Pay freeze for MPs

A bill freezing MPs' salaries has been passed by the House.

The Remuneration Authority (Members of Parliament Remuneration) Amendment Bill - try saying that ten times fast - passed its first, second, and third reading on Wednesday this week.

Usually each reading of a bill would have a debate of about two hours, the bill would go to a select committee for about six months, and be put through a committee stage where its parts are examined in detail for as long as is necessary.

But the House can pass a bill through much faster if it agrees to, or if it's sitting under urgency.

In this case, the House debated only the second reading and they all agreed the bill should pass.

So what is it?

Remuneration is an official sounding word for payment. This bill is about freezing pay for MPs.

The salaries of people who have state-jobs like Judges, MPs, local government representatives and the Governor General are set by the Remuneration Authority.

It used to be called the Higher Salaries Commission and was first set up in 1974 by the Wage Adjustment Regulations.

The name was changed in 2003 but the “higher salaries” of MPs is still a topic for debate - particularly their pay increases.

In 2015 a formula was introduced to determine MPs’ salaries but the Minister for Workplace Relations and Safety, Iain Lees-Galloway, said it hasn’t worked as intended.

“The formula has resulted in higher than expected percentage increases to MPs' salaries,” he said.

“Given the level of pay that MPs receive relative to the average wage in New Zealand, a high percentage increase can result in a significant increase in the total amount that MPs are paid.”

Mr Lees-Galloway said a 3 percent increase for someone on the median annual income of $52,000 would result in an extra $1,500 but an MP earning $163,961 would get an additional $5,000.

“These significant pay increases are unfair and unjustifiable, and they contribute to the growing imbalance in pay between those on highly remunerated salaries and the rest of New Zealand. This is not acceptable to the New Zealand public,” he said.

It’s not the Remuneration Authority’s fault as their decisions must be made according to criteria set out in legislation.

The bill freezes the salaries at the current level and also says the Remuneration Authority doesn’t have to release a decision on salaries or allowances until at least 30 June 2019.

What do the other parties think?

National MP Michael Woodhouse was the Minister responsible for the bill which amended the legislation in 2015.

He said he wishes Mr Lees-Galloway the best in figuring out a new system as it’s not an easy task.

“I say that in the spirit of goodwill, because I and my Cabinet certainly grappled with this particular problem in 2015 when it became apparent that the Remuneration Authority, independent of members of Parliament, were going to increase remuneration by—I think from memory—3.5 percent to 3.6 percent, and there were some other changes on top of that that made it look like even more of an increase,” said Mr Woodhouse.

The Remuneration Authority does a good job he said, but there “seemed to be a trajectory... in the wake of coming out of the global financial crisis of increasing the remuneration to a degree that I, my Cabinet, and my Prime Minister were uncomfortable with.”

Mr Woodhouse also said it was important to keep a level of pay that attracts high quality people to stand as an MP.

“We want to make sure that we continue to attract people for the right reasons. The setting of remuneration that is neither attractive nor unattractive is going to be a bit like the search for truth or wisdom that the Minister for Workplace Relations and Safety will have.”

Green Party MP Gareth Hughes said a high salary shouldn’t be the drawcard.

“Of course we want high-quality people in this Parliament, but if your definition is people who will only do it for a salary at an appropriate level—that's not a definition of high-quality; that's a recipe for making sure we get more wealthy people in Parliament,” he told the House.

“What we want is a diverse House of Representatives. What we want is people coming to this Chamber not for the salary but because they want to serve the country.”

Mr Hughes said MPs' salaries are in the top 10 of the developed world and a “fair, simplistic, and transparent” formula is needed.

“We've always proposed the idea that our salaries be set to the nominal median wage,” he said.

“Don't set it to the average wave. A more accurate reflection of how New Zealand and New Zealanders are doing is by linking to the median wage.”

He said it also shouldn’t be linked to the percentage rise but the nominal rate.

“If the average median workers' wages go up by 200 bucks a year, MPs' should only go up by that amount. If you do it by percentage, you're going to see that growth.

“Now, the fact is that I asked the Parliamentary Library to do some research for me, and what we know today is that our salaries are 2.7 times the average ordinary wage and 3.2 times median salary.”

New Zealand First MP Tracey Martin said it is not the time for a pay-rise but there is often confusion about what MPs do to earn their keep.

“One young man, particularly, I remember, said, "I heard you get free travel." I said, "Yes, that's right. We do." And he sort of rolled his eyes, and I said, "But the next question is to ask why." And it does go to some of this conversation,” she told the House.

She said some of the structures around the salary are “probably more important than the salary itself” because it helps make working at Parliament an option for a wider range of people.

“I said to him, "If somebody from Invercargill had to fund their own travel...There would be fewer people from Invercargill than there would be politicians who are living just down the road from Parliament. There would be fewer people from, perhaps, those representative communities who are not as wealthy as some other communities.

The Bill passed with support from across the House and the next step is for MPs to work on a new system to determine MPs’ pay.