MP salaries

February 27th, 2015 at 7:00 am by David Farrar

The Remuneration Authority has announced the new salaries for MPs, backdated to July 2014.

A key para is:

In 2014, the Authority’s payline at the level for ordinary members increased by 3.3%. For this year, the personal benefit of the travel entitlement to members and their families has been assessed at $3,200 per member, a reduction in the amount assessed in previous years, which takes into account tightened provisions around the personal use of travel by family members. Taking into account the change in value of the travel entitlement, this produces a package increase of 3.56% and a salary increase for ordinary members of 5.5%.

So a 3.6% increase. All pay rises for MPs are unpopular but with inflation at below 1% this one will be more so.

The MPs only have themselves to blame though. On multiple occasions I have submitted that the law should be changed so that the Remuneration Authority sets salaries for an entire parliamentary term, rather than annually. There is no need for annual adjustments in a low inflation environment. They should be set three months before each election and apply for the whole term.

Maybe the backlash to this increase, will finally see a change. I don’t begrudge MPs getting well remunerated for what can be very tough roles. But they go through a needless annual round of pain and vitriol by having annual increases.

MP Salaries

This shows the new salaries for each type of MP, and the increase in total salaries which is $1.22 million more.

Of interest is the Labour Deputy Leader and Senior Whip get paid more than the Green and NZ First party leaders.

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MPs salaries

October 7th, 2014 at 1:00 pm by David Farrar

Following confirmation of the size of the Executive, and composition of Parliament, here are the salaries different MPs will be on:


Worth noting that David Seymour as a Parliamentary Under-Secretary is paid only slightly more than the Green Party Whip.

Also note that while the Green Party Leadership is shared, they get just one leader’s salary. I suspect what they do is split the additional $34,370 between them so they each get $164,985.

Select Committee Chairs and Deputies have yet to be determined. There are 14 main select committees, but it is possible there will be less than 14 chairs and deputy chairs as some MPs may be a chair of one and a deputy of another. I’ll update once committees are known, if it changes.

The total salary bill for the 121 Ministers and MPs will be $21,942,420. They each are eligible for a 20% (of base MP pay) superannuation subsidy which is $29,560 each, so if all 121 take that up, that is an additional $3,576,760 bringing total remuneration to $25,519,180.

The “median” MP will get $152,400 salary and $29,560 superannuation subsidy, which is $181,960. The average (mean) salary per MP is $181,342 plus $29,560 which is $210,902.

For a fair number of MPs, they take a significant pay cut entering Parliament. For others, it is the most money they have ever earnt, or will earn. Overall I think the levels are about right, but as always they should set the pay levels to be constant for an entire term of Parliament.


2013 Salaries Determination for MPs

November 22nd, 2013 at 9:00 am by David Farrar

The Remuneration Authority has released its 2013 determination for MPs salaries. These are backdated to 1 July. The new salary levels for each type of MP are:

  • PM $428,500
  • Deputy PM $303,900
  • Cabinet Ministers (18) $268,500
  • Speaker $268,500
  • Leader of the Opposition $268,500
  • Ministers outside Cabinet (7) $226,300
  • Government Senior Whip $200,770
  • Labour Deputy Leader $192,560
  • Labour Senior Whip $191,820
  • Deputy Speaker $189,400
  • Green Party Leader $182,170
  • NZ First Party Leader $173,140
  • Green Whip $172,520
  • Maori Party Leader $166,060
  • NZ First Whip $164,780
  • Assistant Speakers (2) $162,200
  • ACT Party Leader $162,200
  • UnitedFuture Party Leader $162,200
  • Mana Party Leader $162,200
  • Junior Whips (3) $162,200
  • Select Committee Chairs (13) $162,200
  • Select Cmte Deputy Chairs (13) $152,400
  • Ordinary MPs (49) $147,800

The Remuneration Authority said that the average annual increase in terms of total remuneration is just under 2%.


Horan’s amendment should be supported

October 23rd, 2013 at 3:00 pm by David Farrar

Brendan Horan has announced:

MPs pay will be fixed for each term of Parliament, if an amendment proposed by the independent MP Brendan Horan is adopted.

“Back in December I promised that I would put forward an amendment in a bid to get Parliament to agree that salaries would be set by the Remuneration Authority before the next General Election. The salaries would apply for the three year term of each Parliament.

“Now that the Government has given the bill its second reading, I have formally introduced the Supplementary Order Paper

“I have written to all parties in Parliament seeking their support,” said Brendan Horan.

If adopted, the new law would still require the Remuneration Authority to independently set the salaries of MPs. The difference is that the determination would be published about three months before the election.

“That way, every candidate running for Parliament and all voters will know the remuneration of MPs for the next three years. Voters will choose their MPs, and we’ll have an end to the spectacle of Christmas pay rises,” said Brendan Horan.

All parties in Parliament should seriously look at supporting this amendment. They will do themselves a huge favour if they back it, and avoid the annual ritual of self-flagellation of getting payrises that the public hate.

The Horan amendment will not see MPs paid less. It will see one rate fixed for a three year term, based on what is deemed to be the fair level over the three year term.

The public will more willingly accept something that is not a pay rise part-way through a term – but is an increase in remuneration for the next term of Parliament. It means certainty for candidates, MPs and the public.

