Let's get this David Laws issue right

David Laws is a highly intelligent and articulate man who has enjoyed great success in business and is now a Member of Parliament. For seventeen days last year he was a member of the Cabinet - appointed to the Privy Council and entitled to be known as "Right Honourable". In the fortnight between his appointment and his resignation he made a good impression on a lot of people, me included. The message he put forward was restricted to his ministerial duties at the Treasury and was as clear a statement as you could have of the necessary consequences of the previous government having spent far too much money that it didn't have. Then it was disclosed that he had claimed £40,000-odd in expenses to which he was not entitled and he left office (but did not resign from the Privy Council).

The essential circumstances of this wrongful receipt of money are important. Mr Law was a secret homosexual and shared a home with a gentleman friend. Beause he did not wish to disclose his proclivity to his family or to the world in general he pretended that he was renting a room in his friend's home and claimed that rent as expenses. The reality was that he was living with the man rather than renting a room from him. No doubt he made a financial contribution to the running of their joint household and, had matters been declared openly, at least some of that could have been reclaimed as expenses. I have read suggestions that he could have claimed more than he actually claimed and am happy to accept that as true.

Two matters that frequently crop up in discussions about Mr Laws must be discarded immediately because they are not relevant to the crucial point.

First, that he is independently wealthy as a result of his previous work did not disqualify him from claiming legitimate expenses. A system existed for compensating Members of Parliament for constituencies outside London for costs they incurred by reason of having to run two homes rather than one. We can quibble about the details of the scheme but there was a scheme and an MP who incurred additional living costs was entitled to claim at least some of them. Mr Laws could afford not to claim anything but it would be absurd to argue that his private wealth should exclude him from having additional costs reimbursed - that would amount to requiring him to make a substantial additional contribution of tax.

Secondly, that he could have claimed the same sums or more had he arranged matters differently is neither here nor there. He did not arrange matters differently, he arranged them as he arranged them for reasons of his own. A footballer who hacks an opponent's ankle to prevent him making a pass cannot avoid a yellow card by claiming that he could have used a lawful shoulder charge instead. What matters is what happened not what might have happened had you not chosen to do what you actually did.

The crucial point is very very simple. He told deliberate lies in order to expropriate money. Had he been paying rent to his friend he would not have been entitled to reclaim that rent because of the nature of their relationship (namely that they co-habited in a single household regardless of bedroom preferences). It seems unlikely to me that he did pay rent, but anything is possible. If we assume he did pay rent he was not entitled to reimbursement and he knew it. He lied about the nature of the relationship in order to get the money. It is blatant fraud. If, as I suspect is more likely, he contributed financially to the household and those contributions are not properly defined as rent, he lied about the nature of the payments he made in order to be repaid out of public funds. That is also blatant fraud.

It is a matter of the simplest and most basic test of honesty. Spinning a policy so fast that a politician appears to be saying something factually inaccurate will be defined as lying by his political opponents when it is possible (sometimes only by being incredibly generous) to describe it as ambitious advocacy. Some might consider it dishonest or even fraudulent to act in this way but there is room for debate on the issue. There is no room for debate when it comes to making deliberate false statements in order to claim money you could not obtain if you told the truth.

Some might suggest that Mr Laws should have special dispensation because he was merely trying to keep his private life private. That just doesn't wash with me. He told deliberate lies in order to get money from the public purse. Whatever the circumstances and however strong the mitigation might be, the underlying dishonesty remains and that dishonesty is what is relevant first last and all the time in this tale.

Now suggestions are being made that Mr Laws might return to the cabinet. I am not concerned about the "signal" this sends to anyone, because that looks at it from the wrong angle. I am concerned that someone who thought it appropriate to lie in order to obtain money he could not have obtained by telling the truth should be in Parliament at all let alone in the uppermost layer of government. No matter how able he might be and no matter how strongly he wanted to keep his sexuality secret, his chosen method of protecting himself was to act in a way wholly inconsistent with the responsibilities of ministerial office.

It was not so long ago that dishonesty caused resignation as a matter of course, not just resignation from ministerial office but from Parliament, and banishment to the history books as a former politician with no hope of recovery. Ability was irrelevant because the right to represent others and to hold power over others required probity. The country might lose the services of someone with much to offer but that was of no consequence when the politician in question had failed to conduct himself in a way Parliament and the law requires the little people to behave. You can call it a betrayal of trust if you want, I believe it is something more general and, perhaps, more fundamental. If you are to have power over others you can only justify your position if you live by the standards the law requires of those under your power.

Mr Laws chose to act dishonestly and in doing so he forfeited any right to have power over others. He should not still be in Parliament, for him to return to the cabinet would cast a serious blow against the fragile legitimacy of the current coalition government.

Blank - the bureaucratic default position

Just when we thought the scandal about MPs' expenses and allowances couldn't plumb new depths the Parliamentary authorities released copies of relevant documents but deleted so many details that a lot of the documents provided no relevant information at all. In some cases the whole document was blanked-out, yet still it was released for public consumption. The only real pleasure in this exercise has been the reintroduction of the verb "to redact" to everyday usage, thereby dredging it from its old home in the Chancery Division of the High Court, a home in which it gave many of us enormous pleasure for years.

When challenged about the futility of revealing documents that don't allow a clear examination of whether expenses or allowances were properly claimed, the response from the politicians concerned has been a unified "nothing to do with us guv". In a way they are correct. They assert that the decision to edit receipts and expenses forms was taken by civil servants without guidance or instructions from any of our elected politicians. If this is correct, it is indeed nothing to do with them but only in a narrow sense of them not having taken the decision. In a wider, and I believe more accurate, sense it is everything to do with them because they failed to ensure that the material released would satisfy the purpose of the exercise, namely to allow the little people to assess whether claims for reimbursement were valid.

Taking their narrow point at face value, what has happened is a good indicator of one of the most significant problems with bureaucracy. By definition bureaucracy is concerned with implementing a system and not with whether that system is effective or efficient. It is about following procedures whether or not they make sense and whether or not they deliver a benefit. We have seen this at work in so many fields of the public sector recently.

The Financial Services Authority concerned itself with the procedures followed by banks and other lenders rather than with the substance of the effect of the loans on the whole financial sector. A bank that advanced a large loan to someone with no realistic prospect of being able to service the interest payments let alone repay the capital raised no FSA eyebrows provided the correct forms were used. Hospitals have had to provide streams of statistical material to the Department of Health (or whatever they are calling it this week) rather than spending the resources involved on treating patients or keeping wards clean. Policemen are kept off the streets to fill in forms. And armies of pen-pushers have been employed at taxpayers' expense to shuffle information up and down the hierarchy in every government department. Filling in the form is often more important than what the form contains. After all, the information on the forms can usually be interpreted to say almost anything the government wants it to say. The job of the bureaucrats is, both literally and figuratively, a matter of form rather than substance.

And so it is with the redaction of MPs' receipts and claims. There can be no doubt that some information on these documents should not be released because to do so would compromise the privacy of innocent third parties or because they are simply irrelevant. For example, a document might disclose the home address and telephone number of an MP's secretary as well as showing how much he or she was paid; it is the latter information that matters, the former is usually not only irrelevant but is not something the public has any legitimate right to know. An MP who submits an invoice from a shop containing five items of which only one is claimed as an expense can reasonably expect the other items to be blanked-out because they are none of the public's business. But what happens if redacting an ostensibly irrelevant detail, or one which might be thought to be none of the public's business, results in the document becoming ambiguous or even meaningless? That defeats the whole purpose of the exercise, so a balance has to be struck between the need to ensure the validity of expenses claims can be assessed and the need to keep irrelevant and personal details from prurient gaze. It is not only in the current climate that assessment of the validity of claims must be paramount. For example, where the MP's secretary's address is the same as the MP's address that fact is, on the face of things, a legitimate factor in evaluating the claim for reimbursement because it can cause perfectly fair and reasonable questions to be asked.

