MPs Salaries, Expenses and Funding

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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