UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

SPEAKER'S COMMITTEE FOR THE INDEPENDENT PARLIAMENTARY STANDARDS AUTHORITY

IPSA

TUESDAY 14 MAY 2013

PROFESSOR SIR IAN KENNEDY, ANDREW MCDONALD and PHILIP LLOYD

Evidence heard in Public

Questions 1 - 54

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Oral Evidence

Taken before the Speaker's Committee for the Independent Parliamentary Standards Authority

on Tuesday 14 May 2013

Members present:

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

Mr Nicholas Brown

Mr Andrew Lansley

Sir Bob Russell

Mr Charles Walker

Lay members present:

Dame Janet Gaymer

Sir Anthony Holland

Elizabeth McMeikan

Examination of Witnesses

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

Q1 Chair: Colleagues, welcome back. Thank you very much indeed. We have quite a lot of questions to get through, so we will try to be pithy. May I begin by asking you how this year’s estimate of spending under sub-head A compares with your current estimate of forecast out-turn for 2012-13?

Philip Lloyd: There are broadly four categories of sub-head A. If I go through each category it may help to explain how we have estimated the figure for 2013-14. The first is MPs’ salaries. We have increased it by the 1% that has been announced, so it is last year’s plus 1%.

On MPs’ staff, we looked at the run rate of expenditure in the last couple of months of 2012-13, and increased it for the uptake of staff costs that is likely to happen. Because the announcement about staff budgets came early on in the year, MPs started to recruit staff, which went up from three and a half to four people in the budgets. The first few months of the year do not represent the true spend for the full year, so we took the last couple of months-December and January-inflated it up and projected it for the full year.

The third category is MPs’ expenses. We looked at the capped budget, which covers accommodation and office expenditure. We looked at the run rate in the last few months and increased the budget for inflation. Similarly, for the uncapped budgets we looked at the run rate for the last couple of months of the year to see what expenditure was and inflated that up because of inflation.

Overall, under sub-head A you have the 1% increase for MPs’ salaries, and MPs’ staff budgets. They have been taken on the last few months of the year. Likewise, for the capped and uncapped budgets, we looked at the run rates in the last few months of the year to see what the expenditure was and inflated it.

Q2 Chair: Right. May I ask what the difference is between your request for resources for 2013-14 and the total amount you would require to support Members if every budget was claimed to the maximum?

Philip Lloyd: If the spend is up to the maximum, there is at the moment some capacity within expenditure on MPs’ staff. The biggest expenditure is on MPs’ staff costs and MPs’ salaries, and there is scope within that to increase the MPs’ staff budget, so we think there is capacity there. The uncapped and capped budgets are running at the normal rate, and we do not think that more is going to be spent than we have estimated this year.

Andrew McDonald: It is fair to say we do not have with us today, but can provide very quickly, what the total figure would be if MPs were spending to the maximum of all budgets. It would be significantly greater than the amount that we are putting forward. This estimate reflects now three years’ worth of experience of expenditure patterns and, in particular, one year’s experience of expenditure at the higher staffing budget level. That is the crucial change.

Q3 Chair: Yes, but obviously the prospective budget-the request for resources-is not premised upon 100% spend.

Andrew McDonald: Absolutely not, no.

Q4 Chair: Because you are informing your judgments by reference to past practice.

Andrew McDonald: Exactly. We now have those data to draw on in a way we did not in previous years.

Chair: Thank you. Okay, I think that is clear to me and I am grateful to colleagues for that. I wonder whether we might move on to the savings target and hear from Charles Walker.

Q5 Mr Walker: The question here is: how will you achieve your 5% savings target on your operational costs in 2013-14? In asking that question, I point out that there is still the running sore of service levels offered to Members of Parliament. In particular, with the telephone answering service, you cannot speak to someone until 1 o’clock in the afternoon, which is a fairly Soviet way of running a public service. I do not think any other public services operate like that. That is an important point. I know we keep coming back to it, but there must be a provision of service to Members of Parliament that is of a high level and that allows them to perform their function, which is to meet the needs of their 72,000 constituents. So on the one hand there is this great desire to drive IPSA’s budget down, but on the other hand are we cutting to the bone too much?

Sir Ian Kennedy: I hear what you say about levels of administration, but we are talking about 185,000 claims a year, 99.5% processed accurately, claims reimbursed within 9.6 working days on average, payroll accuracy of 99.9%, 95% of e-mails answered within five working days and 80% within three working days and no errors in publication over the last quarter. These are levels of administration which I think any organisation would be pleased with. As regards the telephone, this decision was made some years ago and it was based purely on considerations of value for money. When analysis was done on how many telephone calls were received and when, the answer was that a large majority were received from around 1 o’clock in the afternoon onwards, and very few before, so the decision was made that in deploying our resources, it was better to deploy some to deal with e-mails in the morning and telephone calls in the afternoon, because that was more cost-effective. So Charles, while I hear what you say about levels of service, I think the levels of service that are delivered are, very considerably, good.

