Standards & Privileges Committee Report Published
18 Jun 2008
The Committee which Sir George chairs has published its 12th Report

Committees18-06-08 - Standards and Privileges - Twelfth Report
HC 744






Contents



Conduct of Sir Nicholas and Lady Winterton

Terms of Reference






Appendix 1: Memorandum from the Parliamentary Commissioner for Standards







Written evidence received by the Parliamentary Commissioner for Standards





















Appendix 2: Letter to the Clerk of the Committee from Lady Winterton 12 June 2008

Formal minutes

Reports from the Committee on Standards and Privileges in the current Parliament





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Conduct of Sir Nicholas and Lady Winterton





Conduct of Sir Nicholas and Lady Winterton

Introduction

1. We have received a memorandum from the Parliamentary Commissioner for Standards on the outcome of his investigation of complaints against Sir Nicholas Winterton the Member for Macclesfield and Ann Winterton the Member for Congleton ('the Wintertons') by Mr Gary Poole and Mr Michael Barnbrook. The complaints related to claims against their respective Additional Costs Allowances (ACAs) made by the Wintertons in respect of the rental of a property in London.

2. The Commissioner's report is reproduced at Appendix 1. In accordance with our usual practice we have shown the Wintertons copies of the Commissioner's report. A copy of their response is reproduced at Appendix 2.

Background

3. The complaints relate to the Wintertons' use of a flat in London which they purchased on a mortgage in the early 1990's and have occupied since then as their 'second home'.[] Initially they claimed the mortgage interest against the ACA.[] Subsequently they paid off the mortgage from their own resources following advice about their likely Inheritance Tax liability. The Wintertons were further advised to put the flat into a trust of which they are two of the three trustees. [] The beneficiaries of the trust are their three children.[] The trust came into existence in February 2002. Since then the Wintertons have continued to occupy the property as tenants of this trust paying a market rent based on an independent valuation [] and they have each charged half of the rent against their respective ACAs.

4. For the duration of the period following the purchase of the property up to the creation of the trust the Wintertons held both the legal title to the property and the beneficial interest. Following the establishment of the trust the three trustees held the legal title on trust for those who held the beneficial interest in this case the Wintertons' three children. This is relevant to the question of whether and to what extent the arrangements fell within the scope of what was permissible for reimbursement under successive revisions of the ACA rules.

5. Before entering into the arrangements described above the Wintertons contacted the Fees Office[] to ascertain whether these would be acceptable as they wished to continue living in the flat (and by inference meeting the cost from their ACAs). They say that they would not have gone ahead if the proposed arrangements had not been acceptable to the Fees Office.[] No written record exists of the terms of the assurance or the basis on which it was sought but from a record of discussions between the Wintertons and the Department of Resources in March 2008 it appears to derive originally from advice given no later than 1998 that paying a market rent albeit under a family trust arrangement was not against the rules set down by the House. Likewise no written record exists of these discussions.[]

6. Since the Wintertons established their trust there have been two relevant changes in the rules in the Green Book. In June 2003 a provision prohibiting claims for "the cost of leasing accommodation from yourself" was introduced both in respect of the ACA and the Incidental Expenses Provision (IEP). The second relevant change was in July 2006 when a provision was introduced explicitly prohibiting the use of the ACA to meet the cost of "leasing accommodation from....any organisation...in which you or a....family member—have an interest; or [from] a.....family member."[]

Conclusions

7. As the Commissioner has pointed out [] the arrangement entered into by the Wintertons in February 2002 by which they transferred their interest in their London property to a family trust and thereafter continued to occupy the property as tenants of the trust is an unusual use of the ACA. He also pointed out that it benefited the family their estate and assisted their personal inheritance tax planning. We agree with the Commissioner that given their substantial personal interest in the arrangements it would therefore have been prudent for the Wintertons once having gone ahead with the arrangements to have checked to ensure that charging the rent to the ACA remained consistent with the rules particularly when these were changed.

8. We accept the Wintertons' assurances that they discussed with the Fees Office the likely acceptability of their proposed arrangements before they entered into them. We note though that the key assurance on which they apparently relied was given at least three years before the trust was established. It would have been prudent for them to have taken the initiative of checking again when they were finally ready to proceed that their proposed arrangements remained acceptable for ACA purposes.

