UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

SPEAKER'S COMMITTEE FOR THE

INDEPENDENT PARLIAMENTARY STANDARDS AUTHORITY

IPSA DRAFT ESTIMATE 2012-13

TUESDAY 22 MAY 2012

BOB EVANS, SIR IAN KENNEDY and ANDREW MCDONALD

Evidence heard in Public

Questions 1 - 38

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Oral Evidence

Taken before the Speaker's Committee

on Tuesday 22 May 2012

Members present:

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

Mr Nicholas Brown

Sir Bob Russell

Laura Sandys

Mr Charles Walker

Dame Janet Gaymer (lay member)

Sir Anthony Holland (lay member)

Elizabeth McMeikan (lay member)

Examination of Witnesses

Witnesses: Bob Evans, Director of Finance and Corporate Services, IPSA, Sir Ian Kennedy, Chair, IPSA, and Andrew McDonald, Chief Executive, IPSA, gave evidence.

Chair: Professor Sir Ian, Andrew and Bob, may I welcome you and thank you for coming today?

Sir Ian Kennedy: Thank you.

Q1 Chair: 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.

As at our previous public meetings, I should make it clear that I consider this to be primarily an occasion for my colleagues on the Committee to put their questions to you. My role as Chair will be to enable them to do so, acting more in the style of the neutral Chair of a Public Bill Committee or as in the proceedings of the House, rather than as the Chair of a Select Committee, who quite customarily comes in with questions. I do not expect to do that.

Sir Ian, do you wish to make any opening remarks?

Sir Ian Kennedy: I am grateful to you, Mr Speaker. Yes, may I make just a few brief introductory comments?

Chair: Please do.

Sir Ian Kennedy: You will see from the estimate that this is our third estimate. We see it as an example of making good, steady progress. The scheme of business costs and expenses is stable, well established and routine. There is still room for improvement, and we accept that. That means that we are keen to work with MPs and their staff to identify areas that need improvement, an example being the need to work to improve take-up of direct payment; my colleagues will refer to that later.

We have already embarked on our next major task, which is the review of pay and pensions. We will consult on this in the autumn, but we are already doing a great deal of preparatory work, and at the same time seeking to build public confidence.

As I said, this is the third occasion we have produced an estimate. We started the process much earlier, supported by our corporate plan, which I know we have shared. In the corporate plan, the themes are: engagement with MPs, with staff and with the public more generally; explanation to make sure that we get our message across as to what the scheme is and what we are doing; and sustainability, which means ensuring that we continue to reduce our costs while maintaining quality.

Just a few more remarks, if I may. We have made significant progress in addressing the recommendations of the National Audit Office, the Public Accounts Committee and this Committee, SCIPSA, itself. As you can see, we have further reduced the estimate. We have been able to do that because we have more complete evidence of MPs’ spending, whereby the outturn was lower than that which we forecast; colleagues will speak about that.

In the estimate, we have provided for an increase in the staffing budget because we judged it right to do so. But at the same time, the estimate remains, in our view, taut and realistic. As regards our own costs, we have shown great progress in reducing our costs-10% in the first year and over 5% this year in terms of our operational costs. That is notwithstanding taking on pay and pensions and a review of accommodation. You will see, Mr Speaker, that we are seeking to do more for less.

Those are my introductory remarks.

Chair: Thank you very much indeed. We move to questioning, first to Dame Janet Gaymer.

Q2 Dame Janet Gaymer: I think this may be a question for Mr Evans. In the draft estimate before us, you have transferred the funding from the proposed unallocated provision to Subhead A. I want to ask you two questions about this. First, could you explain why you have done that? The second question relates to the risk analysis, by reference to which you have made the assessment in the draft estimate. In your strategy document, you say that your approach to risk is proportionate and reflects emerging evidence. Clearly, having made a risk-based assessment, you have made some judgments. The question is whether there will be a point or points in the forthcoming financial year where you may have an opportunity to review the decisions you have made, and to decide whether those risks are indeed correct or not, and, if they are not correct, what you then propose to do about it.

Bob Evans: Thank you very much. If I can take each of those points in sequence. First, with the draft estimate that we have put before you, we have tried to build it from the bottom up. As the Chair has just said, we are able to do that because we now have the annual accounts, or the first draft of the annual accounts, which gives us the first hard evidence of what we spent last year. Everything we have had up till now has been a forecast. We have the first hard information that we actually spent £147 million last year-a really hard figure on which to build. We looked at our estimate and, as we have said to the Committee in the past, we are anxious to take account of trends in claiming, rather than just base an estimate on the maximum possible budget that MPs can claim.

