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Audit and Assurance of MPs’ Allowances Cm 7460

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Audit and Assurance of MPs’ AllowancesAugust 2008Audit and Assurance of MPs’ AllowancesPresented to ParliamentBy the Lord Privy Seal, Leader of the House of Commonsand Minister for Women and EqualityBy Command of Her MajestyAugust 2008Cm 7460 £13.90 © Crown Copyright 2008The text in this document (excluding the Royal Arms and other departmental or agency logos) may be reproduced free of charge in any format or medium providing 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 specifi ed. Where we have identifi ed any third party copyright material you will need to obtain permission from the copyright holders concerned.For any other use of this material please write to Offi ce of Public Sector Information, Information Policy Team, Kew, Richmond, Surrey TW9 4DU or e-mail: licensing@opsi.gov.ukISBN: 978 0 10 174602 1Audit and Assurance of MP’s Allowances Foreword To: All Members of the House of Commons On 3 July, the House of Commons agreed some important measures 1that will improve the way the £93 million of public money claimed by Members annually is controlled, and audited and will put the disciplines in place to prevent abuse. We agreed:• that, before any salaries will be paid, all Members’ staff contracts andjob descriptions must be deposited with the Department of Resources(from 1 October 2008). This will promote fairness and transparency in the ...

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Audit and Assurance of MPs’ Allowances
August 2008
Audit and Assurance of MPs’ Allowances
Presented to Parliament By the Lord Privy Seal, Leader of the House of Commons and Minister for Women and Equality By Command of Her Majesty August 2008
Cm 7460
£13.90
 © Crown Copyright 2008 The text in this document (excluding the Royal Arms and other departmental or agency logos) may be reproduced free of charge in any format or medium providing 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. Where we have identified any third party copyright material you will need to obtain permission from the copyright holders concerned. For any other use of this material please write to Office of Public Sector Information, Information Policy Team, Kew, Richmond, Surrey TW9 4DU or e-mail: licensing@opsi.gov.uk ISBN: 978 0 10 174602 1
 Foreword
  
   
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Audit and Assurance of MP’s Allowances
To: All Members of the House of Commons On 3 July, the House of Commons agreed some important measures that will improve the way the £93 million1of public money claimed by Members annually is controlled, and audited and will put the disciplines in place to prevent abuse. We agreed: that, before any salaries will be paid, all Members’ staff contracts and job descriptions must be deposited with the Department of Resources (from 1 October 2008). This will promote fairness and transparency in the engagement of MPs’ staff; that the receipt threshold for expense claims will go down from £250 to £25 from 1 April this year. This will be crucial to the successful implementation of an enhanced system of expenditure control. It reduces from 4.3% to under 1% non-vouchable expenditure; and on the need to strengthen the system of scrutiny and that a rigorous internal system of audit of the Additional Costs Allowance be introduced covering 25 per cent of Members each year, and every Member each Parliament. In order to put into effect these agreed improvements, as well as to achieve our aspiration to build public confidence in the use of public money by MPs, we are consulting on further steps to improve financial control and audit. Over the past 6 months, the Members Estimate Committee (MEC) has undertaken a thorough review of the position and published recommendations and evidence. We are most grateful to them for all the work they undertook. Parliament is at the centre of our national democratic institutions. Last year in the Governance of Britain White Paper2, the Government made it clear that renewing trust in these institutions was essential to our proposals for constitutional renewal, and that the role of Parliament should be strengthened.
£156m total spend on salaries, pensions and allowances for year 2006-2007. £93m consists of staffing costs, Incidental Expenses Provision, Additional Costs Allowance and travel costs. HC 832, House of Commons Members.Annual Report, Resource Accounts & Audit Committee Annual Report 2006-07. Cm 7170.
