Review Body on Senior Salaries REPORT No. 64 Review of parliamentary pay, pensions and allowances 2007 Chairman: Sir John Baker, CBE Volume 1: Report Cm 7270-1 £33.45 net Review Body on Senior Salaries REPORT No. 64 Review of parliamentary pay, pensions and allowances 2007 Chairman: Sir John Baker, CBE Presented to Parliament by the Prime Minister by Command of Her Majesty January 2008 Volume 1: Report Cm 7270-1 £33.45 net Two volumes not to be sold separately © Crown Copyright 2007 The text in this document (excluding the Royal Arms and departmental logos) may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the document specified. Any enquiries relating to the copyright in this document should be addressed to The Licensing Division, HMSO, St Clements House, 2-16 Colegate, Norwich, NR3 1BQ. Fax: 01603 723000 or e-mail: [email protected] ii Foreword Review Body on Senior Salaries The Review Body on Top Salaries (TSRB) was appointed in May 1971 and renamed the Review Body on Senior Salaries (SSRB) in July 1993, with revised terms of reference. The terms of reference were revised again in 1998 as a consequence of the Government’s Comprehensive Spending Review and in 2001 to allow the devolved bodies direct access to the Review Body’s advice. The terms of reference are: The Review Body on Senior Salaries provides independent advice to the Prime Minister, the Lord Chancellor and the Secretary of State for Defence on the remuneration of holders of judicial office; senior civil servants; senior officers of the armed forces; and other such public appointments as may from time to time be specified. The Review Body also advises the Prime Minister from time to time on the pay and pensions of Members of Parliament and their allowances; on Peers’ allowances; and on the pay, pensions and allowances of Ministers and others whose pay is determined by the Ministerial and Other Salaries Act 1975. If asked to do so by the Presiding Officer and the First Minister of the Scottish Parliament jointly; or by the Speaker of the Northern Ireland Assembly; or by the Presiding Officer of the National Assembly for Wales; or by the Mayor of London and the Chair of the Greater London Assembly jointly; the Review Body also from time to time advises those bodies on the pay, pensions and allowances of their members and office holders. In reaching its recommendations, the Review Body is to have regard to the following considerations: the need to recruit, retain and motivate suitably able and qualified people to exercise their different responsibilities; regional/local variations in labour markets and their effects on the recruitment and retention of staff; Government policies for improving the public services including the requirement on departments to meet the output targets for the delivery of departmental services; the funds available to departments as set out in the Government’s departmental expenditure limits; the Government’s inflation target. In making recommendations, the Review Body shall consider any factors that the Government and other witnesses may draw to its attention. In particular it shall have regard to: differences in terms and conditions of employment between the public and private sector and between the remit groups, taking account of relative job security and the value of benefits in kind; changes in national pay systems, including flexibility and the reward of success; and job weight in differentiating the remuneration of particular posts; iii the need to maintain broad linkage between the remuneration of the three main remit groups, while allowing sufficient flexibility to take account of the circumstances of each group; and the relevant legal obligations, including anti-discrimination legislation regarding age, gender, race, sexual orientation, religion and belief and disability. The Review Body may make other recommendations as it sees fit: to ensure that, as appropriate, the remuneration of the remit groups relates coherently to that of their subordinates, encourages efficiency and effectiveness, and takes account of the different management and organisational structures that may be in place from time to time; to relate reward to performance where appropriate; to maintain the confidence of those covered by the Review Body’s remit that its recommendations have been properly and fairly determined; and to ensure that the remuneration of those covered by the remit is consistent with the Government’s equal opportunities policy. The Review Body will take account of the evidence it receives about wider economic considerations and the affordability of its recommendations. Members of the Review Body are: Sir John Baker, CBE Chairman Mark Baker, CBE Mary Galbraith1 Professor David Greenaway Mei Sim Lai, OBE, DL1 Mike Langley Jim McKenna Sir Peter North, CBE, QC Richard Pearson1 Paul Williams1 The secretariat is provided by the Office of Manpower Economics. 