MEMBERS' EXPENSES

Speech delivered to House of Commons on Thu 3rd Jul 2008

Nick Harvey (North Devon) (LD): I beg to move: That this House welcomes the Third Report from the Members Estimate Committee: Review of Members Allowances (House of Commons Paper 578), and endorses in particular the recognition of the need for a robust system of scrutiny for parliamentary allowances and the accompanying emphasis in the Report on improved audit.

The motion invites the House to approve the recommendations made in the report on Members' allowances produced by the Members' Estimate Committee. It has been just over five long months since the House instructed the Committee on 24 January to consider the recommendations in the Senior Salaries Review Body's July 2007 report on Members' allowances. Members will recall that, no sooner had that instruction been given than the House was plunged into controversy following the irregularities in staffing practices of one hon. Member, the atmosphere that that created, and the judgments made by the freedom of information tribunal shortly thereafter.

It was decided at that point that the review being conducted by the Members Estimate Committee should be a more thorough review, that it should look at every aspect of Members' allowances and that it should be a root and branch review. I am not necessarily suggesting that we have cut off every branch; that is for others to judge. The report runs to 271 paragraphs, and it follows that no one-not even all six members of the Members Estimate Committee-will think that all 271 of those paragraphs are perfect. The six members of the Committee have had to make compromises between ourselves in order to reach consensus.

The task that we were set at the beginning of the review was to balance the interests of Members of Parliament with the interests of taxpayers. I do not need to tell Members that the impression created in the national media has not reflected well on this House as an institution or on its Members. The public believe-quite erroneously, in my view-that our allowances are excessive, that there are irregularities in the way in which Members claim those allowances and that the systems in this place are lax. I repeat that those are not my views, but that is the impression out there among the general public, and that is the context in which the Members Estimate Committee has conducted its investigations and the basis on which we have brought forward our recommendations.

We have a clear need to restore the reputation of this House. Thus it is that our principal recommendation is that we need a more rigorous system of audit and assurance, possibly going rather further than the strict requirements that an audit would deem necessary. We need to do this in the interests of trying to restore public confidence in this House. The events of earlier this year have adversely changed people's impression of our arrangements for these allowances. Frankly, nothing will ever be quite the same again, not least because the freedom of information regime now means that we will publish, right down to receipt level, every claim that every Member makes against every allowance.

Over the past five months, we have been grateful for oral, written, formal and informal comments from colleagues. As I have said, we cannot expect to make everyone happy, but we have done our best to take on board as many of those representations as we could. We are also grateful to the outsiders who have come in and given evidence and advice to us. They include the Comptroller and Auditor General in the National Audit Office, Her Majesty's Revenue and Customs, two firms of accountants, the Institute of Chartered Accountants' practice assurance experts, and our own officials within the House.

When we published our report last week, we made it clear that tougher rules on the way in which we police our allowances were essential to putting right the problems that some people detect and the impression that abounds among the general public.

Mr. David Winnick (Walsall, North) (Lab): Will the hon. Gentleman give way?

Nick Harvey: I will just finish laying out the recommendations, then I will happily give way to the hon. Gentleman.

Members of Parliament are unique in certifying their own expenses. The Committee was advised by all those who gave evidence to us that this is simply not a practice that takes place in other walks of life. Even the chief executive of a plc will have an expense claim certified by the chairman of the board. The belief that a Member's signature reflects the fact that a gentleman's word is his bond is, regrettably, not one that the rest of the country is prepared to put its faith in any longer. The proposed system of practice assurance will for the first time allow checks to be made against the basis on which Members have made their claims and the uses to which the resources they have claimed have been put.

I encourage Members to read closely what is being suggested. We are not employees of this House but independent office holders. Our situation is comparable in many ways to that of professionals, whether as partners or in individual practices. The assurance system proposed in the report places us on a similar footing to professionals who practise either in partnership or as sole practitioners. Our intention is that there should be better record keeping and accounting and that if Members are doing anything at all irregular, they are more likely to be doing it through inadvertence than malfeasance.

