John Armstrong: Ardern's freeze on MPs' pay defused a political time-bomb - but praise was unjustified

No politician has ever lost votes by blocking Parliament's 120 MPs from enjoying a hike in their pay or perks.

So it was no surprise that Jacinda Ardern received applause aplenty for this week imposing a freeze which will see current salary levels and other entitlements remain unchanged for the next 12 months.

The praise was unjustified, however.

True, the freeze has defused what was a political time-bomb thrown into her Government’s midst in the form of the Remuneration Authority’s draft recommendation of a 3 per cent rise in MPs’ salaries.

The Prime Minister’s flagging of the almost certain scrapping of the current formula for setting those salaries amounts to a failure of leadership, however.

There isn’t a lot wrong with the current formula. It is based on the change in ordinary time weekly earnings for full-time employees in the public sector as determined by Statistics New Zealand’s Quarterly Employment Survey.

It will be difficult to come up with an alternative which better ensures that movements in MPs salaries adjust in line with overall movements in wages and salary levels in the state sector.

Now Ardern wants to dump that formula merely because it did not deliver the outcome she wanted.

She is embarrassed because a 3 per cent rise in her salary would see her pocket an extra $14,000 a year before tax on top of the $471,049 that she currently earns.

Well, she is Prime Minister. It might be argued that the current size of the prime ministerial pay packet is peanuts in terms of what is paid in the private sector for a comparable job.

It is most definitely a disgrace that some chief executives in the public service are paid more than the Prime Minister. But that is another story.

Ardern’s gripe appears to be that the Remuneration Authority is hampered by it announcing its salary adjustments solely in percentage terms — rather than having the option of increasing pay rates in dollar amounts.

Taking on board the latter option would be a means of avoiding the wage gap between those at the top of the parliamentary pay pyramid and low and middle-income earners expanding even more than has been the case in recent years.

In the big cities and in small towns teachers turned out in force. Source: 1 NEWS

Or so Ardern would argue.

The only consequence, however, would be the easing of Labour Party consciences. Placing limits on the pay rise awarded to the Prime Minister would have absolutely zilch impact on the wages and salaries of those employed outside the parliamentary precinct.

The Prime Minister’s argument may be bogus, but it serves another, more nefarious purpose. Arden has sought to pull the wool over the eyes of the populace by claiming the salary freeze was motivated solely by Labour Party "values" and her Government’s focus on helping low to middle income earners.

She has insisted that there was no connection between Monday’s announcement of the freeze and ongoing and pending wage talks across the state sector, along with the lingering threat of further industrial action by school teachers.

That assertion is frankly laughable. It makes it hard to take what she has to say seriously.

It is absurd to suggest the freeze had nothing to do with pay negotiations.

Cabinet ministers would have been close to being in a state of shock after being made aware some weeks ago of the Remuneration Authority’s draft recommendation.

There would have been a collective sharp intake of breath followed by observations that "draft" must not become fact given the already huge pressure on the Labour component of the Government to deliver significant wage relief to the party’s core supporters.

The thought of being handed close to $9,000 on top of their existing salaries of just under $300,000 while simultaneously telling nurses and teachers that their wage claims were unaffordable is the stuff of nightmares.

You can guarantee that none of those worries ever found their way into the subsequent Cabinet papers which set the freeze in train.

Such "ring-fencing" of the authority’s recommendation enabled the Prime Minister to be emphatic in denying the freeze was related to the pay rounds in the state sector.

Had the authority’s recommendation leaked into the public domain, however, the Government would have been completely on the back foot.

In taking the initiative this week and declaring that the pay rise was utterly unacceptable at the same time as she was making it public, Ardern made a virtue of a necessity.

It was akin to turning water into wine.

In that respect, she has been helped by the relative quiet of the other parties in Parliament. They have wisely taken stock and followed the dictates of the aforementioned basic law of politics — that no politician has ever lost votes by slamming an increase in MPs pay scales. Likewise, no politician has ever gained any votes by defending any rise in such salaries.

One awkward question lingers in the aftermath, however.

Would Ardern and her colleagues been so adamant in rejecting the authority’s draft recommendation had state sector pay negotiations been long completed and the industrial relations landscape in that quarter of the workforce consequently been far more settled?

The Prime Minister says there is a widening gap of inequality in New Zealand. Source: Breakfast