FOR RELEASE: Monday 13 April 00:01
MPs' generous expenses, index-linked pensions and second-home allowances give them a multi-millionaire lifestyle that their constituents could scarcely dream of, shock figures reveal today.
The effective income of the average MP is £319,165 – nearly 18 times the pay of the average voter, according to Bournemouth University tax expert Richard Teather, who has also produced a 'fat-cat ranking' for each of our Westminster representatives.
In his report, for the independent think-tank the Adam Smith Institute, Teather takes MPs' basic salaries – ranging from£64,766 for backbenchers to £194,000 for the Prime Minister – and adds in their pension rights, another £17,357 for backbenchers, up to £52,059 for Gordon Brown.
But what is the value of all those expenses claims – from barbecues to bathplugs – that the rest of us would never have a hope of getting through our employers, never mind Her Majesty's Revenue and Customs? Teather says that to pocket what the average MP claims in expenses, free of tax and National Insurance, the rest of us would have to earn £228,215.
It all amounts to a total pay package worth £319,165 – and that is just the average. Welsh Secretary Paul Murphy tops the league table with a package of pay, pensions, and expenses worth £423,932 a year. That is more than 28 times the average income of his Torfaen constituents.
On the best interest rate currently available – 1.83% from Birmingham Midshires, you would need over £23 million (£23,165,683) to get an income matching Paul Murphy's annual £423,932. You would need over £17 million (£17,440,710) to earn in interest what the average MP earns from Westminster.
The Fattest and Leanest Cats
The top ten fat cats are all Labour MPs, including Hazel Blears, Jack Straw, David Miliband and Geoff Hoon – recently embroiled in the 'three homes' row –their total income boosted by their ministerial salaries.
Eight out of the leanest ten MPs are Conservatives, including Malcolm Rifkind, John Redwood and Sir Nicholas Winterton – perhaps now chastised after taking £66,000 in expenses for 'rent' on a home owned by his family trust.
The MP who cleans up most from expenses is Ann Keen (Labour, Brentford & Isleworth), whose £167,306 expense claims are worth a staggering £283,569 before tax and National Insurance.
The Keen family is remarkable. Ann's husband Alan Keen is also an MP, with a salary and expenses package worth £330,272, and her sister Sylvia Heal is an MP as well, with a package worth £338,294. That is more than £1m (£1,071,617 in fact) between the three of them.
The Regional Fat Cats
Welsh MPs are the fattest regional cats, with earnings equivalent to £323,068 – over 20 times the pay of their constituents.
The leanest are MPs from London, at £308,881 or nearly 15 times the pay of their constituents – but that is because many London MPs live too near to Westminster to claim a second-home allowance.
Along with the £1,000 fireplaces and £550 sinks, MPs' expenses also include the costs of assistants. Teather who is the Adam Smith Institute's Senior Tax Fellow, defends the inclusion of these staff costs in the figures, pointing out that MPs routinely employ family members to boost their household income.
The most blatant was Derek Conway, who claimed for his full-time student son, but the Institute asks whether even Jacqui Smith would pay a non-relation £40,000 a year for the administrative help that her husband provides. The rest of us are challenged by HMRC when we employ relatives, and have to show that their job justifies the pay. But MPs' affairs are dealt with by a special HMRC office in Cardiff, which seems to exempt MPs from this sort of scrutiny.
In addition, much of the work of MPs' assistants involves campaigning for their re-election. Critics of the Parliamentary expenses system see this as corrupt as those MPs who claim their full expenses allowance and then make large donations to their local Party – in effect, a taxpayer subsidy to their political grouping and their general election campaign.
Adam Smith Institute Director, Dr Eamonn Butler, says the figures confirm the claim of his new book, The Rotten State of Britain, that MPs have "conspired in an organized and systematic scam against the public". Richard Teather's figures show just how extensive that scam really is. Dr Butler commented:
"MPs are always embarrassed to raise their salaries, so they decided to take 'stealth salary' instead, as expenses. They organized their affairs to get the maximum benefit – making their sister's spare room their 'main residence' or charging 20p a mile for cycling to Westminster – never imagining for a moment that their expense chits would ever see the light of day.
"How wrong they were. And it is not just the huge range of goods and chattels that they've been claiming for, but the huge scale of the scam that appals their voters. To live like an MP, anyone else would have to be a multi-millionaire."