Q6 Mr Walker: I do not want to be argumentative, but it is extraordinary. There is no public service that does not answer its telephones for four hours in the morning. I find you are almost in the position of defending the indefensible. Why cannot an eight-hour telephone service be provided to Members of Parliament, who in a sense are your constituents, in the same way that Members of Parliament provide an eight-hour-plus telephone answering service to their constituents?

Sir Ian Kennedy: Because we would have to make a judgment that something else has got to give and we made the judgment that the telephone service as run seems, as regards the levels of satisfaction, to meet at least a degree of satisfaction and it allows us to do other things.

Andrew McDonald: I’ve little to add to that. That was borne out by the results of the survey of MPs and their staff last year. We will obviously take a view when that survey is repeated this year. It is a judgment about how we can most efficiently use the information team, who are working, as the Chairman says, both on e-mails and on the telephones. We believe we provide a good service, and we deal with a lot of telephone callers in the morning who are very often calling other MPs or their staff back in the morning. That is a more efficient way than handling e-mail. The service is more flexible than perhaps that stark description might suggest.

Q7 Mr Walker: A final question on budgets. There have been two well-publicised court actions. There was one against Jim McGovern where I think estimates-sorry, Sir Ian, you are shaking your head. Was it not well publicised?

Sir Ian Kennedy: No, it wasn’t against Mr McGovern. Mr McGovern brought the suit. That is a very important distinction.

Q8 Mr Walker: Okay. Well, you defended that to the cost of £20,000, I think. You are currently in legal dispute with Stewart Jackson from Peterborough. I understand, though I could be wrong, that you have appointed Matrix chambers, who have a QC and a deputy counsel working on that. Have you any indication of what the cost of that has already been and what the estimated cost is in prosecuting that action?

Sir Ian Kennedy: I am happy to talk to you outside this meeting on that, Mr Walker, but I do not think it is appropriate to discuss a matter that is now before the court in terms of-

Q9 Mr Walker: I don’t want to discuss the details of it, I just want to discuss the cost of it, because obviously we are discussing your budget today. Just the estimates?

Sir Ian Kennedy: Part of our legal approach is a function of what we are advised and when we are advised it, so that will determine how much is spent. I would rather we did not discuss that in public at the present moment.

Mr Walker: I would quite like to discuss it, but obviously if they are not willing to discuss it, we cannot discuss it.

Chair: Well, Sir Ian is entitled to give the answer that he wishes. Charles, I am in a position analogous to chairing in the Chamber: it is not for me to evaluate the quality of a ministerial answer. You are perfectly in order to ask the question-totally in order-and Sir Ian is in order to answer it or to respond to it in the way that he thinks fit. If you wish to pursue your action, you can.

Mr Walker: It is very difficult to look at budgets when you do not have an indication of what is going to be spent within that year.

Q10 Chair: I do not know, but it may be-and I am simply seeking to interpret and to be helpful here-that Sir Ian is taking the line that he is on the grounds that he does not wish the particulars of an individual case to be disclosed. Whether he feels able, on present knowledge, to estimate a global or holistic figure for likely legal costs in the financial year, I do not know; he may feel that such an estimate would not be accurate or even meaningful at this stage, not knowing what the year might hold. I am always keen on more information rather than less, but I cannot ask that you do other than answer the questions as you think fit.

Andrew McDonald: One general point, and then I will ask Philip to add something: in terms of detail, Mr Walker, plenty of detail is provided in respect of the £6 million of administrative expenditure. I think it is maybe one of the more detailed £6 million of public expenditure that there is. There is plenty of detail that has been provided.

On the legal budget as a whole, what we can do is tell you what the core legal budget is, leaving aside expenditure on individual projects. It is worth adding that, necessarily, a lot of our legal expense relates to seeking particular advice, for example, on the new pension scheme; also, we sub-let our accommodation last year, and we needed legal advice on that. What we can do is to identify the core legal budget within the main part of sub-head B, looking inside projects, and that, Philip, is?

Philip Lloyd: It is £110,000. That is the same as last year, and as Andrew said we spend that on general legal issues, such as last year’s sub-let accommodation, and some pension advice and so on.

Q11 Mr Walker: But not on the appeal regarding the Information Commissioner.

