National will pay a steep price for grotesquely bad pay review politics

Sunday, 11 May 2025

Vernon Small is a journalist and former adviser to the Labour government.

OPINION: If the Government loses the 2026 election – and on the latest polling it’s a 50/50 call – at least it will know one of the main reasons why.

This week’s changes to the Pay Equity Act, aimed at seriously slowing progress on the road to pay equity, were more than just an unpopular policy.

The amendments transgressed good process, failed on openness - most significantly with the parties worst-affected - had no regulatory impact analysis so beloved of legislative wonks (and normally an article of faith among ACT and its acolytes), and were grotesquely bad politics.

Did no-one among the coalition’s spin doctors tell ministers what they ought to have known already; how bad it would play and how impossible it would be to sell as a “robust, sustainable and workable” revamp of the law? That few would accept the Government remained committed to advancing pay equity while denying it – or long delaying it – for tens of thousands in a “depopulate the village to save it” strategy?

Never mind that the issue was neither mentioned in the election campaign, nor in the sacrosanct coalition deals, or in the prime minister’s 38-point Q2 action plan released just a month ago. Or that the billions “saved” would come from the future pay pockets of mostly low-paid women, including those in the 33 existing claims that have been torpedoed. Including those that became national heroes during the Covid pandemic.

Even some of the Government’s own advisors were shaking their head in disbelief this week.

Just how much those low-paid workers will contribute to improving the Government’s deficit track is a little unclear.

The total unallocated contingency for public-sector wages and pay equity settlements in the 2024 Budget amounted to $17 billion over four years.

Clearly the full $17b was not all for pay equity deals, as some have implied. What portion of it should be tagged to pay equity settlements has not been made public yet, but those in the know suggest it will be much more than just a couple of billion bucks. $5b anyone?

If you had to fabricate a self-immolating political act it is hard to go past one that targets thousands of low-paid women, was done without input from those affected, looked motivated by the need to curb future deficits, contained elements of retrospectivity, would reinforce Opposition claims of an austerity Budget, and was passed at full-tilt through the House. You might even say at breakneck speed, because one of the downsides of “all stages urgency” is that it doesn’t give the Government the option of backing away when it is copping a public thrashing.

To make the optics worse, the undue haste reinforced the sense that it was being done super-quickly to “save” the Budget so Treasury could include the cuts in its fiscal forecasts. But that is not so. Once Cabinet had made its decision, Treasury would have included the impact in its Budget numbers whether or not the law change had gone through the House.

Then there was the Government’s garbled defence.

Almost simultaneously ministers denied the Budget and the billions “saved” were the motivating factors, while ACT leader David Seymour was gleefully praising his deputy, Workplace Relations and Safety Minister Brooke van Velden, for “saving the Budget”.

Then Finance Minister Nicola Willis disclosed she had been “shocked” back in December 2022 when told the projected cost to the Government. That suggests winding back the programme had long been in her sights and was not just a product from ACT’s conveyor belt of cost-cutting and anti-worker laws. Willis identified it, van Velden is implementing it. Deputy Prime Minister Winston Peters even tried to argue a reversion to pre-2022 law was needed because no pay equity deals had been struck after that – when in fact 10 had been.

But wait, there’s more.

Most of the focus of the political fallout has been on the response of women, who already skew their votes towards the Left.

ACT attracts few women and low-paid voters so it won’t be much concerned, so the narrative goes.

The major damage would be to National’s hopes of recovering the female vote that has drifted away since the Key years.

But it is not solely about those lower-paid women voters who are immediately affected.

On that score, it’s worth remembering the impact of Labour’s interest-free student loan policy, which was influential in swinging the close 2005 election away from National.

It was so potent because it not only appealed to affected students but also to their wider families. Parents and grandparents saw their kids leaving the country to avoid their debt burden or earn higher wages to pay it back. Student debt was also blamed for delays in their kids forming long-term relationships, having (grand)children and buying a home.

The danger to this government is that in a mirror-image of the student loan policy the impact of the mean-seeming pay equity law change will shrink their support – especially National’s – as it reverberates well beyond the women immediately affected. They are also partners, sisters, daughters and friends – and their income affects whole households.

At the very least it has given the Left a giant stick to beat them with, another justification for the Opposition to label them austere – which Willis clearly loathes – and has handed a cross-industry campaigning and recruiting tool to the unions.

A very bad week’s pay for a very bad week’s work by the Beehive.

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