Consideration of IPSA's Estimate 2010-11

CORRECTED TRANSCRIPT OF ORAL EVIDENCE

HOUSE OF COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE THE

SPEAKER’S COMMITTEE ON THE INDEPENDENT PARLIAMENTARY STANDARDS AUTHORITY

INDEPENDENT PARLIAMENTARY STANDARDS AUTHORITY

WEDNESDAY 30 JUNE 2010

SIR IAN KENNEDY, PHILIP LLOYD and ANDREW McDONALD

Evidence heard in Public

Questions 1 – 75

USE OF THE TRANSCRIPT

1 . This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings.

 

Oral Evidence

Taken before the Speaker's Committee

on Wednesday 30 June 2010

Members present:

John Bercow, Speaker of the House of Commons (Chair)

Mr Nicholas Brown

Bob Russell

Laura Sandys

Mr Charles Walker

Ms Rosie Winterton

Sir George Young

Examination of Witnesses

Witnesses: Sir Ian Kennedy, Chair, IPSA, Philip Lloyd, Director, Corporate Services, and Andrew McDonald, Interim Chief Executive, IPSA, gave evidence.

Q1 Chair: Mr McDonald, Mr Lloyd, Sir Ian, thank you very much for being with us and good afternoon. The purpose of this meeting is to review the estimate of IPSA’s use of resources and to decide whether the Committee is satisfied that the estimate is consistent with the efficient and cost-effective discharge by IPSA of its functions.

We will turn shortly to questions, but I ought to say at the outset that I will have a particular approach to the chairmanship of this Committee. It is principally an occasion, as far as I am concerned, for my colleagues on the Committee to put their questions to witnesses. My main role as Chair will be to enable them to do so, acting more like the neutral Chair of a Public Bill Committee, or as in the proceedings of the House, rather than the Chair of a Select Committee, who will often intervene and ask questions. I do not expect to ask questions.

Just before we go into questions, I would like to ask whether Sir Ian, Mr McDonald or Mr Lloyd would like to make a brief opening statement. It is not compulsory, but if you wish to do so, you are welcome to.

Sir Ian Kennedy: Mr Speaker, because we have already come in slightly late and you have lost some of your time, I was going to say something, but I will defer it to you. You go ahead; you don’t need to hear from me.

Chair: That is very gentlemanly of you, Sir Ian, and we are grateful to you for that. We will open up the questions.

Q2 Sir George Young: We operate in a rather challenging climate for public sector organisations. In the Budget, indications were given as to the reductions in overheads expected from public bodies. Looking at your own administration costs, once you are in steady state, would you be able to meet some of the targets that we have heard about, around -25% in the remainder of this Parliament?

Sir Ian Kennedy: Thank you. Even before the Treasury directive was made known, we, as a board, challenged the executive to ensure that when we arrive at steady state, which we will, we should be looking for something like a 5% per annum reduction. At the same time, the board is aware of the target of 25% over five years, and naturally we will take that into account.

Q3 Sir George Young: Looking at the estimates in front of us, your intention is for the combined costs of the new scheme plus admin to cost less to the public purse than the preceding combined arrangements under the House. You estimate that in a normal year, the total spend on Members’ staffing costs and expenses under IPSA’s scheme may be £12 million less than under the previous scheme. Has IPSA looked at the implications that the reduction might have on Members and the services they offer?

Sir Ian Kennedy: There are two areas in particular where the money available to MPs is less than it previously was. The thing to begin with is to accept that this is a somewhat more austere regime of expenses than was previously the case, which may be a function of the tenor of the times and what the public were asking for. Communications allowance, as it was under the previous scheme, is now much reduced. Secondly, the area in which one is counted as living near enough so that one is not entitled to have accommodation in London has expanded somewhat, so fewer people are entitled to that, which brings down the total amount that is available in the system. After all, one of the mandates that we were given was to ensure that the amount of money spent was no more than, and preferably less than, the old system.

Q4 Sir George Young: You are consulting on some changes to the present scheme, for example, the ability to make direct payments. If you were to do that, are the costs of that included in the estimates?

Sir Ian Kennedy: Do you mind if I ask Andrew to answer?

Andrew McDonald: Specifically in respect of direct payments, the board has said that it will consider the matter in its first annual review of the scheme this autumn, so the costs are not reflected within the current budget.

Q5 Sir George Young: Have you looked at the implications on the staffing costs of MPs? If those goes down, will there be an impact on the services that MPs can provide?

Sir Ian Kennedy: The amount of money available under the staffing budget cannot really be compared entirely with what was available under the previous system of allowances, not least because some areas, such as maintenance, services for hardware, translation services or recruitment services that were included in the old allowance but are not in the staffing budget are allowed elsewhere, in other budgets. After all, we took the figure that comprises the starting budget from the Members’ Estimate Committee.1 We relied on that figure and picked the median point for the various salaried appointments we were adopting.2

I have had a fruitful meeting with some London MPs, who said that their particular circumstances, which they have brought to the House’s attention three times over the past six years, warranted further consideration. So we set up a meeting. We have had good meetings on that.

If I may say so, we exist to provide a service. If we are getting it wrong or we are not enabling MPs to do the job that they were elected to do, then we need to listen and make appropriate adjustments, and that is what we are seeking to do.

Q6 Mr Brown: Just to follow Sir George’s question on direct payments, if you move to such a system, will you still need the sum of money shown in the estimates for loans and advances to Members of Parliament?

Sir Ian Kennedy: I would have thought yes, but less. I say that because under the old system of direct payments, as I understand it, there were about 12,000 or more suppliers, each  individually identified, and it was quite difficult sometimes to track and create an audit trail. In the review in the autumn we will undoubtedly consult on big ticket items that can be directly paid for. There may still be other matters that do not fall into that categorisation, where an MP may still need some assistance.

Q7 Mr Brown: So what do you estimate the reduction in the need for loans and advances will be as a proportion of the total?

Sir Ian Kennedy: Philip, do you have a view?

Philip Lloyd: The £4,000 advance is there to help MPs with their cash flow. To date some 160 MPs have applied for those loans, so that is around a quarter of the total number of MPs. On big ticket payments or suppliers, I would expect the 160 to fall-this is purely an estimate-maybe by half.

Q8 Mr Brown: Can you think of another example of a job that would require people to spend their own money up front to carry out the job? What’s the comparator?

Bob Russell: Doctors, opticians?

Mr Brown: Actually, Bob, I was asking them, not you.

Bob Russell: I was just trying to be helpful.

Sir Ian Kennedy: I think there are lots of circumstances in which you have to pay out first and get it back from whomever you are claiming it back from, whether from your employer or yourself.

Q9 Mr Brown: Do you have an example to help the Committee?

Sir Ian Kennedy: Let me write to you on that.

Q10 Mr Walker: We want to know how much of the savings that IPSA is making are being financed by Members of Parliament borrowing on behalf of your organisation, because hundreds of colleagues are owed thousands of pounds by IPSA. So basically they are funding IPSA through their overdrafts. Why, in this estimate, do you not make it clear how much of your savings are actually being funded by Members of Parliament, probably having collectively borrowed more than £3 million, at the moment, waiting for your organisation to pay them back?

Sir Ian Kennedy: Can I say, Mr Walker, that the organisation has been operational for eight weeks, during which time it has paid loans with a collective value of nearly £200,000, advances with a value of £650,000 and has processed 2,300 expenses claims at a collective value of nearly £300,000? In that time, therefore, it has also paid every MP, and every new member of staff has had their salary paid, and so on.

Q11 Mr Walker: You haven’t actually paid every MP, because you got every MP’s salary wrong. So I don’t think that goes in the "We got this right" column. In fact, it goes in the column named, "We failed to pay every MP their salary because we got the salary wrong".

