Pay freeze for MPs in 2012/13

MPs' pay is to be frozen at £65,738 for 2012/13, it was announced today.

The Independent Parliamentary Standards Authority (Ipsa) also recommended a 1.85% increase in MPs' pension contributions.

And it said it will consult on a 1% pay rise for the years 2013/14 and 2014/15.

Ipsa chairman Sir Ian Kennedy said: "We have been given responsibility for reviewing and, as necessary, reforming MPs' pay and pensions.

"We are exploring the broader question of how to reform MPs' remuneration to make it fair to MPs and taxpayers alike and, crucially, how to make it sustainable.

"In the meantime, we must be mindful of the conditions in the rest of the public sector where pay has remained static and where settlements will see most people pay more into their pensions too.

"While we address the longer-term changes which are needed, I believe it is right that we act in the interim so that MPs' circumstances more closely reflect those experienced by others."

Ipsa's decision means that MPs' pay will be frozen for a second year in succession.

Last year, the Commons agreed to forgo a 1% hike recommended by the Senior Salaries Review Board after Prime Minister David Cameron said they should turn it down.

The power to set MPs' pay was handed over to Ipsa at the end of last year, and this is the first time it has passed judgment on what rise is appropriate.

Under the new rules, Ipsa's decision is final and does not have to be approved by a vote in the Commons.

Announcing its decision, Ipsa said it was "appropriate" for MPs to share the burden at a time when public sector workers were experiencing pay restraint and being asked to contribute more to their pensions.

The watchdog said its decision also recognised the vote in the House of Commons last year calling on Ipsa to increase pension contributions in line with the public sector.

The proposed 1.85 percentage-point increase in contributions would be an interim measure, while Ipsa carries out its longer-term review of pay and pensions, due to be complete by the end of 2013.

Unusually, in their current pension scheme, MPs can select the rate at which they accrue benefits - whether in 40ths, 50ths or 60ths of their annual salary. Those selecting 40ths are facing a rise in contributions from 11.9% to 13.75% of salary, those on 50ths from 7.9% to 9.75% and those on 60ths from 5.9% to 7.75%.

In recognition of the already high contribution that some MPs make to their pensions, Ipsa is also consulting on allowing them to change the rate at which benefits accrue. If they choose to reduce the rate of accrual, their contributions would be lower but so too would be the benefits they receive from the taxpayer.

Matthew Elliott, chief executive of the TaxPayers' Alliance pressure group, commented: "At a time when there is a pay freeze across the public sector, it ought to go without saying that MPs should be subject to the same treatment.

"It would have been unthinkable for them to get a rise when everyone else is feeling the pinch.

"The 1.85% increase in the contributions that they will have to make to their generous pension scheme is also to be welcomed.

"It remains our view that, in order to maximise accountability, MPs should set their own pay and costs at the end of each Parliament for the following five years.

"That way, voters can factor their MP's judgment about his or her own pay into the decision they make at the general election that follows about whether their representative deserves re-election."

Ipsa is planning to announce its decision on pay in the next Parliament - expected to run from 2015-20 - by the end of next year.

Mr Cameron welcomed Ipsa's decisions.

A Downing Street spokeswoman said: "The Prime Minister welcomes the decision taken by Ipsa on MPs' pay and pensions, ensuring that MPs are in line with other public servants, and welcomes the changes that they continue to introduce to help MPs perform their duties.

"The Government is committed to an independent and transparent system for the regulation of MPs' expenses, which Ipsa has introduced.

"Ipsa does an important job and should now be allowed to continue with it."

Ipsa said the Government actuary had estimated that the 1.85% increase in MP contributions would save the taxpayer £700,000 a year.

The consultation document said NHS workers earning the same as MPs will be paying an extra 2.4% from April.

"We recognise that there are several factors particular to the MPs' scheme, including the current high level of contributions (and benefits) and the higher normal pension age of 65," Ipsa stated.

"We therefore propose to apply a slightly lower increase than that being applied to similarly paid workers (who by and large pay lower contributions and have a lower normal pension age).

"That said, we propose that MPs pay a higher increase than the average increase paid in other public service schemes."

PA