The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
"IPSA did a good job in introducing the new system for paying MPs' expenses. It came in on time, expenses have been paid within the rules and MPs have been reimbursed accurately . There is evidence that public confidence is starting to improve.
However, the current scheme is expensive to run and does not yet demonstrate value for money. It is striking that 38% of claims are for less money than the average cost of administering them.
IPSA needs to get better at distinguishing between high- value and high-risk claims, which require rigorous checks, and those where the risk of error is low.
Although there has been a 15 % reduction in the amount paid out for MPs’ expenses, that cannot be claimed as an efficiency saving while so many MPs report that they are put off from claiming legitimate expenses because the claims process is so bureaucratic.
MPs also report that they and their staff are spending a disproportionate amount of time dealing with expenses claims. The NAO estimates that the combined cost of time spent on making claims is around £2.4 million a year. It is also time taken away from serving constituents.
IPSA acknowledges the need to strike a better balance in future and is taking steps to reduce the amount of time spent on making claims.
IPSA has not properly distinguished between expenses and salaries. It should do so, and should emphasise in its public statements that all claims approved are within the rules. That would further improve public confidence.
We were impressed by the constructive approach taken by all sides at our hearing. This bodes well for improved relations between IPSA and MPs in future. IPSA made a number of commitments to improve the system and we look forward to seeing the results."
Margaret Hodge was speaking as the Committee published its 51st Report of this Session which, on the basis of evidence from the Independent Parliamentary Standards Authority, examined the first year of implementation of the MPs' expenses scheme, and proposals for improving service levels in the future.
The Independent Parliamentary Standards Authority (IPSA) was established in the wake of the 2009 crisis in public confidence on MPs' expenses. IPSA established itself quickly and introduced a functioning expenses system on time in May 2010.
Since then, IPSA has also been paying the salaries of MPs and their staff. Expenses have been paid within the rules, and MPs have been reimbursed accurately.
In 2010-11, IPSA paid out over £118 million in total, comprising £98.6 million in salaries for MPs and their staff, and £19.5 million in MPs' expenses. IPSA assesses that 99.7% of all claims made by MPs are within the rules it has set, and that when claims are rejected it is overwhelmingly due to administrative error. IPSA has concluded, therefore, that there has been no abuse of the new system to date and that public confidence in MPs' expenses has improved.
The aim of any workplace expenses system is to support the delivery of frontline business and it needs to be administered as efficiently as possible, placing the minimum necessary burden on those who have to use it. IPSA has focussed less on the economy and efficiency of its systems so far and, as such, its expenses scheme is expensive to administer and is not yet demonstrating value for money. Overall, 38% of claims submitted in 2010-11 were for less than the average cost IPSA incurs to process them. MPs and their staff also spend a disproportionate amount of time on the claims process and, in some cases, feel inhibited in claiming legitimate expenses because of the bureaucracy involved. While it is essential that the scheme continues to provide the public with confidence about the integrity of claims, there is scope to consider a more proportionate and cost effective approach to validation.
There has been a 15% reduction in the amount paid under the new scheme compared with its predecessor but IPSA should be wary of claiming all of this as an efficiency saving while so many MPs report not claiming some legitimate expenses.
The committee is also concerned about the lack of clear, easily accessible guidance for MPs and their staff, and the cumbersome nature of some processes, such as payment card reconciliation.
The committee welcomes the constructive approach taken by all sides at the hearing, which we hope will set the tone for improved relations between IPSA and MPs in future. IPSA made a number of commitments for action, and we look forward to seeing these being implemented. In particular, the committee supports IPSA's plans to undertake a wide-ranging review of remuneration arrangements for MPs' staff, and to consider how more use could be made of smarter procurement arrangements in future, particularly bulk purchasing.
There are two remaining issues which IPSA needs to address. Public confidence could be improved further if IPSA made clearer public statements about approved claims being wholly within the rules. The current classification of all costs as "expenses" is also misleading, given that the most substantial element is the cost of the salaries of MPs' staff, which would not be classified as an "expense" in any other business.