Remuneration Authority (Members of Parliament Remuneration) Amendment Bill (No 2)

I move, That the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill (No 2) be now read a second time.

I thank the members of the Education and Workforce Committee for their consideration of this bill. The select committee has not recommended any changes. In light of this it is my intention to very briefly set out the intent of the bill.

It is critical that public money is spent responsibly. The formula that Parliament previously put in place was intended to rein in significant pay increases for members of Parliament. Unfortunately, it has not had that effect at all and MPs’ pay has outstripped inflation significantly. The 2015 change removed the Remuneration Authority’s discretion in setting the increases as these increases were determined by a rigid formula. Since the 2015 changes, MPs’ salary increases have ranged from 2.46 percent to 4.06 percent per year, compared to average increases of 1.7 percent for the four years prior to the 2015 changes. In absolute dollar terms, the increases since 2015 have also been higher. The repeatedly high annual increases in pay set under this formula call into question whether the settings for determining MPs’ pay are fit for purpose.

This bill amends the Remuneration Authority Act 1977 and the Members of Parliament (Remuneration and Services) Act 2013 to establish a new process for how the authority sets the salaries of MPs. The bill restores the authority’s discretion to determine MPs’ salaries based on criteria. The criteria system is currently used by the authority to set the salaries of judicial officers, the Governor-General, and elected local authority officials, and has resulted in lower pay increases compared to members of Parliament. Although the circumstances of each role are different, this discrepancy suggests that the criteria-based system is a more appropriate one.

The bill also restores the requirement for the authority to consider the personal benefit arising out of MPs’ entitlements when setting their salaries. The bill requires the authority to make this year’s determination of MPs’ pay under this restored system.

Finally, the bill will link future reviews to the electoral cycle so that the authority would conduct one review after each general election and would set MPs’ pay for the entire term of Parliament specified on a year-by-year basis.

This bill establishes a new process for how the authority sets the salaries of MPs. This new process will strike a better balance between the interests of New Zealanders and those whose remuneration is being assessed. I commend this bill to the House.

Thank you, Madam Speaker. I’m taking this call to support the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill (No 2) in the second reading. This is a bill which in the Education and Workforce Committee we decided to not amend at all. So you can see the kind of support this bill received from all sides.

For some reason I was expecting a lot more submissions for this legislation, because when we talk about MPs’ salaries, for some reason there is a lot of interest amongst people. But we received only six submissions on this legislation. We didn’t hear from any submitters. So nobody appeared for an oral submission to the select committee, but that doesn’t diminish the value of their written submissions.

All I want to say is that this has been very non-controversial legislation in the select committee process and the recommendation that we made in the select committee process for this bill, for the report back to the House, is that the bill proceed without amendment. I have rarely seen this happen: when a bill goes to the select committee and we don’t make any amendments and we say that the bill actually should go through without any amendments.

This legislation clearly highlights that MPs come to this job not for financial reward; MPs come to Parliament to do better for New Zealand, to do better for their communities, because they really believe that they can make that difference. So they don’t come here for financial reward.

What we saw in 2015 was that because of the system that was followed at that time, MPs were getting an increase in their salary of 5.5 percent, and we thought that was not justifiable. So that’s why we decided to review two Acts: the Remuneration Authority Act and the Members of Parliament (Remuneration and Services) Act. Through that review, what we did was link MP salary increases through a fixed formula to public sector wages. So this legislation now actually repeals that change that we did in 2015. So we are going back to giving that independence to the Remuneration Authority, not linking it through the fixed formula to public sector wages but using that criteria that is listed in the legislation.

I also want to highlight that we have realised that going back to the system that was there before 2015 actually would be better in our current circumstances, because if we look back to the increases that we received from 2011 to 2014, the average increase was around 1.7 percent, and if you look at the increase that we received from 2015 to 2018, that ranged from between 2.5 percent to 4 percent. Also, at the start of 2018, we realised that the increase that MPs—us, that we will get in our salary will be around 3.3 percent. We want to make sure that the increases that we get in our salaries are justifiable, and that’s why we think this is a bill which should go through and we support this legislation. Thank you.

