Government introduces new rules to slow pay rises for politicians

Workplace Relations Minister Iain Lees-Galloway says changes in 2015 caused pay rises for MPs to increase faster. Photo / Mark Mitchell

The Government hopes to rein in pay rises for politicians with new rules for how their annual raises are calculated.

But the Green Party says the changes don't go far enough and MPs will still get salary bumps much higher than most New Zealanders.

The Government last year rejected a 3 per cent pay rise and froze salary and allowance increases for politicians, saying the increase wasn't fair compared to the rest of the country. The move was estimated to save taxpayers about $750,000.

Workplace Relations Minister Iain Lees-Galloway on Tuesday announced the Government would now be dumping a change made to the rules in 2015 that had caused an increase in proposed raises since.

"In 2015, MPs took control of the way that their pay increases were calculated by replacing the Remuneration Authority's independence with their own preferred formula," Lees-Galloway said.

"The changes were a failure, with this formula generating higher pay increases than the system used prior to 2015."

The Government will now introduce a bill reverting the system back to its pre-2015 state, meaning the authority will make its decision in a similar way it does for other key public office holders.

The set of considerations includes fairness to taxpayers, economic conditions, and the requirements of the job, among others.

Reviews of MPs' wages will now take place after each election, setting what the increases will be for each of the three years of that term.

The bill will be introduced in Parliament on Wednesday and will cover the 2019 raise.

Prime Minister Jacinda Ardern told reporters increases proposed since 2015 - of between 2.4 and 4 per cent - were too large and out of step with public expectations.

"It wasn't fair and it wasn't in keeping with what the general public were seeing," she told reporters.

But the Green Party says while it will vote for the legislation, it believes it's a wasted opportunity.

"While this should prevent the sort of sharp increases in MP payments we've seen recently, it's still not good enough," Greens co-leader James Shaw said.

"It's disappointing when we could be bringing MP pay in line with annual wage changes experienced by New Zealanders generally."

The party will be looking to make amendments to the bill to put them more in line with wage growth around the country.

Act Party leader David Seymour agrees, saying he wants pay for MPs to be tied to economic growth.

"That's how you might get people around here to understand economics," he said.

The National Party said it would back the legislation, but would seek assurances it would lead to lower pay rises.

But shadow leader of the house Gerry Brownlee denied the 2015 changes had led to bigger raises.

"The whole of Parliament supported those changes, which were linked to the average increase for the public sector, and meant that a 3.5 per cent increase proposed by the Remuneration Authority was revised down to 1.5 per cent," he said.

Current pay rates for politicians:

• Prime Minister $471,049

• Deputy Prime Minister $334,734

• Cabinet Minister $296,007

• Minister outside Cabinet $$248,839

• Speaker $296,007

• Leader of the Opposition $296,007

• Backbench MP $163,961