Dr Harris responds to Telegraph allegations

6.20.35pm BST (GMT +0100) Mon 1st Jun 2009

Response to Daily Telegraph story 1st June 2009

On Sunday 31st May I was contacted by the Daily Telegraph with a series of questions and some allegations about my claims on the second home allowance.

I replied to them a few hours later, refuting some of their allegations and explaining other points.

On Monday 1st June they published an article but included only parts of the answers I had given.

I therefore thought it would be useful for me to set out the basic facts so that my constituents have the opportunity to make a proper judgement on the situation.

My use of the Additional Costs Allowance:

I will start by re-iterating my previous statement that I have always designated my Botley maisonette in the constituency as my main home for both parliamentary and tax purposes, and my small flat in London as my 2nd home. I have made a clear commitment that any capital gain that has been financed by a taxpayer-financed mortgage will be passed on to the taxpayer at whatever time I cease to need a 2nd home in London. I have never "flipped" the designation.

After election in 1997 I bought a lease on a small, one bedroom flat near Westminster. My parents gifted me a sum of money for the deposit and I paid the balance with a mortgage, claiming the mortgage interest from the Allowance.

During the years in that flat I did not claim for any new bathroom, kitchen, major refurbishment, plasma TVs, gardening or anything of that order. I did claim for a basic carpet refitting (at a cost of £1,000 for the whole flat) and for some emergency plumbing work in the bathroom (three invoices totalling £2,940.07) which was due to a leak and the subsequent reinstatement of the existing bathroom suite.

In 2005-6 I asked the fees office whether I was allowed to extend the mortgage on the flat in order to release the original deposit. They agreed subject to receipt of the relevant documentation, which I then supplied, but I then did not pursue it further.

In 2006 I was given clear advice by my solicitor that the value of the flat was going to start decreasing in value rapidly as the lease had only 52 years to run. I was advised to extend the lease in order to maintain the value of the flat for the tax-payer and myself. I again asked for advice from the fees office, who approved it and then went on to extend the lease.

In 2008 I decided to look for a new flat, which had a study. This was because, with the advent of wi-fi etc, it much easier to work in the evenings to deal with email, etc., than it was in 1997.

My parents - who live in Oxford but wanted a London base - offered to buy the flat from me. In order to avoid any accusations of wrongdoing, and in line with best practice, I was careful to get an independent external valuation. I sold the flat to my parents in line with this valuation.

At that point I stopped claiming any costs relating to the first flat and started claiming for the new flat. Since the move there has been a reduction in my claims against the allowance which were less than two thirds of the maximum in 2008-9.

I believe that the above use of the Allowance was entirely within, not just the wording of the rules, but the spirit as well. Indeed, it is in the best interests of the tax-payer, who retains a stake in the value of my second home because of my commitment to pass on the equity gain that they have financed. I have never claimed for anything in any way 'luxurious' and have only ever claimed for a small, basic flat to enable me to do my job as an MP effectively.

While I recognise the valuable role the Daily Telegraph has played in exposing nefarious and dishonest practice of MPs in relation to allowances and expenses some of the allegations are unfair or unfounded, and this is the case with those against me. I have set out below the errors and other flaws in the Telegraph story:

"MPs' expenses: You help pay for flat, then parents buy it"

The key question for tax-payers is in fact not who buys an expenses-financed 2nd home (as long as it is sold at the right valuation) but where does the capital gain from the sale go? In my case it will get passed on to the tax-payer. In other cases it may have gone to the MP's bank account.

"Evan Harris sought permission from the fees office to increase his mortgage by £67,000 to cover a deposit he paid when buying his Westminster flat and to extend the lease, thereby enhancing the value of the property."

This is not accurate. I submitted to the fees office formal solicitor's advice that unless I bought the lease extension the fall would fall in value year on year. The matter was urgent. The Telegraph had a copy of this letter of 16th January 2006 from my solicitor which states "I can confirm that it is necessary to extend the term of this Lease in order maintain the value of your interest in this Leasehold Property. … Once any Lease goes below 55 years the capital value starts to decrease on an annual basis."

Any increased value of my second home financed by the tax-payer will be passed over to the tax-payer when I no longer need it. To reject or ignore the legal advice and not extend the lease at this time would therefore also have short-changed the tax-payer as the value of the property would have fallen year on year dramatically.

Given that I am committed to pass on the tax-payer any equity gain financed by the tax-payer from the second home allowance and that the flat was 80% allowance-financed, not to extend the lease would have cost the tax-payer four times what it cost me. In addition the threat of impending negative equity would mean that the mortgage company would force later, more expensive action.

"Dr Harris, the MP for Oxford West and Abingdon, told officials that he needed part of the enlarged mortgage to repay £27,000 which he had borrowed for the deposit from his parents, Brenda and Frank, a respected university professor."

This is simply untrue. The £27,000 was my initial deposit - stemming from a gift from my parents. The Telegraph knew this, as again there is a solicitor's letter on their file.

"That request was declined,"

This is not the case. It was in fact approved but I chose not to pursue it. The documentation they have clearly show the fees office saying "subject to him providing the necessary documentation, we would be willing to agree to increase the amount of mortgage interest payable equivalent to the cash deposit he first made to purchase his ACA property". However despite providing that documentation I did not pursue it. To be fair to the Telegraph on this point, in my short notice response to their questions on the Sunday afternoon, I said I thought the request had been declined. I had not seen the paper they had seen which states that it was agreed, I did not have access to my solicitor's papers and I did not remember the outcome.