Philip Lloyd: It covers also the legal costs of the compliance officer as well. So last year it covered the cost of McGovern.

Q12 Mr Walker: There is an appeal going on at the moment with regard to a ruling by the Information Commissioner on the publication of receipts. Will that be covered by another budget or from that budget of £110,000?

Andrew McDonald: It is at that point that we begin to say that what we do not want to do is to identify individual budgets relating to individual cases that are before the courts or might be before the courts. That is the dividing line that we draw.

Q13 Chair: Can I just be clear, Andrew? I understood that to be the unstated but clear rationale in relation to a case that focused on an individual hon. Member. Are you also arguing that you are unwilling to give answers that would identify particular sums in relation to any legal case, even if it is not about an individual? I am simply proffering, on behalf of my colleagues, the observation that I think colleagues would feel that, where an overall case is concerned and the particular course of action you are taking in respect of it is on the table for discussion, it is perhaps not unreasonable to have some sense of what the numbers might be.

Andrew McDonald: I am happy to do that, as it were, with sunk costs. So, in the case referred to, I am happy to indicate that costs incurred so far are-irrespective of that case-in the order of £60,000.

Chair: As, to be fair, you did say.

Andrew McDonald: What we are reluctant to do is identify the respective budgets in cases where the duration and course are very difficult to predict, apart from anything else. We would be reluctant in open session to share that information, not least with the opposing parties.

Chair: No, I do see that. That is very clear to me.

Q14 Sir Anthony Holland: It is a matter of principle; it is nothing to do with detail. As a matter of principle, when you are negotiating legal costs, are you asking for fixed fees, as most commercial companies do these days, of the lawyers-a fixed fee for both conducting litigation and the counsel’s fees? That is a matter of principle generically across the whole. Is that your normal approach?

Andrew McDonald: I am not sure what we are doing with the next stage of this litigation, so I don’t know is the answer to that.

Q15 Sir Anthony Holland: Can I commend that idea? There is a lot of competition out there. People are desperate for work, both large and small firms, and counsel in particular. They will be happy to submit fixed-fee estimates and stick to them.

Sir Ian Kennedy: Yes, you are right. Mr Speaker, if it is any comfort, the legal advice we have from our solicitors was only after what is sometimes called the beauty parade of solicitors seeking to come and assist us. If we don’t do it, I will ensure that we do.

Sir Anthony Holland: Good.

Chair: We are obliged to you. Now, if none of my colleagues wishes to come in further on that matter, we will move on to the subject of one-off pressures relevant to your role and statutory remit.

Q16 Mr Lansley: As you know, under your overall operational costs on a like-for-like basis, you are setting out to reduce costs by 5%. However, when one takes into account added project costs, the budget being looked for this year is an increase over 2012-13. Can you explain, first, your criteria for determining that any particular expenditure is so-called project expenditure-that is, exceptional-and should be regarded as outwith your normal operational costs?

Andrew McDonald: I am happy to take that. Typically, it is not recurring; it is not expenditure that recurs annually. It is on a discrete task, and there is a question of scale. Typically, this is a matter that involves procuring external expertise, rather than using exclusively internal staff expertise.

Q17 Mr Lansley: Some of the things included from your point of view in the list for this estimate of projects could be regarded as a normal part of the process of providing IPSA’s responsibilities. Things such as the publication policy review or managing the auto-enrolment for MPs’ staff are a consequence of either your normal activity or, in the case of auto-enrolment, something that employers the length and breadth of the country have to do. Why should IPSA regard them as outwith its overall savings discipline?

Andrew McDonald: If we take those two examples, auto-enrolment for a start is not strictly speaking an IPSA responsibility. We would be within our rights, though it would be massively unhelpful, if we said that this is actually the responsibility of the employers; it is the responsibility of all MPs to do this, as employers. We are saying that that would be a nightmare administratively for MPs and it would be better to collect this together and do it as a one-off exercise by IPSA. There is a clearly a choice. We thought that was a more helpful thing to do.

In terms of the publication policy review, the Freedom of Information Act requires authorities from time to time to review publication schemes, so it is not an annual exercise. In our case, we know more than we did three years ago, when we were set up. This feels an appropriate time for us to look at the scheme again; I do not envisage that we will do it again for a number of years. I think it meets the criteria for not being annual recurring expenditure.

Q18 Mr Lansley: If we were to take the general proposition that the purpose of the definition of project expenditure is to encompass those things that do not form part of the recurring annual responsibilities and expenditure of IPSA’s operations, which I think is reasonable, how do you think we might propose that financial discipline be applied to those projects overall? I am not designing anything today, but almost all of what you are describing has the character of being a regular review. To that extent, over the course of, say, three years in this Parliament, we might arrive at what is effectively a rolling average over a period and apply that as a financial discipline in the next Parliament; otherwise do we not run a risk that, over time, no financial discipline or downward pressure is applied to those project costs?

