MPs' salaries should be boosted with flat-rate allowances to fund second homes and travel, a cross-party committee suggested today.
The extra cash - potentially tens of thousands of pounds a year - could offer "greater value for money" for the taxpayer by avoiding the need for politicians to provide evidence of spending.
The Committee on Members' Expenses also accused the Independent Parliamentary Standards Authority (Ipsa) of damaging democracy and called for it to be stripped of key responsibilities. The committee urged legislation to force the watchdog to change unless it acted by April.
The controversial conclusions came in a report into the operation of the expenses system introduced in the wake of the 2009 abuses scandal.
Ipsa has already responded to fury among MPs by loosening rules to permit more spending on accommodation and travel for families, and staffing.
But the committee - chaired by Tory Adam Afriyie - dismissed adjustments made so far as "insufficient".
It said the "status quo was untenable", insisting: "The administration of the system does not provide value for money; MPs are being hindered in carrying out their parliamentary duties and deterred from making legitimate claims, to the detriment of their constituents and the democratic process;
"Transparency is not achieving its purpose of enabling the public to make informed judgments about the costs incurred by individual MPs and to make valid comparisons between them; and MPs with families or without independent means are being placed at a disadvantage, with long-term consequences for the future composition of the House."
The MPs suggested that Ipsa could "simplify" its scheme by using "geographically-differentiated supplements". These would be added to salaries in the same way as the existing weightings for inner and outer London MPs.
The report stated: "For the accommodation element, it would be essential to minimise the scope for a personal benefit to MPs and to make a significant saving over the recent average costs in each region.
"There could be different rates for those MPs with and without a second dwelling. The levels of the supplements would of course be determined by Ipsa."
The travel allowance could be "determined in a similar way, taking account of actual travel claims (perhaps for the period 2001-10)".
The committee said: "A system of regional supplements could have the advantages of: increasing transparency and contributing towards public confidence, as a simple comprehensible system for the public; reducing the cost for the taxpayer, by cutting the administrative costs and by setting the initial levels lower than the current average payments, thereby guaranteeing a reduced overall cost; reducing the time spent on form-filling, leaving MPs and their staff more time to carry out their parliamentary duties; minimising the disadvantages felt by MPs with families and without independent means; and not deterring MPs from requesting payments towards costs legitimately incurred."
MPs can currently claim up to £19,900 a year for renting second homes in London and paying household bills.
Those with constituencies in the capital - or who opt to use their own property - get a flat-rate supplement of £3,760, or £5,090 for inner London.
Many whose seats are a significant distance from Westminster spend more than £10,000 annually on travel.
The committee called for an independent cost-benefit study of using supplements, and a debate to be held in the Commons on the findings within six months.
It also urged five-year pay settlements for MPs - with allowance levels also being mapped out at the start of each parliament.
The report said Ipsa should be stripped of responsibility for administering expenses payments. Instead it should merely regulate the system, with a department created within the Commons to control payments - effectively re-establishing the old Fees Office.
"Ipsa's current administrative role should be carried out by a separate body, so that Ipsa is not regulating itself, and the (Parliamentary Standards) Act should be amended to permit this," the committee said.
"The best arrangement would be for that separate body to be within the House of Commons Service, both because such a body would avoid imposing undue burdens on MPs and because it would benefit from the economies of scale of being part of a larger organisation in areas such as human resources and IT.
"Independent regulation by IPSA and transparency would ensure that it did not replicate the deficiencies of the old expenses system."
The MPs noted that parliament could currently pass a motion that would spark the removal of Ipsa's chair, Sir Ian Kennedy, and other board members.
However, they indicated that a more "constructive" option would be amending the law under which it operates.
"Some of our recommendations require legislative changes; others are not dependent on legislation, but could be brought about in that way if Ipsa does not act," the report said.
"We believe that step should be taken if Ipsa's board has not implemented the recommendations of this report by April 1, 2012."
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