Some MPs may be reluctant to support this amendment, because it is from Horan. That would be very short-sighted and cutting off their nose to spite their face. Unless MPs enjoy the annual self-flagellation they go through, they should vote for Horan’s SOP.

I covered the case for setting salaries once for each term of Parliament in my submission.

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MPs pay rise coming

October 22nd, 2013 at 11:00 am by David Farrar

Claire Trevett at NZ Herald reports:

Prime Minister John Key has hinted the Remuneration Authority is lining up a good pay rise for MPs this year, saying he had been consulted on the proposed increase and had told the authority he believed only a small, if not zero, pay rise should be offered.

Mr Key would not reveal what the proposed increase was or what he had said but hinted it was above the rate of inflation.

“But bluntly, I’m not in favour of big pay increases for MPs. If it was my vote, it would be no pay increases, but I don’t get that vote.”

He said there might be a valid argument for low increases to an MPs’ salary to keep pace with inflation. “That would be the top end. But I don’t buy the argument that they’re out of whack with the rest of the private sector or the public sector.” Inflation over the 2012/13 year was 0.7 per cent.

Wage increases across the board is one of the factors the authority takes into account when setting the salary, which it usually announces in December and is backdated to July.

Mr Key said he often copped the blame for those increases, although the authority was independent and made its own decisions.

The Government and MPs could save themselves some pain if they adopted my submission which was that the salary for MPs should be set just prior to each election, and remain fixed for a term of Parliament. In these days of low inflation, that won’t disadvantage them. Rather than say get three annual pay rises of 2% each, the salary for each term might be say 6% more than the term before. The key thing is they would get elected on that salary and stay on it.

MPs’ pay

Between 2009 and 2012:
*MPs salaries rose by 2.9 per cent
*General wages rose 5.6 per cent

A useful fact. I still expects howls of outrage though.


MPs Remuneration Bill

June 22nd, 2013 at 10:00 am by David Farrar

The Government Administration Committee has reported back the Members of Parliament (Remuneration and Services) Bill which was to transfer some expense decisions away from the Speaker to the independent remuneration Authority, which is a good thing.

The Herald reports the major changes:

A committee of MPs has recommended tougher financial penalties for themselves and their colleagues when they are away from Parliament without leave.

But MPs on the Government Administration Committee say decisions about MPs’ travel perks should remain with Parliament’s Speaker while the Remuneration Authority should decide on the level of their accommodation allowances.

The Government’s Members of Parliament (Remuneration and Services) Bill – drafted in response to the regular public anger over MPs’ remuneration – lifted the penalty for MPs absent without leave for more than nine days each year to about $270 a day from the current $10.

However, the committee has recommended that the penalty kicks in after just three days and is effectively increased by setting it at 0.2 per cent of the individual MP’s gross salary.

That works out to $289 a day for a backbench MP, $525 a day for Crown Ministers and the leader of the Opposition and $838 a day for the Prime Minister.

That is much better.

While the Prime Minister, other ministers and MPs are frequently away from Parliament on sitting days, they generally have a leave of absence. New rules setting out the criteria under which MPs are deemed to be absent without leave will be formulated by parties in consultation with the Speaker.

Hone may not end up getting paid much! He’s almost never there.

I’m disappointed however that the committee did not take up (or even mention) my proposal that MPs remuneration should only be reviewed every three years, with any changes to take place after an election. This would have avoided the public backlash around MPs getting pay rises, as no MP would get a pay rise during their term of Parliament. So when they get a backlash at the next pay increase, well they’ll have no one but themselves to blame.

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Will Horan set up a party?

January 30th, 2013 at 1:14 pm by David Farrar

3 News reports:

A defiant independent MP Brendan Horan arrived back at Parliament today, vowing to fight for more transparency around MPs’ pay rises. …

He even wants to run for re-election come 2014.

“I am here to stay,” he says.

Mr Horan may even start his own party.

“I’m keeping all my options open in that regard.”

Maybe he should call any party the Transparency & Accountability Bloc Party, or the TAB Party?

Mr Horan’s also planning to campaign for more transparency for MPs’ pay rises, after an increase was announced just before Christmas.

“It’s not what the average Kiwi wants to hear when you’ve got thousands of people losing their jobs and being made redundant,” says Mr Horan.

He’ll try and amend a bill that’s already before Parliament, so the public know what MPs’ pay increases are before each election.

On that issue, he is on the right side. Chris Hipkins has also said he supports such a change. Hopefully it may happen. The salaries and allowances should be set prior to each election for the entire term.

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The Parliamentary Salaries and Allowances Determination 2012

December 21st, 2012 at 7:00 am by David Farrar

The Remuneration Authority have published their 2012 determination. While most people will be unhappy that MPs get paid more than $2 an hour, it is worth noting what the Authority has said:

In recent years, members’ remuneration packages have not kept pace with increases in the cost of living, nor with general wage movements. …

Since fiscal year 2009 general salaries and wages have increased by 5.6% and the Consumers Price Index has increased by 8.0%. Parliamentary salaries (excluding the $2,000 and $5,000 increases in 2010 and 2011 to compensate for the reduction in value of the travel discount entitlements) have increased by only 2.9%.

Taking into account the prevailing adverse economic conditions and the small reduction in assessed value of the travel discount entitlement, the Authority has decided to apply a general increase this year of around 1.9%.

This still leaves members of Parliament receiving lower remuneration increases than the general population.