"but he was allowed to increase the mortgage to pay for the £40,000 cost of extending the lease. As a result, his claims for mortgage interest went up from £519 to £781 a month. The MP's application to put the cost of re-mortgaging on his expenses appeared to have raised concern among officials."

No it did not. It raised a question that they needed to consider carefully, but they were "sympathetic".

"In a memo, a senior member of the fees office wrote: "I got the impression of a man under some pressure ... loan of money from his parents ... he needed to pay the money back to them."

This is a selective quotation from an email from one official to another, cobbled together with words taken from two sentences separated from each other by another two sentences. The official merely presumed that because the deposit was paid by my parents that it was a loan and not a gift.

"After re-mortgaging, Dr Harris claimed the £1,050 legal fees and £881 surveyors' bill on his expenses. Three years later, in the autumn of 2008, he sold the one-bedroom flat to his parents for £350,000, at a time when property prices in the capital had collapsed as a result of the recession. Land Registry documents show that they bought the property without taking out a mortgage."

If I had extended the lease with a view to selling the flat below the fair price to my parents, I would not have waited three years and I would not have - in line with recommended best practice for private sales - obtained an independent external valuation and sold the flat at the recommended price from that valuation.

"Dr Harris sold the flat to his parents for £200,000 more than he paid for it in 1997. He then bought a new flat for £730,000 a short walk away. The MP said yesterday that the price paid by his parents was based on an estate agent's valuation in August, shortly before the collapse of the market."

I did not say "shortly before the collapse of the market". The valuation in August was for "£350-380,000, but accept offers of £350,000 for a quick sale". The offer was accepted in September and contracts were exchanged soon after. The property market for flats in Westminster did not, in any event, collapse.

"Insisting that the sale abided by "best practice", he added: "It is no secret that my parents bought the flat. All my friends know this and I told the local paper last week." The MP added that it would have "short-changed" the taxpayer not to have bought the lease because the value would have fallen."

This is because unlike most of the MPs identified by the paper who have "flipped" and sold their 2nd home, I have always been committed to passing on the tax-payer any realised capital gain that was financed through the allowance. Nick Clegg has asked the Kelly Committee to for this to be a general requirement.

"During the two years running up to the sale, Dr Harris spent more than £6,600 of taxpayers' funds doing up the apartment."

This is incorrect. There was no "refurbishment" or "doing up". No new furniture, kitchen, or bathroom. To get anywhere near to £6,600 the Telegraph have had to wade through hundreds of pages of receipts and cobble together the following mix of repairs and minor decoration over 3 years:

• a plumbing bill to repair a leak in the bathroom (£2,940.07) -see appendix below for full details

• a coat of paint to match the remaining walls with those walls repainted by the insurance company of the flat above whose plumbing had leaked into my flat. (£1,100)

• two new light fittings after one fell out, on advice of electrician, - £100

• a cheap new beige berber carpet (from "Carpet Express") for £1,000 including labour for a 500 square foot flat replacing a similar water-damaged one of twenty years heritage

• oven repair £157.07

• a plumbing bill of £135 for a blocked sink

• Cleaning of curtains (at least 15 years old) - £175

This amounts to £5,600 mainly for emergency repairs and making good which is no-one's idea of a major refurbishment.

"He said: "I have not identified any allowances claimed which were inappropriate. I will pass over to the taxpayer any capital gain financed by allowances when I no longer need a flat for work. This means the taxpayer is no worse off and perhaps even better off as a result of the way I have used the second home allowance. "I am very confident that I have acted entirely appropriately in terms of claims made as a Member of Parliament." Mr Harris said that he paid capital gains tax when he sold the flat to his parents."

In fact the CGT is only payable in the coming tax-year. This is a cost born entirely by me as no cash has been realised from the sale of the flat as a I bought a larger nearby flat with a study.

"He added: "I have sold a second home without avoiding CGT, without benefiting a family member and without refurbishing it first."

In fact I have done all the things that other MPs have been criticised for not doing and not done any of the things that others have been criticised for doing.

Evan Harris

Appendix - the reapirs and minor decoration items in full:

04/06/07 (£798.82) - Pimlico Plumbers - urgent call out for leak behind bath

Disconnected and removed bath and set aside. Closed off tiles halfway up wall and cleared from site. Removed bath/shower screen and cleared from site. Fixed bather to wall. Refitted bath fixed to floor and levelled. Reconnected supplies, fitted new bath waste, reinstate supplies and test. Siliconed around sink and bath. Replaced toilet ball-valve.

Materials used:

2"x1" battens. Clear and white silicone, 9.5 torbeck float valve. 1-bath combined waste and overflow.

Recommendations:

Tiler to return on 18/06/07 to seal walls, re-tile, supply and fit bath/shower screen and re-fit bath panel.

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19/06/07 (£1435.35) - Tiler

Bathroom. Re line walls around bath/shower area using weo board and seal joints and silicants, re tying tais area and finish edges with metal chrome trim. Grate and seal make up men timber frame and re fit b/ panel.

Materials:

Trim, adhesive, grout, silicone, tiles, timber, weo board.

Recommendations:

Supply and fit bath/shower screen, add skirting to bath panel and silicone seal around bath.

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09/07/07 (£705.90) - Pimlico plumbers

Shower screen, supply and fit new bath/shower screen adding silicone bead where needed. Fitted new mahogany skirting around bath panel to finish bottom edge.

Recommendations:

Shower screen, silicone, skirting board.