PP 2019/0158 EMOLUMENTS OF MEMBERS OF TYNWALD REPORT BY AN INDEPENDENT PANEL NOVEMBER 2019 To: Standing Committee of Tynwald on Emoluments You appointed us earlier this year to review the Emoluments of Members of Tynwald. We now present our Report to you. Should you wish to publish our Report, we would have no objection. Ian Cochrane (Chair) Jennifer Houghton Sir Miles Walker Douglas 18th November 2019 I. Tynwald, its Members, what they do, and how they are paid ........................................1 II. The review ........................................................................................................................2 III. Overall costs .....................................................................................................................3 IV. Level of pay.......................................................................................................................3 V. Executive and scrutiny roles.............................................................................................4 VI. The civil service link..........................................................................................................6 VII. Expenses...........................................................................................................................6 VIII. Differential between the Branches ..................................................................................7 IX. Pensions............................................................................................................................9 X. Implementation and transition ......................................................................................10 Annex 1: Costs under the present system...............................................................................13 Annex 2A: Proposal..................................................................................................................17 Annex 2B: Costs under the proposed system..........................................................................19 Annex 3: Panel terms of reference, membership and procedure...........................................23 Annex 4A: Written submissions of Tynwald Members ...........................................................25 Annex 4B: Paper submitted by Bill Henderson MLC................................................................51 Annex 4C: Two documents submitted by Lawrie Hooper MHK ..............................................91 Annex 4D: Spreadsheet submitted by Bill Shimmins MHK......................................................97 Annex 5: Public consultation paper (includes description of the present system)...............103 Annex 6: Analysis of responses to public consultation..........................................................109 Annex 7A: Public consultation responses..............................................................................113 Annex 7B: Appendix to submission of Roger Tomlinson (on behalf of Positive Action Group).. ......................................................................................................................................145 I. TYNWALD, ITS MEMBERS, WHAT THEY DO, AND HOW THEY ARE PAID 1. The High Court of Tynwald is the parliament of the Isle of Man. Tynwald is of Norse origin and over a thousand years old. It is the oldest parliament in the world with an unbroken existence. 2. Tynwald Court has two Branches, the House of Keys and the Legislative Council. The House of Keys has 24 Members, all directly elected by the people. The Legislative Council has 11 Members. Of these, eight are elected by the House of Keys while the other three (the President of Tynwald, the Lord Bishop and HM Attorney General for the Isle of Man) sit ex officio.1 3. The Branches sit separately on a weekly basis in Douglas to consider primary legislation. They sit together as Tynwald Court monthly in Douglas for other parliamentary purposes, and annually at St John’s to conclude the Tynwald Ceremony. 4. Nearly all Members of Tynwald hold additional offices, or roles, which carry further responsibilities on top of attending sittings. Many of these come under one of two main types: executive roles and scrutiny roles. Executive roles include Chief Minister, Departmental Minister or Member, and membership of various public bodies such as the Manx Utilities Authority or Culture Vannin. Scrutiny roles include membership of a standing, or permanent, parliamentary committee such as the Public Accounts Committee; or membership of a temporary ad hoc committee on a particular topic, known as a Select Committee. As a general rule there is nothing to preclude Members from holding more than one of these roles at the same time.2 5. At April 2019 rates, a Tynwald Member who is a Member of a Department is entitled to a taxable salary of £56,522 and a tax-free annual sum for expenses of £7,403, making a headline rate of £63,926. If the annual sum for expenses is “grossed up” by an assumption of income tax at 20%, this works out at the equivalent of a fully taxed salary of £65,777. Taking into account extra responsibility allowances for other offices, the equivalent figure for a Minister is £74,473, for the Speaker is £78,820 and for the Chief Minister is £87,517.3 6. At present all but five Tynwald Members are remunerated at least at the level of a Member of a Department. 1 We have not reviewed the remuneration of the Lord Bishop and HM Attorney General. Therefore, when we use the terms “Member of Tynwald”, “Tynwald Member”, “Member of the Legislative Council” and “MLC” in this report, those two Members are excluded. 2 As an exception to this general rule, section 2(2) of the Government Departments Act provides that no Member of the Treasury may be a Member of another Department. 3 See Annex 1 1 II. THE REVIEW 7. In February 2018, Tynwald resolved that the Emoluments Committee should establish a review of the emoluments of Tynwald Members. In May 2019 we were appointed to undertake the review. 8. We have gathered a diverse range of views not only from present Members of Tynwald but also from the public, whom we consulted between 8th July 2019 and 31st August 2019.4 We have also sought and received technical advice from the Income Tax Division of the Treasury and from the Public Sector Pensions Authority, for which we are grateful. We have adopted a collaborative approach and have as far as possible considered the views of everyone from whom we have heard. 9. The present arrangements for Tynwald Members’ emoluments are described in an annex to our public consultation paper.5 The word “emoluments” is used because it is a broad term and includes all pay or salary, allowances, expenses and benefits – in other words, the entire financial package which is made available to a Tynwald Member. 10. These arrangements have evolved over nearly 100 years, with the first Payment of Members’ Expenses Act having been enacted in 1922. The present basic pay formula was arrived at in 1997. The system of percentage uplifts for different roles was put in place in the mid-1980s. The separation between taxed and untaxed amounts dates back to 1980, before which time the entire sum was untaxed. Pensions were introduced in 1976 and reformed in 1980, 1985, 1996 and 2016. A system of claiming mileage for on-Island travel was introduced in 1953 but has been moribund since October 2013; it was nevertheless reformed in 2014. 11. It is fair to say that this is not the starting point we would have chosen. The current system is overly complicated. No-one really remembers why some of its elements are the way they are. We are certain that it can be improved. In this report we present a proposal which we believe would simplify the system and make it more transparent; and would do so in a way that is fair, reasonable and sustainable. Our proposal is set out at Annex 2A and costed at Annex 2B. 12. In developing our proposal we have adhered to the terms of reference set for us by the Emoluments Committee, which are in turn based on the Tynwald resolution of February 2018.6 4 Our public consultation paper is at Annex 5, our analysis of public responses is at Annex 6 and the responses of those who gave permission to publish are at Annex 7. 5 Annex 5 6 Annex 3 2 III. OVERALL COSTS 13. We are required by our terms of reference to have regard to the principle that any change to the structure for pay and allowances must not result in an increase in overall costs of Members’ remuneration. We consider that the overall costs of Members’ remuneration include both the present costs of pay and allowances and the future costs of pensions. 14. In terms of the baseline for present costs, we believe that this should be taken as the potential maximum costs under current legislation, assuming that all posts are filled and everyone takes everything they are entitled to, and allowing for that fact that it is open to the Council of Ministers to appoint every Tynwald Member as a Member of a Department. At April 2019 rates this baseline works out at £2.3 million per year.7 15. We do not have a similar figure for the Government’s future liability for the payment of pensions to Tynwald Members. However, we have taken advice from the Public Sector Pensions Authority and we consider in the light of that advice that our proposal will not increase that liability. 16. We have not taken account of: whether the Treasury has actually budgeted for the potential maximum cost in the next three years, as this is a matter for the Treasury