Prime Minister John Key has announced an overhaul of the Remuneration Authority Act, tying MP salaries to those of the wider public sector, which will be passed under urgency.
Mr Key says the decision was made after the Remuneration Authority’s latest determination which saw the total remuneration received by MPs increased by about 3.5 per cent.
“That increase was neither necessary nor justified at a time when inflation is at 0.8 per cent,” says Mr Key.
“While the decision was made independently of MPs, they should not be receiving increases which are disproportionate to the wider public sector.”
Mr Key says the Remuneration Authority referred specifically to the criteria contained in the Remuneration Authority Act 1977 as the reason for the increases, therefore a law change was necessary.
The change will take away the Authority’s discretion when setting MP pay. The sole criteria will now be the average public sector pay increase for the previous year.
Mr Key says the decision to remove the Authority’s discretion was not taken lightly, given that it changed a practice going back several decades.
“However, it is clear that changing the criteria upon which that rate is set is the only way to ensure the Authority will start handing down more modest pay increases.”
The new legislation will be backdated to 1 July 2014, meaning the pay increase outlined in the latest determination will not be awarded.
Based on the most recent data, total remuneration will instead increase by something in the range of 1 – 2 per cent, reflecting average wage growth in the public sector.
Ministers anticipate more detailed advice from officials on the measure to be used, which will be set out in the legislation, likely to be introduced in the next sitting session.
There is always an uproar when MPs’ pay rises are announced but feelings were stronger about last week’s announcement when inflation is so low.
Continuing to say it was out of their hands was an untenable position for MPs when they had the power to change the legislation.
Acting to reduce the current pay rise is a good move but it would be better if changes to the legislation weren’t done under urgency to allow public submissions.