Fungiblity

Stephanie Flanders nails why I found it impossible to build the requisite outrage at the expenses scandal:

    The idea is this: money is fungible. Put simply, that means one £50 note is the same as any other. They all have the same value and they will all buy the same amount of stuff.

    Put it even more simply, if you give someone £100 to buy a chair, you can’t say for sure that he bought a chair with your money – even if he shows you the chair, and a receipt. All you can say for sure is that you made him £100 better off, and he has bought a new chair.

She continues:

    But the focus, at least until recently, has mainly been on who claimed for what, and whether it was an “appropriate use of taxpayers’ money” – the moats, the dog food, the fancy furniture.

    If, like so many MPs, your MP has claimed the full amount – around £24,000 in the most recent year, then the point to note is that he or she has had £24,000 a year more to spend. Full stop.

    For example, some have said it was unfair that MPs such as David Cameron have escaped criticism for claiming the maximum allowance each year, because their claims were almost entirely made up of mortgage interest and utility bills. Whereas other MPs, possibly with similar necessary expenses, have made much smaller claims, yet faced criticism for the details.

If you set up a system of expenses like this, the most rational will simply hand their receipts to their accountant and ask them to sort out what they can claim for. It is entirely the rational thing to do; there is no suggestion of illegality. I am certain that many of those currently exploding with rage would have done precisely the same thing, and I equally doubt that many businesses would want their expense records probed in embarrassing detail. And in the end, as Stephanie points out, it doesn’t even make sense. Money saved on sensible claims can be spent frivolously elsewhere.

The practice of “flipping” seems to me qualitatively different, however. It goes beyond simply claiming an allowance to actively looking for ways to beat the system and to avoid paying taxes owed. In the worst cases it is simply outright fraud. On this point heads should definitely roll.

But more generally, when things calm the debate needs to about how much we pay our politicians, and how much we need to pay them. Like it or not, lobbies often have head amounts of turning money to throw at people – all above board, of course – to try and influence the result they want and many people going into politics could earn much larger sums in other places and we need to attract and retain talent in government. I personally favour scrapping all allowances in favour of a single salary, and supplying a unified budget for constituency work. This reduces the debate to its basic and essential form; perhaps we are paying politicians too much already but we need to remove which car they drive or what their taste in furniture is as irrelevant to the debate.