Decisions

Wednesday 23 April 2008 at 10.30am in Speaker's House

Present:

Sir Stuart Bell MP
Nick Harvey MP
David Maclean MP

In the absence of the Speaker, Mr Nick Harvey MP was called to the chair.

The Committee met with Matthew Hunnybun and Mark Groom, partners in PricewaterhouseCoopers

Matthew Hunnybun is a chartered tax adviser and leads PwC's employment solutions practice nationally. Mark Groom is the director of PwC's employment solutions practice and is especially involved in tax internal controls mapping processes including independent reviews for companies on behalf of Revenue and Customs.

Mark Groom said that there were normally four or five levels of assurance in the private sector€”(1) expenses policy, the equivalent to the Green Book€”the clearer the rules were the better, (2) robust internal controls on claims, (3) review by a line manager as claims are made; claims to be accompanied by evidence of expenditure, usually a receipt or other acceptable contemporaneous record. It was noted that HMRC is prepared to allow £5 per night unreceipted for overnight incidental expenditure when staying away in the UK in the performance of duties. Higher unreceipted amounts for travel and subsistence have recently been announced by HMRC when staying away overseas, (4) in a large company there would be internal audit doing periodic checks on systems and sampling of expense claims and reporting to the management, (5) there would be an external auditor reporting to the shareholders. There was merit in keeping the system simple and not becoming over-bureaucratic. It was really important to go behind the signature of the person claiming reimbursement. A key issue is what would happen to someone who was found to be making false claims? In the private sector, lapses would be corrected and in serious cases, there was also a real risk of losing a job or even going to prison. The system needed to have some teeth but to be proportionate. On the whole most errors found by auditors involved mistakes or misunderstandings.

Matthew Hunnybun said that the tax treatment afforded to Members of Parliament did not necessarily apply elsewhere including the treatment of certain travel expenses, the winding-up allowances as well as the Additional Costs Allowance.

In discussion the following points were made:

  • Rules should not be too rigid. The Green Book should not be made more prescriptive and could be improved.
  • Some companies had introduced central procurement for items such as hotels for the purpose of gaining value for money and as a control over the expenditure concerned.
  • It might be practical to add some of the allowances to salary like benefits in kind if this was publicly acceptable.
  • It was questionable whether public finance should be used for personal gain on houses and in other countries there were rules about repaying unusual profits from public funds.
  • The Additional Costs Allowance had developed from a system when 30 years ago some Members would sleep in their own offices. Then they had moved to using hotels, then renting flats and now many found it more economic to buy a house and claim the interest on the mortgage.
  • In the private sector an employee on a long-term secondment would normally be provided with a company flat or the funds to rent a furnished flat or to stay in hotels. Usually actual costs would be reimbursed rather than a general allowance provided and this would not cover the acquisition of furniture and white goods (this is normally only considered where employees are required to relocate). A favourable tax treatment in respect of travel, accommodation and other subsistence costs whilst on secondment would only apply to secondments for less than two years. Employers might occasionally finance mortgage payments but such costs would normally be reflected in salary; no tax relief would normally be available. Someone who owned a second home and used it as a base for work might be able to claim some tax deductions.
  • A travel allowance or budget might be practical if a sensible formula could be devised with the right principles. There would need to be rules and a possible tax dispensation would have to be discussed with the Revenue. While the possibility of a limited budget for travel covering both return journeys between constituency and Westminster and travel within the constituency would be worth exploring, there might well be difficulty devising a workable formula. If a formula could not be determined that could be said to reasonably reimburse Members' qualifying travel and subsistence costs, receipts would be required for actual costs incurred and mileage records in respect of any motor travel.
  • There were advantages in the short to medium term of having an external team checking claims in terms of independence and public impression. It was easier for an external body to challenge individuals, though it was rarely necessary to go that far. An individual Member might feel the reputational advantages of opting into some external check [it was believed there was some such arrangement for Labour MEPs].
  • On staffing, it would be rare for an employee in a business in the private sector to employee his/her own staff: they would normally be employed by the business, which would be responsible for employment law and tax matters arising. Managers would typically be required to present a business case for recruiting staff and may have a headcount budget with a degree of flexibility on costs. Such a budget for staff would not be considered to be a manager's personal expense allowance, but an expense of the business. One possibility would be for the House to adopt a similar approach.
  • Whether or not employed by the House or directly by MPs, more comprehensive records of work undertaken, qualifications, hours etc would solve many of the perceived problems. If the staffing allowance was replaced by a budget in terms of numbers of staff employed, any perception that the allowance is a discretionary sum at the disposal of MPs might be changed. It would also help if guidance/policy on staffing could be dealt with, and expenditure on staffing accounted for, separately from MPs' general expenses. A real distinction should be made between staffing and expenses.

Nick Harvey thanked Matthew Hunnybun and Mark Groom for helping the Committee.