PM in move for bigger payoffs to MPs

MPs who lose their seats at the next election are in line for bigger severance payments following the personal intervention of Tony Blair.

MPs who lose their seats at the next election are in line for bigger severance payments following the personal intervention of Tony Blair.

The Government believes the present system is outdated. It means that MPs under 50 will qualify for only half of their salaries if they leave Parliament at the next election.

Many of the new intake of Labour MPs are younger than 50, entitling them to around £24,000 if they lose their seats.

The payments are tax-free and some might regard them as generous, but they still leave many ex-MPs facing financial hardship unless they have directorships to fall back on.

The Prime Minister has asked the senior salaries review body to report on increasing MPs' payments, known as "resettlement grants", as part of a wide-ranging review of salaries and expenses.

Downing Street refused to comment on the Prime Minister's move, but it will be seen by MPs as a tacit admission that, with his huge majority at the last election, Mr Blair is bracing his party to lose some of its more marginal seats next time round.

MPs can qualify for up to £30,000 tax-free on a sliding scale, according to seniority. The sums involved begin rising when MPs reach 50 and have 11 years' service. Those in the normal retirement bracket - aged 55 to 64 - can qualify for a pay-out of the whole of their salary, about £48,000, if they have 15 years' service or more.

However, the backbench MPs are more interested in a shake-up for their office cost allowances. Clive Soley, the chairman of the Parliamentary Labour Party, is leading the campaign for the payments to be made directly to staff.

MPs qualify for around £50,000 in addition to their salaries to pay for their offices in their constituencies and at Westminster, leading to complaints by staff that they lack proper pay and conditions.

Mr Soley said: "What we need is not a vast increase but it does need to recognise that constituents demand far more now. They are constantly writing to MPs about all sorts of issues - pensions, petrol and fox hunting. They all need a reply. MPs want to be doing things that service their constituents well, but often can't do that."