So what are the new salaries:

  • PM – $419,300
  • Deputy PM – $297,400
  • Cabinet Ministers – $262,700
  • Speaker – $262,700
  • Leader of the Opposition – $262,700
  • Ministers outside Cabinet – $221,400
  • Government Chief Whip – $196,420
  • Members of Executive Council not a full Minister – $192,700
  • Labour Deputy Leader – $188,470
  • Labour Senior Whip – $187,680
  • Deputy Speaker – $185,300
  • Green Party Leader – $178,230
  • Under-Secretaries $171,800
  • NZ First Party Leader – $169,410
  • Green Whip – $168,780
  • Maori Party Leader – $161,220
  • NZ First Whip – $159,960
  • Mana Party Leader – $158,700
  • Assistant Speakers – $158,700
  • National and Labour Junior Whips – $158,700
  • Select Committee Chairs – $158,700
  • Select Committee Deputy Chairs – $149,100
  • Member of Parliament – $144,600

Interestingly they seem to have decided that parties with over 45 MPs can now have a second junior whip funded.

I repeat my earlier point that MPs salaries should not be reviewed annually, but set for each parliamentary term in advance.


MPs pay rise tomorrow

December 19th, 2012 at 12:00 pm by David Farrar

Tracy Watkins at Stuff reports:

MPs are in line for a Christmas bonus of several thousand dollars.

The Remuneration Authority confirmed today it expected to issue its annual review of MP salaries on Thursday – backdated to July 1, meaning they are in line for backpay as well.

Based on a pay rise in the order of 1.5 per cent, that could be $6000 plus for Prime Minister John Key, while a back bencher will get an extra $2000-plus a year.

But MPs could also be in line for an adjustment worth a couple of thousand dollars more, based on changes to their international travel discount which was estimated to have left them about $9000 a year worse off.

The Remuneration Authority has already adjusted their pay by $5000 and $2000 over the last two pay rounds and is likely to top up pay packets further in its determination on Thursday.

Remuneration Authority chief executive John Errington said he could not discuss details till the determination was gazetted.

But when asked if the payrise was likely to be in the order of last year’s rise of 1.5 per cent he confirmed that was likely.

The annual pay rise is always controversial and likely to attract stiff criticism again this year after  pre-Christmas news that motorists will be stung by a hike in petrol taxes by 9c a litre over the next three years.

I have advocated for many years a win-win solution to this issue. Rather than have annual pay adjustments, the law should require the Remuneration Authority to set salaries and allowances for MPs for an entire term of Parliament, every three years  before the election. This means that no MP gets a payrise during their term, and people stand for Parliament knowing exactly how much the salary will be for that Parliament. It doesn’t mean MPs get paid less overall, but it does mean you avoid this annual masochistic exercise. Rather than say an annual 1.5% increase, you may just have the salary for one term of Parliament set 4.5% higher than the previous term.

The Govt Admin Select Committee has yet to report back on a bill, which may make that change. Hopefully the inevitable outcry tomorrow will convince MPs of the merits of making a change.


MPs (Remuneration and Services) Bill submission

May 21st, 2012 at 12:00 pm by David Farrar


 About the Submitter

  1. This submission is made by David Farrar in a personal capacity. I would like to appear before the Committee to speak to my submission.

Overall Bill

  1. I submit in support of the bill proceeding. I think its provisions represent a welcome and overdue reform, especially in regard to having the Remuneration Authority take responsibility for most allowances and services, as well as salaries.

Timing of Salary Determinations

  1. I propose that the bill be amended to legislate that the Remuneration Authority only review MPs salaries every third year, and publish their determination around three to six months before the scheduled election. The new determination should take effect for the term of the next Parliament.
  2. I submit this, not because I think MPs are overpaid and should be paid less. Quite the opposite. I think it is important that MPs continue to receive appropriate remuneration. However the current system of annual increases creates a regular self-flagellation exercise as media and members of the public lash “greedy” MPs voting themselves a payrise (even though that is an inaccurate description of the process), and pressure is put on MPs to turn down the payrise, and/or donate it to charity.
  3. The public will never like MPs getting payrises during their term of office. However they will accept that the salary for one term of Parliament will be higher than the previous three year term. In the days of high inflation, there may have been a case for annual payrises, but in today’s environment a three yearly adjustment should still not be too large an increase.
  4. They key thing is that no MP gains a payrise during their term office. The salary level for an MP is set prior to the election at which they are elected, and stays for that term. So the public know when electing MPs what the remuneration for the job will be – and candidates will know what the salary is they are elected.
  5. I would expect that the Remuneration Authority, if making a determination for a three year term, would take into account the fact it is for three years.
  6. I think this proposal is a win-win. It gives greater certainty to MPs, removes the annual flagellation around payrises, and still ensures that MPs salaries are set at the appropriate level over time.
  7. The formal amendment would be the addition of a Clause 9(5) which says “The Remuneration Authority will make a determination under Subsection (1) no later than 30 September in the year of a scheduled election, and the determination will remain in force for the duration of the next Parliament as detailed in Section 11.
  8. It could be prudent to have a clause detailing what should occur if there is a snap or early election. In this case, one could either have no new determination, or authorize the Remuneration Authority to make a determination prior to polling day.

