Ban on MPs claiming mortgages could end up costing taxpayer more

A ban on MPs claiming for mortgages, as recommended in the Kelly report, could end up costing the taxpayer £2,316-a-year more per member.

Today’s Daily Telegraph reports that Sir Ian Kennedy, the new head of IPSA – the Independent Parliamentary Standards Authority, set up to “represent a break from old practices and put in place a new independent system” of MPs’ pay and expenses – “plans to rip up the proposed reforms” unveiled in the Kelly Report earlier this week.

Among the reforms he is unhappy about, reports the paper, are the ban on members employing relatives and the requirement of MPs to hand back profits from the sale of second homes. Another key recommendation suggests banning MPs from claiming mortgage payments, instead allowing them to claim rent payments.

This recommendation especially should not be simply nodded through without analysing the implications of it – in particular the implications on the cost to the taxpayer. Obviously the cost of mortgage payments will vary depending on what type of mortgage MPs take out and the lenght of time they are repaying it over; similarly, the cost of rent payments will depend on where the MP is living.

The recommendation does have the potential to lay additional costs to the taxpayer under certain circumstances. For example, an MP who has a 30-year interest rate tracker mortgage on a house in the south east that is purchased at the current average asking price would be paying around £815 a month in mortgage repayments.

By contrast, if that MP was renting a house in the south east at the average rental asking price, the cost would be £1,108 a month. This arrangement under Kelly’s proposals would cost the taxpayer an additional £293 a month, or £3,516 a year.

It must be noted that in some instances Kelly’s recommendation would save money but the benefit or liability the taxpayer gets in result of the recommendations has the potential to vary dramatically by the individual circumstances of MPs.

These proposals should be seriously looked at the by the independent committee that will now review Kelly’s recommendations to make sure that the new system that is implemented does not end up costing the taxpayer more money.

While it may seem unfair for MPs to get contributions towards a long-term asset they will own, the ultimate goal of this review must be to create a fair system that costs the taxpayer the least amount of money.

Our guest writer is Jack Storry

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