Saturday, 6 July 2013

Proportional pay for MPs

Cheerleaders for the establishment orthodoxy often    
defend the status quo with spurious claims that "there 
is no alternative".

In this occasional series I will present some alternative economic and political ideas.

The case for ... Pay proportionality for MPs

In July 2013 the Independent Parliamentary Standards Authority (IPSA) will give MPs an enormous pay hike of more than £10,000 a year, a 15% increase on their current basic salary.

Given that the government have just pushed through a (significantly below inflation) 1% pay freeze for public sector workers, accepting a 15% pay hike for themselves looks like a recipe for public outrage, especially given that MPs themselves must surely be considered public sector workers, since their pay is entirely funded by the taxpayer. What could possibly make politicians exempt from the 1% cap they've imposed on the rest of the public sector?

It's not only public sector workers that have the right to feel bitterly aggrieved by this egregious pay hike, there are many other people suffering financial deprivation due to Tory austerity.

Millions of people working for the National Minimum Wage were handed a below inflation raise of just 12p an hour, meaning that their salaries will be smaller in real terms in 2013 than they were in 2012.

Another group to have suffered one of George Osborne's austerity justified 1% caps are ordinary working people. Osborne's stunningly disingenuous argument that "all benefits must be capped below inflation at 1% to prevent feckless shirkers getting bigger percentage pay raises than working people" fails dramatically on the fact that the majority of people suffering these real terms benefits cuts are actually working people, through real terms cuts in all manner of in-work benefits such as Tax Credits, Child Benefit, Statutory Sick Pay, Maternity and Paternity Pay and Housing Benefits.

Another consideration must be the fact that due to Tory economic mismanagement, the average wage has risen below the rate of inflation for three continuous years. This means that taken as an average, the UK workforce has suffered real terms income losses month after month, after month, after month, after month, after month, after month - for three whole years!

There are countless examples of people suffering real terms losses in their incomes this year, thanks to the policies of a bunch of politicians that look set to rake in huge inflation busting pay raises for themselves, which is a remarkably clear demonstration of the Coalition government lie that "we're all in it together".

When news broke that this massive pay pay hike is on the cards, the chairman of IPSA Ian Kennedy came out with an absurd and shocking justification narrative. Here's what he said:

"Of course, this is not a good time to be talking about the pay element of the package, save to notice that in the public sector pay increases are limited to 1% a year. But given that there has never been a good time, this is as good a time as ever.
"Moreover, we know what happens when the element of pay is pushed aside as being simply too hard - the nods and winks school of public financing emerges, and ultimately we end up with circumstances like 2009."
So his stance is that if IPSA don't give MPs a huge pay rise, they're bound to just abuse the expenses system in order to steal it for themselves! 

Not only is this an admission that in his opinion MPs are a bunch of self-serving schemers that will rob the taxpayer blind, but it is also, given that it is his responsibility to administer the expenses system (ie. prevent MPs from abusing their expenses to steal from the taxpayer), an outright admission of his own incompetence.

Another logical flaw in the argument that a pay hike is necessary in order to avoid another expenses scandal is that in making such a claim he's admitted that he is powerless to stop MPs thieving public money with dodgy expenses claims, so what's to stop them brazenly pilfering the expenses system even if they do get the vast inflation busting pay hike he's offering?

Kennedy's massive pay offer to MPs is a grotesque insult to the countless millions of people suffering real terms income cuts under the narrative of "austerity" and his absurd justification is a clear demonstration that he is unfit to do the job he's been charged with. In my view MPs salaries should reflect conditions in the real economy, rather than being drawn up behind closed doors by a bunch of establishment cronies. 

One simple proposal would be to make politicians subject to the 1% salary cap they have imposed on public sector workers, however I have another proposal, which if implemented properly, would actually give them strong personal incentives to improve the economy and combat poverty.

My proposal is that MP's salaries should be made proportional to the average (median) income.
MP's pay should rise or fall in relation to the median income (including the incomes of pensioners and those on benefits). If the median income declines in real terms, as it has done for the last three years, then MPs salaries decline too. If it rises at a similar rate to inflation, then MP's salaries should too. If the median income rises above the rate of inflation, then MPs get a well deserved pay rise.

Given that MPs seem to be such a self-serving bunch that the standards commissioner is offering them a huge salary hike as a bribe, in the vain hope that they'll stop pilfering their expenses, making their salaries proportional to the median income would give them some (self-interest inspired) incentive to actually improve the economy, to combat working poverty and to reduce unemployed wouldn't it?

Higher unemployment and lower wages for the masses would translate to real terms pay cuts for MPs whilst a reduction in unemployment and rising wages would guarantee them a nice pay rise. If they do their jobs badly, their salaries decline, if they manage the economy well and introduce effective measures to reduce poverty, then they get a financial reward for their good work.

The exact mechanism for determining incomes would have to be carefully considered. I believe that incomes should be calculated after payroll taxes and other deductions such as student loans, and that MPs incomes should be calculated post-tax too.

The ratio should be something like 2.5 : 1. So if the median income (post tax and deductions) is £15,000, an MP should get a post tax income of £37,500. Lets not pretend that MPs just sit there doing nothing, an MP that actually does their job properly must work very hard indeed. Many people have called for MPs to get minimum wage, or no wage at all, however such paltry pay would only serve as yet another barrier to people from ordinary backgrounds entering parliament, and make parliament the exclusive preserve of pampered millionaires with no real world experience like David Cameron and George Osborne and workshy scroungers like the odious Iain Duncan Smith (that sponge off the estate of their parents in law). These people are already massively over-represented in parliament, we certainly don't need knee-jerk policies to make sure that the current over-representation is replaced with an absolute monopoly.

We desperately need more real people in parliament, not fewer, so MPs salaries should reflect the fact that being an MP is an important role in society, worthy of a high  but this salary must be calculated in a way that is seen to be fair and above board, and in my opinion, the establishment of a clear proportionality mechanism would remove the suspicion that people like "Sir" Ian Kennedy and the IPSA are just a bunch of establishment cronies feathering the nests of their buddies in parliament with ludicrous pay hikes, whilst the rest of the population suffer the financial hardships of austerity.

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