Woodhouse Michael: Remuneration Authority (Members of Parliament Remuneration) Amendment Bill — First Reading Second ReadingText is incorporated into the Bound VolumeWoodhouse Michael: Remuneration Authority (Members of Parliament Remuneration) Amendment Bill — First Reading Second Reading[Sitting date: 17 March 2015. Volume:704;Page:2274. Text is incorporated into the Bound Volume.]Hon MICHAEL WOODHOUSE (Minister for Workplace Relations and Safety): I move That the Remuneration Authority (Members of Parliament Remuneration) Amendment Bill be now read a first time. In accordance with the Remuneration Authority Act the Remuneration Authority recently released the Parliamentary Salaries and Allowances Determination 2015 which provides for an increase in the remuneration received by MPs of 3.56 percent effective from 1 July 2014. The size of this increase is disproportionate to salary movements in the wider public sector and the current rate of inflation. The Government considers that this is not appropriate.Under the current provisions of that Act the Remuneration Authority is required to review and issue determinations of MP salaries and allowances at least once every 3 years considering information from a range of sources including relativity to comparable positions the need to recruit and retain competent persons and the requirements of the job. These criteria have resulted in an increase that the Government believes is unfair to taxpayers and does not reflect the average wage growth of the wider public sector. It is therefore necessary to make amendments to legislation to amend the criteria that the Remuneration Authority must consider when setting salaries for members of Parliament. The decision to amend the authority’s discretion is not taken lightly. However the change is necessary to ensure that MPs’ remuneration movements reflect those in the wider public sector.This bill is an omnibus bill that amends two Acts: the Remuneration Authority Act 1977 and the Members of Parliament (Remuneration and Services) Act 2013. The first change is to set aside the part of the Parliamentary Salaries and Allowances Determination 2015 that relates to salaries. It then sets out a new requirement on the Remuneration Authority to solely consider public sector wage movements when determining the remuneration of MPs.The bill does this by pegging MPs’ remuneration to the quarterly employment survey or QES for the public sector average ordinary-time weekly earnings for fulltime-equivalent employees. The quarterly employment survey is a sample survey carried out every 3 months by Statistics New Zealand. Each quarter it collects information from organisations in the public and private sectors at 18000 different locations. It captures information on hourly earnings weekly earnings weekly paid hours and the number of filled jobs. Information from the quarterly employment survey is used in the production of Statistics New Zealand’s quarterly gross domestic product and other productivity statistics and for labour market and economic analysis. Changes in quarterly employment survey measures are also used in legislation to benchmark figures such as the level of national superannuation and paid parental leave.The quarterly employment survey measures actual wage growth rather than wage inflation. Using this means that MPs’ remuneration will increase in line with the average public sector salary. Given that the quarterly employment survey measures actual wage growth it is susceptible to potential sudden increases or decreases due to fluctuations in employment. As such the bill also requires that the percentage change for each of the reported quarters for any financial year be averaged out to smooth any such spikes or dips. Under this bill the authority will be required on an annual basis to adjust MPs’ remuneration by the quarterly employment survey public sector index using the June rate from the previous year measured against the current year. For the June 2014 year the quarterly employment survey public sector increase was 1.5 percent.The bill will make a minor change to the formula for determining MPs’ remuneration. The authority will be required to take the previous year’s base salary and superannuation and multiply this by the quarterly employment survey index. This figure will be the remuneration for the current year. The authority will be required to adjust remuneration to take account of personal benefits where there is a change to the level of an existing entitlement provided. A recent example of this is in the 2015 determination where the Remuneration Authority reduced the value of the travel entitlement to account for tightened provisions around the use of travel by family members. In this scenario the reduction in personal benefit created as the result of that tightened provision will be shifted to the cash component of the remuneration—that is base salary. It will not be subject to the quarterly employment survey adjustment in the first year in which it is transferred. There are no changes to how the authority the Speaker of the House and the Minister responsible for Ministerial Services determine the value of personal benefits for MPs and their families such as travel. These changes will also not affect any of the persons that the Remuneration Authority determines remuneration for other than MPs.Although the current practice of the authority is to gazette a determination for parliamentary salaries and allowances on an annual basis it is required to do so only every 3 years. The bill requires that the authority must fix MPs’ salaries on an annual basis to ensure salaries stay in line with annual changes in public sector wages.The MPs’ salary determination that was issued by the Remuneration Authority on 26 February 2015 will be revoked apart from the provisions in this determination that relate to allowances which stay in place. The authority gazetted its determination for the 2014-15 financial year based on existing statutory criteria. So that the new criterion applies to salary adjustments from 1 July 2014 the bill revokes and overwrites the effect of the 2015 determination for salaries. The provision relating to allowances will remain in effect. The 2013 determination will come back into force until the authority is able to gazette a new determination for the period of 1 July 2014 to 30 June 2015 based on the amendments Parliament has made to the Act. Any changes in salaries resulting from the new determination will be backdated to 1 July 2014.This bill responds to the disproportionate growth in MPs’ total remuneration by providing a sensible measure that reflects the average growth in public sector wages. I commend this bill to the House.