MPs Salaries, Expenses and Funding

June 22nd, 2009 at 3:22 pm by David Farrar

I’m going to do a series of a dozen or so posts on , expenses and funding. The purpose is to increase awareness and education of what MPs are paid, what they cost, what budgets they have available and associated issues. I have found that most of the reporting on this issue is rather superficial (as dictated by the medium), so am hoping this will help provide a more balanced comprehensive view.

MPs Salaries

The headline salary for an ordinary MP was set in 2003 to be $110,000. Those with additional responsibilities get paid more – with the Prime Minister’s salary then being $305,000.

What almost no-one knows is that the salary is calculated as part of a total remuneration package, and the “perks” such as superannuation subsidies and some air travel are deducted from the remuneration level, to get to a base salary. So when you see an article on how MPs get a 20% superannuation subsidy (if they put in 8%), you should be aware that if the subsidy did not exist, MPs would simply get paid 20% more. The superannuation level does not affect the total cost to the taxpayer (unless they are on the former gold plated scheme which closed off in the early 1990s).

So what is the total remuneration package for an MP? The 2003 determination that details all this doesn’t appear to be online, but the Remuneration Authority kindly sent me a copy – which is uploaded here – parl-s-a-det-2003

In 2003 the Remuneration Authority said it was $142,700. The components were:

1. Salary $110,000
2. Superannuation $22,000
3. MPs Domestic Travel $1,500
4. Spouses Domestic Travel $3,400
5. MPs/Spouses International Travel $5,800

So again this is something very few people realise. The average value of the personal benefit of free travel has been calculated and is deducted from an MPs remuneration to calculate their base salary.

Now you may wonder how the Remuneration Authority calculates the private benefit of the travel entitlements. Well the IRD did it for them. The IRD estimated:

• Domestic MPs Air Travel – $30,296 per member and 5% is of personal benefit
• Domestic Spouses Air Travel – $7,516 and 45% is of personal benefit
• MPs and Spouses International Air Travel – $5,780 per member and 100% is of personal benefit

Now this system is not perfect. You could argue why should some MPs get paid less, because other MPs have (for example) spouses. But I don’t think married MPs should have to pay for them to see their spouses occasionally during the week. So averaging out the personal benefit and deducting from their remuneration is a sensible approach.

Now these are the numbers used in 2003. What are they in 2008? Well sadly the Remuneration Authority only reports annually the change in base salary, not the change in total remuneration package. This is a pity, as if they were to republish the calculations every year it would educate more people about how the “perks” are deducted from MPs remuneration.

But we do know the salary for a backbench MP is now $131,000 so we can estimate their total remuneration package in 2008. It would be:

1. Salary $131,000 (a 19% increase over five years)
2. Superannuation $26,200 (20% of salary)
3. MPs Domestic Travel $1,800 (assume 19% increase)
4. Spouses Domestic Travel $4,000
5. MPs/Spouses International Travel $6,900

This is an estimated total remuneration package in 2008 of $167,900 for a backbench MP. So base salaries and total rem packages (estimated) for each job in 2008 bis:

1. Backbench MP $131,000 salary; $167,900 total rem
2. Deputy Committee Chair $135,300; $173,060
3. Committee Chairs $144,500; $184,100
4. Nat/Lab Junior Whips $144,500; $184,100
5. Maori/Act Whip $144,500; $184,100
6. Assistant Speakers $144,500; $184,100
7. Progressive Leader $144,500; $184,100
8. Green Whip $148,100; $188,420
9. Green Leader $157,100; $199,220
10. Deputy Speaker $169,900; $214,580
11. Labour Senior Whip $175,420; $221,204
12. Labour Deputy Leader $176,170; $222,104
13. National Senior Whip $180,400; $227,180
14. Minister outside Cabinet $204,300; $255,860
15. Leader of the Opposition $243,700; $303,140
16. Speaker $243,700; $303,140
17. Cabinet Minister $243,700; $303,140
18. Deputy PM $276,700; $342,740
19. PM $393,000; $482,300

The Remuneration Authority notes that the remuneration package for a backbench MP is now roughly in line with comparative jobs. They say that at the upper levels, they lag behind – for example the PM’s salary being relatively low for the immense responsibilities that go with it. However yet to meet a PM who is in it for their salary.