9. As the Commissioner recognises the complaints raise two specific questions:

did the arrangements made by the Wintertons fall foul of the 2003 prohibition on Members meeting from the ACA the cost of renting from themselves; and

did the arrangements fall foul of the 2006 prohibition on meeting from the ACA the costs of leasing accommodation directly or indirectly from a family member?

10. The Commissioner considers it 'arguable' that the change to the Green Book in 2003 put the Wintertons' arrangements outside the scope of the rules but does not consider it productive or necessary at this remove to attempt to resolve this issue.[] We agree but also share the Commissioner's view that it was unfortunate that there was no recognition that the Wintertons' arrangements might need to change.

11. The position is unequivocal though in respect of the rules in force from July 2006. We agree with the Commissioner and the Department of Resources that the family trust which had become the Wintertons' landlord in February 2002 when the property was transferred was an organisation in which they had an interest (as trustees) and their children had an interest (as the beneficiaries). It was therefore inappropriate for the rent to be reimbursed thereafter through the ACA and we agree with the Commissioner that the complaints should be upheld in this respect.[]

12. The Wintertons advance three principal arguments to justify the current arrangements:

they were approved by the Fees Office before they were put into place and thus not affected by the subsequent rule changes;

it is unreasonable to change the arrangements in the course of a Parliament; and

there was no additional cost to the taxpayer.

We deal with each in turn below.

13. On the question of prior approval over-riding future rule changes we agree with the Commissioner that while there may well be a need for transitional arrangements in particular cases agreements between the Department and individual Members as to the interpretation of the rules of the House at a particular time should not normally be expected to override changes in the rules of the House.[] However we nonetheless consider it unfortunate that the July 2006 changes in particular did not include any transitional provisions as Members could not reasonably have been expected to have made new arrangements overnight.

14. On the question of changes to the rules in the course of a Parliament we do not accept that this is in principle unreasonable provided adequate notice is given and suitable arrangements are made to deal with cases of difficulty or hardship. We note that such changes have been made in the past notably in this context in 2003 when the prohibition was introduced on the reimbursement from both the ACA and the IEP of the cost of Members leasing accommodation from themselves.

15. As to whether the arrangements could be justified on the basis of their impact on public funds we do not accept the relevance of the Wintertons' argument. It is undoubtedly true that the identity of the landlord is irrelevant on this ground if a market rent is being paid (as it was in this case). However the key feature which made the arrangement unacceptable post July 2006 in terms of the cost being met from the ACA was the fact that the overall effect of the arrangements was that members of the Wintertons' family benefited directly from the payment of rent which was in substance met from the ACA to a trust of which their children are the beneficiaries. This the rules explicitly prohibited.

16. We are also concerned about the length of time their arrangements had been allowed to continue. The Department of Resources made clear to the Wintertons as long ago as February 2007 that the arrangements were inconsistent with the current requirements of the Green Book.[] That should have alerted the Wintertons to the need to review them. The ultimate responsibility for ensuring that their ACA claims remained within the rules rested of course with the Wintertons. However the Department of Resources was at fault in this case in not responding to the outstanding letter from Lady Winterton.[]

17. After their arrangements were publicised in February 2008 the Wintertons volunteered to end them on or before March 31 2009 "in order not to cause embarrassment or difficulty for the Fees Office or the House of Commons" [] a proposal which the House authorities have accepted.[]

18. In their observations on his memorandum the Wintertons argue that the Commissioner "appears not to have shared equitably the responsibility for what has occurred between the Department of Resources (formerly the Fees Office) and ourselves....we are perfectly agreeable to share the responsibility but feel that we have not received fair treatment [from the Commissioner] in this regard".[] We do not accept this argument. Whatever the shortcomings of the Department of Resources we repeat that the final responsibility rests with Members themselves for ensuring that their use of allowances is above reproach as successive editions of the Green Book have made clear. The onus is also on them to seek advice in cases of doubt and to read the Green Book with care.