Deductions for Absent MPs

  1. I support the increase in the deduction for an MP absent without leave from the House.
  2. The deduction is based on sitting days missed. It is worth noting that if the House is in urgency or an extended sitting, then multiple days may be counted as the one sitting day. This means an MP (for example) could attend on a Thursday yet skip a Friday and Saturday extended sitting, yet face no penalty. It may be wise to define a sitting day as any physical day the House of Representatives is sitting, rather than implicitly the definition used by Standing Orders.
  3. I think the deduction could be increased from 0.2% per day missed as with only 96 scheduled sitting days, that means (after deducing the nine days which gain no deduction) that an MP who attended not a single sitting day would only be deducted 17.4% of their annual salary (if an ordinary MP).
  4. I also think the nine “penalty free” days is too high, as this is only for MPs without leave, which is simple to obtain. I would submit a better threshold is three sitting days (one week) before deductions begin, and then deductions of 0.5% per sitting day. This means an MP who did not turn up to a single sitting day in 2012 would have 46.5% of their salary deducted, instead of 17.4%.

Frequency of Determinations for Services

  1. Clause 29 states that determinations for travel and accommodation services under section 18 should be made once per term, in the first two years.
  2. As with MPs salaries, I think it is more logical to have this determination made towards the end of the parliamentary term and apply for the following term. Again this removes the perceptions of MPs gaining some extra “advantage” during a term.
  3. I propose Clause 29 be amended so that determinations are made in the final year of a term of Parliament, and that they apply for the next term of Parliament.
  4. I support retaining 29(4) to allow for emergency amendments if necessary.

Official Information Act status

  1. This bill entrenches the welcome increase in transparency introduced by the current Prime Minister and Speaker over spending by Parliament.
  2. Some people have submitted in favour of going further, and bringing The Parliamentary Service under the Official Information Act.
  3. I can understand the reluctance of some MPs for this to occur, as it could mean that attempts are made to access (for example) internal communications between MPs and staff discussing political strategy and the like. You could end up with each party OIA’ing the communications and documents of all the other parties in Parliament. Draft policy documents could be OIA’d, for example.
  4. A pragmatic solution may be to agree to have the Official Information Act apply to The Parliamentary Service, but only for the purpose of financial documents. This would provide full scrutiny of parliamentary expenditure but protect political discussions and strategy.

Thank you for considering this submission. I would like to make an oral submission in support, and look forward to appearing.

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MPs salaries

December 2nd, 2011 at 9:00 am by David Farrar

Derek Cheng at NZ Herald reports:

Twenty-five new members of Parliament will pick up a pay packet of at least $141,800 – a huge pay rise for some of the newcomers.

It is not a universal rule, but for those from the centre-left an MPs pay packet is the highest salary they have ever had in their lives. While for many from the centre-right, it is a considerable drop in income.

Here’s what the salaries will be for the various MPs.

  • PM – $411,500
  • Deputy PM – $291,800
  • Cabinet Ministers – $257,800
  • Speaker – $257,800
  • Leader of the Opposition – $257,800
  • Ministers outside Cabinet – $217,200
  • Government Chief Whip – $192,370
  • Members of Executive Council not a full Minister – $189,000
  • Labour Deputy Leader – $184,790
  • Labour Senior Whip – $183,940
  • Deputy Speaker – $181,200
  • Green Party Leader – $174,790
  • NZ First Party Leader – $168,640
  • Under-Secretaries $168,600
  • Green Whip – $164,310
  • Maori Party Leader – $161,250
  • NZ First Whip – $158,160
  • Mana Party Leader – $157,550
  • Assistant Speakers – $155,700
  • National and Labour Junior Whips – $155,700
  • Select Committee Chairs – $155,700
  • Select Committee Deputy Chairs – $146,200
  • Member of Parliament – $141,800

If a leadership position is shared, my understanding is that the difference between the Leader’s salary and a normal MPs salary is shared between them – they don’t both get the full leader salary.


KiwiSaver v Parliamentary Super

May 13th, 2011 at 7:50 am by David Farrar

Vernon Small reports in Stuff:

MPs’ generous superannuation schemes will not be cut, despite Government plans to slash the subsidies paid to KiwiSaver accounts. …

Since 1992, MPs have been entitled to a subsidy of up to 20 per cent of their salary, receiving $2.50 for every dollar they put in. Those elected before 1992 receive a subsidy equal to 23 per cent of their gross salary.

Asked why taxpayers should subsidise MPs up to 20 per cent when he was winding back KiwiSaver subsidies, Mr English said they were different schemes.

“The MPs’ scheme has been wound down over the last 20 years to something that is pretty similar to what everyone has available to them. In fact, I think a number of MPs are probably members of KiwiSaver.”

There is a vital fact missing from this article. The Remuneration Authority operates on a “total remuneration” basis and the value of that 20% superannuation subsidy is effectively deducted from their salary. If the subsidy increases 5%, then their salary drops around 5%. If the subsidy is decreased, then the salary increases.

Personally I would just pay MPs the full remuneration for their jobs (which would see their pay increase 20%) and leave it up to them to decide whether they put some of it into a savings scheme or not.

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MPs pay should be constant for the term

December 27th, 2010 at 3:00 pm by David Farrar

Kate Chapman at the Dom Post reports:

Prime Minister John Key urged restraint over the setting of politicians’ pay this year but most MPs seem resigned to the boost in their salaries which, they are quick to point out, was decided independently.

