What will happen to MPs salaries?

November 16th, 2010 at 9:00 am by David Farrar

The Herald reports:

An increase to MPs’ salaries is almost inevitable if the Prime Minister’s bid to get rid of their foreign-travel perks is successful.

It is. As people now all know (and something I was the first to highlight over a year ago as it was obscurely buried in the ’s 2003 determination, and had not been explicitly listed since) the value of the perk (as calculated by IRD) is deducted from their salary effectively.

If the Speaker just abolished it unilaterally, then MPs would have their base salary increase by $9,500 by the Remuneration Authority.

Although the demise of the perk seems certain, the taxpayer is likely to have to make up for it by an increase in MPs’ salaries.

Mr Key said he expected any rise to be “very modest” and putting salaries up by the full $9800 value of the perk was “unacceptable to me”. A significant increase would only expose MPs to more criticism, even though they had no say in their pay, he said.

Mr Key has urged the Speaker to ask the Remuneration Authority to decide how to abolish the perk and whether changes should be made to salaries as a result.

This is where the PM has been quite cunning. He is basically asking the Remuneration Authority to say in advance how much they would increase salaries, if the perk is abolished – with a rather unsubtle note that an increase to the full value is “unacceptable”.

So the Remuneration Authority now has to decide what to do, which is challenging as the most logical would just be to stop deducting the $9,800 from the base salary.

Annual totals for international travel perks for existing MPs:

1992-93 – $263,567
1995-96 – $387,950
2008-09 – $600,000
2009-10 – $432,989

Here’s what I would do. Divide $433,000 by 120 MPs and that is $3,500 per MP. Add that to the base salary and you can claim the exercise is revenue neutral. It’s not the principled way to do it (that would be the $9,800 option) but it is a pragmatic solution.

Labour leader agreed with Mr Key’s request for the perk to be reviewed independently, but said it was essential to retain some entitlement to international travel to allow MPs to go overseas on parliamentary business.

He had used his rebate for his recent trip to Australia to meet Prime Minister Julia Gillard and senior Cabinet ministers. “That enables me to do my job properly and is a legitimate use. Trying to justify the use of it for holidays will never be regarded by the public as a legitimate use.” …

Act leader said he agreed with the Prime Minister that the perk should go and although it was for the Remuneration Authority to decide on salary increases in lieu of the perk, “you’d hope they’d be a wee bit judicious”.

He disputed Mr Goff’s call for some provision for work travel, saying there was already enough discretionary funding for it in party leaders’ budgets – a bulk sum they get to run their offices.

I’m actually more in agreement with Phil Goff on this point. I do think MPs should be able to travel internationally when it is work related. Many of the best policy ideas come from initiatives in other countries etc.

Now Rodney is right that such travel can be funded from the leader’s office budget. And that is where it should be funded from – rather than a separate dedicated fund. If you have a fund for travel – then people will make sure it gets fully used. If it comes from the bulk fund, then the leader (or their COS) has to decide whether the value of that travel is greater than the value they would get from spending it on more staff, or policy research, or a pamphlet etc etc.

But what I think Goff wants, and I agree with him, is a review of the level of funding for the Leader’s Office to ensure it is adequate to be able to fund legitimate work related international travel by MPs, now they can not use the perk to fund it.

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20 Responses to “What will happen to MPs salaries?”

  1. Chris2 (765 comments) says:

    The hidden perk that NEVER ever gets discussed is: AIRPOINTS.

    I assume MP’s and their staff earn airpoints every time they take a flight, rent a car, stay in a flash hotel, etc. Because they travel so much these airpoints must be very very considerable, but what happens to them? We the taxpayer paid for the travel but who is getting the undeclared personal benefit of using these airpoints?

    I wonder if in fact MP’s are cashing in these airpoints to pay their portion of the unsubsidised 25%-90% travel perk they already get? In otherwords, are MP’s actually paying nothing at all for their private air travel?

    If so, then airpoints credited to an MP must also be factored into their salary when the Remuneration Authority considers their salary package.

    Answers please from someone who might know ….