Redacting documents requires the exercise of judgment. It requires substance to be placed above form and sometimes involves a difficult balancing exercise between keeping private that which is genuinely private and exposing that which is necessary to be disclosed even though it is private. I am not at all surprised to find that things were done as they were because that is the nature of bureaucracy, it is non-judgmental. The default position is the path of least resistance - arrive at 9am, follow the guidelines slavishly, tea break at 11, follow the guidelines slavishly, lunch between 1 and 2, follow the guidelines slavishly, cup of tea at 3.30, follow the guidelines slavishly, go home at 5pm. Do not think for yourself, do not seek to exercise judgment, push that pen, shuffle that paper, tote that barge, lift that bale, never get a little drunk and land in jail.

Proportional misrepresentation

We have today been treated to the most blatant challenge yet to Gordon Brown's leadership of the Labour Party. One of the few members of his Cabinet capable of stringing together a sentence without using jargon has called for a referendum on our voting system. Writing in The Times, Alan Johnson called today for the next general election to be accompanied by a referendum in which we would be given the choice of retaining the present first-past-the-post system and something called "alternative vote plus". In doing so he knows there is virtually no chance of it happening, but that is not what troubles me.

A referendum is a serious thing. In my lifetime there has only been one for voters in England and the same one is the only one in history for voters throughout the whole United Kingdom. It was held in June 1975 and concerned our membership of the European Economic Community. The referendum was held as a direct result of a general election manifesto commitment by Harold Wilson's Labour Party to hold a referendum on continued UK membership of the EEC once his best efforts to re-negotiate the terms of our membership of the EEC were known. The general election was held in February 1974 and the re-negotiation took almost a year (another general election occurred in this time, in October 1974). By mid March 1975 a new deal had been reached and the following month Parliament voted for a referendum.

Membership of the EEC was a very hot topic at the time. It split both main parties then as membership of the EU (an entity those arguing for continued membership of the EEC in 1975 said was never a prospect) does now. Politicians of both parties expressed their views freely and it was one of the most widespread topics of debate. The referendum was held not just because of the February 1974 manifesto promise but also because the issue was a festering sore, a big red boil that needed lancing. One way or another an answer had to be provided so that the country could move on from an argument that threatened to engulf every aspect of political debate.

Today, completely out of the blue, we find a cabinet member arguing for a referendum on something that was nothing more than an aspiration in general election manifestos. The Labour Manifesto of 1997 included these two sentences tucked in the middle "We are committed to a referendum on the voting system for the House of Commons. An independent commission on voting systems will be appointed early to recommend a proportional alternative to the first-past-the-post system."

The "independent commission" was headed by former Labour Home Secretary and Chancellor of the Exchequer, Roy Jenkins. Labour's Manifesto for the 2001 election watered down the position put forward in 1997. After mentioning that the new devolved authorities for Scotland and Wales, the London Assembly and European Parliament elections had different electoral systems they said: "We will review the experience of the new systems and the Jenkins Report to assess whether changes might be made to the electoral system for the House of Commons. A referendum remains the right way to agree any change for Westminster."

Showing no evidence that they had undertaken the promised review, their Manifesto for 2005 abandoned any proposal for altering the voting system to the House of Commons saying: "Labour remains committed to reviewing the experience of the new electoral systems - introduced for the devolved administrations, the European Parliament and the London Assembly. A referendum remains the right way to agree any change for Westminster."

This is hardly the necessary background for holding only the second national referendum in history. The issue wasn't on the national radar in 1997 when it was a firm manifesto commitment, since then it has even been dropped in importance by the Liberal Democrats who have argued for proportional representation for decades. So, why is it now important? The simple answer is that it is just as important or unimportant as it ever was. What it is not, however, is something to be sprung on us with no more than a year to the next election. The Jenkins report might have recommended "alternative vote plus" and I might have heard or read about it at the time, but it rings no bells in my drink-sodden mind.

I am no fan of proportional representation systems because I believe it is healthier for one party to be able to do its worst and be shot down than to have a series of compromise solutions that satisfy no one. That, however, is not my objection to Mr Johnson's proposal. Mr objection is that the issue is far more complex than choosing between the current system and a proposal Mr Johnson's government has abandoned. If the current voting system is to be challenged through a referendum it should only be after full debate about all the options. I find it fundamentally objectionable that an idea should be brought out of mothballs and presented as not only the solution to current ills but the only possible solution. And why is it said to be the solution? Because of a plea to authority. An "independent commission" considered the matter and we should bow down and accept their wisdom. A wisdom which, as far as I am aware, has not been adopted in any other country. No, it doesn't work like that.

The issue needs mature consideration, not a knee-jerk reaction.

The upside-down Archbishop

One of the greatest challenges for those interested in politics is to decide where to draw the line between political and personal criticism. As a general rule, the higher someone climbs up the greasy pole of political power the more open he or she is to personal attack. Jeremy Clarkson famously described our current so-called Prime Minister a "one-eyed Scottish idiot", I suspect he would not have described Gordon Brown in that way were he a junior minister. As a matter of inescapable fact he would still have been a one-eyed Scottish idiot, but he would not have been in the firing line for that sort of personal attack.

High rank puts one in the firing line for personal attacks whether or not they are fair or accurate. It's part of the territory - set yourself up above the little people and the little people expect a lot of you. In real life it is necessary for some to be above the little people. Like it or loath it, we need government and that means we need government ministers, and that means we need a hierarchy of government ministers, and that means there is someone at the very top of the pyramid. The higher you climb the more we little people will expect of you and, it has to be said, the more you will profit when your time in office has ended.

Let's go down a few ranks to workaday MPs. They don't have the glory of wielding real power but they are the Parliamentary representatives of all their constituents, on average something like 80,000 people. Of that 80,000, on average something like 78,500 will earn less than an MP's salary. Only a very few of those that earn more than their MP will not be under any pressure to justify their income. Maybe they are authors or musicians raking in royalties, or the sons and daughters of wealthy people living on the produce of historic family investments. Such people are few and far between. The other high earners are in business and answerable to customers and/or shareholders every day of the year. MPs' customers are their constituents, the vast majority of whom struggle to balance the family books from one month to the next. News that our MP has been paid by us for a personal rather than a work expense might receive a "tut, tut" when times are good, but in a recession it receives a "how dare you?"

The single reason we criticise our MPs for using loopholes and manipulating the rules as we might in our lives (if only we could) is that they are above us. They are above us constitutionally and practically, so we have every right to expect them to behave at least as ethically as they tell us to behave. That we might have turned a blind eye for years is neither here nor there, when circumstances change so does the way we all look at things. In particular something we would not have been too concerned about at one time can become a matter of fundamental importance which must be changed. There is no once and for all, right-or-wrong assessment of the matter. In relation to MPs' expenses/allowances it cannot rationally be said that the widespread criticisms being made of MPs now lack merit because they were not made before, nor can it rationally be said that we were wrong not to raise these criticisms earlier. It is all a matter of context. For example, adultery by senior politicians was far more of an issue after John Major launched his "back to basics" campaign than it was before because the government was openly promoting fidelity. Similarly, hearing politicians from all sides tell us to tighten our belts because of recession makes their financial waistlines fair game for comment.

