And the reality is it
was Nicola Willis who drove the pay equity “reset” because of the huge amount she knew that reducing future settlements would free up for her second Budget.
It turns out to be $12.8 billion over four years, and that is more than half of all the savings in this Budget for reprioritisation – $21.4b over four years.
And part of that $12.8b includes $1.8b that Treasury had earmarked for pay equity settlements in the current financial year, none of which have taken place.
None has taken place since the coalition was formed in 2023 and the specialised taskforce embedded in the Public Service Commission to oversee a complex new area of social compensation was disestablished. Pay equity was apparently going swimmingly back then.
“It is a sign of success that the process for settling pay equity claims has now matured to a point where the same level of governance support and facilitation from the taskforce is no longer required,” Willis said a year ago when she shut down the pay equity taskforce as Public Service Minister.
More recently, all 33 claims that were in the pipeline were cancelled under van Velden’s bill, passed under urgency three weeks ago, and will need to be resubmitted under a stricter law designed to lower settlements.
Willis is a formidable and combative politician and has spent most of the past three weeks “blaming” the previous 13 settlements under the previous Government on their lack of control, but attempting to flourish her feminist empathy for sex-based discrimination.
She went further yesterday and said Labour had written out blank cheques for pay equity, though in all the furore over pay equity no settlement has been identified as having been unworthy.
In a bid to illustrate what she says was a blowout in costs, she disclosed a figure previously confidential to Treasury – being Treasury’s estimate in 2020, when the first pay equity bill was passed, of the cost for the next four years.
That estimate was $3.7b over four years, although Willis did not reveal any of the assumptions on which that estimate was based, such as the number of claims.
However, the point was made that given a contingency still exists – for Government employees – and Treasury has been able to surrender $12.8b over four years for reallocation as well, costs had ballooned (as the cost of everything had between 2020 and 2025).
The coalition has assumed that a large figure automatically meant over-compensation rather than countenancing that the payouts might have been a true reflection of the degree of discrimination.
In any event, the $12.8b savings from pay equity are way bigger than any other savings such as $2.4b savings over four years delivered by changes to KiwiSaver, the $1b saved in emergency housing costs by getting people out of motels sooner, the $211 million saved by means testing Best Start in year one, or $164m saved by cutting dole payments to 18 and 19-year-olds whose parents can support them.
If Willis had not had the $12.8b pay equity to play with, the 2025 Budget would have been so much harder for her to produce, given her many fewer choices.
It would have come closer to being an austerity Budget. It may have made it more difficult to come up with Investment Boost, the $6b centrepiece of the Budget for business, or Shane Jones’ $200m contingency for co-investments for new gas fields.
“This is not austerity – far from it. In fact, it is what you do to avoid austerity,” Willis said in one of the more memorable lines of her speech.
It is tempting to believe that the $12.8b was so tempting for a Finance Minister that the decision was made to release it for the Budget, and the political story – and attacks – were made to fit afterwards.
There is no doubt that producing Budget 2025 was hard for Willis and it will be interesting to see what policy Labour presents on pay equity before the next election.
But the bigger question is who is going to save Willis’ third Budget?
