8 May 2009

MPs’ expenses: did system fuel the housing boom?

Big Ben in the rain - ReutersIf you step away from the details of bathplugs, unnecessary taxis and sibling cleaning contracts, there is a staggering picture emerging about the MPs who decide our laws.

During the biggest housing boom in Britain’s history (and some economists argue in world history) many of the politicians who had the power to rein it in were in a position to benefit handsomely from that boom, at taxpayers’ expense. It’s what I would call culturally corrupt rather than actually corrupt.

MPs have been able to claim for mortgage interest, plus other expenses for the running and maintenance of a second home – an asset which soared in value.

The 200 per cent increase in house prices over the past decade in the UK, compares with about 4 per cent in Germany.

That huge increase did not universally benefit all in Britain. It was a massive redistribution to homeowners from homeseekers. It was a redistribution that led senior Bank of England figures to question privately why younger people weren’t kicking up more of a fuss.

So I raise the question that MPs’ expenses may anger the public for many reasons, but did they indirectly contribute to the severity of this recession?

Our MPs were at the very best immune from the downside of the property boom thanks to their parliamentary perks. At worst some MPs appear to have built small buy-to-let empires on the back of the taxpayer.

Politicians talked a good game about “affordable housing”, but fundamentally their own personal financial interests – in pure economic terms – could have been to make housing less affordable.

Let’s put it like this: if MPs were as nakedly exposed to the dark underbelly of Britain’s housing surge, without the featherbedding of their expenses, would there have been more political pressure to rein in the boom?

27 reader comments

  1. Graeme says:

    The more details that come to light regarding Ministers and MPs’ expenses, the more surprised I am.

    Although Ministers and MPs enjoy generous tax exemptions (Sections 292 & 293 ITEPA 2003), I am not convinced they are wide enough to cover such things as cleaning, council tax (which is not listed in the Green Book), etc, as it seems unlikely that such expenditure will meet the notoriously narrow “wholly, exclusively and necessarily incurred” test. In addition, where Ministers and MPs have overclaimed expenses in “error”, they have effectively received a loan from their employer and, if the sum is greater than £5,000, a taxable benefit-in-kind will arise and tax will be payable.

    Therefore, my question is has anyone asked HM Revenue & Customs to comment on the tax position of these expenses/loans?

    1. Andy says:

      MY SOLUTION to expenses nonsense.

      No need to change any existing rules
      concerning expenses. Add one… That all
      expenses submitted should be put into the
      public domain. Handed over to the press
      after six weeks of submission to parliament.
      That way any outlandish claims will only
      bring embarrassment and possible dismissal
      if they are seen to be injurious to the
      party.
      a simple measure. Will not happen though.
      they’d rather police themselves? one hand
      lathering the other.

  2. Shalim Khan says:

    Very good observation.

    It seems to me that the boom was largely fueled by mortgage companies who were willing to give people larger and larger mortgages, because this would inflate house prices.

    Artificially inflated house prices would result in higher profits for them, and they could always reposess the house if people suddenly found they couldn’t pay.

    I think your observation highlights a key reason as to why MP’s did nothing to rein the mortgage companies in. (i.e. they might lose out personally if they did.)

  3. Andy says:

    Your article makes a good point. All day i have heard various politicians claim that it is ‘the system’ that is to blame.
    These politicians had governance over ‘the system’ and have been shown to be without any morals or ethics. Its been disgusting to see them try and justify their naked avarice and attempts to hide what they have been up to.

    1. Mike V says:

      All prospect
      ive MPs should be made to write 2000 words on the following before a decision on eligibility:

      A professional politician is an inherently mendacious person who seeks to achieve actual power or access to it for personal benefit by cynically manipulating people and exploiting rules and situation regardless of the morality or consequences of those actions.
      Discuss.

      MKV

    2. M A Owen says:

      Your article raises interesting questions that we should all consider, but perhaps young working class people in particular should be asking themselves, how can these politicians police a system sensibly when they are actually gaining huge personal benefit from the system being out of control

  4. Jen Birks says:

    Don’t be ridiculous! A smattering of MPs aren’t going to have make that great an impact on the market, even at the local London level. C4 property shows like Property Ladder probably had a greater effect.

