PM Jacinda Ardern's decision to freeze MPs' pay saves taxpayers $750,000

In August last year, Prime Minister Jacinda Ardern announced MPs would not receive a pay increase as she didn't believe it was fair.

The Government's decision to freeze MPs' pay will save taxpayers $750,000.

A regulatory impact assessment of the decision, written by the Ministry of Business, Innovation and Employment (MBIE), also revealed officials tossed up the idea of giving MPs the option of donating their would-be pay rise to a charity of their choice.

In August last year, Prime Minister Jacinda Ardern announced MPs would not receive a pay increase as she didn't believe it was fair.

The Remuneration Authority – an independent body that sets MPs' salaries – advised it planned to increase MPs pay by 3 per cent.

For a person who earned $70,000, a 3 per cent pay rise amounts to $2100. But for an MP earning a base salary of $163,961, a 3 per cent increase would be just under $5000.

Ardern said that was "not acceptable to this Government".

"Cabinet agreed while the Government is focused on improving incomes for ordinary working Kiwis, it's just not appropriate for MPs to be the subject of such an increase."

Ardern's decision was made just a month after nurses went on strike and as teachers were also considering industrial action.

A regulatory impact assessment, written by MBIE last year, revealed approximately $750,000 would be saved by not increasing MPs' salaries, superannuation subsidies and expense allowances.

Speaking to RNZ after making the announcement in August, Ardern said the money involved wasn't significant in the "grand scheme of the government's budget".

She said the move was about not increasing the gap between those on the highest incomes and other New Zealanders.

The impact assessment also showed there were a number of options available to address what it called the "growing imbalance in pay between those on highly remunerated salaries and the rest of New Zealand".

One of these options was MPs resolving to pass on any pay increases to charity until the next determination was due in 2019.

"MPs could pass a unanimous resolution to voluntarily give the increase in salaries and expense allowances to a nominated charity. This option would not require amending the Act."

But this was not recommended by MBIE.

"As this option is voluntary, there could be a lack of transparency around whether MPs provide their pay increases to charity and no ability to require MPs to comply," the assessment said.

It also said this option would be too complicated.

Instead, MBIE recommended a freeze on MPs' salaries and expense allowances at 2017 levels until the next determination was due in 2019 while conducting a review of the settings for how MPs' salaries and allowances were determined.