    [DPF: Off memory MPs sign a declaration that they agree to surrender their work related air points when leave Parliament and/or use them for work related travel]

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  2. Brian Smaller (4,017 comments) says:

    I’m actually more in agreement with Phil Goff on this point. I do think MPs should be able to travel internationally when it is work related. Many of the best policy ideas come from initiatives in other countries etc.

    What is wrong with email and the internet? Most travel, even on ‘parliamentary business’ is nothing more than a junket. Any info they get could be sourced from 21st century means rather than while sipping coffee in Paris or somewhere.

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  3. David Farrar (1,868 comments) says:

    Brian – there is a world of difference between reading about a policy, and being able to actually discuss it in depth with an overseas Minister, their Chief executive etc.

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  4. coventry (316 comments) says:

    Wouldn’t that $3.5K increase have to be the net increase in take home pay after tax ? Something in the region of $5.2K before tax.

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  5. big bruv (13,454 comments) says:

    While they are at it they should abolish the “speakers trips” which are a complete and utter waste of their time and my money.

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  6. trout (916 comments) says:

    The scrutiny of MP’s perks and allowances, and general behaviour is, in part, a consequence of having ‘List’ members. The existence of List members is viewed by the electorate as a rort; an invention by political parties to give the faithful a sinecure. The Electoral commission did not anticipate that non-elected MP’s would be regarded with such opprobrium. Even in Parliament they are regarded as an inferior species; when an electorate becomes available List MP’s climb over each other to get the job. The sooner that all MP’s are elected on their on individual merits, by whatever system, the sooner they will regain some respect.

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  7. tvb (4,234 comments) says:

    I agree the Leaders Office could have a budget for international travel. Except what confidence will we have the Labour Party will NOT spend it on advertising to fight elections. And a modest payment in kind say $3,500 ish.

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  8. homepaddock (434 comments) says:

    MP’s should not have to pay for work related travel. The taxpayer shouldn’t pay for anything but work related expenses.

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  9. orewa1 (428 comments) says:

    Chris2 – Airpoints are a different issue – these are widely accepted as a “perk” in the private sector and they do not continue ad infinitum after a Member leaves parliament. They are quite dirfferent to the travel perks which have no parallel anywhere outside parliament.

    The interesting element of the perks debate today was to hear Rodney Hide pontificating against them on Morning Report. How can that man utter the word “integrity” without gagging? They didn’t name him “Hide” for nothing!

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  10. backster (2,106 comments) says:

    [DPF: Off memory MPs sign a declaration that they agree to surrender their work related air points when leave Parliament and/or use them for work related travel]……….Weasel words worth a scornful laugh..Have any been surrendered?

    It seems to me that our members should get approximately the same salary as Australian Federal MPs discounted by 40% to reflect the relativity between their workforce and ours and then by 2025 if the Government achieves its target they will reach the same remuneration level as Australia.. Note Last time I checked Aussie MPs got a lot less than ours.

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  11. Bryce Edwards (248 comments) says:

    DPF is technically correct.

    And in my mind this is the reason that we should remove the setting of MP pay from the Remuneration Authority.

    The level of MP pay should be a “political question” not one for unelected bureaucrats to determine based on some sort of market-model. The whole Remuneration Authority scam has been an effective way for politicians to essentially remove the question of pay from the political arena and further the professionalisation of political life.

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  12. PaulL (5,969 comments) says:

    Bryce, politically speaking you may be correct. There is a lot of attention on MP salaries, and a lot of people think they’re overpaid.

    I’d look at it differently though.

    Firstly, the dollar amount of MP salary vs the amount that govt spends in total is minuscule.
    Secondly, even a small improvement in the quality of MPs would have a substantial impact on the performance of NZ as a whole
    Thirdly, if even 1 good MP candidate chose not to put themselves forward because of the low pay, then I reckon that’s a loss we can ill afford. The talent pool in NZ politics is already puddle deep
    Fourth, providing good pay reduces the likelihood of corruption. NZ politics is less corrupt than Australian politics

    In short, making this not a political decision I think has reasonable upside, and the only downside is that we spent maybe $20K per MP more than we might otherwise, or a total of $2.4 million per annum than we might otherwise.

