How IPSA is misleading us all in trying to raise MPs wages

1:00 pm - July 12th 2013

by Unity    

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By now you’ll surely have seen the that IPSA, the Independent Parliamentary Standards Authority, has recommended that MPs should receive a 9% increase in their pay in 2015/16 which, on top of the 1% increases they’re due to receive in the next two year, will raise the basis gross salary for a backbencher to £74,000 a year from its current figure of £66,366 a year.

IPSA have also proposed that from 2015 onwards MP’s pay should be indexed to changes in average earnings and, as justification for this increase, has put forward the argument that since 1980, the amount we pay our backbench MPS has fallen relative to average earnings from 3.16 times the average in 1980 to just 2.7 times the average today.

Now when people start taking about averages, particularly bureaucrats, the very first question that needs to be asked is ‘which average are you talking about?’. There are three different ways in which we can calculate the average: mean, mode and median

Bsed on data from the Office for National Statistics, the mean figure for gross weekly pay in the UK in 2012 was £476.40, which scales up to an annual salary of £24,772.80 – and if we multiply that figure by three, which appears to be the figure that IPSA and other have in mind for the ‘correct’ relationship between MPS pay and average pay, then we end up with a annual figure of £74, 318.40, which is as near as damn it that figure that IPSA have put forward.

So I think we can safely conclude that IPSA’s average is the mean.

Well, the ONS figure for median gross weekly pay (excluding overtime) is just £391 and we scale that up we get an annual salary of £20,322 which, when we apply the three times multiplier for MP’s give us a figure of just £60,996.

All of which means that, just on their current salaries, backbench MPs are paid 3.27 times the average (median) salary for the UK and that will rise to 3.57 time the average (median) salary if IPSA’s proposed pay increase for MPs goes ahead, assuming that average (median) earnings rise by just 1% per annum between now and 2015.

Mark Ferguson’s argument that linking MPs pay to average earnings would provide MPs with an incentive to deliver prosperity for ordinary working people might have some merit if the link was based on median earnings.

This would at least force MPs to work to improve pay for people right in the middle of the income distribution, but its one that falls apart completely if the link is made to changes in mean earnings as this figure can be inflated simply by increasing income inequality and creating greater prosperity just for those at the top of the income distribution while allowing the wages paid to ordinary working people to remain flat, if not decline.

If the last few years should have taught us anything it’s that just about the last thing we need to doing in providing backbench MPs with a financial incentive to work towards increasing the bonus payments paid to bankers and city traders in order to up their own salary.

A longer version of this post is here

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'Unity' is a regular contributor to Liberal Conspiracy. He also blogs at Ministry of Truth.
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Reader comments

In my consultation response I was very clear to make two points on this particular question.

1) That we can’t use the median, it reflects too much success in income inequality, which is nothing we should reward and,
2) while the median income is better if we’re using averages, income is also only one (albeit large) factor in the “success” of the country economically, and equally it should be considered with regards to the relationship wages have with inflation and, perhaps most importantly, the year on year spending power of *all* citizens, not just those earning a wage.

I think people need to make the point that MPs getting an index linked rise in their pay in the same year they can effectively cut the amount of money the poorest people have to live on is something that shouldn’t be able to occur.

Index link the fuckers to the average (mode) salary, and make them like it, I say.

In 1) Lee, of course, means that we can’t use the mean (not the median) as an income average because it’s too readily skewed upwards by increasing income inequality.

As for Lee’s point about the relationship of wages to inflation, etc. I address this to a degree in the full version by suggesting that having set an initial baseline for MPs pay of 3 times median income, any future increases should be based on the lower percentage figure of either change in median earnings (excluding overtime) or the percentage uprating in JSA for single persons aged 25 or over, creating an incentive for MPs to ensure that no one gets left behind when the country prospers.

Thanks for the pick up there Unity, brains are stupid sometimes, I definitely meant we should be using Median average, as you say!