19. In our view the Wintertons' arrangements have been in breach of the rules applying to the ACA since July 2006 a fact of which they were officially made aware in February 2007. This should have been addressed at an earlier stage.

20. We accept as did the Commissioner [] that the Wintertons have at no stage attempted to conceal their arrangements. While it is true that once these had attracted the attention of the media the Wintertons took steps to end them and to find alternative London accommodation we believe that they could and should have begun to do so earlier. Had they taken this course of action they might reasonably have expected to have made suitable arrangements by the end of the 2007 Summer Recess. We therefore recommend that no further claims should be paid against the ACA in relation to the rent payable in respect of their current property from September 1st 2008. The Wintertons will by then have benefited from what amounts to a grace period of two years which in our view is in all the circumstances more than adequate.

21. The Commissioner has also drawn attention to a number of general lessons arising from this complaint designed to avoid Members getting into difficulties in the sensitive area of use of allowances.[] We commend these to the House.










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1 The property has throughout been designated by each of them as the property in respect of which they are eligible to claim against the ACA.



2 WE 7 p. 28.



3 WE 8 p. 29.



4 WE 17 p. 35.



5 WE 7 and WE 8 p. 28. and 29.



6 The Fees Office was part of the Department of Finance and Administration now incorporated in the Department of Resources.



7 WE 7 p. 28.



8 WE 9 p. 30.



9 WE 6 p. 27.



10 Appendix 1 para. 37.



11 Appendix 1 para. 37.



12 Appendix 1 para. 38-9.



13 Appendix 1 para. 36.



14 WE 14 p. 34.



15 WE 15 p. 34. See also WE 13 p. 33.



16 WE 17 p. 35.



17 WE 9 p. 30 and WE 10 p. 32.



18 Appendix 2 p. 37.



19 Appendix 1 para. 40.



20 Appendix 1 para. 41.



Terms of Reference



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The Committee on Standards and Privileges

The Committee on Standards and Privileges is appointed by the House of Commons to oversee the work of the Parliamentary Commissioner for Standards; to examine the arrangements proposed by the Commissioner for the compilation maintenance and accessibility of the Register of Members' Interests and any other registers of interest established by the House; to review from time to time the form and content of those registers; to consider any specific complaints made in relation to the registering or declaring of interests referred to it by the Commissioner; to consider any matter relating to the conduct of Members including specific complaints in relation to alleged breaches in the Code of Conduct which have been drawn to the Committee's attention by the Commissioner; and to recommend any modifications to the Code of Conduct as may from time to time appear to be necessary.

Current membership

Rt Hon Sir George Young Bt MP (Conservative North West Hampshire) (Chairman)

Rt Hon Kevin Barron MP (Labour Rother Valley)

Rt Hon David Curry MP (Conservative Skipton & Ripon)

Mr Andrew Dismore MP (Labour Hendon)

Nick Harvey MP (Liberal Democrat North Devon)

Mr Elfyn Llwyd MP (Plaid Cymru Meirionnydd Nant Conwy)

Mr Chris Mullin MP (Labour Sunderland South)

The Hon Nicholas Soames MP (Conservative Mid Sussex)

Mr Paddy Tipping MP (Labour Sherwood)

Dr Alan Whitehead MP (Labour Southampton Test)

Powers

The constitution and powers of the Committee are set out in Standing Order No. 149. In particular the Committee has power to order the attendance of any Member of Parliament before the committee and to require that specific documents or records in the possession of a Member relating to its inquiries or to the inquiries of the Commissioner be laid before the Committee. The Committee has power to refuse to allow its public proceedings to be broadcast. The Law Officers if they are Members of Parliament may attend and take part in the Committee's proceedings but may not vote.

Publications

The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at: www.parliament.uk/sandp. A list of Reports of the Committee in the present Parliament is at the back of this volume.

Committee staff

The current staff of the Committee are Dr Christopher Ward (Clerk) Mr Keith Neary (Second Clerk) and Miss Michelle Owens (Secretary).

Contacts

All correspondence should be addressed to The Clerk of the Committee on Standards and Privileges Journal Office House of Commons London SW1A 0AA. The telephone number for general enquiries is 020 7219 6615.







