MPs will be given a ten per cent pay rise, the Independent Parliamentary Standards Authority has confirmed, just a week after Chancellor George Osborne renewed the public sector's one per cent pay cap.
The increase will be backdated to 8 May and means that backbench MPs will see their annual wages rise by £7,000, from £67,000 to £74,000. MPs elected before May 2015 will also see an increase to their pensions, which are linked to their basic salaries.
Prime Minister David Cameron, who previously said the proposal was "unacceptable", will personally accept the rise on top of his £142,500 salary.
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BBC political correspondent Iain Watson says the decision is unlikely to be seen as "entirely politically sensible" in the current age of austerity. "Ipsa says this is a very sensible package, but it comes at not a very sensible time if you're an MP, because it looks as though you're getting more than ten per cent while your constituents are probably having their pay restrained," he says.
Three of the Labour party leadership candidates – Andy Burnham, Yvette Cooper and Liz Kendall – have all said they would reject the increase.
Cooper described it as "crazy" and urged Cameron to stop it from going ahead. "The idea of increasing MPs' pay by ten per cent at a time when nurses, care workers, police officers and our armed forces face another five years' pay freeze is completely unfair," she said.
Sir Ian Kennedy, the chairman of Ipsa, said the increase would replace the "opaque and discredited system of allowances".
The new scheme marks a "break with the past", said Kennedy. "We have created a new and transparent scheme of business costs and expenses, introduced a less generous pension scheme, where taxpayers contribute less and MPs make a higher contribution, and scrapped large resettlement payments."
He added that over the last parliament MPs' pay had increased by two per cent, compared to five per cent in the public sector, and that the "one-off" ten per cent increase would be followed by a formal link between MPs' pay and public sector pay.
MPs' pay rise of £7,000 sparks union outrage
Members of Parliament are to receive a £7,000 pay rise this September, taking the annual salary for a backbencher from £67,000 to £74,000 . The news has provoked outrage among trade union leaders and caused David Cameron to be branded "grossly hypocritical".
The PM, who has always argued that such a pay rise would be unacceptable, has decided to back down from a confrontation with the body that advocated the increase – Ipsa (the Independent Parliamentary Standards Authority). As a result, his own salary will go up from £142,500 to £149,440.
The case against the increase
Trade union leaders and right-wing pressure groups are furious, the Financial Times reports, partly because the news comes as the Treasury is considering a fresh wave of public sector cuts to implement later this year – with "public sector pay likely to be in the line of fire once again".
Mark Serwotka, head of the Public and Commercial Services Union, said: "It would be grossly hypocritical for any MP who voted for years of pay cuts for public sector workers to accept a ten per cent increase for themselves."
Jonathan Isaby, chief executive of the TaxPayers' Alliance, said: "It's apparent that Ipsa is hopelessly out of touch and not fit for purpose."
The case for the increase
Ipsa was set up in the wake of the Commons expenses scandal to take MPs' pay and conditions out of their hands, The Times reports. This pay rise is Ipsa's idea not the MPs' – and it will not cost the taxpayer "a penny more" because it will be balanced by reduced pension rights and the removal of certain perks like evening meals.
It was long argued that MPs wouldn't fiddle their expenses if they were properly paid. The pay rise comes after a long period during which any increase would have been impossible.
As a result, MPs' pay has dropped from three times the national average wage to around double. Ipsa believes that the return of economic growth justifies the rise.
As for David Cameron's change of heart, the Daily Telegraph reports that Tory backbenchers told him that rejecting the increase would be "gesture politics" and "laughable" given his personal wealth.
There is nothing to stop the PM voluntarily refusing the extra pay or donating it to charity. But The Sun reports a Downing Street official saying he has "no intention" of doing that. "The factual situation is that if Ipsa decides to press ahead, the pay increases automatically," the spokesman said.
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