Freesteel Blog » MPs expenses and so on

MPs expenses and so on

Friday, April 3rd, 2009 at 12:21 pm Written by:

It’s a heavy topic, and I haven’t much time. I don’t know how we got here, but it’s a lot better than it was in the 1980s when MPs started “work” at 2pm to give them time to deal with all their “business interests” in the banking sector. Apparently these outside activities helped them keep in touch with the outside world and suppliment their inadequate income — until too much sleaze was coming to light.

They’ve made the argument that MPs don’t get paid enough to attract the high calibre individuals who don’t want to take a break in the lucrative careers to work for such a pittance. This has been said back in 1996, and probably a lot of times since.

Now, a lot of much cleverer, harder working, consciencious and honourable people than the current pack of MPs do very effective and important jobs for much lower pay, and get by well on it. There is no evidence that the party system, whose headquarters are all located in London and who act as the gate-keepers to Parliament (as evidenced by their ability to parachute in what ought to be totally inadequate candidates) is at all capable of sifting in good candidates — in terms of ability to serve the public interest.

Where do these candidates come from? There should be a live survey of their backgrounds, scraped from their wikipedia templates.

How could the high-calibre but not-paid-enough candidates story play out?

Suppose there is a rather garrulous businessman in the high finance who gets on well with people. His peers — including revolving door civil servants, political party advisors, and closed clique media — suggest to him why not run for Parliament. You could do us a lot of good there, making sure the tax code is moth-eaten piece of toilet paper, and none of the regulatory bodies work. But I can’t afford it, he says. I need my yacht in the Mediterrainian, and my wife wants to go shopping in Dubai every weekend. The kids are in Westminster School. That’s what you do with lots of money. I wouldn’t have these problems if I didn’t earn so much.

Don’t worry, we’re trying to get the pay raised up to appropriate levels so that our sorts of people with our sorts of sympathies are going to be willing to be put forward for service.

What about the House of Lords?

Well, Gordon Brown tried appointing some businessmen as goats (Government of all talents), but it didn’t work out. There was no filtration at all for capabilities. You’ve got to go through at least some test of mettle.

Meantime, there’s always fiddling the expenses to keep your life up to the level to which you have become accustomed. And it’s a good thing: We don’t want to have honest people in Parliament. We want them to be like us, in the business world — just greedy, small-minded, petty, self-interested individuals with no morals who can easily be bought, and are able to cover up for us. After all, if you’ve shown off your true character over some trivial expenses because you feel duty-bound to fly close to the wind and not play safe even though you are paid loads, then you are qualified to represent the money interests against the people.

I was thinking about business expenses a while ago. The standard procedure is that a company reimbursing expenses is equivalent to the company buying the goods and services directly.

So, in this day and age, it would be pretty convenient for employees to always use a special company credit card, which deals with expenses and logs the purchases. Anything else is their own business. No more form fiddling.

It’s also supposed to be a standard rule that everything the company buys belongs to the company, and if you want to keep it for your own personal use, you have to buy it from the company at a fair rate. At least that’s how it would work if shareholder’s interests actually counted, because more often than not the managers on the ground are able to shuffle stuff around with no come-back.

This is where there’s a problem with tax. For if a company buys a bar of gold, and then gives it to you as a gift (or sells it at a cheap rate), then you can sell it on to redeem its value because it’s yours, and you can evade a lot of tax that would have been paid had the company just given cash.

This was happening years ago in the 1990s where I worked regarding company cars. Some of the staff got company cars which they drove around for free on expenses. They redeemed the value of this gift by not running their own car. This eventually became taxable (as with any beneficial gift you receive from a company) and the scam stopped.

I’m not really an expert on these things, but the words seemed to be “qualifying expenses”. A salesman driving to a customer wouldn’t have to pay tax on the journey, but the programmers running to and from work in their shiny company cars do not qualify.

There’s a lot of tax law and forms involving this, which applies to ordinary people:

Under general Income Tax law, a director or employee is taxable on the full amount of earnings received and this generally includes reimbursed expenses he or she may receive. The employee may, however, obtain a deduction from those earnings under Section 336 ITEPA 2003 for qualifying expenses. That is to say, the level of income is reduced by the qualifying expenditure in calculating the tax due.

So, all the money you receive in goods and cash from the company has to be considered. And you can deduct only the qualifying expenses from this before you calculate your tax.

The expenses rule which applies to travel costs also covers related subsistence costs. This type of expenditure qualifies for a deduction where it is part of the cost of travel necessarily incurred in the performance of the duties, or for necessary attendance at a temporary workplace. So, in general, payments by an employer for an employee’s accommodation and subsistence when staying away from home overnight on business are not taxed.

