MPs to keep profits from second homes

A REVIEW of Westminster expenses led by Commons Speaker Michael Martin today said MPs should be allowed to keep profits from selling on properties funded by the taxpayer.

The recommendation comes just weeks after the Scottish Parliament voted to scrap a similar system at Holyrood.

But the Westminster review also recommended MPs should be banned from using public money to buy furniture and renovate their homes.

That would effectively abolish the so-called "John Lewis list", which provided a guide to how much MPs could claim for household items – for example, £350 for a washing machine or £10,000 for a new kitchen.

However, the report said MPs should still be able to claim up to £19,600 tax-free every year to cover the cost of running a second home. And it proposed they should also be entitled to £30 a day for subsistence – without receipts – up to a maximum of £4200 every year.

The review by the Commons Members Estimates Committee was set up in a bid to restore public trust in MPs' expenses after a string of scandals.

Despite looking at the Scottish Parliament's decision to abolish the system which allowed MSPs to claim public money for mortgage interest payments and keep any profit when the property was sold, the Westminster committee decided against a similar move.

The report argued: "Property values can go down as well as up, and some MPs who left Parliament at the 1992 general election – after a property crash – faced losses.

"The property market is currently looking rocky once again, so the same could happen. An MP who chooses to buy not rent is taking a risk."

The report rejected other options for replacing the Additional Costs Allowance under which MPs can currently claim up to £24,006 towards running their second homes.

It branded the idea of buying or building parliamentary flats in central London as "neither feasible nor affordable" in "one of the most densely populated, expensive and mature property markets in the world".

Scrapping the allowance altogether and boosting salaries from around £61,000 to more than £102,000 had attracted "both strong support and firm opposition". But the plan would be extremely complex, requiring major adjustments to pensions and income tax arrangements, according to the committee.

The report said new MPs setting up home in London would need to use their allowance to furnish and equip it. But it added: "It is hard to see any justification for such purchases continuing indefinitely at the public's expense. As for repairs to the home, where needed, we believe that these should be claimable but not capital improvements."

The committee also called for better auditing procedures.

At least one in five MPs would face "spot checks" on their claims and, except for the subsistence allowance, all claims "however small" would require receipts from 2009/10.

The committee said: "Our overriding conclusion is that we must introduce a robust system of scrutiny for parliamentary allowances as a matter of urgency in order to build public confidence."

The Commons is due to vote on the recommendations on July 3 – the same day as they decide their pay rises.