Thank you, Madam Speaker. I just want to briefly rise to commend the bill to the House. I think this is a very sensible bill which puts the setting of MPs’ remuneration back within a framework that delivered moderate and appropriate increases. I think that the previous regime that was set up under the Key Government was well intentioned, but in tying MP remuneration to public sector increases, it actually had the reverse outcome. Incidentally, I think there’s an interesting little lesson in there, which is: “Why might that be?” Primarily, it’s because public sector has retained a very strong level of collective bargaining across the economy and have been able to, therefore, argue for and successfully have higher pay increases. So that’s a good lesson there for workers about a good way of increasing your pay: join your union.

But in this case, I think the House is of one mind, which is that we want to see a more moderate and appropriate level of increases for members of Parliament. The formula, the set of criteria previously considered by the Remuneration Authority, achieved that, and this bill will take us back to that point, as well as having the very sensible reform of setting pay once every three years, which I think has a range of benefits instead of the annual process and some of the difficulties that arise from that. So I commend this bill to the House.

Thank you, Madam Speaker, for the opportunity to take a call on the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill (No 2) at this reading. I just want to commend this bill to the House on behalf of the National Party, and to acknowledge, firstly, the chair of the Education and Workforce Committee, Dr Parmjeet Parmar, for the work that she’s done, and also the Minister for Workplace Relations and Safety, Iain Lees-Galloway.

This is a bill about MPs’ pay. It’s one of those issues which gets a lot of interest in the community. Essentially, what this bill does is restore the independence of the Remuneration Authority to be able to set the pay for members of Parliament, and that’s a principle which I believe is going to lead to fair and reasonable pay remuneration for members of Parliament, something which will ensure that it isn’t something that varies depending on whether public sector pay is going up, down, or faster than the other, and something which allows members of Parliament to have nothing to do with what that determination is or the formula which creates it. I think that’s the appropriate way that it should be set, and so I commend this bill to the House.

I rise, slightly unexpectedly, to speak on behalf of New Zealand First on this bill. I see that Clayton Mitchell was due to be speaking on this, but he’s headed for the hills and allowed me to take the public wrath of, essentially, voting on my own pay rise. So this is perceived sometimes to be a contentious issue with the public, but I think the levels of submissions to the Education and Workforce Committee suggested that, I think, there is an understanding that a formula and an independent process—and perhaps returning it to that original formula—is a good one. It is probably quite a hard profession, if you could call it that, to evaluate in terms of where the appropriate setting should be. So that independent process and that independent formula that had worked pretty well prior to those 2015 submissions is the appropriate formula, and New Zealand First does support that.

I did sit on the select committee through this. It was non-controversial, and, as I say, having it sit in an independent process is where it should be. So New Zealand First supports this bill to the House.

Thank you, Madam Speaker. I’m absolutely fascinated to see how quickly the Government is now moving through its business. I honestly think that this week they have completed more business than they have in the previous three months. For most of this year, of course, they’ve been filibustering their own bills, and now finally they’ve decided they want to get on with it—maybe it’s because they recognise that the public sees what a joke the year of delivery has been and they better at least deliver some legislation.

Be that as it may, I am very pleased also to take a short call and to express my support for the bill, not least because, in my experience, the public appetite for hearing MPs talk about their pay and conditions is probably akin to a two-year-old’s appetite for beetroot and brussels sprouts. Whenever we talk about the subject, there’s a sort of general condemnation that we’re all overpaid, we’re all a waste of space—and there may be some truth to that in some cases.

Nevertheless, there are two serious points that I want to make. One is that I am very happy that we have a Remuneration Authority, because it is very important that we have no control over the way in which our salary is conducted; if we were to do so, there would then be some genuine reason for the public to express the sort of contempt and mirth that we so often hear. So I appreciate the work that the Remuneration Authority does and I just hope that they can find a formula that continues to be fair and minimises the anger of the public about the fact that we might ever get an increase in our salaries.

