27 February 2015

Politicians' pay rises an annual embarrassment

How much should Members of Parliament be paid – and who decides anyway?
New Zealand Prime Minister John Key has openly disagreed with the recent decision that lifts the basic salary of a backbench Members of Parliament 5.5 per cent, from $147,800 to $156,000, while his own salary rises by $23,800 to $452,500.
So, the Prime Minister still earns less than many chief executives, including many of those in the state sector. But these salary rises are above both inflation and increases in the median income, and they come just after the minimum wage has been raised by a mere 50 cents per hour (3.5 per cent). Public cynicism towards politicians and resentment about inequality have caused a political backlash against the announcements of rises in MPs’ salaries.
For very good reasons, though, MPs’ salaries (and those of judges and elected local government politicians) are set by an independent Remuneration Authority. For obvious reasons, we do not want politicians setting their own salaries. And therefore, for exactly the same reasons, politicians should not interfere in the decisions of the Remuneration Authority, regardless of whether they think an increase is too small  – or in this case, too large.
But Mr Key has told reporters that he wrote to the authority urging it not to give MPs any salary increase at all. He argues that one should not be in politics for the money, and that there is no valid comparison with senior roles such as chief executives.
It is utterly inappropriate for the Prime Minister to attempt to influence the authority’s salary determinations, however. Mr Key is eager to dodge any political bullets that may be aimed at him due to his massive pay-rise. But he should not be trying to influence the authority’s decision, even if his aim is to have no pay increment at all. The point of having the Remuneration Authority is to keep this decision out of the hands of politicians themselves and to distance it from political interests.
For many taxpayers, it might be more satisfactory to give MPs no salary rise, or only one that aligns with average income increments in the economy at large. But the Remuneration Authority employs a widely recognised "job sizing" method, and it is required by law to take into consideration salaries for comparable occupations, fairness to the MPs and to taxpayers, the nature of the job itself, and the state of the economy. To make an informed judgement on the pay-rise determination of the authority, and whether it is reasonable and lawful, we would have to read through the information that the authority had before it.
Parliament could amend the law that governs the Remuneration Authority to more tightly restrict future pay increments. The Prime Minister has hinted at exactly that. One can imagine the interesting debates that would occur in the House over such a Bill. It would amount to political interference again.
Given though that future circumstances are not always foreseeable, it may be unwise to tie the Authority’s hands any more tightly than they are at present. And repealing such an amendment, if it turned out to be impractical, would only add to the political wrangling.
The whole idea of having a Remuneration Authority was to prevent political interference in setting the salaries of elected representatives and judges.
If Mr Key and other MPs feel so strongly about the fact the increases they receive are regularly larger in percentage terms than those received by ordinary New Zealanders, including pensioners, beneficiaries and those on the lowest pay rates, then they might like to consider the means by which that disparity occurs. That would include the National-led government’s recent amendments to employment law, its discouragement of collective wage bargaining, and the decisions Ministers make on pensions, welfare and minimum pay rates.
Until then, if the Remuneration Authority makes a determination that happens to embarrass the Prime Minister, that is just too bad for him. He will have to take the money and smile.


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