Sir Ian Kennedy: "Salary wrong" would be one way of describing it, but it would not in my view be the only, or the fairest way, of doing so. For example, the real reason is that there was a difference in the computational method used by the House as against IPSA. That has now been resolved and will be rectified in the next payment.

Q12 Mr Walker: "Salary wrong" would be the way my wife would describe it. It was wrong, and I don’t think you can finesse that.

I want to get on to some serious questions about your organisation. Why did you not outsource your back office? Your function is costing £6.5 million. There are five organisations-American Express, Barclaycard and others, including J. P. Morgan-on a Government-framework agreement that do outsourced expenses and provide an off-the-shelf solution that has huge amounts of reporting in it and allows huge amounts of drill-down. But IPSA decided to build its own solution, and I think you are aware that there are a number of problems with it: first, its cost; and secondly, the fact that it doesn’t work or do what it should be doing. The real point is that there are solutions on the market that would do what you are doing far more effectively. After all, you are just a payroll and expenses function. Why have you chosen to spend a lot of taxpayers’ money on building a bespoke solution that isn’t really working?

Andrew McDonald: Perhaps I could help with that. First, the brief that we were sent was from a standing start last September to create an organisation to be up and running with the store open for business the day after the general election, the date of which we didn’t know. We have succeeded in doing that. We have a system that is up and running, and have created a system of rules that were published to cross-party support-

Q13 Mr Walker: But you are not answering the question. The question is: why didn’t you use an established back office provider who would have relieved you of that, and could have had a system in place in a few weeks?

Andrew McDonald: I think the timetable is directly relevant. We were consulting in January and February on the nature of the rules. On the back of that, we had then to create an organisation which, by the time of the election, was ready to deliver services to MPs-services that are being delivered successfully in the way that Ian has described. It would not have been possible to have run an outsourcing exercise which would have delivered those services safely by the time of an April or May election.

Q14 Mr Walker: But you did put a tender out. American Express chose not to respond to the tender. I think you had conversations with OGC Buying Solutions about your tender, and it suggested that perhaps the tender needed to be redrafted.

Andrew McDonald: We were not tendering for the outsourcing of the whole of our operation. We explored the question of whether or not outsourcing of payment was a practical option and a cost-effective option, and we concluded that it was not.

Q15 Mr Walker: But if you feel you can outsource the travel card part-some Members have been given a travel card-why don’t you just use, say, American Express or Barclaycard to do a whole payment system that would flag up exceptions and give you huge amounts of data? Why couldn’t you do that?

Andrew McDonald: The travel card is a discrete and much simpler service. We have said that we will look at the question of broader outsourcing in the context of the organisational review that we will conduct in the autumn and winter of the coming year.

Q16 Mr Walker: The question is-this is my final point-that we are not convinced on this Committee that at £6.5 million you are delivering value for money, because the House of Commons presented a paper saying that it delivered the functions that you are delivering for £2 million. It accepts that it is not a comparable service. However, you say that on a like-for-like basis you need to do it at a lower cost than the House of Commons. Do you have the data that allow you to demonstrate to us that you are actually doing it-administrating it-in a more cost-effective way than the House of Commons? If you don’t, I don’t see how we can approve these estimates, because we cannot ascertain whether you are delivering value for money to the taxpayer.

Andrew McDonald: On the direct point in respect of the like-for-like comparison, the best way of doing this is to look at the direct staff costs that related to the payment of expenses. On that basis, we are doing this at a lower cost than the cost at which the Commons did it.

Chair: Charles, can you make this your last question? I will then go to Rosie and then to Laura and then to me.

Q17 Mr Walker: One last question. You have 77 or 78 members of staff, and you are going to reduce that to 55 for what is basically a payroll and expenses function. Many large organisations do that with a dozen people. Why do you need 55 full-time members of staff, what are they doing, and can you furnish us with each of their contracts and their salary bands? While you are doing that, can you furnish us with your rental contract for your offices in Portland place so that we can ensure that you really are getting value for money for the taxpayer?

Andrew McDonald: Let me take both parts of that. First, in terms of our role, we are not simply a payroll bureau. We have a role as a regulator, as a setter of rules, and as a consulter of the public, as well as paying expenses and salaries. I don’t think our role is directly comparable with the organisations you described.

I am very happy to provide further details of, for example, accommodation. What we sought to do was to secure accommodation on the Government estate because we took the view that that was most likely to be in the best interests of the taxpayer. It proved impossible to do that. Consequently, we went out to the market and ensured that we got best value for money. I am very happy to provide documentation to support that.

Mr Walker: Thank you.

Q18 Ms Winterton: I am looking at this paper that we have been furnished with, and the table in paragraph 2.9, which compares the costs under the previous scheme and the costs under the IPSA scheme. The first item is what is called the capped budget scheme costs, which says, "e.g. accommodation, constituency office rental". The difference between the previous scheme and the new scheme is £9.7 million.

It would be helpful to have a breakdown of what that actually covers-whether it covers, for example, second home allowances, the cost of rental and whether it covers the office costs allowance. There are obviously some issues around at the moment where some Members, because of the way the budgets are structured, are looking at having to perhaps move offices or close their offices because, even though they were covered quite satisfactorily under the previous arrangements, they are not covered under the new arrangements. Presumably, there must be an allowance made for removal costs and costs of breaking leases. Does that come under what is called the contingency fund and how much is allowed for those changes that have occurred? Would any of this be covered-in the current thinking-if there is a decision taken to allow Members to via, as used to happen, so that they don’t have to split off the rental from the service charge and so on?

Philip Lloyd: I can answer the first part of your question. In terms of what is in the capped budget scheme and the changes, I can get a note to you of the breakdown that you have asked for. In terms of those additional costs that you went on to ask for, that is exactly what the contingency of £7.4 million that we have outlined in the notes to paragraph 2.9 is for. We have set up a process whereby MPs can approach us and say, "I have additional costs in terms of my accommodation", whether it is personal or office accommodation. We can fund those where it is merited and justified, and that is what the contingency of £7.4 million is for.

Q19 Ms Winterton: In arriving at, presumably, the different budgets, how was account taken of different costs for office rental-perhaps inner-city office accommodation, or constituencies that might be geographically larger and where Members have sometimes had offices in two places, in order to serve their constituents? How has that been arrived at? Is there any difference in allowance made for the types of different accommodation?

Sir Ian Kennedy: Yes, the answer is that there are differences. They reflect some understanding of the difference in cost between London and other regions.

Andrew McDonald: There are two principles of data, if we are looking at accommodation. One is that we use the Valuation Office data from throughout the UK when looking specifically at residential accommodation. In respect of office rentals, we use the data produced by the Members Estimate Committee in 2008-09.

Q20 Ms Winterton: In terms of "uncapped scheme costs (e.g. travel, disability)", obviously there was an increase between the previous scheme and the IPSA scheme. Will you give us a bit more information about that increase because some issues arise with the limit of only being able to claim for children to travel with their parents if they are aged under five years? I am surprised that that has not gone down instead of up. Why has the figure increased?

Philip Lloyd: The £7.6 million referred to in paragraph 2.9 is an estimate from about four months ago, looking at trends in the travel costs of MPs. It includes all the different types of travel, whether by rail, air or car. It is an estimate, and it is uncapped precisely because you can’t necessarily forecast the travel that will take place in the year. So, it was based on the then-known trends of costs of travel of MPs at the time.

Q21 Ms Winterton: What was the estimate of what was going to be saved by preventing MPs from having their children over the age of five travel with them? Do we know that figure?

Andrew McDonald: I don’t think that we have that figure with us, but we can happily include it in the note that we send you.