Only time can determine when the criticisms have run their course. It's not like a guillotined debate in the House of Commons in which a vote is forced after a certain time whether everyone with a desire to speak has had their turn, these criticisms will be made by real people for as long as they feel there is a need to make them. Any MP who resigns or announces they will not seek reelection might find they drop off the comment radar, any who do not answer criticism satisfactorily will find they are just delaying the inevitable. In an article in yesterday's Times newspaper the Archbishop of Canterbury said "the continuing systematic humiliation of politicians itself threatens to carry a heavy price in terms of our ability to salvage some confidence in our democracy." I could not disagree with him more.

What is happening now is an essential part of a mature democracy. You do not damage a system based on the notion of representation of the people by forcing the main representational institution to meet the standards required of it by the people. No damage is being done to confidence in our democracy, only to confidence in the way Parliament is behaving. The answer is to force it to change, and that is happening. It is happening because, not despite, "continuing systematic humiliation of politicians".

Confidence in democracy is a deeply ingrained cultural force in Britain. Democracy is often described as the least bad system of government but it is much more than that. It is something that helps to hold the country together. We all know that our personal, individual power to change the law or influence government policy is so small as to be virtually nil, we also know that both the law and policy can be altered where the public mood (expressed in countless different ways) is so strong that government and Parliament have to accede to that mood. In recent times we have seen significant changes of policy on petrol taxes, the 10p income tax rate and, most recently, rights of settlement for Gurkhas; all of them brought about by public pressure and criticism. This has not damaged our democracy, it has enhanced it by showing that it works.

The only way our democracy can be damaged is by damaging the ability of the little people to influence the big people. If it takes the humiliation of dozens of big people in order to ensure that influence remains in place, so be it.

Euro-elections and MPs' expenses

We are now just a couple of weeks away from the elections to the European Parliament and little is being heard about it above the noise of the expenses scandal. I have tried casting my mind back to the last lot of Euro elections to see whether I can remember there being much excitement then, sadly, memory is there none. Why, I wonder, can't I remember? I remember general election campaigns and even some aspects of local election campaigns, but nothing about Euro elections.

I think it's probably a consequence of what Euro elections are. Voting for an MP or local councillor means voting for someone with a direct part to play in the implementation of policy and the making of law (Acts of Parliament in the case of an MP and by-laws in the case of a councillor). The number of MPs/councillors elected for each party determines the form of the national or local government that rules over us. For all the deficiencies and quirks in the first-part-the-post constituency system and, indeed, in the amount of power political parties have over elected representatives, at least the outcome of the election decides who governs and sets the strength of their nominal majority in the chamber. Returning an MEP to Brussels has no discernible effect on policy or on the structure, form or political balance of the ruling EU elite.

So what can we vote for in the Euro elections? What issues are there? It seems to me there is really only one issue and our votes are just a glorified opinion poll on that issue - do we want to stay in or do we want to get out? The policy of all three main parties is to stay in the EU. They don't campaign by promising they will actually achieve anything if elected because they know they can't; they angle for support because votes in any election strengthen their overall domestic position.

An interesting side-issue arising from the MPs' expenses fiasco is that it shows how public opinion can bring about change regardless of the voting strength of the parties in the House of Commons. Fiddles of a few hundred pounds here and there have raised a stink just as much as profiteering by tens of thousands on sale of a house paid for by the taxpayer. Neither the government nor the opposition parties can ignore the fuss because it is engulfing the whole country, there is simply no buffer between them and us, no insulation to allow them to carry on as they wish. By contrast far greater corruption goes on within the EU institutions. MEPs can and do draw many thousands in perks, allowances and so-called expenses. Commissioners receive substantial salaries and simply enormous fringe-benefits including pensions so sweet they would make real people cry. When exposed to howls of derision among the little people over the failure of the EU's accounts to pass audit and the lack of controls over MEPs troughing, nothing changes. Nothing changes because change can only come from the self-appointed EU elite who are not subject to any direct pressure from the serfs. They serve their time, pick up their massive salaries and are replaced by their friends. Neither the ballot box nor public opinion has any influence at all.

The row over MPs' expenses shows a strength of our democratic system. When something is sufficiently repugnant to normal standards of fair play there are avenues through which it can be addressed. Those avenues are not restricted to the ballot box. Genuine disquiet can cause a major change in Parliamentary procedures or in government policy whatever the result of the most recent general election. The effect of public opinion does not operate outside the democratic system, it is part of it. Indeed it is more accurate to say that elections are just one way in which public opinion influences the way we are governed.

Public opinion is irrelevant to the workings of the EU institutions. It is irrelevant because there is no mechanism for it to operate on those workings and, more significantly, it is irrelevant because the institutions exist not by the will of the people but by the will of a self-perpetuating political elite. It is an elite that has devised a system to give it powers wholly removed from the democratic process. If we ever want an example of the importance of retaining a direct link between the will of the little people and the activities of a ruling elite, the expenses row is it. Manipulation of expenses rules to the personal benefit of MPs existed because it could. The corrupt ones, supported at every turn by the hopelessly incompetent trougher-in-chief known as the Speaker, fought tooth and nail to keep their practices secret but eventually the truth came out and now they have to face the consequences. For many of them those consequences will be dire, so be it, that's the price you pay for cheating. Yet that price can only be exacted for so long as there are both means of exposing corrupt practices and the will to combat those practices. The latter is wholly lacking in the EU institutions.

In or out? That's an easy question for me. Contrived arguments about the EU having kept the peace in Europe can be stuck where the attendance allowance doesn't shine, not only are they factually unsustainable but they are also now irrelevant. Dissolve the whole EU today and there won't be war or any threat of war between France and Germany - forget Italy, Spain and the rest, the only fear of serious western European war in the last century has involved those two countries. Contrived arguments that a free market, or anything approaching a free market, between European nations requires centralised political control are patently absurd. Both the EU and the USA have defined free-trade agreements with numerous countries without any need for the blending of governments. Arguments about how much money membership of the EU costs the UK and how much departure from the EU would harm our economy are neither here nor there. Figures given by protagonists on both sides are always selective, hypothetical and/or exaggerated. If we gain, great. If we lose, we lose.

To me it is a matter of self-determination. Only self-determination by nations states can create the circumstances necessary for stable society (I have opined on this point before). Only a direct link between the will of the little people and the power of the ruling class can keep political misbehaviour and corruption to the minimum. That link is impossible on any scale larger than the nation state and, let's be frank, it's difficult enough even in a small country like the UK. Leaving aside any other aspect of the in-out debate, this one is utterly persuasive for me.

If it ain't working, fix it

In the real world, if something doesn't work it is abandoned. It might have seemed a good idea at the time and its intended outcome might have been a great boon to mankind and to fluffy bunnies, but if it doesn't work it doesn't work so we say "nice try, bad luck" and we move on. Abandoning an unsuccessful experiment can be very expensive for those engaged in the project. History is littered with many thousands if not millions of "greatest inventions since sliced bread" that never got anywhere near the toaster let alone were buttered and consumed. Countless inventors and investors have lost every penny pursuing an idea which either failed to meet its potential or failed to find a market. Because that's what real life is like - someone has an idea, it seems like a good idea so it is tried. If it seems like a really good idea initial failure might justify further attempts. Always, sustained failure results in abandonment. The money required to continue the experiment can no longer be justified so the tap is turned off.