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Over the past 150 years, British politics and public life has enjoyed a comparatively high reputation for propriety and low levels of corruption. This is no accident. This reputation was built on institutional arrangements designed to ensure that the public interest came ahead of the private. It falls to each generation to make the institutional arrangements which will be effective, taking account of new problems and the higher expectations of the public. In recent months there has been particular focus on the use, and in a small number of cases, abuse of public money by Members of Parliament. MPs play a vital role in our democracy – representing their constituents, legislating and scrutinising the executive. To do this, they must have the resources to do their work effectively and they must command the confidence, respect and trust of the public. We need arrangements which achieve both these aims. There is a consensus on the need to raise trust and public confidence in Parliament. We need also to build a consensus on the means to achieve it. Such means must be proportionate to the sums involved and should build on the existing parliamentary machinery for audit and compliance. We are seeking Members’ views on these measures and comments are sought by 29 September. Comments can be sent in writing to Office of the Leader of the House of Commons, 26 Whitehall, London SW1A 2WH or by email to leader@commonsleader.x.gsi.gov.uk This document is available on the website commonsleader.gov.uk
Harriet Harman Leader of the House of Commons August 2008
 Helen Goodman Deputy Leader of the House of Commons
Audit and Assurance of MP’s Allowances
Summary of Proposals
1. In order to put into effect the changes agreed on 3 and 16 July and to build on the determination of the House to protect public money from abuse and to justify public confidence in expenditure on MPs allowances, this paper sets out what has been agreed and poses questions on further steps the House can take to improve financial control and audit. 2. In summary, the key elements as agreed on 3 and 16 July regarding allowances are that: the Advisory Panel on Members Allowances (APMA) prepare a redraft of the Green Book; the APMA will review the Green Book; the “John Lewis List” will be abolished; and that  the APMA membership should be augmented by two independent external appointees for the duration of the review. 3. Furthermore, we propose consultation on the following which should be subject to views from Members and the APMA: as suggested in the Written Ministerial Statement of 16 July, whether the Additional Costs Allowance be changed so that the reasonable reimbursement of the costs of furniture and other household goods be capped at 10% of the ACA in any one year; and the need for the APMA to look at the case for a further reduction of receiptable expenditure to £0 in future for maximum transparency. 4. The Members Estimates Committee would, following advice from the APMA, consider the revisions to the Green Book. 5. On Audit, it was agreed by amendment on 3 July that a rigorous internal system of audit of the Additional Costs Allowance be introduced covering 25 per cent of Members each year, and every Member during each Parliament. It was agreed on 16 July that an external financial audit be undertaken by the National Audit Office covering all the allowances in the Green Book, including: Additional Costs Allowance; travel; staffing costs;
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Audit and Assurance of MP’s Allowances
Expenses Provision for other office costs; andIncidental  the Communications Allowance. 6. The audit would include: guidance as to what is and what is notapplication of the rules and of acceptable under the rules; review of the management controls and processes used by the Department of Resources to ensure compliance with the rules; and testing of the controls, to ensure that they are adequatechecks and and effective. the NAO would report to the Members Estimate Audit Committee, which will include 3 external independent members (the Committee currently has 2 external members). 7. Crucially, the new requirement for receipts in support of all claims over £25 (previously £250) will provide the evidence needed to check on expenditure actually incurred by members rather than taking allowance claims at face value as now. 8. The Comptroller and Auditor General believes that given the additional evidence to be provided in support of all claims there is an opportunity to strengthen significantly the assurance that public money has been properly spent. 9. The NAO might undertake an extended external audit with the statements for the financial year 2009-10. 10. Recent instances of MPs employing their children has raised public concern and dented public confidence. We are therefore consulting on whether MPs’ children should be barred from paid employment in their parent’s consituency or parliamentary offices, or in any other role relating to the parent’s work as an MP. 11. We are seeking views on these proposals by 29 September 2008.
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Context
Audit and Assurance of MP’s Allowances
Role of the MP 12. UK voters elect Members of Parliament to represent their interests in the House of Commons. MPs’ work encompasses Parliamentary work, party political work and constituency work. The role of the MP has changed significantly in the last 40 years. The volume of legislation, the extension of parliamentary scrutiny and the level of constituency work have all increased. Constituency work is held by both MPs and the public to be a vital part of the MP’s role. A recent poll put ‘representing the views of local people in the House of Commons’ at the top of the public’s priorities, and ‘dealing with individual constituent’s problems joint third, alongside ‘holding the government to account’3. 13. Constituency business is arguably the area of greatest increase in MPs workload. In 1971, the Senior Salaries Review Body4discovered that the average MP spent 11 hours a week on constituency business. By 1982, this had increased to 16 hours a week. A survey of new members a year after the 2005 election suggested that they were spending 49% of their 5 time on constituency business. In the Hay’s Group survey of members undertaken for the Members Estimate Committee, 64% percent of those asked saw a substantial increase in workload relating to ‘working for the constituency as a whole’ and 92% saw a substantial increase in constituency case work6.
The Current System of Allowances 14. To enable Members to fulfil their roles properly, a system of allowances has been developed so that MPs can work effectively at Westminster and in their constituencies, comprising: – between Westminster and the constituency;Travel Additional Costs Allowance (ACA) – for staying away from home (whether at Westminster or the constituency); Staffing costs – for employing staff;
3Audit of Engagement, (2007). 4 Then known as the Review Body on Top Salaries. 5 Hansard Society, (2006)A Year in the Life. 6 HC 578-IIMEC Review of Allowances, Third Report of Session 2007-08, Volume II(page 64).