Q22 Ms Winterton: Thank you. In staffing costs, there is obviously a reduction of £2.4 million. Could you give us an idea of how that difference of £2.4 million has been achieved? Did the previous figure include pension costs in the staffing budget that MPs were allocated? Does it compare favourably with the new scheme? Many MPs are finding it difficult to keep employing the staff they have employed for many years because of changes in the way that this has been structured. Could you comment on whether you think it is appropriate that that should happen? Also, is employer’s liability included in the costs?

Philip Lloyd: The MPs’ staffing costs do include the pension contributions. All the figures in the table in paragraph 2.9 include the pension contributions. The reason why the figure drops in the IPSA scheme-I believe that a note is provided-is that the previous scheme included in the staffing costs other costs such as professional advice, cleaning, janitorial and reception services, and maintenance services for hardware and software. Under the IPSA scheme, those costs have now gone into the general administrative expenditure budget.

Q23 Ms Winterton: I certainly was never aware that in the previous scheme the staffing budget was to cover cleaning, but perhaps you could do us a note on exactly which part of that and how much was previously spent by MPs on those costs that came out of their overall staffing budget. I am not aware that there was any guidance from the Department of Resources about, for example, model contracts for cleaners and IT people, so perhaps you could come back to us on that.

Andrew McDonald: I am happy to do that and to provide that part of the rules under the previous system, but perhaps it is also worth noting, at this point, the announcement that we made a couple of weeks ago in respect of the staffing budget. We said that the evidence we had available to us when we were calculating these budgets indicated that relatively few returning MPs would have difficulty with the new budgets as now calculated. We were working on the evidence given to us by the Commons. Clearly there has been a very strong reaction from MPs in this Parliament, who have said that that is wrong and that the facts are different. What we said in response to that was, "If you provide us with the evidence, we will look at that afresh," in the way in which Sir Ian was describing earlier. MPs are now beginning to come to us with that evidence and we are beginning to process it. I am very keen to get the message through that we have listened to that reaction, and that where the facts are different we will look at it afresh.

Q24 Ms Winterton: How quickly is that being turned round at the minute?

Andrew McDonald: I think that it is being done pretty quickly. I think that so far we have had only between 10 and 15 MPs approach us.

Q25 Laura Sandys: In many ways, I am pleased that Mr McDonald highlighted one aspect of your function, which is this issue of policy and scheme development. When looking at this budget, it would be really useful for that to be broken out into a separate category because I understand that it includes communications people, policy development people, probably public affairs people, and so on. It would useful to have that very transparently illustrated.

I suppose therefore that it would be useful, if the Committee agrees, to see it in three categories: the allowances and payroll that are direct costs to Members of Parliament; your policy and scheme development or procedure section; and then the administration of the payroll and expenses themselves. In the actual administration of the payroll and expenses, I would like to focus on the last one from a personal point of view. I have not been in Parliament before, so my colleagues are much better placed to look at the issue of allowances. I am interested in what sort of benchmarking you did on the cost and value for money of the payroll and expenses process. For example, we have a remit of three things only. One is cost-effectiveness, the second is efficiency and the third transparency. For the first two, cost-effectiveness and efficiency, what sort of benchmarking did you do on the systems that you have chosen in relation to what other private and public sector operations do? Is there-I am sure there is-a sort of industry benchmark of cost per pound administered, plus also fully loaded costs?

If I were organising a payroll system or expenses within a company, I would look not only at my back office expenditure, but also at the processing of the people whose expenditure I was servicing. I do not know whether you have done any calculation on what the burden of regulation is on the overall administration of the organisation that, on the payroll and expenses side, you serve.

Andrew McDonald: I will ask Philip to talk specifically about the ratios of administrative costs to programme costs. As you say, it is worth seeing this in the context of the total spend of £170 odd-million in a standard year, and the way in which our administrative costs relate to that total expenditure.

Philip Lloyd: You are asking what analysis IPSA has done. Clearly, we have looked at the administration of IPSA as a percentage of the total programme expenditure, and that is one measure as a percentage that is common, particularly in the national health service, for example. IPSA’s administration as a percentage of its programme is around 3.8%. That is based on the 2010-11 figures, which include a lot of transitional costs, as I believe the Treasury’s letter pointed out. The aim, as Sir Ian said at the beginning, is to get those costs down; get efficiencies in the operating costs and get that 3.8% down.

In the national health service we have looked at, for example-

Q26 Laura Sandys: Is that 3.8% just your costs, and not the fully-loaded administrative cost on the organisation that you serve in terms of payroll and allowances?

Philip Lloyd: It is the running costs of IPSA.

Laura Sandys: The back office, I suppose.

Philip Lloyd: All the costs of IPSA as a percentage of the programme.

Q27 Laura Sandys: Could we have a figure for that as well?

Philip Lloyd: Yes.

Laura Sandys: Because this isn’t the figure, is it? That includes policy, communications people and all the rest of it. It would be really nice to have that very specific figure. So, it is 3.8%.

Philip Lloyd: Yes, 3.8%. Our experience in terms of the national health service and the PCTs that we looked at, particularly central London and NHS London, is that it is round about 2.6%. The programme expenditure is about twice that of IPSA, so you get efficiencies according to scale as you deal with a greater programme of expenditure. We have got that target in mind.

Laura Sandys: It would be interesting to look at something parallel-2,000 employees probably. It would be useful to see that cost- effectiveness if you could find an equivalent.

Ms Winterton: Can I follow on?

Chair: Can I say to colleagues that I am in the Committee’s hands, but we do have a lot of questions to get through? It would be good to think that we could move on to something further beyond this fairly soon. Rosie, if you want to come in briefly.

Ms Winterton: It was simply to ask whether in drawing up those comparisons with others, it would be possible to look at the amount of time that the people who were in receipt of the allowances or expenses in these companies spent accessing them? It should take both into account.

Mr Walker: There is an advantage for making them difficult to access from IPSA’s perspective. A lot of Members of Parliament will not bother to make claims, so that is an advantage.

Chair: Rather than debate the issue ourselves, let’s have an answer to the question.

Q28 Laura Sandys: Can I just finish with one other question about your choice of software? I would be interested to know how many other organisations use it, what were the criteria for efficiency, which is our thing, what cost-effectiveness it was chosen on and whether there will be a review of that software. In particular, as you are a new organisation, you should obviously be right at the forefront of technology, delivering the most effective platform for us to operate. I would like to know who else uses it and what their experiences were before you adopted it.

Andrew McDonald: I can help with that. I would run a tender exercise that led to the selection of the main supplier. The system of work has been the subcontractor; they provide expense of work, which is the system that we have used or configured here. It is a standard system that has been configured specifically for use by MPs. We can give you some examples of other organisations that use system-of-work product, but this is a piece of software that works in a number of public and private sector organisations. I am very happy to release the criteria that we used for the tender exercise.

Sir Ian Kennedy: You are quite right that we will keep it under review as part of the annual review process.

Q29 Chair: I certainly don’t want to dwell on the point excessively, but I think it would be fair to say, as a summary of the concerns of colleagues, that most Members would like some indication-certainly most Members that have communicated with me on these matters-that IPSA, in coming to a judgment about our legitimate levels of staffing costs has given some consideration to, or made an assessment of, work load, increased caseloads, levels of correspondence and whatever trend data might be available on those matters. If it were the case that no such assessment had been carried out, we would want at least to know that. If, on the other hand, there were such an assessment, it would be of great interest to Members; although it might not entirely cohere with the views that they hold, it would be interesting as evidence for us to consider.

Sir Ian Kennedy: The fundamental baseline has been three and a half staff members, inherited from the previous system. They have been graded at different levels; the salaries were considered and the median point arrived at. It may be the case that in not providing for the fact that there may have been some employees at a more senior level there was a need to reconsider what the amount of money made available should be. That is where we come in, and listen and find out whether areas of adjustment are required. That is what we are in the business of seeking to do.

