Cost

In 2017/18, gross expenditure on both Houses of Parliament (Commons and Lords) totalled £550.8m – roughly equivalent to the administration budget of one mid-sized government department. Calls to reduce the cost of politics tend to focus on reducing numbers of Members of Parliament (MPs) and peers, but the salaries and expenses of parliamentarians make up less than half the total expenditure on both Houses of Parliament. But there are broader costs associated with the running of Westminster’s parliamentary democracy, including the organisations who supervise elections, standards and constituency boundaries. in total, and net of the income all these bodies generated (for example, through retail activities or rentals), the UK Parliament and supporting organisations cost a combined £552m in 2017/18.

It is important to understand what Parliament costs in assessing how it is doing its job. But doing this is not straightforward. The two Houses of Parliament are separately governed and publish separate accounts, although there are some areas of shared costs that are split between the two. For example, the cost of the Parliamentary Archives is split between the Lords and Commons in a 60:40 ratio. The two Houses also have different rules regarding the salaries, allowances and expenses that their members (MPs and peers) can claim. In the Commons, since the 2009 expenses scandal, MPs’ salaries and expenses have been independently administered, while the Lords administers its members’ expenses directly.

Of course, the cost of running Parliament is not the same thing as its value. There is much about Parliament’s role in democracy – representing citizens, enacting legislation, facilitating debate and scrutinising government – that cannot simply have a price tag attached to it. But understanding what it costs to run Parliament on a day-to-day basis, and where that money goes, is important in assessing how well it works and in building public trust.

The UK Parliament and supporting organisations cost a combined £552m in 2017/18*

Much of the cost of running Westminster-based parliamentary democracy (the UK Parliament; not the devolved administrations for Scotland, Wales and Northern Ireland) is associated with the two Houses of Parliament, but there are several other public bodies – the Electoral Commission, the Independent Parliamentary Standards Authority (IPSA) and the Boundary Commissions of all four nations – whose work enables the UK Parliament to function, and whose costs should be taken into account. Combined, all of these organisations cost £552.4m to run, net of the income they generated, in 2017/18.

Expenditure (net) on both Houses of Parliament, and associated organisations, 2017/18

Funding for the House of Commons comes from three sources. In 2017/18, expenditure totalled £428.3m across these sources, net of the income the Commons received. Most funding comes from the annual Administration Estimate, which is produced and voted on by Parliament each year, with a supplementary estimate also considered if necessary. This estimate covers most of the general costs of administering the Commons in a year, including the cost of the 2,374 staff employed by the House, and a broad range of other expenditure, such as security, catering and information services. Expenditure from this source was £228.7m, net of the £17.5m in income the Commons generated, through activities such as tours, retail and catering.[1]

The Commons is also funded through a separate Members’ Estimate, which covers the cost of certain services provided to MPs, including funding to enable opposition parties to fulfil their parliamentary role (known as Short Money) and to pay for MPs with specific parliamentary responsibilities. It used to also cover the cost of MPs’ information and communications technology (ICT), and stationery, but funding for this transferred to the Administration Estimate in 2017/18. Expenditure through the Members’ Estimate came to just under £18m in 2017/18.

The Members’ Estimate also used to include MPs’ salaries and expenses, and the costs of employing MPs’ staff. But following the expenses scandal in 2009, the regulation and administration of these costs was passed to IPSA, which is funded through a separate IPSA Estimate, also voted on by Parliament each year. Expenditure on MPs’ salaries and expenses through the IPSA Estimate came to £181.6m, net of £115,000 of income IPSA received to run an internship scheme for MPs.[2]

Funding for the Lords is much simpler, and comes from just one source. The Lords Estimate covers all costs associated with the Lords, including peers’ allowances and expenses, which are set at a flat rate and can only be claimed on days when peers attend the House. But the Lords Estimate also includes expenditure on a range of other items, including work on the parliamentary estate, security and the cost of employing 495 staff. In 2017/18, the cost of the Lords was £98.9m, net of income generated through retail and catering services.

Combined, and net of the income each House generated, the cost of running both Houses of Parliament – including members’ salaries, allowances and expenses – was £527.1m.

This figure tells us the total cost of operating Parliament on a day-to-day basis, but there are other public bodies whose work is of direct relevance to the UK Parliament, and whose costs are therefore part of what it costs to administer and run parliamentary democracy in the UK more broadly. These bodies are independent, but are accountable to committees chaired by the Speaker of the Commons.

  • The Electoral Commission (£15.8m) is responsible for supporting the running of general elections and referendums in the UK (as well as local elections and elections to the devolved parliaments), and regulating the finances of political parties. Its spending was much higher in the 2016/17 financial year, when the Electoral Commission spent a net total of £143.8m, of which around £120m related to the cost of the referendum on Britain’s membership of the European Union (EU), than in the 2017/18 financial year.[3]

  • IPSA spent £7m on its running costs in 2017/18, separately from the funding for MPs salaries and expenses that it oversees.