24 July 2007 1 Members of the Parliamentary Sub-committee, chaired by Sir John Baker iv Contents Paragraph Page Summary and recommendations .................. vii Chapter 1: Introduction ................................... 1 Introduction . 1.1 1 The remit for this review . 1.2 1 Our last report . 1.3 1 The structure of this report . 1.4 3 Our approach for members of the House of Commons . 1.5 3 The problem of variety ....................... 1.8 3 Allowances ................................ 1.13 5 Dealing with the evidence ..................... 1.16 6 Principles . 1.20 7 Our approach for Ministers and paid Opposition office holders . 1.24 8 Allowances for members of the House of Lords . .` 1.26 8 Chapter 2: Evidence ...................................... 9 Evidence . 2.1 9 Chapter 3: The salaries and pensions of Members of Parliament and committee chairmen ........................ 13 Introduction . 3.1 13 Has MPs’ pay fallen behind? . 3.2 13 Job evaluation . 3.4 14 The choice of comparators . 3.5 15 International comparisons . 3.9 15 Workload . 3.11 16 Setting the level of MPs’ salaries . 3.14 16 Our conclusion on MPs’ pay . 3.19 17 The uprating mechanism . 3.21 18 Frequency of reviews of parliamentary pay, pension and allowances . 3.28 19 Who should set MPs’ pay? . .` 3.29 20 Pay for chairmen of Select and Public Bill committees . 3.33 20 Pay for members of Select and Public Bill committees . 3.34 21 The case for extension of payments to Opposition front bench spokesmen . 3.35 21 MPs’ pensions . 3.37 21 The cost of the improved accrual rate . 3.41 23 The retained benefits restriction . 3.44 23 Sustainable funding of the scheme . 3.51 25 Matters raised by the Association of Former Members of Parliament . 3.59 28 Chapter 4: Pay and pensions of Ministers, Speakers and certain other office holders ............................. 31 Introduction . 4.1 31 Ministers’ pay . 4.7 33 Ministers and office holders in the House of Lords . 4.12 37 The Lord Speaker ........................... 4.12 37 The Lord Chancellor ......................... 4.13 37 Ministers in the Lords ........................ 4.14 37 Other office holders in the Lords ................ 4.16 38 v Severance payments for Ministers . 4.18 39 Pensions of Ministers and other office holders . 4.21 40 Chapter 5: House of Commons expenses ..................... 43 Introduction . 5.1 43 Expenditure on employing staff . 5.9 44 Parliamentary Resources Unit (PRU) . 5.22 47 Expenditure on offices . 5.23 48 Provision of IT equipment and support . 5.36 51 Communications expenditure . 5.38 51 Expenditure on travel and accommodation . 5.41 52 Additional Costs Allowance . 5.52 55 London Supplement . 5.58 56 Compensation on leaving office . 5.60 56 Winding Up Allowance . 5.65 57 Chapter 6: House of Lords allowances ....................... 59 Introduction . 6.1 59 Reform of the House of Lords . 6.5 59 Evidence . 6.6 60 Day subsistence . 6.11 61 Overnight subsistence . 6.13 61 Office costs and secretarial allowance . 6.16 62 Travel . 6.19 62 Road .................................... 6.20 62 Rail and air ................................ 6.21 62 Travel of spouses, civil partners and children ........ 6.23 63 Provision of IT Equipment . 6.25 63 Convener of Cross-Bench Peers . 6.27 63 Chapter 7: Cost of Recommendations ....................... 65 Introduction . 7.1 65 MPs’ pay . 7.2 65 MPs’ pensions . 7.3 65 MPs’ expenditure . 7.4 65 Pay of Ministers and other office holders in the House of Commons . 7.9 66 Ministers in the House of Lords . 7.10 66 Allowances in the House of Lords . 7.11 66 Conclusion . 7.12 67 Appendix A Commissioning letter from the Prime Minister ..... 69 B Current salary levels and allowances .............. 71 C Comparison of salaries of members of Parliament in selected countries ............................. 75 D Comparison of salaries of Heads of Government in selected countries ............................... 77 E Calculation of Resettlement Grant ................ 79 F List of those who provided evidence .............. 81 G Website references for publications .............. 83 H Previous Review Body reports on related matters ... 85 vi Summary and Recommendations Introduction 1. We received a remit from the then Prime Minister in July 2006 asking us to review the pay, annual uprating mechanism and aspects of pensions and allowances of members of the House of Commons (MPs), Ministers and office holders in both the House of Commons and the House of Lords. We were also asked to review the allowances of the members of the House of Lords who do not receive a salary or pension. We submitted our report to the Prime Minister in July 2007. 2. Our last review of parliamentary pay, pensions and allowances was completed in 2004. Most of our recommendations then were accepted, but the House of Commons rejected certain proposals aimed at recognising the differing costs of employing staff in London and elsewhere, and at ensuring that there was no financial advantage or disadvantage from MPs’ choice of whether to base their staff on the parliamentary estate or in their constituencies.