May I make a somewhat more fundamental point? Our presence here is for you to scrutinise this estimate-rightly so-but there is a more symbolic importance in our being here. We are for the first time in 300-plus years of history, as an independent entity, by which I mean we are non-partisan and external, seeking to regulate an area of expenditure of the public purse. The symbolic importance is that, in my view, it is the beginning of a very important dialogue of the sort that we are having.

A far bigger exam question falls to IPSA to solve and answer-namely, what I call the big exam question: what does a modern, 21st-century legislator need from the public purse to do his or her job properly? That, of course, entails asking what the job is. That is a conversation that one should not be having simply through the vehicle of expenses. It is a much larger question, and I would hope that we can create the environment in which we can have that dialogue.

Chair: I am very keen to move on to other questions, as there is a lot to cover. Bob, very briefly.

Q30 Bob Russell: Sir Ian, as part of that dialogue, have you visited the constituency offices of any Member of Parliament to discuss with their staff and the Member what it takes to operate a constituency office?

Sir Ian Kennedy: We have staff and we have an MP who sits on the board, both of whom have experience in all of that.

Bob Russell: Can I ask the question again? Have you done so?

Sir Ian Kennedy: Personally? No.

Q31 Bob Russell: Mr McDonald declined an invitation from me to visit my office.

Can I say, Sir Ian, that I would like to say some nice words about IPSA, but frankly you have the most inefficient organisation I have known in nearly 40 years of public office, and that includes 13 years on the trot dealing with the Child Support Agency. You are not complying with the Act, which says that you have a general duty: IPSA should act in a way that is efficient, cost-effective and transparent. You are not doing so on the first two and we don’t know about the third yet because you haven’t been there long enough. The second part says that Members should be supported in carrying out their parliamentary functions efficiently, cost-effectively and transparently. They are not.

In addition to your 77 staff, if each MP and their staff are giving five hours a week to filling in forms, electronic records, and the rest of it-I suspect that is a considerable underestimate-that works out at 3,250 hours a week, or the equivalent of 93 full-time jobs. You have created something even though a simple credit card system could have done it. Everybody else uses credit cards. You have created something that you did not have to create.

Chair: Thank you. Let’s have a response to that. We believe in robust inquisition here, Sir Ian, and I know you won’t object to that. We will have an answer from Sir Ian and then another question.

Sir Ian Kennedy: I think it’s appropriate to hear views from across the spectrum.

Bob Russell: You haven’t even been speaking to MPs in their offices.

Chair: Bob, please. You’ve asked a fair question, but let us have an answer.

Sir Ian Kennedy: I am pleased with the reports from the staff in the past few days about how many MPs they have been dealing with who have now found it possible to say, "Thank you for your help, that was very helpful", and words to that effect. I find that progress gratifying.

Rosie Winterton asked earlier whether I could break down from the estimate how much time may be involved in registering one’s expenses online. We will seek to do that. That may provide a way of answering Mr Russell’s question about 90 people, or whatever the figure was.

Chair: I think Nick had one further question.

Q32 Mr Brown: I have a new one now. Sir Ian, if you can find some satisfied Labour MPs, can you please point them in my direction and get them to express their satisfaction to me? I am besieged with complaints about the way in which the system operates in practice, and there is an expectation that we will do something about it. I think it better that we just focus on the estimates, rather than on these broader issues. You are showing a non-cash budget for depreciation. What are you depreciating?

Philip Lloyd: The depreciation is on the fit-out of the building and on the infrastructure and IT. The costs of fit-out and IT, under normal accounting practice, will depreciate over five years.

Q33 Mr Brown: Yes, but the building?

Philip Lloyd: It is the fit-out of the building.

Mr Brown: The furniture.

Philip Lloyd: The furniture. Plus we took over a building that was an empty shell. It relates to the fitting of floor, ceiling and lighting to make it into a modern office.

Q34 Mr Brown: Could you let the Committee have a breakdown of how the depreciation is actually calculated? I understand the point about the IT: given that it is a bespoke system, I think it is legitimate. But the furniture?

Philip Lloyd: That’s normal practice.

Q35 Mr Brown: I’m sure it is, but perhaps we could have a breakdown and just see what furniture is being depreciated, and at what rate, because I think we would be every bit as interested as people are in our furniture.

The complaint I get more than any other is that the system you’ve devised is clunky and difficult to use and that it consumes an enormous amount of the time of your officials, and the time of Members of Parliament as well. How is that accounted for in the estimates? Can you tell me specifically why you decided on a system that asks people to split the actual receipts-the evidence of the claim-from the claim itself? Under a more normal system, as I understand it, a claim would be made to which the evidence would be attached, but you do not require that.

As a subset of that, you are asking for receipts, as I understand it, for things like rates, gas, electric and other utility bills, including water bills, but these utilities do not usually issue receipts-nor does a local authority. Normally, rather than issue a receipt they request a payment and you pay it. In the past, the practice has been to submit the invoice rather than to ask the utility for a receipt. You won’t get a different answer, but it is time-consuming and clunky and often quite difficult to extract receipts from utilities and local authorities.

Can I also ask if you would consider paper claims instead of using the computer system? In other words, could people just fill in a form, clip the receipts to it and send it to you and, eventually, get a cheque in return or some rational dialogue as to why a claim was not agreed?

Andrew McDonald: I am happy to take those questions in turn. In terms of the online system, it is perhaps worth saying first that we have said that, as of Monday next week, we will provide-indeed, in some ways we are already providing-one-to-one tuition on the way that the system works to help those Members who are finding some aspects of it difficult. That is one of the things that we are now-

Q36 Mr Brown: I don’t want to be discourteous, but one of the complaints is about the amount of MPs’ time that is being consumed in what ought to be a reasonably straightforward transaction. To offer them further training on what ought to be an administrative task does not really show understanding of the legitimate complaint, which is that MPs work long hours and are focused on a wide range of things-they must have good general knowledge about all sorts of things-and to take them away to train them to make a bespoke piece of an IT system work is not really helping them.

Andrew McDonald: I hope that when Members take up the offer of that tuition it will be seen to reduce the burden on MPs in terms of the amount of time that they have to spend.

Equally, on the next question, in terms of the basic design choice when the system was being designed-who handled receipts and how they were handled-there was a choice between whether receipts would be scanned in by MPs and their staff or whether IPSA did it. We took the view that it would be more cost-effective for MPs to do it, but that it would reduce the risk of error if receipts were sent in by post and we did it. That was an attempt to be helpful. We have said that we will continue to review the operation of the IT system and that we will look at subsequent releases, which will, I hope, pick up on feedback to make the system progressively more user-friendly. So we will listen to the feedback and respond to it. As for a paper system, we could of course provide one in addition to the IT system, but that would add significantly to the cost because one would have parallel systems.

Mr Brown: I find that difficult to accept.

Q37 Mr Walker: I am sorry to labour this point, but I think it is worth labouring. We still have not had an answer-I know it is difficult to give answers in these short sessions-to the question on credit cards. Why did you not just go to a credit card system? Really, it does work. It works across numerous Departments.

Members of Parliament could have a credit card with which they would pay their stationery bill, for example, so you can see what was ordered, and when and how it was ordered. The credit card statement is then sent to you and is flagged up on a report. That removes the need for paper shuffling and we do not have to spend our time doing it. More importantly, from your perspective, your staff would not have to be deployed to do it. There really is no good argument for not going to a credit card system. Can you respond to that?

Sir Ian Kennedy: There are a number of reasons why. Let’s begin at the end. We know that a number of MPs, including yourself, would argue in favour of that, so we are going to keep it under review and we will obviously come and talk to you. But the difficulty is, first, that statements do not always provide sufficient information to verify the claim. Secondly, we have to remember the context in which IPSA operates: the previous system was shown to be lax, with vague rules, and it was open to abuse and sometimes was abused. The public wanted-and you and Parliament commanded us-to put in place a rules-based system that was transparent.