We started with the amount of money we had spent last year and the reasonable assumption that we are not going to spend any less this year. We then took account of new expenditure in the estimate. There is something like £14 million of new expenditure in the estimate. The bulk of that is the starting budget, but there is also about £500,000 for legal expenses insurance, the provision for pay and pensions that we discussed previously, provision for the accommodation review in the coming year, and, of course, the new subhead for the renewal of the IPSA board. That all adds up to £14 million, and then we have Subhead D, the annual managed expenditure, which was not there before. That takes us to £162 million, so we know that we are not going to spend less than £162 million in 2012-13.

The question was: how much more are we going to spend? That is where the second part of your question comes in-where we have to form a risk-based view. We could say that we are going to be risk averse, so we are going to cover all the risk that MPs might claim up to their budget ceiling-all budgets everywhere. If we did that, it would add probably another £24 million to the estimate and take us to something like £186 million. We do not think that that is necessary. We did not even think that that was necessary before in the draft estimates we put before you. On the other hand, it is unlikely that we are going to get away with £162 million. In particular, if we had £162 million we would certainly have to come back to the Committee at a later stage and ask for a supplementary estimate.

The question is the balance of risk. Can we come to an estimate that balances on the one hand the need to come back for a supplementary, and on the other keeps it realistic? What we have done is looked at the evidence we received from the past year on rates of claims. In particular, we looked at the claiming rate in the first half of last year, which was a steadier period. One of the problems I have talked to the Committee about before is the difficulty of forecasting the end-year surge in claims, and that has been part of the problem outturn this year. So we based the estimate on the level of claims that were coming in the first half of last year, which suggests that uptake of the staffing budget will be somewhere between 89% and 95%, and that uptake of expenses will be somewhere probably nearer about 70% and 87%. We have set the estimate on that basis and that gets us to £176 million, which we think is a prudent risk-based amount. That is the way we have taken account of the risks of overspending. Now, I have to be perfectly honest with the Committee and say that I cannot guarantee that expenditure will not exceed that. Clearly, if behaviour changes radically, it is not inconceivable we would have to come back for a supplementary estimate, but I do not expect that to be the case and I would not put an estimate forward on that basis.

A final point about the unallocated provision: because we have built the estimate on this basis, we do not think it is necessary to have an allocated provision sitting separate in another subhead just as a reserve. We think that we can manage within the amount we are putting before you, so we have decided that an allocated provision is a complication that we do not need. That is why we have dropped it. It is not a question of transferring money from the unallocated provision into the estimate. We have built the estimate up in a different way this year.

Q3 Dame Janet Gaymer: Can I just ask one final question in relation to that answer? If you have got it wrong, and you may need to go for a supplementary estimate, when you would you expect that to occur?

Bob Evans: The problem, which I think we discussed when we talked about the supplementary estimate in the last year, is that we need to leave it as late as possible, so we have as much good information as possible to bring to the Committee, but it must be early enough to complete the process. We would need to take a decision in November, probably, and come to the Committee in December, otherwise we are not allowing ourselves enough time.

Chair: Thank you. We will move on to Laura.

Q4 Laura Sandys: Thank you. IPSA has, and was set up with a very clear purpose, which is to deliver confidence from the public’s perspective about how this place is funded, our remuneration and our expenses. How are you assessing whether that is being achieved? What are the barometers, and what matrix are you using to see how successful we are collectively being in this very important, fundamental task to the organisation?

Sir Ian Kennedy: Andrew, do you want to answer that?

Andrew McDonald: I will happily. Public engagement, as Ian was saying in the introduction, is a crucial part of our work programme for the coming year, not least around pay and pensions as a whole. As part of the lead-up to the formal consultation on pay and pensions in the autumn, we are doing a wide range of activities, focus groups, and citizens’ juries, as well as a wide range of media engagements around pay and pensions as a theme, using there a variety of sources of tapping into public opinion. In addition, we have a programme of public opinion polling, using the same question that the National Audit Office used last July. Its polling then showed that 55% of the public thought that the general situation in respect of expenses had improved.

Q5 Laura Sandys: That is interesting, because I am intrigued by what the end position is-you talk about lots of media engagement, polling and all the rest of it. The materialisation of the vision-i.e. that there is confidence in our expenses-will be that there is no media coverage about it, no interest in it, and absolutely no engagement on it, because it is known to be a totally clean, transparent system. What I am interested in is that you are looking at activities that generate media coverage, rather than how we get to a stage where we can assess whether there is absolutely no interest in the subject, because it is considered too boring to look into.

