November 16, 2010 9:00am by David Farrar

What will happen to MPs salaries?

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.