The other thing I just want to point out—and, Madam Speaker, I’m sure you’ll be familiar with this as well—is that I’m constantly surprised by how many people think that the old parliamentary pension scheme still exists. People say, “Oh, well, you’ve completed your three terms as a member of Parliament now, so therefore you automatically qualify for a pension.” Well, for anybody listening who’s labouring under that misapprehension, that scheme was abolished more than two decades ago—Madam Speaker might be able to tell me exactly the year it was, but I think it was around about the time—

ASSISTANT SPEAKER (Hon Ruth Dyson): Before I came in.

—yes it was; well, you’re a very young woman, Madam Speaker—that MMP was introduced in the mid-1990s. There is a different scheme, but we all have to contribute to it. I’m not going to explain it other than the fact that you do not automatically qualify simply by completing three terms as a member of Parliament, and I’d hope that the public would welcome that as well. This is a good bill; I’m very happy to support it.

Kia ora, Madam Speaker. Ngā mihi nui ki a koutou. Kia ora. Madam Speaker, I haven’t had a half as long and industrious career as you, but in my decade in Parliament I’ve seen this play out multiple times in our parliamentary history. A Government comes in, freezes the MP salary, and then later on has to unfreeze it and there’s a big boost. There’s been tinkering over my decade in Parliament, and, unfortunately, we still have not seen an enduring solution. So while the Green Party is supporting this—because it’s preferable to the status quo, which has seen unrealistic and, I think, indefensible pay rises for MPs—the fact is that I still don’t think we’ve got an enduring solution that’s going to see something with political and public support. Now, the previous speaker—I think, in jest—talked about how MPs didn’t want to speak long in this debate and draw attention because the public doesn’t want to see MPs talk about their pay. I don’t think that’s true. I think the public don’t want to see MPs once again tinker with MP pay when they’d rather see an enduring solution.

Now, we support this legislation because it’s better than the status quo, but it is not the ideal solution. For many, many years—probably 10 years now—the Green Party have been advocating for a much more robust, clear system that was transparent, easily understood by the Remuneration Authority, by politicians, and by the public, that was actually based on a clear metric. Now, the problem, of course, is that while this is better than the status quo, essentially we’re kicking the ball back to the Remuneration Authority, who have six criteria on which to base their decisions. Now, what I think would be much easier for the public to understand, which would be much more politically defensible, would be to index our salaries to the nominal weekly median income.

What I mean by that is that by linking it to public servants—and the previous speaker, Michael Wood, mentioned how as public servants had seen pay increases, so MPs had under the previous system. But what public sector employees receive is not the same as what your everyday Kiwi, your median Kiwi on the street, actually receives. What I think is critical is that what we have seen is MPs’ pay actually increase faster than public servants’, because we’re taking a percentage. Now, a percentage on $50,000 is a lot less in weekly take-home pay than a percentage on $150,000, and equally so for higher remunerated positions in the Parliament. What the Green Party has advocated for and what we’re going to continue to advocate for is actually making it the nominal increase. So if the median New Zealand worker gets $5 extra in their pay packet a week, that’s what MPs should get.

Now, I appreciate this might not be the most popular position in the House, but I think it would be the most popular and defensible position amongst the public. Analysis the Parliamentary Library did for us found that had we had the system since 2011, when, again, we saw another political decision to freeze MPs’ pay, we would be $11,000 less remunerated as a result if we’d used this nominal median income.

Now, I think it’s important to reflect we are in the top 2 percent of income earners, so I’m not going to take a quick call to try and not draw attention to it. I think we have to face up to the fact that we are very well remunerated for the work that we do, and, actually, if the public’s going to see continuing pay increases, it should be indexed, and I think if you were going to index it to one thing, it’s the median worker and how they’re doing.

Now, I think the important point to raise, of course, is that if the median worker goes backwards, I think so should members of Parliament. It’s important that we actually reflect, if there are tough times out in the economic community, that we are sharing the burden, and that is not likely to happen using the current criteria. So while it’s good that we’re changing the system, while I’d point out the benefits of moving to a triennial or a three-year system rather than the annual pay rounds that we have seen in the past, we think there is a much more robust, enduring, positive, fair, transparent, clear solution ready and waiting. We’ve been advocating for a long time, and I just fear that in the future, we’re going to see the same situation play out once again, until we have such a clear, fair system.

