July 5, 2010 1:00pm by David Farrar

Herald on MPs pays and perks

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.