Note: The following explanatory memorandum should be read in conjunction with the explanatory memorandum(s) appended to the:

• Parliamentary Salaries and Allowances Determination (No 2) 2020 Amendment Determination 2021

In 2015, Parliament inserted a provision into the Remuneration Authority Act 1977 (the Act) requiring the Remuneration Authority (the Authority) to use a particular formula for calculating the salaries of members of Parliament (MPs). In the years from 2015 to 2017 the Authority, as required by the amendment, adhered to the formula. During that period, MPs’ salaries rose by a total of 8.54% while the annualised weekly average earnings in the public sector grew by 3.08%.

In 2018, a provision was inserted into the Act that froze MPs’ salaries and allowances for the period 1 July 2018 to 30 June 2019 at the levels determined in the Parliamentary Salaries and Allowances Determination 2017 (the 2017 Determination). That provision was removed in a December 2019 amendment to the Act.

After that change to the Act, in 2020, the Authority made a determination (effective from 1 July 2019) that maintained MPs’ salaries and allowances at the levels of the 2017 Determination. The 2020 decision on the determination was made at the beginning of the COVID-19 pandemic.

As well as the changes to the Act referred to above, the amendments made in December 2019 changed some of the processes that the Remuneration Authority has historically used to set MPs’ salaries and allowances. Under section 19 of the Act, the Authority must now begin a review of the MPs’ salaries and allowances within 3 months from the return of the writ after a general election (which in this case was returned on 20 November 2020). The review must be based on the information that is available to the Authority at the time of the review.

The Authority must also link its review to the electoral cycle, so that its determination sets out MPs’ salaries for the entire term of Parliament in 4 tranches. For the current Parliament, the periods for which MPs’ salaries must be set are as follows:

• the period beginning on the day after polling day (18 October 2020) and ending on 30 June 2021:

• the period beginning on 1 July 2021 and ending 30 June 2022:

• the period beginning on 1 July 2022 and ending 30 June 2023:

• the period beginning on 1 July 2023 and ending on polling day for the next general election.

As required under the Act, the Authority has consulted the Speaker of the House and the Minister Responsible for Ministerial Services and has also consulted all MPs, who were invited to provide the Authority with any comments that they wished to make on their salaries and allowances.

In reviewing the MPs’ salaries and allowances for the next 3 years, the Authority, as required under the Act, took into account—

• fair relativity with comparable positions:

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

• the requirements of the job:

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

• the conditions of service enjoyed by the persons whose remuneration is being determined:

• any prevailing adverse economic conditions based on evidence from an authoritative source.

The information made available to us at the time of the review, from a range of authoritative sources (including the Reserve Bank of New Zealand and the Treasury), suggests that New Zealand’s economic outlook remains highly uncertain due to COVID-19 and its impact on global economic conditions. Modelling and projecting salary movements for the 3 out years (as is now required by the Act) proved to be a significant challenge. Both domestically and internationally, it appears that economic recovery from COVID-19 and its related disruption will be slow and uneven, with the pace of the recovery during the current term of Parliament largely determined by the containment and management of the virus.

Therefore, for the period beginning on the day after polling day (18 October 2020) and ending on 30 June 2021, the Authority has decided to maintain the salaries and allowances of MPs at the levels in the determination that was effective from 1 July 2019 (which is effectively at 2017 levels), as set out in Schedule 1 of this determination.

It should be noted that the Remuneration Authority (COVID-19 Measures) Amendment Act 2020, which was enacted earlier this year, enabled the Authority to temporarily reduce MPs’ salaries by up to 20% for a defined period. The Authority made a temporary reduction determination that commenced on 9 July 2020 and that ends on 6 January 2021 (see the Parliamentary Salaries and Allowances (Temporary Reduction—COVID-19) Determination 2020). That temporary reduction determination will continue to prevail until 6 January 2021 and, when it expires, MPs’ salaries will revert to the salaries shown in this determination (which are the same as in the previous determination effective from 1 July 2019, which set MPs’ salaries at the same level as was set on 1 July 2017).

When considering the out years, as is now required under the legislation, and after taking into account the advice received regarding prospective changes in New Zealand’s economic situation, the Authority could find no compelling evidence that pointed to when the economy might recover to pre-COVID levels, regardless of some recent good economic news. It has therefore decided the following with regard to MPs’ salaries for the out years:

• 1 July 2021 to 30 June 2022—no change:

• 1 July 2022 to 30 June 2023—no change:

• 1 July 2023 to polling day of the next general election—no change.

It should be noted that if there is a marked change in the economy in any of those periods the Authority can consider at that time whether the change meets the statutory criteria for the Authority to amend this determination. If so, the Authority can make a change.

Since 2002, MPs have been entitled to a tax-free allowance intended to cover out-of-pocket expenses incurred in the pursuit of parliamentary business, which may include the following:

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

• memberships, sponsorships, and fees:

• koha:

• donations and raffle tickets:

• gifts and prizes:

• flowers (excluding wreaths for public commemorative events):

• passport photos:

• briefcases and luggage:

• meals.

No change has been made to this allowance for the entire period of this determination.

This determination is effective from 18 October 2020 and expires at the end of polling day for the next general election.

Note: The preceding explanatory memorandum should be read in conjunction with the explanatory memorandum(s) appended to the:

• Parliamentary Salaries and Allowances Determination (No 2) 2020 Amendment Determination 2021