Nick Harvey: MPs should be able to profit from second homes'

by Stephen Tall on September 1, 2009

The south-west’s Western Morning News has the report:

A WESTCOUNTRY MP has told an official inquiry into the Parliamentary expenses scandal that politicians should be able to profit from their taxpayer-funded second homes. North Devon Lib-Dem MP Nick Harvey made the case in a six-page letter to the Committee on Standards in Public Life which has received more than 700 submissions.

Mr Harvey, who claimed up to £1,250 a month mortgage interest for his house in London, argued: “If making a capital gain is seen by some as a ‘crime’, then it is a ‘victimless crime’ because it does not add in any way to the taxpayer’s burden: it is simply a function of market movement.

“The MP has borne all the risk, which may prove painful for some in the current market, and maintained the property in marketable condition. The taxpayer could not be expected to bear any capital loss. The fair and equitable sharing of any capital gain is through the capital gain tax system.”

As the WMN revealed earlier this month, Mr Harvey also suggested that MPs outside London be paid a taxable and non-pensionable lump of £30,000, linked to inflation – based on the average cost of a hotel stay near Westminster and the number of nights MPs need to be in London. It would mean a massive cut in the allowances for MPs, leaving them with £17,000 after tax.

But, the Liberal Democrat frontbencher, went on: “In return for this huge reduction, and the MPs renouncing their tax privilege and moving onto the same basis as everyone else, the taxpayer would relinquish the recently acquired right to probe into MPs’ domestic expenditure.”

Nick’s position is at odds with party leader, Nick Clegg, who has decared his view that no MP should profit from a market increase in the value of their taxpayer-purchased second home. Nick’s full proposals for MPs’ expenses reform are available on his website here.

I have more sympathy with the views of Andrew George, also named by the Western Morning News as one of the MPs portraying themselves as a ‘victim’. Lib Dem Voice has already pointed out the gross unfairness of the Daily Telegraph’s reporting of Andrew’s expenses claims here. It is quite reasonable for those MPs who were trampled underfoot in the Telegraph’s stampede to ‘name and shame’ to set the record straight – Andrew George, Alan Reid and Jo Swinson (to name but three Lib Dems) are quite entitled to a moan given the shoddy standard of journalism to which they, and their families, were exposed.

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Surely a bigger slice of the profit than just the CGT belongs to the investors? After all, we gave him the money in the first place. And why on earth should we have to give MPs secrecy over their allowances again? We have aired quite the number of skeletons from a dusty closet.

by Robson on September 1, 2009 at 2:24 pm. Reply #

I get quite nauseated by the ridiculous and continual bickering over potential second homes’ solutions. The solution is quite simple: Publically owned accomodation in London for MPs. End of story. It doesn’t have to be a barracks. The public could easily buy up a portfolio of properties to suit MPs’ needs in much the same way as they currently buy homes now and charge the mortgage payments to the taxpayers.

by Paul Walter on September 1, 2009 at 2:54 pm. Reply #

As far as I can see, what Nick Harvey is proposing is that instead of dodgy ‘allowances’ based on more-or-less fictional ‘expenses’, MPs from outside London should get an upfront, honestly acknowledged, higher taxable salary, in recognition of the extra costs involved in their position (in effect the same principle as ‘London weighting’ in many public sector jobs, but reversed because of the different circumstances of MPs). In which case there wouldn’t be any basis or justification for scrabbling through MPs’ expenditure (not expenses) on mundane items because they wouldn’t be claiming for them, they’d just be getting the declared salary for the job. There’s nothing secretive or disreputable about that. Even his suggestion that MPs can keep the capital gains isn’t inherently unreasonable if they’re not claiming more money depending on how large a mortgage they get, because MPs really would be shouldering the whole risk and cost of the purchase. (If you think you’re still bearing the cost of the mortgage because it’s being paid for out of a salary you pay for, then you presumably think that your employer/customers pay for your mortgage, and you plan to return any profit you make on your house to them? No, of course not: because what they pay you was never explicitly linked to the amount of mortgage you pay.)

