Under section 19(6) of the Remuneration Authority Act 1977 (the Act), the Remuneration Authority (the Authority) must begin a review of the salaries and allowances of the members of Parliament (MPs) within 3 months from the return of the writ after the 2023 General Election.¹ The writ was returned on 16 November 2023.

The Authority must, under the Act, link its review to the electoral cycle, so that its subsequent determination sets out MPs’ salaries and allowances for the entire term of Parliament in 4 tranches. For the current Parliament, the periods for which MPs’ salaries and allowances must be set are—

Current year

Out-years

Since no full review of MPs’ salaries and allowances had been completed for over 20 years and MPs had received no adjustments to their salaries and allowances since 2017, the Authority took a green-fields approach to the review, which began immediately after the return of the writ.

The Authority completed the review in several distinct stages and, as required under the Act, based it on the information that was available to the Authority at the time of the review.

At the start of the review, the Authority engaged a student from the University of Canterbury’s Master of Applied Data Science programme to evaluate the suitability of using long-term forecasts from 1 July 2024 onwards, such as the Labour Cost Index (LCI), average wage, New Zealand Consumers Price Index (CPI), and other labour market and economic indicators, to inform its decisions on MPs’ salaries and allowances. The  report  of  the evaluation  substantially  agreed  with  the forecasters’

own advice to treat their figures with caution, especially the longer-range forecasts.²

Significant research was undertaken on identifying and comparing the remuneration received by New Zealand MPs with the members of Australia’s House of Representatives, Canada’s House of Commons, Ireland’s Dáil Éireann (Lower House), and the United Kingdom’s House of Commons. Those countries were identified as having parliamentary systems that are most closely comparable to New Zealand, but with some substantial differences. Information about the salaries of Australian States and Territories’ MPs was also used for comparative purposes. Labour market and economic data including forecasts were gathered to inform the review. Comparisons were also made between New Zealand MPs’ remuneration and the remuneration received by senior executives, middle managers, and technical specialists in both the private and public sectors and with remuneration (average wage and wage growth (LCI)) received in the wider economy.

As no “job descriptions” exist for MPs’ roles, the Authority had to glean information on the various positions from a wide range of sources including McGee Parliamentary Practice in New Zealand,³ the New Zealand Parliament website, the Cabinet Manual 2023, and the Standing Orders of the House of Representatives (17 October 2023).

To assist its review, the Authority agreed on the following principles with regard to MPs:

• salaries and allowances are related solely to the office and not to the person:

• roles are full time and it is assumed that MPs have no other income:

• MPs undertake their roles with a sense of public service:

• MPs have family commitments, and the sacrifices MPs and their families make in their enjoyment of leisure and family life would be considered:

• salaries and allowances should assist with the attraction and retention of MPs who represent the diversity of New Zealand society and support a culture of inclusion in an MMP Parliament.

These 5 principles augmented the following criteria that the Authority is required, by the Act, to consider when reviewing and determining MPs’ remuneration:

• fair relativity with the levels of remuneration received elsewhere:

• the need to be fair both to the individuals whose pay is being set and to the taxpayer:

• the need to recruit (attract) and retain competent individuals:

• the requirements of the job:

• a comparison between the conditions of service enjoyed by the persons whose remuneration is being determined and comparable other persons or groups.

The Authority sought to understand whether there were any “prevailing adverse economic conditions, based on evidence from an authoritative source”⁴ that would have led the Authority to determine remuneration at a rate lower than it would have otherwise. From the information it obtained from authoritative sources (the Reserve Bank of New Zealand and the Treasury), the Authority formed the view that there is not a compelling case that meets the test implied in section 18A(2) of the Act; although the Authority decided that prudence was required to be exercised in its decisions on making this determination.

After taking the above into account and considering the submissions received, the Authority determined that the annual salary for an ordinary MP would be $168,600 per annum (rounded) for the period beginning on 15 October 2023 and ending on 30 June 2024.

For the out-years salaries, the Authority’s decisions were informed by forecasted movements in the LCI, which were prudently discounted. Forecasters advised the Authority to treat their figures with caution, a conclusion that was reinforced by the research the Authority had commissioned.

