Politicians set for pay lift of 2.6 per cent

Prime Minister John Key's salary will increase by $11,381 to $446,394. Photo / Mark Mitchell

Remuneration pegged to average wage but top-ups can be claimed.

Politicians are likely to get a 2.6 per cent pay increase this year under new rules for setting their salaries and could get a further top-up to soften the blow of perks being tightened.

The final pay increase will not be known for a couple of months but the Remuneration Authority now has to peg pay hikes to the average increase in wages in the public sector over the previous year. This year's increase will be calculated from quarterly labour market statistics released this week. The Green Party asked the Parliamentary Library to calculate the increase that would apply to MPs' pay this year. That was 2.6 per cent, which amounts to $3925 more for backbench MPs and $11,381 more for Prime Minister John Key. That is higher than the 1.6 per cent increase last year. Mr Key changed the way MPs' pay was set last year to try to restrict high pay increases for MPs, which are set by the Remuneration Authority. It meant that last year MPs got a 1.6 per cent increase instead of the 3.7 per cent the Remuneration Authority proposed under its old criteria.

Green Party co-leader Metiria Turei said this year's likely 2.6 per cent increase showed the method Mr Key chose to limit MPs' pay rises was ineffective because it was not significantly different from increases in previous years. The average increase in the six years before the new criteria was introduced was 2.7 per cent. Since 2007, increases have ranged from zero in 2008/09 to 5.2 per cent in 2011/12, a year in which the increase was particularly high because of a catch-up after a zero increase and cuts to MPs' other entitlements such as international travel rebates.

Ms Turei believed increases should instead be pegged to changes in the labour cost index, which would mean a more humble 1.2 per cent increase this year.

This year, MPs could also get a further top-up to compensate for changes in entitlements over the past year such as new limits on the use of free domestic air travel by family members.

Remuneration Authority chairman John Errington said the authority would release its decision once it had calculated the extent to which MPs were worse or better off under those entitlements. The authority considers any personal benefit MPs get from their entitle-ments, including superannuation, as part of their overall salary package and deducts that from their base salary.

MPs could also get an increase in the tax-free annual allowance provided to cover work-related costs such as meals and koha. The allowance is $16,560.

MPs' base pay increase must now be the same as the change in the average weekly earnings for full-time employees in the public sector in the year to June.

New pay

What they will be paid with a 2.6 per cent increase.*

Prime Minister John Key: $446,394 - increase of $11,381

Labour leader Andrew Little: $279,712 - increase of $7131

Cabinet Ministers: $279,712 - increase of $7131

Backbench MPs: $153,973 - increases of $3925.68

*The Remuneration Authority is yet to make its determination on MPs' pay but must base it on the average pay increase in the public service. That was 2.6 per cent over the past year.