The following blog was not written by me. The person who wrote it is known to me. I have every reason to believe all that he or she says is offered with sincerity. I offer it here in the same spirit.
----------------------
For my sins, although not to bank, I was in Geneva last week. As I left, on the shuttle from my hotel to the airport, I was seated with a group of Syngenta workers. They discussed at some length the absurdity of MPs’ expenses claims, explaining them to non-UK colleagues — from moats and tennis courts to non-existent mortgage payments. Finally one said ‘If I tried to put any of this through expenses at Syngenta I’d be fired.’
While I share the outrage at the MPs’ expenses system, I do think it has been overdone. On the one hand, because those who paid attention were fully aware that the deal was done, initially under a Conservative government, in order to allow MPs to draw a higher income without increasing their formal salary. UK MPs are paid less than many equivalents, without taking the expense allowance into account, but for political reasons it was felt easier to increase this on the side. The same somewhat dishonest political rationale explains increases in VAT and NI over nearly thirty years while headline income tax rates fell. In that sense, the expense payments were completely transparent but less prominent nonetheless.
Is it reasonable then to join a mob mentality against all MPs — many of whom either were not part of the decision to pursue this route, or have indeed not taken the opportunity personally to do so, or in a good many cases both? And of course many of whom were simply given the impression that the full allowance was effectively theirs to top up their salary. While I’m not absolutely certain about my feelings on each of these groups, it does inevitable that transparency will be part of the new regime, and regardless of the actual rules put in place, this transparency will be the most powerful deterrent to abuse. And of course we may well see formal salaries rise once the current crisis is over.
The funny thing about the comments I heard on the way to Geneva airport is that they highlighted the lack of proportion in many of these discussions. As a former Labour press officer said to me today, the money paid out in dubious expense allowance claims hardly compares to the public money wasted on, for example, continuing with rail privatisation.
More pertinently to the shuttle discussants perhaps, it does not approach the public money lost to corporate tax dodging. Christian Aid estimates that developing countries lose $160 billion a year to just one form of corporate tax evasion. The TUC estimate a UK loss of at least £4 billion a year. If each of the 646 MPs had falsely claimed £25,000, the annual loss to the public exchequer would only be £16 million.
Now, fair enough, MPs should be held to a higher standard than companies, but even so the difference in scale is startling. The employer of my travelling companions, Syngenta, is known to base its global operations in low-tax hubs, and as a result only pays 5.2% of its gross profit, or 18.1% in 2008 of its income, before taxes, in tax. On pre-tax income under IFRS of $1.7 billion, a further 1% paid in tax would mean an additional $17 million of public money.
Once again, transparency rather than strict regulation may be the key — let’s have country-by-country reporting to let us clarify who, if anyone, appears to be losing from individual company profit-shifting — which we assume, like most MPs’ expenses behaviour, to be completely legal. Then the court of public opinion can decide what they think is legitimate — a quite different question.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Richard
I’m struggling with this. In the vast majority of corporate, armed forces and civil service environments the fraudulent claiming of expenses would result in dismissal and, probably, criminal proceedings. Why should MPs be any different? It is only due to the sheer scale of the frauds that MPs are not being sacked. If it was one or two MPs who fraudulently claimed say £100k each then they would both have been hung drawn and quartered.
Rupert
Like it or not (and I don’t) you have to recognise that this fraud you allege was no such thing – the claims in question were knowingly and openly approved by the House authorities. Someone who willingly and knowingly makes payment has not been defrauded – they have been unwise.
This failure was systemic. It requires massive overhaul of the procedures of the House of Commons. Rightly those who abused the spirit of the rules should be admonished – but on the same basis all those who use structures in the Crown Dependencies probably require tax penalty to be imposed: the absue is the same, even if legal. Respectfully, I suggest you are one of the last people to comment when you are in the position of the Fees office of the House of Commons, as far as I can see.
Yes there may be tax to pay: I hope there will be. Yes, repayment can be demanded. Yes, reform must happen, soon. I suspect some will lose office: so be it. But I also suspect that unless the claim was blatantly dishonest (and a few were, as is clear) to suggest fraud is simply inappropriate.
And respectfully, you are no arbiter of abuse anyway – I doubt if you could spot one a mile off so used are you, I am sure, to turning a blind eye to them.
Richard
Richard
Your response is both insulting and unnecessary. “All those who use structures in the Crown Dependencies probably require tax penalties to be imposed”. That simply shows how deluded and misinformed you are. Your credibility is being very quickly eroded. I can accept that we have a difference of opinion over whether lawful and fully compliant tax avoidance is abusive, but that comment about the Crown Dependencies once again shows your true colours. You really cannot accept that there are people in the Crown Dependencies who do not represent your warped view of the offshore finance industry.
Obviously there are a few cases of expense claims which may well be fraudulent. But, for the most part, most MPs have simply claimed what they were entitled to, and encouraged to claim.
If presented with a large banquet feast, few people will only help themselves to a single mini sausage roll!
According to Private Eye, ‘the complete tax exemption of the overnight allowance, which is key to the second home benefit rip-off, was confirmed and updated (from 1988) by the Labour government … via the Income Tax (Earnings & Pensions Act 2003.
It is a nonsence to claim that MP’s pay is so low that they need a system of tax-free expense allowances that enables them to legitimately make up a shortfall in what they think they should be ‘earning’. MP’s annually vote themselves a salary increase well above inflation, and they receive generous financial allowances to enable them to employ their own staff. We know the jiggery pokery that has been going on in this respect as well( employing their wives & children & claiming tax relief on office space in their own homes & allowances for utilities used, expenses, etc). It all stinks of deception, fraud & scam.
