MPs get 5.5pc pay increase

Former MP Mike Sabin, who stood down in January, would get a slightly larger lump sum of nearly $5000 as a result of the pay increase announced by the Remuneration Authority. Photo / File

Former MPs including Mike Sabin are set to get a farewell present from the taxpayer after a 5.5 per cent backdated pay increase was announced by the Remuneration Authority.

Mr Sabin, who stood down in January "due to personal issues that were best dealt with outside Parliament", would get a slightly larger lump sum of nearly $5000 because he held a position as select committee chair until January.

As a result, Prime Minister John Key's salary would rise by $23,800 to $452,500. Cabinet ministers would receive $283,400, up from $268,500.

The base salary for backbench MPs would rise from $147,800 to $156,000.

The pay rise would be backdated to July, so MPs should get an additional lump payment of at least $5000.

Leader of the Opposition Andrew Little's pay packet would increase from $268,500 to $283,400.

In its determination, the authority said the payline for ordinary members increased by 3.3 per cent in 2014.

However, tighter rules around MPs' travel meant their annual entitlement fell to $3200, compared to around $6500 last year.

"Taking into account the change in value of the travel entitlement, this produces a package increase of 3.56 per cent and a salary increase for ordinary members of 5.5 per cent."

Mr Key said he was disappointed in the authority's decision, saying there was no justification for the increase given inflation of 0.8 per cent and average wage growth of around 2.5 per cent.

In last year's determination, the increase was pegged at 2.2 per cent because of the need to restrain public sector spending in the wake of the global economic crisis. However, authority chair John Errington added that the pay gap between ministers and executives in the private sector was growing and would have to be addressed.

The new salaries are usually announced in November or December, but last year the Remuneration Authority issued only its determination on the travel and accommodation entitlements of MPs, delaying the salary consideration.

The Speaker used to set those entitlements, but the bulk of it has since been put into the hands of the Remuneration Authority. That was to remove politicians from the calculation after sustained criticism and scrutiny over the 'perk' elements of their entitlements, such as international travel subsidies. Those subsidies can now only be used if the trip is at least partly work-related and has the Speaker's approval.

Mr Key said Parliament may change the law on how MPs' pay rates are set in the future. Hesaid he wrote to the Remuneration Authority early this year urging it not to give MPs a pay rise at all this year.

Bigger pay packets
*John Key: $452,500
*Cabinet Ministers : $283,400,
*Backbench MPs: $156,000