Sumptuary allowance of Deputy Ministers
Note: The given changes are being made for a period of one year, effective from April 1, 2020.
Sources: Salary, Allowances and Pension of Members of Parliament (Amendment) Ordinance, 2020 ; Salaries and Allowances of Ministers (Amendment) Ordinance, 2020; Members of Parliament (Constituency Allowance) Amendment Rules, 2020; Members of Parliament (Office Expense Allowance) Amendment Rules, 2020; PRS.
PART B: KEY ISSUES AND ANALYSIS
The Ordinances and Rules have revised the salaries of legislators downwards. We look at some methods and principles which could be helpful in deciding the salaries of legislators.
Methods for setting salaries
Article 106 of the Constitution empowers MPs to determine their salaries by enacting laws. 1 Till 2018, MPs periodically passed laws to revise their salaries. As MPs set their own salaries, the question of conflict of interest arises. In 2010, while discussing the issue in Lok Sabha, several MPs suggested that a mechanism to set MP salaries should be created that does not involve MPs or a parliamentary committee.[8]
In 2018, Parliament amended the law setting the salary for MPs through the Finance Act, 2018 to decrease this conflict of interest and ensure regular revisions. The Finance Act, 2018 provided that the salary, daily allowance, and pension of MPs will be increased every five years, on the basis of the cost inflation index provided under the Income-tax Act, 1961. 2
Other democracies have also grappled with this issue. Some appoint an independent authority (e.g., Australia and the UK), some peg it to the salary scale of senior civil servants (e.g., France), and some index salaries to inflation (e.g., Canada). [9] The United States decides the salaries of legislators through a law but its Constitution specifies that the revision will be effective after the next election to the House of Representatives.[10] Table 2 summarises various methods used in different countries to set salaries for legislators.
Table 2: Various democracies use different methods to decide the salaries of legislators 9
Countries
Different mechanisms for determining the salary of legislators
Salary indexed to inflation
India
Increased every five years, on the basis of the cost inflation index
Canada
Adjusted annually as per the average consumer price index of the previous year
Salary set by an Independent Authority
United Kingdom
Composed of a former MP, former judge, and auditor; salary revised annually as per the average public sector earnings
Australia
Composed of experts in government, economics, law, and public administration; salary revised annually
New Zealand
Composed of judges, MPs, and members of independent statutory bodies; b ased on the legislator’s position in Parliament
Salary indexed to civil servants’ pay
France
Average salaries of the highest and lowest paid civil servants at the highest grade used to determine salaries. Pay of civil servants decided by treasurers (three MPs) of Parliament.
Sources: Various government websites of respective countries- please see endnote 9 for details; PRS.
Table 3: Salaries of Some Public Officials
Position
Pay before COVID-19 (Rs per month)
Member of Parliament
Supreme Court Judge
Secretary to central government
Note: This table only gives the basic pay and does not include allowances.
Sources: Acts and websites listed in endnote 12; PRS.
Whereas Indian MPs decide their own salaries, this conflict of interest is not present for fixing salaries of other public officials. For several constitutional office holders such as the President, Vice-President, and Judges of the Supreme Court and High Courts, the compensation is decided by laws passed by Parliament. In the case of central government employees, the government periodically sets up independent pay commissions to review and recommend changes to their wage structure. [11] State governments follow a similar process.
Note that the base salary of MPs is significantly lower than that of other senior public officials (Table 3).[12]
In addition to salaries, legislators across the world are provided with allowances and facilities to help them fulfil their duties. The US does not provide any housing allowance[13]; the UK provides an allowance for non-London MPs to rent a house or stay at a hotel[14]; Indian MPs are provided with housing in central Delhi. While the US and the UK provide office space at Capitol Hill/Westminster, Indian MPs are not allocated any office space. Legislators are also provided with allowances to hire support staff including researchers. A US Senator gets about $500,000 a year for hiring legislative staff 13 (sufficient for a legislative director and about five legislative assistants)[15]; a British MP gets about £177,000 a year 14 (sufficient to have 3-4 legislative assistants); whereas an Indian MP is provided Rs 40,000 per month 3 (which will not cover the cost of even one legislative assistant).
Effect of amendments on resources to fight COVID-19
The amendments to reduce salaries and allowances of MPs and Ministers are done to supplement the central government’s resources to fight the coronavirus pandemic. 4 The question is whether this reduction has a significant impact to help ramp up financial resources needed to fight COVID-19.
The proposed reduction to the salaries and allowances of MPs and Ministers amounts to savings of around Rs 54 crore. This is less than 0.001% of Rs 20 lakh crore which is the amount of the special economic package announced by the centre, in light of the COVID-19 pandemic .