Sir Ian Kennedy: I would separate out business costs and the expenses scheme, where it is quite clear that the level of interest is falling away, as it is more and more perceived that this is-

Q6 Laura Sandys: So you have been able to monitor the media interest?

Sir Ian Kennedy: For example, between January 2011 and this year, it went from over 5,000 hits on the first day-I can give you the precise figures in a moment-to 500, a couple of months ago. That’s not to say, therefore, that we should not bother to publish this.

Q7 Laura Sandys: Oh no, not at all. The point is that it is there, available.

Sir Ian Kennedy: Precisely. On the other hand, exactly as you say, there is an importance in raising the issue of the remuneration available to our elected representatives. It is perhaps a once-in-a-generation opportunity to get this right, and we think it is appropriate to engage the public, but engage them in a particular way. I said only the other day, as anyone with sufficient time on their hands to listen to Radio 5 Live would have heard-I see Mr Brown is smiling-that we are not talking about business costs and expenses any longer; subject to improvement, that is settled. The conversation that one was able to have, with people phoning in, was about salary and pensions. The other matter rarely entered the conversation, save a little bit of the residual distrust and "Hang on a second, wasn’t there a bit of bad history?". We are trying to move the conversation on, having settled in our own view something that is now a matter of routine. Andrew, you may want to add to that.

Andrew McDonald: I have very little to add, other than that my own experience from doing radio interviews last week is that the questions are now primarily around pay and pensions, not expenses. The story has moved on, because we have that clear programme of the publication of expenses. As Ian says, there is clearly a declining trend, in terms of the number of hits on the website each couple of months.

Q8 Sir Bob Russell: Mr McDonald, in this public consultation, are those being asked for views being advised that it is estimated by the NAO-I believe it is a National Audit Office estimate-that 91% of MPs subsidise the cost of being an MP?

Andrew McDonald: That is not the question being asked. We are proposing in an annual poll to replicate the same question used by the National Audit Office.

Q9 Sir Bob Russell: I appreciate that, but don’t you feel that in order for the general public to come to an informed opinion, they should know the statistic, which I recall came from the National Audit Office estimate, that 91% of MPs are subsidising the cost of being a Member of Parliament?

Andrew McDonald: It is not our intention that any MP should have to subsidise the cost of being an MP. We have set out clearly-just changing the name to "business costs and expenses" makes it absolutely clear-that what we are about is making sure that MPs who appropriately incur business costs are covered. When we go back to MPs, as we are about to do in a survey that is again modelled on one used by the National Audit Office, we will be asking them about the amount of time they spend and the proportion of the costs that they recover.

Q10 Sir Bob Russell: With respect, that is not the point I am making. Are those whom you are consulting being informed of that National Audit Office estimate?

Andrew McDonald: That is public information. As I said right at the start, we are not, in our question, replicating that information from that earlier survey. What we want to do is test whether that same information comes back when we survey MPs about their views. As Sir Ian was saying in his interruption, what we are committed to doing is engaging with MPs as well as with the public.

Q11 Sir Bob Russell: So the answer is that the full picture is not being conveyed to those whose views are being asked.

Andrew McDonald: No, that is not the answer, because that information is publicly available. There is always a judgment to be made about how much information one puts into an individual question in an opinion poll survey. We take the advice of our pollsters on that.

Sir Ian Kennedy: Bob, may I add to that a little bit? My understanding of the National Audit Office figure was that it was a result of a survey rather than an estimate, which is somewhat different. The point you make is, if I may say so, critical. It is the sort of point that would be made in citizens’ juries and other forums where the whole intention of the exercise is to make sure that those responding to the question about remuneration should have as wide a range of information from as many sources as possible. So that will be flagged up as part of our examination of public attitudes. People will have that drawn to their attention.

Chair: Thank you. Nick?

Q12 Mr Brown: May I underpin what Bob has said? Reputational management is definitely a constraint on submitting expenses claims, and Members of Parliament are just carrying the burden themselves, rather than risking the damaging media stories. That is something you could factor into examining the fundamental structure of the scheme. A lot of your costs derive from the scheme structure that you have chosen. I wanted to ask: are you considering simplification proposals? When you consult, do you put simplification proposals to those whose opinions you are seeking? Underlying that question, as I am sure you will spot, is the matter I have raised before about allowances, rather than a receipt-based scheme.