  • Each of the four nations of the UK has a Boundary Commission. The Boundary Commissions for England, Scotland, Northern Ireland and Wales (£2.5m) are included here as they review the geographical boundaries of UK parliamentary constituencies (as well as boundaries for elections to the devolved administrations in each nation).

* Unless otherwise stated, all data in this chapter is for the 2017/18 financial year and covers only resource spending. Numbers may not sum due to rounding.

† This figure is also inclusive of a write-back of pension-related provision, totalling £861,000.

 

The total day-to-day cost of running Parliament (£550.8m) is roughly comparable to the cost of administering one mid-sized Whitehall department

The unique constitutional role of Parliament makes comparison with other organisations difficult, but comparison with government departments is useful to give a sense of scale. A government department’s administration budget is just one small part (often less than 2%) of its entire expenditure,* and covers the cost of actually running the department – for example, the cost of staff, training and travel. It excludes expenditure on the public services and programmes for which a department is responsible.

This administration cost can broadly be compared to the total resource expenditure of both Houses of Parliament (including the costs of MPs’ and peers’ salaries and expenses). Combined, the total (gross) resource cost of Parliament in 2017/18 was £550.8m, which was smaller than the four costliest government departments: the Department for Health and Social Care, Ministry of Defence, HM Revenue and Customs, and Department for Work and Pensions.Total (gross) expenditure on Parliament, and government department administration budgets (outturn), 2017/18

One of the key roles of Parliament is to scrutinise the work of all government departments; but it does so with a budget roughly equivalent to the administration costs of one mid-sized Whitehall department.

* Total managed expenditure (TME), which comprises a department’s allocated budget (its Departmental Expenditure Limit), and the money a department spends that is not controlled as it depends on demand, such as debt interest payments (its Annual Managed Expenditure).

† This figure does not net off the pension write-back of £861,000 by the House of Lords.

 

MPs’ salaries and expenses make up less than half of total spending on the House of CommonsTotal (gross) expenditure on the House of Commons, by area, 2017/18

In 2017/18, gross expenditure on the House of Commons was £446m, made up of funding from the Administration Estimate, Members’ Estimate, and MPs’ salaries and expenses paid for through the IPSA Estimate. The total cost of MPs’ salaries and expenses (including the cost of MPs’ staff) was £181.8m – less than half of total expenditure on the House of Commons.

The annual basic salary for an MP in 2017/18 was £76,011.[4] In total, MPs’ salaries cost £50.1m.* MPs who do not take their seats in Parliament are not entitled to receive salaries, though they are eligible to claim expenses to enable them to undertake constituency duties. [5]

Some MPs receive additional salary for performing specific parliamentary roles. In 2017/18:

  • Chairs of select committees, and members of the Panel of Chairs – MPs appointed by the Speaker to chair Public Bill Committees and other general committees – were entitled to receive an additional £15,235.

  • The Speaker of the House of Commons received an additional £76,885; the main deputy Speaker (known as the Chairman of Ways and Means) £41,981; and the other Deputy Speakers £36,896.[6]

MPs who are ministers are also eligible to receive additional salary. This includes certain members of the Opposition, reflecting the official role the Opposition plays in Parliament. These salaries are paid by the Government, rather than Parliament, and so are not included in the figures above:

  • The Prime Minister was eligible to receive an additional £77,896 in 2017/18; Cabinet ministers could receive an extra £69,844 and ministers of state £33,490.

  • The Leader of the official Opposition was entitled to receive an extra £64,029. [7]

In addition to their salaries, MPs can claim expenses to cover the cost of running an office, employing staff in their constituency and Westminster offices, living in either London or their constituency, and travelling between the two.[8] Eligibility and levels of expenses are determined annually by IPSA, and depend on whether an MP’s constituency is inside the London area or not.Key MPs’ expenses in 2017/18

In 2017/18, MPs’ salaries and expenses totalled £181.8m, of which £50.1m went on MPs’ salaries, and £72.2m on the salaries of MPs’ staff.[10] Spending by individual MPs varies significantly, often reflecting the location of their constituencies. As an institution, the majority of the Commons’ expenditure goes on:

  • Staff costs (£117.4m) covering the 2,374 permanent staff employed by the House of Commons, ranging from clerks who support the work of MPs and committees, to estate management, financial support and communications staff.

  • Goods and services (£82.9m) – including £29.2m on accommodation services, £18.6m on security, and £2.2m on information services.

  • Member services (£6.9m) – which includes the costs of MPs who hold parliamentary positions, and Short Money paid to enable the Opposition to fulfil their parliamentary functions.

  • Non-cash items (£31.4m) such as depreciation, which effectively reflect the annual resource costs of capital investment in the parliamentary estate.

In September 2018, the boundary commissions of the four nations are due to present their final recommendations following reviews of the current electoral boundaries. These reviews have worked on the assumption that the number of MPs will be cut from 650 to 600 – an 8% reduction. This was a commitment originally made by David Cameron [11], partly as a means to “reduce the cost of politics."[12] But given that the cost of MPs’ salaries and expenses make up less than half of total Commons expenditure, an 8% reduction in the number of MPs would only have a relatively limited impact on the cost of Parliament.