But, still, the Green Party is able to support it, because it’s better than the status quo, and we’d like to acknowledge all those who submitted and played a role in the Education and Workforce Committee. I’d like to acknowledge the committee and the chair and thank Parliament for making a step in the positive direction here today. Kia ora koutou.

Thank you very much, Madam Speaker. I was privileged to be on the select committee that took this particular bill through to this point, the Education and Workforce Committee. I take some of the points from the previous speaker, Gareth Hughes, but the problem fundamentally that I have with what he said is he’s purporting to have the ideal solution. What we found out through the select committee process is that there are a gazillion ideal solutions when it comes to MPs’ pay. Everyone has a different solution, and we were quite surprised, as pointed out by Dr Parmar, that only six people submitted on this. We really genuinely thought that we’d be facing a much longer hearings process.

Here’s an example of how wide and varied opinions can be on this topic. One particular submitter wanted us to define “fair relativity”, a phrase used in the bill, when it comes to MPs getting fair relativity in regards to levels of remuneration received elsewhere. As a select committee team, the officials—and good luck to the independent authority that decides all these things. The term “fair” is such a subjective concept, so it’s so fitting and right that this be taken out of our hands and into an independent authority.

I’d just make one more comment, and that is that we support the bill, and we also believe that it’s a good thing that the review will be once every three years following an election, so we don’t have what some may call tweaking—we don’t have that on a sporadic and erratic basis; we have consistency. That’s exactly what this bill is aiming to achieve. Thank you.

This is a split call—Dr Liz Craig.

Thank you, Madam Speaker. It’s a pleasure to rise in support of this bill, because what this bill is going to do is return discretion to the Remuneration Authority in terms of sitting MPs’ pay, rather than having to rely on a strict formula, which ended up inadvertently with very large pay increases for MPs. So instead, what it’s going to be doing is allowing MPs’ pay to be based on a range of different criteria, and they include relativity but also the prevailing economic conditions. So I have no hesitation in commending this bill to the House.

Madam Speaker—

💬 David Seymour: Got to be in to win.

—I rise to support this bill, and eagerly await the member David Seymour’s contribution, which he’s clearly enthusiastic about making.

In starting my contribution, I want to give a bouquet to Gareth Hughes, a member in this House who I don’t often agree with and a retiring member who has had a lot of time to reflect on matters in this House. I think he is correct when he says that members of Parliament should be incentivised to make sure that the median wage is rising and that we as members of this House aren’t getting so removed from the typical New Zealand worker that we’re not incentivised to see those wages increasing. In fact, here on the National side of the House, we think it is a fundamental role of any Government to ensure that average wages are rising and that they’re keeping up with the cost of living and, in fact, that people are getting ahead.

All of us, when we are making policy decisions in this House, when we are determining which way we do things, should be thinking about the impact that policies will have on the wages of typical Kiwi earners. So I appreciated that contribution. National supports this bill. We support the independence of the Remuneration Authority to determine MPs’ salaries based on criteria. We support linking the reviews to the electoral cycle, and we support restoring the requirement for the authority to consider the value of the personal benefit of entitlements. Thank you, Madam Speaker.

I understand this is a split call—David Seymour.

Thank you, Madam Speaker. I rise on behalf of the ACT Party in opposition to this bill. It would have been very simple to do something that was clear, simple, and, ironically enough, endorsed by the Green Party. The story of MPs’ pay has been the search for finding somebody to blame, and for a long time it was the Remuneration Authority. They set it with some discretion, and then that became unpopular. So then the thought was perhaps if the pay of MPs was tied to a mathematical formula, it would be easy to say, “Well, this is what the formula says.” The only small difficulty was that the formula presented MP pay rises much larger than anticipated. So we are now throwing out the idea of having a mathematical formula, in order to go back to discretion of civil servants in deciding MPs’ pay. Having failed at blaming a mathematical formula, we’re going to go back to trying to blame people.

The problem is that there was a solution—strangely enough, elucidated by Gareth Hughes of the Green Party, of all people—that actually would have been much better. The solution is simply that MPs’ pay, rather than being tied to the pay of public servants as it has been for the past several years, should be tied to the median wage of the New Zealand worker, because to whom MPs’ pay is tied not only changes the incentives of MPs but tells us something about the purpose of this place, the purpose of members of Parliament, and what our values and aspirations are.

