Hiking MPs’ pay is very much in vogue among certain sections of the SW1 chattering classes. The argument runs like this: politics suffers from a talent problem, parliament is packed with mediocrities. If MPs were paid more, they say, Britain might attract a higher calibre of candidate – the sort typically found in the private sector – who, while more expensive, would ultimately deliver better results for the country.
It is an argument with surface-level appeal. Politics is demanding, often thankless, and MPs’ pay has not kept pace with comparable senior roles elsewhere. But before rushing to sign off on higher salaries for politicians, taxpayers are entitled to ask a far more basic question: paid for what, exactly?
Peter Kyle, the business secretary, has reportedly suggested linking the pay of MPs to GDP. With caveats, this idea has real merit, and it is one the TaxPayers’ Alliance has argued for as far back as 2020. But done properly, it would almost certainly leave MPs worse off, not better.
MP pay should be linked to whether ordinary Britons are genuinely becoming more prosperous
Any serious discussion has to start with how MPs’ pay is currently set. Each year, the same ritual plays out: pay rises are announced, public anger follows, and MPs insist the decision was out of their hands. And for once, they have a point. Responsibility was delegated years ago to the independent parliamentary standards authority (IPSA), a quango designed to remove politics from the process following the 2009 expenses scandal.
In theory, this was meant to depoliticise MPs’ pay. In practice, it has failed. MPs still receive the flak and are accused of hiding behind IPSA, while simultaneously being stripped of any ownership of the decision. The result is the worst of all worlds: public anger with no one visibly responsible.
Nor would it be workable for politicians to vote their pay every year. That would be an unedifying spectacle and a political disaster waiting to happen. What is needed instead is a consistent, automatic metric that removes discretion altogether.
One obvious candidate is inflation. Linking MPs’ pay to inflation would prevent real-terms erosion without ever delivering an outright pay rise. But while superficially sensible, this would create disastrous incentives.
Britain has experienced two major inflation spikes in recent years. The first, between 2021 and 2023, was driven in large part by the last government’s decision to open the spending floodgates and print money during the Covid pandemic. The second, from 2024 onwards, has been fuelled by the current government’s decision to make large transfers from the private sector to the public sector, and from those in work to those on benefits.
If workers are seeing their real wages eroded as a result of those decisions, there is no serious argument for insulating MPs from the consequences. Indexing their pay to inflation would reward precisely the behaviour voters most resent.
A better metric, then, is growth, as linking MPs’ pay to economic performance at least attempts to align incentives with outcome. But here too, the details matter.
Contrary to what Kyle has proposed, using headline GDP would be a mistake. GDP measures the total value of goods and services produced in an economy. The more people there are, the higher GDP tends to be. That creates a perverse incentive: expand the population, open the borders, and GDP rises regardless of whether living standards improve. And after years of uncontrolled mass migration, it is clear that this has not delivered the prosperity promised and has instead made the average Briton worse off.
GDP per capita, however, is a different story. It measures the average economic output per person and is a far better proxy for living standards. If MPs’ pay is to be linked to anything, it should be linked to whether ordinary Britons are genuinely becoming more prosperous.
This is where the proposal becomes uncomfortable for politicians. Britain has suffered multiple ‘personal recessions’ in recent decades – periods where GDP per capita has fallen for two or more consecutive quarters. As a result, GDP per capita has barely grown since 2010.
Had MPs’ pay been uprated in line with GDP per capita over that period, their salary today would be around £81,945. Instead, MPs are currently paid £93,904 – roughly £12,000 more than they would be under this system.
That is a brutal figure, but it is also revealing. It reflects not a flaw in the metric, but the cumulative impact of decades of poor decisions made by politicians themselves. Weak productivity growth, high taxes, bloated spending and a failure to reform public services have left Britain poorer than it should be. A GDP-per-capita link would simply force MPs to live with the consequences of their own actions.
This does not mean MPs should never be paid more. If living standards rise, if productivity improves, and if Britain genuinely becomes more prosperous, MPs’ pay would (and should) increase automatically, without rows, without quangos, and without public resentment. That is the real attraction of the idea. It replaces an annual farce with a simple bargain: politicians do well when the country does well. If Britain stagnates, so do they.
Those calling for higher pay in the abstract miss the point. The problem is not that MPs are underpaid relative to outcomes, but that outcomes have been so consistently poor. And if linking MPs’ pay to GDP per capita leaves them worse off in the meantime, then so be it. If they want the reason why, they should look in a mirror.
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