IPSA Non-Cash Budget

Depreciation on Accommodation

245

245

Depreciation on IT System

545

-50

495

External Auditing Charge

95

95

Total Non-Cash

885

-50

8 3 5

 

less Compliance officer overhead recharge

-152

-152

Total IPSA Operational Budget

5,526

 

6,0 2 4

1,000

Compliance Officer Function

Staff costs

1 8 8

1 8 8

Overhead recharge (as above)

152

152

Total Compliance officer

3 4 0

 

3 4 0

 

Total IPSA(including Compliance Officer)

5,8 6 6

 

6, 364

2,602

Total 2011-12 Budget requirement

172, 098

2,602

Resource + Capital

Overall total

17 4 , 700

Net Cash Requirement

17 3 , 866