However, Paul Walter’s solution is still better. Let being an MP be a job that comes with tied accommodation, like being a warden or a caretaker or a teacher in a residential school. If you choose not to use it but to find your own accommodation, that’s your look-out. You’ve got a very large salary to make it possible, and it doesn’t need to be increased.

(By the way, one valid question is whether the portfolio of properties idea is too expensive: average allowances of £20,000 per year per MP would I think equate to a capital outlay of about £400,000 or so per MP. I don’t know anything about London prices – what could you buy for that?)

by Malcolm Todd on September 1, 2009 at 3:22 pm. Reply #

Thanks Malcolm. You’d just be replacing the public as the holder of the mortgage. So, if an MP is charging the public for a mortgage payment now, all that would happen is that mortgage payment would be made in future by the public directly, and the public would own the property, rather than the MP. So costs would remain the same. The only extra cost would be in managing the property portfolio and the furniture/fittings (I would suggest these are publicly owned also, and issued/returned to/from a central repository). But those management costs would be worth taking the whole thing out of MPs’ hands and be off-set by profits from modest sales/reinvestment over the long term.

by Paul Walter on September 1, 2009 at 3:32 pm. Reply #

Doesn’t he want to hold his seat?

by felix holt on September 1, 2009 at 3:43 pm. Reply #

If the MP’s risk making a loss on a second home then they should be able to make a profit within the existing rules/laws.

Given the current set up it is hard to argue with what Nick Harvey is saying.

Paul Walters idea with regards to tied housing is excellent.

by Martin Kinsella on September 1, 2009 at 4:03 pm. Reply #

“The MP has borne all the risk, which may prove painful for some in the current market, and maintained the property in marketable condition. The taxpayer could not be expected to bear any capital loss. The fair and equitable sharing of any capital gain is through the capital gain tax system.”

What utter bollocks. What risk? Even with the current downturn, anyone who bought a property 4 or more years ago has made money on it – from doing absolutely nothing.

The proportion of this unearned uplift on an MP’s second home that has been financed with public funds belongs wholly and completely to the taxpayer – all 100% of it. Nick Harvey’s assertion that it is ok for him to pay a mere 18% CGT on this value, while pocketing a massive 82% for himself, not only flies in the face of Nick Clegg’s line on the matter, but also 100 years of Liberal policy and any sense of moral decency. Harvey should be hung out to dry.

by Andrew Duffield on September 1, 2009 at 4:08 pm. Reply #

I also agree with Paul Walters suggestion. The accommodation should also be for the sole use and occupation of the MP and his or her immediate family while the MP is in residence. No other occupations of the property except as authorised. All net rents and profits from such authorised occupations to go to the tax payer. In the event of any unauthorised occupations the MP should forfeit the accommodation. I only spell this out as I can foresee abuses of the system

by Stanley Theed on September 1, 2009 at 4:09 pm. Reply #

Sharing Andy Duffields St Chads school of liberalism I have to agree with his comment and conclude – what a load of bollocks

by david on September 1, 2009 at 5:38 pm. Reply #

I thought we had been told that all the Lib Dem front-benchers had pledged to give back any capital gains on their second homes.

Is that not the case? Or has Harvey pledged to give back his capital gains while publicly arguing that he should have the right to keep them?

Bizarre.

by Herbert Brown on September 1, 2009 at 6:47 pm. Reply #

The idea of “tied accommodation” for MPs is ridiculous.

First, it assumes that all non-London MPs have their main residence in their constituencies. Some do, some (such as Nick Clegg) don’t, preferring to have their family home in London so that they can see more of their families.

Second, it would require a substantial capital outlay – at least 500 flats or houses costing between about £250,000 and £400,000 each – a total outlay of between £125M and £200M. Either that or ongoing rental costs that would be no cheaper than the current arrangements.