So, anyway, there’s kind of a lot of this stuff, loopholes and all (including an inexcusable issue with air miles). What’s almost certainly not allowed — for ordinary people — is putting your hotel expenses towards a second home mortgage somewhere, and then keeping that afterwards (without paying lots of tax on that).

So, are MPs taxed on their second homes, which they have kitted out with fine furnature?

I don’t know.

There’s this article about their paying tax on the capital gains on one of their two theoretical homes. Normally if you sell two properties whose value is higher than what they were bought for, you pay no tax on your primary home, and you pay tax on the profit on your second home. The article reports that MPs can each decide for themselves which one is which, and so they invariably chose the London one which had gained more value. It smells awfully similar to Lord Conrad Black’s cheat on his company regarding a property he decided he wanted to buy at the original price — like it was a share option.

But what about tax on the original expenses that were paid to buy that second home? There’s this statement:

Members of the House of Commons, the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly may have homes a long way away from the Parliament or Assembly and so may need accommodation near it. Alternatively they may need accommodation in their constituency. Expenditure that is incurred in connection with the provision of this accommodation is not qualifying expenditure for PMAs.

I can’t work out what PMA means.

I gotta go. So I’ll leave you with some links to special HM Revenue & Customs tax forms just for MPs.

Form MP2 says: “Tick box 1.6 if you held ministerial office”.

Notes MPN4 say:

If you were a Member of Parliament
Fill in one copy of the Parliament Pages
If you were a Minister in the House of Commons
Fill in one copy of the Parliament Pages for your income as an MP and one for your ministerial office – but see below if you changed office.
If you were a Minister in the House of Lords
Fill in one copy of the Parliament Pages – but see below if you changed office.
If you changed office during the year
Fill in a separate copy of the Parliament Pages for each office from which you received any income in the year ended 5 April 2007.
If you held a non-parliamentary office or employment at the same time
Fill in a separate set of Employment Pages for each non-Parliamentary employment from which you received
any income.

I also see:

Your Parliamentary income includes the value of any accommodation and ancillary services (for example, heating, lighting or cleaning) you (or your family or household) get by reason of your office as an MP. (If you have the benefit of any accommodation by reason of another office or employment, enter it on separate Pages covering that office or employment.) The value of some accommodation is exempt from tax, for instance, if there is a special threat to your security and the accommodation is provided as part of special security arrangements. If you have agreed with us that your accommodation is exempt, do not enter anything in box 1.14 unless circumstances have changed. However, there is still a charge to tax on the ancillary services. This is usually limited to 10% of your salary from the office concerned. Enter this value in box 1.14.

I’m not able to find forms MP1 and the rest. There are similar special forms for the Scottish Parliament.

All of which is morally hazardous, because these are the people who oversee the tax code in this country. If they’re getting their dispensations from it, then they don’t really come into contact with its effects, and they feel more predisposed towards giving dispensations to other classes of self-important individuals for whom they share sympathies.

The reverse at least has happened with the Freedom of Information Act, but by an oversight was applied to Parliament, and then by public outrage has not been disapplied to Parliament.

Because the Freedom of Information Act applies to MPs, they’re discovering first hand what a powerful tool it is, and they’ll hopefully not have any sympathy with groups who want to exempt themselves from this Act.

And finally, there’s this suggestion of getting rid of these housing expenses altogether (the other expenses remain) and replacing it with a £24,000 pay hike, because of all the trouble it’s causing. Evidently, MPs and ministers can’t be trusted to operate their own affairs without getting into deep trouble the first time someone from outside their clique gets to look.

Bad idea.

The one thing that should exist in politics are little bits of personal temptation, whose consequence can get out and which are easy for the public to understand. These stories reveal more about their characters than any policy arguments over theoretical things. I’d rather have that than not know.


  • 1. Topics about Gold »&hellip replies at 3rd April 2009, 6:27 pm :

    […] Freesteel added an interesting post today on MPs expenses and so onHere’s a small readingIt’s a heavy topic, and I haven’t much time. I don’t know how we got here, but it’s a lot better than it was in the 1980s when MPs started “work” at 2pm to give them time to deal with all their “business interests” in the banking sector. Apparently these outside activities helped them keep in touch with the outside world and suppliment their inadequate income — until too much sleaze was coming to light. They’ve made the argument that MPs don’t get paid enough to attract the high calibre in […]

  • 2. MPs expenses and so on | &hellip replies at 12th April 2009, 8:02 pm :

    […] Read the original: MPs expenses and so on […]

  • 3. Freesteel&hellip replies at 1st May 2009, 1:07 pm :

    […] returned to this MPs’ expenses topic several times, following the MPs’ brutal attempt in 2007 to change the Freedom of Information Act and […]

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