Andrew McDonald: I recognise the challenge. In terms of the nature of the activities-if we look at, say, the accommodation review-our intention is that, once done, we will not return to this for a very long time. You may recall that, when IPSA was being established, we said that there were a number of discrete policy questions that we were not able to look at in sufficient detail when the scheme was being established in great haste by March 2010. One of those was the staffing levels of MPs, which we addressed a couple of years ago, and another was accommodation. With those two, whether it is residential or office accommodation, I would not expect us to be returning to them in the near future.

Similarly, on pay and pensions, I dearly hope that we do not have to return to that question in the near future. If we do it once, I would want us to retain not only a one-off review but an element of automaticity to any changes to MPs’ remuneration thereafter. I have already described publication policy and auto-enrolment.

I think those are the projects, unless I am missing one.

Q19 Mr Lansley: Would it be reasonable for there to be, in effect, an agreement through SCIPSA and with the Treasury, as part of your corporate plan process, on what the expenditure on project costs should be? And would it be reasonable for a discipline to be agreed on the reduction of project costs?

Sir Ian Kennedy: I absolutely understand the point on the responsibility and integrity of the process, but I am not quite sure of the mechanism. If you aggregate them all together, they are so disparate in terms of what they might cost-they are apples and pears-but we ought to explore the notion of discipline. I would be more than willing to seek to explore that through the Speaker and you as time goes on. I think that is a very important point.

Q20 Elizabeth McMeikan: Have you considered whether certain projects could be prioritised or deferred to enable you to live more within the budgetary pressures to which Andrew Lansley has just referred? For instance, could you defer the MPs’ accommodation review to 2014-15? Have you looked at the balance of projects in any given year?

Andrew McDonald: Sir Ian might want to add that. From a policy point of view and from the board’s point of view, this clearly goes to the heart of independent decision making by an independent organisation. From an administrative point of view, we have looked very much at the sequencing of projects. We have also sought to respond to the questions that have been raised with us-sometimes quite vigorously-by MPs on whether we have got the arrangements for office and residential accommodation right. We seek to be responsive on the balance of activities across each year.

Sir Ian Kennedy: Well, I think it is for the board to identify those matters that really require deep thinking as to whether we have got them right. On accommodation-residential accommodation in constituencies and London office accommodation-let us take the easy example of whether the accommodation that MPs use in their constituencies should be made amendable to being handed on to the next MP by using publicly or commonly owned offices. I will not go into the detail now. I once floated the idea of local authority premises being used, but it was a bad idea then, and I assume it is bad idea now, although there may be other ways of doing this.

These are very important questions about the taxpayer’s money. If you had an office, for example, that was handable-over, so, too, would be the equipment in that office, and you would begin not only to reduce the difficulties MPs might confront in terms of start-up costs, but save in terms of the continuity of the premises, because another agent would not have to come in, look at the premises and draw up another lease. Those are important value-for-money questions. We postponed looking at the issue for a while, because we simply did not have time to get round. We do not think it has gone away, and we would wish to wrestle with it.

Q21 Elizabeth McMeikan: Thank you. Can I move on to discuss how you evaluate project costs? Some may say that, for example, a £300,000 cost for the accommodation project is high. My first question to you on costs is, could you undertake the accommodation project, if we take that as an example, at a significantly lower cost? Have you looked at the value-for-money aspect of a £300,000 spend on that project?

Andrew McDonald: Perhaps I can just answer in general terms, and then pass it to Phillip. The short answer is yes. The senior executive team has looked at the costings for this project, and those costings were subject to scrutiny by the board, but Philip might want to take you through, at least in headline terms, the build-up of the figures.

Philip Lloyd: Yes, in terms of doing a proper exercise and looking at the property costs of office accommodation and private accommodation, the bulk of the costs would be the estate agent and property expert advice; that is a fair proportion of the overall £300,000. Secondly, we need to look at getting legal advice on any proposed changes, and that constitutes a fair chunk of the £300,000. Lastly, there is the Valuation Office-getting some information from it-and it charges fees for its information. Together with those three, there are also communication costs and publication costs. We have estimated that £300,000 is a good estimate.

Q22 Elizabeth McMeikan: Can you tell me how you evaluate the value that you are getting from your consultants? You said your first chunk of money for accommodation was for consultants’ fees. Are you experts in buying consultants’ time? How do you evaluate that you are really getting a good price for the service?