Sir Ian Kennedy: Andrew can speak to this in detail, but of course we have asked on a number of occasions whether there should be a reversion to the system previously operated.

Q13 Mr Brown: That, of course, is not what I am asking.

Sir Ian Kennedy: No; if you will allow me, I was answering your question in stages. The first stage is about reversion to the old system, which I accept you are not advocating.

Q14 Mr Brown: We all know that there is no going back.

Sir Ian Kennedy: Thank you. I just wanted to clear that ground. Then the question is: do we move to a system whereby money is allocated under various headings, and the headings can increasingly be brought together so that we have budgets that are more global, if you like? We have already begun that trend, and it is a question of the balance of the assurance of public transparency against what is most efficient and most conducive to complying with our statutory duty to have regard to the principle that we should support MPs. That is a journey we are on. Certainly, we have had conversations and have consulted on how fast and how far we should move along that evolutionary journey. Andrew, do you want to add anything?

Andrew McDonald: I have just a couple of points to make, to demonstrate that we are committed to that move towards simplification. Perhaps the clearest example of that is that we have listened to feedback from MPs and MPs’ staff. Given the changes made to the administration of the scheme over the past 18 months or so-changes which, for the most part, have been welcomed-and given also the changes to the scheme itself, one of the things that MPs and their staff have been saying is, "We need to make sure that we understand how the administration now works. We need to understand the scheme as it now is." We can put serious effort, over the 12 months that have just begun, into making sure that we explain the scheme and explain the way the administration works; hence the drop-in sessions for MPs and their staff, and our proactively writing to MPs who, for example, are not currently using the payment card or making very much use of direct payments, to demonstrate that there is a simpler way of doing this and a way of doing things which will involve less pressure on MPs’ bank accounts. We are not just waiting for MPs to come to us; we are going out, proactively, to put that message out there.

Sir Ian Kennedy: We have written recently, I think, to over 100 MPs-

Andrew McDonald: One hundred.

Sir Ian Kennedy: And we said, "Look, these facilities exist, and they are not being used as much as they could be." Equally, we asked the staff on the telephones to make that clear. We have gone from around 15% of claims being made through the use of payment cards last year to over 40% now. It could be 72% or more, and we will be increasing, over time, that facility. One of the tasks of simplification is our need to communicate what is available, so as to make life a bit simpler.

Q15 Mr Brown: All of that is welcome. Underlying my question was this issue of rolling up the accommodation costs and the daily subsistence costs into an allowance, similar to that which local authorities and private businesses use, rather than having a receipt-based scheme or an administratively burdensome scheme whereby IPSA rents properties for MPs to dwell in and checks the receipts of every meal to make sure it has allowed, I think, £15 a day.

Chair: Yes-I think we are straying a little bit from the scrutiny of the estimate, but if Sir Ian wishes to deliver himself of a response to that question, we shall await it with bated breath and beads of sweat upon our collective brow.

Sir Ian Kennedy: I will take your guidance on that, Mr Speaker. You are right. You and I can have conversations outside; we are always anxious to listen. As I say, we are describing something which is evolutionary. The end point is, as Laura Sandys said, a system which commands public confidence, and that is a journey we are on.

Q16 Mr Brown: In order for me to follow this journey-

Laura Sandys: You’re on it.

Sir Ian Kennedy: Come along with us, Mr Brown.

Mr Brown: I am doing so-struggling along behind. Given your commitment to transparency, will you be publishing-in summary form, of course-the sort of representations that are made to you, including those on our pay and pensions from the Cabinet Office and the Treasury?

Sir Bob Russell: Some of those that I have seen already are not printable.

Andrew McDonald: This is in the formal consultation that will be happening in the autumn on the fundamental review. We will follow the normal approach to publication.

Sir Ian Kennedy: We publish everything.

Q17 Mr Brown: Including the representations you have received from the Treasury and the Cabinet Office?

Andrew McDonald: The standard approach with a public consultation would be that, unless anybody-an MP or anybody else-specifically seeks confidentiality, then the responses will be published.

Q18 Mr Brown: Does that include the Treasury and the Cabinet Office, or have they sought confidentiality?

Andrew McDonald: This is a consultation-I am talking about the fundamental review in the autumn-so it has yet to happen.

Q19 Mr Brown: Are you going to publish what the Treasury and the Cabinet Office have said to you about our pay and pensions?

