MPs are paid to fear inflation and not care about unemployment

Want to know what an MP cares about? Look at their pay packet.

FullFact.org has put together highlighted a chart made by IPSA showing MPs pay in real terms over the last hundred years. Since 1911, when it was introduced at a rate of £400 per year, the pay of elected representatives has fluctuated between six times, and one and a half times, the average wage in the UK. It currently sits a little over two-and-a-half times higher:

As a reminder of what we've historically considered a fair wage for MPs, it's useful, especially in the context of the continued debate over IPSA's decision to award a pay rise. We can see, for instance, that the vast majority of MPs, elected in 2001 or later, are earning less than they every have before in real terms. But for the 100 or so oldest MPs, in office since before 1992, they've had the experience of being much poorer.

But there's something else which is worth noticing, which is how badly hit MPs were by the inflation of the 1960s and 1970s. Between 1962 and 1976, MPs pay fell from 4.5 times the average wage to double it; and that despite two pay rises in the interim period.

Everyone earning a salary is hit by inflation to some extent. But MPs are in the category of workers who are hit hardest. They don't have the annual pay rises typical in many industries; they have no ability to negotiate individually in response to changed circumstances; they can't leave for a better paid job without completely switching industry; and so on. And that's even before you take into account the unique peculiarities of their situation: asking for a pay rise due to inflation is a bad idea if the inflation is seen as your fault to start with.

So MPs, as a class, actually have more to fear from inflation than most other people. (To a certain extent, offloading the job of setting their pay to IPSA has made things slightly easier, but as the latest fuss shows, a pay rise is still a PR disaster.) And that explains a lot about the hawkish attitude of most MPs.

Conversely, MPs are also the one group who have no (direct, financial) reason to fear recession or high unemployment. Their pay is set free of market forces, and, while they might not see much of a rise in lean times, they can be pretty certain it won't be cut in nominal terms. That's a comfort few employees have. And they are absolutely certain that, no matter how bad the business environment, they won't be let go because their organisation can't afford to keep them on.

All of which means that the economics of being an MP are directly aligned with a tendency to over-value inflation, and undervalue growth, in setting priorities for the country. In so far as the new Governor of the Bank of England, Mark Carney can fight that consensus, he should; but IPSA could have a role to play as well. In deciding what to do with MPs pay, they could look at a wider economic index of how the country is doing. That way, MPs would know that getting their dinner relies on everyone else getting theirs.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The Conservative-DUP deal is great news for the DUP, but bad news for Theresa May

The DUP has secured a 10 per cent increase in Northern Ireland's budget in return for propping up the Prime Minister.

Well, that’s that then. Theresa May has reached an accord with the Democratic Unionist Party to keep herself in office. Among the items: the triple lock on pensions will remain in place, and the winter fuel allowance will not be means-tested across the United Kingdom. In addition, the DUP have bagged an extra £1bn of spending for Northern Ireland, which will go on schools, hospitals and roads. That’s more than a five per cent increase in Northern Ireland’s budget, which in 2016-7 was just £9.8bn.

The most politically significant item will be the extension of the military covenant – the government’s agreement to look after veterans of war and their families – to Northern Ireland. Although the price tag is small, extending priority access to healthcare to veterans is particularly contentious in Northern Ireland, where they have served not just overseas but in Northern Ireland itself. Sensitivities about the role of the Armed Forces in the Troubles were why the Labour government of Tony Blair did not include Northern Ireland in the covenant in 2000, when elements of it were first codified.

It gives an opportunity for the SNP…

Gina Miller, whose court judgement successfully forced the government into holding a vote on triggering Article 50, has claimed that an increase in spending in Northern Ireland will automatically entail spending increases in Wales and Scotland thanks to the Barnett formula. This allocates funding for Wales, Scotland and Northern Ireland based on spending in England or on GB-wide schemes.

However, this is incorrect. The Barnett formula has no legal force, and, in any case, is calculated using England as a baseline. However, that won’t stop the SNP MPs making political hay with the issue, particularly as “the Vow” – the last minute promise by the three Unionist party leaders during the 2014 independence referendum – promised to codify the formula. They will argue this breaks the spirit, if not the letter of the vow. 

…and Welsh Labour

However, the SNP will have a direct opponent in Wales. The Welsh Labour party has long argued that the Barnett formula, devised in 1978, gives too little to Wales. They will take the accord with Northern Ireland as an opportunity to argue that the formula should be ripped up and renegotiated.

It risks toxifying the Tories further

The DUP’s socially conservative positions, though they put them on the same side as their voters, are anathema to many voters in England, Scotland and Wales. Although the DUP’s positions on abortion and equal marriage will not be brought to bear on rUK, the association could leave a bad taste in the mouth for voters considering a Conservative vote next time. Added to that, the bumper increase in spending in Northern Ireland will make it even harder to win support for continuing cuts in the rest of the United Kingdom.

All of which is moot if the Conservatives U-Turn on austerity

Of course, all of these problems will fade if the Conservatives further loosen their deficit target, as they did last year. Turning on the spending taps in England, Scotland and Wales is probably their last, best chance of turning around the grim political picture.

It’s a remarkable coup for Arlene Foster

The agreement, which ticks a number of boxes for the DUP, caps off an astonishing reversal of fortunes for the DUP’s leader, Arlene Foster. The significant increase in spending in Northern Ireland – equivalent to the budget of the entirety of the United Kingdom going up by £70bn over two years  – is only the biggest ticket item. The extension of the military covenant to Northern Ireland appeals to two longstanding aims of the DUP. The first is to end “Northern Ireland exceptionalism” wherever possible, and the second is the red meat to their voters in offering better treatment to veterans.

It feels like a lifetime ago when you remember that in March 2017, Foster was a weakened figure having led the DUP into its worst election result since the creation of the devolved assembly at Stormont.

The election result, in which the DUP took the lion’s share of Westminster seats in Northern Ireland, is part of that. But so too are the series of canny moves made by Foster in the aftermath of her March disappointment. By attending Martin McGuinness’s funeral and striking a more consensual note on some issues, she has helped shed some of the blame for the collapse of power-sharing, and proven herself to be a tricky negotiator.

Conservatives are hoping it will be plain sailing for them, and the DUP from now on should take note. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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