    I’m surprised that Channel 4 news is jumping on this moral outrage bandwagon – not because I have any great respect for this government (far less than I generally have for Channel 4 News), but because it is so obviously populist nonsense. Private sector employees ‘milk’ expense accounts all the time, much as they do the bonus system – it is just seen as another part of the salary. Perhaps we should just pay MPs better.

    1. Jule says:

      You wally. Or are you an MP? MPS should be paid far less than they are, and its the ridiculous comparison that somehow a nations government is in charge of “UK PLC” that is the cuase of all these problems. If you want to be a greedy self intertested person work in the private sector and fiddle your expense, but dont think that is acceptable as a public servant.

  5. Alan Wallace says:

    Faisal, as you well know, those who inhabit the “Westminster Bubble” are utterly divorced from reality so you may well have a point that lack of connection with issues that directly affect the rest of us. But MPs were well aware of rising house prices – they have after all made tidy profits on the back of it so I would go further than you and suggest that not only were MPs unconcerned by the housing boom, they had everything to gain by its continuance. We decry MPs for being involved with companies that mayinfluence their decision making and there are rules designed to prevent this, but isn’t ownership of a house partly funded by the taxpayer a vested interest in itself?

    http://wwwthepartysover.blogspot.com/

  6. PETE says:

    These people constantly bleat that it was within the rules They are using the excuse that it wasn’t them to blame but the system that is at fault, did the system “force” them to claim what they did?
    It speaks volumes about the integrity of these imdividuals.

  7. Gabby S says:

    No, I don’t think that MPs expenses fueled the housing boom, as those few MPs are minor in the country of 60 million people. And I don’t think the MPs indirectly contributed to the severity of this recession. What the disclosure of their expenses shows is that THEY FOUND A WAY HOW TO CHEAT THE SYSTEM AND HAPPILY SURVIVE THE RECESSION. Unlike us ordinary people who had to cut down on our day-to-day expenses and sacrifice our standard of living, the MPs are still living their lifes as in those boom days (or maybe even better, as H. Harman said in the interview), Gordon Brown is talking about changing the “system” and the “system” was not good. WHAT SYSTEM? IT’S THE TRUST THAT THEY BROKE, THE TRUST WE GAVE THEM BY VOTING FOR THEM. THEY CHEATED ON US ALL. THEY SHOULD RESIGN. IF THIS HAPPENED IN MY WORKPLACE, I WOULD BE SACKED FOR GROSS MISCONDUCT. But they are still smiling for the cameras (Hazel Blears is the best at it) and it looks like they will get away with it.

  8. Ray Wallis says:

    The new rules must be made retrospective and the MP’s made to pay, for what amounts to, their stealing from the public purse. After all that is exactly what they did to people who entered into schemes to avoid paying TAX, although at the time it was legal to do so.

  9. Alan Wallace says:

    In response to Graeme, perhapsothers may care to use parts of this letter that I sent today to HMRC

    Mike Clasper CBE
    Chairman
    HM Revenue and Customs
    100 Parliament Street
    London SW1A 2BQ

    Dear Mr Clasper

    In light of today’s press, does HM Revenue and Customs have any plans to look at MPs expenses? There is obviously some doubt about whether many of the expenses incurred are wholely necessary for the execution of MP’s duties. Additionally, it is not clear whether the expenses allowances granted to MPs was used exclusively for the purposes intended.

    As an independent candidate standing on the Jury Team platform in the forthcoming European Elections, I note that adoption of the Jury Team principles would prevent this from happening in the future.

    I look forward to your response.

    Yours sincerely

    http://wwwthepartysover.blogspot.com/

  10. Kerrin says:

    Someone should compile a list of genuinely honourable MPs. It may not take long!

    However, my MP is on the list. You can look at Anne Milton’s website to see her position on expenses, which is absolutely right and correct.