This illustrates one of the many fine qualities of money. Money allows us to measure success or failure of every commercial project. We can tell from a profit-and-loss account whether it has been a financial success to date, if it hasn't yet made a profit we can tell by the level of loss incurred whether it has a decent prospect of becoming profitable within a reasonable time. Money not only allows us to measure how successful a commercial enterprise is, it also provides a means by which we can assess whether a commercially unsuccessful venture should be continued (through private or public subsidy) because it provides a benefit that is perceived to be affordable. For example, a local council might operate a swimming pool and choose to spend up to £100,000 of taxpayers' money subsidising it each year; once running costs exceed entry fees by more than £100,000 questions will be asked about whether it should stay open. The mere fact that the swimming pool has been built and provides a benefit can never justify limitless spending on it. Some would say no such subsidies should ever be given, others might argue that £200,000 is the correct maximum figure, but whether a subsidy is given and if so how much it should be are decisions taken with an eye to money - the universal means of measurement.

Some areas of government expenditure cannot easily be assessed in monetary terms. The armed forces, the police, prisons and the fire service can only be effective if they have a certain number of front-line personnel and the equipment necessary for them to do their work. The level of necessary service determines how much must be spent, it is not possible to say "we can afford half a billion for the police and that's that". Of course countless arguments can be had over what level of service is appropriate, how it should be organised to get best value for money and whether there is a sensible role for the private sector, but at heart these services must be funded according to need (however you wish to define that) and cannot or should not be limited by purely financial considerations. The central point about these services is that they are protective services, they exist to prevent trouble and to protect us when trouble brews.

Other so-called public services are not protective in nature, they are intended to provide a positive benefit rather than to protect us from a threat. Health, education, refuse collection, laying and maintaining roads, providing street lighting and many other things are essentially commercial activities being carried out by one arm of the State or another. Some of them are usually provided by private sector businesses but paid for from taxation, road maintenance and refuse collection being perhaps the most widespread examples of this.

Not so long ago refuse collection was manged by local authorities and performed by people employed directly by them. In many areas the task has now been contracted-out to private businesses who are paid less than it cost the local council to run it's own service and are subject to a contract requiring them to provide a service at least as good as the one they replaced. As far as I am aware, no council has chosen to revert to the old system once a contract with a private provider has expired. No doubt one reason for this is that a council would incur a substantial cost in buying or hiring the necessary lorries and installing managers on its payroll but the more compelling reason is that the work is a service which is best left to the private sector because only that sector is subject to market pressures to keep its costs as low as possible, not least because they do not have to battle against the monopoly public-sector unions. The provision of refuse services is a normal commercial exercise. Local authorities specify the service they require, price is a matter for negotiation and the result is a binding contract. There is an important public health element to the work but so there is in the supply of all sorts of goods and services, appropriate contractual terms and general legal obligations on suppliers ensure (insofar as you ever can) that health is not adversely affected by the identity of the supplier.

The effectiveness of private-sector delivery of services such as refuse collection can be measured by money. Once the standard of required service is defined it is a matter for competitive tender who can give the purchaser (the council) the best price. That these tenders will be pitched at a level that allows the supplier a profit does not mean that the state sector could provide the same service at a lower cost in particular because working practices in the state sector are not subject to the same constant pressure to be efficient as the private sector because the provider is also in charge of paying the bills.

When it comes to health and education is there any reason to believe the private sector will provide an inferior service? After all, non-state schools and hospitals have to provide what their customers want or they lose business. MRSA infections don't happen in private hospitals because a single occurrence could cost the business millions in lost custom. Indiscipline and a failure to teach to a high standard can have the same effect in private schools, so it just doesn't happen. It doesn't happen because the system is designed to deliver a service not to deliver a political agenda.

The NHS doesn't work. It doesn't do what it was set up to do. Part of the problem is that it is not operated as it was intended by its founders to be operated. The original idea was for it to be a universal health service funded by insurance but operated as the best private hospitals and general practices were operated. Instead it has become a perpetual opinion poll, fiddled with by government after government with at least as much of an eye to political advantage as providing a service. There is now about twice as much money in real terms being pumped into the top of the NHS as twelve years ago. It hasn't resulted in twice as good a service at the bottom, despite the efforts of the vast majority of doctors and nurses to do their very best by every patient. The NHS is the largest single employer in the western world and it has the highest rates of hospital acquired infections of any developed country. It simply isn't working.

State schools don't work. They don't do what they were set up to do. Levels of general numeracy and literacy at age sixteen are pitiful. Far too many bright children are not stretched as they should be to develop their analytical powers. Universities have to hold remedial classes for those who have splendid examination results on paper but struggle in real life to construct a sentence. It simply isn't working.

Why have these failed institutions not been farmed-out to the private sector which has a long record of providing a better service for a lower cost? No doubt part of the reason is the desire of politicians to use health and education as measures of the success of their time in government. If they had any sense they would realise they are onto a hiding for nothing in the long term. A system that cannot deliver, cannot deliver. You can fiddle with it to your heart's content but it still won't deliver. You can boast of so many more billions being spent on the NHS or school and, as we have seen, you can win elections, but a system that cannot deliver, cannot deliver.

The central problem is that additional money is pumped in at the top rather than the bottom. Pumping in extra money at the top means, in the mind of government, that there must be additional oversight of how the bit that gets down to the coal face is spent. Ah, but there's more, you can't just pump money in and distribute it to everyone, you have to choose where it goes. That requires committees. Extra committees to deal with the extra money. And if more is getting down to a region the region will need an extra manager or ten to supervise it, and every hospital will need an extra manager or five to report back on how it is being spent. The whole system doesn't work. It's almost as far as it could be from Beveridge's idea of a private system funded by public insurance.

In the real world a system that doesn't work must be replaced, root and branch if necessary. We are seeing at the moment how the public have a taste for radical change where systemic inefficiency, waste and corruption are to be avoided. Today it is MPs' expenses and allowances, this is the perfect time to widen the debate and expose systemic inefficiency in the state delivery of services. Strike while the iron is hot and tomorrow we can spend less and receive more.

A useful Act of Parliament

Here's a thought, all ideas for improvement welcome:

An Act to Confirm the Honesty of the Members of the House of Commons

Section 1:
(1) All property real and personal paid for by the Second Homes Allowance is and always has been owned by the Crown save to the extent, if any, to which any Member of the House of Commons has contributed to the purchase price.
(2) Any payment of interest on any loan taken out for the purpose of the acquisition of real property and secured on that real property shall be treated as contributions towards the purchase price of that property for the purposes of sub-section 1 of this Section.

Section 2:
(1) Upon a Member of the House of Commons ceasing to hold that position (whether by death, failure to secure re-election or in any other way):
(a) all personal property paid for, in whole or in part, by the Second Homes Allowance shall within 7 days of the Member ceasing to be a Member be surrendered physically to the Crown, and
(b) all real property paid for, in whole or in part, by the Second Homes Allowance shall within 21 days of the Member ceasing to be a Member be sold at public auction.
(2) The Member shall, on ceasing to be a Member, have the right within the periods specified under sub-section (1) of this Section to purchase all or any of the real or personal property purchased in whole or in part through his Second Home Allowance.
(3) For the avoidance of doubt the power contained in subsection (2) of this Section may be exercised by the personal representative of any Member whose demise causes sub-section (1) of this Section to operate or the personal representative of any Member who dies within the periods set out in sub-section (1) of this Section.
(4) In the event of a Member or the personal representative of a Member exercising the power contained the sub-section (2) of this Section, the price to be paid by him shall be determined by agreement between the Member or the personal representative of the Member, as the case may be, and such person as shall be nominated for that purpose by the Comptroller and Auditor General. In default of such agreement the real or personal property in issue shall be dealt with in accordance with sub-section (1) of this Section. Upon the Comptroller and Auditor certifying that additional time for negotiation is required the Speaker for the time being of the House of Commons may, at his absolute discretion, allow up to a further 28 days for agreement to be reached and sale to be completed.
(5) The price payable by any Member or personal representative of a Member in exercise of the power contained in sub-section (2) of this Section shall take into account such contribution, if any, made by the Member towards the purchase price.

