Pay cuts for the Prime Minister, other MPs, mayors and police and Defence Force heads can now go ahead – but some MPs may end up with a smaller cut than the 20 per cent the Prime Minister wanted ministers to take.
A law to allow for temporary pay cuts during the Covid-19 pandemic was passed unanimously in Parliament today. It will allow for temporary pay reductions of up to 20 per cent for up to six months for ministers, other members of Parliament, some public sector bosses and mayors and councillors.
The legislation will allow the Remuneration Authority to make a temporary cut to the salaries of MPs and others it sets salaries for.
Those include the Police Commissioner and Chief of Defence Force. However, it will not apply to the Governor-General or judges, because of "constitutional and fairness considerations".
It has been a month since Prime Minister Jacinda Ardern announced she and her ministers would take a six-month 20 per cent cut to their salaries.
Ardern said at the time that, while the fiscal impact was minimal, it was to show leadership and solidarity while other workers were facing pay cuts to get through the Covid-19 hit.
Other MPs and some councillors, including Auckland Council, followed her lead by offering to take cuts.
However, a law change was needed to allow for cuts to happen because the existing law did not allow the Remuneration Authority, which sets the pay for MPs and other senior public sector roles, to reduce their pay.
The scale of the pay cuts will now also be decided by the Remuneration Authority - and does not have to be the 20 per cent Ardern has stipulated.
An email from Remuneration Authority chair Fran Wilde to all MPs said the authority was "looking at a sliding scale" in applying the cuts to MPs, and asking for their views.
Wilde confirmed that meant the authority would consider whether backbench MPs, for example, could face a lower percentage pay cut than ministers because they earned much less – backbench MPs get a base salary of $163,961 a year while Cabinet Ministers get $296,000.
Wilde has also already written to Mayors and Regional Council Chairs to say pay cuts would only apply to those councillors getting more than $100,000 and higher percentages would be applied to the highest earners. Some elected representatives have claimed to have donated a portion of their salary to charity, and Wilde said that would be taken into account.
Act leader David Seymour said the pay cuts for politicians should be mandatory, rather than at the discretion of the Remuneration Authority, and the same 20 per cent cut should apply across the board for all MPs.
In his speech to Parliament, he also criticised the two-month delay in passing the law to ensure the pay cuts would apply.
"It was April 14 when the Prime Minister was happy to bathe in national, indeed global, media adulation for leadership when announcing an MP pay cut would be made. Yet here we are a month later."
His own attempts to introduce a law change earlier had been blocked by the Government.
Most public service chief executives have already taken pay cuts because the State Services Commissioner sets their salaries, but some positions are handled by the Remuneration Authority instead.
The reductions allowed by the legislation are capped at 20 per cent, can only apply for up to six months and the Remuneration Authority must have signed off on any cuts before the end of June.
The law change is not permanent and will expire at the end of January 2021.