We thus view these proposals as a soft knock on the door and as a helpful advisory service to be provided by professionals trained to do this in other walks of life, who will come in to assist Members. I want to clear up at this point any suggestion that the proposed practice assurance model is intended to go any further than deal with Members' claims and their use of public money.

Mr. Winnick rose-

Ian Lucas (Wrexham) (Lab) rose-

Nick Harvey: I will give way in a few moments.

It has been suggested, for example, that the practice assurance teams might come in and start telling Members how to go about their political business, how they should be serving their constituents, how they should order their political priorities and so forth. Nothing could be further from the truth. This is targeted solely at how Members are making claims and the uses to which resources allocated to them from public funds are put. I hope that I have made that clear.

Mr. Winnick: Let me turn back to what the hon. Gentleman was saying a little earlier about the lack of public confidence in the way we claim our allowances. Does the hon. Gentleman not recognise that the manner in which the House of Commons Commission went to the High Court without any authorisation from the House whatever-there was no motion of any kind-is hardly likely to bolster public confidence in the system of allowances, much of which is absolutely justified?

Nick Harvey: I do not accept what the hon. Gentleman says. The principal argument advanced at the High Court was that Members' private addresses should not be put into the public arena, and Members will have an opportunity to express their opinions on that subject later in today's debate.

Ian Lucas: The hon. Gentleman has referred on a number of occasions to the phrase "practice assurance", which I believe is a deeply unfortunate one. He seems to be saying-will he confirm it-that the audit arrangements will extend only to financial assurance, not to practice assurance. Practice assurance goes way beyond audit and financial assurance. Does he agree that a much better, more accurate and less ambiguous description would be "financial assurance", and will he use that term from now on?

Nick Harvey: Let me confirm that it is the financial practice, not the political practice, that the assurance team will be coming round to check, but I would not be satisfied to call it simply "financial assurance" for this reason. The scandal that I mentioned earlier related to the employment and use of staff. With respect, that went a little wider than just financial matters, but in no sense whatever would the assurance teams involve themselves in matters of political practice, which are entirely a matter for Members' judgments. We are talking about the usage of considerable sums of public money-and nothing else.

Mr. David Clelland (Tyne Bridge) (Lab): Will the hon. Gentleman tell the House how much all this will cost and how much it will save?

Nick Harvey: How much it will save time alone will tell. I hope that it will save and improve the reputation of the House and improve the quality of British democracy. If it does that and if in a couple of years we have convinced people that any problems that there were are being ironed out, it will have been worth it. The question of how much it costs will depend on terms of contracts that we let, what people bid in at and what scale of work is done. Some estimates are included in the appendices-

Michael Jabez Foster (Hastings and Rye) (Lab): Will the hon. Gentleman give way?

Nick Harvey: I will press on, with respect to the hon. Gentleman, so that more Members get the opportunity to contribute to the debate.

The purpose of introducing the principle of practice assurance is to put Members of Parliament on the same footing and the same basis as other members of the professions and others in other walks of life. One thing that we were asked to do at the outset of the process was to examine practice elsewhere and ensure that the practice of Members of Parliament was analogous to that of those in other professions. A mindset that Members of Parliament are in some separate world of their own and that different rules apply to us than to everybody else has got the House into the sort of trouble that we have at the moment.

Helen Jones (Warrington, North) (Lab): Will the hon. Gentleman give way?

Nick Harvey: I will press on. Introducing this system of practice assurance is intended to put us on the same footing that other professionals in other walks of life are involved in.

The rules of engagement will be drawn up by Members of Parliament. The rules against which our practice is judged will be drawn up by Members of Parliament. The contract with the professionals who carry this out will be set by Members of Parliament. The House will still have domain over its own rules and regulations and the practices that it puts in place to police them. This is not something being imposed from outwith, but we are using the expertise of professionals in other walks of life so that they can come in and ensure that we are adopting best practice in 2008.

