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NZ politicians’ salaries and perks – put them at risk

  • July 10th, 2010

The Economist report that John Key was sixth in a table showing Leaders' salaries as a multiple of GDP per head (John Key gets 10x our GDP per head) came on top of  widespread comment on the Speaker's triennial review of MPs pay and allowances, released on 1 July.

Most people will recall the comments on the report, not the report itself. Even Kiwiblog focussed on rebutting mistakes in the opinionated Herald editorial.

I'm disappointed with the review recommendations in two areas. One of Doug Kidd and Phil Barrys' concerns leads straight to a radical conclusion but they did not draw it. The other will be damaging if it is taken too far.

The first issue is identified in the review simply:

"We are concerned that the rate of growth in expenditure by the Parliamentary Service departmental and the Office of the Clerk in recent years exceeds by a wide margin the rate of growth in the economy (which has averaged 1.4% p.a. in real terms over the five years to 2009). Our view is that this trend is not sustainable and needs to be checked."

MPs are sheltered from the consequiences of their own dumb decisions that lead to our poor growth. Their personal experience is of constantly improving conditions, and they get elected by promising more to others, and by sticking to the political wisdom that the bearing bad tidings gets no votes, however necessary it might be to speak the truth to the people who would rather hear comforting platitudes.

A solution – MPs should be obliged, just like many company executives, to put a material chunk of their salaries at risk if they do not improve our wealth.

That chunk should go into a deferred receipt scheme. It could be paid out say 3 years in arrears, but adjusted in proportion to New Zealand's over or under-performance in gdp growth compared to the OECD average.  I'd suggest say 40% at risk. Ordinary MPs can afford it. They get well over 4 times the NZ gdp per head. They should have even more of their pensions at risk, tied directly to long term increases of average gdp. If it increases at a faster rate (or declines less) than the OECD average, they should get a bonanza. If it underperforms, they should lose proportionate chunks.

The second issue is the review's enthyusiasm for bulk funding and the reduction of provision of services in kind. I think they have insufficient concern about the behavioural effect of "bulk funding" and monetization of benefits for people with mutliple temptations to free ride on the efforts of others. Many may  simply take the monetary equivalent and use it in ways that benefit them personally, and not provide the services sought by voters.

They may not act differently from the beneficiaries who spend money on cigarettes and coca cola and grog, when the same amount distributed as food stamps could ensure a generation of kids with better nutrition.

I do not defend the general international travel privilege. Nor do I think that any form of international holiday travel should be subsidised. But I believe that there should be more, not less international travel by MPs. In my opinion the people of New Zealand get very material value out of many of the overseas tours that take MPs away together.

Many MPs get an exaggerated idea of not only their own importance, but of the importance and power of New Zealand. For those MPs is sobering to spend time in countries where nothing you do or think makes the slightest impact on the people around you, or their TV news or their newspapers. I've heard Maori MPs, for example,  exclaiming over how immaterial are their issues to the world and to indigenous people facing far more pressing problems.

More importantly, those group trips are now (since MMP and since Parliament ceased to have the 'lads' culture of a gentlemen's drinking club) often the only occasions when MPs from different parties get to know each other without the party label barriers up. When on a trip overseas we are treated as New Zealanders without much concern for the tribal differences. And in turn we come to remember that the things we share as New Zealanders and our common interests can be far more important than the things on which we divide. I believe I was more constructive as an MP after a few trips where I formed warmer personal relationships with MPs I'd never expected to like. In comparison to the gains for the country, the costs are trivial.

Those trips  should continue to include spouses. Unpopular though it may be to say it, in my experience spouses sacrifice a lot. Worst can be the gap that opens up as the MP grows and learns in the challenging job, while the spouse gets left behind intellectually. The shared experience of the people in a tour group as well as the learning from those met overseas may help reduce that dangerous disparity.

it is simply not true that private sector businesses do not allow senior executives to include spouses in travel. Some do expressly encourage it with limits of course. Others allow targetted executives (often those away from home a lot) to "cash in" a business class seat for two economy class seats. That should be encouraged.

Sitting in business class while your voting plebs are behind is not good for the MP's soul anyway.


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