The second argument about a credit card is that IPSA would lose an important tool of compliance, because there is no guarantee that any of the claims made on a card would be backed by the requisite evidence, so IPSA would have to put in place quite a complex debt recovery system and would also bear the liability until it was otherwise met. The only effective control tool, if the card was not properly used, would be to withdraw it, which would leave MPs high and dry.

Q38 Mr Walker: But credit cards are used across Government Departments and businesses. You have to balance risk; there will always be a risk that someone who is determined to be a crook is going to be a crook. But at the end of the day, a credit card scheme administered by one of the six organisations on the Government framework agreement really would have solved a lot of problems. I have a suspicion that, in three years’ time, we will be on a credit card scheme. You could be really brave, sir, bite the bullet and say, "You know what? We did get it wrong. We’re going to go to a credit card scheme sooner rather than later." A lot of these issues would then evaporate, and you could get down to the job that you’re paid to do and want to do, which is to regulate the system and look at ways of improving it, rather than dealing with grumpy, miserable MPs such as myself the whole time.

Sir Ian Kennedy: Mr Walker, I absolutely welcome what you’ve just said. If we have this capacity to talk and to understand where you are and where people feel the system needs some improvement, we can have that. It may well be that if we can rebuild-I regard today’s meeting as the first step in the journey to rebuild public confidence in a system that was, on everybody’s assessment, broken-we will be on a journey. If you’ll join me on that journey, Mr Walker, who knows where we will be in three years’ time.

Chair: We are grateful.

Q39 Ms Winterton: Let me follow up on Charles’s point. I referred to the £4.3 million for loans to enable people to pay up front, they then send in their receipt online and follow it up separately with the receipt itself. I have been led to understand that that is not a very good auditing approach, because separating the two payments is difficult and things may be lost. However, in terms of staff time, it must mean that somebody has to spend time looking at the original invoice and then at the payment, before marrying everything up when the receipts come in by post. So it is quite a tortuous system. Obviously, these loans are in recognition of the fact that there are people who are incurring large debts, bank charges and so on. If there were a change to a direct payment system that would, in a similar way to a credit card, remove all that bureaucracy in one go, how much staff time might be saved? Obviously, the £4.3 million would be saved immediately because the loans would not be required, but has there been an estimate of the benefits in terms of the amount of staff and MP time that would be saved?

Philip Lloyd: If we go to direct payment of suppliers, there are additional costs attached to that because of dealing potentially with 12,000 different suppliers. There would be some savings because not so much validation would be required. So we have gone down the line of thinking that, if that comes in the review, which we have said will be in the autumn, there is a potential cost from dealing with 12,000 extra suppliers.

The loans you refer to are for deposits on the personal accommodation and the office accommodation. We’ve made those loans to the MP where there’s a three-month or six-month deposit required by the landlord. They are there until the tenancy finishes, and that’s what the £4.2 million represents.

Chair: I shall call Bob and then Nick, and then I would like to try to move on to other questions.

Q40 Bob Russell: Sir Ian, up until a few minutes ago, everybody’s contribution to the debate was about office costs, MPs’ staff and so on. You, in one reply, brought in what are called the second homes and then linked that with the public’s disquiet, and you’re absolutely right-the public disquiet was over the so-called second homes. I am not aware of any serious misgivings over the way Members of Parliament have conducted their constituency office work, their staff etc. What you have done, I am sorry to say, is manage to muddle the two together. I sincerely hope you didn’t do that deliberately just now, because I am concerned here about the efficient running of my constituency office and those of colleagues who have elected me-elected me; we have been elected-to serve and represent Members of Parliament as best we can. At least we have an elected mandate from our constituents and from the House. You don’t have any such mandate, so can you please address the problem of Members of Parliament who want to get on and do the job they were elected to do? You’ve already acknowledged you haven’t even bothered to find out yourself what it’s like to be a Member of Parliament. It is not a nine-to-five, Monday-to-Friday job. In two months, you’ve destroyed the whole ethos of the public service I thought I had been elected to undertake.

Sir Ian Kennedy: Mr Russell, I have a mandate from Parliament to chair a body to introduce a system of independent regulation pursuant to a statute. We have done that. There is absolutely no intention of making the position you have in the constituency any more difficult than you find it by virtue of carrying out your office. If there is any particular in which you are finding it difficult and you let us know, let me know or let Andrew, my colleague, know, we will seek to take account of it. That’s much easier when we know what we have to deal with and can begin to respond to it.

Q41 Mr Brown: I want the independent authority to work and I welcome what you said about having a dialogue with ourselves to sort through some of these issues. Can I just return to what is a relatively small part of this, but it is indicative? That is the requirement to get receipts for things for which receipts, as opposed to invoices, are not normally issued, like local authority rates and gas, electricity and utility bills. Surely any reasonable person would accept the bill itself as evidence that there was a requirement to pay, rather than requiring a Member of Parliament to get in touch with these different bodies to-unusually-gouge a receipt out of them.

Sir Ian Kennedy: I’ll defer to colleagues, but that’s evidence, as I understand it, of a claim that has to be paid; it may not be evidence that it has been paid, and that’s of course what the system is about.

Q42 Mr Brown: Can I just say this to you kindly and lightly? I think that’s taking things a bit too far.

Sir Ian Kennedy: Can I put this back to you, Mr Brown-?

Mr Brown: How can you cheat on your gas bill or your rates bill? It’s not as if we’re consuming rates and utilities.

Sir Ian Kennedy: I understand that, of course, and we’ll take the point back that you make, because it’s a very helpful point, if I may say so, but it’s part of a larger system, which is that the world outside tends to live by reference to the fact that you get your money back when you present the receipt or whatever the evidence is of payment. That’s the general principle that the rest of the world lives with, and what now MPs are living with. If there are circumstances in which we can, with due understanding of the National Audit Office, accept the kind of proposition you made, of course we’ll look into this.

Q43 Mr Brown: Have you taken advice on this point from the National Audit Office?

Sir Ian Kennedy: The National Audit Office is very anxious in all circumstances for us to produce evidence-

Mr Brown: I don’t want to be pedantic, but on this specific point, have you taken the advice of the National Audit Office?

Philip Lloyd: We have. What we have done is, on invoices which haven’t yet been paid, we will actually pay in advance. We put out a notice saying "Advance payments on invoices", so where they are large invoices, payment not made but goods received, such as utility bills as well, we can actually pay those on receipt of the invoice.

Q44 Mr Brown: Would it be possible for this Committee to see the advice you obtained from the National Audit Office on this point?

Sir Ian Kennedy: You may not need to, because it would appear-

Andrew McDonald: I think we’ve actually met your point. This is one of the issues we addressed in the early weeks of the running of the scheme. With habitual bills, gas bills being a good example, we have taken the view, not least in the light of feedback to us, that there is no need to put you through the burden of going back to get a receipt, and we will pay on the basis of that habitual bill. We’ve heard the point, and we’ve addressed it, but it does illustrate a broader point.

Q45 Mr Brown: I would still like to see the advice you received from the National Audit Office, if that’s all right with yourselves.

Andrew McDonald: Indeed, but the broader point that we’re seeking to address is to make sure that as and when problems are identified and are addressed, we get the appropriate message through to you and to colleagues right across the House. It’s something we are very keen to take advice on from yourselves and from others as to how best to do it, whether it’s working through a liaison group or whether it’s through the weekly email bulletin that we now issue. We’re very keen to make sure that all Members are in a position where they’ve got the most up-to-date advice so that they can handle their affairs with the efficiency that I know you want to handle them with.

Q46 Mr Brown: I would still like to see the advice that you received from the National Audit Office. All you’ve got to say is, "We’re willing to send it to the Committee." You’re saying that?

