IPSA and Public Sector Pay Growth
In an annual ritual, there was consternation over the rise in the basic annual salary for elected Members of Parliament.
The Independent Parliamentary Standards Authority (IPSA) sets the pay of MPs. Since 2015, IPSA has stated the increases are “linked” to average pay growth in the public sector.
This article explores the nature of that link.
An unclear link: IPSA’s documentation does not reveal the exact rule they use for increasing the basic annual salary of MPs.
Suggested rule: IPSA appear to take the minimum of total and regular pay growth in the entire public sector, for the three-month rolling average to October.
A Link to the Past
Following the scandal over MPs’ expenses, IPSA was established to set the pay of MPs, manage their pensions, and administer expenses incurred through parliamentary duties. These expenses typically cover office costs, accommodation and travel.
Between 2012 and 2015, IPSA conducted a comprehensive review of the pay of MPs. From May 2015, an MP’s basic annual salary was set at £74,000 in a one-off increase. Thereafter, IPSA state:
Annual changes in MPs’ pay are linked to changes in average earnings in the public sector using Office for National Statistics (ONS) figures.
The announcement of this mechanistic increase for this year (2.7%) has received a ritualistic chorus of derision, from established publications (with articles in The Guardian, The Daily Express, The Mirror, and others) to social media.
The Golden Rule
If MPs’ pay is linked to changes in pay in the wider public sector, what is the nature of that link?
The 2015 IPSA pay review stated:
We will therefore change MPs’ pay each April, for the remainder of this Parliament, on the basis of Office for National Statistics data on average weekly public sector earnings from the previous October.
Confusingly, an article in The Mirror claims the pay increase was linked to public sector earnings in July 2018.
There are, in fact, eight measures that reasonably be described as reflecting annual growth in the public sector, in nominal terms.
This depends on whether you choose:
- total pay (including bonuses) or regular pay (excluding bonuses);
- to include or exclude financial services in the public sector;
- to look at a single month (e.g. the increase from October 2017 to October 2018), or at a three-month rolling average.
None of these eight measures of nominal public sector earnings growth showed an increase of 2.7% in July 2018.
The Mirror article appears to have confused that IPSA had confirmed the linkage “in July 2018 following a further review of MPs’ pay.” This about the timing of a confirmation, not the rule they are using.
We can show the table of all these measures for October, in the last four years, against the actual increase in the basic salary of MPs:
It is plain that a single measure of public sector earnings growth does not work for every year. For the last three years (2016 to 2018), MPs’ pay has increased in line with total average weekly earnings in the public sector, for the three-month rolling average to October.
A simple, workable rule is that IPSA take the minimum of increases in total and regular public sector average weekly earnings, for the three-month rolling average to October.
This does not preclude that IPSA have been inconsistent, or that a more complex rule is being used.
IPSA may wish to clarify what rule they use for selecting their change, further communicating its connection to measures of average pay in the public sector.
These measures of public sector pay increases compare average weekly earnings in the selected month to the same month a year prior. Alternately, a three-month rolling average is used.
Average weekly earnings data comes from the Monthly Wages and Salaries Survey. The data has been published online.