Remuneration Authority (Members of Parliament Remuneration) Amendment Bill

I move, That the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill be now read a second time.

The Remuneration Authority is required to release an annual determination that sets out the salaries for members of Parliament according to a formula set in law. The 2017 Parliamentary Salaries and Allowances Determination expired on 1 July 2018. The authority is due to release the 2018 determination, which proposes, according to a formula set in law, an increase of 3.08 percent for the salaries of members of Parliament.

The formula for determining MPs’ salaries was introduced in 2015, and it increases MPs’ salaries by the percentage average growth in public sector wages as measured by the quarterly employment survey, removing any superannuation subsidy and personal benefits received from allowances. The formula has resulted in higher than expected percentage increases to MPs’ salaries. 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. For example, a 3 percent increase for the median annual income in New Zealand of $52,000 would result in an additional $1,500 pay, whereas an MP earning $163,961 annually would receive a further $5,000, which is over three times more in real dollar terms. 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.

Since the formula’s introduction, in 2015, pay increases for MPs have ranged from 2.46 percent to 4.06 percent. The repeatedly high level of annual increases in pay set under this formula calls into question whether the settings for determining MPs’ pay are fit for purpose. It is critical that the Remuneration Authority Act 1977 be amended in order to stop this significant pay increase from progressing while work can be done to improve the way in which MPs’ pay is determined. This bill amends the Remuneration Authority Act 1977 to freeze MPs’ salaries and allowances at the current levels set out in the 2017 determination, and the superannuation subsidy as set out in the Parliamentary Superannuation Determination 2003 until 30 June 2019.

The bill also makes amendments to the relevant provisions in the Members of Parliament (Remuneration and Services) Act 2013 to reflect that no determination must be made for salaries or allowances during the same time period. The bill does not impact on how MPs’ services are determined for this time period. MPs’ services are individualised and need to be responsive to the differing accommodation, travel, and international travel needs of different MPs and Ministers. Work will be carried out to examine whether changes to the way in which MPs’ pay is determined are required. If further amendments to the Act are proposed as a result of the outcome of that work into how MPs’ salaries and expenses are determined, these will be made ahead of the 2019 determination being made. The Remuneration Authority will be consulted to test and ensure that any proposed changes will be fit for purpose.

In conclusion, this bill puts in place an immediate freeze to MPs’ salaries and allowances and will maintain them at 2017 levels until 30 June 2019 while work is carried out into the settings determined for MPs’ pay. This bill is a critical first step to ensure that MPs’ future salaries and increases are reasonable and justified in relation to those increases received by hard-working New Zealanders. I commend this bill to the House.

Thank you, Mr Speaker. I rise to speak to the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill with a sense of déjà vu because the last time this legislation was amended, in 2015, I was the Minister responsible for passaging it through the House. I recall, actually, that the bill was passed in the same manner as we are doing today, on 17 March 2015, to which my colleague Jonathan Young quipped that it was appropriate to be passed on Saint Patrick’s Day, because it was a rather “Irish” thing to do. But we will support it.

I would also want to wish the Minister for Workplace Relations and Safety all the very best, actually, in deliberating, and, I hope, with something of a bipartisan nature, on what the appropriate methodology for the setting of remuneration for members of Parliament will be. 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, was going to increase remuneration by, I think from memory, 3.5 percent or 3.6 percent, and there were some other changes on top of that, which made it look like even more of an increase.

But more than that—and without disrespecting any members of the Remuneration Authority at that time, who do a very good job—there seemed to be a trajectory, a momentum, at that time, in the wake of coming out of the global financial crisis, of increasing the remuneration to a degree that I and my Cabinet and my Prime Minister were uncomfortable with. It’s worth bearing in mind that that 3.6-odd percent increase was adjusted downwards using the formula that is presently in law, to about 1.5 percent, and that was deemed to be a much more appropriate comparator with general wage inflation at that time. It was lower than wage inflation but slightly higher than the Consumers Price Index.

Now, this is relevant in the sense that I think we have the model correct. I think it’s appropriate that there be an independent remuneration-setting process; although, I do also recall Mr Hipkins, in his second reading speech, saying something to the effect of “Well, if it’s possible for MPs to legislate to reduce their salaries, what’s to stop MPs from legislating to increase them?” And the answer I gave him was “Nothing.”—except the normal tensions and disciplines that we have. Actually, no single party has ever, under MMP, formed a majority, so I think it is unlikely, but he was technically correct that that is possible.

That said, I do think it is necessary—and, hopefully, we’ll get there—to prevent the two- or three-yearly cycle of reflection, review, and downgrading of the recommendations of an independent body, because I don’t think that’s helpful in the long run. In fact, you, Mr Speaker, will have more knowledge than most of the framework prior to the 1990s, when it was this House’s prerogative to actually set its own remuneration, and that was both highly inappropriate and highly problematic. When the Minister and I visited the United Kingdom on a Commonwealth Parliamentary Association trip in 2009, we arrived in Westminster—and the Minister will remember—in the middle of an absolute media firestorm because of the revelations in a daily paper of 30,000-odd pieces of paper that reflected MPs’ expenses, including things like duck islands, moats around castles, and things like that, which were being paid for by the British taxpayer, which led to a furore and the first resignation of a Speaker in 400 years of parliamentary democracy. We were there when John Bercow was elected the Speaker of the House of Commons over there, and he still is, I believe.

