The Independent Parliamentary Standard Authority (IPSA) no longer is going to allow members of parliament to employ their spouses and children given their paycheck is cut from taxpayer money. Some £4.5M is annually dished out for a nepotistic practice. This rule, expected to a major part of the 2020 election, is a revision to existing expense claim procedures.
A senior MP, Sir Peter Viggers, included with his expense claims, which totaled some £1,645 ($2,033). These line items revealed it covered the cost of Viggers’ five-foot-high floating duck house for the garden pond at his home in the south of England.
Subsequent investigations found that the same MP had paid more than £30,000 ($37,000) of taxpayer’s money for gardening work and supplied over a three-year period.
This news marks progress with identifying conflicts of interest and putting the right parameters in place to do business the right way.” – Katie Smith, EVP, Chief Compliance Officer, Convercent
This became widely known as “the expenses scandal” which became a leading indicator of the widespread ethical and conflict of interest failures in the UK government at the highest level. To compound matters even greater, research suggests that spouses, relatives and family friends are paid an average of £5,000 ($6,180) more than those with no prior connection. The basic MP salary excluding expense coverage is approximately £75,000 ($92,000) a year.
A principles and values-based compliance and ethics program is crucial to avoid conflict.
New rules for MP’s will attempt to prevent those employment conflicts of interest by not allowing spouses and other relatives to be employed – but those rules will not come into force until the 2020 election. Our UK-based compliance expert and managing director Keith Read outlines three specific lessons to be learned from this:
- While it may have been technically within the rules, Richards’ duck house purchase was not reasonable or ethical.
- While employing a relative may not be entirely unreasonable, introducing additional pay that those “connections” receive, the situation is a clear conflict of interest and an ethical failure.
- While the claims and employment practices might meet requirements, they do not pass the spirit test, and that is why the ability to leverage compliance insights is fundamental to truly understand what is going on in an organization.
“Conflicts of interest can sometimes be seen as largely inconsequential; managing them as part of a wider compliance program can often be considered time-consuming, tedious and ineffective,” says Read. “However, it takes just moments now to find examples of COIs – at both senior and junior levels – where that conflict is unethical, fraudulent and an affront to any reasonable-thinking person; the head teacher whole awarded her partner a five-figure contract that was never delivered; the COO who awarded his wife a six-figure consultancy without proper scrutiny.”