Subsidised purchase scheme might be scrapped

MSPs would be forced to hand back the profits made on their publicly-funded second homes under plans being considered by a Holyrood review team. Experts are exploring a "claw-back" system where MSPs would give to the taxpayer a proportion of the capital gain made on their lucrative Edinburgh homes.

They are also looking at whether the scheme that allows MSPs to purchase a subsidised property in the capital should be abolished.

The Edinburgh Accommodation Allowance (EAA) enables MSPs who live outwith commuting distance of the parliament to claim up to £11,400 a year in mortgage interest payments for a property in the Lothians.

However, the scheme has been dogged by criticism after it emerged Holyrood politicians were pocketing the profits upon the sale of their taxpayer-funded homes.

Jim Wallace, the former LibDem leader and deputy First Minister, made a post-sale gain of £69,000 from his EAA flat, while his LibDem colleague Mike Rumbles netted £37,000 from the sale of his taxpayer-funded properties.

Other MSPs have used the profit on one property to then buy a publicly-subsidised family home in the capital, while another has used the perk to pay the interest on three separate flats.

Last year the Sunday Herald revealed that SNP transport minister Stewart Stevenson had sold his family home in Linlithgow, then bought another property just yards away, thus claiming mortgage interest to live in a town in which he has stayed for 30 years. Tavish Scott, the LibDem transport minister, used the profit made on one taxpayer-funded flat to buy a £380,000 family home.

All told, the 40-plus MSPs who currently claim the subsidy are sitting on a potential profit of £3.14 million, equivalent to £76,500 each.

The creative use of the scheme caused public revulsion and prompted the parliament to set up a review of the entire expenses system.

The minutes of a recent meeting of the allowances team reveal how its members are looking at requiring MSPs to hand back the profits made on their second homes: "It was agreed that an index-linked claw-back option in respect of the interest payments on the capital required to purchase a property should be explored."

The scheme would involve devising a payback formula, based on the allowances that MSPs have claimed and on the profit made upon the sale of a property. The review team is also considering a more radical option, namely, scrapping the scheme altogether: "The panel has not ruled out recommending the abolition of the purchase option."

Getting rid of the mortgage option would mean restricting MSPs to either renting in the capital, or staying in hotels. It is unclear from the minutes, however, whether the "claw-back" would apply to current mortgage claimers, or if it would be for those who sign up to the scheme in future.

One option the review team has ruled out is for the parliament to purchase property that would then be rented out to MSPs. The review team concluded it was "not a realistic option" because of the costs involved in buying flats.

Lothians MSP Margo MacDonald said: "The public perception of the scheme is that MSPs are sometimes milking the system. A good reform would be to claw back the profits made from the public purse."

Matthew Elliot, the chief executive of the Taxpayers' Alliance, said: "We would be very keen on MSPs' handing back these profits. It is right they are given assistance to do their jobs, but it is taxpayers who must get any profit from publicly-funded properties."