A tramp asks you for five pounds. You don’t want to give him money that he might spend on drink, so you take him to the cafe and buy him a plate of food. Another tramp asks me for five pounds. I give it to him: and watch him go into the off-license and spend it on cider.
Were you a better giver than me? Perhaps not. Perhaps your tramp had a fixed budget for food, and the effect of your purchase was to allow him to save for cider, the money that he would have spent on food if you had not been so generous. Maybe my tramp had a fixed budget for cider, and the cider that I watched him buy would have been bought by him, anyway: maybe the overall effect of my donation was to enable him to pay for an extra visit to the zoo.
A House of Commons official writing Rules for Donation to Tramps would specify that money must not be given for cider.
It is natural to think that there can be no insuperable obstacle to framing sensible, workable rules for the re-imbursement of second-home expenses. Surely there are some clear-cut cases. Take the MP for Stoke who needs a London address. He has to buy a London flat, and to do so has to take out a mortgage. The ‘interest’ on the mortgage is properly chargeable to expenses. I can see no problem with this.
Problems come when we consider complicated cases. Most cases seem to be complicated, at least among the independently wealthy MPs and those who have been MPs for many years. Here is a complication: the MP already owns a London address, free from mortgage, when he is elected. There is no mortgage ‘interest’ to be re-imbursed, and this MP will struggle to pump out his full Allowance. The obvious device is that a) he charges himself rent. This is disallowed by the Rules. Well, then, he b) takes out a second mortgage for the express purpose of pumping out Allowance. But this too is disallowed by the Rules.
Now, you may be thinking that these disallowances are well-motivated, and are serving to maintain the integrity of the system. But a system of defence is only as strong as its weakest point: it is purposeless – and probably harmful – to bolster defences in one place when they can be readily breached in another. The MP who is allowed neither to rent to himself nor to raise a mortgage for purely pumping purposes will find another way. We can imagine various methods but we know of two that are in operation: 1) sell the property which is under-mortgaged, and buy another, but do not put the full sale proceeds into the replacement property; invest money and simultaneously raise a mortgage, which can then be used to pump. 2) rent out the property which is under-mortgaged, and buy another – on a mortgage – which can then be used to pump.
You might think that an intelligent official, using her wisdom and imagination to anticipate the impact of various Rules, would easily foresee the futility of Rules a) and b) in view of expedients 1) and 2). You might then wonder what Rules a) and b) can be for. In practice they have served to separate the behaviour of the unenergetic, who can’t raise the effort to operate method 1) or 2), from the more enterprising, who are at 1) and 2) all the time... the Blears, the Hoons, and all the rest.
Combining these blunders with the Cider Fallacy, we have an Expenses system with amazingly perverse effects. The sly operators cleanly extract as much mortgage ‘interest’ as they wish, trading and accumulating and charging their transaction costs to the taxpayer; and the slothful, who have only miscellaneous expenditures to pump, are left to nominate various ridiculous outgoings which can then be (mis)represented as ‘what they spent our money on’.
The greed of some of our MPs is real. And it is surely true that they designed these Rules to give their greed room to operate. But I think it is also important to understand the amazing incompetence of these Rules. I have concentrated upon the major issue. Many more spring to mind when reading them. The officials concerned should be dismissed.