Parliamentary Fatcats 2009 by Richard Teather, with an introduction by Eamonn Butler: http://www.adamsmith.org/parliamentary-fatcats-2009/
Monday 30 March
The G20 won't solve the financial crisis because it is blaming the wrong things and coming up with the wrong solutions, a leading financial think-tank says today (Monday 30 March). Writing for the Adam Smith Institute, senior financial analyst Miles Saltiel says that the crisis was not caused by the bonus culture or too little regulation, and is not going to be cured by more regulation or big economic stimulus packages.
Saltiel, of capital analysts Fourth Phoenix and with twenty years' experience in the financial sector, says that the popular 'causes' of the crash – over-complex financial products, bank deregulation, excessive risk-taking driven by large bonuses – don't stand up to scrutiny.
Instead, the blame should fall on inept monetary policy, political social engineering that forced the banks into risky mortgages, regulation that forced mergers and created banks too big to fail, and the failure of the Basel banking rules.
Director of the Adam Smith Institute, Dr Eamonn Butler, said: "Unless the politicians understand what really caused the crisis – and what didn't – they will be applying the wrong cures based on the wrong diagnosis. And that's going to make the world economy even sicker."
Click here to download a PDF of What Went Wrong? An Agenda for the G20
The Adam Smith Institute (ASI) has been ranked as the No.10 think tank outside the US in a major new study for Foreign Policy magazine, making it the highest-placed domestic policy think tank in the UK. The ASI was also listed at No.5 in the 'Top 5 International Economic Policy Think Tanks' category.
The 'Think Tank Index' – which is based on a worldwide survey of hundreds of scholars and experts – is published in full in the January/February issue of Foreign Policy. It was compiled by James McGann, Assistant Director of the International Relations Program and Director of the Think Tanks and Civil Societies Program at the University of Pennsylvania.
Dr Eamonn Butler, the Director of the ASI, said, "Naturally we are delighted to feature in the top 10 of such an authoritative international study, and to be considered one of the five leading economic think tanks in the world – despite having a much smaller budget than many of our competitors. We put it down to many years of solid effort to produce timely, well-researched and practical policies, an eye to cost-effectiveness, and the continuing loyalty of our many supporters among the general public."
Top Non-US Think Tanks
1 - Chatham House
2 - International Institute for Strategic Studies
3 - Stockholm International Peace Research Institute
4 - Overseas Development Institute
5 - Centre for European Policy Studies
6 - Transparency International
7 - German Council on Foreign Relations
8 - German Institute for International and Security Affairs
8 - French Institute of International Relations
10 - Adam Smith Institute
Top 5 International Economic Policy Think Tanks
1 - Brookings Institution
2 - Peterson Institute for International Economics
3 - Fraser Institute
4 - National Bureau of Economic Research
5 - Adam Smith Institute
Notes to Editors
The full survey results and accompanying article are available here
24 November 2008
The Adam Smith Institute (ASI) has today called on Alistair Darling to substantially raise the personal income tax allowance in today's pre-budget report. Author Tom Clougherty advocates a personal allowance of £12,000 – which is roughly equivalent to the minimum wage, or half the average wage.
As well as stimulating the economy by giving people more disposable income to spend and invest, raising the personal allowance to £12,000 would strengthen incentives to work, help to eliminate the 'benefits trap' and make low-paid jobs more economic – greatly increasing opportunities for the unemployed.
If the higher rate threshold were kept at its current level, rather than raised in line with the personal allowance, this policy would cost the Exchequer just £18.9bn in lost revenue.
The authors argue that such a sum could easily be offset by cutting government waste, and urge against further government borrowing, noting that the taxpayer already spends more than £30bn a year servicing government debt:
In the face of a recession, every business and household in the country is looking to find economies and make savings. There is no reason why government, with an annual budget in excess of £600bn, should be any different.
Tom Clougherty, the ASI's policy director, added:
Tax cuts are not a silver bullet, but there they are the most powerful, pro-growth policy tool that the government has available to them. The government is right to want to cut taxes: they should start by putting more money back in people's pockets, and this means radically increasing the personal allowance.
