Serem team cuts MPs’ home and car loan benefitsTuesday March 12 2013
The Salaries and Remuneration Commission (SRC) Tuesday deepened its resolve to tame MPs’ greed with the publication of new regulations limiting the benefits that go with their offices.
Members of the 11th Parliament — serving in the Senate and the National Assembly — will face more stringent conditions on fringe benefits such as car loans and mortgage facilities, according to regulations published in the official Kenya Gazette.
Legislators seeking mortgage facilities through the parliamentary scheme will be entitled to a maximum of Sh20 million payable over five years.
The loan is subject to an interest rate of three per cent per annum and must be fully paid by the end of their term.
This is a significant departure from the interest-free mortgage loans of up to Sh15 million payable over five years enjoyed by members of the 10th Parliament.
Besides, the parliamentarians will no longer enjoy interest-free car loans.
“A State officer serving in Parliament shall, subject to availability of funds, be entitled to a car loan of up to Sh7 million repayable at an interest rate of three per cent per annum within five years or before end of term, whichever is earlier,” the SRC said in a special Kenya Gazette notice.
Members of the 10th Parliament were entitled to a Sh3.3 million grant to purchase cars for which the government paid import duty.
“We are trying to instil a sense of fiscal prudence by letting the MPs own and maintain their own cars or homes,” Sarah Serem, the chair of the SRC said.
The notice was published as scores of newly elected MPs milled around the National Assembly offices in Nairobi asking the staff about their car and mortgage loan entitlements.
But Michael Sialai, the deputy clerk of the National Assembly, said they will only engage the MPs on such matters after they are sworn into office.
Extending the generous benefits to the new two-tier Parliament was expected to come with huge budgetary implications going by the sheer numbers involved.
The Senate has 68 members, including the Speaker while the National Assembly has 350, including the Speaker.
The last Parliament had 224 members, including the Speaker and the Attorney-General as ex-officio members. “We are out to ensure benefits and packages of State officers are realistic and reflective of the prevailing economic circumstances,” Mrs Serem said.
The diluted car and mortgage loan schemes deals a fresh blow to MPs who took a major pay cut two weeks ago and had their sitting allowances slashed as part of the effort to contain a swelling public wage bill.
(Read: SRC blocks the allowances gravy train in Parliament)
The new pay structure consolidates and caps State Officers’, including MPs allowances, at 40 per cent of the total remuneration package and reduces their gross pay to Sh532,500 from Sh851,200.
This means that with a starting gross pay of Sh532,500 in their first year of service, plus a special duty allowance of Sh150,000 per month, an MP's gross monthly pay amounts to Sh682,500.
Both salaries and allowances of members of the 11th Parliament are taxable at the rate of 30 per cent under the new Constitution, a radical departure from the 10th Parliament.
The popularity of the Members of the 10th Parliament dipped to an all-time low after they conspired to award themselves hefty salaries and allowances during their term.
“We intend to rope the remaining batch of parliamentary officers into a similar structure. We had to deal with the MPs first because we wanted to finish the process before they assume office,” Mrs Serem.
The cuts in MPs perks come as the State struggles to tame its recurrent expenditures amid a massive shortfall in revenue collection. The public wage bill is one of the key areas targeted for trimming to help ease the pressure on the national budget.
The SRC estimates that the public wage bill currently stands at Sh458.7 billion or more than half of the country’s total domestic revenues. That also amounts to 30.2 per cent of the total government expenditure or more than 12 per cent of the GDP.
The reduction of State officers’ salaries early this month is expected to save the government Sh1.5 billion besides the Sh500 million savings that Mrs Serem said had been saved when she published the proposed remuneration structure on February 5, 2013.
The initial phase of public service pay perks review affects 3,670 State officers whose total wage bill currently stands at Sh14.7 billion annually.
This is expected to fall by Sh2 billion to Sh12.7 billion when the new salaries come into force.
A sharp reduction in the pay perks of top government officials bears the potential of saving the State billions of shillings when the commission gets down to aligning middle and low-cadre employees’ pay perks with those it has set at the top.
The Treasury has warned too that the current wage bill is not sustainable given the poor performance in revenue collection since last year.
“Choosing between competing objectives under tight fiscal strains will be needed at this moment. Therefore, difficult choices must be made to ensure that scarce resources are directed to priority areas of economic development,” Finance minister Njeru Githae said last month.
(Read: Treasury plans civil service job cuts in wage bill purge)
A huge shortfall in revenue collection and low disbursement by donor partners has pushed the outgoing government into a deep financial crisis that threatens to derail the implementation of some of its development projects.
A recent report by the Controller of Budget showed that the situation has become dire such that the government even failed to honour its public debt of Sh32.6billion and exchequer requisitions by ministries, departments and agencies amounting to Sh56.7 billion over the second quarter of the 2012/13.
The pressure is expected to increase when the government implements its functions across the 47 counties.