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  13. malcolm (2,000 comments) says:

    ..the value of the perk (as calculated by IRD) is deducted from their salary effectively.

    This “deducted from our salary” bullshit is just a flimsy foil. If it were true that the perk was covered by the salary deduction, then the perk would be limited to the value of the deduction, or the total perk limited to the total deduction (122 x 9500 = $1.16M, which would just about cover Bolger and Carter). Furthermore, if I understand correctly, the perk was instigated in lieu of an equivalent pay increase. So to say that MPs surrendered some salary in return for a chance to plunder the pot is a bit disingenuous and no doubt why most people think so poorly of MPs.

    The fact is, the perk is just a perk and the salary level is just a number plucked from the air. There’s no reason why the perk can’t be scrapped if it is excessive, a bad-look and is being abused (all true IMHO). And there’s no need to compensate the ‘employees’. If they don’t like it, they can get another job. Just like everyone else.

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  14. kaya (1,360 comments) says:

    Bryce Edwards @ 10.51am

    Well said re the remuneration authority. Hardly likely to bite the hand that feeds them and gives the illusion of MPs being detached from the whole process. That old bleat that “nothing we could do about the pay rise, it was imposed on us” is a lot of bollocks.

    I understand if you pay peanuts you get monkeys, but it seems to me we have quite a few overpaid simians in Wellington.

    Someone told me yesterday that it wasn’t too long ago that back benchers, police and teachers were all paid around the same. How did MPs manage to get their remuneration to 3 times the others?

    And they don’t need compensated for loss of a perk! They should be showing some leadership in tight economic times and waive it. Their esteem in the public eye might see them get a fingernail out of the pig trough.

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  15. first time caller (384 comments) says:

    I do think it’s time this whole pay/perk area was well and truly gone through. Folk may not like the decision though, we may find the costs go up.

    Personally, I’d like to see different levels of pay for different levels of responsibility. Senior govt back benches v’s opposition list mp’s for example. Also, as far as cabinet is concerned, some portfolios have considerably more work load than others. I understand that once elected mp’s are meant to be considered equal, but really it’s just a nonsense.

    The other point I would make is that we really can’t afford to have a multi millionaire setting the pay levels for something so important and presumably enduring for our democracy. No disrespect to the PM but we do need to be careful here.

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  16. davidp (3,551 comments) says:

    If MP’s salaries were significantly lower than they are now then it might be a less attractive career option. At the moment we see plenty of time servers progressing their way through unions, a stint in the Labour leader’s office, and then 20-plus years as an MP. Instead we could have MPs who were willing to sacrifice for a few years in order to serve their country. Pay them enough to be comfortable, say $100k a year, and make it clear that they need a career both before and after parliament.

    I think there is merit in the US system where a president and selected cabinet run the agencies of government while congress concentrate on legislating, rather than combining the two functions. Their record with cabinet members is that they are generally people who have been successful in their own careers and private lives and take a large drop in salary to serve their country for a few years, then return to business or some other career.

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  17. Viking2 (11,220 comments) says:

    Yep, lower the salary and reduce the number of MP’s. Its what the elctorate voted forsome time ago ifyou recall.

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  18. Paulus (2,544 comments) says:

    Are you sure that the airpoints are not “quietly” accumulated, as I believe they are the property of the ticket holder and airpoints member not the payer. I also believe that senior public servants who travel also get airpoints, and I believe may use them elsewhere (“later quietly”)ie private holiday.

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  19. BeaB (2,074 comments) says:

    Oh the rich irony. Creepy Pete on Nat Radio just said Helen Clark wouldn’t have tolerated this kind of behaviour (ie Pansy Wong)!!!!!!!!!!!!!!!!!!!!!
    I just love the Socialists’ Big Lie approach.

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  20. Boglio (77 comments) says:

    I suppose the business carried out on the govt subsidized travel is not much different to business folk finding a conference or trade show that they can call in while on holiday with the partner so that they can pay with the company credit card and claim the lot as a tax deduction so that the govt pays in part for their holiday….oh no kiwis would not do such a thing??

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