Philip Lloyd: All our procurement is through the Government Procurement Service. There, we have firms that have tendered and gone through a process, and there are fixed fees for their services. We go out to do a proper procurement of the service. We will get in three, four or five tenders at least and evaluate them against the quality of their service, and they are provided against the fixed fee agreed with the GPS.

Q23 Elizabeth McMeikan: Would you take the lowest cost?

Philip Lloyd: We look at the criteria, so it is cost and the quality of their service.

Q24 Elizabeth McMeikan: So you are looking at value for money.

Philip Lloyd: Value for money, indeed.

Andrew McDonald: We use a value-for-money matrix. Equally, at the end of each project, we will do a project review, which includes looking at not only whether the project has achieved its objectives, but the cost of achieving its objectives. So we are evaluating at both ends, and while the project is going on as well.

Q25 Elizabeth McMeikan: And you are applying that same evaluation to all aspects of expenditure for any given project, pre and post.

Andrew McDonald: Yes.

Sir Ian Kennedy: And all of that will ultimately come to the board, which will take a view on whether it is persuaded by what it sees.

Q26 Sir Bob Russell: Can I just ask about the figures? Do they include the office costs of Members of Parliament located within the Palace of Westminster?

Andrew McDonald: We have not yet defined the scope of that project. As currently envisaged-this project is some six months away from being initiated-the answer to that question is no, but we are conscious that the question you raise is a live one. We have been in discussion with the House authorities about what some might argue is a perverse incentive to move staff into Palace accommodation, rather than housing them in accommodation funded through IPSA. We are conscious that that is a live issue, so we have not yet taken a final view.

Q27 Sir Bob Russell: Would you accept from me that if I shut down my constituency office in a converted church hall and moved all my staff up here, the cost to the public purse would be greater and the service to my constituents less?

Andrew McDonald: You would know the costings of the church hall. That seems to me an entirely plausible outcome.

Q28 Sir Bob Russell: Secondly, those Members of Parliament who have all their staff based here, or several members of staff here, have all their telephones, printers and so on funded by the public purse and not by IPSA. Would you accept that we are not 650 branches of McDonald’s?

Andrew McDonald: I certainly accept the latter point, and I accept that the costs relating to MPs’ staff based here, as far as I am aware, are not surfaced and expressed as explicitly and clearly per MP as those costs which go through IPSA’s books. If I understand the drift of your questioning correctly, I think there is a question about the way in which one captures the costs relating to staff based here, as against those funded by IPSA.

As I was saying at the start, we have not defined the scope of the office accommodation project yet. What we will suggest doing might lead us to define that project in a way which involves some collaboration with the House about costs which are currently incurred on the House’s books rather than ours.

Sir Ian Kennedy: If I may say so, that is a very helpful intervention, and it demonstrates why this is an issue that really needs to be examined. For example, there is-I would not say tension, but always some sense of uncertainty as to what is the financial responsibility of the House and what is the responsibility of IPSA. To negotiate one’s way through that so it is clear on both sides is one of the ambitions we have. The accommodation review is just one such example.

Q29 Dame Janet Gaymer: Back to the subject of project reviews, particularly in relation to your current accommodation, your lease expires in 2015, and you have recently sub-let. As a result of that sub-letting, I understand that there was an increase in your depreciation costs due to refurbishment you had to do for your new tenants. I have two questions. First, has the experience of that sub-letting led to any lessons learned for the next stage in your accommodation journey, if I can call it that, when you have to find new premises? Secondly, your draft corporate plan refers to the recruitment of additional temporary staff to help you through the period of the general election. Will you have space for them?

Andrew McDonald: I will answer in general terms and then pass it across to Philip, if I may. Yes, we had a lessons learned exercise as a result of the accommodation project we undertook last year-a project which achieved its objectives. There are clearly lessons which we want to apply when we do the next accommodation project. As you suggested in the second part of your question, the second project will be a good deal more complicated, because we will have short-term staff in respect of the general election, but also, potentially, short-term staff in respect of the increased publication activity which we may have to undertake.

The work that we were going to do this year on accommodation was to get our minds around the appropriate stage at which to withdraw the permanent team from our current accommodation, and whether there might be some scope for the temporary team to remain in our present accommodation while the permanent team moves out to other accommodation. We need to do an option appraisal. We need to find the most economic and efficient way of basing our permanent team, as well as the temporary team.

Q30 Dame Janet Gaymer: Apart from the sub-letting issue of the rise in depreciation costs, are you content to share any of the other lessons that you have learned and that you said you had considered?

Andrew McDonald: I am happy to do so. I have to say that I do not have them in front of me now.