Helen Jones: The hon. Gentleman will accept that outside the House proportionality applies. Therefore, will he explain to the House how much this system will cost and how much he expects to save for the money spent?

Nick Harvey: That question was asked a moment ago and I repeat what I said then. The objective of the exercise is to restore the reputation of the House and its Members. We cannot say how much it will save until we have tried the system and seen what it will save. What it will cost is laid out in the report and I invite the hon. Lady to have a look at it.

Michael Jabez Foster: Will the hon. Gentleman give way?

Nick Harvey: No, I am going to make some progress.

The second part of this is the question of formal financial audit. Our proposals involve the National Audit Office extending the scope of its audit of the House accounts and bringing it up to the general standards of the public sector. The NAO will continue its practice of sampling transactions and systems, but it is not the role of the external audit of our accounts to test the behaviour of Members. For the first time, the NAO will have the power to look behind the Member's signature, and it has also indicated to us that reducing the receipt threshold will enable it to give assurance on the House's accounts on a comparable basis to that which it offers on the accounts of other public sector bodies.

An amendment has been tabled that would knock that provision out. I invite the House to consider that carefully. We have before us a recommendation that would put the audit of the House accounts on the same basis as that of other public bodies. If we vote it down, we will knowingly vote to have our accounts on a less adequate basis than those of the rest of the public sector. In my view, and in the light of the challenges that we have experienced to the reputation of the House, it would be utterly catastrophic for us to do that knowingly and having taken advice from the NAO.

Sir Patrick Cormack (South Staffordshire) (Con): I go along with much of what the hon. Gentleman says, and as a former member of the Commission and of the Members Estimate Committee I understand the difficulties of his task. I am grateful to him and his colleagues. I can understand the £25 threshold, but I am told by people in the House's own accounts department that requiring a receipt for everything-be it £1, £2 or 7s/3d-will cause enormous and disproportionate cost. Why was that recommendation made?

Nick Harvey: On 1 April, the receipt threshold was reduced from £250 to £25. That change has involved a far greater adjustment of the administrative load than the further-quite small-reduction from £25 to zero.

When we made that change, it was I who was sent to the media studios. The interviewers did not say, "This is entirely commendable. The House of Commons has reduced its receipt threshold from £250 to £25." The first question on the lips of every interviewer was, "Why are you sticking at this £25 threshold when the rest of the world expects receipts for everything?" [Interruption.] According to the evidence that we have been given, that is the case in many other walks of life.

There is a £30-a-day subsistence allowance for Members, also based on the practice that we have observed in other professions-the civil service, for example. We do not expect receipts for that. It is a small sum, and the way in which Members use it is at their discretion. Members have complained that they would not be able to get a receipt for the purchase of a newspaper or a cup of coffee. Those are exactly the sort of purchases for which the £30 daily subsistence rate is meant to provide. It is true that the receipt threshold is going down to zero for most purposes, but a small amount is still left to the discretion of Members.

Stephen Hammond (Wimbledon) (Con): Will the hon. Gentleman give way?

Nick Harvey: I will, but then I must make a little progress.

Stephen Hammond: I entirely support what the hon. Gentleman has been saying, but those in almost every other walk of life must submit a receipt for almost every item of expenditure. Can he explain the rationale for a £30 daily subsistence which will not involve receipts, and can he also explain why it is not being given to all Members of Parliament?

Nick Harvey: The £30 subsistence allowance is based on the subsistence arrangements in other professions, which are recognised by Her Majesty's Revenue and Customs. HMRC does not allow people a tax-free subsistence rate unless they are staying away from home. I think the hon. Gentleman is asking me about those who have only one home. He will have noted our proposal to increase the London subsistence rate and make it a London costs allowance. If he works out what that will deliver to him, net of tax, he will find that it bears a close resemblance to the subsistence allowance that is on offer to other Members.

Simon Hughes (North Southwark and Bermondsey) (LD): Will my hon. Friend give way?

