Monday, 25 July 2016


The new Minister for Pensions - as he will be called - was demoted before he even began his job.

Richard Harrington the MP for Watford was appointed to his post on Monday 18 July after the dismissal of his predecessor Baroness Altmann late the previous Friday.

Lady Altmann was a Minister of State, second in the ministerial pecking order below the Secretary of State and above the lowest rank of Parliamentary Under-Secretary. But Mr Harrington was put in that lowest rank. Above him are three Ministers of State - one for Employment, one for Disabled People, Work, and Health, and one for Welfare Reform - and the Secretary of State Damian Green. The only other Parliamentary Under-Secretary Caroline Nokes is Minister for Welfare Delivery, junior to the Minister of State for Welfare Reform.

Steve Webb, the previous Pensions Minister but one, was clear what this meant.

“an Undersecretary of State is junior to a Minister of State so it is a demotion for pensions. The seniority of ministers really does matter, not least in dealings with other government departments such as the Treasury. This…demotion for pensions sends a worrying signal.”

It is not just seniority Mr Harrington has lost. As a Minister of State in the Commons he would have been paid £9,305 a year more than he is as an Under-Secretary. He won't be poor. His total pay as an MP and a Minister will total £90,397. But that is 9% less than the £99,702 paid to his Minister of State colleagues in the House of Commons.

Lady Altmann has made it clear in newspaper articles and radio interviews since she left Government how tough it was for her even as a Minister of State to get her voice heard, still less effect any real policy change. An Under-Secretary will face an even bigger challenge.

But perhaps it doesn't matter. Unlike his two predecessors Mr Harrington has no apparent background in pensions or indeed social policy. I understand his job will be to continue with the implementation of existing policies rather than to introduce anything new or radical. A spokeswoman told me

"Pensions remain a key priority for the Government and the important work to bring in the new State Pension, roll-out automatic enrolment and safeguard the pension freedoms will continue under our new Minister for Pensions."

No date could be given for the new Pensions Bill which would make important changes to protect consumers, increase their freedom, and provide new ways to give them advice and guidance. But "it remains a priority and is expected in the Autumn". New Pensions Bill see p.30

On his appointment Richard Harrington is quoted as saying

"I am delighted to take responsibility for this important ministerial post, and I look forward to tackling the full range of state and private pension matters, including the new Bill and automatic enrolment, among so many others."

That will keep him busy.

Footnote: Under the three Labour governments 1997-2010 Pensions Ministers lasted in post on average for 14 months (426 days). The Coalition government benefited from having one Pensions Minister for its full five year term. Baroness Altmann also lasted in her job just 14 months (431 days). 

Footnote 2: The previous Pensions Minister, Baroness Altmann, was a member of the House of Lords. Ministers of State in the Lords receive the standard Minister of State pay in the House of Lords of £78,891 which has been frozen at that level since 2011. Peers do not get MP’s pay and Ministers are not allowed to claim the standard £300 per day for turning up which applies to other Lords. So in total the new Minister gets more than his predecessor, though the bulk of that for being an MP (£74,962) not a Minister (£15,435). See Minimum Wage Ministers.

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25 July 2016

Sunday, 24 July 2016


Thirty junior Ministers in Theresa May’s Government earn barely the minimum wage for their ministerial duties. Just £15,435 a year which is £7.42 an hour for a 40 hour week.

The lowest rank on the Ministerial ladder is the Parliamentary Under-Secretary. Above them are Ministers of State and at the top in charge of the Department is the Secretary of State who also attends Cabinet.

A Minister’s pay comes in two parts. 

First, they are paid as an MP. That salary is determined now by the Independent Parliamentary Standards Authority (IPSA). Currently that it is £74,962, a rise of £962 on the £74,000 paid to MPs returned at the 2015 General Election. 

Second, they are paid as a Minister. The Government no longer publishes a list of Ministerial Pay. The House of Commons, IPSA, the Cabinet Office, and Downing Street, all told me they did not know what Ministers were paid. Eventually I was sent a list of Ministers’ salaries in Regulations dated 14 July 2011. Since then, I was told, Ministers’ pay had been frozen.

But the amounts in the Regulations were clearly not right. It then turned out that when David Cameron froze Ministers’ pay he froze the total, including the MPs’ pay. So as MPs’ pay rose each year the extra paid to a minister was cut. In 2011 a Cabinet Minister was paid £68,827 on top of their pay as an MP of £65,738. A total of £134,565. But year by year as their pay as an MP rose the extra paid as a Minister was frozen leaving them with same total. When their pay as an MP rose to £74,000 in April 2015 their pay as a Cabinet Minister fell to £60,565. That is a cut in their Ministerial pay alone of 12%.

That offsetting ended in April this year. So when MPs’ pay rose by 1.3% in line with overall public sector pay to a total of £74,962 the pay as a Cabinet Minister stayed fixed at £60,565. So the total now is £135,527. That figure was confirmed to me by the House of Commons but no one could say what junior ministers was paid.