Andrew McDonald: In terms of the interim change made specifically to pensions in April just gone? Is that the question?

Mr Brown: Anything.

Andrew McDonald: I cannot predict what the Treasury or anyone else is going to say about consultation responses.

Mr Brown: My question is whether you are going to publish it.

Q20 Laura Sandys: Is it your policy to publish everything?

Andrew McDonald: Our policy is to publish responses to consultations from everybody, unless any individual or organisation specifically asks for confidentiality. That is the standard approach that the Government also adopt. We have not in any way departed from that.

Q21 Mr Brown: Have the Treasury and the Cabinet Office sought confidentiality, or are they happy for the representations they have made to you about MPs’ pay and pensions to be put in the public domain?

Andrew McDonald: There hasn’t yet been a consultation on MPs’ pay, so the question hasn’t arisen.

Sir Ian Kennedy: They have not made any representations.

Q22 Mr Brown: So what are they talking to you about?

Sir Ian Kennedy: In what context?

Chair: May I try to clarify this? I was not intending, and I do not intend, to ask questions, but I think, Nick, you are referring, when Sir Ian says there hasn’t been any consultation as yet on pay, to the meetings that took place some months ago-a relatively large number of meetings in a relatively short period-on MPs’ pensions. I think that is what you have in mind, and, if I remember correctly, those were meetings, but I am not aware that there was written documentation. I think those were meetings that took place. Unless they were recorded, which seems unlikely, it may be that there is no verbatim text of the exchanges, which obviously will be a matter of great disappointment both to Ministers and to IPSA, but I fear that the technology probably wouldn’t exist to recover the details of what was said on those occasions. You are, therefore, presumably thinking prospectively, rather than retrospectively.

Mr Brown: We know the meetings took place because of the parliamentary answers. Given the commitment to transparency, I am interested in what was discussed in the context of pay, pensions and the expenses scheme.

Chair: I think Andrew now knows what the question is aimed at, and he may wish to respond.

Andrew McDonald: It is on public record, and we have discussed it in this Committee before, that there were meetings between IPSA and a wide range of stakeholders, including the Government, which dealt in part with questions of pensions. We are not proposing, as we have previously discussed with the Committee, to disclose any documentation related to those meetings because they were confidential meetings. So that question is different from the one on public consultation, where the normal rules would apply in the way I have just described.

Sir Bob Russell: Mr Speaker, we are wading through treacle. Talk about transparency-the only reason we know about the meetings is because I tabled a parliamentary question asking about them. Neither IPSA nor the Government volunteered that information until they were pressed by a parliamentary question.

Chair: Thank you. I will perhaps take that not as a question, because it was not a question, but as an observation, which is now on the record.

May I very politely remind colleagues that it is now 11.17, so we are technically a little over halfway through? We are, however, only at the conclusion of question two. A further seven questions remain, so there is an issue of productivity.

We move now, on the subject of staff, to someone who knows about productivity at the sharp end, namely Liz.

Q23 Elizabeth McMeikan: Thank you. I think it would be fair to say that we welcome the net operational budget reduction of 5.1% that we can see in the estimate. We understand that that represents a like-for-like staff saving of 17%. Could you explain to the Committee where those reductions in staffing will be achieved? Could you reassure us of the negligible impact, if any, on the services that the affected staff provide?

Secondly, could you say whether there will be any impact on the leadership of the organisation and on any policy developments that you have in mind for the forthcoming year?

Andrew McDonald: Perhaps I can ask Bob to comment on the composition of the savings, and then I will take the remainder of the question.

Bob Evans: Yes, of course. The savings in the estimate are based on actual staff costs, so we have actually profiled the staff whom we know will be leaving during the year. When IPSA was set up, it was set up quite deliberately with a number of the appointments, particularly the senior ones, being on fixed terms, with the assumption that once IPSA had been established we would not need such a large senior management team. That has proved to be the case, so there are a number of staff who are leaving in the course of the next few months, including the director of communications and the director of operations. That has been long planned.

In addition, we have been refining our operations-our processes-and we have told the Committee before about our plans for streamlining our validation process. As part of that, we have been conducting a voluntary redundancy or voluntary exit programme, and we will lose a further four staff as a result. We have also had a number of staff who have left voluntarily during the year. The net result is to reduce the costs, as you have seen in the estimate.

I can certainly give the assurance from my side that these staff reductions are planned and that therefore we can carry on maintaining the level of service with the reduced resources. I do not think that there are any problems about that. We have made changes, as I say, to our operational processes to make sure that we can do that.

