Expenses reform: a tale of smoke and mirrors

 

OPINION:The attitude on political expenses still appears to be one of ‘if the member signs the form, we file it’, writes ENID O'DOWD

POLITICIANS’ EXPENSES are in the news again, and for all the wrong reasons. Doubtless politicians of all parties will argue that Senator Ivor Callely’s current difficulties relate to the old expenses regime and point out that a new transparent system was introduced in March 2010, involving a “clocking-in” system and expenses being published online.

It is true that the expenses regime changed this year, but did anything really change for the better?

In answering this you have to understand that politicians make the rules that govern their expenses – a unique situation not found in other employments. We citizens (the employer), whose taxes pay these expenses, have no say in the rules. And there appears to be an inconsistency in the Constitution between politicians and other citizens.

While Article 40.1 states that “all citizens shall, as human persons, be held equal before the law,” Article 15.15 states that “the Oireachtas may make provision by law for the payment of allowances to the members of each house thereof in respect of their duties as public representatives and for the grant to them of free travelling and such other facilities (if any) in connection with those duties as the Oireachtas may determine.”

So arguably politicians are more “equal” than other citizens. If an employer pays an allowance for travel to work there would be tax implications for the employee, as Revenue Statement of Practice SP-IT/2/07 makes clear. The Constitution was drawn up at a time when politicians were not paid as well as they are now, and the intention of Article 15.15 was presumably to ensure that politicians would not be out of pocket. However, it has in recent years been used to pay generous tax-free allowances for travel and subsistence, generally known as “turning-up money”, in effect a tax-free part of salary.

The new system effective from March 1st this year increased the amount of unvouched expenses paid automatically to members, and asks them to “certify retrospectively the following year that the amount paid to them under the regulations was applied in respect of expenses incurred within the relevant period”.

But what does that mean – that the member actually incurred all or at least most of the expenses paid automatically to him/her? The official reply to my query on this was to quote back to me the statutory instrument setting up the new regime which I quoted in my question! Which presumably means – if the member signs the form, we file it.

Under the pre-March 2010 regime, while some allowances were paid automatically, our politicians had, like any other employee, to complete the appropriate form and submit it for approval and payment. A daily rate applied to Dublin-based TDs and an overnight and mileage rate to TDs from outside Dublin. They claimed for the number of days they turned up over the time period of the claim.

Before Charlie McCreevy was appointed minister for finance in 1997, members had to give the dates on which they turned up. But one of the changes he made was to remove the requirement for the actual dates, making it difficult to check claims. McCreevy increased the Dublin “turning-up” money by 70 per cent from £26.40 to £45 effective from June 1997, and increased it again by 8 per cent effective from January 1999. He also introduced the Special Secretarial Allowance in 1998 which gave politicians the option of increased staffing and/or a combination of vouched or unvouched expenses in addition to existing allowances.

In September 2009 chartered accountant Tom O’Higgins resigned as chairman of the audit committee of the Houses of the Oireachtas over the lack of progress on the reform of expenses. Perhaps embarrassed by the publicity over his resignation, the Houses of the Oireachtas Commission – which consists of nine politicians from all parties and one employee of Leinster House – proposed a new regime to Minister for Finance Brian Lenihan which became effective last March.

Under the “reformed” system, members can receive €15,000 for general expenses (the public representation allowance), €12,000-€37,850 for travel and accommodation, and €8,000 for setting up a constituency office, which can be in the spare bedroom or anywhere as long as it’s not in the Dáil – without producing any receipts.

Clearly, many members could not have spent any sum approaching the travel allowances now paid to them.

Members living within 25km-60km of Dublin now receive €28,106 per annum, tax-free, to meet their travel expenses to work, and for constituency travel. This is more than some people earn in a year. Places such as Rush, Balbriggan, Naas and Wicklow are within this band. More locally based members such as those living in my own constituency of Dublin South East automatically receive € 12,000 per annum, which is more than a single unemployed person gets on the dole in a year. Other members, like Jackie Healy Rae, are entitled to a senior citizen’s travel pass but there is no requirement to claim it or to use it.

Politicians genuinely have much higher work-related expenses than other workers. But which of their expenses are wholly and exclusively related to doing their job and which are largely or entirely related to getting re-elected? The new regime does not address the issues of proper verification of claims, value for money for taxpayers, or tighten rules which were open to abuse.

While it is accepted that some Ministers regularly use their State car for private purposes, they face no benefit-in-kind implications, as workers with company cars do. While repayment of travel allowances where attendance is below 120 days is provided for, repayment can be avoided by successfully claiming there were “extraordinary circumstances” for poor attendance. The Ceann Comhairle or Cathaoirleach will decide on a case-by-case basis. And there is no provision for salary deduction for non-attendance without a valid reason. Members must refund unspent money from their annual public representation allowance. How the 50 per cent of members who have opted for the unvouched € 15,000 per annum can do this escapes me.

Only 10 per cent of members opting for the € 25,700 vouched scheme will be liable for audit. And, invoices retained by members in case of audit will not be available under Freedom of Information.

Even after recent public sector pay cuts, TDs receive € 92,672-€ 98,424 per annum, with more for office-holders and Ministers. And political parties receive generous funding under the Electoral Acts and the Party Leaders Allowance Scheme (€ 13.6 million in 2009).

The new expenses system will be reviewed next year. Real reform would involve accountability for every cent, but don’t bother writing to your TD about this. Our politicians, regardless of party, clearly feel they are entitled to their expenses whether vouched or unvouched. They make the rules, and turkeys don’t vote for Christmas.


Enid O’Dowd is a chartered accountant and writer working in Dublin

emodowd@gofree.indigo.ie