Official Report: Minutes of Evidence

The Chairperson (Mr Brett): I am delighted to welcome Lee Bridges, who is the director of policy and engagement at the Independent Parliamentary Standards Authority (IPSA); and the authority's chairman, Richard Lloyd OBE. You are very welcome. Thank you very much for coming along. The Committee is indebted to you for giving of your time and providing your expertise. At this stage, I am very happy to hand over to you, gentlemen, if you are content.

Mr Richard Lloyd (Independent Parliamentary Standards Authority): Thank you very much, Chair, I will be brief. First of all, good morning, and thank you for inviting us to give evidence. We are grateful for the opportunity and wish you well in your deliberations.

As the Committee has noted, this matter, rightly and understandably, is of considerable public interest. IPSA has become very much accustomed to that public interest since it was established in 2010. As you know, our remit goes beyond that of the proposed remuneration board, but we see that same level of scrutiny and challenge being applied to our decisions on Westminster MPs' pay. Every year, that generates a disproportionate level of interest, which, again, is for understandable reasons.

From my perspective as chair of IPSA, I will start by suggesting four key learnings that the Committee might find helpful. First, there is no easy answer to the question of what elected representatives should be paid. We take into account a range of factors, which we will elaborate on, if the Committee would like us to. The role of elected representative is unique and hard to compare. There is no single, simple approach to determining the level of pay that has stood the test of time.

Secondly, the principles and process by which the decisions are made are key. Fairness to Members and taxpayers — for example, enabling people from all backgrounds, including those without independent wealth, to become parliamentarians — transparency, ensuring that everything is explicable and the independence of the decision-making body have all been important components of our work.

Thirdly, ensuring that the decision-making body has the means, as well as the obligation, to consult on and communicate its determinations has been important for IPSA. At a time when trust in Parliament is low and democracy itself is increasingly under threat around the world, it is incumbent on bodies such as IPSA to explain and communicate to the public in very clear terms why it is necessary to support the parliamentary work of Members and how we decide their pay.

Fourthly, the arrangements need flexibility. In the past, we have taken the approach of linking annual increases in pay with a measure of earnings growth in the public sector, which worked for a period. For many reasons, however, that no longer works, and we have had to take a more tailored approach in recent years. Having the capability to respond to the economy and the circumstances faced by constituents is important.

I hope that that was helpful, Chair. We are, of course, happy to elaborate on those and any other points.

The Chairperson (Mr Brett): Thank you very much, Richard. I have a couple of points to make first, if I may. IPSA has a benchmarking process that it carries out to set the level — you articulated it well — but there are very few other roles that you can compare it with as like for like. In our proposed legislation, the Assembly Commission has proposed a benchmarking of other Parliaments and devolved legislatures on these islands. IPSA does not do that, so I am keen to know where you benchmark against or where you make a comparison with Members' salaries in order to make a decision on a fair and equitable basis.

Mr Lloyd: We benchmark informally against similar roles in G7 economies. In the last year, we published where Westminster MPs' pay sits relative to economies such as Germany, Canada, France, New Zealand and other developed economies. The issue with that comparison is that the roles are not entirely the same. For example, there are Parliaments in which Members are on a list system and are nationally elected. There are Members with a local constituency. There are different requirements depending on the precise nature of the roles. It is a useful guide, and we have published that in more recent years, but it is not the sole reference point for us.

We look more widely across senior public-sector roles, and we watch very closely what the Senior Salaries Review Body in the UK is recommending and what its analysis is. We watch very closely, for example, the level of pay for senior civil servants and the arrangements in the round, because, of course, it is not just salaries but the wider remuneration of MPs that we consider. For example, we look at the comparability of the pension arrangements. So, it is a factor and a useful guide. We are doing more extensive work to see whether there is a better benchmarking approach internationally that we can take for this new Parliament in Westminster.

Since 2015, essentially, when a benchmarking exercise was done by my predecessors, we have applied an annual uprating metric, which, until recently, was based on average earnings increases in the public sector. In other words, there has not been a significant benchmarking exercise, but there has been an annual uplift that has sought to reflect the experience of workers across the public sector in the UK.

The Chairperson (Mr Brett): Thank you. One of the issues that has garnered the most public and political attention in the proposed Bill from the Assembly Commission is the clause to remove the disbarment of a former Member of this place from sitting on the independent panel. Obviously, the proposed legislation does not go quite as far as what governs you, in that it is a legal requirement that a former Member of Parliament sit on your panel. I am keen to get IPSA's view of the benefits that having a former Member of Parliament sitting on your panel brings.

Mr Lloyd: As you say, it is a statutory requirement. An MP cannot join our board if they have served more recently than five years ago. There is a period within which former MPs cannot join us. A serving MP is not able to join, for obvious reasons. That has been helpful in two respects. First, in the broader remit that we have to support MPs' parliamentary activity in the round, including staffing and other allowances, it has been helpful to have a former Member to bring that experience to the table. There has often been commentary about the IPSA board's not having been sufficiently close to the coalface, if you like, to be able to understand the role of MPs. Having a former MP in the room is therefore helpful, but, of course, we engage practically daily with Members on a whole range of issues. Therefore, the former MP on our board is not our sole source of experience of parliamentary life. In addition to that, the public reputation consequences of the decisions that we make are very much at the front of our minds, and it is helpful to have a former MP helping us to consider those.

Obviously, we are aware that there are concerns about a potential conflict of interest, particularly in relation to the rules that we make governing our pension scheme. We are extremely careful to manage that. First, we have a public declaration of interests, which is published and renewed at the beginning of every board meeting. Secondly, if there is any decision in front of our board where there might be a perception of a member of the board having a conflict of interest — that could apply to any member of the board, but, in relation to your particular question, it is the former MP — that member will recuse themselves, and, as chair, I make sure that that happens. That has been particularly important, and it is publicly minuted in our decisions on the parliamentary pension fund.

