Sunday, 5 April 2009

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.


Mark Wadsworth said...

TFB, I could launch into a 10,000 word essay here on the way that MPs have tweaked the tax rules to exempt all their property gains, or how SDLT is (taken in isolation) a totally evil Jealousy Surcharge that ought to be rolled into a flat Land Value Tax for all.

But I won't. It's time for me to go to bed.

TheFatBigot said...

My complaint is about them making a profit, whether by way of tweaking the tax rules or anything else. Provided they don't make a profit and cannot claim as "expenses" anything the little people cannot also claim as "expenses", I don't have a problem with the reimbursement of genuine expenses necessarily incurred in order to allow them to do their work.

For the reasons I gave, I cannot see SDLT as anything other than a valid and recoverable expense provided the property in question is genuinely required to allow them to do their work properly.

Pete said...
This comment has been removed by the author.
Pete said...

But when we have examples of people actually buying their houses out of allowances, surely, when they leave Parliament the house should belong to the Taxpayer not the MP?

james c said...


I think people are objecting to the MPs paying a capital cost out of their annual expenses.

There is no reason for this as the stamp-duty could be added to the mortgage debt, and the MP would reclaim the interest expense.

TheFatBigot said...

I agree, Mr Pete. The whole idea is to be fair to MPs, not to add to their salaries or their capital assets.

TheFatBigot said...

Mr James, I think the first point you make is valid. But why do people object? It seems to me that they object because the MP gets to own the property and, therefore, to benefit from any capital gain.

There would be no difference in substance if SDLT were added to the mortgage and the taxpayer paid the interest.

In all the many recent examples of objectionable troughery we have seen one or both of two things.

First, making a capital gain through a system which is intended to reimburse expenses rather than result in a profit.

Secondly, manipulating the first home / second home designation so as to get the taxpayer to pay for things that are not (under any plausible definition) additional costs incurred by the MP by reason of having to take on additional accommodation in order to do his or her job.

I am sure the valid objections are all about MPs making a profit out of a system which is designed to prevent a loss. They should be breaking-even, no profit and no loss.

Ayrdale said...

FB, have you met Butch ?

Strikes me he's a tad unappreciated...

james c said...


People object to MPs making a tax-free capital gain.

TheFatBigot said...

Mr James, I object to them making a capital gain at all.