My next post will be on MPs expense allowances, and then will go through centrally funded expenses (such as travel), and bulk funded expenses (such as constituency offices etc). I expect close to a dozen posts all up – the intent is to inform, and to be balanced.

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46 Responses to “MPs Salaries, Expenses and Funding”

  1. Jeff83 (771 comments) says:

    Would be curious what they would choose to be a compariable position for an MP in the private sector.

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  2. big bruv (13,249 comments) says:

    DPF, would it be right to suggest that the bloody Greens are double dipping when it comes to claiming a leaders salary?

    In other words, are the tax payers paying for their politically correct co leadership bullshit?

    [DPF: I very much doubt it. My assumption is that they share the difference between a backbench salary and a leader's salary. The position gets $26,100 extra, so my assumption is they each get $13,050. If this was not the case then a party could declare all MPs are co-leaders to get extra money!]

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  3. big bruv (13,249 comments) says:

    Good point Jeff, Bradford in particular would never be able to command a salary that goes anywhere near the amount she steals from us as a list MP.

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  4. donkey (43 comments) says:

    Good post DPF
    I’m looking forward to you showing up the nations leading papers (hah) including the DOMPOST who could have done this anytime as a handout for their readers.
    Maybe they will now that Tim Pankhurst has gone.

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  5. Ratbiter (1,265 comments) says:

    Thanks for this – good to see a summary of all this in plain English / numbers.

    Bruv – you would be familiar with the idea “Pay peanuts, get monkeys” I presume?

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  6. MyNameIsJack (2,415 comments) says:

    Ratbiter (1185) Vote: 0 0 Says:

    June 22nd, 2009 at 3:46 pm
    Thanks for this – good to see a summary of all this in plain English / numbers.

    Bruv – you would be familiar with the idea “Pay peanuts, get monkeys” I presume?

    I am, AND I have seen big bruv’s payslip. :-)

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  7. ben (2,396 comments) says:

    Great stuff DPF.

    Given the extraordinary share of the economy’s resources under the control of these few individuals, these salaries are IMHO too low. You want highly competent people making these decisions given the tremendous consequences of their actions. Not a popular view, this one, but if higher pay gets better quality decision making then I say double their pay.

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  8. getstaffed (9,189 comments) says:

    Thanks for this DPF. A question I have for our representatives – each one of them: When you first became an MP did you remuneration increases or decrease? While they ponder that, remember poor ol’ georgina… who moaned about being unemployed and not the receipient of any plump labour board position after her resignation

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  9. MyNameIsJack (2,415 comments) says:

    Yes Ben, it certainly works in the private sector, doesn’t it?

    Look at how well ING, Geneva Fianance, AIG, General Motors, Fisher & Paykell, Telecom etc have performed since they began paying massive salaries to the guys at the top.

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  10. sonic (2,818 comments) says:

    What might be better Ben is to pay them the average wage, so they would be rather more in touch with where people are at, and have a good incentive to increase wages.

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  11. donkey (43 comments) says:

    It would be a good start if we had OIA on all the monies that run through their hands.
    let’s actually see this so called transparency they all like to talk about at election time.

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  12. big bruv (13,249 comments) says:

    Oh dear, Sonic still thinks that employers can magically increase the wages for their workers irrespective of their crap productivity.

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  13. getstaffed (9,189 comments) says:

    pay them the average wage? the troll’s masterstroke to ensure new socialists MPs continue to get a pay increase while scaring off right-wing candidates. the result, of course, would be to lower effective wages as a result tax increases to support poor management, overspening etc. socialism has been tried. it didn’t work out too well, especially for those who starved.

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  14. MyNameIsJack (2,415 comments) says:

    well, if socialism failed, why not try communism? Marx got so much right about capitalism’s current failings, maybe he’s right about the rest.

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  15. Father Ted (85 comments) says:

    No thanks comrade fugley!

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  16. sonic (2,818 comments) says:

    ” new socialists MPs continue to get a pay increase while scaring off right-wing candidates”

    The Right-wing are greedy you see, even getstaffed admits it.

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  17. RKBee (1,344 comments) says:

    It would be cheaper to put them in containers…

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  18. MyNameIsJack (2,415 comments) says:

    Father Ted (44) 0 1 Says:

    June 22nd, 2009 at 4:19 pm
    No thanks comrade fugley!