Section 3:
(1) This Act shall apply to all Members of the House of Commons on the commencement date and shall apply to all real and personal property, whenever acquired, paid for through the Second Homes Allowance of all such Members whether such payment or any part thereof occurred before or after the commencement date.
(2) This Act is intended to ensure that the Second Homes Allowance does not allow Members to make a profit but to be reimbursed for out of pocket expenses and it must be construed to meet that intention.

Schedule
Commencement : as soon as possible.

The irrelevance of MPs' additional income

The latest government initiative is to try to deflect attention from the dishonest profiteering of Labour members through the generous MPs' expenses rules. Gordon Brown wants MPs with paid employment outside the House of Commons to declare how much they earn because he believes, probably correctly, that more Conservatives than Labour members have such jobs. As I understand the current rules they have to declare sources of additional income but not the amount received. On tonight's Question Time we had the usual "balanced" panel of two Labour Party supporters, one hard-left Welsh Nationalist, one Lib Dem and one Conservative. On this topic being reared we heard exactly the type of confused, ignorant and envious arguments Gordon sought to elicit.

Those arguments were three: (i) MPs should work only as MPs otherwise they can't do the job properly, (ii) they get paid enough so taking other work is just greedy and (iii) they shouldn't do other work because being an MP is a career in itself.

The first of these points is quite stunningly absurd, yet it was pressed to the hilt by the Labour MP on the panel, Hilary Benn, a cabinet minister. Perhaps the heat of the studio lights caused him to forget his own position. He has two jobs. He is an MP and he is a government minister. I have never heard anyone suggest he is unable to represent his constituents adequately because of the time taken to do his other work. I have to be fair and acknowledge that ministers receive additional secretarial assistance to help them deal with constituency correspondence. No doubt some routine enquiries from constituents which would otherwise be dealt with by the MP himself are instead delegated to assistants, but that does not mean that the heavy burden of cabinet office leaves the minister's constituents unrepresented.

In any event, whether a particular MP represents his constituents adequately cannot be judged by whether he has other interests (be they paid work, needlepoint or watching large ladies wrestling in mud), it can be judged only by how he does his job as an MP and his constituents are the sole judges of that. Some MPs don't do a good job as constituency MPs even though they devote all their time to it, others have the ability to do all sorts of additional things without ever providing a less than first class service to those they represent. I would rather have as my MP someone who is able to do a lot of things well than someone who is either frustrated by being limited to only one role or struggles even to do that. We have all met people with extraordinary amounts of energy and who operate at a level of efficiency we could not dream of meeting. You see it in every walk of life and no one would think of saying that those who are capable to doing more should be prevented from doing so (although the EU does its best through the working time directive).

On the second point a lady in tonight's audience bristled at the thought of the Conservative MP on the panel earning £24,000 from a non-executive company directorship in addition to his MP's salary. She observed that many can only dream of earning £24,000 for their only job at which they work long hours. No doubt that is true, but it is neither here nor there. After all, those people would not be filling the vacancy if the MP were forced to resign that directorship. I wasn't sure whether her point went any further than just expressing envy at the MP's fortunate position. I suppose it is possible that she was arguing for an absolute income cap at the rate of pay received by MPs (£64,700, I believe), no, that can't be possible, it's just too absurd for words. It seems to be part of the character of many Brits these days to act with spiteful envy towards those with more money than them. Perhaps this is not surprising given the levelling-down culture that permeates state education and much of the output of television, it will take a long time to turn it round if ever the will exists to do so. In the meantime all that can be done is to argue against it point-by-point. In the case of the MP earning an additional £24,000, there is no benefit in depriving him of that income (and the Exchequer of the top-rate income tax paid on it).

In relation to this second point a further and very important issue arises. Learning how much MPs earn from consultancies or directorships tells us the cube root of nothing about anything relevant to how they do their work as MPs. As I mentioned above, some have the ability to undertake all sorts of additional work while representing their constituents very well, others do not. Take two MPs of identical ability who each can take on one consultancy or directorship requiring twenty days' work a year and still be good MPs. Twenty one days and their constituents suffer, nineteen days and they have a wasted day on their hands. One takes a consultancy for twenty eight days and received £10,000, the other takes an identical job for twenty days and receives £25,000. The amount paid to them tells us nothing, indeed it is entirely misleading because the one earning less is compromising his role as an MP whereas the other is not. The figures of how much they earn are meaningless except in stoking envy among Labour's core voters and, presumably, increasing their chance of voting Labour at the next election.

The third point is, perhaps, the most worrying of all. For a good twenty years we have seen a steady fall in the calibre of MPs and ministers as more and more "career politicians" have filled the House of Commons. Only one member of the current cabinet had anything even vaguely approximating to a successful career before entering politics. Some of them practised law at a junior level for a few years, at least one was a teacher for a decade or so, the rest (apart from Alan Johnson) have been full-time career politicians since university. Mr Johnson was a postman and rose through the ranks of a Trade Union to a senior position. Only he had a career first and then entered politics, all the rest have so little experience of the outside world that it is hardly surprising the current government is a complete shambles with no grasp of the real consequences of their policies.

I am sure poor Gordon will shore-up a tiny part of his party's core support among the bitter and envious by this measure, but it is yet another piece of shallow and meaningless political gesturing from a man who is proving every day how he has nothing else to him.

Another day, another slap in the face for Gordon

There was always something slightly surreal about Gordon Brown's intervention last week into the debate on MPs' expenses. With the Committee on Standards in Public Life only part-way through its research and deliberations he tried to short circuit the whole process with a clumsy announcement projected through YouTube and the proud assertion that the House of Commons would be voting on his big idea on Thursday of this week.

Today his plan has been abandoned, so certain is he that putting the matter to the vote will result in yet further humiliation for this most incompetent of Prime Ministers. It is not the substance of his argument that I want to address today but the way he chose to put it forward. If there is one thing that runs through the blood of people who have had to argue points for a living it is the knowledge that there is no such thing as a guaranteed winner. So often we think of a proposition and cannot see how it can fail to be accepted, only to find that our opponent in the debate or the arbiter of the proceedings throws out a question or counter-argument that cuts the ground from under our feet. It's not that we have been careless or sloppy in our preparation or presentation, it is just that no one can think of everything from every angle. That is one reason we choose to decide legal proceedings and settle laws through a process of debate in which propositions are put forward and examined. All sorts of good ideas turn to dust when their practical implications are exposed or the theory underlying them is seen to contain a previously undetected flaw.

And you know what? It takes guts and skill to stand up and argue a point. You have to be able to respond substantively (if you can) to all sorts of assaults on the proposition you are putting forward. It is not an exercise for the faint hearted or for those lacking mental and linguistic dexterity. The reason we use that system is that no better way has yet been devised. An essential aspect of it is that someone has to lose. It can be disappointing to lose a debate, it can even be embarrassing if your argument is shown to be wholly without merit, but that soon passes, you have to be able to cope with it or you shouldn't be playing the game in the first place.

