Sunday, May 17, 2009

What about MSPs' second homes?

The Scottish Parliament has, with some cause, been feeling rather smug about itself during the blazing row over MPs expenses. MSP well remember being laughed at by Westminster colleagues some years ago when Holyrood seemed mired in scandal over taxi chits, lobbying and second home allowances. The “bonsai scandals” of the Scottish Parliament, as they were called, were put down to inexperience by MSPs and their inability to 'handle' the media.

Papers like the Sunday Herald were criticised for damaging democracy by inquiring under freedom of information about the use of MSPs expenses. Trivial! A distraction! Not any more. These trivial issues have now plunged the Mother of Parliaments into its worst crisis since it the days of the suffragettes. Perhaps if Westminster had understood what was happening in Holyrood they might have avoided the scandal that has now engulfed them. For in its own chaotic way the Scottish Parliament was establishing the ground rules for the conduct of elected members in a modern, transparent democracy.

The Scottish Parliament had been designed to be much more open than Westminster. It was founded on the principle of freedom of information and grew out of the reaction to the sleaze scandals in Westminster in the mid 1990s. There are no archaic 'club rules' and no lobby to enforce them. MSPs are not seen to be above the law. The Presiding Officer in Holyrood doesn't have the power to enforce secrecy about members' behaviour. This presumption of openness made it inevitable that the financial conduct of MSPs would eventually be exposed to the light of day.

And that made it inevitable that the same standards would eventually be applied to Westminster. Democracy is porous. Heather Brooke, the freedom of information campaigner who pulled down the wall of secrecy about MPs expenses says she was inspired to persevere in Westminster because of the regime in Scotland. The Holyrood rules, she wrote in the Independent in April 2006, “make Scottish politicians some of the most accountable in the world”.

If Holyrood rules had applied in Westminster, MPs might not be suffering verbal assaults from their furious constituents. Honourable members might have thought twice about claiming for those trouser presses, hanging baskets, toilet seats and moats if they'd known their receipts were going to be published. They might have thought twice also about flipping their second homes to maximise their allowances. The very minimum that the public will demand now is that Holyrood's standards are applied in Westminster.

However, before the back-slapping gets out of hand in Holyrood, there is one area in which both Holyrood and Westminster are still in the dock of public opinion: the question of the pile of cash many MPs and MSPs have accumulated through property speculation during the boom years. In the Scottish Parliament, this whole disreputable system is to be brought to an end by 2011, after which MSPs will no longer be able to claim for mortgages on second homes. They will have to rent or use hotels when in Edinburgh for parliamentary business. However, MSPs seem determined to sit on the tens of thousands of pounds they have already made playing the Edinburgh property market.

According to an analysis by the Sunday Herald yesterday, some 28 senior MSPs, who have been charging their mortgage interest on expenses, stand to share around £2m in 2011 when they sell up. Five MSPs could pocket over £100,000 tax free. In a variable property market it is impossible to be precise about home values, but the paper had its estimates validated by a leading estate agent. It is the last big perk, and the most difficult to deal with.

This is because there are a number of former MSPs who left the Scottish Parliament some years ago and pocketed thousands of pounds in capital gains. It is not going to be possible to recover any cash from them. However, this doesn't mean that those MSPs who have yet to realise their capital gains will be able to profit in the same way. I have some sympathy for MSPs caught in this dilemma – they have at least moved to end the abuse. But the public is in an ugly mood, and MSPs contemplating selling their second homes before the 2011 deadline will have to examine their consciences very closely before they decide what to do. The voters may decide that to take matters into their own hands.

However, at least Holyrood has faced up to the problem and resolved to end the second homes scam. In Westminster, both the Conservatives and Labour are proposing only to make MPs liable for capital gains tax on their second homes currently 18%. But why stop there? If the taxpayer has been paying the mortgage, then surely the tax payer should make the profit not the MP. Why should members like Greg Barker, who according to the Daily Telegraph made £360,000 on the sale of his London flat, keep any of this money? He hasn't earned it. Other MPs who rent when they attend parliament don't receive a huge cash windfall from the taxpayer.

When people look back on this era they will be amazed that MPs ever thought they had a right to plunder the public purse in this way. I think the sense of entitlement came from the strange psychology of the property bubble, when we all lost any sense of values. 'It's not real money' we said, just a 'paper profit'. But of course it is real money to anyone who is trying actually to buy a house right now. First time buyers in Edinburgh have to put up four or five times average earnings to get a poky one bed flat. That is a debt that will burden them for life.

MSPs and MPs weren't responsible for the property spiral, but they benefited from it and they allowed it to happen. If MPs and MSPs had had to pay huge mortgages out of their own pockets to get on the property ladder, I suspect the housing question would have been addressed with rather more urgency. Well, it's payback time. The public are furious. MPs and MSPs stand to lose a lot more than their windfalls if they don't act soon. You don't get second home allowances when you are unemployed.

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