    Give me a ring tonight, I have a message for you from Kristy, seems she has been seeing a lot of Alex lately.

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  19. grumpyoldhori (2,410 comments) says:

    I like that American state where state members of the house get paid nothing.
    So a question people, what the hell does the average MP do that increases the productivity of this country ?

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  20. gd (2,286 comments) says:

    IMHO We only need 50 Members and they should be paid a salary of $1 million pa plus appropriate expenses and allowances.

    For that I would demand a set of KPIs that they would either achieve or I would accept and date the undated letter of resignation they signed upon being elected.

    We would have a 4 year term with a mid term electronic assessment at 2 years where they were awarded point on a 1 to 5 scale 1 being bottom 5 being top. Unless they each got 2.5 or better they couldnt stand forat the next election.

    With fewer of them they would either prove their worth on the Treasury or Opposition benches or they would be Fox Trotted Oscars come the next election.

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  21. sonic (2,818 comments) says:

    So in other words gd, you would be in charge of everything, setting the KPI’s and “Resigning them” if they bothered you and also being of charge of who is allowed to stand in an election?

    All hail our new king, (do we get to vote for you or are you just appointing yourself?)

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  22. kevin_mcm (152 comments) says:

    To answer the comment about the pay being too low, I would agree if they were all competent, but that is not the case. Would increasing their salary to $x make a difference to their competence? Unlikely.

    I would like to see a portion of their reuneration being variable based on some KPI’s. The difficulty is how that would work, and again, would it change behaviour.

    No easy answers – as is usually the case, despite what you read in the comments on this blog:)

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  23. PaulL (5,872 comments) says:

    Pay peanuts and get monkeys. But the opposite is not necessarily true – pay lots doesn’t mean you get fantastic people (yes, evidence Ford, GM et al). Just paying more won’t increase the quality of candidates, we need to look at the selection process and whether that encourages the right sort of people.

    And then we immediately get into discussion about the “right sort of people.” We could probably all agree that we want smart people who can analyse problems and make good decisions. But some might want people “with life experience.” You know, like Sue Bradford, or maybe John Key. Others might want people with good qualifications and understanding of past events, political realities, and current evolving economic theory. You know, university lecturers – those with history, political science and economics degrees.

    Bottom line – we’ll get better quality political candidates when we start voting for better quality political candidates. Both on election day, and also within our parties when the lists are set. In terms of pay, it needs to be enough that an MP has a comfortable life and has no particular incentive to corruption (i.e. the amount they’d make from corruption less the risk of getting caught is smaller than the amount they get without corruption).

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  24. toad (3,669 comments) says:

    Hmmm! No brothel allowance? Watch this space.

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  25. Grant Michael McKenna (1,156 comments) says:

    These are facts. I don’t want facts! I want mindless sensational populism!

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  26. Ratbiter (1,265 comments) says:

    If we accept at face value the stories of how it is an 80-hour working week being an MP, then a base salary of $131,000 is an equivalent hourly rate to a salary of $65,500 for a “standard 40 hour working week” (if such a thing exists.)

    Doesn’t seem unreasonable when you consider the market for professional positions in general?

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  27. PaulL (5,872 comments) says:

    Ratbiter, only if we assume those other professional positions have a “standard 40 hour working week.” I’m not aware of many positions that do. As for 80 hour weeks, I always take that with a grain of salt. I’ve worked my share of 80 hour weeks, and that means 12 hours a day during the week, and 10 hours each day in the weekend. I very much doubt that MPs average that week in, week out.

    I’d believe they do it on a busy week – extended sitting hours, a couple of working dinners, maybe some constituency work and reading of papers etc on the weekend. But I find it hard to believe they’re averaging it – that for every 60 hour week they do, somewhere they do 100 hours.

    I, and most of my peers in a professional job, would easily work 8->8 every day during the week, usually without any significant break (other than my blog breaks….), so that gives about 11 hours. 5 days a week, there’s 55 hours. A handful of hours in the weekend catching up on e-mails, planning the week ahead. The odd work dinner – although I wouldn’t typically count those in my working hours. I guess as an MP you probably do 2-3 of them a week, so it starts to feel like work, but the line is rather gray.