Mr Key was consulted by the Remuneration Authority – the independent body that sets politicians’ pay – and said given the circumstances restraint should be shown.

“He argued there should be a nil increase for MPs, or if there was any increase, it should be in the band of other public-sector pay settlements,” a spokesman for Mr Key said.

The authority decided on a 1.4 per cent rise backdated to July and a one-off payment of $2000 to cover the decreased use of MPs’ travel subsidy. The rise boosts Mr Key’s salary to $400,500 and a backbencher’s to $134,800.

Every year the MPs go through a self-flaggelation when the Remuneration Authority does their annual pay adjustment for MPs. It is either too much, or it is at the wrong time, or it is backdated etc etc.

This will always be the case, as MPs getting pay rises during  term of Parliament never will be popular.

The easy way to solve this, is what I have long advocated – set the salary and associated terms around three months before each election, for the next term of Parliament.

So MPs would get elected to Parliament for a term, on a known salary which remains constant during that term.

This might not have been possible in the days of high inflation, but one could do it easily and the adjustment from term to term would still be a fairly modest single digit percentage.

You don’t even need to change the law to do this. The Remuneration Authority Act says that the maximum gap between adjustments is three years, so it would just take the leadership in Parliament to ask the Authority to move to setting MPs salaries as constant for each term of Parliament.


MPs pay 2010

December 24th, 2010 at 7:42 am by David Farrar

The Remuneration Authority has heeded the PM’s advice, and has not done a massive pay rise to compensate for loss of the international travel perk.

The perk had been valued at over $9,000 and this value was deducted from MPs remuneration to get their base salary. However the compensation has been set at only $2,000 – recognising that not all MPs were using the perk. This should mean the abolition leads to a net saving for taxpayers. There is a warning that this may just be an interim adjustment until they get advice from IRD on what the value of the travel entitlement was deemed to be.

The general wage incraese is 1.4%, which is at the lower end of the public sector. Also worth noting that there was no increase at all last year.

So the new salaries are:

  1. PM $400,500
  2. DPM $282,500
  3. Cabinet Ministers, Speaker and Oppn Leader $249,100
  4. Ministers outside Cabinet $209,100
  5. Chief Government Whip $184,640
  6. Deputy Leader Labour $180,420
  7. Labour Senior Whip $179,600
  8. Deputy Speaker $174,200
  9. Green Party Leader $161,230
  10. Green Whip $152,130
  11. Assistant Speakers  & Select Committee Chairs $148,500
  12. ACT Whip, Maori Whip, Nat Junior Whip, Lab Junior Whip $148,500
  13. Progressive Party Leader $148,500
  14. Select Committee Deputy Chairs $139,100
  15. Other MPs $134,800

Law Commission on Parliamentary Salaries and Perks

December 7th, 2010 at 1:28 pm by David Farrar

The Law Commission has published its review of the Civil List Act 1979, which sets out MPs salaries and expenses. They recommend:

  • Travel, accommodation, attendance and communications services for members of Parliament and members of the Executive should be determined by an independent body – an enhanced Remuneration Authority which includes a former MP and a person with appropriate skills and
    experience in the administration of Parliament
  • The RA should also determine entitlements to funding and services to support parties’ and members’ parliamentary operations
  • The Official Information Act 1982 should be extended to cover information held
    by the Speaker in his role with ministerial responsibilities for Parliamentary
    Service and the Office of the Clerk; the Parliamentary Service; the Parliamentary
    Service Commission; and the Office of the Clerk in its departmental holdings
  • The OIA should not apply to information held by members in their capacity as members of Parliament, information relating to the development of parliamentary party policies,  and party organisational material, including media advice and polling information.
  • Unauthorised absences of greater than nine days should result in 0.2% of annual salary being deducted a day. That is around $250 a day, up from $10.

Overall this looks very good. I’ve long supported the OIA applying to the financial aspects of Parliamentary Service, but have not supported full inclusion, where someone like me (for example) could send in an OIA asking for all e-mails between Phil Goff and his press secretaries. No parliamentary party could operate with its internal e-mails being made available to the media and other parties.

So I think the Law Commission have done a good job on the OIA side, as their proposals hopefully stand a good chance of being adopted.

The handing over of perks, expenses and parliamentary party funding to an independent body is also an idea whose time has come. Having a former MP and someone with parliamentary administration experience on the Remuneration Authority should mean that its decisions will be made on practical experience, not textbook theory.

I hope the Government, and indeed all parties, support the report. There may be some fine-tuning to be done, but the principles look good to me.

UPDATE: Yay the PM has just announced that the Government has accepted in principle the recommendation to have MPs and Ministers expenses set by an independent body. By the end of this term of Parliament, things will be hugely more transparent and accountable compared to 2008 and before.

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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 Remuneration Authority’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 Phil Goff 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 Rodney Hide 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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Key on travel perk

November 15th, 2010 at 10:00 am by David Farrar

Andrea Vance at Stuff reports:

MPs across the political spectrum are calling for their private travel perks to be scrapped after the resignation of Cabinet minister Pansy Wong.

Prime Minister John Key said yesterday there was “a time and a place” for looking at the travel perks.

Speaking from Japan, where he was attending the Apec summit, he said: “It’s possible there may need to be some change but today’s not the day to make those comments.

“It’s tripped up a number of MPs and that’s very unfortunate. It looks somewhat like a relic of the past but in the end that’s not solely my decision. That’s something we need to discuss [and] in due course we will.”