Nick Harvey: I will give way to my hon. Friend, but then I shall try to finish my speech so that others can contribute.

Simon Hughes: I am grateful to my hon. Friend. I support the most robust of responses, which I think is what his Committee proposes. Can he tell us what is the difference between the proposal in his motion that the report

"should be implemented, subject to decisions of the Members Estimate Committee with respect to their introduction and application"

and the amendment tabled by the right hon. Member for Islwyn (Mr. Touhig), which appears to delay some changes until October this year, some until April next year, some until April 2010, and some until the end of the next Parliament? How soon will my hon. Friend's proposal be implemented? I want it to be implemented tomorrow, if that is possible.

Nick Harvey: I do not think it is possible to introduce such systems in the middle of a financial year. I believe that the earliest point at which we can implement most of them is 1 April next year, and that some of the more complex arrangements will take a little longer than that.

I have seen my hon. Friend's amendment asking for the proposal for central procurement for constituency offices to be brought forward, and inviting the Members Estimate Committee to produce a comprehensive plan before 22 July. With great respect to my hon. Friend, I must tell him that that is simply not possible. We are very keen for the system to be sound and reliable, and over the next year or 18 months, during which time some Members' leases will expire, we will seek opportunities to pilot the new system so that we can get it right for the majority of Members. That will take a little time.

My hon. Friend invites me to contrast the arrangements proposed in our report with what is proposed in the amendment tabled by the right hon. Member for Islwyn (Mr. Touhig). As I said earlier, it is impossible to please all the people all the time, and I do not believe that any one of the six members of the Committee is entirely happy with every last detail of the report. However, we have to decide collectively what is in our best interests. The problem with the amendment in the name of the right hon. Member for Islwyn is that it helps itself to the spoonful of sugar, but declines to take the medicine. The package that the report proposes was meant to be just that-a package, some aspects of which are to the advantage of Members, but in a context of there being greater controls that are more visible so that the public can see them and therefore understand. If we help ourselves to the goodies but decline to take the medicine, the danger is that any progress that we are making in improving public perceptions of our practice and in improving the reputation of the House will be fundamentally undone. That is the danger if we take the sugar but do not take the medicine.

Mr. Don Touhig (Islwyn) (Lab/Co-op): Let me tell the hon. Member for North Southwark and Bermondsey (Simon Hughes) that the dates in the amendment I have tabled have not been made up, but that they are taken from the Members Estimate Committee report, so there is no difference between us as far as that is concerned. I hope that reassures him.

The hon. Member for North Devon (Nick Harvey) says the amendment would lead to our taking the spoonful of sugar, but not the medicine. That is a very lyrical turn of phrase, but will he tell us why the main thrust of this report involves an audit system that is uncosted? I sit on the Public Accounts Committee, and I am sure that this will cost the taxpayer millions. Does not the Members Estimate Committee have a responsibility not to waste public money?

Nick Harvey: It is not true to say that it is uncosted. We have explained in the report the possible range of costs, but in any event the cost of this system will be less than 0.5 per cent. of the Members' estimates. Surely a sum of less than 0.5 per cent. of the total cost of the allowances Members are drawing is a price worth paying for the purpose of trying to restore the reputation of this House?

Members will have seen over the course of the past week the media reaction to this report, and they will have seen in particular the response from the Committee on Standards in Public Life. It is perfectly clear to me that if the amendment in the name of the right hon. Gentleman is passed, any sense that we are putting our house in order-that we will have transparent systems of financial control that the rest of the world will recognise and respect-will be undone, and in no time at all Sir Christopher Kelly and his standards committee will be conducting their own separate inquiry, which they have thus far concluded they do not feel they need to conduct.

The right hon. Gentleman accuses me of being lyrical, but I believe that what I say about his amendment is accurate. It will go along with central procurement for constituency offices, which will cost a lot of money, and it happily cashes in on the fact that we are not suggesting reducing the value of the incidental expenses provision, as was suggested by the Senior Salaries Review Body. However, when we suggest having a light-touch system of financial control to try to restore the reputation of the House and faith in the systems we have, he does not want to take that fairly light and sweet medicine.

