Lords reform: would an elected House cost the taxpayer £500m?

Published: 21st Jun 2012

As Liberal Democrat objections to the Education Secretary's plans to replace GCSE exams tests the unity of the two parties in government, today also saw another bone of contention between the Coalition partners re-emerge in the the form of Lords reform.

After the Joint Committee on Lords Reform published its recommendations for a reformed House of Lords back in April, opponents of a part-elected second chamber hit the headlines by claiming that the plans would cost the taxpayer almost £500 million over the course of the next Parliament.

However as Full Fact noticed at the time, this wasn't entirely accurate, as the estimate was based upon the proposals put forward in a white paper the previous year, and not those currently on the table.

The peer who had put together the original estimate - Lord Lipsey - has now revised the projected costs, and found that based on the latest set of proposals, Lords reform would cost the taxpayer... almost £500 million.

While superficially not much has changed in the headline estimate (in fact, as the press release put out by the Campaign for an Effective Second Chamber notes, the new estimate is actually £7 million higher than the previous one) some important finessing has nevertheless taken place.

As we can see from the table above, the estimate no longer includes the cost of salaries for transitional peers, as the most recent proposals from the joint committee have detailed that they will instead be paid a daily rate, such as that currently received by peers.

So whereas £220 million was set aside to pay these salaries in the previous estimate, £72.2 million is the cost now given for reimbursing these peers between 2015 and 2020.

On the face of it, this would seem to be a saving, so how has the cost risen from £477 million to £484.4 million?

Partly, this is due to more costs being factored into the total cost than made the cut the first time around. For example, the Campaign for an Effective Second Chamber points out that the Joint Committee have recommended that the changes would need to be approved by the public via a referendum.

This brings the cost of the two requisite ballots to £188.1 million from the £113 million initially put forward. On top of this, other costs have increased as the assumptions behind them have changed.

For example, in the initial costing it was assumed that elected Lords would claim two-thirds the office and staffing costs of an MP, while a transitional peer would claim one quarter of an MP's allowance. In the new set of figures these assumptions have been raised to three quarters and half respectively, increasing the cost of keeping an office from £155 million to £168.5 million.

Until the details are fleshed out, there will of course be a certain degree of modelling and assumption associated with these estimates. In putting together these figures however, we can at least see that the Campaign for an Effective Second Chamber have used the Government's own data wherever possible, and mid-point rather than top-end scenarios.

The Government is due today to reveal its own estimate of the cost of reform in response to a question in the Lords. It will be interesting to see how the two estimates compare.

Disclosure: Lord Lipsey is a trustee of Full Fact. Trustees set editorial policy but individual editorial decisions are made independently by Full Fact's staff. For obvious reasons, our policy is that being a trustee or otherwise involved with Full Fact should be no barrier to being factchecked by us.


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