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– for other office costs andIncidental Expenses Provision Communications Allowance – to pay for communications with constituents. 15. The detail, rules, amounts and actual use are fully described in the MEC Review volumes I and II7.
Key Principles 16. In looking at how this system of allowances operates, there are two key principles:  (1) That Members are fully reimbursed for costs properly incurred. 17. Failure to achieve a fair system will result in a democracy unrepresentative of the diverse electorate, unable to meet its needs or sustain its confidence. The MP’s role has changed since the eighteenth century when it was a part-time exercise undertaken by those who could fund themselves. David Lloyd George recognised the issue of ensuring that being a politician is not limited to those who can afford it in 1911 when he called it the “demand of democracy”. 18. We are now committed to delivering a package of pay and allowances that provides appropriate support for Members. 19. The Government does not want to move to a political system or culture that requires individuals to have extensive private means and excludes those whom voters support, but who could not afford to fulfil the role without a system of allowances. 20. The second key principle is that:  (2) The money is properly used for the purposes for which it was voted. 21. The MEC has agreed to publish greater detail on MPs’ allowances (subject to MPs’ security needs), but greater transparency does not of itself guarantee that the money has been spent appropriately.
7 HC 578-I and HC 578-II,MEC Review of Allowances, Third Report of Session 2007-08, Volumes I and II.
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22. Therefore, a more robust system of audit is essential to ensure an appropriate level of scrutiny remains. In order to instil confidence, it is essential that the audit regime should be both robust and proportionate.
Progress in Recent Months Pay 23. The House of Commons decided on 24 January 2008 that MPs should no longer decide on, and vote for, their own pay but that an independent body do this. This decision was taken on 3 July when it was further confirmed that this role should be undertaken by the Senior Salaries Review Body.
Control 24. The MEC decided that from 1 April, receipts would be required for expenditure claims over £25. The previous limit had been £250. This decision alone will make a significant difference to the potential scope of the NAO’s audit, cutting from 4.3% to under 1% the proportion of non-vouchable expenditure, based on figures for Additional Costs Allowance, Incidental Expenses Provision and Communications Allowance for 2007 – 2008. This decision was confirmed by the House on 3 July. If MPs’ claiming patterns reflects that of recent times, the amount of unvouched expenditure is, in future, unlikely to be material. However, APMA will need to look at the case for a further reduction to £0 so that all expenditure could be receiptable, ensuring maximum transparency.
Staff contracts 25. On 3 July, the House voted for a number of changes to the structure of allowances, control over spend and to extend audit. The MEC proposals and the House’s decisions are attached at Annex A. The most significant change was to require that all staff contracts and job descriptions be deposited with the Department of Resources (DoR) before any salaries will be paid. The House also agreed on 27 March 2008 to make compulsory from 1 August 2008 the registration of any family members employed through the Staffing Allowance. This system will be rigorously enforced.
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Audit and Assurance of MP’s Allowances
Controlling Expenditure by MPs
26. The control of expenditure by MPs is governed by the rules in the Green Book, which is prepared by the Department of Resources under the authority of the MEC and is updated periodically. This sets out the detailed rules followed by the Department of Resources. 27. As stated in the 23 June 2008, Review of Allowances by the MEC (HC 578-1), the Department of Resources currently maintains the systems and procedures that control the expenses arrangements. 28. Some expenditure is reimbursed to Members, but much is paid direct to staff or suppliers on Members’ behalf by the Department of Resources. It is for this reason that rigorously enforced controls are at least as important as the provision of supporting receipts. 29. The structure of allowances is very important as they must be, and be seen to be, appropriate to meet the actual needs and costs MPs face in doing their work. There has been a great deal of discussion of the structure recently, including in the debate on 3 July.
New Role of the APMA 30. The House agreed on 16 July, that the Advisory Panel on Members Allowances should prepare a redraft of the Green Book setting out the detailed rules and guidance on entitlements to allowances. The Panel’s recommendations will then be considered by the MEC. For the rewriting of the Green Book, the membership of the APMA should be augmented by two external appointees. The APMA will also keep the Green Book under review and advise on any further modifications to the rules that may be required, including the reimbursement of reasonable costs of keeping a second residence. Furthermore the House agreed by Resolution on 16 July to abolish the so-called John Lewis list. 31. Therefore, we wish to consult on the following proposal: in the Written Ministerial Statement of 16 July, should theAs outlined ACA be changed so that the reasonable reimbursement of the costs of furniture and other household goods be capped at 10% of the ACA in any one year? This should be subject to views from Members and the APMA; and Whether the receipt threshold should be reduced so that receipts are required for all transactions.
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