Andrew McDonald: We’ve said yes, but I’m also pointing out that we’ve addressed your specific point.

Chair: Good. I said at the outset that I wasn’t minded myself to ask questions; I wanted to leave my colleagues to do so, and I think it’s pretty obvious that I’ve stuck to that. I don’t intend to ask questions, but before we proceed to further questions, I think I can allow myself an observation which I suspect reflects the centre of gravity so far as parliamentarians are concerned. There is a body of commentators who think that the rougher and the tougher the regime is for Members of Parliament, the better-no questions asked, must be a good thing. Most of us wouldn’t go along with that view. There is a very small body-perhaps an infinitesimally small body-of refuseniks among politicians who are totally against an independent system or having an in-house system.

I think I would be right in saying to you, gentlemen, that the overwhelming majority of my colleagues-I am one of them-strongly support an independent system which is audited, transparent and accountable. We do believe that, consistent with that, it’s perfectly reasonable and absolutely incumbent upon us to ask probing questions both about the accounts and the budget and about whether the system allows us effectively to discharge our obligations as Members of Parliament. This has nothing to do with hands in the till or people seeking to enrich themselves-if I may say so, the really downmarket Vauxhall Conference League of commenting on our affairs. It has nothing to do with that and everything to do with the sorts of issue that my colleagues have encapsulated in their questions.

As you gentlemen know, I have my duties under the Parliamentary Standards Act. One of my duties was to appoint an interim chief executive. I was pleased to appoint Andrew McDonald-as you know, Andrew-and I have never resiled from that. I had a hand in relation to the appointment of the chairman. Sir Ian, I was proud to announce your appointment, and I haven’t resiled from that. So I hope that you will take this pretty tough interrogation in the spirit in which it’s intended, which is to get at the right answers, and that you will recognise that we are going about our business in a proper, if perhaps demanding, way.

Can I just ask-because I am not psychic, and I would like to have an idea-whether any colleague here wants to ask a question about IPSA’s use of temporary staff? Bob, would you like to come in on that?

Q47 Bob Russell: It’s not so much the temporary staff, although I find it astonishing that there are so many temporary staff, and that even when the temporary staff are gone there will still be 26 more than were there before, which I think works out at one member of staff for every 12 MPs, which is quite a lot. What I’d like to ask, however, is how many of them are communications officers, with whom they are communicating and what their purpose is, if they are communications officers. There are rumours that IPSA has appointed or will be appointing three communications officers. I hope that’s not correct.

Sir Ian Kennedy: IPSA will be appointing, soon, a director of communications, and there will be two supporting staff. Why we would have that is that we have a number of audiences, Mr Russell. One is the public at large; another is Members of this House; another is the media, broadly defined. As today indicates, there is a big job to be done in terms of communicating. Even though we have tried to do it, we have obviously not done it as well as we could have done, and I take responsibility for that. There is always, as I said at the outset, room for improvement, and we seek so to do. We have been operating at a somewhat breathless pace; so we will be using people so as to be able to establish the kind of liaison groups that Andrew talked about a moment ago, with an ability to communicate with you and others about what we are doing, and to take advice on changes or adjustments.

Q48 Bob Russell: Sir Ian, I must pursue that. You haven’t mentioned the salary levels, which I think are a pertinent factor. I don’t see why IPSA needs three communications officers. Before I became a Member of Parliament I was the publicity officer for a university, with students and staff totalling about 8,000. I did it on my own, so please explain why IPSA needs three communications officers. And what salaries will they be getting?

Sir Ian Kennedy: Why it needs three is because, as I have already said, there is a lot of work to be done, as the past history of IPSA and the future prospect of IPSA demonstrate. As regards the pay scale, the job of director, I think, was advertised at a salary up to what is the current market rate of £85,000-and Andrew will help me on the pay for the other two.

Andrew McDonald: We can provide details.

Q49 Bob Russell: I would like to know, please, because presumably, these three are in addition to the staffing levels, which, we are told, are going to be reduced. Why, after two months, do you need three communications officers? Why was that not part of the staffing structure? Because clearly, if you need to communicate, you need to communicate in the early days. I think these are spin doctors, aren’t they? They’re designed to undermine the integrity of Members of Parliament.

Sir Ian Kennedy: No, they are not.

Andrew McDonald: Just as clarification, the three posts are within the complement.

Q50 Laura Sandys: Just to follow on from that, I go back to an earlier question. This again comes back to one of our three remits, and that is transparency. We’ve received from you a budget estimate, which really doesn’t tell me a lot about what you do in certain areas. It’s very difficult to sign something off without that. For example in the category that Bob is talking about, which is policy development, communications-who your target audience is-how are you going to evaluate that? How are we going to evaluate your progress or your use of money?

To be frank, it strikes me that an element of this is that, if you want to become elaborate maybe you do that in year two, or year three-not that we will necessarily have the budget for it-but you’ve got to get the knitting right. I feel quite strongly that the budget should reflect getting your very strong basic functions very effective, and absolutely working perfectly, before you get to what, in some ways, even the outside public might think is a little bit of icing on the cake. I would like to see this broken down in the budget into very specific policy communications and what’s called other incidental, and maybe extra, functions.

Sir Ian Kennedy: You have made that point and it is very helpful; we’ll do that. Thank you. To be clear, it’s the principal role of the board to make sure that the executive lives up to whatever it is supposed to do; then the board obviously reflects to this Committee what it is doing, and it is open to this Committee to say "You are not doing enough" or "Well done" or points in between.

Q51 Laura Sandys: We need evaluation points for why you’re doing it-what you’re trying to achieve-because otherwise there is no way.

Sir Ian Kennedy: Understood.

Andrew McDonald: Taking that point, can I just add one supplementary point, which is that-in your terms-getting the knitting right is intrinsically bound up with communicating effectively. In answer to the question earlier from Mr Brown, of how we communicate with you and colleagues-

Laura Sandys: I can’t communicate with you at the moment.

Andrew McDonald: It’s a two-way process, I fully acknowledge, and we need to get better at making sure that we get those messages through to you in a way that means you can be clear about what the current advice is. So, getting the knitting right depends on communicating well.

Q52 Mr Walker: How much money are you paying to head-hunting companies? What is the arrangement that you have with the search and selection company, or head-hunting company, for the communications director? You are offering a salary of up to £85,000. What percentage of that salary will you be paying?

Andrew McDonald: I am very happy to include the answer to that in the answer to the earlier question, in respect of the way in which the communications functions start.

Q53 Mr Walker: Which head-hunting firm, or search and selection firm, do you use for your senior searches?

Andrew McDonald: We are using Green Park for that search.

Q54 Mr Walker: Okay. And what are Green Park’s fees? What fees have you negotiated with Green Park?

Andrew McDonald: I don’t know whether Philip can help you now; otherwise, we will write to you subsequently.

Philip Lloyd: The precise percentage that they charge-

Mr Walker: No, hold on. I come from a recruitment background. It is normally between 20 and 30% of first year salary and package. Would that be about right?

Philip Lloyd: Generally, we have negotiated slightly lower percentages than those.

Q55 Mr Walker: Slightly lower than 20% or slightly lower than 30%?

Philip Lloyd: Yes.

Mr Walker: What? You have negotiated at the lower end of that?

Philip Lloyd: Yes.

Mr Walker: So, about 20%?

Andrew McDonald: I think that it is better that we write to you with the precise details.

Q56 Laura Sandys: And that’s also for the chair and the board members as well, that you go through an independent selection firm?

Andrew McDonald: The selection of the chair and board members was a process supervised by the Office of the Commissioner for Public Appointments.

Q57 Mr Walker: How many senior people do you use your search and selection company to find, approximately?