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Appendix 1: Memorandum from the Parliamentary Commissioner for Standards




Appendix 1: Memorandum from the Parliamentary Commissioner for Standards

Complaints against Sir Nicholas Winterton and Lady Winterton

Introduction

1. This memorandum reports on a complaint that Sir Nicholas Winterton the Member for Macclesfield and Lady Winterton the Member for Congleton may have breached the rules of the House in claiming Additional Costs Allowance in respect of their rental of a property in London held in trust for their children.

2. On Sunday 3 February 2008 two Sunday newspapers carried articles reporting that Sir Nicholas and Lady Winterton had put their London apartment into a family trust and subsequently claimed the cost of their rent for that apartment from the House of Commons Additional Costs Allowance.[] Shortly afterwards I received a number of complaints from members of the public based on those newspaper articles.

The Complaint

3. Under the procedures approved by the Committee and based on the Standing Orders of the House when I receive a complaint I consider whether the complainant has provided sufficient evidence to merit at least a preliminary inquiry that the Member may have breached the Code of Conduct for Members or its associated rules. That evidence can either be evidence put together by the complainant or it can draw on evidence provided in newspaper reports. I do not accept complaints however based on newspaper reports alone where there is not sufficient foundation identified in the report for the allegations made. Where a complainant provides no information beyond that which I am already considering on the basis of another complainant's letter I do not join the subsequent complainant to the complaint.

4. In this case after careful consideration I concluded that the complaints I received from Mr Gary Poole dated 3 February[] and from Mr Michael Barnbrook dated 3 February[] and following my initial response to that letter a further letter dated 10 February [] provided sufficient evidence to merit at least a preliminary inquiry.

5. In essence the complaint is that the arrangements which Sir Nicholas Winterton and Lady Winterton made for meeting the costs of overnight stays in London away from their main home are contrary to the rules laid down in the Green Book on Parliamentary Salaries Allowances and Pensions and in particular the provisions in Section 3 dealing with the Additional Costs Allowance.

Relevant Rules of the House

6. Paragraph 14 of the Code of Conduct for Members of Parliament provides as follows:

"Members shall at all times ensure that their use of expenses allowances facilities and services provided from the public purse is strictly in accordance with the rules laid down on these matters and that they observe any limits placed by the House on the use of such expenses allowances facilities and services."

7. The Green Book on Parliamentary Salaries Allowances and Pensions provides guidance and rules on the use of allowances "wholly exclusively and necessarily"[] incurred to enable a Member to stay overnight away from their main residence. The rules on the Additional Costs Allowance have developed over recent years in successive editions of the Green Book. The first relevant reference was in the Green Book published in June 2003 as follows:

"3.12.1 The following expenditure is not allowable: ...

The costs of leasing accommodation from yourself."

8. The next relevant change to the Green Book was in July 2006 when the following text was incorporated:

"3.3.1 Principles

You must ensure that arrangements for your ACA claims are above reproach and that there can be no grounds for a suggestion of misuse of public money. Members should bear in mind the need to obtain value for money from accommodation goods or services funded from the allowances.

3.3.2

You must avoid any arrangement which may give rise to an accusation that you are or someone close to you is obtaining an immediate benefit or subsidy from public funds or that public money is being diverted for the benefit of a political organisaion.

3.3.3

ACA must not be used to meet the costs of a mortgage or for leasing accommodation from:

yourself;

a close business associate or any organization or company in which you—or a partner or family member—have an interest; or

a partner or family member."

My Inquiries

9. Following my consideration of the complaints I had received from Mr Poole and Mr Barnbrook I wrote separately but in identical terms to Sir Nicholas and to Lady Winterton on 14 February to invite their comments.[] I informed Mr Poole and Mr Barnbrook that I was doing so. In particular I invited both Members to let me know:

b) the sequence of events which led them to establish the arrangements for their overnight stays in London provided for under the Additional Costs Allowance;

c) any advice they received from the House authorities either before or after instituting these arrangements;

d) the size of the claims they had made in respect of their overnight stays in London under the Additional Costs Allowance.