    So I can see a regular 60 hour week, but 80 sounds to me a bit like exaggeration.

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  28. David Farrar (1,853 comments) says:

    My estimate of average hours (house sitting week) for an MP and a Minister is:

    MP:
    Mon 9 – 6 (8 hrs excl meals)
    Tue 8 – 11 (13 hrs)
    Wed 8 – 11 (13 hrs)
    Thu 8 – 9 (12 hrs)
    Fri 9 – 5 (7 hrs)
    Sat 9 – 5 (7 hrs)
    Total = 60 hrs

    Minister
    Mon 7 – 7 (10 hrs)
    Tue 7 – 12 (13 hrs)
    Wed 7 – 12 (13 hrs)
    Thu 7 – 9 (12 hrs)
    Fri 9 – 5 (7 hrs)
    Sat 9 – 5 (7 hrs)
    Sun 12 – 9 (8 hrs)
    Total = 70 hrs

    This is excluding things like conferences which chew up entire weekends.

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  29. kevin_mcm (152 comments) says:

    But David

    1. Are they there all the time; and
    2. While they are physically there, are they there mentally?

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  30. clintheine (1,563 comments) says:

    I would prefer we bulk funded MPs via their leader so that if they decided to go on a splurge, i.e. when Labour sent up everybody incl the kitchen sink to Mt Albert, it comes out of their budget and not the taxpayers.

    It’s already well established that *most* of the left had to “suffer” an extraordinary pay increase when they arrived in Wellington. Comrade Sue especially went from being a beneficiary and had particular legal issues to address when coming an MP as she had been banned from the grounds of Parliament a few times. No wonder whe has kept her head down in fear that she may end up having to live off that MA in Chinese ;)

    Is it true that John Key gives his entire or part thereof his salary away to charity?

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  31. PaulL (5,872 comments) says:

    clint – only because he got rich whilst destroying the wealth of the western world. If he’d worked at an honest job like the Labour party members did, he wouldn’t have the ability to donate it. Jeez, don’t you read the Standard anymore?

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  32. llew (1,533 comments) says:

    Heh.

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  33. reid (15,927 comments) says:

    I like getstaffed’s question re: did your rem rise or fall when elected? That should be compulsory, public information.

    I also agree that the current rem is peanuts for capable people yet is much more than some are/were ever worth: e.g. remember morons who aren’t worth it like Kopu.

    Personally, I’d like to see both performance incentives and, critically, disincentives for poor performance. I know its difficult to design rem packages when the oil tanker takes sometimes years to turn around, but surely it’s not beyond human capability to design a system that rewarded actual outcomes in the field of politics. Forget the rhetoric that accompanies a change. Assess the outcomes.

    For example, Max Bradford. Should he be rewarded or penalised for his electricity reforms? The jury’s in. The answer’s clear. You could go through the entire list of past MPs.

    The point is, every commercial operation offers incentives but the flaw is, they’re appropriate for the drones on a short-term basis but not for the senior management. However they also offer them to senior management on a short-term basis. If you designed incentives and penalties based on a five-ten-15 and 20 year outcome, factoring in the “noise” created by successors who’d subsequently reversed/distorted them, using the 20/20 hindsight of actual market outcomes, and made the sum or penalty significant and meaningful, you could create a real incentive scheme that would both motivate and penalise these plump velvet-coated silk-bottomed creatures we call MPs.

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  34. Razork (375 comments) says:

    Keep the total amount paid the same, but reduce the number of MPs to about 60.
    Then you can each of them more.

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  35. Glutaemus Maximus (2,207 comments) says:

    For a population of 4.2m persons. There are too many Members of Parliament.

    The UK has far too many, even with the huge population. 500 would be plenty, instead of 635.

    You would have thought that after all this time, all the necessary laws have been passed, tested, and are fine.

    NZ does not need any more laws.

    EU spews out 3 a day, and their representatives are remunerated on how much they can control the Federal Population.

    Stasi 2.0

    FFS, why doesn’t somebody call a sensible and workable number of members in the House that would suit a 5mill population, that doesn’t have any interference from a superior Federal Authority.

    As for pay, they should be on $250k -$500k, and find everything themselves, travel, pensions, the lot! No post power priveledges.

