Bill to reduce MP/minister salaries passed in Lok Sabha: A look at how much these cuts will help

Two bills to reduce the salaries and allowances of MPs and ministers for one year have been introduced in Parliament. This is being done to help supplement the financial resources necessary to tackle the COVID-19 pandemic. These bills replace the Ordinances which have been in force since April this year.

The bill reducing the salary of the MPs was passed in Lok Sabha on Tuesday. In this article, we discuss the changes the bills are bringing in, how salaries of legislators are determined in India and other democracies, and how the determination of MP salaries compare with other public officials in the country.

What are these amendments doing

The salaries of MPs will be reduced by 30 percent from Rs 1,00,000 to Rs 70,000 for one year. The sumptuary allowance of ministers will be reduced by 30 percent for the same duration. This allowance is given to ministers to entertain visitors and is set at different levels for different ministers.

In addition, through rules notified under the Salary, Allowances, and Pension of Members of Parliament Act, 1954, certain allowances of MPs were also reduced in April 2020. These are constituency allowance and office expenses allowance.

These reductions will apply for one year effective from April 2020.

Bill to reduce MPminister salaries passed in Lok Sabha A look at how much these cuts will help
Sources: Salary, Allowances and Pension of Members of Parliament (Amendment) Bill, 2020; Salaries and Allowances of Ministers (Amendment) Bill, 2020; Members of Parliament (Constituency Allowance) Amendment Rules, 2020; Members of Parliament (Office Expense Allowance) Amendment Rules, 2020; PRS

How much will the salary cuts help

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 percent of Rs 20 lakh crore which is the amount of the special economic package announced by the Centre, in light of COVID-19.

During the discussion on the bill in Lok Sabha on Tuesday, MPs supported the reduction of salaries and the bill was passed. This now needs to be passed in Rajya Sabha.

Parliament’s approval to revise the salaries of legislators brings up some questions on how they should be determined.

How salaries of legislators are determined in India and elsewhere

In India, Article 106 of the Constitution empowers MPs to determine their salaries through legislation. Until two years ago, MPs periodically passed laws to revise their salaries which raised the issue of conflict of interest.

This was changed in 2018 when Parliament amended the salaries of MPs law through the Finance Act. 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. This change ensured regular revisions and decreased the conflict of interest of MPs setting their own salaries.

Various democracies have taken different approaches to decide the salaries of legislators. Countries such as Australia and the UK appoint an independent authority. Other countries, like France, peg it to the salary scale of senior civil servants, while Canada indexes the salaries to inflation.

The United States decides the salaries of legislators through a law but its Constitution specifies that the revision will be effective only after the next election to the House of Representatives.

Bill to reduce MPminister salaries passed in Lok Sabha A look at how much these cuts will help

How allowances for national legislators compare across the world

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; the UK provides an allowance for non-London MPs to rent a house or stay at a hotel; 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 is entitled to $500,000 a year for hiring legislative staff (sufficient for a legislative director and about five legislative assistants) and an MP in the UK Parliament gets about £177,000 a year (sufficient to have 3-4 legislative assistants). In India, MPs are provided Rs 40,000 per month (which will not cover the cost of even one legislative assistant).

How salaries of other Indian public officials are set

The conflict of interest present with MPs determining their own salaries is not present for fixing the 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 in 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. State governments follow a similar process.

Bill to reduce MPminister salaries passed in Lok Sabha A look at how much these cuts will help

Prachi Kaur is a research analyst and Mridhula Raghavan is a programme officer at PRS Legislative Research.