Budget 2025: Labour’s Chris Hipkins won’t commit to returning $13 billion savings to pay equity regime

Labour leader Chris Hipkins is not willing to commit just yet to returning the near-$13 billion in pay equity savings back into the regime should he be re-elected to power.

He says Labour would reverse changes made by the Government this month to tighten up the scheme, but he’s unsure how the savings figure announced in Budget 2025 was calculated.

Therefore, wants to see more detail before committing to returning that to pay for future potential pay equity settlements.

“They haven’t released the calculations on how they arrived at the savings they’ve delivered today, so I can’t give you numbers,” Hipkins told reporters.

“I can give you the principle. The principle is very clear for us. We don’t believe that women should be paid less than men.”

The Government said its pay equity reforms this month were necessary to ensure the regime remains focused on addressing sex-based discrimination.

It raised the threshold for claims and narrowed what roles groups could compare themselves to. However, future settlements were still expected.

The financial consequence was that less money needed to be booked to pay for potential future pay settlements. Prior to the Budget being delivered, ministers told reporters this would equate to “billions”, but the precise figure was not made immediately clear.

The Budget papers showed that as a result of the changes – as well as removing an assumption that the Government fullyfund potential settlements involving non-Government employers – “the estimated cost of pay equity settlements for the Crown has significantly reduced” compared to previous forecasts.

“Overall, the reduction in funding has created fiscal headroom of $12.8b over the forecast period,” the Budget Economic and Fiscal Update (BEFU) said.

Finance Minister Nicola Willis said these savings were being “redirected to support investments in frontline health, education, and other government services” and additional money was still being retained in contingency to settle future pay equity claims.

The amount of money being kept aside is secret to not affect negotiating positions.

Finance Minister Nicola Willis during her presentation at the Budget 2025 lockup. Photo / Mark Mitchell

After the savings figure was released, the Herald asked Hipkins whether Labour would reverse the changes and return the near-$13b in savings back to settling potential future pay equity claims.

“We’ve only just seen the Budget. What we’ve said is that we’ll certainly make sure that we get the pay equity system back up and running again. We haven’t seen the detail of exactly how they’ve reached the calculations that they’ve got,” the Labour leader said.

“We’re going to need to go through quite carefully before we can make commitments about how much extra money we will put into pay equity. But we want to ensure that women are paid fairly and the current regime that they’ve legislated under urgency doesn’t do that.”

During her Budget presentation, Willis said that pay equity costs in 2020 were initially expected to reach $3.7b but there had since been a “blowout” with costs rising steeply, especially due to Labour’s 2022 decision to fund claims in the “funded sector”.

Asked if he – a former senior minister between 2020 and 2023, and briefly Prime Minister – took any responsibility for that figure inflating, Hipkins responded: “For goodness sake, I don’t take responsibility for the fact that women are being paid less than men”.

“I do take responsibility for the fact that we were going to do something about it ... clearly, we have done the calculations and worked out women are being less than they should be.

“I am not going to make an apology for the fact we believe, as a Labour Party, that women should not be being paid less than men.”

The Labour leader said he couldn’t say how much money had been set aside for potential settlements when he was in office.

“I’d have to go back and check, but we certainly knew that it was going there was going to be a reasonably significant price tag with settling pay equity claims ... I didn’t memorise the report.”

Labour's Chris Hipkins wants to see the detail before making a commitment. Photo / Mark Mitchell

‘Typical of Labour’

Prime Minister Christopher Luxon said Hipkins needed to answer whether he would increase taxes or borrow if he wanted to reverse the pay equity changes and put more money aside for future potential settlements.

“We made sensible changes to focus that bill on its original purpose, which is to deal with gender-based discrimination. We have set money aside,” Luxon told the Herald.

“We expect pay equity claims to happen. The question for Chris Hipkins is: is he going to tax more or is he going to borrow more?”

When it was put to Luxon and Willis that Hipkins said there was a lack of detail of how the savings figure was calculated, the Finance Minister said that was “typical of Labour”.

“They just let things get completely out of control, and that was a scheme that was growing in every year. When we came into government, we saw that those costs had got exponentially bigger than had ever been forecast when the law was first passed.

“The fact that Labour did nothing about it and ignored it tells you everything that you need to know.”

Willis said the pay equity settlement figure inflated the most in 2022 when Labour made a decision to “write a blank cheque for private sector employers who went to the bargaining table with unions”.

Jamie Ensor is a political reporter in the NZ Herald Press Gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub Press Gallery office. In 2025, he was a finalist for Political Journalist of the Year at the Voyager Media Awards.