Q31 Dame Janet Gaymer: But you are happy to share them with the Committee?

Andrew McDonald: Yes, indeed.

Q32 Chair: Okay. Thank you. I think that probably covers the whole of that terrain for the time being, in which case we move on to Tony Holland.

Q33Sir Anthony Holland: What was the effect of the Information Commission’s decision from your perspective?

Andrew McDonald: The Information Commissioner took a decision late last year-

Q34 Sir Anthony Holland: I am sorry. I have misled you. The appeal that you have just had at the Lower Tribunal: what was the impact of that? What is the position first of all?

Andrew McDonald: The Lower Tribunal reached a decision that it was upholding the decision of the Information Commissioner that we should publish receipts in addition to the data that we publish in respect of all MPs’ claims. At the moment, as you are no doubt aware, we publish 185,000 claims a year in tranches every two months, three months in arrears. We publish all the essential details of the claims on our website. The process works efficiently. It is cost-effective. The effect of the tribunal’s overruling and the original Information Commissioner’s decision, we maintain, would be to require us to publish the images of all the receipts we receive in future but also all those which we already hold.

Q35 Sir Anthony Holland: And what would be the cost of that?

Andrew McDonald: The cost of that we estimate would be about £3.5 million over the next three years and about £900,000 every year thereafter.

Q36 Sir Anthony Holland: When you receive the information in the form of invoices, you do not do any redactions at that point?

Andrew McDonald: No.

Q37 Sir Anthony Holland: Would you change to that system whereby you had to redact as and when you received them?

Andrew McDonald: We would run separate projects. There would be a project which relates to the publication of the back catalogue-the 650,000 invoices that we have already got. Clearly that is a discrete historic exercise. Secondly, with new receipts we would modify our business process to add a stage at the end where the redaction would take place. That redaction would be a complicated process in that it would require rigorous quality assurance, not least because we are conscious that we are dealing here with personally sensitive data under the terms of the Data Protection Act- bank account details, just to take one example, where we would have to be absolutely rigorous to ensure that we were not releasing those into the public domain by mistake. I think we would do that at the end of the business process. We have looked at how to redesign the business process to incorporate it and we have a way of doing it. But it is an expensive business and will require the recruitment of additional staff to undertake it.

Q38 Sir Anthony Holland: One of the options presumably would be that the receipts that were obtained by Members of Parliament or, indeed, that you asked them to get, were designed in a way that made the redaction much simpler.

Andrew McDonald: That would involve receipts being generated in a way by merchants which-

Q39 Sir Anthony Holland: Is that not practical?

Andrew McDonald: Given that MPs buy services from just about every conceivable merchant in the country-

Philip Lloyd: They are not necessarily electronic. Some of them are written receipts from landlords as well.

Q40 Sir Anthony Holland: It seems to me that given the estimated cost is so enormous to the taxpayer eventually, this issue of receipts will demand some pretty focused attention as to how you actually address the whole issue of receipts-game over, if you like-so that you start by saying, "What do we want from a receipt in the first place?" because you have not got the information and you do not have to give it. It is the getting of the information sufficient for your purposes to justify the payment. Has any work been done in that direction?

Andrew McDonald: First of all, if you are saying that the problem, if problem it is, already exists in that we have already got receipts-

Sir Anthony Holland: You have got the existing problem. I am talking about for the future.

Andrew McDonald: We take the view, and the board has recently confirmed the view, that requires it as being essential that receipts are provided to support expenditure rather than reverting to an allowances system, and that retaining a receipt-based system is crucial for public confidence. Whether there is any scope-and this we haven’t explored-for us to influence merchants who are producing receipts to produce them in a way that limits the requirement for redaction, I do not know. We have not considered that. I do not quite see how that might work.

Q41 Sir Anthony Holland: Well, there are some places where you have to produce receipts, but they can be certified by various members of the organisation. It is a question, it seems to me, of a different approach being made if you are going to be involved in this kind of expense. I appreciate that, from your perspective, when you first started out the receipts seemed the obvious ways forward. But there are alternatives, both in terms of evidence of what was spent and of certification of what was spent, beyond merely producing a receipt every time. The question I am asking is: if you are not successful in the ultimate outcome of this particular case, will you look again afresh at the whole issue of receipts, because the whole thing is very costly?

Sir Ian Kennedy: If you are asking whether the board would contemplate introducing a system where there was no evidence of that which had been spent, the answer is no. If you are asking whether it is possible to reflect upon ways of managing this situation in a more creative manner, the answer is, of course, yes. And we will bend our minds to it should we have to do that.

