Q and A on MPs' perks

Former MPs and their partners can travel cheaply each year to London. Photo / Supplied

Politicians have been vigorously defending their right to taxpayer-funded perks this week. Political reporter Claire Trevett examines the claims.

Transtasman oneupmanship - rather than a reward to MPs for taking smaller salary increases in difficult times - appears to be the reason for the introduction of a travel perk for former MPs in 1972.

A letter on the history of the perk, which gives former MPs up to 90 per cent discounts on international travel up to a value of about $10,000, reveals the idea was first conceived because Australia's federal Government paid for its MPs to travel to New Zealand.

The letter was from former Speaker Doug Kidd, in response to Rodney Hide's questions about the perk in 1997.

Former MPs have said they will fight to retain the perk if there are attempts to cut it off, saying it was part of their conditions of employment and a reward for taking lower pay increases in difficult economic times.

About $1.1 million was spent by the former MPs and their spouses in 2005/06. Although the Parliamentary Service regularly released the numbers eligible for it and the cost of it through the 1990s, it no longer makes the information public.

Q. Where did the perk originally come from?

A. Cabinet approved it in 1972 after a request from a committee of cross-party MPs which got the idea from Australia, whose MPs had subsidised travel to New Zealand.

The initial scheme - for both sitting and former MPs - was less generous than its modern equivalent. It did not include spouses and an MP had to have served for at least three terms (now one term for a 25 per cent discount) to get any discount at all. Only those who had served more than seven terms got the highest 90 per cent discount (now available after four terms.)

It changed in the mid-1970s and 1980s to become more generous and flexible - spouses were included and discounts were provided at an earlier stage of MPs' careers. The scheme for former MPs was initially uncapped but two ex-MPs made such excessive use of it that in 1977 it was restricted to the cost of a return first-class airfare to London and 12 domestic trips each year.

In the mid-1980s it was reduced to a business-class return trip ticket and a change allowed the spouses' entitlement to be "transferred" to a new partner if a marriage broke up or a spouse died.

Q. Was the perk introduced in lieu of a pay rise in the 1970s when Norman Kirk was Prime Minister and held back MPs' pay rates because of wage freezes?

A. There were Government-imposed wage freezes and restraints throughout much of the 1970s. Although MPs' own wage increases were not technically covered by these, in 1971 they took a 12 per cent increase instead of the 19 per cent they were entitled to.

They also took a lesser amount in 1972, the year the travel allowance came into being. In 1973 - a wage freeze year - a big show was made of refusing a large pay increase of 45 per cent for backbenchers and 30 per cent for ministers, recommended by a royal commission. However, it was quietly put through in March 1974, before the wage freeze ended, and was backdated a year.

Until the mid-1970s, MPs' salaries and allowances were reviewed every three years by a royal commission. In the intervening years, cost-of-living adjustments applied.

In 1974, MPs turned down a 9 per cent adjustment for the cost of living but further significant increases were given by the royal commission in 1976 to help catch up.

Stan Rodger, an MP from 1978 to 1990, who led the review that resulted in the perk being halted for new MPs in 1999, said the allowance was widely seen as an acknowledgement by the Cabinet that the wage restraints would have a permanent effect on the superannuation payments of MPs and an acknowledgement for long service.

Q. What about Sir Douglas Graham's claims he turned down pay rises in the 1990s?

A. The 1990s, the decade over which Sir Douglas Graham said he had refused pay increases as a Cabinet minister, was also a time of restraint. In 1992, the cross-party MPs committee asked the Higher Salaries Commission not to give them a salary increase.

It obliged, but noted the dangers that such decisions could mean later on when catch-ups were needed. The following year, the commission did increase salaries by about $4000 for a Cabinet minister. A press statement from Jim Bolger followed, stating Cabinet ministers would refuse the pay increase "as they consider an increase would not be appropriate in the current climate of constraint".

Increases of about $3000 to $4000 were granted in each of the three following years, none of which appear to have been universally rejected although some MPs said they would donate it to charity.

In 1996/97 pay rates were reviewed to take account of MMP.

In 1998, National MPs said they would turn down a 2.5 per cent increase - which was given soon after the decision to cut the future level of superannuation - but because it was paid automatically, decided to take it and donate it to charity.

By the time National went out of government in late 1999, Cabinet ministers were paid $145,400 - a 29 per cent increase on the $113,000 when it had entered government in 1990.

The previous Labour Government had also tried to keep MPs' pay down - in the 1980s David Lange had limited pay increases to 10 per cent after the Higher Salaries Commission recommended 26 per cent. Geoffrey Palmer also threatened to sack the commission if its award was excessive - its recommendation of 5-7 per cent in 1989 was accepted.

The verdict

The introduction of the travel allowance does coincide with a period in which MPs were taking lower increases than they were entitled to. However, Sir Douglas Kidd's account, which seems to be taken from Cabinet papers of the time, does not mention the wage freezes among the reasons given for the international travel allowance. Furthermore, 44 MPs who had already left Parliament qualified for it at the time it was introduced - and these would not have been as affected by the wage freezes. Although MPs did take smaller increases in some years, these were subsequently compensated for in "catch-up" increases.

That also does not account for subsequent Governments retaining the perk through better economic times and higher pay rises and also broadening it to apply to more MPs.

TAKING PERKS COULD MEAN TROUBLE

Any attempt to strip former MPs of their international travel perk could end in trouble unless there was compensation or a "strong public interest" rationale for doing so, says a public law lecturer.

Dean Knight, a senior lecturer in public law at Victoria University, said while MPs were not technically employees whose perks were in contracts, it would be difficult to remove them without compensation.

He said a case could be made for stripping Taito Phillip Field of the privilege on the grounds of strong public interest, because of his convictions. Speaker Lockwood Smith is expected to do so by the end of the month. "But for other ex-MPs, just because there is a public outcry isn't a strong enough countervailing public interest argument to take it away without compensating for it."

Mr Knight said the MPs had a reasonable expectation that the perks they were offered would not be discontinued.

The president of the Association of Former Members of Parliament, Graham Kelly, said this week that the association would defend any attempt to strip the perk from ex-MPs, describing it as a legal entitlement and part of their conditions of employment.