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Political mess doesn’t mean we should slash MPs' pensions

Despite sentiment towards politicians being at an all-time low, Ollie Smith argues we need better public representatives, not a kneejerk overhaul of their generous pensions

Political mess doesn’t mean we should slash MPs' pensions

Anyone with one eye on the news recently may have seen reports MPs working to find a Brexit solution are stressed. Lobby journalists say our legislators are ‘exhausted’, and one MP admitted on live radio he is eating and drinking too much to cope with the 18-hour work days, the endless debates, and the threats of violence.

On top of all that, MPs have to do their actual jobs too: representing their constituents. That involves constant travel away from their families, very little privacy and a mailbag that never empties.

Why should we care? Nobody forced MPs to run for office. They are paid well above the average salary (£79,468 versus £28,677), receive a whole host of taxpayer-subsidised benefits (including those selfsame drinks in the parliament’s numerous bars) and, to top it off, they get a gold-plated pension when they retire.

In an unscientific, but possibly revealing, Twitter poll of our readers, 82% of respondents said MPs do not deserve those pensions. Clearly our readers are struggling to sympathise with Brexit-induced burnout.

On paper, MPs have a pretty cushy life. As public scrutiny over their activities increases, and in particular what looks to many voters like MPs’ failure to come up with a solution to the Brexit impasse, public sentiment will likely turn even more against their remuneration and retirement benefits.

The more complicated truth of the matter is nothing is perfect, and radical change to the system could create dangerous incentives. But that may well get swept aside.

Benefits for days

Take the parliamentary pension. The MPs’ pension scheme is formally known as the Parliamentary Contributory Pension Fund. It is actually comprised of two schemes rather than one. There is a scheme for MPs and also one for ministers: The Ministerial Pension Scheme. As with other public sector schemes for nurses and doctors, both now work according to a career-average framework, which pays out benefits according to members’ average salary throughout their time in the fund, rather than their final salary at retirement.

The schemes still include a lot of impressive benefits, though, such as: a discretionary lump sum if a member dies in service; pension benefits for members’ dependents; the option to retire earlier or later than the scheme’s normal retirement age of 65; rights to transfer in or out and provisions for early retirement in the event of ill health. Sound good? You bet it does.

To find out more about this I spoke to the only man I know who is both a beneficiary of the scheme and a pensions expert himself: former pensions minister Steve Webb (pictured above), now director of policy at Royal London. The scheme is still very generous even in the career-average format, he says, but there is a very good reason for that.

‘Historically, the big generosity has been the accrual rate. There have been times when you could build up one fortieth of your final salary, and that was the big attraction,’ says Webb.

‘No question, it’s a generous scheme. It is partly designed that way to reflect that people in general on average aren’t members of it for terribly long. Yes, there are people who are members for 40 or 50 years. But the typical MP has a relatively short period where they build up pension rights quite quickly.’

MPs typically are not in post for very long. Forget Kenneth Clarke, who has been MP for Rushcliffe since 1970, or Jeremy Corbyn, MP for Islington North since 1983. According to the parliamentary website, the average length of service for MPs elected in May 2015 (and remember some of those MPs were being re-elected), was 3,175 days. That is 8.75 years. Figures on how that compares to the rest of the UK’s workers are difficult to come by, but consensus seems to be that 8.75 years is above average. And yet it is still not very long considering people like Clarke.

Campaign champagne

Political journalist Isabel Hardman’s recent book Why We Get The Wrong Politicians points out there are certain other financial trials and tribulations MPs go through that a generous pension accrual rate may exist to balance out.

Apparently the average cost of becoming an MP is £11,000, but that could be a lot higher depending on what kind of salary an individual sacrifices – and for how long – to campaign and win.

To declare an interest, I know a bit about this because my own mother has attempted it on five separate occasions, at every single general election since 2001. She never spent that much on each go, but she has spent thousands without doubt. At grassroots levels, where the input of smaller parties is sometimes scant, obtaining the money for the £500 deposit is often the biggest obstacle. That is a lot of money candidates do not get back if they fail to get 5% of the final vote, particularly if you have kids, or are in receipt of a low income.

Meanwhile, for candidates in the bigger parties, there is pressure from head office to spend on campaign necessities, and that results in debt. Placards, posters and banners all have to be paid for.

‘Nobody is expecting sympathy, but it is certainly the case that many people mortgage themselves to the hilt and arrive in parliament heavily in debt,’ says Webb.

No wonder then, that upon leaving parliament and becoming a policy expert, Webb sought a financial MOT from adviser Fraser Heath, later bought by 1825, in his home city of Bristol.

‘I think it was probably in the run-up to the 2015 campaign. Somebody who was clearly going to lose their seat told me they were just about to remortgage their house to pay for the campaign. Another colleague of mine who is a household name MP was permanently in debt because he poured money into his local party, and because he felt he had to lead by example. He said if he did not pour money in, other people would say: “well, you’re not, so why should we?”’

There is a separate debate there about candidates’ privilege and independent means, and how accessible becoming a legislator is. But overall, the picture is not great for MPs’ personal finances. Throw in expenditure on staffing costs throughout an MP’s term, and no wonder many are very grateful indeed for a good pension. As Webb points out, if we want people from other well-paid professions to share their experience by entering politics, retirement benefits is a pretty good draw.

Now, that all supposes all MPs are good people who stick to the rules, do their best for their constituents, and do not get embroiled in the kinds of scandals to which we have become accustomed to encountering. My own experience of MPs is the vast majority are well-meaning, with genuinely good intentions and a strong desire to do their best for their constituents, but very occasionally the bad eggs stink out the batch. Those are the incidents that see clamour for punishment.

I might add that both sides of the Brexit debate now see the other as that bad batch. Whatever side of the debate you sit on, Brexit has obtained the status of a national scandal – a black hole of bitterness and division that has sucked everyone in.

Same pensions, better eggs

In our current malaise, however, where everybody just wants somebody to be accountable, the answer to our very public problems with our very public political life is not to go after MPs’ benefits. It should be to get better politicians. To use a pensions analogy, we should consider whether or not raiding MPs’ benefits would generate extra relief.

It would not provide a long-term solution to a long-standing problem, which, incidentally, is what pensions are all about.

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