Secretary of State for Northern Ireland

Rt. Hon James Brokenshire MP

Secretary of State for Northern Ireland

Northern Ireland Office

Westminster

London

INTEGRITY OF THE SYSTEM FOR PAYING MLA SALARIES AND EXPENSES

We are writing to you as the former members of IndependentFinancial Review Panel in the NI Assembly to make representations on measures we consider essential to ensure the future integrity of the Assembly. Should Direct Rule become necessary, we would wish the Order in Council to limit all claims and payments to MLAs to a 3 month period only.

The Panel was set up by the Assembly Speaker and Commission in 2011. Over its lifetime it radically reformed the expenses system. The IFRP awarded MLAs a substantial pay rise – the first in almost 12 years – but funded this through changes in the arrangements for MLA expenses and pensions and reducing waste. We also delivered a net cash saving of over £0.5m per annum

Panel members collectively left post in June 2016 when our appointments expired. In law the Panel still exists but all the posts are vacant. The Assembly Commission has failed to start any process to replace us. We understand that this is becausethe two major parties are unable to agree on how this should be done or what the future shape of the system might be. The impact is that there is now no externaloversight on the arrangements to pay salaries and expenses to MLAs and Ministers, nor is there any ability to change theexisting system which will continue until legislation is changed or a new Determination issued by a revised panel.

Looking at the overall political situation we assume it likely that a new Executive will not be appointed soon and that a period of Direct Rule may therefore follow. It is in that context that we feel we should bring certain matters to your attention at this stage as the Assembly has appeared incapable or resolving these and they have a direct bearing on public perception of its future integrity

PAYMENTS TO MEMBERS IN THE EVENT OF AN ASSEMBLY SUSPENSION

Our understanding of the current situation is that, post election, successful candidates will attend the Assembly and sign the Assembly Roll. They will then immediately be entitled to payment of all salaries and expenses – around £130k / member / year

We are very aware that during the suspension of the NI Assembly from 2002 to 2007 special provision was made for the payment of MLAs salaries and expenses, we believe at a rate of 66% throughout the suspension. From our work when the Panel was first formed under the 2011 Act we became aware the period prior to our formation was characterised by significant abuses in the expenses system. These included

• widespread diversion of funds for constituency work to the coffers of the political parties. This ranged from paying Political Parties amounts of up to £7k per MLA for unspecified ‘central services’,and for specific issues like ‘Press Services’, with no rationale for why this should have been paid from public funds
• nepotism in appointments of staff by some MLAs and sometimes a simple disregard of basic employment law
• the award of service contracts to a number of companies and bodies associated with some Political Parties and individual MLAs where there was no evidence that work was done or services provided. It was also noted that as soon as these arrangements became public some of the companies ceased to trade.

We stress that these issues did not apply to all MLAs but they were a significant and widespread problem

Given our work and the general public disquiet expressed to the IFRP in every public consultationthe Panel undertook, we must stronglysuggest that paymentsto MLAs in the absence of a functioning Assembly and Executive would be publically regarded as unjustifiable. Also, that any future system for payments to MLAs needs strong and independent administration, supervision, and audit. If the Government is therefore forced tosuspend the Assembly by Order in Council we strongly recommend that you consider strictly limiting the period for which members may draw salaries and expenses – perhaps to a period of 3 months to allow completion of any negotiations. We do not even see why expenses should be paid for this period as these are supposed to relateto the management of MLAs constituency offices and without a functioning Assembly the work that can be done in these is very limited

FUTURE ARRANGEMENTS TO DETERMINE MLA SALARIES

The IFRP Determination and Report 2016 strongly recommended reform of the future arrangements for determining and managing MLAs Salaries and Expenses. In the event of Direct Rule, these should be a condition imposed before any return to a devolved NI Assembly.

The Panel was created in 2011 because of the impact of past scandals on public perception of Stormont politician’ssalaries and expenses. At that point the then Speaker and his Commission had a real desire to protect the reputation of the Assembly and reform the existing system. We set out to regularise this situation by progressively defining tighter controls. Given the culture we found among some MLAs, this developed into a process of attrition.

We are proud of what was achieved despite the limitations of the powers of the Panel under the amendments to the 1998 Act and the 2011 Act. These limitations included:

• the absence of formal powers for the Panel to seek information on expenses or make enquiries;
• a limit that, other than in exceptional circumstances the Panel could only issue one Determination in each Assembly. This meant that, if some members found a way to avoid controls we had tried to impose, we might have to wait 4 years to close any loophole. This in turn forced us to issue very proscriptive, detailed and legalistic Determinations to try to limit avoidance or unintended administrative practices;
• although the Panel defined the rules for payment, those were ‘interpreted’ by Assembly Staff who also supervised and controlled the payment systems as directed by the Chief Executive who was directly answerable to the Commission and had to follow their directions. There was evidence within the system of some MLAs and political partieslobbying to make payments that had been rejected and that members aggrieved at a refusal of payment lobbied the Commission through Party whips seeking to have the decisions reversed, although the Commission itself has denied that this took place.