Poor Gordon's attempt to by-pass debate by announcing his ill-thought out plan and demanding that the House vote on it a week later is troubling in several respects. First, the issue is not for government but for Parliament so it was not for him to seek to preempt the process. Secondly, the sensible way to deal with it was to make his idea known and allow it to be considered along with all others rather than to force it through. Thirdly, trying to use this issue for party political advantage through YouTube was absurdly clumsy. When full details of MPs' expenses claims are published in the summer his party will be hammered left right and centre, trying to appear virtuous on the subject now could only make the fall even steeper. Fourthly, and most importantly, arguing his case on YouTube is a cowardly way to avoid challenge.

It is quite obvious what he was seeking to achieve, he wished to show himself as a decisive and incisive leader on an issue that has caused public uproar. If you are going to follow that path you have to do so bravely and with a well formulated solution to an urgent problem. Yet even then, sneaking your idea through the back door rather than having the courage to state it to the House of Commons and have it debated means that you prevent the very acclaim you seek.

On a wider point, it is also troubling to find two important announcements being made by senior ministers through YouTube in one week. Mr Darling spoke about the economy and now poor Gordon has spoken about MPs' expenses. No doubt some bright spark in the government spin machine thought it would be a good idea to connect with the little people directly through a popular medium and without the restrictions applicable to party political broadcasts on television and radio. If so they must disabuse themselves of the idea forthwith. No doubt it is very convenient to have a free platform to say what they want without questioning or contradiction, it certainly works to the advantage of the leaders of North Korea. But at a time when politicians are held in probably as low public esteem as ever in modern history the very last thing they should be doing is avoiding open debate.

Capital gains in the trough, an answer

Following on from the interesting comments under my previous piece I want to make clear my position about what MPs should and should not be allowed to claim by way of the second home allowance.

For the reasons I set out on Sunday, I think it is only fair that MPs who have to take on an additional home in order to fulfill their duties should have the reasonable costs of doing so reimbursed from the public purse. The main reason I believe this is that it would be quite wrong for an MP for a far-flung constituency to have to spend a substantial proportion of his salary on something that is necessary for his work whereas an MP for a London seat would not have to do so. From that starting position a number of questions arise.

First, how much should they be allowed to spend? Clearly there must be an upper limit. Currently it is just under £24,000. I am not minded to disagree with that figure because I am not in a position to say whether it is too high or too low.

Secondly, what particular expenses should be included? To my mind the only supportable answer is that the additional costs the MP incurs, over and above the costs he or she would incur if living in their constituency home. This means that it is not just the acquisition or rental costs of the second property that should be allowed but also a reasonable sum to kit it out with furniture and the usual kitchen and laundry appliances. In most cases it would also be fair to include things like cutlery, crockery and bed linen because it will not be practicable to split existing supplies used by the MP in the constituency home.

Thirdly, what should happen to the things paid for out of the public purse? This, I think, is the key to the whole issue. We needn't worry about a few napkins or fish knives, it really is neither here nor there whether these are retained by an MP when he is voted out. The honest ones will donate them to a charity shop or pay the Treasury a rough estimate of their value. The greedy will just take them anyway but at such minor cost to the taxpayer that there is no need to make a fuss. It's houses and flats that cause problems because substantial capital profits can be made during the course of a five-year Parliament, profits that result from money spent by the taxpayer not the MP. I'm not sure why this is seen to be an insoluble problem, because it arises frequently in the real world and the law has had an established answer for many years.

Let me introduce you to the resulting trust.

Say Alice, Bill and Charlie have been flatmates while at university. They graduate and start work, still sharing a rented flat. They decide to buy a property together and each chips-in a different proportion of the deposit and a different proportion of the interest on the loan required to buy the property. Who owns what? They might all have their name on the Land Register as owners of the property, or just one might be the registered owner, it doesn't matter either way. The law imposes what is known as a resulting trust so that each owns a share of the property equivalent to the proportion of the purchase price he or she has paid (interest payments being treated as contributions to the purchase price because they are a necessary part of the process of purchase). There are circumstances in which this general rule does not apply, but we needn't trouble with those for present purposes.

The general principle of the resulting trust is very simple and very fair. If you have paid 60% of the purchase price and someone else has paid 40%, you receive 60% of any profit or incur 60% of any loss on the transaction. You can't say fairer than that, you pays your money and you takes your chance. If Alice, Bill or Charlie pays less than one third they can hardly complain if any capital gain accrues to the benefit of the flatmate who has put more into the deal.

It seems to me that the resulting trust provides the perfect answer to allegations of MPs profiteering from houses and flats bought in their names but at taxpayers' expense. To the extent that an MP makes payments towards the purchase price out of his own resources, it is fair that he should share in the proceeds of any subsequent sale in proportion to his input. If all he has done is live in the place he can have no complaint about those who have paid for it receiving every single penny when it is sold.

Stamp Duty Land Tax - a red herring in the trough

Day by day further examples are given of MPs, including government ministers, being recompensed by the taxpayer for the sort of ordinary living expenses we little people have to pay from our own shallow pockets. Mr Kitchen has a helpful summary of the most recent exposures, expressed in his customary forthright terms. Outrage has fumed from all quarters and accusations of fraud and theft are rife. I want to look at one aspect of the matter in which I believe the criticism to be ill-founded.

Take two MPs, one representing a rural constituency 200 miles from London (Outer Farflung) and the other representing an area of inner London (London Nicepart). Each is paid the standard salary of £64,766. Whether we think that salary is too much, too little or just right, it is the set rate for the job and each is entitled to receive it. Each is allocated an office in Parliament but no staff. It is unrealistic to expect them to be able to perform their duties efficiently without at least one assistant to help with correspondence and at least one researcher to help keep him abreast of current legislation and other matters relevant to any particular issue the MP wishes to promote or question. These staff could be employed directly as civil servants and allocated to MPs randomly but conflicts of personality are much more likely to arise under such a system rather than where each MP hires his own staff subject to an overall cap on the cost. Whatever system is in place, some MPs have special interests in areas that require more research help than others, so it would be unrealistic to expect each to spend exactly the same.

The big difference between the two MPs is that one cannot readily commute from home to Westminster whereas the other can hop on a bus or tube train and get there in a few minutes. It makes no sense at all to expect the MP for Outer Farflung to pay out of his salary for accommodation in London in addition to his home in his constituency when the London-based MP does not have to do so. A second home allowance of some kind seems inevitable otherwise MPs representing areas outside reasonable commuting distance of London will, in effect, receive salaries substantially lower than some of their colleagues.

The MP for the constituency of Outer Farflung might rent a property in London or he might buy. If he rents he risks having limited security of tenure and having to move several times during the course of a five-year Parliament. I would suggest that would not be conducive to the proper performance of his duties and that buying a flat or house is a perfectly sensible course to follow. That being the case, there will be costs associated with that purchase. Because the purchase is only made necessary by virtue of his need for a London base to allow him to represent his constituents to best advantage, I see no reason why he should have to bear the costs of purchase. Say he buys somewhere for £350,000, even after recent falls in prices this will hardly buy a palace. Among the costs of purchase will be Stamp Duty Land Tax of £10,500. Much has been made today of MPs being able to reclaim this tax, but the system would operate very unfairly if they were not allowed to do so. The MP for Outer Farflung would have to fork-out more than one fifth of his net first year's salary whereas the MP for London Nicepart with a home close to FatBigot Towers would not.

