What to pay politicians?

Few workers, when asked whether or not they should be paid more, would answer in the negative. So it is no surprise that, when this question was put to MPs, two-thirds agreed wholeheartedly.

Indeed, the surprise is that a third of Members believe that no pay rise is merited. But perhaps these are the politicians who are more in touch with the public mood, who understand the anger still felt over many MPs’ misuse of the expenses system and who realise that, in a climate of austerity, when the pay of so many voters is virtually frozen, a pay increase of any size for MPs is deeply insensitive, never mind the £10,000 to £20,000 figure that is being considered.

The problem is, of 
course, that MPs’ pay 
has long been a sensitive issue, even in boom 
years, and it was as a direct result of continued low pay rises that the expenses system became ever more complex, covert and lucrative, a means of rewarding MPs while keeping the full details of their remuneration hidden from the public gaze.

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Understandably, the party leaders are unwilling to sanction any large increase in MPs’ pay at the moment. It may be beyond David Cameron’s powers to prevent any increase, but by loudly condemning it, he can at least assure the public that he is on their side.

Clearly, however, this situation is unsustainable. Pay and expenses may now have been taken away from Parliament’s control and given to an independent body, but this has not solved the underlying problem of how politicians can be properly remunerated without offending the public and without using the expenses system as a concealed means of boosting pay.

In many ways, the ideal solution would be to give MPs a substantial increase, to be paid for by the abolition of the expenses system altogether. Whether any party leader will be able to summon the political courage to push for this, however, is another matter entirely.

Whitehall power

WHEN Lord Heseltine outlined his plan for devolving spending power to the regions, he made it clear that this would be a revolutionary departure in the way Whitehall made funding decisions.

According to the Tory grandee’s proposals, endorsed enthusiastically by the Government, money for transport, housing and skills training which was previously spent by central government would be made available in a so-called single pot for local enterprise partnerships to spend for themselves. Effectively, it would be the town hall, rather than Whitehall, that made the big decisions and stood answerable for them to local people.

From what Nick Clegg said yesterday, it is clear that many in the Government, including the Deputy Prime Minister, still believe sincerely that this is the way forward. The reality of the devolution settlement contained in last week’s Spending Review, however, is somewhat different. As Mr Clegg suggests, no one should sneer at £2bn being made available to the regions. But the fact remains that this is almost all money that was earmarked for regional spending anyway.

Far from Lord Heseltine’s original notion of Government departments surrendering large portions of their budgets for the regions to decide how the money is spent, Whitehall has clung defiantly to its own little empire and the only money surrendered is largely that which would have gone out for regional decision-making in any case.

In other words, this supposedly revolutionary funding settlement is disappointing on two counts. Not only is it far less than anticipated, but there has been no fundamental change in Government mindset. The message sent out is that Whitehall still knows best and local leaders are not to be trusted to make their own economic decisions.

Taking charge

THE new Governor of the Bank of England, Mark Carney, was hardly short of advice as he took office yesterday. For all the good wishes and hopes invested in him by George Osborne, however, the reality is that Mr Carney’s room for manoeuvre is limited.

The Chancellor has made it clear that he is relying on the former Bank of Canada Governor to boost the nascent economic recovery through an aggressive monetary policy which, in Mr Osborne’s terms, means further doses of his favourite remedy, quantitative easing.

Given that Mr Carney is seen as the Chancellor’s man, he may not disagree with this. But even if he did, he may find he has no other choice. The money markets, on whose approval Mr Osborne depends, have become wedded to the notion of the Bank printing money to buy the Government’s own debt. This practice has inflated asset prices and kept interest rates low even though pensioners and savers have been hit hard by the policy and one of its key aims, increasing bank lending, has not been achieved.

Growth may be slowly returning to the economy, but it is far from clear that QE is responsible. If Mr Carney is to nurture the recovery, he may find that this is best achieved by showing that the Bank is indeed independent of the Government and that Mr Osborne’s methods are not the only ones available.