Andrew McDonald: There are some examples of there being some scope: for example, the introduction of the Trainline service, where individual receipts do not have to be produced. There are some categories, such as direct payment, which we have already introduced, which minimise the need for receipts to go through the system. But there needs to be evidence of appropriate quality in place of receipts. We may well have already identified those categories, but let us look again. There might be other categories that are appropriate. Let us see. Trainline is one illustration. More generally, it is part of our move towards direct, simplified payments, and we have had considerable success over the last year. Now, more than half of all expenses by value are paid through direct or simplified payment means, rather than through universal means. There are still a good deal of receipts involved with simplified payments, but fewer than there were before.

Q42 Sir Anthony Holland: Because, ultimately, this whole question of receipts is going to become increasingly expensive and lose any appeal if you stick to the present arrangements. Therefore, it does demand, in my view, fairly focused attention over the next two or three years to sort it out. We cannot just go on assuming that we will carry on photocopying receipts and redacting them ad infinitum.

Andrew McDonald: And we are saying that it not a photocopying process. The process is done electronically. The need for us to provide assurance to the public that there is something underlying the expenditure is one to which the board attaches-and with good reason-very significant importance. I think that need will continue. In some categories-Trainline, for example-we might be able to provide alternative forms of assurance, but I think they are going to be in the minority.

Q43 Sir Anthony Holland: You see, my argument would be, looking at this in the long term, from the taxpayer’s perspective, what value is he going to get from a lot of money being spent going down a particular process ad infinitum when there may be alternative ways forward. That is all I am asking the board to address. You said you will.

Sir Ian Kennedy: Yes, absolutely. But of course your question is premised on the fact that it is not our decision to contemplate receipts, and we made a conscious decision not to do that. That was a decision that at the time we ran past the then Information Commissioner. It received at least a nod that it was a plausible system. However, it appears that times have changed. We do not want to be in the position that you described in that worst case scenario. But if that should happen, we have got to find a way round it. We recognise that.

Q44 Sir Anthony Holland: Did you say the Information Commissioner-the previous one-gave you the nod for doing it this particular way?

Sir Ian Kennedy: We took advice.

Andrew McDonald: I think what the Information Commissioner approved was the publication scheme, not strictly speaking, as I recall, the question of the provision of receipts.

Sir Ian Kennedy: The publication scheme specifically did not involve the use of receipts, but rather that which we extracted from them.

Q45 Sir Anthony Holland: The Information Commissioner at the time said that would meet with the requirements of the Freedom of Information Act section 1?

Andrew McDonald: I do not think that the commitment was as explicit as that. This is a general publication scheme, so, three years ago, I think it is fair to say that the commissioner was not committing himself specifically on that point; he was approving a general publication scheme.

Sir Ian Kennedy: Andrew thinks that I may have over-egged the omelette, so I will withdraw my cooking from that.

Chair: Tell me, have you completed your line of inquiry?

Sir Anthony Holland: Yes. I do not want to go into the question of appeal at this stage, because that is premature.

Chair: Okay. Tony, you are done for the moment. Thank you.

Q46 Sir Bob Russell: Following on Sir Anthony’s line of questioning that perhaps the system needs looking at, the National Audit Office has estimated that in excess of 90% of MPs are currently subsidising their work because of the systems and I believe that the published figure was that 38% of all claims cost more to process than what the claim is for. Is that not further evidence that the whole system needs to be looked at to see whether there is a more cost-effective way for the public purse and for the efficiency of Members of Parliament and their officers?

Andrew McDonald: I will happily begin on this. There is a cost associated with public confidence in the way in which MPs are remunerated. When we last polled the public, more than half took the view that the new system had improved things.

Q47 Sir Bob Russell: Could you tell us how many people responded, in numbers?

Andrew McDonald: It was a public opinion poll, so it was a properly sampled, standard opinion poll, but I do not know the numbers. There is a cost associated with providing reassurance to the public, and doing that in the light of the crisis of 2009, we judged that the provision of receipts in support of expenditure is part of the way in which that assurance is provided to the public. We have continued to judge that to be appropriate.

At the same time, it is important that we drive down our administrative costs. The estimate we put before you today demonstrates that we are doing that with IPSA’s core costs. As for cost per claim, we do not think that that is a terribly helpful metric to use because it has got a number of components to it, not least the number of claims that are put in by MPs. So, as a metric of our administrative efficiency, I am not sure whether it is terribly effective.

