MPs 'should repay profits' from taxpayer-funded homes

The head of the new authority tasked with overhauling MPs' expenses has said profits made on taxpayer-funded second homes should be "surrendered".

Sir Ian Kennedy told the Times gains made from rises in the value of properties should not be retained.

"The mechanism for doing it is the only question we have to decide," he said.

Sir Ian is chairman of the new Independent Parliamentary Standards Authority (Ipsa), set up in the wake of the MP expenses scandal last year.

He said sitting MPs and candidates would know the details of his new expenses regime by the end of March.

'Courtesy of the taxpayer'

MPs from outside central London are permitted to claim back the interest on mortgages taken out on second homes, to reflect the additional cost of maintaining a base near Westminster as well as in their constituencies.

Until now, they have been able to pocket any profit when they sell their homes - though they have to pay capital gains tax if the property is classed as a second home for tax purposes.

Last year's report on MPs' expenses chaired by Sir Christopher Kelly recommended an end to taxpayer-funded mortgages, following a transitional period.

Sir Christopher also said MPs should forfeit any rise in the value of second homes between the publication of his report in November and the implementation of the new allowances system.

Although Ipsa is not required to follow the Kelly recommendations, Sir Ian told the Times he agreed with Sir Christopher.

"The position we take is that gains - an increase in the equity value of the property - should be surrendered to the state in one way or another," he said.

"The view Kelly took and we take is that that gain ought to be surrendered because it is made courtesy of the taxpayer."

It was unclear whether Sir Ian wanted the clawback to be retrospective or to come into effect when the new system is implemented following the election.

He said that would be a matter for tax authorities to decide.

If HM Revenue & Customs lacked powers to retrieve the cash, Parliament should legislate before the election to allow it to do so, he said.

He also defended Ipsa's £6.6m start-up cost - six times as much as MPs have been ordered to repay after an audit of their second home claims.

Sir Ian told the Times there would about 60 staff and the running costs would be below that of its predecessor, the Commons Fees Office.

Meanwhile, Ipsa announced on Monday it had received more than 2,500 responses from individuals and organisations during the public consultation on proposed reforms to the system of MPs' expenses.