Applying the same arithmetic and the 2011 Regulations it turns out that a Minister of State is paid £24,740 on top of their MP’s salary and a Parliamentary Under-Secretary gets just £15,435 for their ministerial duties on top of their MP’s pay. If they work 40 hours a week on purely ministerial duties then they are being paid £7.42 an hour for doing them, barely above the National Living Wage of £7.20 an hour.

The total of £90,397 paid to a Parliamentary Under-Secretary is, or course, a very high income. By itself it would put a Minister without a family among the richest 1% of the population. But 61% of that population has a total income higher than the amount Ministers are paid for their Ministerial work.

The history of Ministers' pay is complex. After he became Prime Minister in June 2007 Gordon Brown decreed that Ministers would not take available pay rises and their pay was frozen in 2008/9, 2009/10 and 2010/11. So even though available pay was higher Ministers did not take it, keeping the pay that was set on 1 November 2007 plus the MP's pay set on 1 April 2008. 

After the 2010 election David Cameron went further and announced a 5% cut in Ministers' pay. The 5% was calculated from the amounts Labour Ministers had taken. He also followed Gordon Brown - who had cut his pay by £25,000 - and reduced his own pay to around £8000 more than a Cabinet Minister. It is those amounts which are set out in the 2011 Regulations.

On 1 April 2010 the total actually paid to a Parliamentary Under-Secretary was £94,142 comprising £63,291 as an MP and £30,851 as PUS. Today’s Parliamentary Under-Secretary gets half the pay as a Minister and £3,745 (4%) less in total.

Ministers in the House of Lords have their own pay scale as they do not get paid as an MP. These were also set out in the 2011 Regulations. It sets pay for a Cabinet member in the Lords at £101,038, a Minister of State at £78,891, and a Parliamentary Under-Secretary at £68,710. These amounts have been frozen since then and are still paid at those levels.

Peers can claim a tax free allowance of £300 for each day they attend the House of Lords. But Ministers and others who are paid a salary for their duties there cannot claim this daily allowance. The House of Lords sits on average for 150 days a year. So an assiduous Lord who attended every sitting day could claim £45,000 which is equivalent to earning £64,712 before tax. Ministers do attend frequently and the extra they get as a Minister on top of the allowance they could claim as non-Ministers is probably less than their Commons equivalents.

More information

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25 July 2016

Monday, 11 July 2016



There is no doubt that the FTSE 250 index has fallen following the vote to leave the EU on 23 June announced on 24 June (Brexit).

Many people – mainly it seems those who voted Leave – have been questioning this analysis. They are wrong. Of course there are dates you can pick which show the FTSE250 lower in the past than it was after the Brexit vote. But not many.

This analysis compares the FTSE250 post Brexit with previous months before the vote was announced on 24 June 2016.

It compares the previous run of the FTSE 250 with two figures for the Brexit level of the FTSE250.
  • The average closing price from 24 June 2016 to 8 July 2016 – the Brexit mean.
  • The closing price on Friday 8 July 2016, two weeks after the Brexit vote was announced.

The Brexit mean of the 11 closing prices from 24 June 2016 to 8 July 2016 was 15899.66.

Over the previous year – 24 June 2015 to 23 June 2016 the FTSE 250 closed higher than that on 241 out of 250 occasions (96.4%) and closed lower on 9 occasions (3.6%).

The Brexit mean was
  • 5.4% lower than the average from the day the vote was called (19 February 2016) to the day before the vote (23 June 2016).
  • 4.4% lower than the average from 1 January 2016 to that date.
  • 6.1% lower than the average over 12 months from 24 June 2015 to 23 June 2016.

The closing price on 8 July 2016 was 16177.8.

Over the pre-Brexit year – 24 June 2015 to 23 June 2016 the FTSE 250 closed higher than that on 229 out of 250 occasions (91.6%) and closed lower on 21 occasions (8.4%).

The closing price on Friday 8 July 2016 was
  • 3.7% lower than the average from the day the vote was called (19 February 2016) to the day before the vote (23 June 2016).
  • 2.7% lower than the average from 1 January 2016 to that date.
  • 4.5% lower than the average over 12 months from 24 June 2015 to 23 June 2016.

Of course this effect may disappear in weeks or months. But the immediate effect on the FTSE 250 index of share prices in mainly UK medium sized companies is clear and unarguable.

Why the FTSE 250?
The FTSE 250 is a better indicator of the effect of Brexit on UK companies than the FTSE 100. The FTSE 250 index measures the share prices of the 250 companies ranked under the FTSE 100 in size. The FTSE 100 contains mainly overseas companies with foreign earnings. They of course have benefited from the fall of 10% or more in the pound against all other major currencies including the US dollar and the euro. The FTSE 250 comprises mainly UK based companies trading in Sterling.

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10 July 2016