Andrew McDonald: I have a couple of points to build on what Bob said. This, Bob was saying, is part of a planned reduction. We had 81 staff in July 2010, it is now about 54 and it will be down to about 42 by April 2014. Some of this was planned ahead of time, and we have had this voluntary exit programme, to which Bob also referred. In any exercise of this sort-you will be far more familiar with this than I am-there is a risk-based judgment to be made about the amount of cost one is going to take out of the organisation and the degree of risk that that exposes one to in delivering the services and regulatory activities that we deliver. This bears very much on the point about leadership of the organisation, with the senior team reducing from nine to five on current plans over the coming 12 months-a significant reduction-but my view is that, given that we are now moving into a different phase of IPSA’s operations, given that the start-up activity is behind us, given that we have got stability in our operations and given that we have changed the way in which we operate, we can deliver the services safely, securely and responsibly on the lower level of funding. Inevitably, however, there is a level of risk that one has to take in making this reduction, but I think that we can deliver the quality that MPs and their staff have a right to expect from us.

Elizabeth McMeikan: Mr Speaker, may I ask a supplementary question?

Chair: Please.

Q24 Elizabeth McMeikan: In the light of the discussion around pay and pensions, and the importance that it has to the work that we have undertaken this year, does the departure of the director of communications, in what may be a very critical year in terms of how you communicate with all your stakeholders, concern or perturb you at all?

Andrew McDonald: It is safe to say that I would like to keep the very wide range of staff who have done excellent work for IPSA. The director of communications has always been on a fixed-term contract, which runs through to September of this year, so we will have the benefit of her input through to September, I hope, and that is when most public engagement work on paying pensions will be undertaken. I think that we can deliver the programme that we have in view with the director moving on in September.

Q25 Elizabeth McMeikan: On the topic of pay and pensions, you have put £350,000 into your estimate for this year, and I know that we have had this discussion before, regarding this composition-you have helpfully broken that down for us. Are you confident that there is sufficient resource in there to enable you to deliver, as you need to deliver, during the course of this year the work on pay and pensions?

Andrew McDonald: Bob may say a bit more about the composition, but if I can just make an initial answer: yes, I am confident. It is fair to say that it is, obviously, the first time that we have done a fundamental review of pay and pensions so, inevitably, this is prospective forecasting. We think we have got the balance right, and, further to helpful conversations with the Committee over the past couple of months, as you know we have revised the provisions somewhat.

Bob Evans: I think that we are confident in the estimate. It is not just plucked out of the air, but based on the expenditure to date. Obviously, we know the costs we have for legal advice. We have had many discussions with the Government Actuary’s Department about the work that it always does for us. We put in about £80,000 for the work of the Government Actuary’s Department, which is based on discussions, so that is fairly firm. We have also had discussions with advisers on the subject of the sterling work that we need to do on reward and actual consultation. I think that the estimate is well founded, and I am not particularly concerned that we will be short at the end of the year. My concern is always the speed of the exercise and actually getting on with it.

Q26 Sir Bob Russell: I make no criticism of IPSA staff. They have to operate under the systems laid down by the board and the management team. However, I have been advised that the key performance indicators for last year indicate that the target for resolving correspondence within five working days has not been met in six of the last 12 months. How will fewer staff result in a better outturn?

Andrew McDonald: Perhaps I could help with that. The key performance indicator is for us to respond to more than 90% of items of correspondence, whether by e-mail or post, within five working days. Over the year as a whole, we achieved 92%. We hit the target for the year just as we have hit all our operational key performance indicators for the year.

Q27 Sir Bob Russell: So, in six months out of 12 it wasn’t met-and with fewer staff this year it will be met.

Andrew McDonald: I do not recognise your figure of six months out of 12. What I am saying is that over the year as a whole, which is what the key performance indicator is, 92% was the figure we hit and I am confident that we will hit our key performance indicator for correspondence in the year just begun.

Q28 Sir Bob Russell: With fewer staff?

Andrew McDonald: Yes.

Chair: I am grateful. I suggest that we move on to a question about direct payments.

Q29 Laura Sandys: You have already discussed with one of my colleagues the issue of direct payments and about how you are keen to enhance and encourage them. There are two things. First, there is the group of items that are currently on offer to be paid directly. What you are saying is that you are still encouraging us to do more of that. What other areas do you think could be extended as part of the direct payment scheme, and are there comparisons in other public sector areas, or other organisations that have a similar scheme that shows you that we can move quicker towards more of a direct payment operation, with a higher percentage of expenses being put through that?

