Electorate Office ownerships

Whale Oil blogs on all the electorate offices owned by a Labour Party company, and rented to MPs, with Parliamentary Service paying the rent, and has a number of good questions.

This is a situation worth exploring, but it is more complex that it may appear, and isn’t quite the same as the issue of Wellington accommodation.

An MPs Wellington accommodation expenses are paid for out of a general parliamentary fund. If they do not spend the maximum $24,000 then they can’t spent the underspend in other areas.

An out of parliament office is a charge against the “individual members’ support budget”. This is $64,260 for electorate MPs and $40,932 for list MPs. That budget also has to cover all the communication expenses for an MP with their electorate such as postage, newsletters, advertisements etc. So the more that is spent on rent, the less they have to spend on communicating with constituents. This does provide some incentive for the rent to be reasonable.

There are incidentally some issues with this arrangement, as the cost of renting an office is much much higher in central city seats, than suburban and provincial areas.  This can disadvantage certain urban MPs. But that is a debate for another day.

Now it is not just political parties than sometimes own the building rented to the MP. Sometimes the MP will own the building themselves. This can lead to an assumption that the MP has done so, as an income generating activity.

However there are other reasons an MP will want to own their electorate office. The main reason I know of, is that it means they have a permanent office – no worries about having to shift location every so often. Also it means they can make any changes to the building they want to make it functional, which can be difficult for buildings you do not own.

Now I am pretty sure that Parliamentary Service do require a market valuation for an electorate office, in approving any rent. And especially so if a party or MP has an interest in the office.

However this does still leave open the possibility of perception that it is an easy money making activity for an MP – buy a building and rent it to yourself. Maybe there is a return on capital greater than you would get by having it in a term deposit.

My solution would not be to ban ownership of electorate offices by MPs (I am not quite so sure about the party owning it) as ownership often allows an MP to provide a bigger and more effective office to service constituents than would otherwise be the case.

But what I would do is have a rule where any rental paid by The Parliamentary Service can only be say 75% of an independent market valuation. This would mean that the MP or party would not be perceived as making money on the property. Maybe even set it at 66% – basically i would aim for a lvel where any income would be slightly less than the return on capital you could get in a risk free investment (ie money in a bank). This would protect the MP from being seen to benefit from it, and in my experience the MPs who have purchased an electorate office have done so for practical, not commercial reasons – especially as any rent paid comes out of their budget.

Possibly this notion of setting the maximum rent at say 66% or 75% of the market rate, could also be applied to MPs Wellington accommodation. If your super fund owns your house, then you are not eligible for $24,000 a year but instead $16,000 or $18,000.