MPs are braced for a major public backlash on Thursday when a deal that would see their pay soar by almost £10,000 is unveiled. The Independent Parliamentary Standards Authority (Ipsa) is expected to propose a rise to around £75,000 - but offset it with a crackdown on perks such as dinners on expenses.
The existing final salary pension scheme is also set to be downgraded to a career average system, clawing back some of the millions of pounds in extra salary. The regulator is likely to argue that overall the new package will only be a few hundred thousand pounds a year more costly for the public purse.
But the prospect of a pay hike is certain to spark public fury with memories of expenses abuses still fresh, and the rest of the country suffering austerity. David Cameron, Ed Miliband and Nick Clegg have already urged restraint and are widely expected to reject the extra cash themselves.
However, they would need to change the law to prevent Ipsa pushing the rise through, and such a move would be very unlikely to succeed with most backbenchers convinced they are underpaid. Ipsa chairman Sir Ian Kennedy admitted last week that the 1% cap on public sector pay rises made the job of reviewing MPs' remuneration more difficult.
But he insisted there was "never a good time" to deal with the issue, and warned that avoiding an increase could create another expenses-style crisis as politicians sought to top up their salaries. The deal being unveiled this morning is expected to back a 12% rise from the current level of £66,000, to take effect after the general election in 2015.
From then on wages will rise annually in line with average UK earnings, a mechanism that the regulator hopes will ensure the situation is resolved for the long term. However, the £15 expenses available for dinner when the House sits beyond 7.30pm will be scrapped - saving hundreds of thousands of pounds a year.
There could also be tighter rules on using taxis, and restrictions on claiming running costs for second homes such as contents insurance. The notorious "golden goodbye" resettlement grants of up to £65,000 that used to be handed to departing MPs will not be brought back.
Instead, those defeated at an election could be entitled to redundancy similar to other public sector organisations. The proposals will go out for consultation before Ipsa finalises the arrangements in the autumn.
A senior Labour source said: "Our view is clear that any decision about MPs' pay must reflect wider economic circumstances and what is happening in the rest of the public sector. It must be consistent with what is happening to nurses, teachers and others in the public sector as well as conditions in the private sector."
In a blog for the Spectator website, Tory backbencher Conor Burns said it was the "most imperfect" time for a pay rise. He questioned whether the timing represented "errant genius or malice" on Ipsa's part.
"All MPs who are doing their job to any percentage of excellence know that our constituents are feeling very concerned for the future," he wrote. "Any spare money they have is going into repairing domestic debt and yet with rising petrol prices, food costs and utility bills not that many have much spare money at all. So this week with the backdrop of Conservative tearing lumps out of Labour on cash and influence and Labour responding by attacking the Conservatives on funding from business we may see the independent body responsible for setting MPs pay recommend a £10,000 pay increase.
"Leaving aside for a moment whether it is warranted what exactly would this be saying to the public? Can we seriously on the one hand say that we need public sector pay restraint (the private sector is largely self-frozen), that we must all make sacrifices to repair the economy and reduce the deficit if at the same time we accept a large increase to our basic pay?"
Burns said he was concerned about a "massive disconnect" between the issues at Westminster and the worries of the public. He warned that the public may be "quietly perplexed" or "bloody angry" about the things the political class were focusing on. He also insisted a £10,000 pay increase would be "more than offset by a change to the pension arrangements".
"Indeed it would appear that even if the whole pay increase were put into the pension the benefit would still be less," Mr Burns wrote. "So we are asked to accept a headline pay increase that most members of the public would find eye watering and an overall package that would be worse than now. One has to wonder if (this is) errant genius or malice on the part of Ipsa."
Labour's Margaret Hodge, who chairs the powerful Commons public accounts committee, said the increase was "inappropriate". She told BBC 2's Newsnight: "I think it's inappropriate at a time when we are asking public sector workers to take a 1% increase in their pay. We are public workers, we are public sector workers, that's how I see myself."
Asked if that meant she would not accept the rise, she replied: "I'm not going to enter into a Dutch auction of 'I'll do it for £30,000, I'll do it for... In the end some young MPs will do it for ten, twenty (thousand) some might even pay to take their seats and then you are back to the rotten boroughs of the 19th century when people bought their seats."