Andrew McDonald: Perhaps I can say a word about our plans in general. Bob may wish to comment on the specific items that we may consider in the future. My general approach for this year is to consolidate the progress already made. I answered a question earlier from Mr Brown in which I said that one of the items of feedback we have had from MPs and staff is that there has been a lot of change over the last 18 months, both to the scheme and to the nature of our administration, and we are certainly getting a lot of questions indicating that we have not fully explained some of those changes-we have not landed them properly. What we want to do in the first instance is to ensure that we consolidate the progress made.

Earlier, Ian cited the figure for the proportion of claims now being paid through simplified payments-the payment card or directly. It is now just over 40%. Without making any changes to the list of items available, we think we can get that up to something approaching 70%. There is already capacity within the system, and we need to exploit that first of all as part of our explanation as to what is available, hence the letters to the 100 MPs explaining how they might choose to make use of those facilities. Alongside that, we will continue to explore with a number of suppliers collective purchasing arrangements, so that it makes it easier for MPs to purchase directly-not our buying on behalf of MPs, but buying directly what is available. We continue to be in conversations with suppliers, and we set up the arrangement with thetrainline over the past six months or so and we have done that with the stationary supplier as well.

Q30 Laura Sandys: May I add to that? You want to expand from 40%, as it is currently, to 70%, which is your target, on an existing range of services and products. Can you see how you will be able to reduce your staffing internally as that changes? Have you done any planning and mapping on the reduction in human resources that you will need as a result of that increase?

Bob Evans: It is an interesting question. To a certain extent, some of these direct payments involve more work for us rather than less. Clearly, if we are negotiating with a supplier and settling that invoice on behalf of a large number of Members, that actually involves more intervention than just looking at a receipt and ticking it off. I think we can manage that. Indeed, I am keen to push forward on direct payments where we make use of suppliers’ online systems, because that actually reduces work for us as well. If I look at areas like that, there are some obvious ones. The stationery arrangement is a good example of where we can just take a monthly amount-that also makes it a lot easier.

Looking to the future, we have aspirations-and they are aspirations-to increase the areas where we have direct payment such as hotels and parking. I am looking at sums that are quite small in value but that are quite an irritant for Members, such as the annual Information Commissioner’s payment. That seems an obvious one; all Members have to pay it, so why don’t we just settle it directly? There are a number of cases like that, such as parliamentary research, and of course legal expenses insurance is something that we are rolling out now. There are a number of small areas that are quite helpful to Members. They do not make a huge difference in monetary terms, but they simplify and smooth the process.

Sir Ian Kennedy: If I can add one thing. We have a relationship with thetrainline, and over a year ago I went to see the Chair of the Administration Committee to ask whether we could get Hillgate involved in the same procedure. There were still barriers in the way, and we would wish to overcome that and engage Hillgate. That would offer a further service.

Chair: Thank you.

Q31 Sir Bob Russell: I understand that IPSA intends to sub-let part of its current office space at Portland House. Are we talking about something like 10%?

Bob Evans: Fifty per cent.

Q32 Sir Bob Russell: Half?

Bob Evans: Yes; 5,000 square feet.

Q33 Sir Bob Russell: Does that suggest that too much space was taken in the first place?

Bob Evans: I don’t think so. I wasn’t here at the very start of IPSA, but if you look at the numbers when it was first set up, there were probably over 100 people if you included contractors, and the space was very crowded even when I arrived. We have reduced the staff considerably since then, and as you heard earlier we are now down to about 50, and we will be reducing that to just over 40. We have a lot of potential to reduce the amount of space that we use.

Q34 Sir Bob Russell: I have visited Portland House, and my recollection is that the floor is open plan. How are you going physically to subdivide half of it and provide 100% guaranteed security for records relating to Members of Parliament and their staff? It is an open-plan office.

Bob Evans: It is, but if you know the plans-sorry, I didn’t bring plans of the floor, but it is a sort of lozenge shape.

Chair: Like a what?

Bob Evans: A lozenge shape; like a rugby ball.

Chair: Oh, right.

Bob Evans: You can divide it down the middle. I have occupied space in that building on several occasions, and I have experience of splitting the floors. You can actually split them down the longitudinal axis, if I may describe it like that. There are secure doors at either end, and we had a contract with a space-planning company to look at that and see how we can secure it. We have also priced-in the work services that will be involved in modifying the lay-out. I am confident that we can split that floor and that it will be fully secure.