The full briefing paper can be downloaded for free at <http://www.adamsmith.org/images/pdf/personal-allowance-briefing.pdf>
Notes for Editors
WHY ALISTAIR DARLING SHOULD RAISE THE PERSONAL ALLOWANCE is published by the Adam Smith Institute, 23 Great Smith Street, London SW1P 3BL.
Monday 2 June
Tax Freedom Day – the day in the year when we stop working for the government and start working for ourselves – is June 2 this year.
That means that for 155 days of the year, every penny earned by the average UK resident was taken to support government expenditures.
When Gordon Brown became chancellor in 1997, Tax Freedom Day was May 26 – a whole week earlier.
Unfortunately, the true picture could be even worse than these figures suggest. Last year Tax Freedom Day actually came three days later than forecast, because the economy grew more slowly than the government expected. The signs are that 2008 could be no different.
And if government borrowing is included, Tax Freedom Day does not come until June 14.
Government spending will reach £600bn in 2008. That's £10,000 for every man, woman and child in the UK – and twice as much as when Gordon Brown became Chancellor.
If Gordon Brown had only raised public spending in line with inflation, he could have abolished income tax, corporation tax, capital gains tax and inheritance tax by now – leaving the taxpayer some £200bn better off.
Dr Eamonn Butler, the director of the Adam Smith Institute, said:
"The Treasury loathes Tax Freedom Day because they don't want people to be able to picture just how much tax they pay. They prefer to use stealth taxes and an ever more complicated tax code to hide the reality from taxpayers. The value of Tax Freedom Day is that it pulls the wool from people's eyes."
The Adam Smith Institute's latest report – Privatization - Reviving the Momentum – calls on the government to embark on a new wave of privatizations, which could net the exchequer in excess of £20bn. Given the worsening state of the economy and the increasing tightness of the public finances, the report notes that such an inflow of funds would be very welcome.
In addition to the revenues generated for the government, a new wave of privatizations would also deliver significant operational benefits, the report says. Previous privatizations have delivered a wide range of improvements, including increased investment, lower prices, greater choice and better service for customers – as well as underpinning billions of pounds worth of economic activity.
The leading privatization candidates identified by the report include the Royal Mail, Channel 4, BBC Worldwide, Scottish Water, Northern Ireland Water, Glas Cymru, the National Air Traffic Control System, as well as government stakes in British Energy and the Nuclear industry.
The report's author, investment analyst Nigel Hawkins, said:
"Privatization in the UK remains unfinished business. The task for Government, of whatever colour, should be to complete it and to reap the many benefits - including proceeds of some £20 billion."
For Sunday’s papers, Sunday 16 March 2008
The Adam Smith Institute has calculated Tax Freedom Day since 1991, and has figures going back to 1963 – when Tax Freedom Day was more than a month earlier, falling on 24 April. For more information and details of how Tax Freedom Day is calculated, visit http://www.adamsmith.org/tax-freedom-day/
Friday 7 March
According to a new report from the Adam Smith Institute, The Waste of Nations by Gordon Hector, pay-as-you-throw (PAYT) waste charges are the best way to encourage recycling and to boost profitable waste businesses.
The report stresses that PAYT must not be used as a 'dustbin tax' and that its introduction must be accompanied by a corresponding fall in council tax. Evidence from Holland, Ireland and Germany suggests that PAYT should not increase household bills and that, indeed, it may offer an opportunity to reduce them.
According to the report:
The report also calls for the full liberalization of the refuse collection sector, so that private companies would have to compete for customers. Such a move would keep prices down and increase customer satisfaction. It would also lead to innovation and encourage refuse collectors to recycle more waste.
As the ASI's policy director, Tom Clougherty, says:
"The government's proposals for variable waste charging have run into widespread opposition because they are half-baked and ill thought out. The ASI's plan is entirely different. Liberalizing refuse collection and introducing pay-as-you-throw charging would dramatically increase recycling and help the environment, but it would also be an opportunity to reduce taxes, save money, and increase the quality of a vital service."
The final section of the report argues that recycling should be put on a commercial footing. Recycling facilities and providers should be allowed to merge and consolidate, and the free movement and trade of recyclables should be established. This would allow economies of scale to be established, bringing down the cost of recycling and recycled goods, and ensuring a market for commercially viable businesses in the long run.