* National Insurance contributions cost a further £6.4m for MPs, and £6.9m for MPs’ staff.

 

The cost of peers’ allowances and expenses represented less than one fifth of gross Lords expenditure Total (gross) expenditure on the House of Lords, by area, 2017/18

The House of Lords is currently the second largest legislative chamber in the world, with over 800 peers. Following the abolition of hereditary peerages in 1999, the size of the House’s membership fell from over 1,000 members in 1998 to fewer than 700 the following year, but numbers have since crept back up.

Unlike the Commons, the size of the Lords membership is not fixed; it varies constantly as peers leave the House or die, and as new peers are appointed. Not all peers are actually ‘active’ in the House at any one time – some may be granted a leave of absence or occupy a role, for example in the judiciary, that makes them ineligible to take their seat. The number of active peers since June 2017 has hovered at around 800. But the number who are active and eligible to participate does not necessarily reflect the number who regularly attend the House. Data for the last parliamentary session (2016/17) shows that, on average, 484 peers attended the Lords each day.[13]

In 2017, a committee established by the Lord Speaker – who oversees proceedings in the Upper House and chairs the House of Lords Commission – recommended that membership of the House of Lords be reduced to 600 through a ‘two out, one in’ process.[14] The Prime Minister, Theresa May, then made a “statement of intent” to take a restrained approach to appointments to the Lords over the course of the 2017 Parliament, committing to working on the basis that “there is no automatic entitlement to a peerage for any holder of high office in public life."[15] However, in June 2018, 13 new appointments were made (by different parties) to the Lords. It is not currently clear that any comprehensive reform of the Upper Chamber is imminent.[16]

Peers do not receive salaries, other than for holding certain offices. These salaries are higher than those received by office holders in the Commons, reflecting the fact that – unlike MPs – peers do not ordinarily receive them:

  • Lord Speaker (£102,530)

  • Senior Deputy Speaker (£84,524)

  • Chair of the EU Committee (previously known as the Principal Deputy Chairman of Committees) (£79,076).[17]

Peers may, in recognition of their work for the public benefit, claim an attendance allowance for each day that they attend sittings of the House or its committees.[18] The allowance can be claimed at a flat rate of £300, or a reduced flat rate of £150 – it being up to peers to choose which. In some circumstances, they may also claim travel expenses. In 2017/18, peers’ allowances and expenses in the Lords totalled £18.1m – around one fifth of total expenditure on the House of Lords. Despite being a larger chamber in terms of membership, the cost of peers’ allowances was only around a tenth of the cost of MPs’ salaries and expenses; reflecting the fact that peers do not receive salaries and can claim for fewer expenses.

The largest area of spending in the Lords was on the cost of the House’s staff (£30.2m). Goods and services cost a combined £28m, covering expenditure on items such as security (£12.1m), broadcasting, outreach and visitor services (£2.9m), and IT costs (£6.6m). The Lords also spent £18m of its resource budget on estates and works services.

 

Restoration of the Palace of Westminster will be a major cost in the coming years

In 2016, a Joint Committee established to consider restoration and renewal of the Palace of Westminster argued that “complete and sudden failure of the mechanical and electrical services – the kind that would require the Palace to be abandoned immediately – was a real possibility."[19] Warning of the risk of both “catastrophic failure” and “smaller, incremental failures” that could prevent parliamentary business from going ahead, the Committee recommended that MPs and peers leave completely to allow repair work to be done as quickly as possible. In February 2018, Parliament finally agreed to a “full decant” to allow intensive repairs to be carried out.

Since then, a shadow sponsor board has been set up as part of the governance structure that will oversee the programme. Legislation will be required to fully establish this body and the Prime Minister has suggested a draft bill will be brought forward this year.[20] This will be a major area of expense in the coming years – but preparatory work is already costing Parliament a lot. Since 2014/15, both Houses have spent a combined £6.2m from their resource budgets on the work.[21]

The debates over, and delays to, the restoration and renewal of the Palace of Westminster highlight the concern of many parliamentarians about the public’s reaction to spending on Parliament. Much of Parliament’s value lies in ‘public goods’ that cannot easily be given a financial value, such as the representation of citizens, scrutiny of government, and promotion of debate. But it is important that people understand what is involved in the administration of democracy, and what it costs.

 

Looking forward

  • Moves to reduce the number of MPs and reform the House of Lords will remain on the agenda. But while this would reduce expenditure, debate about the costs of running Parliament needs to consider the wider impacts and practical implications of a smaller membership in each House for Parliament’s ways of working.
  • Restoration and renewal of the Palace of Westminster will be a major area of capital expenditure for Parliament in the coming years. Further delays may push costs up. But the decision to decant Parliament offers a chance for its members to discuss with the public what it costs to run Parliament each year, and the spending needed to keep it operating in Westminster.