The Authority decided to maintain the ratios between the salary of an ordinary MP and the salaries of the Prime Minister, Ministers, and most other positions with additional responsibilities as paid under previous determinations. The only positions where different decisions were made were those of the Leader of the Opposition, party leaders, deputy leaders, co-leaders, and party whips.

The Leader of the Opposition is an important constitutional office and takes precedence on the Opposition side of the House of Representatives (the House) in major parliamentary debates. However, the Authority received submissions during the past few years that implied that the position of Leader of the Opposition does not represent or lead in any way the other opposition parties in Parliament and does not have any influence over their views. The Authority believes that MMP has caused the nature of this leadership role to change and that its salary relative to other party leaders is overstated. The Authority thinks that the gap should narrow, possibly significantly. However, the extent of that change is not yet clear. As a first step, the Authority decided to increase the Leader of the Opposition salary by a lesser amount than for other party leaders. The Authority will further investigate and address this issue in its review following the next general election and will call for specific submissions on this topic at that time.

This outcome of the review and this determination has introduced a more straightforward and comprehensible structure to recognise the roles of party leaders, deputy leaders, co-leaders, and whips in parties of differing sizes. There are now fewer ranges, with a fixed payment within each range.

This determination provides, for the first time, the salary for a party co-leader. The Authority decided that co-leaders should be paid half the sum of the salaries that apply to a party leader and a deputy leader. Note that there can only be 2 co-leaders paid per party and a party may not pay co-leaders and pay a deputy leader under this determination. This means that the total leadership cost is the same for parties of a similar size irrespective of leadership structure and ensures that remuneration does not drive those structure decisions.

In setting the new remuneration structure, no position was disadvantaged when compared to what it may previously have been paid, and the relativity between each position was generally maintained where appropriate. Irrespective of this objective, section 24 of the Act prevents any person from receiving a lower rate of remuneration than they are already receiving.

The increase in the ordinary MP’s salary of $168,600 for the current year (15 October 2023 to 30 June 2024) is 2.8%. For those other positions where the ratio to an ordinary MP’s salary has been maintained, the increase is also 2.8%.

For the out-years for all positions, an increase of 2.9% was determined for the 1 July 2024 to 30 June 2025 year, an increase of 2.4% was determined for the 1 July 2025 to 30 June 2026 year, and an increase of 2.0% was determined for 1 July 2026 to the polling day for the next general election.

Section 16(2)(c) of the Members of Parliament (Remuneration and Services) Act 2013 (the MOP Act) requires the Authority to include in this determination a statement on how it has assessed the value of personal benefit and potential personal benefit of entitlements to a service covered by a determination made by the Authority under section 17 of the MOP Act, the directions and determinations issued by the Speaker of the House (the Speaker) under sections 23 and 34 of the MOP Act, or a determination made by the Minister Responsible for Ministerial Services (the Minister) under section 27 of the MOP Act.

In assessing the value of the benefits, the Authority took into account—

• an assessment of the proportion of total cost associated with a service that is subject to fringe benefit tax; and

• that the information supplied to the Authority on the services provided to MPs for the 2021/22 and 2022/23 years was impacted by the COVID-19 pandemic, eg through the curtailing of travel; and

• the need to support a family-friendly Parliament; and

• the need to be fair to all MPs including those MPs who do not have partners or a family or make little use of the benefits available; and

• the need to be fair to the taxpayers.

A number of items were assessed as having a zero value because the Authority considered them to be tools of trade or only available if used on Ministerial business or for a parliamentary purpose.

Employment benefits of comparator roles in both public sector and private sector organisations were studied to understand the value of the benefits available to those roles. The Authority noted that the nature of the benefits received by those in comparator roles may differ from those received by MPs. There was also a wide variation within the data for the comparator roles of the value of benefits received. After scrutinising the available benefit data, the Authority concluded that the typical values for comparator roles were around $3,500 to $5,000, with the highest benefit value being about $24,000 and zero being the lowest benefit value.