MP’s are not ‘hard up’. In addition to their MP salaries they draw huge incomes & enjoy perks as non-executive directors of companies, and they make a fat lucrative living on the after-dinner talk circuit. The simple fact is that at the end of their tenure the majority become super-rich by virtue of being an MP. Look at those socialists who during their political life campaigned on behalf of ‘the poor’, whilst they themselves became rich (eg: Ben, Jenkins, Healy, Dalyll, Prescott, Reid, Blair…)with many continuing to travel first class on the ‘gravy train’ by being elevated to the Lords.
The fraud squad should investigate the validity of every claim made by Members of both Houses over at least the past 20 years, & the money subsequently recovered from false claims made by fraud, scam & deception should be refunded to the taxpayer.
Rupert
I have been a practitioner for quite a long time now and people still ask me why they should set up offshore structures
I can genuinely say I have never found a good answer to that question
I can equally genuinely say I know of plenty of legal and ethcially bankrupt answers to that question
The reality is you ply a rotten a trade: of course you’ll defend it, but that does not and never can justify it
There is no more justification for what you do than there is for abusing the expenses rules of parliament: both were legal, both wholly unethical and abusive. Anyone of right mind sees them in the same way
The rules should be changed to make both impossible. In both cases the change required is simple: full transparency
It’s what the Crown Dependencies persist in denying us. Whilst you do the abuse will go on, and on, and on
Don’t deny it: we know it’s true
Richard
Jim
Your claim is wrong
There are many honest MPs
There are clearly some horribly dishonest ones
Transsparency is letting us tell the difference
It proves the value of everything being open to public inspection
But let’s not damn all with one brush
And let’s not say that an MP is banned forever from a relationship with business. That really would be absurd
But let’s make sure that never ever corrupts the House
Richard
@Richard Murphy
Richard,
I didn’t say all MP’s were dishonest. My argument is that they are not poor, hard-up people who need to make up their poor salaries by making use of the allowances system. Neither am I saying that they should give up their business interests. In this respect they have an independent substantial income over & above what the taxpayer pays them as MP’s & don’t need to milk the allowances system.
Scams, fraud,& deception my not be pandemic at Westminster, but in today’s Politics Show former MP Martin Bell said corruption is endemic in the Commons and he called for “by-elections, de-selections maybe even prosecutions” over the expenses controversy. I believe he speaks with authority & insight from his wide experience as both an MP & a journalist.
Jim
I agree: MPs are not hard up and there is no excuse for many of the expenses they have een allowed, or for their abuse of them. But I ask for perspective: not all have done that. I remain convinced by parliamentary democracy. I am aware many on the Right (including the Tories new European allies) are not. That is very worrying
Yes we need to purge Westminster of thsoe who have done wrong and are in poossession of no0 moral compass
We need to do the same of our banks, boardrooms and professions too
But that does not mean we lose sight that democracy is the right thing to use as the basis for government, and I fear extremism at this moment
Richard
@Richard Murphy
The overwhelming weakness of the democratic system is that it is not sufficiently democratic! Most MP’s start as candidates on a party ticket (nominated by their Party & not by the people). Once elected they come under the Party whip and have to do what the parliamentary party tells them. The Party with the most elected members gets to form the government. The motor of government is fueled by the Civil Service.
Example: I wrote a personal letter to a Minister. It was passed to a junior Civil Servant who gave me ‘from the book’ a stock answer which did not answer a single point that I had raised with the Minister. I then wrote to another Minister & received the identical stock reply from another civil servant! Now I know there is a department of the Civil Service that writes stock replies that are made available through a data base to all Ministries! They didn’t even have to think about the importnt issue that I had raised — they just called up a response on a data base using keywords!
Example 2: I have written several requests for information under the Freedom of Information Act. I have never received the information requested, only responses giving me information that I already knew that led me to ask for more information in the first place!
So I wrote to my MP to complain and asked him for his personal democratic intervention on my behalf. What did he do? He wrote: “thank you for your letter concerning the failure of the Minister to properly answer youe concerns. I have passed this to the Minister asking him to look into this matter”. 3 weeks later I got…er…. the same stock answer from the same junior civil servant!
Yes, democracy is the right thing to use as the basis for government, so why then is the Civil Service – that has no gears just brakes – the basis for it? The message of the British sitcom “Yes Minister” said it all!
Parliament is in a rut. The United Kingdom needs a radical reform of its constitution so that we then actually get “government of the people, by the people & for the people”. Then we might see a more rapid reform of the whole tax system & resolution of the problems that are addressed in this blog.
The Labour Party NEC meets on Tuesday and, according to yesterday’s Guardian, will discuss automatically deselecting any Labour MP found to have made improper expense claims. The views of ordinary members are sought to determine what the criteria for deselection should be. I think this is the only possible answer to the mess and my initial reaction was to welcome the grand cleaning out which will ensue and hopefully ensure the selection of some real Labour candidates rather than the ‘TINA’ lot we’ve put up with since Blair. But this is not going to be an enjoyable exercise when you consider that good MPs like Austin Mitchell may not come up to scratch whilst a certain young minister, parachuted into a safe seat, whom I would dearly love to see the back of, has come out of all this shiny white.
If one were susceptible to conspiracy theories, one might wonder about the establishment of the Fees Office. What the hell were these people thinking of when they approved expenditure on moat clearances, etc. as essential to enable MPs to do their job?