Call for MPs to pay back second-home profits

MPs could face bills for thousands of pounds after the new parliamentary watchdog said they should give up some of the profits on taxpayer-funded second homes.

Sir Ian Kennedy, chairman of the Independent Parliamentary Standards Authority, said gains from rises in the value of second homes "should not be retained" by MPs.

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 by Sir Christopher Kelly recommended an end to taxpayer-funded mortgages, following a transitional period. And Sir Christopher said that MPs should forfeit any rise in the value of second homes between the publication of his report last November and the implementation of the new allowances system.

IPSA is not required to follow the Kelly recommendations when it publishes the new system next month.

But Sir Ian has indicated that he believed profits linked to taxpayer-funded allowances should be surrendered.

"This is a central question for me," he told The Times. "Gains made in that way should not be retained. The mechanism for doing it is the only question we have to decide."

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.

"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."

More than 2,500 people and organisations responded to IPSA's five-week consultation on the future of MPs' expenses, it was announced yesterday.

The Parliamentary Standards Act 2009, which established the body, required it to consult MPs, MPs' staff and other interested parties, as well as the Kelly Committee, in drawing up the new scheme.

Over the past five weeks, meetings have been held with members of the public, 2,259 responses have come through IPSA's dedicated website and 444 emails and letters have also been received. All representations will be published.

Sir Ian said: "IPSA is under an obligation to consult particular individuals and organisations and that is what we have been doing. But we invited a wide range of groups and individuals to join this process too and we are particularly pleased with the response.

"All views will be examined carefully and will help us shape the final scheme which we will publish next month.

"Our timetable is tight. But we are now solely focused on producing a workable and effective new scheme of expenses that helps restore public confidence and enables MPs in the next Parliament do the work we elect them to do."