As it happens, those figures-we are going to have the audited figures from the year just closed-show a continuing fall in cost per claim as we are becoming more administratively efficient. And when, back in 2011, the National Audit Office did its work, to which you allude-my reading of the figures would be slightly different from yours-it took the view that we were the most efficient of the expenses bodies for the UK legislature. That was comparing us to the Scots, Welsh and Northern Irish. We have a good, and improving, record to tell in terms of administrative efficiency.

Q48 Mr Walker: FOI requests are being lodged on a fairly regular basis by the media and private individuals. Do you anticipate any easing in this flow of requests, or are the weekly indications that you are getting that they are going to continue unabated?

Andrew McDonald: It is difficult to predict. About 12 months or so ago, we were getting them in at a rate of about six or seven a month. That rate doubled in the autumn of last year, with the renewed media attention on MPs’ expenses, and it has remained at that level. So, taking the year as a whole, the figure for FOI requests over the last twelve months has been in excess of 130. The figure in February alone was 37. And it is not just that they are numerous, but some of them are particularly complicated. A number of MP colleagues here will have received consultation from us in respect of office accommodation and residential expenses, which has required a significant judgment exercise on our part, but also consultation with MPs and, indeed, with their parties. They are a significant expense for us to bear.

Q49 Mr Walker: And interestingly, they do not seem to have generated a huge amount of media interest. People keep digging for the great smoking gun, but I have not seen an enormous amount of interest. Obviously, there was one on home accommodation, but what happens to these FOIs-do you respond to them and then not hear back again?

Andrew McDonald: Some of them generate media attention, and some of them do not. In terms of the search, you would search for a smoking gun, or we would not think that there is a smoking gun because MPs are making claims within the scheme and we are regulating the scheme properly. As you may recall, there was a flurry of attention about October and November last year in terms of media coverage. That has diminished. The number of FOI requests has continued. I do not quite how to read that.

Q50 Mr Walker: You do not know who is making them? It is done anonymously, is it, or do you know who is making them?

Philip Lloyd: There are one or two people who are frequent FOI people, and they are looking for particular stories, so there are frequent ones, but on the other hand, there are those that are very infrequent.

Sir Bob Russell: Are they invited to the Christmas party?

Andrew McDonald: IPSA is far too poor to have a Christmas party.

Sir Ian Kennedy: If I may say so, Mr Speaker, Charles is making a very important point. IPSA as an organisation has, I think, evolved and I hope matured. If so, the relationship between IPSA and this Committee has, over time, evolved and matured. There is much greater mutual understanding about the challenges. The assumption that there is something out there that either you are doing or we are hiding is still clung on to by some, but with increasingly greater difficulty in my view.

Chair: Thank you. We are pretty close to the end, but-Tony Holland.

Q51 Sir Anthony Holland: I have one quick question. It may be a very stupid question, but when I have accounts prepared each year, my accountant wants all receipts and then returns them to me, and I have to undertake to keep them for six years for Revenue purposes, so why is it not possible for all these receipts to be returned back to the MP who submitted them, on the understanding that he keeps them for a least a period of time in case he is asked to produce them to you for audit purposes. Why do you have to keep the receipts?

Andrew McDonald: I am sorry, I missed the early part of your question.

Sir Anthony Holland: I was saying originally that when my accountant, every year, gets all my receipts for everything, he then eventually returns the whole lot back-he does not want to keep them, obviously-and I have to agree to keep them for six years for Revenue purposes, in case they want to make an inspection of my accounts. The question I am asking is, why do you not return the receipts, once they are dealt with, to the MP, who would undertake to keep them-to your order, if you like, but not even that; just to keep them-for a period of parliamentary process.

Andrew McDonald: If we look at what happens at the moment-

Q52 Sir Anthony Holland: It says here, whether it holds the "information of the description specified" in the question, but if you have not got the receipt, you cannot copy them.

Andrew McDonald: We have scanned images of the receipts, and we have paper copies, which are then sent to storage.

Q53 Sir Anthony Holland: Maybe you should not scan them in.

Andrew McDonald: We are encouraged to be efficient. In terms of the efficiency of the process, the scanning is essential. All that would be happening under that scenario is that, at its crudest, we would be using MPs instead of a storage company for the receipts, which MPs might not be terribly enthusiastic about.

Q54 Sir Anthony Holland: I just think that it is going to require some innovative thinking to get round spending a million pounds a year.

Sir Ian Kennedy: We would not solve the problem because we would have the scanned images, and if we did not have the scanned images, we would not be able to do the look-back or whatever else that might be required of us.

Chair: Okay. We have come to the end of our questions. I would just like to thank everybody very much indeed, Sir Ian, Andrew, Philip-the team from IPSA-for your time, interest and responses. We will have brief confab, and we look forward to seeing you again soon.

Prepared 20th May 2013