Raising MPs’ salary in place of the perks was contentious.

“It’s not so much getting rid of it, the question is would there be any salary adjustment.”

That sounds like a move towards scrapping it.

The issue though, is that it will mean an increase in the salaries for MPs, as the Remuneration Authority currently deducts it from the level at which it judges their remuneration should be, to set base salary.

This increase would basically be automatic – it would not be requested by MPs. You would probably have to change the law, to stop there being an increase if the travel perk is removed.

But that is what should happen. The international travel perk should go, as I have blogged previously. And MPs should get paid what the RA determines is appropriate.

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Dom Post on MPs perks

November 2nd, 2010 at 3:00 pm by David Farrar

The Dom Post has an editorial and a story on MPs perks today, and both rather over-state their case in my opinion.

The editorial is on transparency over the MPs travel perks. Now my position is actually the same as the Dom Post’s – that the perk should be abolished. But the editorial goes too far when it says:

Dr Smith argues that the subsidy, which cost $432,989 last year, is actually paid for by MPs collectively forgoing part of their salary entitlement.

It is an argument that bears a passing acquaintance with the facts. The Remuneration Authority takes account of the cost of the subsidy when setting MPs’ pay.

That is not a passing acquaintance with the facts. It is 100% correct, even if the Dom Post does not like it.

The travel subsidy, like many other MPs’ perks, was initially introduced in lieu of a pay rise. However, when responsibility for setting MPs’ pay was transferred from Parliament to the Remuneration Authority’s predecessor, the Higher Salaries Commission, it ignored many of the entitlements MPs had voted themselves.

It did – up until 2003. In 2003 the Remuneration Authority moved to a total remuneration calculation where it calculates what should be the total remuneration for an MP, and deducts off the super subsidy and the travel perks.

Hence MPs receive what an independent body thinks their jobs are worth plus the value of the extras they have voted themselves over the years

No this is absolutely wrong. The independent body works out what their jobs are worth and deducts the value of the extras off the remuneration to calculate a base salary.

extras that inflate the base salary of today’s MPs from $131,000 to more than $180,000.

Not quite. The Herald calculates it as:

  • Salary $131,000
  • Super Subsidy $26,200
  • Domestic Travel $1,176
  • Partner Travel $3,449
  • International Travel $9,646

That is around $170,000 as the value of an MPs remuneration package.

That gives even the meanest MP an income higher than 99 per cent of his fellow citizens. Whether it is too much is a matter of judgment, but it is not a matter of judgment that should be exercised by those who stand to benefit from it.

Eight years ago Parliament was advised to set up an independent body to determine MPs’ pay and entitlements, but when the legislation reached Parliament’s standing orders committee – a body every bit as powerful and self-interested as any trade union – it was gutted.

The ongoing furore over MPs’ travel expenses is the price MPs pay for refusing to surrender control of their pay and perks. It is a price successive Speakers have been happy to pay, but it is not one the public should tolerate.

MPs’ pay and perks should be set by an independent body that takes account of comparable pay rates here and overseas, the state of the economy and workloads.

I agree they should all be set by the Remuneration Authority, but I don’t think it would reduce the “furore” over pay and perks.

Now in this article we read:

Members of Parliament are secretly planning to change the rules around their $24,000-a-year accommodation allowance to make it easier for those who make Wellington their home to still be counted as out-of-towners.

Under the new rules, MPs will be able to nominate a “home base” where they normally live when not doing parliamentary business in Wellington. If that is outside Wellington, they will qualify for the accommodation allowance.

I have not got a copy of the new rules, but from what I can glean the change is around wording, not substance. The old rules referred to primary residence and the new rules refer to a “home base”. The Auditor-general herself said the term “primary residence” was not a useful one as the test has never been where an MP spends most of their time. If that was the test, then no Minister would ever be found to live outside Wellington.

One has to approach this from a principled approach, in relation to the fact the job of an MP requires them to live in Wellington some of the time, and when in Wellington they need to be have a place to live. The principle is that an MP should not be out of pocket for what is a work related expense, but neither should they gain from it.

If an MP, before they became an MP, resided outside of Wellington then their Wellington accommodation expenses get met (up to a limit) by the taxpayer. The exception to this is if the MP abandons their out of Wellington residence – either by selling it or renting it out. If they do that, then they are gaining at taxpayer expense.

The Auditor-General ruled (as did Speakers Hunt and Wilson) that Bill English was entitled to a Wellington accommodation allowance because he still maintained his Dipton property. If he had sold it or was leasing it out, then they would have found differently.

The one change I would make is I would bar MPs from having a direct or indirect interest in the Wellington accommodation they claim the allowance for. The Greens had their super scheme own several as a way to maximise income for themselves – and in fact were even claiming twice for the same property. Other MPs have owned the places they rented.

So the change in the rules is fine – the only potential for abuse is:

But one MP agreed yesterday that under the new definition it might be possible for an MP to maintain a small empty apartment out of Wellington and nominate it as a “home base”, when it would not have fitted within the definition of a primary residence as most people understood it.

In theory yes it is possible an Minister could move their family to Wellington, and sell their five bedroom house in the electorate and designate a small apartment as their home base. But there is always a way for venal people to rort the rules – and if any tried to do that, I would hope the media will expose that.