The problem with the old formula is that if any of those signals are to be taken seriously, then we aspire to be a country with higher paid civil servants—right? That’s what, under the old formula, MPs had to do if they wanted to get paid more, and what they should be doing is making New Zealand wealthier and more productive, because one of the real public policy and performance scandals of New Zealand in the last couple of decades has been anaemic growth in productivity. Perhaps a related scandal is that over the years that the previous arrangement was in place, MPs’ pay went up so rapidly because public servants’ pay went up so rapidly, and public sector productivity has been rubbish over that time.

One could comment, having listened to some of the speeches that preceded mine, about the productivity of the MPs who have been receiving these pay rises, too—the quality of outputs for the effort put in perhaps not being as high as it might be.

Nevertheless, we are missing an opportunity here. By seeking to blame a Remuneration Authority for any unpopular decisions about MPs’ pay, we have missed the opportunity to retain the strategy of using a mathematical formula, and we’ve missed the opportunity to pick the correct mathematical formula that would have aligned members of Parliaments’ incentives with something much more important than raising the pay of the public sector. We could have actually chosen to align MPs’ incentives with the productivity and median wages of New Zealand. Simple: New Zealand gets richer, MPs get paid more; New Zealand gets poorer, MPs get paid less. How difficult is it to understand that? Well, actually, it’s clear to understand, and that’s another one of the advantages of taking this strategy.

You see, the real issue underneath all of this, which no one else will say, is that it’s about MPs finding someone to blame for unpopular decisions about their pay. If it was linked to the median wage of the average or the median New Zealand worker, then it would be simple enough and justifiable enough that nobody would complain. So not only would that alternative advanced by Gareth Hughes have been better in terms of performance and incentives, it actually would have been more durable and effective in solving the real problem these politicians here are grappling with, which is how to blame someone for unpopular decisions about our own pay.

Nevertheless, that opportunity has been missed. We’re going round in circles, and I’m quite happy to be opposing this bill. Thank you, Madam Speaker.

It’s a delight to stand and talk on this Remuneration Authority (Members of Parliament Remuneration) Amendment Bill (No 2). I wasn’t a member of the Education and Workforce Committee, and I have not, up until very recently, reviewed the legislation. Quite simply, I see this bill as having no fixed formula, a review set to the electoral cycle so that at the beginning of coming into Parliament you know what your salary will be for the next three years, and consideration for the authority to put the value of personal benefits in. I think that this bill is very practical. It’s very sensible. I acknowledge there are different opinions in the House; however, I commend this bill to the House.

It’s a pleasure to rise and to be the last speaker from the National Party on this bill. There have been a lot of points that have been traversed today into this bill. So just to summarise some of those points: MPs, by and large, don’t do this for the pay. On this side of the House, if we were doing this for the pay, we’d be in the private sector. We do this because we earnestly want to make a difference and improve the lives of New Zealanders.

This is about valuing the contribution of MPs. I know that that’s very subjective. My own late father suggested that members of Parliament were overpaid, and then there are other people that I’ve spoken to who have said we’re underpaid. So this is very subjective, but I believe in the Remuneration Authority, and giving the Remuneration Authority the authority to actually do this and to assess MPs’ pay is important. National supports this bill, and we commend this bill to the House. Thank you.

Well, I’ve got the last say, and that’s always a good thing, and it’s always a very difficult topic to talk about. We’re much more humble and have humility on this side of the House. We’re here because we’re privileged and honoured to be here and the rest as such. But, look, I remember when I was chair of the Performance Review Committee for the chief executive officer of the Wellington City Council—always difficult; the ratepayers always got a little upset when you had to adjust things to certain levels, and some outfit told you that this is how much you had to pay and then we paid it, and, of course, great uproar. So we’re a bit more smarter, I think, in central government, and we’re going to give that discretion to the Remuneration Authority. They’ll do a good job—different criteria—and I think we’ll await the results. I commend this bill to the House. Kia ora.