Andrew McDonald: The board and then those senior members where we have gone outside-

Q58 Mr Walker: How many senior members are there outside the board? You have got the head of communications. How many others would there be?

Andrew McDonald: About four others. But again, in the same note we can get you the right answer rather than-

Q59 Mr Walker: Four others. Just going back to the estimate, there are various headings: there is subhead A; subhead B; subhead C. There is provision in the legislation for you to return to this Committee at a later date, on two or three occasions possibly, to ask for more money in case you run out. What happens if, say, in one of these sub-headings you actually overspend your budget? Will you then come back and ask us for more money under that subhead, or will you try to find additional resource within the overall budget before coming back here?

Philip Lloyd: Each of the subheads is slightly different. Subhead A is obviously the expenses scheme and you can see that we have actually budgeted for perhaps the maximum that can be claimed. So we don’t envisage coming back and asking for more, because that is the maximum amount.

Under subhead B-IPSA’s operating costs-we anticipate that those costs will be met and that we will not come back and ask for any supplementary, obviously providing that the remit of IPSA doesn’t change. Going ahead in 2010-11, we will work within that budget.

Q60 Mr Walker: But in subhead B, you’ve got staffing budget, resource budget and non-cash budget. And a compliance officer function comes under that. It is possible that, in one of those budgets, you could overspend-it is just possible. Would you come back to us if you overspend the IPSA staffing budget, or would you try to find money-underspends-within other parts of the budget to save yourself from having to come back here?

Philip Lloyd: The general principle is that we try to manage within the overall budget. So, if one line of expenses-

Q61 Mr Walker: Do you know what that’s called? That’s called virement. So, if you’re allowed to do it, why aren’t we? Because when we had a meeting with one of your directors, we were told, "Oh no, no, no, in business"-and I come from business, so I knew it wasn’t right-"in business we can’t virement between budgets. No, no, you have to deal with the budget you’ve got." But you, in answering my question, have just told me that if you run out of money in one of your staffing budgets, resource budgets or non-cash budgets, you will vire to another budget to make up the shortfall. So, if it’s good enough for you, why can’t we do it?

Philip Lloyd: The answer in each of those lines of expenditure is that we anticipate spending-

Mr Walker: No, no, no. You said that if you overspend in one of those budgets, you will seek to make up that overspend by identifying underspends in other budgets. That is a luxury that you are allowing yourself that you are denying us. Now, why should you have that luxury as a public body and why should we be denied it?

Sir Ian Kennedy: Let me say that there would be no intention of coming back for more money, nor would there be an intention of viring across. [Interruption.]

Mr Walker: No, we need a very succinct-

Chair: Order. Quite a lot of what I would call heckling from a sedentary position is taking place. I want to hear Sir Ian’s answers.

Mr Walker: I do need an answer.

Chair: Indeed. But I didn’t hear the last words, because there was muttering going on.

Sir Ian Kennedy: There is no intention of overspending nor of viring across.

Mr Walker: No, that’s not the answer I-

Chair: It may be the acoustics or it may be me. Just speak up a bit, Sir Ian. Shout at me if necessary-I’m getting on a bit.

Sir Ian Kennedy: I do beg your pardon. My fault-I’m sorry. There would be no intention of spending more than we have allowed for, nor would there be any intention of introducing virement across budget.

Mr Walker: That’s not the answer that Mr Lloyd gave.

Chair: No, I understand that. Perhaps we could come back to Mr Lloyd on that.

Philip Lloyd: I’m sorry-let me answer your question. It’s the general principle about the overall budget. The way we manage our budgets is that each of those lines will be managed within those budgets. We do not expect to vire between those budgets. The general principle is-

Q62 Mr Walker: Sorry, but this is a fundamental point. The record will show in answer to my original question that you said you would exercise virement between these individual budgets to ensure that you didn’t have to come back and ask us for more money. If you allow us to have virement between our budgets, I promise you that very few MPs will come back and ask IPSA for more money because we will manage our budgets accordingly. If there is an overspend, as in the past, you can go and find it in another budget. It is perfectly reasonable for you to do it; I am not attacking you for doing it, but I think it is completely wrong that you are not allowing us to do it. As you have identified, it is standard business practice to do it.

Sir Ian Kennedy: Mr Walker, the record will also show that I said, as chairman of the board, that there will be no virement. The principle of no virement is because we are talking about budgets rather than allowances. We can have that conversation, but we have already made that clear and first of all we consulted on it.

Q63 Chair: Order. I am trying to help the Committee. I would like to get to the bottom of this because on the one hand, Sir Ian, you have been very explicit in saying what you have just said. I have heard it very clearly, and other colleagues will have heard it very clearly. Virement is not for you. That’s your answer-it won’t happen. Mr Lloyd, with respect, you said that as a general principle it wouldn’t happen. We are politicians and we know that there is a difference between there being a general principle, and an absolute unyielding and unvarying practice. Therefore, what I want to establish is this. You are here appearing as a collective. Are you telling us, this Committee, that there will be no virement, or are you saying that as a general principle there will not be virement but that there might be occasionally, in extremis? If it is the former, let’s be clear that that’s the case with an absolute, down the line insistence that there will not be. If it is the latter, that there might be virement from time to time, given that that would represent a departure from the general principle, would you expect that you would first come back to this Committee to notify it of your intention to depart from the general principle, or not?

Sir Ian Kennedy: I can answer that, and the answer is yes, as regards the latter point.

Chair: Namely, Sir Ian, that you would expect to come back here first.

Sir Ian Kennedy: Yes.

Chair: Okay. That is helpful.

Q64 Laura Sandys: Can I add something on to that? On that basis, when one looks at this, can we have a more explicit budget with my issues about the policy, before one agrees that things are not being vired from one line to another? Can we have a little bit more detail? That would be very useful.

Sir Ian Kennedy: That’s helpful. That’s a point you have made and we have got that.

Laura Sandys: So before one looks at the budget and accepts it in its categories.

Q65 Bob Russell: Sir Ian, is there a bonus scheme for IPSA staff if they perform?

Sir Ian Kennedy: No.

Andrew McDonald: No. The board said that there should not be a bonus scheme for IPSA employees.

Q66 Bob Russell: So, a clear categorical assurance that no IPSA staff will get a bonus?

Andrew McDonald: For IPSA employees, what the board has said-and Ian may want to add to this-is that there will be a modest reward and recognition scheme for IPSA employees.

Q67 Bob Russell: A modest reward and recognition scheme-what does that mean?

Andrew McDonald: We can illustrate this as it is something we are developing at the moment. It might be vouchers of up to £20 or so. It is common practice in the public sector.

Q68 Bob Russell: And can Members of Parliament have modest reward and recognition schemes for their employees?

Andrew McDonald: We’ve said no to bonuses in the same way that we have said no to bonuses for IPSA employees. I think there is a question to be clarified about reward and recognition schemes for MPs’ staff. I’m not sure that that has been raised with us directly.

Q69 Bob Russell: Okay. I just wanted to get a bit of consistency. Can I ask the three gentlemen: what mode of transport did you use today to get to this meeting?

Andrew McDonald: We walked.

Bob Russell: Well done.

Chair: Right. We’re grateful to you, Bob, for those questions. Rosie?

Q70 Ms Winterton: On the estimates, under subhead B in the staffing budget, there is £1.24 million, or whatever it is, for "temporary staff transition phase". In the residual IPSA one-off set-up costs, there is £163,000 for seconded staff. Is there not any crossover between those two figures? It would be interesting to have a breakdown, under subhead C, of the other set-up costs. In some parts of this, there is an indication that there was, for example, £700,000 last year on IT and associated support services and another £500,000 this year on support and IT services. It just seems to be a bit of duplication there.