You could try and have a rule that an MP does not downgrade their home residence while they are an MP, but frankly it is unworkable – what if their kids move out of home etc.

So no problems with the change, but I do think it would be desirable to do a further change – to ban MPs from claiming the allowance for a property they have a direct or indirect interest in.

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MPs travel perks

November 1st, 2010 at 2:00 pm by David Farrar

It was reported last week that Lockwood Smith has decided not to include details of how much each MP has used of their “travel” perk, as it is discouraging MPs from using it – which is unfair as the value of the perk is deducted from their remuneration package in setting their salary.

Now Lockwood has identified the problem correctly, but in this rare instance I disagree with his solution.

It is unfair to be deducting the value of the perk from the salary, and to be having witch hunts against those who use it. But the solution is to abolish the travel perk and increase the salary – not to try and keep the details secret.

Lockwood and the PM have opened up the books greatly, and doing so is a one way street effectively. Even if the Parliamentary Service only now publish the total amount of travel perks used, the media will question each individual MP about whether they have used it, and so the end result will be the same.

The Herald quotes Rodney Hide saying much the same:

“Why don’t you just pay the MPs, don’t allow the rebate and cover their legitimate expenses?”

While the Green Party is looking at releasing their rebate details anyway, Hide could not speak on behalf of all his MPs on whether they would follow suit.

“I don’t think the speaker can put the genie back into the bottle, because people quite naturally expect transparency and accountability and it would be impossible to explain, in this day and age, that this rebate is being paid out of an MP’s salary, even though it is.”

I agree with Rodney that this is what should happen. There has been an argument that the travel perk should stay, because it is the only way to recognise more experienced MPs service. But I would say that if we wish to do that, then do it directly through salaries. There is no reason the Remuneration Authority can’t be asked to set a slightly higher salary for MPs who have served a certain number of years. some may argue against this also – my point is one should set the salary to cover all remuneration, and then just have legitimate expenses claimed.

Some MPs do use their travel perk for a mixture of work and play – such as travelling to meet colleagues in other countries. But that can be funded from the Leader’s Budget. If the argument is their budgets are not big enough to cover that, then lets debate that, rather than keep the travel perk which will never be accepted by the public – inevitably it will go the same way as the perk for ex MPs.

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Herald on MPs pays and perks

July 5th, 2010 at 1:00 pm by David Farrar

The Herald editorial:

In straitened economic times, the renegotiation of contracts routinely results in employees losing allowances or other benefits. Rarely is the base salary raised in compensation.

This starts with a false premise. The triennial review is not something done due to the recession. It happens every three years.

The Herald also makes another false premise – that people do not get compensated for losing allowances. Most senior employees are on a total remuneration package. So if for example you get a company car for private use, then your salary drops to keep the total package the same.

The authors of the review, Sir Doug Kidd, a former Speaker of the House, and economist Philip Barry, are certainly right to bring the boom down on these perks. No one has ever mounted a coherent explanation for them being necessary for an MP’s job.

I agree, which is why they are deducted from their total remuneration, to give MPs a lower salary than would otherwise be the cause.

In practice, they furnish a generously subsidised pursuit of pleasure. They were introduced by Cabinet, not an independent commission, supposedly as compensation for parliamentarians accepting lower salaries.

But the independent Remuneration Authority does deduct them from their salary package. It has done so since 2003.

Yet there has never been a time when there was a shortage of people wishing to be MPs. Further, most pay little heed to the money on offer.

The review does not explain why MPs should be compensated for the loss of a benefit that bears no relationship to their work and should never have been granted. Nor does it say why parliamentarians should be treated differently to members of the public.

Again they are being treated no differently to any other employee on a total remuneration package. The Remuneration Authority will not be instructed to increase MPs salaries if the perks disappear – it will be obliged under the law to do so because they explicitly deduct them from the package to calculate salaries at the moment. And they can not deduct something if it no longer exists.

Think of an analogy. Say you have a contract with your employer that they will pay you a total package of $120,000 a year. Now they pay $10,000 into a superannuation fund on your behalf, so your actual salary if $110,000. The company decides that it no longer is appropriate to be offering a superannuation scheme so they scrap it. Well then they will automatically adjust your salary up to $120,000 to keep the total package the same.

I know this is not a popular position to take, but it is a principled position that MPs should not be treated differently to anyone else on a total remuneration package.

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MPs Children Travel

April 6th, 2010 at 3:00 pm by David Farrar

The Herald reports:

Greens co-leader Metiria Turei is backing a plan to expand the travel perks for MPs’ children which potentially opens the way for MPs to claim for taking their children on holiday.

Parliament’s Speaker, Lockwood Smith, revealed last week that he was considering changing the rules to allow the children to travel anywhere in New Zealand to join their MP parent rather than just between their home and Wellington.

School-aged children now get four return trips to Wellington a year to allow them to see their MP parent while he or she is working in Parliament.

However, Dr Smith said most children could travel only during the school holidays – when the House was in recess and few MPs were in Wellington.

He believed more flexibility was warranted but said he did not intend to make it more expensive or expand it beyond the equivalent of four trips a year. A financial cap was one possibility.

The current policy seems reasonable to most people. The job requires MPs to spend half their year in Wellington, so their school age kids can travel down once per term, or more likely once per school holidays.

It is tempting to then go along with the argument that as few MPs are in Wellington during school holidays, the travel policy should be more flexible and wllow them to travel to other areas to be with their MP parent.