In developing our final Determination in 2016, for example, we carried out a benchmarking test on a small sample of data in which we found that implementation of the 2012 Determination had been delayed by a number of months by agreement with one party and discovered around 15 additional cases where there appeared to be flagrant failure by MLAs to follow the rules, particularly in the award of contracts for services. This led to a majordispute when Panel members were forced to challenge this publicly and then found themselves criticised in a coordinated attack on the floor of the Assembly by the DUP and SF who claimed thatthe payments were appropriate and attacked the panel for challenging them. Six months later in the Assembly Accounts the Chief Executive was forced to admit that many our concerns were justified, but stated that the Assembly Commission had decidedthat it should not to take any formal action against the members concerned nor seek any recovery of irregular payments.

We must stress that the amounts involved in manyof these cases were quite low although several were over £1000 and one near £5000. Again, when exposed, matters like this cause disproportionate damage to public confidence in the integrity of the Assembly and our politicians

In our collective view just replacing the Panel and leaving the management and administration of MLA remuneration, pensions and expenses payment systems in the control of the Commission and Speaker will not resolve the issues, nor restore public confidence. This is not the fault of the Chief Executive and Assemblystaff as they are employees of the Commission and are required to follow their instructions and influence. In our view it has however, led to interpretations of Panel Determinations which have negated their clear intent and were contrary to public interest. It also led to the part-time Panel having a succession of secretarial arrangements where there was a lack of continuity, downgrading, and lower priority attached to our work.

Given the experience of the IFRP over the 5 years up to July 2016, in our Final Report (available at www. ifrp.org.uk) we recommended that the Assembly should replace the Panel with a NI equivalent to IPSA, with full administrative and investigative powers over MLA financial matters. We understand that nothing has been done about this because, whilst the then First Minister publicly appeared to support this model, SF and some other parties are opposed. We also understand that numbers of MLAs actually want a relaxation of the existing rules with an expanded Panel containingseveral former MLAS who “will be more sensitive to the needs of members”.

We also recommended that should a fully Independent Panel be established, it should also control the payments made by the Assembly to Political Parties – known in the Assembly as Financial Assistance to Political Parties (FAPP) , and equivalent to Short Money in Westminster. We know that thisproposal will be strongly opposed by all the major parties here who are keen to control any access to funds by smaller parties. Our reason for supporting this is simple – in our experience the vast majority of malpractice we have seen in the expensessystemhas been for the purposes of party funding, not personal gain. NI is also unique in the UK in that the vast majority of FAPP money goes to the parties in power in the Executive whereas, at Westminster for example, the Party in Power does not get short money which funds the opposition’s ability to discharge its responsibilities

At the very end of the Panel’s existencewhen the Opposition was being formed in the Assembly the Panel wished to consider if, within its powers, it should make provision for additional expenses for the Opposition Leaders posts. We met fierce resistance and, in the end, were unable to complete the necessary legal steps before our term of office expired. Again we made recommendations in our final Report.

SUMMARY

These are all matters which have consistently led to serious publicconcerns in NI. They have spawned at least two major investigations by BBC Spotlight where, despite very serious allegations, the Assembly has, in our view, frustratedproper investigations by not reporting matters to the police or making formal complaints. It has been perfectly entitled to do so in law – and that is part of the problem as we see it.

We believe that as a Panel we were able to make significant reforms in the system, fairly reward MLAs and save public money year by year – but that work now needs to be carried forward. We therefore strongly recommend that, if Direct Rule has to be imposed, in that period you consider:

• a 3 month time limit for remuneration for MLAs,
• immediate protective notice for their employees.

also, as a condition to returning devolved powers to the Assembly there should be time bound commitments to a new Assembly bringing forward legislation, or the Westminster Parliament amending the NI Act 1998 to provide:

• a new fully independent Authority/Panel with powers to investigate, assess and report cases to the Assembly Standards and Privileges Committee or PSNI as it sees fit and to publish full details of claims and payments.
• That Authority / Panel needs to have a corporate structure that guarantees its independence from the Assembly – for example by being created as a Corporation Sole
• transfer of responsibility for all paymentsfor MLAs to that Authority/ Panel
• transfer of responsibility for developing a fair system for Financial Assistance to Political Parties to that Panel.

As former members of the Independent Financial Review Panel of the NI Assembly we are firmly committed to having an effective working Assembly that people can trust and which will build public esteem. We believe that the majority of individual MLAs act with integrity and will share that view

In your role as Secretary of State we are confident you share our aspirations for probity and good governance and may be able to use your good offices to bring about much needed reforms as outlined above. If any further clarification is required we would be happy to hear from you.

Best wishes,

Yours sincerely

Pat McCartan CBE

Dr Etta Campbell CB

Alan McQuillan OBE