Mr. Touhig: Is it not a fact that it will cost £1,200 a day to bring in fat cats from the City accountancy firms to spend three days a year going around examining Members' office cost allowances? The hon. Gentleman is like Ethelred the Unready: pay them gold and they will run away. That is what he is trying to do: he is trying get rid of a bad headline by throwing public money at it, and thereby wasting that money.

Nick Harvey: The comment about being lyrical could be employed there, too. The proposals include measures that are intended to try to improve the reputation of the House, and we believe that they constitute a balanced package. I know that some Members are unhappy that we are getting rid of the so-called "John Lewis list"- [Interruption.]

Mr. Speaker: Order. Allow the hon. Gentleman to speak.

Nick Harvey: Let me rephrase my point, Mr. Speaker. There are those who are upset that the report recommends that Members ought not in future to be allowed to purchase items with their additional costs allowance. I think that they will have the devil's own job if we continue with the existing system. In an era when freedom of information requires every receipt to be perused by the public, they would have a difficulty in justifying the purchase of televisions, fridges, three-piece suites, curtains, carpets and whatever else. Every time that Members make any such purchase, it will not only be for the individual Member to defend it to his local paper; the reputation of the House and the impression given of us all will be demeaned by the process of that information coming out and being debated and haggled over in the public press.

Several hon. Members rose -

Nick Harvey: I give way, for the last time, to the hon. Member for Lanark and Hamilton, East (Mr. Hood).

Mr. Jim Hood (Lanark and Hamilton, East) (Lab): I thank the hon. Gentleman for giving way. Did his Committee at any time consider the Member of Parliament who has to spend thousands of pounds out of his or her own pocket, and then gets into trouble and criticised for trying to claim it back? Is not a better way to have fewer receipts and a system of audit and accounting, in which MPs do not have to spend as much of their own money? Let me give an example. I was away on NATO assembly duty last week and had to pay $1,500 out of my own pocket just to be on duty. That is outrageous, and this House should be looking at what it can do to help Members, so that they are not laying out their own money and having to claim it back.

Nick Harvey: I am grateful to the hon. Gentleman. A number of Members did make the point to us during our consultations that, across all the allowances, they end up having to shell out quite a lot of money up front and that it takes some time to get it back. I am very sympathetic to what he says and we continue to look at that as a live issue. I am sorry that we have not found a solution at this time, but we have absolutely logged the problem and we continue to explore ways of assisting with that.

Several hon. Members rose -

Nick Harvey: I have been speaking for a lot of this 90-minute debate, and I think it right that I shortly allow other Members to speak.

I commend the report, which provides a balanced package. We bring in for the first time systems that the rest of the world would recognise. We are not intending to string up at the scaffold every Member who is found to have had the smallest administrative mishap. There will be a balanced approach. The hon. Member for Warrington, North (Helen Jones), who intervened on me earlier, said that things need to be proportionate and that is exactly what we intend them to be. Clearly, as we work our way through this system and as it matures, we will find a way of dealing with these matters that is fair to Members. The rules will be set by Members; the terms of engagement for those coming in to do the studies will be set by Members; the findings of those assurance teams will be reported to Members; and only if it is felt that something is of so severe a nature that it reflects on the standards will it be referred to the Parliamentary Commissioner for Standards and the Standards and Privileges Committee.

However, everybody involved in this-the Standards and Privileges Committee, the commissioner, the Members Estimate Audit Committee and the practice assurance teams-will have to work out together how we are going to deal with these matters in a proportionate and graded way. I do not think that any Member will have anything to fear from this system. On the contrary, they will find it helpful, and within a short time we could have made substantial progress toward restoring the reputation of this House. However, if we do not take this step today and we vote through the amendment, we will be absolutely back to where we were in the dark days of January and February, and back to the sort of media coverage and public hostility that was being expressed towards this House.