Philip Lloyd: On the first one, the seconded staff are seconded from the civil service. They were staff who helped right at the beginning last year, as IPSA started. In fact, we started off the ground with 15 of those staff, continuing into April. We’re now going down to two, so there’s only a few remaining.

The temporary staff transition phase in subhead B includes the main core staff of IPSA. Some of those are temporary at the moment. As part of the transition of staff to IPSA-the movement of staff from the Fees Office to IPSA-16 came across in April, and a further 183 are coming across in August. Until those come across in August, there are transitional temporary staff covering the posts until those people come across.

Chair: Rosie, thank you very much indeed. Sir George?

Q71 Sir George Young: If we’re coming to the end-this meeting only takes place once a year, something for which you may be grateful-we’ve been at it for an hour and a half, and I’m conscious that we’ve only touched on a number of issues. There are many other ones that colleagues would like us to have raised. It’s difficult to do that in the context of just approving the estimates. I think the exchange has underlined the need for a more regular dialogue between IPSA and the House so we can go through these issues. You’ve written to me saying that you would welcome such a channel of communication. This is just to say that this is something which we’re taking forward. I hope to reply quite soon so we can carry on this dialogue and get to the bottom of some of the issues which are clearly worrying colleagues and worrying you.

Sir Ian Kennedy: Sir George, you’re absolutely right. We have talked about this. We do think it would be important. It would be most unfortunate if we only met once a year and therefore everything was, as it were, stored up for an hour and a half of exchanges and no more. We’ve used a variety of ways, as you know, and I think we need to build on something which can be, as it were, systematised and regular, where you tell us what we need to do and we advise you how we can accommodate your views within a scheme which has lively support from political leaders and so on and the world outside. That being the case, we’ve always said that we won’t get everything right. When we don’t get it right, we want to listen so as to make it right and improve it. Such a group would be extremely valuable.

Chair: We’re grateful for your suggestion that a channel of communication should be identified and established. Sir George speaks not merely for himself but for others in saying that that’s something we would welcome. We hope that that will be operational sooner rather than later.

I think it’s implicit-if I may say to our witnesses-in some of the supplementary questions and requests that Members of Parliament have put to you that we as a Committee would like further information on a number of particular issues. Although there is no formal deadline, it would obviously be helpful to have that material as soon as possible, compatible with its being comprehensive and accurate. We would want to look at that because it is fundamental to our discharging of our duty to consider whether we can legitimately and with good conscience approve the estimate. Our staff will be in touch with you pretty shortly.

As Sir George has just said, there were various issues that were not touched on and on which, in other circumstances, we might have wished to touch, although it is fair to say that quite a lot of the numbered questions on our lists were effectively subsumed in the lines of questioning that colleagues pursued. One question that was not pursued-I briefly flag up a window of opportunity, although I am not especially encouraging colleagues to pursue this-was the cost of the compliance officer function. If anybody wants to raise it now, he or she can do so briefly.

Q72 Mr Walker: The compliance office is going to take up about 5% of your budget-staff costs £176,000, overhead recharges above £131,000. What is going to be the salary of the compliance officer?

Philip Lloyd: The salary is up to £90,000.

Q73 Mr Walker: Up to £90,000? Have you appointed the compliance officer yet?

Philip Lloyd: Not permanent.

Q74 Mr Walker: Now, I’ve looked at the remit of the compliance officer, and at your consultation on compliance, but I’m not exactly sure what he’s going to do. If there is one thing that you have achieved-you have actually achieved more than one thing-it is that any Member of Parliament who tries to fiddle their expenses or stretch the envelope would need to have their head seen to, to be perfectly honestly. People would be crazy to do that. Look at those people who are in court at the moment. It would be totally foolhardy. Given that that’s the case, I’m not exactly sure what your compliance officer is going to do. It strikes me that he will almost be a kind of witchfinder-general, trying to find someone who has overspent five quid on their stamps. He will investigate them, the public will be called in for the hearing, the £5 will be paid back and a fine will be imposed. Do you see what I mean? I don’t mean to have a go at your for this, but I just wonder why, given that you have been quite effective in creating a pretty tight expenses system, albeit one that needs to be greatly improved, we need to spend £176,00 plus all the accommodation costs on a compliance officer.

Sir Ian Kennedy: As you know, the compliance officer was added into the Constitutional Reform and Governance Act 2010 at the end of the last Parliament, so an appointment on an interim basis has been made. The compliance officer may have a variety of other functions, one of which would be to offer advice and help about how to operate the scheme and where the edges might be, but that is not, if you like, a full-time job if he or she is not doing investigations.4 If I may say so, I hope you’re right in your analysis, and I think you are. I also take as a compliment what you said about our having brought in a system that will make these things very unlikely. However, it is incumbent on the board, notwithstanding the obligation placed on it by the Constitutional Reform and Governance Act, to review matters and perhaps come back to this Committee to say, "Hang on a second. Either this person should be working one day every two weeks or their role needs to be redefined." It is for precisely that reason that we have an annual review, and we would like the iteration with this Committee.

Q75 Mr Walker: I think that’s a step forward. Again, I can recognise the need for a compliance officer, because this is a compliance-based system, but I think the world’s moved on since Parliament suggested this. Mr McDonald, as chief executive, could be quite an effective senior compliance officer. That is probably not something you want to do, but it would not take up a great deal of your time. There is significant scope for savings in this function.

May I just make one plea? You say that the leaders of the political parties have a great interest in this issue, but I don’t really care what the leader of the Labour party, Bob’s leader or my leader thinks about it-we are all Members of Parliament. It is the leaders of the major political parties who, with our connivance admittedly, have got us into this mess over the last 20 or 30 years, so please don’t focus too much attention on what they think. They would like us to be squealing all the way to market day after day.

Sir Ian Kennedy: With due deference to Mr Brown and Sir George, that that is precisely why I said that we need to a have a conversation more broadly about the big exam question about the proper remuneration of MPs in the 21st century and that I would hope to have that conversation with all MPs, not necessarily just with those who lead them.

Chair: Sir Ian, Mr McDonald and Mr Lloyd, thank you very much indeed for coming to us today. You’ve been with us for an hour and a half. We’ve had some testing questions, which you’ve answered, and you’ve maintained your composure and sense of humour throughout, for which we thank you warmly. At this point, I would ask members of the public gallery to take their leave, because we will briefly resume in private session. Thank you and goodbye to our witnesses. We’ll be in touch. We appreciate your involvement.


[1] Note by witness : The budget for Staffing Expenditure budget is derived from a calculation of all the costs associated with the employment of 3.5 full time equivalent staff members in a typical office setup. This was the level of staff considered appropriate by the Members’ Estimate Committee following a recommendation by the Senior Salaries Review Body in its 2007 report “Review Body on Senior Salaries: Review of parliamentary pay, pensions and allowances 2007”. Subsequently this recommendation was adopted by the House of Commons in determining the allowances available to MPs in 2009/10.

[1]

[2] Note by witness : The budget set out in the IPSA Scheme of £109,548 includes the average salary costs, and employer contributions to National Insurance and pensions, of one caseworker, one researcher, one senior researcher/parliamentary assistant, and half a junior secretary. Average salary costs were determined by taking the mid-point of the pay ranges for 2009-10, and uplifting by 1.4% to obtain a comparable cost for 2010-11.

[2]

[3] Note by witness : The actual number is 13 rather than 18.

[4] Note by witness: On further reflection, I should like to make clear to the Committee that, while the Compliance Officer may offer advice to IPSA arising from his work, advice on the Scheme is not one of his two functions, given to him by the Constitutional Reform and Governance Act 2010. The first of these functions is that the Compliance Officer may, at the request of a Member, review a determination by IPSA to refuse an expense claim. Secondly, the Compliance Officer may conduct an investigation if he has reason to believe that a member of the House of Commons may have been paid an amount under the MPs’ allowances scheme that should not have been allowed.