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Last Updated: Friday, 24 November 2006, 11:28 GMT
How EU commissioners afford houses
By Stephen Mulvey
EU reporter, BBC News

Where did Peter Mandelson find the money to buy a 2.4m house in London's fashionable Primrose Hill?

Primrose Hill
Popular with celebrities, Primrose Hill is leafy but close to the centre
Not from his salary as a European Commissioner, say Commission staff, anxious to play down the idea that they are swimming along on a gravy train.

Before talking about gravy, they say, compare their salaries with those of civil servants in the member states - and compare Peter Mandelson's wage with that of a British cabinet minister.

The truth is that Mr Mandelson's EU wage packet of 153,109 per year (223,614 euros) did come in very handy when he went house-hunting.

His spokesman confirms that:

  • He sold his flat in Trafalgar Square for 1.2m
  • His share of an inheritance from his mother was about 725,000
  • He has a "substantial mortgage" on his new property

The mortgage must come to at least 450,000, probably more, unless he owned his previous flat outright.

It can probably be taken for granted that Mr Mandelson has not taken any loans from a friend, after the scandal that erupted when he borrowed money from former Paymaster General Geoffrey Robinson to buy a house in Notting Hill 10 years ago.

His failure to declare the loan led to his resignation from the British cabinet in 1998.

Low tax

In terms of comparisons, he is earning roughly double what he would be taking home if he had been appointed again to the British cabinet.

I never quite understood my pay packet, I just knew that it was large
Former Commission employee
Taking into account a commissioner's various other allowances and perks, Mr Mandelson could even come within reach of the Prime Minister's salary.

Although Tony Blair earns about 30,000 more than Mr Mandelson's basic salary, Commission staff receive an allowance equivalent to 15% of basic salary, to help them pay for a second home in Brussels.

This lifts Mr Mandelson's pay to 176,000.

He will also have benefited from a one-off payment of 25,500 (two months' basic salary) to cover his installation expenses in Brussels.

As a single man, Mr Mandelson misses out on various allowances other Commission staff receive for their spouse (2,000 euros per year), children (3,000 euros per child per year) and children's education (up to 5,000 euros per year for a child studying abroad).

But he does benefit from a relatively low rate of "European tax" - 8% on the first 18,000 euros (12,000) of taxable income, rising to 45% for those earning more than 62,856 euros (42,470).

Big pension

He will also enjoy in future a generous pension.

Peter Mandelson
Mr Mandelson spends much of his time "on mission"
For example, the former French prime minister Edith Cresson, who was a commissioner for just four years in the 1990s - before helping to bring the whole Commission down in a corruption scandal - receives an annual pension of 43,000 euros (29,000).

If Mr Mandelson stays in the job for five years, or even 10 years as some commissioners do, his pension will be commensurately larger. Again, handy for paying mortgages.

Most of a commissioner's other perks do not end up in his or her pocket.

Mr Mandelson can pay thousands of euros per year entertaining guests in the appropriate style, but he does not benefit financially from any underspend.

In theory, Commission officials "on mission" do get a per diem expenses rate of 50 euros per day, to cover minor expenses - but the sum is reduced each time they get a meal without paying for it.

Though Mr Mandelson, as trade commissioner, spends much of his time travelling, he is not likely to boost his salary much in this way.

One former Commission official said the pay system was hard to follow, even for insiders.

"I never quite understood my pay packet," she added. "I just knew that it was large."

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