    It is the long tail expenses that always get discounted, and cost the most over time. Bit like the AUW agreements in the States

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  36. AG (1,760 comments) says:

    GM,

    You need to go to Parliament’s website and check out the Justice & Electoral C’tee’s report on the “99 MPs” Bill …
    http://www.parliament.nz/NR/rdonlyres/…/DBSCH_SCR_3542_3576.pdf

    Appended to this are some damn fine statistics from one DPF, which appear to demonstrate you are speaking from your your arse.

    Goodnight.

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  37. Glutaemus Maximus (2,207 comments) says:

    At the moment, in NZ you get the feeling that the PM is like being head boy or girls at a big posh school. With a very active Debating Society.

    The PM should be on circa £2m- $4 all in. Plus any travel, insurance, and other stuff that would be necessary to in the function and performance of that role.

    Pensions, post power freebies all to be cancelled. They can make fortunes from the lecture circuit, UN Sinecures, Non Exec Directorships etc.

    Cut out the post power trinkets!!!

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  38. Glutaemus Maximus (2,207 comments) says:

    As ever AG, you can stick that and the rest of your finely honed opinions up your own sphincter!

    Prick.

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  39. campit (460 comments) says:

    My estimate of average hours…

    I’d say this is a maximum, not an average. Watch Parliament TV in the evenings and count the handful of MPs actually there. And shouldn’t there be a requirement to resign from all other jobs / directorships / elected positions if you are being paid a salary as a full time MP?

    Informative piece though David, thanks for putting the time and effort into this. It would be interesting to see how close the IRD estimate of air travel is compared to actual use per MP – i.e. divide the total spent on air travel over a year by the number of MP’s.

    [DPF: Don't confuse attendance in the House with being at work. Almost all MPs are in Parliament - working on correspondence, constituent inquiries etc.]

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  40. AG (1,760 comments) says:

    Bloody Parliament … keep moving things about.
    http://www.parliament.nz/en-NZ/PB/SC/Documents/Reports/7/c/f/7cf2fe64b2134b1bbaa22d278f4cc81e.htm

    And I understand GM, I really do. I know how upsetting it must be for you when facts get in the way of a good grump. But you see, those of us in the reality based community work on things like facts. Old fashioned, I know. But that’s the way we are.

    But you keep on making your little plans. It’s nice you have a hobby.

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  41. Glutaemus Maximus (2,207 comments) says:

    Yes, it was page not found!

    Not being Grumpy. My point is valid. Pay the going rate in a commercial world. Or even more than the pay for the CEO’s in the Public Domain.

    But Having no treats after Parliament, will make them more accountable.

    Anyway, nanny always told me about the dangers of talking to poor people!

    ;-)

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  42. reid (15,927 comments) says:

    “Not being Grumpy. My point is valid. Pay the going rate in a commercial world. Or even more than the pay for the CEO’s in the Public Domain.”

    Yeh but where’s the expectation the best quality candidate has been selected, as opposed to the usual numpty?

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  43. Glutaemus Maximus (2,207 comments) says:

    Expectation based on the size of the prize!!

    I truly believe that more folk would be motivated to get into politics. Bigger candidate pool, better chance of a sensible MP.

    Or am I being too naive?

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  44. Redbaiter (13,197 comments) says:

    “the intent is to inform, and to be balanced.”

    Fuck that. I want some hyperbole, bigotry and rabble rousing.

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  45. sheath (63 comments) says:

    Based on this info I gather that the ‘bog standard’ MP is taxed at $167,900 as that is their remuneration?

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  46. philu (13,393 comments) says:

    come off it..dpf..

    ..the backbenchers go to questiontime..

    ..then return to their rooms to self-arouse..

    ..they have nothing else to do..

    ..the mindnumbing boredom..

    ..must be just that..

    ..and even in questiontime..

    ..most of them are reading/crosswords/daydreaming..

    ..they have nothing else to do..

    ..except go yah..!..boo..!..

    ..on cue..

    ..being a backbench mp must be like waiting for godot..

    (rkbee gets comment of the day/week/month..heh..!..)

    phil(whoar.co.nz)

    [DPF: You see to know nothing about what MPs do. The House is a small part of it. There are select committees, caucus committees, portfolio work, constituency work, party work, etc etc]

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