Q35 Sir Bob Russell: So there will be no detriment to the business that IPSA provides. Can we assume that in three years’ time, IPSA will move to office accommodation out of central London? I would suggest that Romford is quite a nice place and office rents are considerably lower than in central London.

Andrew McDonald: I brighten considerably at the mention of Romford, given that I come from just up the road from there. I think we will do an investment appraisal closer to the time and we will find accommodation which is appropriate for IPSA at that time.

Laura Sandys: Colchester.

Q36 Sir Bob Russell: I think that would be too close. I mention Romford purely because it is easy to get to and from. The serious point behind my question is that I remain unconvinced that having those IPSA offices there was a good move in the first place. I think it would be a good move to find somewhere a lot cheaper.

Andrew McDonald: We did an investment appraisal at the time to determine where to locate IPSA. That determined that it should be in central London. We tried to find somewhere on the Government estate. Sadly, that was not possible. I am keen on that option myself. We were not able to secure a deal with the Government landlord to move on to the Government estate. We will do an investment appraisal. One of the things that we will be mindful of is delivering the quality of administration which MPs have a right to expect. That argues for proximity of colleagues to the Palace of Westminster. We will also be mindful, in a very small organisation, of the need to maintain expertise and experience within the organisation. But I hope that that investment appraisal is for the future.

Sir Bob Russell: I am not suggesting you follow the BBC to Salford.

Andrew McDonald: Romford has got many attractions.

Chair: I say to the hon. Member for Colchester that the responsibility to notify a colleague of an intended visit to his or her constituency does not apply in the context of the questioning of IPSA. But if he is going to celebrate the merits of Romford and advertise its potential attractiveness as a location, he might think it seemly and courteous to notify the hon. Member for Romford (Andrew Rosindell) if he is doing so.

Sir Bob Russell: Mr Speaker, you know the hon. Member for Romford. He doesn’t need any assistance promoting the wonderful aspects of Romford.

Chair: Right. Okay, on that happy note, is there anything else? I am extremely grateful to colleagues from IPSA.

Q37Sir Anthony Holland: Yes. I have been very quiet but to be fair, there is not a lot I wanted to say anyway. This is not so much about the budget and the estimate as the cost of the consultation on pay and pensions. If you move aside the ground-clearing work you did on expenses-that really was ground-clearing work-you are probably going to be engaged shortly in the most important aspect of pay and pensions that you’ll ever have to do, which is the crucial thing.

Two things concern me. One is that there is plenty of provision built in for communication. The second is an oblique issue arising out of what Mr Brown said, which is that it is the one area where I personally think there should not be confidential communications with anybody about anything in connection with pay and pensions. It is something that should be totally and utterly transparent. I shall just leave it at that.

I believe, on this one occasion, you should stick to your guns and be transparent, because otherwise one will never have a feeling, as an ordinary taxpayer or member of the public who believes in democracy, that the proper job has been done.

Sir Ian Kennedy: Just replying to the second point, Andrew’s already said that we will publish everything that we receive. Now, it is a judgment that we do not yet have to make and I would be delighted to talk to you further outside this meeting, because you have experience of these things. If you won’t get evidence from some quarters unless it’s on terms, that puts you in some difficulty. We would hold to the point as strongly as we can that this debate and discussion-this discourse-is not going to be as rich as it needs to be unless everything is in the public domain. That is our starting point.

Andrew McDonald: I agree with all of that. We would be keen to have the conversation on that basis, and if we could do so that would be good. The early work that we are now conducting-the media interviews, for example, over the last fortnight-shows that we are keen to begin to have a national conversation around the proper remuneration for MPs. I think it is better and healthier for democracy that that conversations happens in the open.

Q38 Sir Anthony Holland: Conversations in corners and behind doors are not conducive to progress.

Sir Ian Kennedy: Absolutely.

On your point about making sure that we have enough personnel, the board is-

Sir Anthony Holland: No, I am content about that.

Sir Ian Kennedy: Okay, thank you.

Sir Anthony Holland: It is a way of dealing with the question of confidentiality, to be absolutely honest.

Sir Ian Kennedy: We will keep it under review. This is such an important matter that, if we feel there is a need for something to give somewhere else, we may have to do that.

Chair: Sir Ian, Andrew, Bob, thank you very much indeed for your answers today. If we could ask you now to withdraw, we shall consider your evidence further amongst ourselves. We are very grateful to you indeed. Thank you.

Prepared 24th May 2012