I raise that because it is a salient lesson in not going back to that kind of influence. We are kind of influencing it now by doing this, but the reason that I think they got into such a tangle was that, in this very financially deprecating manner, they would stand in the House of Commons and say, “No, we can’t possibly give ourselves a pay increase this year. It wouldn’t be inappropriate.” and yet, through the back door of expense reimbursement, a remuneration of sorts was being achieved, and that is entirely inappropriate but understandable given the long period of time between pay increases.

It is also, I think, important to make sure that we do have remuneration that encourages good people of high quality and calibre to stand in this place. I absolutely believe that we have that in the main, and 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. So, in supporting this legislation, I wish the Government all the best, and I look forward to all parties in Parliament having a contribution to make to that, because I do think it is important that we come to a formula that doesn’t require the Government to continue to nip and tuck and tweak every two or three years.

Kia ora, Mr Speaker. Ngā mihi nui ki a koutou. Kia ora. I rise on behalf of the Green Party to support the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill. This bill, effectively, implements the Government’s decision to freeze MPs’ salaries, superannuation, subsidies, and expense allowances at the current rate for the next year. The rise comes about because of what we heard from the last speaker, Michael Woodhouse, which was that 2015 change. On the advice I have received, the pending 2018 decision this year would increase MPs’ salaries by 3.08 percent and our expense allowances by 1.5 percent. That change comes about because of how it was indexed to the public sector wages measured in the quarterly employment survey.

Look, we’ve got to be frank. It’s failed in what I believe its original intent was: to restrain MP pay rises. That decision is still delivering MP pay rises at a time when kids are still growing up in poverty, homelessness is still on the streets, and we are seeing our families facing energy poverty and high costs of living. So while this freeze is in force, it gives the Government time for a process to be worked out.

Now, the Green Party has long questioned how MP salaries are set. We heard from the member that, in the 1990s, it was MPs themselves who set that, and I think any reasonable member would say that it’s simply unacceptable for those who benefit to set the decision. But, equally so, what we need is a formula—a transparent, simple, understandable formula—that everyone can get behind. That’s why we’ve always proposed the idea that our salaries be set to the nominal median wage. Don’t set it to the average wage: a more accurate reflection of how New Zealand and New Zealanders are doing is by linking it to the median wage.

Now, importantly, it shouldn’t be linked to the percentage rise; it should be linked to the nominal rate. Here’s the kicker, right: if the workers’ median wages go up by 200 bucks a year, MPs’ should only go up by that amount. If you do it by a 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 the median salary. That’s a slight decrease from 2003 on both criteria. We also know that we are, according to Parliamentary Library research, amongst the top 10 paid members of Parliament in the developed world. Now, it can fluctuate because of currency changes. But, look, I think what the public want to see is us having a formula that is fairly remunerated.

I do take umbrage with the point made by the last speaker that we want to attract high-quality people. Of course we want high-quality people in this Parliament, but if your definition is people who will only do it for a salary of 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. 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 their country. When our salaries are in the top 10 of the developed world, I think what we need to make sure is that we do have a fair, simplistic, and transparent formula that everyone can understand.

So we are very happy to support this. The proof is going to be in the pudding—that formula that comes out once the freeze is lifted. I do note that the Green Party did work with the previous Government back in the time of the global financial crisis, and we reached an agreement on that MP freeze. What we need to find is a durable, robust, and enduring framework so we aren’t constantly bringing this legislation to the House. I don’t think the public want to see MPs talking about themselves; they want to see MPs coming to this House, talking solutions. It might be a little bit easier and more palatable when we’re freezing our salaries, but they want to see us talking about dealing with child poverty, dealing with energy poverty, dealing with the costs of living, cleaning our environment, and delivering a richer New Zealand. Kia ora koutou.

On behalf of New Zealand First, I’ll just take a very short call on the bill that we’re discussing right now. It was with great pleasure that the New Zealand First caucus just unanimously, without a moment’s hesitation, agreed to support this piece of legislation. I think everybody across the House recognises that the nation has some challenges, and this is not the time for us to accept a pay increase, considering that we are well paid for what we do.

I do want to make the point that I often—I’m sure we all do—have conversations with young people about how this place works, what parliamentarians do, what politicians do, because it is a mystery to many people, interestingly enough. One of the things they ask about is how much we get paid. So I tell them. And then 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. I said to him, “If somebody from Invercargill had to fund their own travel, there would be less people from Invercargill in Parliament—”

💬 SPEAKER: Fewer.

Fewer. I beg your pardon. Thank you, Mr Speaker—obviously, a very highly regarded previous Minister of Education. 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. And that is why some of the structures around the salary are probably more important than the salary itself, because it makes sure that we remain—well, we try, and we fight to be—a representative democracy. I often say to young people that if you can’t see yourself here or identify with somebody in this House, then it’s not doing its job.

So this is a good thing. New Zealand First 100 percent supports this, no hesitation at all. We do look forward to working constructively, obviously, across the House to come up with a new way to calculate in the future. But right now this is the right thing to do. The whole of the Parliament agrees, so New Zealand First supports it. Kia ora.

Bill read a second time.

In accordance with the determination of the Business Committee, this bill is set down for third reading forthwith.

Third Reading