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British MPs in line for 11% pay rise

Chris Hepburn | Vetta | Getty Images

British members of Parliament are on course to get an 11 percent pay rise, boosting their annual salary to £74,000 ($121,375), the independent parliamentary watchdog said Wednesday, setting it up on a collision course with politicians and public opinion .

The Independent Parliamentary Standards Authority (IPSA), an independent body set up by U.K. lawmakers in 2009 to set their salaries, is recommending that MPs' salaries should rise from £66,396 to £74,000 after the general election in May 2015. The MPs' salaries will then increase in line with average earnings thereafter.

But the authority, which was set up after public outcry over MPs claiming excessive expenses to bolster their salaries, insisted the move will "not cost the taxpayer a penny more." The increase, in which politicians and party leaders have no say, still has to go through a further formal review before it's implemented.

"For the first time, MPs' pay and pensions will be set independently, and away from political deals cooked up in Westminster. We are sweeping away the out-of-date and overly generous benefits, and introducing a one-off uplift in pay. Crucially, thereafter MPs' pay will be linked to everyone else's'," IPSA's chairman, Sir Ian Kennedy said in a statement.

(Read more: UK growth to beat pre-recession peak in 2014: BCC)

"We have designed these reforms so they do not cost the taxpayer a penny more. When taken with the tens of millions we have saved by reforming the business cost and expenses regime, we have saved the taxpayer over £35 million with the changes we have introduced since 2010."

The pay rise sets Ipsa on a collision course with MPs who have denounced any form of pay rise. On Wednesday, Prime Minister David Cameron threatened the reform or even abolition of the watchdog if the pay rise went ahead. He told the House of Commons that an 11 percent increase was "simply unacceptable".

Labour opposition leader Ed Miliband also opposed the salary rise while Liberal Democrat chief secretary to the treasury Danny Alexander called any increase "wholly inappropriate".

(Read more: UK economy goes from 'zero to hero' but don't expect giveaway)

The public also opposed the plans. According to research carried out by ComRes for Ipsa, 66 percent of respondents felt a £74,000 salary for MPs was "too high", while only 24 percent thought it was "about right".

The head of Ipsa launched a staunch defense of the reforms this morning prior to the report being released, saying the result of MPs setting their own salary was a "disaster", and an independent body is needed to carry out this role.

"The alternative approach takes us back to the days of political deals, with scandal never far away. I can't believe anyone seriously believes that is the way forward," Kennedy wrote in The Times newspaper on Thursday.

—By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal

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