The decision to restrict equity claims in the public and funded sectors could cut as much as $3.8 billion from this year’s Budget.
In the process the decision might also bring forward the Government returning its books to surplus. (The Finance Ministert’s office has subsequently advised POLITIK that the equity claims make up only part of the $3.8 billion; other items are in there too. Neverthless the impact will be substantial.)
Given that the Finance Minister has already said she will cut the annual operating allowance by $1.1 billion, the move on Tuesday could be a Budget lifesaver.
But even so, it will come at a potential political loss.
National generally polls lower among women than Labour, but this year the Roy Morgan polls show a slight increase (one per cent) in National’s female support.
That must now be at risk.
The spinoff for National is that the decision to scrap the pay equity claims goes a long way to bringing New Zealand back into surplus, possibly as early as next year’s Budget.
The pay equity claims are provided for in the Government’s fiscal forecasts as “unallocated operating contingencies”.
The 2024 Budget Economic and Fiscal Update costed them for 2025 -26 at $3.796 billion.
The Budget deficit (using the traditional measure) is forecast to be $7.9 billion for the coming Budget and $1.6 billion for the 26-27 year.
The decision to scrap all 33 existing public sector pay equity claims involves upwards of 150,000 workers across education, health, funded, tertiary, local government and public service sectors.
The biggest affected group is 75,000 teachers.
The PSA said yesterday that the 2017 legislation providing for pay equity settlements had a five-year time limit, which expired in June 2022.
“Since then, as a result of successive governments’ refusal to fund a new pay equity settlement, about 65,000 mainly female care and support workers are losing $148.50 a week they are entitled to,” said PSA Assistant Secretary Melissa Woolley.
A clue to the size of the impact the decision will have come in a comment from ACT Leader, and Associate Finance Minister, David Seymour who said the move would save the Budget.
Labour’s Finance spokesperson Barbara Edmonds took that comment up with Finance Minister Nicola Willis during Question Time in Parliament yesterday.
Edmonds asked whether she agreed with Seymour’s comment and, if so, what the savings to the Government might be.
Willis’s reply indicated some frustration with Seymour.
“I understand from my colleague Mr Seymour that he was speaking as ACT leader when he made that statement, not associate finance Minister,” she said.”
“The words the ACT leader chose are not what I would choose.
“I agree that changes being made to pay equity legislation will reduce the Crown’s expected future costs from pay equity settlements.
“There is some important context here and, as has been the practice with successive Ministers of Finance, it is my judgment that it is in accordance with the public interest to provide detailed information about this in the full context of the Budget.
“However, to help the member, I can confirm that there is a reduction in projected future costs to the Crown of several billion dollars.”
The Government has surprised the Opposition by pushing the legislation to provide for the new tougher pay equity criteria to be pushed through Parliament under urgency.
Willis said the Government didn’t need to do that.
“We are passing this legislation under urgency in order to provide absolute clarity and for claims to be once again submitted,” she said.
“It is not the case that this is required for the Budget, because the decisions made by Cabinet were enough to put the financial implications into the Budget.
“The legislation did not need to be passed for that to happen.”
The legislation does not eliminate the ability for a group of workers to bring a pay equity claim, but it does make it much more difficult.
The Minister in Charge of the legislation, Workplace Relations Minister Brooke van Velden, told Parliament that the problem was all about “comparators”; what female pay was compared against.
She said the old Act provided the flexibility to choose from a wide range of comparators, which had led to comparators being chosen even where the comparator’s work and skills were very different to the claimant’s.
“Health New Zealand administration and clerical staff, as an example, have been compared to mechanical engineers,” she said.
Mechanical engineers earn on average $95,000 to $115,000 a year; Health administration staff earn $60,000-$65,000 per year.
“Health New Zealand librarians have been compared to transport engineers, and Oranga Tamariki’s social workers have been compared to air traffic controllers.”
She said the Government was committed to maintaining a process to raise and resolve pay equity claims, but the system needed to be robust, workable, and sustainable.
“Whether it is a public or a private sector employer, implementing a pay equity settlement means employers will need to determine how to factor in additional costs,” she said.
“Parties, therefore, need to be able to have the confidence that the process to assess a pay equity claim is robust.”
Labour, probably not surprisingly, are calling the Government’s move a “war on women”.
“I don’t think anyone should be mistaken, this is a war on women,” said Labour Deputy Leader Carmel Sepuloni.”
Sepuloni argued that the move was designed to make up for National’s 2024 tax cuts, which came to more or less the same amount as the restricting of pay equity is expected to achieve.
The tax cuts are forecast to cost $14.5 billion over five years, or $2.9 billion a year, in the same ballpark as the savings the pay equity move will make.
“They (the Government) are fundamentally doing this because they cannot afford their Budget,” said Sepuloni.
“They promised tax cuts that they were told were unaffordable; they told New Zealanders before the last election that they would be better off.
“Now they can’t afford them, and who do they expect to pay the bill?
“It’s going to be future women; women who will no longer have their pay equity claims addressed. In fact, they won’t even be able to take those claims up.”
Those are the political battle lines. National, with its fiscal restraint, versus Labour, backing women.
If you were a betting person, you would probably back Labour in this fight.
