A section of the National Assembly on March 28, 2013. Photo/Stephen Mudiari
Nation Media Group
By EDWIN MUTAI
In Summary
- An MP who decides to go for half of the Sh7 million car loan amount would therefore be relegated to the less prestigious cars of below 3,000 cc such as Toyota Rav4 and not the classy Prado or Nissan Patrol that was the MPs car in the 10th Parliament.
- Without additional income, most MPs will have to keep their ambitions to a maximum Sh10 million that can only afford them housing outside the prestigious Nairobi suburbs such as Lavington, Karen, Runda and Muthaiga.
- These are the realities that have seen Members of Parliament promise to rise up against the SRC upon being sworn into office.
Members of the 11th Parliament are expected to
come to terms with the strict lifestyle changes imposed by their heavily
diluted pay perks following last month’s review by the Salaries and
Remuneration Commission (SRC).
Top on the list of privileges that the MPs are set to lose is access to top-of-the-range cars and home ownership in upmarket city estates.
MPs are entitled to a maximum of Sh20 million home loan and up to Sh7 million in car loan payable within the term of Parliament.
Excluding the allowances, Members of the 11th Parliament —sworn in Thursday — will earn a salary of Sh532,500, which is now subject to tax at the rate of 31 per cent.
This means that unless they have extra income from other sources, the legislators will find it difficult to service home and car loans at the maximum amount allowed and at an interest rate of three per cent per annum.
The two facilities would attract a monthly repayment bill of Sh343,332 monthly taking the legislators across the one-third net take-home rule provided for under the Labour Act. The rule requires that each MP must be left with at least Sh178,000 for personal upkeep every month after all deductions are made.
The headroom is limited by the Sh159,750 that would be deducted from the salary in the form of income tax, leaving each MP with a discretionary income of Sh372,750.
It is from this amount that they must derive their monthly home and car loan repayments and keep within the one third rule.
The Sarah Serem-led Salaries and Remuneration Commission (SRC) increased the mortgage entitlements for MPs from Sh15 million to Sh20 million and the car loan from Sh5 million to Sh7 million.
“A State officer, serving in Parliament shall subject to the availability of funds, be entitled to a mortgage of up to Sh20 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 Gazette Notice dated March 8, 2013 on the remuneration and benefits for State officers serving in parliament.
But it also imposed an interest rate of three per cent on the loans unlike in the past when they were interest free and retained a requirement that the loans be paid within the five-year term of Parliament.
Members of the 11th Parliament face another hurdle in how long their term will last. The new parliament is expected to last only four years and five months -- seven months less than the five-year term in line with a constitutional requirement that the next General Election must be held in August 2017.
The basic salary of a member of the National Assembly or Senate is expected to rise up to a maximum of Sh692,500, including earnings from committee and chamber sittings that are subject to taxation.
This is because the SRC has set Sh5,000 as the amount a member of a parliamentary committee can earn for every sitting up to a maximum of four sittings per week meaning that a legislator can earn up to Sh80,000 per month.
Equally, the legislators can earn up to Sh80,000 per month from House sittings. Ordinarily, the House sits for four times a week in the plenary for which each an MP can earn a maximum of Sh20,000.
This means that a hardworking member, who is not a chairperson or vice chairperson of a committee, and attends all committee and plenary sittings will cumulatively take home Sh692,500 a month.
This immensely reduces the possibility of a first time member with no other source of income going for the maximum mortgage and car loan allowed.
An MP who decides to go for half of the Sh7 million car loan amount would therefore be relegated to the less prestigious cars of below 3,000 cc such as Toyota Rav4 and not the classy Prado or Nissan Patrol that was the MPs car in the 10th Parliament.
MPs will face a similar dilemma in their quest to access home-loans as provided for in their remuneration package.
Without additional income, most MPs will have to keep their ambitions to a maximum Sh10 million that can only afford them housing outside the prestigious Nairobi suburbs such as Lavington, Karen, Runda and Muthaiga.
They cannot even buy land in these leafy suburbs and build own houses because an eighth of an acre in these estates costs an average of Sh10 million.
In the upper middleclass estates such as Nariobi’s Kilimani, Sh10 million can buy one bed roomed apartment leaving the lawmakers with the option of residing in lower middleclass estates of South B, South C, Donholm and Buruburu among other less prestigious areas like Kitengela on the outskirts of Nairobi.
These are the realities that have seen Members of Parliament promise to rise up against the SRC upon being sworn into office.
It remains unclear how they plan to do this given the fact that the SRC is anchored in the Constitution.
Though taming the MPs greed has proved popular with the Kenyan public, analysts believe salary cuts and freezes will make only a small impact in the desired reduction of the public wage bill until an attempt is made to reduce the workforce.
“We are going around in circles about the wage bill. Reducing the salaries of MPs and a few other state officers won’t take us far,” said Eric Munywoki, a research analyst at Old Mutual Securities.
Mr Munywoki reckons that the entire public service should be
assessed afresh saying that the existing workload can be handled by a
smaller number of workers.
“Eighty per cent of the recurrent expenditures are salaries and wages. A lot of this money should be re-allocated to areas such as infrastructure,” said Mr Munywoki.
He added that there must also be cuts in none-core government spending such as hospitality and vehicles as well as introducing paperless offices.
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