Critics of politicians' pay increases need to be careful what they wish for. It is too easy for the leader of a ruling party to agree and dispense with independent, careful and sensible criteria for setting their remuneration. That is what John Key proposes to do. Agreeing with criticism of the latest pay increase awarded by the Remuneration Authority, Mr Key's Cabinet has decided to legislate to overturn the raise and replace the authority's pay-setting criteria with just one: from here on, MPs' baseline rate will rise by no more that the average public sector pay increase in the previous year.

That link has obvious political attractions for National and pitfalls for Labour. A government that keeps a budgetary squeeze on public servants' salaries will be able to say it is accepting the same austerity for itself, while a government that is happy to see pay rates rising in the public sector will be open to the accusation of self-interest. Labour's leader was concerned yesterday that the Prime Minister's proposal might be used as an excuse not to give "nurses, teachers, police officers and other hard-working civil servants the wage increases they deserve" this year.

Andrew Little suggests a review of MPs' pay-setting arrangements should instead curb the salaries of chief executives in the public service. These have raced far ahead of the rates for even the PM and Cabinet members. The PM's annual salary is $428,000. The head of the Treasury receives at least $650,000, the chief executive of the Ministry of Business, Innovation and Employment, $620,000. Its minister, Steven Joyce, is on $268,000.

Chief executives in the private sector receive far more than the chair and members of their boards, but the pressure on private-sector executives to produce measurable results is much greater than it is in the state service and their job security is much lower. It may be that departmental heads, these days sometimes recruited from the private sector, could command greater salaries outside the public service but the Remuneration Authority has been worried at the widening gap between the pay of ministers and those who report to them.


Holding, or even reining back, top rates in the public service would help to contain increases in parliamentary salaries. The system which Mr Key wants to jettison sets MPs' salaries by using as a starting point the pay for public servants doing work of similar complexity and responsibility. The authority then deducts the value of MPs' superannuation subsidy and personal benefit they may derive from free air travel and other "perks".

The result is a basic backbencher's salary of $148,000 a year, which would have become $156,000 backdated to July if the authority's 3.5 per cent increase was allowed to stand. The increase is out of line with this year's very low inflation but the adjusted salary looks reasonable for the demands on an MP. Politicians' pay will never be popular, nor can it ever reflect the national import of the decisions leading politicians make. Decisions affecting their own pay are among those they should never make.