There are plenty of valid objections to the way the second home allowance operates, in particular that it can be manipulated by MPs to make profits rather than to reimburse necessary expenses. But I can see no valid objection to the reimbursement of Stamp Duty Land Tax itself, it is a genuine expense for those who follow the reasonable course of buying somewhere to live in London in order to allow them to do their job.

Whatever other complaints we might have about trough-swilling politicians, the reimbursement of a genuine expense is not one.

Now, let me see ...

A number of prominent news stories crossed my mind today as I watched England's cricketers limp and hobble their way to failure in Antigua. My thought-process was: Antigua - cricket - Stanford - anti-terror laws - banks - Madoff - MPs' expenses.

Nothing is as big in Antigua as cricket. For those who don't follow these things, England were scheduled to play a match against the West Indies on Antigua's new ground last week but it had to be abandoned after a short period of play because the ground was unfit. To the enormous credit of Antigua's cricket authorities a replacement match was arranged at very short notice on the island's old ground, and it is that match that ended today with England snatching a draw from the jaws of certain victory. Antigua's greatest living hero is the retired cricketer Sir Vivian Richards, a man of fearsome talent who graced the professional game for about 20 years from the mid 1970s. Sir Viv was knighted in 1999 under the system of honours set up by his home country the previous year.

There are not many Antiguan knights, another is a fellow by the name of Allen Stanford. Sir Allen Stanford has dual citizenship, being American by birth and having adopted citizenship of Antigua & Barbuda in later life. He holds a lower rank of knighthood than Sir Viv, which might explain why The Times refers to him as Mr Stanford. He hit the front page of The Times today as a result of having got himself into a bit of a pickle with his accounts. All sorts of allegations are being thrown around but the only thing that is known for certain is that no one seems to know what has happened to the money paid to his financial and banking businesses. Time will tell whether he has also been in the baking business and has been cooking the books. Sir Allen Stanford rather enjoys cricket and has sponsored some vastly remunerated tournaments. That, however, would appear to be all in the past because the US financial authorities are investigating his businesses and have frozen his assets.

For more than a day Sir Allen was nowhere to be seen. Noted for his keenness to be photographed as well as his love of cricket, it seemed somewhat odd that he was not lording-it-up with Sir Viv and the rest of the West Indian cricket glitterati, but champagne and dolly birds were there none. He'd done a runner. Where had he gone? No one knew. It can't have been the US because their impeccable anti-terrorist border security systems will have made it instantly apparent that he was there. Ah, woops. He was found in Virginia as the result of a tip-off. When discovered he was served with legal papers relating to the freezing of his assets and of those of his businesses. One of those businesses is the Stanford International Bank which boasted of making extraordinarily large profits for investors year-on-year. Once rumours circulated of the investigation by the US authorities there was a run on the bank and a number of governments had to intervene to stall claims while investigations continue into whether it is a Northern Rock with bad investments or a Ponzi scheme with no investments.

Obvious parallels are being drawn with the recently-exposed Madoff fraud. Whether there is a true comparison will only become apparent later in the course of the enquiry, but what is clear is that nothing is clear. Nothing is clear because the accounting practices adopted by the Stanford Financial Group's accountant (allegedly a one-man firm operating from a small office above a fish and chip shop) were not concerned with transparency. Lack of transparency does not itself cause fraud, but it does allow fraud to go undetected. Madoff took advantage of this for years, as did many fraudsters before him.

It's not just fraud that can remain hidden where rules do not require absolute financial candour. Similarly, the need for candour in financial dealings is not just so that fraud can be eliminated. Companies insist on receipts to back up expenses claims because they only want to pay for expenses that were actually incurred and they need to be able to prove those expenses further along the accounting chain. That they also want to ensure their employees are not cheating them is part of the story, but only part of it. The other part is the need to ensure money is being spent for proper purposes. And that's how my brain arrived at MPs' expenses.

If ever there is a proper use of the phrase "if you have nothing to hide you have nothing to fear" it is in relation to "expenses" payable by the taypayer to those who sets the levels of tax. Transparency is the only way to deter jiggery-pokery.

Hapless Jacqui performs a public service at last

One of the most important aspects of the rule of law is that we are all entitled to use the law to our best advantage. The most obvious example of this is probably tax law in which there is a clear difference between minimising your tax liability by taking advantages of exemptions allowed by law (known as tax avoidance) and simply fiddling the figures thereby not paying tax that is due by law (tax evasion). Arguments surface from time to time whether it is morally reprehensible to take advantage of so-called "loopholes", and predictable positions are taken according to political belief. Those who believe in big government see it as a disgrace that government should be deprived of a single penny it might otherwise receive, those who believe in the rule of law say any objection to avoidance must be addressed by changing the law to remove the loophole.

There has long been a fine irony thrown up by such a debate. Those who argue against avoidance generally use the technicalities of the law to their advantage and the advantage of causes they support in all fields other than tax, and those who say "if you don't like it, change the law" are often first in line to tut-tut at alleged criminals escaping conviction by relying on the Human Rights Act or technical "loopholes" in the laws under which they are prosecuted.

Of particular interest to me are the more radical elements of the left who know every rule book of every organisation they wish to infiltrate and take systematic advantage of the rules to get their way. Somehow their hypocrisy over tax avoidance is particularly stark because they fight hardest to use "loopholes" to their benefit and argue loudest against others doing the same.

Apparently an advertising leaflet used by the government to attract the most politically-correct to fill specious non-jobs also prints editorial opinions and is campaigning against companies avoiding tax despite doing exactly the same itself. It is a fine example of the absurdity that arises when there is no principle behind a so-called point of principle. What possible objection can there be to individuals or companies only paying the amount of tax the law requires them to pay? I can't see one. Any who think they themselves should pay more tax can make additional voluntary payments or pay a lump sum to a charity of their choice in order to both assuage their consciences and be seen to be practising what they preach.

There is only one point of principle here, that everyone is bound by the law. Either we have defined laws or we have arbitrary rules applied according to the whim of public officials. We have chosen the former course for very good reason. If you want to argue for the latter option, by all means do so but be ready to be a victim of it yourself when the government of the day is no longer your government of choice.

We see similar lines of argument arising over MPs' expenses, in particular their right to claim certain housing costs. Today the hapless Home Secretary is exposed as taking fat financial advantage of laxly defined rules. Despite her utter unsuitability for the high office she holds, hapless Jacqui Smith is unlikely to be so stupid as to have broken the rules, time will tell. My addled brain wonders whether there is a difference in principle between what she has done and what a lawful tax-avoider does. Assuming she has kept within the rules, each has used the current law to their personal advantage and in doing so has affected the size of the Treasury's black hole. But maybe there is a difference.

When asking how much we should take from our pockets and give to poor Gordon, the natural starting point is that what we have received belongs to us unless the law says otherwise. From that starting point, a close investigation of the immensely complex web of tax legislation and regulations can be undertaken to see exactly how much we are obliged to hand over. In the absence of a legal obligation to pay poor Gordon, our position stays as it was, namely that our money remains our money. In a way it is no different from going to the butcher and asking the price of a pound of chuck steak, he defines how much it costs and we pay that much. Tax law is just a very complex price list.