The Chairperson (Mr Brett): That is perfect. I now open the questioning to colleagues.

Ms Bradshaw: Thank you, gentlemen. You are very welcome. I will start with your title. You are the Independent Parliamentary Standards Authority, and the equivalent pay body for the Welsh Parliament has "independent" in its title as well. To what degree do you think that the word "independent" is important in the public perception of your role?

Mr Lloyd: Thank you. Good morning. Our behaviour and communication and the independent nature of those are, perhaps, more important, or at least as important, as the brand. Obviously, it was done deliberately in Westminster to convey the message that these are decisions that are not being made by Parliament.

I take the view — it is my personal view — that, 15 years on, the name of the organisation, IPSA, is still not hugely well known. What is well known now is that the decision on the level of MPs' pay, including how that is arrived at, is not made by MPs themselves. It is done independently. The word "independent" is helpful, but it is not essential. What is crucial, as I said earlier, is that the process by which we arrive at those decisions is explained, communicated and seen as being independent. What we call ourselves is probably second order.

Ms Bradshaw: OK. Thank you, Richard. I will ask another question, Chair, if you do not mind.

The Chairperson (Mr Brett): Of course.

Ms Bradshaw: You also mentioned consultation. I think that you used the words "consult on ... determinations". Obviously, the scale at Westminster is larger: you have a higher number of Members and a larger population. It would be interesting to know to what degree you engage with people as part of the process before signing off on the final determination.

Mr Lloyd: I will ask Lee to come in on this as well. We have statutory consultees, and those are spelt out in our founding statute. Obviously, we speak routinely to all the political parties. We speak to stakeholders more broadly. This year, as we consider the determination for the coming years, we are carrying out a series of round tables with international and national experts. I consult colleagues at the Assembly and in Scotland and Wales. I speak to your chief executive regularly, and it has been incredibly helpful that I have been able to do so.

There is a range of informal ways in which we establish views. We know that, when we publish our proposal and it goes public, we will get a very strong reaction from the media and public. I could summarise that reaction as often being, "Pay them nothing" or "Pay them much more". I think that we land somewhere between the two. We try to understand the pressures on MPs, the kinds of roles that they play, the degree to which remuneration affects people's decision to stand in the first place and how we can ensure that we reflect the experiences of citizens, but in an appropriate way and in setting an appropriate level. We consult on and engage with people on those things informally throughout the year, in addition to our statutory consultation process.

Lee, do you want to add to that?

Mr Lee Bridges (Independent Parliamentary Standards Authority): Thanks, Richard. Yes. More recently, we have been involved in active consultation, rather than just publishing something and hoping that people see it. We hold big discussion groups with Members' staff, and we talk to Members' Committees when we are running a formal consultation. We seek people's views; otherwise, you tend to get just the people who are watching out for that sort of thing, and it is useful to get more of a balance when talking about something such as MP pay.

Rather than just wait, we go out and seek useful conversations with not only our customers and stakeholders but wider society, because the views on Members and their pay are usually not within our control. The conversations are also with the media and other commentators, so we make a real effort in consultations to get out and talk to people and discuss the issues with them.

Ms Bradshaw: Thank you, gentlemen.

Mr Delargy: Thanks for your presentation and answers. Chair, you touched on a point that I was going to raise, which was on the benefits or drawbacks of having a former Member as part of that consultation process and on the board. I want to go into that a bit more with regard to clause 5. How does that appointment process happen? What are the criteria, and how do you set the benchmark? You clarified who is and who is not eligible to apply, but how do you set out the criteria, and how do you decide who is the best candidate?

Mr Lloyd: That is a really good question. First, I should say that the appointment is not one for me. The appointment is made by Parliament on the recommendation of the Speaker's Committee for the Independent Parliamentary Standards Authority. That is the parliamentary Committee to which we are accountable. The process is managed by the Clerks to that Committee. I sit on a panel with an independent chair and, usually, a layperson from that Committee.

The criteria are straightforward: commitment to support the work of IPSA; not having been a parliamentarian in the past five years; and understanding the role, particularly the nature of the governance of that decision-making body as opposed to making executive decisions. Also, there is a fair and open process. There is a competition, and there is usually quite a lot of interest. We appoint as a panel. We recommend to the Speaker's Committee for its appointment recommendation the best person who comes through that process. Ultimately, it is a decision, as all board appointments at IPSA are, for the House of Commons and, ultimately, the King.

Interestingly, at the outset, this was not an uncontroversial part of our governing arrangements. Over the years, however, with the existence of IPSA, the role of the board and the way that we have tried to do it transparently and, more recently, in a way that stakeholders in Parliament and externally can see how we arrive at our decisions, the presence of a former MP appointed through a fair and open competition has become of no controversy at all. It has been very straightforward.

Mr Delargy: It is useful to know that the process is fair, open and transparent. I assume that the scoring matrix that you use to appoint is also public information.

Mr Lloyd: Yes. At the outset of the appointments process, we publish the criteria against which we will judge candidates. The Speaker's Committee will publish its recommendation to Parliament and the rationale for that. In fact, the panel publishes an extensive report on its recommendation, the Speaker's Committee's response to that and the CV of the preferred candidate, so it is done transparently.

Mr Delargy: Thanks for that clarification.

The Chairperson (Mr Brett): No further members are seeking information. Thank you for your written response and for coming here today to provide that outline. It is very useful for members. I wish you continued success in the important role that you discharge on behalf of the public.

Mr Lloyd: Thank you very much.