10. Lady Winterton responded on 18 March on behalf of herself and Sir Nicholas.[] The letter enclosed a copy of a statement made by Sir Nicholas and herself on 4 February;[] a letter of 12 March 2008 to them from the Director of Operations in the Department of Resources of the House of Commons[] (the Department now includes what was formerly the Fees Office) a further letter of 18 March from the Director of Operations[] and a copy of Lady Winterton's reply of the same date.[]

11. Lady Winterton's letter said that she and her husband had lived in the flat concerned since the early 1990s. They were reimbursed initially by the Fees Office for mortgage interest payments. Subsequently they considered paying off the mortgage. Shortly after that on advice from their accountants and solicitor and taking account of matters including their future inheritance tax liability they decided to put the flat into a trust. That trust was established in February 2002. Before they went ahead they had ascertained from the Fees Office in the House of Commons whether the arrangement was acceptable as they wished to continue to live at the flat. They would not have proceeded with the arrangement if permission had not been forthcoming. Following their re-election in 2005 and the publication of the new rules in July 2006 they did not even consider that the new guidance could be applied retrospectively. They believed they had "grandparents' rights". Subsequently the Fees Office wrote to them about the arrangement and they replied in February 2007.[] They heard nothing further and naturally assumed everything was in order. The Department continued to reimburse them for the legitimate expenses which they claimed.

12. The letters of 12 and 18 March 2008 from the Director of Operations at the Department of Resources annexed to Lady Winterton's letter set out his understanding of the sequence of events and the agreement which he had now reached with the two Members.[] The letter of 12 March noted discussions which the Members reported they had had with the then Director in the late 1990s when that Director had indicated that paying a market rent albeit under a family trust arrangement was not against the rules set down by the House. Neither the Members nor the Department had any documentary record of these discussions.

13. The letter noted that it was arguable whether the new form of words in paragraph 3.12.1 of the June 2003 Green Book[] might have led either Sir Nicholas or Lady Winterton or senior staff in the Department to revisit the arrangements which had been agreed previously. He said that the strict technical position was perhaps that the Members were not leasing accommodation from themselves. Nevertheless a further look at the matter did not seem to have taken place within the Department at that time. Nor was such a review prompted by Sir Nicholas or Lady Winterton. The letter noted also the Members' views that the current arrangement was within the rules at the time it was entered into; that they had taken advice from senior staff; that they considered the 2006 rules were themselves difficult to interpret; that changing the rules during the life of a Parliament and expecting Members to abandon long-standing personal arrangements was unreasonable; and that they considered that market conditions meant that any new arrangement was unlikely to result in a saving to the taxpayer.

14. The Director of Operations accepted in his letter that the two Members had not attempted to conceal the arrangement at any stage. In February 2007 Lady Winterton had written to the Department about the trust arrangement.[] Due to an administrative error a draft reply was prepared but never sent.

15. Nevertheless the Director noted that the House could not agree to the Members' current housing arrangements continuing for the remainder of the Parliament as he believed the rules of the Green Book were clear on this point. The Director recognised however that making alternative housing arrangements in London against the background of the Members' busy Parliamentary and constituency schedules was not a simple matter. He had therefore proposed and the Members had agreed that the current reimbursement of rent for the property must come to an end within twelve months. His subsequent letter of 18 March 2008 [] also attached to Lady Winterton's letter to me confirmed that the relevant end-date was 31 March 2009. The Members would be eligible to claim from the Additional Costs Allowance for any alternative arrangements subject to the normal rules in the Green Book. Lady Winterton's letter of 18 March to the Director accepted this as a satisfactory conclusion.[]

16. I wrote to the Director of Operations in the Department of Resources on 19 March to invite his comments on the application of the Green Book over the years from February 2002 and for other comments on the letter from Lady Winterton.[]

