Let’s pay MPs less

Another year, another inflation-busting pay rise for MPs. Over the last decade or so, it has become one of the most predictable — and irritating — rituals in British politics.

From April, MPs’ salaries will rise by 5% to £98,655 a year. On paper, that might not seem outrageous, but context matters. This increase is being handed out at a moment when the British economy is barely growing, we’re hurdling towards a record-high tax burden, and millions of households are seeing their living standards sliding backwards.

What makes this even harder to swallow is the gulf between the political class and the people they claim to represent. Last week, the public was treated (or subjected) to the spectacle of dozens of MPs taking part in a group dance lesson with Strictly Come Dancing stars inside the Parliamentary estate. While it may have been intended as harmless entertainment, the image of politicians happily twirling around while the Middle East explodes in flames and living standards at home come under ever more pressure was too much to stomach. The phrase “fiddling while Rome burns” sprang, uncomfortably, to mind.

Still, perhaps they felt they had something to celebrate — namely, a bigger pay packet.

MPs’ pay is set by the Independent Parliamentary Standards Authority (IPSA), which increases salaries each year using formulas that bear little resemblance to the economic reality facing the country. And even though MPs claim this situation is out of their hands because a quango deals with their pay, if politicians really wanted to do something about the automatic uprating of their pay, they could. IPSA was created by politicians and given the power to set their salaries, so logically, it can be changed by them.

It is a neat little arrangement which virtually no MPs (bar Rupert Lowe) have actually criticised or pushed back against. The public bears the consequences of political decision-making, while the politicians remain insulated from them.

For years, the TaxPayers’ Alliance has argued that this system is fundamentally backwards and that if politicians genuinely believe the policies they pursue are improving the country’s prosperity, then their own pay ought to reflect that reality. Instead of automatic increases handed out regardless of performance, MPs’ salaries should be linked to GDP per capita, which is the clearest measure of whether ordinary people are actually getting richer or poorer.

Had MPs’ pay been tied to GDP per capita over the past decade, their salaries today would be around £12,000 lower than they are now

For context, had MPs’ pay been tied to GDP per capita over the past decade, their salaries today would be around £12,000 lower than they are now. In other words, politicians would have directly experienced the economic stagnation that their decisions have inflicted on the country.

Naturally, defenders of the current system insist that higher pay is necessary to attract talented individuals into politics, with some going so far as to argue that MPs should be paid significantly more. According to this theory, raising MPs’ salaries will encourage brilliant people from the private sector to enter politics. It sounds persuasive, but that’s probably not how it would work in reality.

Simply paying today’s crop of politicians more will not magically transform them into visionary statesmen, but it will funnel even more taxpayers’ money into the pockets of politicians who already appear remarkably comfortable with the status quo and who too often behave like glorified local councillors rather than national leaders. Even if it brings in a slightly higher-calibre of person, it also won’t help with the problem that we need politicians with principles and beliefs, not just politicians who can decode a company’s accounts.

Critics of linking MPs’ pay to economic performance commonly raise the spectre of Goodhart’s Law: the idea that once a measure becomes a target, it stops being useful. They warn that politicians would simply manipulate economic statistics to boost their own pay. And this objection might carry more weight if the proposal tied MPs’ pay to total GDP.

Total GDP can indeed be massaged through government spending, accounting tricks or population growth. GDP per capita adjusts economic output for population size, therefore providing a far more accurate picture of whether people are actually becoming better off. And right now, that picture is bleak.

While the headline economy has managed to scrape together marginal growth, GDP per capita has declined for two consecutive quarters. In simple terms, the average Briton is becoming poorer even as the overall economy appears to stand still and therefore is in a “personal recession”.

Linking MPs’ pay to GDP per capita over a rolling five-year period would ease this tension. If living standards rise, then MPs would benefit alongside the public. On the other hand, if the country becomes poorer, politicians would share at least some of the consequences of the policies they pursue.

For ordinary taxpayers looking in from the outside, who watch their politicians prance around with TV dancing stars one moment and stumble through basic arguments in the Commons the next, it is hardly unreasonable to ask a simple question: why exactly are we paying these people more every year?