The Authority recognised that some MPs receive a greater share of the value of the services available to them by making more use of their entitlements and having a greater proportion of their costs reimbursed compared to other MPs. However, section 17A of the Act and section 16 of the MOP Act require the Authority to consider both the personal benefit and potential personal benefit for MPs, Ministers, or their family members irrespective of the proportion of services they use. Therefore, the values of the personal benefits or potential personal benefits have been set conservatively as no compensating adjustment can be made for MPs who are not making use of a service.

Accordingly, the Authority has assessed the value of the overall personal benefits or potential personal benefits at,—

• for members of the Executive but excluding Parliamentary Under-Secretaries, and for the Speaker and Deputy Speaker but excluding Assistant and Temporary Speakers, and for the Leader of Opposition, $15,200 per annum for the current parliamentary term; and

• for all other members of the House, $6,300 per annum for the current parliamentary term.

Since 2002, MPs have been entitled to a tax-free basic expense allowance intended to cover out-of-pocket expenses that arise from that recipient’s official duties and any activity undertaken by the recipient for a parliamentary purpose. The allowance may include the following:

• entertainment of visitors, staff, constituents, and officials:

• fees, including memberships and sponsorships:

• koha, donations, and raffle tickets:

• gifts and prizes:

• flowers (excluding wreaths for public commemorative events):

• passport photos:

• briefcases and luggage:

• meals.

The Authority concluded, in its green-fields review of MPs’ salaries and allowances, that a modest basic expense allowance should continue to be provided to MPs. The purpose of the allowance is to contribute to MPs’ minor out-of-pocket expenses associated with any activity they undertake for a parliamentary purpose and that cannot easily or conveniently be itemised for reimbursement.

Statistics New Zealand’s CPI is the most relevant indicator of movements in the price of goods and services that is publicly available. After considering the annual changes in the CPI, both actual and forecasted, the basic expense allowance has been adjusted (lower than the actual and forecasted movements) in the determination for each of the following periods:

• for the current year (15 October 2023 to 30 June 2024), by 5.5% (Statistics New Zealand reported an annual movement to the CPI of 6.0% for the June 2023 quarter):

• for the period beginning on 1 July 2024 and ending on 30 June 2025, by 3.8% (forecasts predict an annual inflation rate of 4.2% for the 2023/24 year):

• for the period beginning on 1 July 2025 and ending on 30 June 2026, by 2.0% (forecasts predict an annual inflation rate of 2.4% for the 2024/25 year); and

• for the period beginning on 1 July 2026 and ending on polling day for the next general election, by 1.5% (forecasts predict an annual inflation rate of 2.1% for the 2025/26 year).

The previous year actual or forecast rates were used to inform the adjustments to the allowances for the following years.

The Authority consulted the Inland Revenue Department (Inland Revenue) on the basic expense allowance. Inland Revenue has confirmed that the allowance will remain tax free.

The Authority was requested to consider remunerating MPs who may be asked by the Speaker, while presiding over the House, to take the Chair as Temporary Speaker. The 2023 Standing Orders of the House describe the role of Temporary Speaker as performing the duties and exercising the authority of the Speaker while presiding over the House.

Accordingly, the Authority has determined a daily allowance for MPs who perform the role of Temporary Speaker. The daily allowance is paid in addition to the salary the MPs receive under clause 5 of this determination. The daily allowance is specified in Part 2 of Schedule 2 of the determination.

To meet its legislative requirements under section 17A the Act, the Authority consulted the Speaker and the Minister on any element of personal benefit or potential personal benefit. The Authority also consulted the Commissioner of Inland Revenue on the tax consequences before making this determination.

In addition to meeting its legislative requirements, the Authority sought submissions from all MPs and a selected list of individuals and organisations who had a good understanding of Parliament and could provide an opinion on the role and remuneration of MPs. The Authority also received submissions from a small number of interest groups and members of the public. All submissions received were considered by the Authority when making this determination.

As required under the Act, this determination is deemed to be effective from 15 October 2023 and will expire at the end of polling day for the next general election.