Taking the high road
George Reid, presiding officer and member of the Scottish parliament (MSP), said of Holyrood, the new building for Scotland’s fledgling parliament, during its October public opening: “There is no more fitting way to mark the beginning of this historic chapter in Scottish life.”
But while we should all celebrate this achievement, Reid’s sentiment conceals deep-seated problems with Scottish politics. For example, its ability to attract the right membership has attracted criticism, as has the degree to which certain aspects of the parliament’s inner workings do in fact represent a new beginning for Scotland.
Take remuneration, for example. As was the case with Westminster MPs, the salary for an MSP was set by the senior salaries review body (SSRB). It was initially based on the remuneration of senior civil servants. One of the recommendations that the SSRB made was that a further review should be undertaken within three years, when the SSRB considered that they would be in a better position to assess salary levels more accurately.
The June 2001 review, which also covered the members of the devolved assemblies of Wales and Northern Ireland, concluded that MSPs’ salaries should be pegged to a level equivalent to 87.5% of the salary of the Westminster MP, or £50,300 (e72,561) compared with ministers of government who earn £88,098.
This is not due to any difference in the cost of living in London. Derek Stein of the personnel office at Holyrood explains: “It was felt that it wouldn’t be fair to set the salaries for the Scottish parliament and the assemblies at the same level as for Westminster MPs who have a heavier workload.” This seems fair given that some but not all powers were devolved to the Scottish parliament.
The Scottish Parliamentary Contribution Pension Fund (SPCPF) is similar to the Westminster scheme, and the main points are as follows.
The defined benefit scheme provides a maximum pension of two-thirds of final salary, which accumulates at a rate of 2% for each year of service.
Employee and employer contributions are 6% and 18.5% respectively. The employers’ contribution rate increased from 17.1% from April 2003 based on the most recent actuarial valuation by the Government Actuarial Department, which identified a shortfall in the fund of just under £600,000. The valuations take place every three years.
The scheme also provides for members to make additional voluntary contributions to one of two approved schemes; Equitable Life or Scottish Widows. The pension for widows and widowers is five-eights of the deceased member’s pension. There are also pension provisions for dependent children: one quarter of the basic or prospective pension of the member if there is one child or three-eighths if there are two or more children. Death in service payment is three times salary.
There are 127 members of the scheme and 21 deferred members. Eight former members are currently drawing pensions. Members must have served a minimum of two years to qualify for a parliamentary pension.
The Scottish Parliamentary Corporate Body (SPCB), a cross-party group of five MSPs which is responsible for the administration of the parliament, also manages the scheme. Its five members are elected by parliament. The SPCB is responsible for appointing the investment managers and has chosen one manager, Baillie Gifford, for this purpose.
Bailie Gifford manages the fund in accordance with the statement of investment principles (SIP), advice for which was provided by the Government Actuarial Department. The SIP states that as the fund is new, inflows should exceed outflows for many years. It notes: “Accordingly, it should not be necessary to sell assets in order to pay for benefits in the medium term, and this enables the investment strategy to be predominantly based on equity investments in order to increase the probability of achieving a higher investment return on the fund’s assets over the long term.”
That said, the composition of the portfolio is very similar to that of the scheme at Westminster, with just over 80% invested in equities. The SIP continues: “Until the size of the fund has become sufficiently large, the corporate body believes that the most effective way of investing with suitable diversification and at a reasonable cost is to use a single pooled fund run by an independent investment management company.” In this case ‘sufficiently large’ means around £20m, according to the SPCB.
The value of the fund has increased significantly: as at 30 September 2003 the market value of investments was £5.5m, a 14.3% increase over six months. The SPCB, which is responsible for overseeing the scheme,
must also review any disposal
or acquisition of assets within six months of the acquisition or disposal.
When the Scotland Act of 1998 was passed it led to the establishment of the first Scottish parliament since the Act of Union of 1707, and has brought autonomy in areas such as health and education.
The new parliament building is the icon of Scotland’s devolved powers and of its aspirations for the future. But it has also generated mixed feelings. On the one hand its design is highly ambitious and represents the radical departure from the rule of Westminster that many Scots have longed for. On the other hand its cost has spiralled to a figure around 10 times its original estimate.
Another irony lies in the fact that while the building’s design and devolved powers are symbols of a new beginning, aspects of the system don’t seem very new at all. James Mitchell, a professor at the department of government of Strathclyde University, says. “There was an awful lot of hype about the Scottish parliament being different,” he says. “But in truth the rhetoric about being different was stronger than the action, in all areas.”
One area of Mitchell’s attention is membership, which numbers some 129 MSPs at present. “During the whole devolution process the main parties felt that there was the need to bring new people into politics, to go beyond the usual culprits – the councillors and so on. So it had to be financially attractive to members of the business community and reflects the fact that a career in politics is a risky business.”
But Mitchell believes that this goal has not been realised: “We have got a reasonably talented field of politicians in the Scottish parliament,” he says, “but we have not managed to go beyond the usual culprits. So it could be argued that the generous remuneration system hasn’t worked and that maybe we need to go back and change something.”
So in terms of attracting new blood has Scotland been less successful than Westminster? “Yes,” says Mitchell. “Especially compared with the 1997 intake of MPs at Westminster. There are not many people with a business background for example.”
This is interesting given that the system of remuneration, including pensions, is based on the Westminster model. The chapter in Scottish life to which presiding officer Reid referred doesn’t seem to extend this far.
And while the similarities have become fewer, it is only because Westminster decided to increase the level of pension contributions and benefits for its own MPs two years ago. No such changes are planned in Scotland.
“The Westminster model was the easiest model because it was familiar,” Mitchell continues.
But familiarity breeds contempt. He concludes: “None of these issues has been given much serious attention; people talked for years about devolution but in terms of the detail they said: ‘we’ll leave that till later’.”