Third, parliament would have to pay the ongoing cost of some sort of estate management operation (whether it was performed in-house or farmed out to the private sector).

The result is that no public money would be saved – indeed, the net cost to the taxpayer would almost certainly be higher than the present arrangements. And for what? To throw some red meat to the Tory press.

The MPs’ expenses system needs thorough reform but we should not contribute to the anti-democratic notion that all elected representatives should be made to serve some sort of penance.

by Simon Titley on September 1, 2009 at 10:05 pm. Reply #

Well the way Nick Harvey carries on, he’ll be lucky to still be an MP this time next year. He is one of the most illiberal MPs who calls themself a Liberal Democrat. It’s a real shame he’s not been deselected.

by rob on September 1, 2009 at 10:56 pm. Reply #

Why are our MPs allowed to get away with this when they have signed a code of conduct? If I said things like this as a PPC I would pretty soon get picked upon, and rightly so.

by Biodiesel on September 2, 2009 at 12:58 am. Reply #

Simon – if it is “ridiculous” then why do Sweden and Australia use this model? The capital outlay would not be as you stated, as the State is able to get mortgages just as well as MPs are currently. The state would be paying the capital mortgage installments, granted, but not the vast outlay all at once which you outline. Some of the houses provided in the capital could easily be family ones. The ongoing estate management would be offset by profits from occasional sales coupled with purchases at lower prices, plus some remortgaging. For what? It produces a completely transparent system where there is clearly no advantage whatsoever for MPs and their hands are seen to be completely clean. It is not a “penance” to live in tied accomodation. All our armed forces do it, including Generals.

by Paul Walter on September 2, 2009 at 9:05 am. Reply #

The feeling of the public is that an MP owns a second home only by virtue of being an MP, the purpose of the second home is to enable the MP to have a home both in London and the constituency, there is no other reason for it. It therefore seems to me to be entirely correct that the ancillary benefit of capital gains should not also be enjoyed by the MP, it should be returned to the public purse. To say “it does not add in any way to the taxpayer’s burden” is wrong – it would reduce the taxpayers’ burden if this money were returned to the treasury. It would be reasonable, however, for the taxpayer also to bear a capital loss should there be one.

If Nick was really saying this to make the point that this whole expenses thing is ridiculous and a flat allowance would be better, OK, but unfortunately he has put it in a way which allows him to be quoted as another fat cat MP wanting to make profit from the system.

People really are angry at the amount MPs get, but press coverage of this works on the basis that most people are too innumerate to see that it’s peanuts compared to what many people in high-up positions in the City and so on get. The fact that the expenses system enabled prurient exposure of the details of MPs’ home lives worked even greater to turn attention away from the real issue – the anger that poor people feel over the huge inequality in our country. Go on and on about luxury scatter cushions or whatever costing hundreds, never mind what top bankers do with their millions. How much better to turn people away from democracy by making out that MPs are the leeches in society, that will help those who put the “democracy is bad, privatise everything” line to get their case accepted and to make much bigger profit from it than an MP claiming full expenses makes.

by Matthew Huntbach on September 2, 2009 at 12:37 pm. Reply #

Nick Harvey sounds like a Conservative to me, I thought the Liberal party represented, fairness and equality in society. We are living in an increasingly unequal and unfair society where some people struggle to pay the rent let alone own one property. The greedy free for all in the last decade with easy money for some has meant a greater disparity between those who have been able to buy multiple homes at the expense of others. Constraints such as increased taxes on second, third etc homes should be introduced and MPs should not be able to benefit from tax payers money to buy second homes. The housing bubble has been blown up with the help of Government policies and this has been supported by the get rich quick mentalities of many MPs at the expense of the electorate. The bubble needs to burst for a healthier and happier society.

by myfanwy on October 5, 2009 at 3:04 pm. Reply #

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