In 2006, the landlord of my London flat sold the freehold to another owner. The new landlord offered me and all tenants in the development a sum of money in return either for giving vacant possession or for giving up my tenancy rights and accepting a new tenancy on different terms involving less security of tenure and an annual assured shorthold tenancy at market rates. There was a third option, of accepting a longer term tenancy with greater security of tenure and at with certain guarantees against excessive rent rises. Under either of the rental options, my rent was due to rise anyway and my recollection is that the rent that I would have had to pay under either was exactly or almost the same.
I accepted the offer of a new tenancy and a cash sum. I reported this immediately to HMRC who told me that since the lease was my property I was liable to Capital Gains Tax on any revenue arising from its sale. I therefore paid full Capital Gains Tax on the sum involved, which left a lump sum of £12,000. As a matter of course, I also sent details of the tenancy agreement to the House of Commons Finance Department (now the Department of Resources).
In case it is not clear, I should add that the liabilities in the contract are binding on me personally. If, for example, the allowances system changed to limit the amount claimable as monthly mortgage interest or rental (as has indeed now happened) I am still liable even if unable to claim the full amount. Similarly, if Parliament decided to exclude my constituency from eligibility for this allowance (as has recently been decided in respect of Outer London and some Home Counties seats) my liability would remain.
The rent for my tenancy has been met mostly out of allowances, the remainder being paid for from my own resources. I certainly did not believe in 2006 that I was doing anything questionable, let alone wrong. My situation was comparable to an MP with a mortgage paid for out of parliamentary allowances and who had made a capital gain, the difference being that in this case the property was in the form of a lease rather than a freehold. An MP whose mortgage interest had been paid from allowances and who then decided to sell the freehold would be free to keep any capital gain (subject to whatever was agreed with HMRC) and could charge interest on the new mortgage to allowances.
That was my thinking in 2006. However, in the last few weeks, I have gone back over my previous expense claims in the light of David Cameron’s instruction that, even if a payment was within the rules, it should be refunded if, even if just in hindsight, it could be regarded as overgenerous. At the same time, I reflected further on this capital gain both in the light of David Cameron’s policy and also Nick Clegg’s argument that capital gains on mortgages should in future be paid to the House of Commons. I was also uneasy over the fact that while the initial rent increases had been modest, and exceeded by the CGT payment, my rent had recently been raised quite sharply.
Over a month ago, I therefore made arrangements to have the £12,000 available for payment. I then contacted the Department of Resources at the House of Commons to say that I believed that I should pay them the balance of the capital gain. The Department advised me both on the telephone and in a meeting with a senior official that there was no obligation for me to make such a payment and that any decision to make a payment was one for me alone. There was no suggestion on the part of the Department that I had acted in any way improperly. If I did make such a payment it would be treated by them not as a repayment of expenses but as a donation, again comparable to an MP paying over the proceeds of the gain on a mortgage. I decided that the right thing to do was to make a voluntary payment of the entire balance of the capital gain attributable to allowances and had done so eleven days before the Daily Telegraph approached me. Since both this payment and the CGT payment were payments from my landlord and not from public funds, the taxpayer has now benefited by a much larger sum than the increase in my rent.
On the wider issue of expenses, I think that every MP needs to apologise for our collective failure to sort out the mess over expenses and allowances a long time ago. We should have been able to agree a system that was transparent and where the rules were clear to understand and to police. I hope that Sir Christopher Kelly’s independent committee will report quickly and that all political parties will fell able to accept his recommendations. As interim measures, the Commons has now agreed a more restrictive regime of eligible claims and a review of past claims. I believe that one element of regaining public confidence has to be much greater transparency. I shall be publishing my claims from 1 June on my website as soon as they are made, at least until the Conservative Party or Parliament has put in place comparable arrangements to cover all MPs.
I regard it as an enormous privilege to serve this constituency in Parliament and have tried over the years to do my very best for each one of more than 80,000 constituents. It is for that reason that I am deeply sorry that any action of mine should have caused anger and disappointment.