Bryce Edwards: How much should we pay politicians?

Bryce Edwards: How much should we pay politicians?

It’s hard to find anyone who disagrees with Prime Minister Jacinda Ardern’s decision to freeze politician pay and review how increases are given. This indicates how the decision really was a no-brainer for the new government. They get kudos for what seems to be a benevolent and self-sacrificing move, and they avoid what would have been an uncomfortable comparison as the Government attempts to keep a lid on other public sector wage claims.

But despite the support for the announcement, there are still big questions to be asked about how much politicians should be paid, and how increases should be decided.

In announcing the pay freeze and review, Ardern put forward a strong and admirable explanation for the decision. She stated: “We do not believe, given that we are at the upper end of the scale, that we should be receiving that sort of increase”, and “This is an absolute acknowledgement that we are high income earners compared to other New Zealanders… we are not comfortable with that and this is our response”.

But “don’t rush to pull out the violin” says Stuff political journalist Stacey Kirk, who thinks it was simply an “astute” move on the part of Ardern, and the rest of Parliament were also smart enough to go along with it: “any MP who had the temerity to moan about the loss of a 3 per cent hike to their $175,000-plus salary would quickly find themselves with a target on their back” – see: MPs need more pay like a hole in the head.

More importantly, the pay decision was clearly made in the context of the current rounds of public servant pay claims, which the Government is trying its hardest to limit. Hence, Kirk says, “As the head of a Cabinet engaged in trying to haggle down the pay demands of teachers, a $13,792 pay rise for Ardern would just about be enough to spark civil unrest at the next march if pay negotiations find little progress.”

Others are also cynical about the freeze. Barry Soper points out that the new Government Cabinet ministers have, after all, just received a doubling of their pay: “A move like this is easy for a new Cabinet to sign off, given they’re now all on the pig’s back when it comes to their pay packets, earning more than many of them would ever have thought possible. So it was easy for Ardern to sound altruistic, maintaining the move was all about her Government’s values” – see: Pay freeze an easy move for Jacinda Ardern to sound altruistic.

Are politicians paid too much?

Hopefully the Government’s pay freeze decision will now spark a bigger discussion on politician pay, and what the right level of remuneration is. This is what I argued today on RNZ’s Morning Report, in an interview with Guyon Espiner and Darien Fenton – you can listen to the eight-minute item here: MPs’ pay freeze: Smart politics?

Part of what I argued was the democratic problem of having our political representatives in the top one per cent of income earners. It means those politicians become more divorced from the lives of ordinary voters. This is a point also put by blogger No Right Turn in response to the pay freeze: “their high pay and the fact that they get a pay increase year after year no matter what they do puts them on a different planet from most New Zealanders” – see: Frozen. And he suggests the best way forward is “indexing their pay to the median wage”.

Similarly, Greg Presland points to some details of MP pay which suggest that remuneration for MPs has got out of kilter: “Bryan Bruce has the details: ‘Backbench MPs are about to earn $163,961 a year. The top of the pay scale for teachers is $78,000.’ If we turn the pay clock back to 1979, Backbenchers and experienced teachers earned roughly the same amount ($18,000 a year) Now the basic MP’s salary is more than twice as much as what a senior teacher earns” – see: Ardern announces salary freeze for MPs.

So, is it right that MPs are earning so much more than ordinary workers? One MP has spoken out strongly about this increasing inequality. Chloe Swarbrick said in an interview late last year, “I think politicians in regard to the rest of society are overpaid and I feel pretty gross about it” – see 1News’ ‘Feel pretty gross about it’ – Chloe Swarbrick says politicians overpaid in regards to the rest of society.

Swarbrick explains how this change occurred: “Since certain reforms in the 1980s what we have seen is this massive divergence where politicians have been looking after themselves”. Furthermore, “She says part of the weird and gross feeling about her wages comes from knowing there is such inequality in New Zealand, with people living on the streets while others are in a far more privileged position.”

There have been some other recent signs that politician pay is extremely lucrative in New Zealand. In May, a study was released which showed that our prime minister is relatively highly paid: “New figures show Prime Minister Jacinda Ardern is the fifth highest paid leader in all OECD countries. Consultancy group IG studied the annual base pay of 32 member countries to figure out where each head of government sits. Ms Ardern earns NZ$491,117 (USD $339,862) per annum, more than Canadian Prime Minister Justin Trudeau and UK Prime Minister Theresa May” – see: Jacinda Ardern 5th highest paid leader in OECD.

Other reports suggest that MP remuneration is fairly decent. According to one financial adviser, each backbench MP should be able to save about $45,000 each year – see this and other details of their salary packages in Rob Stock’s Life hacks from the Beehive: saving on an MP’s salary.

And even after politicians depart office, they all get further lucrative benefits. For example, “As a former Prime Minister, Sir John Key will get $51,725 a year for the rest of his life, a taxpayer-funded car, and free travel if he is carrying out duties as a former leader. It is not known whether he is claiming this entitlement. His predecessors Helen Clark, Jim Bolger and Jenny Shipley have all benefited from it” – see: Former MPs and their perks – salary, free travel and taxpayer-funded cars.

How should their pay be increased?

The article above also reports that “Former MPs and their partners spend about $700,000 a year” on domestic and local travel, which longer-serving politicians such as Annette King, Murray McCully, Maurice Williamson, and Peter Dunne qualify for. Dunne went on the AM Show today to defend MP pay, agree with the pay freeze, and suggest a different way to determine the increases – see: MP salaries need fixed three year terms – Peter Dunne.

There are other ideas being thrown into the mix about how to decide on MP pay increases. The best article covering this is Stacey Kirk’s Government freezes MPs pay amid multiple pay negotiations with educators, police. This explains some other recent changes to pay increases – such as when Prime Minister John Key had the law altered in 2015 to reduce the annual increases.

Green co-leader Marama Davidson has suggested that future pay increases should only be the same dollar amount – not percent – that the average worker gets: “MPs are paid well above the average worker, so giving them a percentage rise accentuates their higher pay. When it is right for MPs to get a rise, they should get the same in dollar terms as what the average worker receives.”

Perhaps we actually need an ongoing pay freeze for MPs, according to Gordon Campbell who has responded to the pay freeze news saying, “the restraint is long overdue. Arguably, MPs are well placed to take at least a five year holiday from inflation adjustments at least” – see: On MP pay.

Here’s Campbell’s main point about the upcoming review of how politician pay is set: “If this exercise is to mean anything of lasting value, the government may have to be brave enough to declare that the current pay (plus perks) packages for MPs have hit a ceiling beyond which evidence of significant hardship would be required before the pay needle is allowed to swing upwards, again. In other words, why not declare the freeze is semi-permanent? Certainly, the freeze shouldn’t be used mainly as a gambit to deny senior teachers – who once used to be paid the same as MPs but who are now paid less than half what first term MPs receive – a leverage point in their current pay negotiations.”

Finally, there is one commentator who disagrees with the pay freeze – Newstalk ZB’s Mike Hosking has written a colourful column putting the case that MPs, ministers and the prime minister aren’t actually paid enough. And he likes the idea of bulk-funding the political parties in Parliament so that they can decide the performance pay of each politician: “Pay a party a lump sum and they hand it out to MPs based on talent. Not a bad idea. Potentially full of acrimony and because of it, political fall out. But at least it attempted to differentiate skill sets” – see: MPs’ pay freeze nothing more than PR fluff.