5. Merrymaker

The employment status of MPs is unclear. It has been claimed that they are self-employed. Others claim that they hold an Office under the Crown. is clear that they are not employed in any normal meaning of the word. They have no contract, no specific duties, they cannot be dismissed during the run of a Parliament (unless they dismiss themselves for gross misconduct). Nevertheless they pay tax via PAYE like every employee. On the other hand, they have no tenure beyond the run of the current Parliament. Their duties can be stated broadly as representing their constituents and engaging in lawmaking. How should this strange hybrid be remunerated? The nearest one could get to the employers of these people is the constituents that they represent. I would suggest the following scheme:
1. On election each MP be given an annual cash allowance to be unchanged in money terms during the course of the Parliament.
2. The allowance be determined by multiplying the numbers on the electoral roll for the constituency by £2 (£2.2 if 300miles from London, £2.4 if 600 miles from London),
3. The MP to fund all expenses plus salary from the cash allowance. Unspent balances may be carried forward. All expenditure to be published on line.
4. If an MP is not re-elected any unspent balance becomes the property of the MP but no redundancy is paid.
5. Towards the end of a Parliament IPSA determines a new per capita amount. Which MPs can reduce on a vote but not increase. This amount will determine the cash allowances for the next parliament,
6. Intruduce recall powers so constituents may remove their MP between Parliaments (they are the employers after all),
7. Reduce IPSA to Sir Ian Kennedy and a dog and let the dog do all the work.

How about fixing the salary of an MP to no more than twice the average/median/mean (whichever is the lowest) full-time salary in their constituency?

That way, all those idle, self-regarding Labour hacks who sit for a lifetime on ‘vote-banks’ in places like Liverpool, South Wales, the NE of England and central Scotland might finally get off their arses and do something to address the lousy conditions most of their constituents have to live in due to deliberately-engineered mass unemployment and miserably low pay for those actually in work.

The problem with that, “The Judge”, is that such conditions can be easily a problem that isn’t something the MP can deal with, especially if in the party of opposition. There’s no point punishing MPs for the realities of their individual positions, which is that they hold little to no real power of responsibility alone. It’s only as a collective that they suddenly get power, and most of that is handed to the party that they are a member of so that they are little more than a additional proxy for the desires of a room of high ranking politicians.

In terms of individual MPs it would make sense to link their pay to how well their constituency thinks they are doing (change year on year), but this is in practice is easy to manipulate and hard to measure with any reliability.

Then there is the question of whether it is truly appropriate to link an MPs pay to anything so fickle and short term anyway, since it gives them the wrong incentives to work.

It’s one reason why I am not against the pay rise 100%, if it is fairly linked to the same kinds of rises and falls the rest of us experience, we should just be setting what is agreed upon as a fair wage and letting it ride out into the future and not having it as an issue any more. It just seems that the level of the rise is based on some fairly flawed choices of measurements.

treat mp salaries like benefits if they do paid work it gets reduced

As the IPSA consultation say though, patrick, that in itself is a form of discrimination. By focusing on the pay of second jobs, rather than total wealth or income from other sources (investments, etc) then you are helping to create a two tier situation that doesn’t actually help the “problem”

Have I missed MP’s sudden increase in productivity? What have they done to deserve a pay rise? Is legislation increasing in quality? Are they working longer hours? No they aren’t, they’re getting longer holidays than ever before in a job which rquires no qualifications, has no minimum standards of performance and from which it is next to be impossible to be sacked between elections and which is a job for life in safe seats.

Any MP who wants a pay rise should submit a form to his or her constituents stating why he or she desrves a rise and detailing all his or her achievements and increases in productivity. The constituents could then vote on the degree of pay rise or cut the MP deserves.

That ludicrous folly known as the Palace of Westminster needs over £3billion in repairs after which it will still be completely unsuitable for the purpose of modern democracy. Sell it or turn it into a tourist attraction and relocate parliament oop North. This would help to reduce the London financial sector’s poisoning of democracy, lower London property prices and introduce MPs to a little touch of reality. As our beloved prime minister is so in favour of regional pay we could instantly cut MPs salaries by at least a quarter.

11. James from Durham

Enough with the statistics, already.

Why not link their pay to the minimum wage? Thus they are incentivised to improve income for the poorest. Obviously, no Conservative government would consider this, but if Labour introduced it, the Tories would find it very difficult to change it!

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