However I think this does change the nature of the policy, from a clearly work related policy, to something that could end up subsidising private holidays – and that is something which I don’t think is appropriate.

Any rule change could stipulate that the perk was to be used only when the MP was on work trips rather than private holidays.

She said MPs often spent the holiday recesses working elsewhere around the country rather than in their hometowns.

Ms Turei said she had no issue with limiting the number of trips, but it made sense for children to travel to wherever their parents were, rather than just Wellington.

“That’s the point, really. Especially for those who have younger children, it can get difficult to see them.”

If the Speaker does change the eligibility, then Metiria’s suggestion of only allowing it to accompany an MP on a work trip has merit, as that would be more palatable than what will be seen as a subsidy for private holidays.

Something that the Speaker may wish to reflect upon, is how the Remuneration Authority currently treats the policy on dependants’ domestic air travel.

You see the Remuneration Authority calculates a total remuneration level for an MP, and then deducts off that total package, the private value of some of the perks.

For example 5% of the average cost of MPs’ air travel is deemed of private benefit, as is 45% of the average costs of spouses’ air travel and 100% of MPs’ international air travel. So these are all deducted from the total remuneration package to calculate an MPs salary.

What I find interesting is what the Remuneration Authority said in their last detailed determination in 2003 on dependents’ air travel:

Dependants’ domestic air travel

4.5 The average cost of this per member is $2,208. The IRD has assessed that all of this constitutes remuneration. The Authority has made no allowance for this in the calculation of the package value as it believes that members should be able to have their children visit them in Wellington at the taxpayers’ expense.

So unlike even an MPs own air travel (which is deemed 5% private) the Remuneration Authority had determined that allowing children to travel to Wellington (four times a year for school age) is a legitimate 100% work related necessity.

But if this is changed to include travel to outside of Wellington, then I would suggest the Remuneration Authority would find that there is now a private benefit to this, and deduct a portion of the cost off an MPs salary calculation (as they do for 45% of spouses travel).

So if the Speaker does make the change, then it may result in MPs having it effectively deducted off their salary – regardless of whether they use it or not.

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MPs pay

September 15th, 2009 at 10:00 am by David Farrar

The Dom Post reports:

More than six months after complaining about the Remuneration Authority not paying enough regard to the recession when setting pay for MPs, judges, the governor-general, mayors, councillors and others, the Government has written a law to make it comply.

A bill from Labour Minister Kate Wilkinson will require it to take account of prevailing economic circumstances when setting pay, drawing on independent advice such as Treasury forecasts. The authority would retain discretion to award no rise or reduce increases that would otherwise have been awarded.

That is sensible as far as it goes, but assuming it goes to a select committee (as it should) I will put in a submission advocating a further change.

I strongly believe we should do what they do in the US, and make it illegal for MPs to get a pay rise during their term of Parliament. Instead the Remuneration Authority should revise the pay levels for MPs every three years, with them to take effect after each election.

It would massively reduce cynicism against annual increases for MPs, for which the MPs always get blamed. It would mean you stand for, and get elected to Parliament, knowing exactly what the salary will be for the next three years.

In previous decades with high inflation, you couldn’t do this so easily. But with relatively low inflation, a salary adjustment every three years is fine. It means perhaps a 10% adjustment every three years instead of 3% annually. Some might say what is the difference. They key thing is you have to get re-elected by the people to get the new salary level. It removes the perception (however incorrect) of voting oneself pay rises on the job.


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 MPs salaries, 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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MPs pay freeze

February 10th, 2009 at 6:14 am by David Farrar

The Herald reports:

The National Party isn’t going to support a Green Party proposal to freeze MPs’ pay for three years, as it doesn’t believe the recession will last that long.

The Greens plan to put their proposal to Parliament, possibly tomorrow, and they hope MPs will vote on it.

Prime Minister John Key said today if it was re-drafted for a one-year freeze, National would support it.

“The Green’s proposal presupposes there will be a recession for three years,” Mr Key said. …

“I don’t accept that proposition. If the Greens want to alter it to one year then National will vote for it, and we might vote for it in the second and third years.” …

Green Party MP Keith Locke said he was pleased Mr Key had responded to the proposal in a positive way and the Greens would want to get it through Parliament on a cross-party basis.

I have long advocated that MPs should get pay rises only once every three years, rather than annually. Not because of the recession, but to get rid of the (inaccurate) perception of MPs giving themselves pay rises.

I would change the law so that the Remuneration Commission sets MPs salaries 90 days before a scheduled election, with the new rates to apply for the next term of Parliament.

This isn’t to lower MPs wages compared to other jobs – just to change the timing. So (for example) instead of annual increases of say 3%, there might be a 10% increase for the next term of Parliament.

This is a slightly different issue to “self sacrifice” of increases during the recession. That comes down to showing “moral leadership” and is a sensible action, as there will be less resistance of making savings elsewhere if they are also occuring at the top.

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PMs pays

December 30th, 2008 at 8:40 am by David Farrar

The Herald runs an AAP story on what different PMs are paid.

The Russian salary is so low, it is inevitable that they enrich themselves through the state unofficially.

The US salary is also set very low, for the job. In fact many US presidents will leave office with greater debts than when they entered, due to the cost of private legal advice. But ex-presidents traditionally can then make millions through lectures and books.