    There are some worthwhile MPs.

  11. Ray Turner says:

    I agree there are interconnections between various systems that have failed us so badly over the last 30 years.

    Systems such as (but not exclusively)politics & banking seemed to feed into each other and fuelled a runaway chain reaction which flipped into meltdown last year….

    I don’t think the housing boom can be entirely be attributed to MPs expenses, but some MPs certainly seem to have been doing their bit.

  12. Roz Taylor says:

    Like everyone else I am sickened by the reports on MP’s expenses. They have clearly had their heads in the trough and unfortunately, money and power very often lead to greed. MPs are not sorry for what they have done because they lack the humility and integrity to realise that their actions are simply theft of tax payers money. MPs are only sorry that they have been caught out.

  13. Josie Bailey says:

    I would like to see a list of the MPs from all parties who did not claim anything, other than travel hotel accommodation expenses incurred. It would certainly assist me if I ever decide to vote in a General Election again. So far I know of only two who have not dipped their fingers into the trough – Hillary Benn and Dennis Skinner – I am sure there are more but who are they?

  14. LEONARD WELLS says:

    These are the guys and gals who decide that the oldies can get by on a State Pension of just over £7k p.a.while they live off the fat of the land with many times that.
    How about a lie detector test for every claim. Boot them out!

  15. yusuf sidat says:

    I dont think we have learnt from our present experiance, people still think that house prices will rise again. We almost will it on to have the feelgood factor. What we need is NO price rise for a dacade and the only way to do it if the Banks lent money responsibly … ha ha ha.

  16. j. glover says:

    The debate has so far centred on MP’s claims for housing. However their claims for salaried assistants are typically three to four times those costs. What information is requested to support those claims.

  17. bernard clement says:

    Like many other pensioners and people who work hard to make a decent life with integrity and honesty I am disgusted by the conduct of so many MP’s whose sole purpose seems to be defrauding those whom they were meant to serve, the higher the office the greedier the minister, I shall not bother to vote again ever!

  18. George Sergeant says:

    It is inconceivable that individuals who clearly cannot understand the concept of morally indefensible should continue to hold public office and retain the power to draft and pass legislation. Our parliament has now lost any remaining shred of credibility. Therefore, it should be dissolved forthwith, and the paymasters i.e. Joe Public be given the opportunity to show our utter contempt at the ballot box.

  19. Dennis Junior says:

    Faisal:
    I think the “system” and other reasons fuel the housing boom in the United Kingdom….

  20. Harry Manning says:

    If a burglar steals from a taxpayer and is caught. Admits the crime, and offers to pay the proceeds back, would he then be let off without any further retribution.

  21. Bill McQuillan says:

    Your item on MP’s expenses was good but did not go far enough. The public are fed up with the mess that Westminister has become. Radical change is needed now. See ‘In Brief’ on my web site.
    Bill McQuillan

  22. Martyn says:

    Why are journalists not looking at the bigger picture all this money being repaid by Mps with no interest added for utilising this money ,no investigations of MPS by the inland revenue.MPS have been laughing at the Person in the street for long enough with almost every benefit means tested, no ruling on bank charges its time we saw some heads rolling.Its time for an election.Its time for some fair play because we are so so angry.

  23. CRILLBO says:

    WELL HERE WE GO AGAIN.HAVE THE 3 MAIN PARTY LEADERS DECIDED THEIR ORIGINAL PLEDGES THAT THE OUTCOME OF THE KELLY REPORT FINDINGS “MUST” BE ACCEPTED WERE MERELY PLATITUDES TO EASE THE ORIGINAL PUBLIC OUTCRY.
    JUST LOOK AT THEIR ARROGANCE IN THE ANSWERS TO THIEVING TAXPAYERS MONEY.THE WINTERTONS NEED TO BE JAILED AND CONWAY SHOULD HAVE BEEN BARRED FROM HOLDING PUBLIC OFFICE FOR LIFE.
    WHAT A PATHEIC BUNCH OF CRETINS.

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