The Government’s decision to hike the fees Crown board members can be paid could cost around $11 million, according to modelling by the Public Service Commission (PSC).
Advice to the Government, seen by the Herald, also showed there would be an average pay hike of roughly $24,000 per general governance board member, should all board fees be increased to the upper limit of the new fee ranges.
The $11m figure is the maximum forecast cost of the increases to the fees that members of Crown entity governance boards could be paid.
This doesn’t include the additional costs of higher fees for the members of statutory tribunals, authorities, and other committees.
Comprehensive information on these additional entities is not available to the PSC, but one estimate using a 2022/23 fee survey suggested the daily rate of members of these bodies could rise from $449 to $584.
Both the PSC and Public Service Minister Judith Collins have said these increases should be seen in the context of Crown entity boards overseeing around $60 billion of public money.
As the Herald revealed in July, ministers this year signed off on changes to the Cabinet Fees Framework, which lays out the ranges of fees Crown board members should be paid.
This included hiking the fee ranges of general governance boards – which oversee many of the Crown bodies – by 80%.
While the ranges in the framework have been lifted, the changes don’t result in automatic increases to directors’ fees. Their pay packet will increase only after a review and consideration by ministers.
The Government has argued that the changes are necessary to make the public service roles attractive to talented directors and to keep up with private market rates after years of no significant adjustments.
The changes made sought to bring the fees within 20% of the rates offered privately. This discount is meant to reflect the public service nature of the jobs.
According to an Official Information Act (OIA) response, the PSC said it used agencies’ annual reports to model the potential cost impact of the changes.
The modelling was limited to entities that fall under “Group 3a” of the framework, which includes the boards of most Crown entities. This is the group which received an 80% increase to their fee ranges under the Government’s recent changes.
“It is estimated if all fees were increased to the maximum 80% of the new ranges, the potential cost could be approximately $11 million,” said the PSC.
“It is important to note this figure is a maximum figure. Not all bodies will necessarily receive maximum increases, and any increases will be subject to a robust fee assessment and will only be made by the responsible minister where the entity can meet additional fees from within baseline.”
Group 3a covers 56 bodies and 450 board members, with total spending on fees about $12m a year at present.
The PSC has previously told the Herald more than 600 bodies are covered by the framework.
Advice provided to then-Public Service Minister Nicola Willis from the PSC in December last year, and only made public last month, also looked at the effect on the median fees paid.
“Our modelling of the potential impact on actual fees from an 80% increase in fee ranges to general governance boards shows that at the current median, Crown entity board member fees could increase from $20,000 up to $45,400 and board chair fees could increase from $40,000 up to $80,800.”
It said the “potential total cost of implementing the increased fee ranges for general governance board fees could be up to $11 million (based on lifting all fees to the 20% discounted private sector rate) with an average increase in fees of $24,200 per board member”.
Cabinet also agreed to hike the fee ranges for members of statutory tribunals, authorities and other committees by 30%.
However, no modelling was included in the OIA response for the potential cost of these increases, as the PSC said information wasn’t recorded centrally for them.
In the advice to the Government last year, the PSC said that based on a 2022/23 fee survey, “we estimate that median daily fees would move from $449 to $584 with a 30% uplift”.
“As with general governance boards, the responsible minister would need to ensure any fee increase is justified and affordable.”
The Green Party’s public services spokesman, Francisco Hernandez, said that because the $11m figure was the “estimated cost to only a subset of the boards covered”, the true cost could be larger.
As previously reported by the Herald, agencies will have to pay for any additional increases to fees from their current baseline funding.
While Collins said agencies shouldn’t cut “essential services to accommodate governance costs”, she acknowledged some “may need to reprioritise or seek efficiencies”. The costs shouldn’t come at the “expense of broader agency operations”.
The Herald also revealed a small number of Government agencies warned the PSC that having to pay for the fee increases out of their current funding could have “significant financial implications” and impact the delivery of some public services.
Hernandez said it was “perverse” that the Government hadn’t budgeted extra money for these increases.
“Instead of investing in our public servants – like firefighters, nurses and doctors – through fair pay and safe working conditions for staff, this Government has chosen to grant a blank cheque to increasing the pay of already well-off board directors and executives.
“It highlights what their priority has always been since they’ve come into office – enriching the wealthy and powerful at the expense of everyday New Zealanders.”
In a statement, Collins stressed the updated framework didn’t mean fees will automatically increase and the Government expected agencies to take a “balanced approach and consider any fee increases alongside the agency’s overall performance and priorities”.
She said the changes were made after no significant adjustment for many years, “despite Crown entity boards being responsible for 70% of the public sector workforce, $60 billion (37%) of government spending, and half (50%) of all government assets”.
"To attract the talent needed to govern complex, multibillion-dollar public entities, fees need to reflect the scale and responsibility of these roles.
“We know agencies are working in a tight fiscal environment. That’s why the framework includes flexibility and requires ministers to oversee any changes. The increase ensures board members are fairly paid for the important work they do, while also keeping public spending accountable.”
Hernandez expressed frustration that Collins hadn’t previously said what the estimated cost of increasing the board fees could be, despite his asking through a written parliamentary question.
Collins responded to a written question on the topic of cost in July by saying that there would be no automatic fee increases and additional costs will “vary entity by entity, based” on fee reviews that will take place.
“The lack of transparency from the Government around the board fees issue is deeply disturbing,” said Hernandez.
The Government didn’t issue a press release on its changes to the Cabinet Fees Framework. It quietly uploaded the updated document online, but ministers only spoke on it as the Herald broke its original story.
Jamie Ensor is a senior 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. He was a finalist this year for Political Journalist of the Year at the Voyager Media Awards.