At least one of the underlying causes of MPs abusing expenses has been the unwillingness of MPs and government ministers to honestly admit that MPs believe they should be paid considerably more than they are paid now. I am personally unconvinced about this and one suspects that MPs know that which is why they've tried to get an "off-balance sheet" pay rise. To put it into perspective (thanks Guido) take a look at this graph created by/for Michael Blastland at the BBC's online Magazine: Just MP expenses make them better off in terms of weekly post tax income than more than a quarter (third?) of the British population. Their salary (sans expenses) puts them safely in the top quarter of the population and the combination of the two shoots them up into the top 5% or so. Now I don't know what MPs salary should be, what their real expenses are and whether their constituents get value for money or not but I do know that MPs seem to be very bad at communicating their value to their constituents - evidence for this includes the fact that the "apathy" vote seems to be increasing at elections which is clearly a bad idea if you want the people to be involved in their government. MPs also seem to be only too happy to try and write laws that allow them special perks and privileges that are not available to hoi polloi, this includes attempts to let themselves opt out of the more burdensome aspects of the tax regime.
It seems to me that there may be a way to fix all of these issues in one go. The fundamental rule of economics is "incentives matter" so what we need to do is come up with a way to incentivise our MPs to communicate with their constituents and convince them that they provide value for money. The way to do this is to make MPs live off the charity of their constituents. Parliamentary constituencies have between 50,000-100,000 inhabitants. If each inhabitant forks over £1/year then the MP is being paid roughly what he or she gets paid today. If each inhabitant forks over £5 a year the MP will be in the top 2% or so of national income and would be as well of as today even including paying for researchers, office space, second homes etc.
Of course the trick is that the MP either has to convince most people in the constituency to contribute or he/she has to solicit far larger sums from a dedicated few supporters. Now that is the basic plan (not to be confused with The Plan - though I admit being inspired by it in part). There are two wrinkles to make the whole thing even more sneaky.
Donations to MPs would be tax deductable just like donations to charities and all donations over a certain threshold would have to be declared so that the constituents can see who is trying to buy their MP.
MPs would receive the donations as income to a small business (I forget HMRCs term but basically the same as a corner shop, family farm, plumber etc.) The small business then pays the MP his salary, makes his NI contributions, pays his reasearch assitant, rent, utilities etc. Since these are business expenses most of these can be set against tax but the MP would be forced to fill in all the tax forms that a small business has to fill in and they would be audited by an accountant just like any other small business.
The benefits of this scheme seem clear. Because MPs get paid by their constituents they have an enormous incentive to work for their benefit and to communicate what they have done. They also have to justify all expenses to the voters and the taxman, whether they are plasma screen TVs or family members being employed as researchers or babysitters. Of course if they don't want to justify/disclose these things then they pay for them out of their salary but then they have to pay tax on them just as everyone else does.
The fact that MPs would have to hold fund-raisers means that they must get out amongst their constituents and communicate with them if they don't have a second income. This does potentially reduce the amount of time they have to pass/debate laws but more importantly it means they will have a far greater incentive to be in the constituency than in London or jetting off on a jolly somewhere.
In addition by making MPs deal with the taxman as a small business as well as an individual they get to see the UK tax system at its worst and have lots and lots of incentive to simplify it and reduce corporate taxation.
All in all the more I think of it the better it sounds....
Blog Home : June 2009 : Permalink