17. The Director of Operations replied to me with his letter of 18 April.[] He noted that the Green Book in 2002 was silent on the matters relevant to Sir Nicholas and Lady Winterton. In 2003 the position changed and changed again in July 2006. He had no doubt that as of July 2006 Sir Nicholas and Lady Winterton's arrangements "fell foul of the rules". He thought that it was likely that the arrangement did not meet the requirements of paragraph 3.3.3 as well as paragraph 3.3.2. He noted that there was an element of doubt by legal advisers as to whether the wording of paragraph 3.3.2 of the Green Book for July 2006[] encompassed the trust arrangements established by the two Members. But the Green Book was not intended to be a legal text nor could it anticipate the variety of circumstances that might arise. The Department of Resources' interpretation was that the trust arrangement described by Lady Winterton "was an arrangement whereby someone close to her and her husband obtained an immediate benefit from public funds". In this sense he considered that the trust arrangement was outside both the letter and spirit of the rules. He also agreed with what he took to be an implication in my letter to him of 19 March that in this case the Additional Costs Allowance was used for leasing accommodation from a family member. []

18. Turning to the retrospective nature of any rule change the Director said that the Department would rarely if ever seek to recover money or goods for past payments which were acceptable at the time when they were made but had subsequently become ineligible expenditure. They would however expect Members to meet new rules prospectively. In cases like the present one they would generally allow a period of time for Members to make new arrangements. The Department had no formal or informal rule which enshrined "grandparents' rights" by which he took Lady Winterton to mean that an existing arrangement should be allowed to continue undisturbed as it had been entered into at a time when it met the rules. This was not a practice generally applied by the Department and it would not in his view be appropriate in this case.

19. The Director commented that the Department did not routinely check whether any rental paid through the Additional Costs Allowance was a fair market rent the underlying assumption being that rentals would always be commercial arrangements on commercial terms. The average rental payment by Members who rented a London property was about £1300 a month. Sir Nicholas and Lady Winterton each paid some £900 a month in rent below the individual average. A notice period of up to six months in such rental agreements was not unusual. The time necessary to find suitable alternative accommodation by Sir Nicholas and Lady Winterton would to some extent depend on the time available in between their busy Parliamentary schedules.

20. The Director annexed the letters of February 2007 referred to by Lady Winterton.[] The relevant paragraph of the letter of 9 February 2007 from the then Department of Finance and Administration read as follows:

"I note that the tenancy agreement states that you are both the landlord and the tenant. I should be grateful if you would confirm if this is correct as I must inform you that you may not claim the costs of leasing accommodation from yourselves; or a partner or family member. These rules are set out on page 11 of the Green Book (section 3.3.3)."

21. Lady Winterton's reply of 11 February 2007 noted that the current accommodation arrangements had been in place for five years and were agreed by the Fees Office at the time. She confirmed that the lease was owned by a trust and stated that the monthly rent was set at a full commercial rent assessed and recommended by an independent firm of surveyors and estate agents.

22. The draft reply from the Department—which was never sent—to Lady Winterton's letter of 11 February 2007 drew attention to the new rules in Section 3 of the 2006 edition of the Green Book and asked that the Members send the Department a copy of the trust deed to enable it to make a judgment about whether the rule changes affected their claims for the Additional Costs Allowance.

23. Having considered the Director of Operations' letter I wrote to Lady Winterton on 23 April 2008.[] I asked whether she and Sir Nicholas accepted in the light of this letter that they were in breach of the rules as established in July 2006. I asked too whether either of them had reviewed the position when the Green Book changed in 2003. I invited them to send me a copy of the market rent assessment made by the firm of surveyors and estate agents. As they were now making alternative arrangements for their accommodation in London I asked whether it would be desirable and possible for them to make the necessary changes before February 2009. Finally I asked to see the trust deed or to have a summary of how it operated.

24. Lady Winterton responded on 28 April.[] She quoted the letter of 12 March 2008 from the Director of Operations which I have summarised above.[] Since she and Sir Nicholas had heard nothing from the Fees Office since 9 February 2007 they "naturally assumed that the original arrangement remained acceptable". Having agreed the arrangement in the late 1990s prior to the establishment of the trust neither her husband nor she felt it necessary at any stage to consult the Green Book believing that an agreed arrangement was a contract only terminated with notice by one or both parties. Following meetings with the Director of Operations and with the Clerk and Chief Executive of the House of Commons they had volunteered to end the current arrangement on or before 31 March 2009 in order not to cause embarrassment or difficulty for the Fees Office or the House
 
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