Employment Minister Tony McNulty is the latest MP to be investigated over the controversial second home allowance which is used by many MPs in the Houses of Parliament. This is one of a number of allowances and expenses available to MPs which have attracted the wrath of taxpayers throughout the UK. What can the authorities do to appease taxpayers?
The problem with second home expenses
The problem which a number of voters have is the fact that while MPs repay the capital on their “second homes” it is the taxpayer that is left to cover the substantial interest charges. At the end of the day, while property markets can go up and down, the vast majority of MPs have pocketed substantial profits from these taxpayer funded “second homes”.
While many MPs argue that they are themselves taking a risk, and exposing themselves to the property market, this is no different from the general UK population (although taxpayers do not receive an allowance to cover their interest). Let us not forget that MPs are not forced to take a second home, and consequently a second home allowance, as they can if they so wish use hotel accommodation and claim back any expenses.
Many taxpayers are also concerned about the fact that many MP’s allowances are shrouded in secrecy, as recent Freedom of Information requests have found, with MPs apparently determined to keep many details out of the public domain. We also have the rather strange situation whereby an MP can have a nominated “second home”, on which they can claim their second home allowance, but under UK taxation laws these “second homes” can be deemed to be their “primary residence”. As there are no capital gains tax obligations on your primary residence, many MPs have been able to crystallise substantial property gains free of capital gains tax.
How much does the system cost you the taxpayer?
Overall it was revealed that last year MPs claimed nearly £87 million in expenses and allowances, all of which are perfectly legal and perfectly within the laws of Parliament. However, there is a debate as to whether the use of the various allowances, in particular the second home allowance, is actually being administered within the “spirit of the law”. Many people may not be aware that there is no such thing as the “second home allowance” as this is actually part of the accommodation expenses regulations and allowances.
Many people will also be surprised to learn that the claiming of interest on mortgages for a second home, together with various expenses for running the property, was not actually why the allowance was introduced in the first place. What is wrong with MPs staying in hotel accommodation when on business in London? What is wrong with MPs using one of the vast arrays of government owned grace and favour flats round the capital, which again cost taxpayers millions upon millions of pounds to maintain and service each and every year?
Grace and favour homes
When you consider that Gordon Brown for example resides at number 10 Downing Street in his role as PM of the UK, why does he need to claim a second home allowance on a property in Scotland?
Gordon Brown is not the only PM who has claimed second home expenses despite the fact that they have a grace and favour property available for their use 24 hours a day seven days a week. Jacqui Smith was recently caught up in a similar type of situation whereby she nominated her sister’s property as her “main residence” meaning that she has been able to claim thousands upon thousands of pounds in a second home allowance application for her family home back in her constituency. The fact that when questioned about the situation the Home Secretary is alleged to have said she “could have claimed more” is not exactly helping the situation and bringing the UK tax-paying public onside!
Why is the so-called second home allowance allowed to continue?
While there are many reasons, both for and against, the various allowances which are afforded to the MPs running the UK, many people do not understand why some of the more controversial elements such as the so-called second home allowance are able to continue. However, when you consider that MPs themselves are in charge of policing, maintaining and investigating complaints into their own allowances and expenses system, this may help to clarify why the situation has gone on unquestioned for so many years.
Even though cases such as Jacqui Smith and Tony McNulty have hit the headlines over the last few weeks it is worth remembering that these are not the only MPs claiming their second home allowance in circumstances which some taxpayers may question. We have seen instances of MPs owning two homes within easy commuting distance of Westminster whereby one is part funded by the generous allowance system.
Moves for a change to the system
Those of you who have studied the press over the last few days will know that Gordon Brown has called for a root and branch investigation into the MP’s allowance and expenses system. However, few people will be aware that it is likely to be years not months before the investigation even begins let alone is completed. This is a classic case of “kicking a problem into the long grass” with Gordon Brown now able to answer questions about the expenses and allowances system by claiming he is “looking into it”.
However, guess who will be reviewing the system? Yes you guessed it, Parliament!
While there is no doubt that the actions of MPs at this point in time are 100% legal, there are concerns that MPs are effectively policing themselves, whether the allowance system is currently being used for its initial purpose and why payments are often shrouded in secrecy. The vast majority of the UK population cannot understand how, in relation to Tony McNulty, an MP is allegedly able to claim a “second home allowance” on a property which he allegedly part owns but which is currently occupied by his parents.
UPDATE: Published in the Evening Standard