When it comes to MP's expenses the position is different in one respect. Their expenses fall into two categories. There are genuine expenses such as stationery and telephone costs where the MP has to write letters and make calls in order to do his job properly and the costs of doing so are just like the expenses any employed person might incur in the performance of their job. Some have to write more letters and make more calls than others and it would be unfair if it had to come out of the basic salary. The murky side of things arises in relation to allowances. As I understand it these are sums which MPs may spend if they wish but which they are under no obligation to spend. Top of the murk parade is the second home allowance. Those whose constituencies are not within very very easy commuting distance to London may claim the cost of a second home, up to a maximum annual figure. We can debate whether an MP for a constituency in, say, Hampshire really needs a London home when the train service is so good they can get door-to-door in less time than it takes by car to cover ten miles in the London rush hour, but that is not the point of this piece.

The allowance exists and it is up to each MP to decide whether to use it and, if so, to what extent. In this respect it is different from tax avoidance. Tax avoidance is about people investigating how much (more accurately, how little) they are obliged by law to pay from their own pocket. MPs' second home allowances are about how much the MP requires the taxpayer to pay. In other words, one is about spending your own money and the other is about spending other people's money. If there is one lesson to be learned from the universally bankrupt religion of socialism, it is that nothing is easier than spending other people's money.

There is no legal obligation on any MP to claim the maximum possible sum for their additional housing requirements. Sadly examples are legion, from both political parties, of MPs doing exactly that. The Home Secretary's position is particularly bizarre and, on the face of it, dishonourable. She lives with her sister when in London but has a house in her constituency. Her husband and children live in the constituency home and by any normal definition that house is her first home. Assume you ran into her on holiday and don't know who she is. You get chatting over a glass of lentil juice and she tells you of her happy marriage, her two delightful children and her busy life as a civil servant which requires her to stay with her sister in London during the week. You ask where her home is, what would you expect her to say? Her sister's place or the house she and her husband own and where he and their children live permanently? There's no contest. She lodges with her sister and lives in her constituency. Yet she nominates her sister's house as her first home for the purpose of raking in taxpayers' cash and says her own house is her second home. That way she can claim up to £24,000 a year for her own house (an allowance she has, apparently, claimed in full some years).

Both hapless Jacqui and the careful taxpayer are using the relevant law and regulations to their benefit. The crucial difference is that the taxpayer is not asking anyone else to pay him anything and he has no control over how the law and regulations apply, he just arranges his affairs so that he loses as little money as possible. Hapless Jacqui, on the other hand, has to pay for her house anyway because her family live there and she needs a base in her constituency. She could, if she had concern for the public purse and were not just out to get as much as she can for herself, charge just the cost to her of living with her sister. Somehow I doubt she pays her sister anything like £24,000 for her room and use of the facilities; whatever she does pay is the true additional cost to her of the second home she needs in London in order to carry out her work as an MP. She has the choice of charging her employer, the taxpayer, the true additional cost (just as real expenses are charged in the real world) or pretending her own house is a second home in order to get us all to pay her mortgage and other costs for her real home.

You can forget any moral duty to pay more tax than the law requires, that is just fantasy. But when MPs have to choose between homes for the purpose of claiming an allowance there is a clear moral duty to impose the lowest possible burden on the taxpayer, to do otherwise results in the taxpayer paying for housing costs the rest of us have to bear out of our income.

There is, it seems to me, a simple mechanism to prevent this sort of dishonourable conduct. When an MP is elected for the first time he or she should have three months (or six, or nine, it matters little) in which to find themselves a base in London if they need one. In their first year they can claim for the reasonable cost of equipping that property up to the current financial limit of the allowance. At the end of their second year in Parliament, and at the end of every year thereafter no matter how long they are an MP, they must declare the costs each year of both their constituency property and their London property. The allowance will be paid equivalent to the costs of the cheaper of the two, subject to an upper limit. Not only will this help the more simple-minded like hapless Jacqui to behave themselves, it will also be a constant reminder that expense accounts are for the purpose of reimbursement of work-related expenses not personal profit.

It is very kind of hapless Jacqui to bring the current disgraceful state of affairs to public notice, at last she's done something useful.

A suggestion about MPs' pay

There is something malodorous about MPs having the power to set their salaries and expenses allowances. Yesterday's debate, concentrating as it had to in present circumstances, on expenses did nobody any favours. Those opposing an increase opened themselves to accusations of pious hand-wringing, those supporting it could be accused of greed at a time when their constituents are having to tighten belts to an alarming degree.

Salary and expenses are very different things and must be looked at separately.

If people of substance are to be encouraged to stand for Parliament it is certainly necessary for a reasonable salary to be paid. I doubt, however, that there is any good reason for that salary to be more than would be considered subsistence wages for a successful professional person.

The present system involves the Senior Salaries Review Body trying to compare the responsibilities of MPs to those of others paid by the public purse. There is a serious problem with this approach because it is unrealistic to compare all MPs to a colonel in the army, a police superintendent or a head teacher (the level of comparison which is made). No colonel, superintendant or head teacher can gain that position in the absence of many years of proven good quality work. Now more than ever the House of Commons is full of young party flunkies. That it also contains many people of genuine quality who can boast successful careers outside party politics does not disguise the fact that a large proportion have never had a real job and have no legitimate claim to comparison in either proven skills or experience with anyone other than middle managers in minor industries.

To argue that top money must be paid to attract top people into Parliament is pure hyperbole. Show me the top people who will stand for Parliament if only the salary were doubled and I might accept there is something to the argument, but I know of no one in that position nor have I ever heard it suggested that there are people in that position. Indeed, if there is an untapped bubble of brilliance give them peerages and an attendance allowance so they can continue their careers and pop into the Lords to help out when their expertise would be beneficial. And then show me how many MPs could command their current salary in the outside world. Many could, of course, but I wouldn't mind betting a pork pie to a pork scratching that a good 40% would not get within spitting distance.

What I suggest is that MPs' salaries are set for a full Parliament. When Parliament is dissolved the level of pay for the next Parliament should be fixed and should stay constant no matter how long until the next dissolution. Those thinking of standing for election who feel they would not be sufficiently remunerated can withdraw and make way for others.

When it comes to expenses there are far too many examples of snouts in the trough (as the great Mr Fawkes and Mr Kitchen have exposed in their blogs - I would add links but don't know how). But I want to look at the system because snouts can only dip into the warm sticky swill if the trough is reachable.

MPs outside a reasonable commuting distance of Westminster do need a London base, it would be unrealistic to say they should not also have a base in or near their constituencies. It is, in my view, reasonable for them to be compensated for at least some of the additional costs of having to run two homes rather than one. What is not reasonable, however, is that they should ever be able to make a capital gain out of the arrangement, particularly a capital gain on their extra home in London. Any money paid by the taxpayer towards mortgage interest or capital repayments should give the taxpayer equity in the property. The percentage equity should be in direct proportion to the amount the taxpayer has paid towards the purchase price compared to the amount the MP has paid.

A capital gain or loss only arises when the resident MP no longer wishes to live there (either because they choose to move or because their constituents become their former constituents). Like the rest of us, while we live in our homes the notional market value is just a figure, a gain or loss can only be made on sale. If the house has risen in value the taxpayer is the appropriate person to reap the benefit, if it has fallen in value the Treasury can decide to sell it at a loss or, more sensibly, it could form part of a pool of houses owned by the Treasury and made available to MPs from outside commuting distance. No chance of personal benefit from expenses = no swill.

When it comes to televisions, fridges, new kitchens, dvd players and the like the sums are so small for any individual MP that they really do not matter - allow them or disallow them it will make no great difference. But for everything that is allowed, there must be a receipt and it must be published. Woe betide the MP in a marginal constituency who draws an annual salary of £60,000-odd and claims a £700 plasma telly when his constituents' pre-tax income averages £23,000.