The National Party leadership briefed its MPs two days in advance of the government’s announcement to overhaul the pay equity system that makes it tougher for women to lodge claims.
While the party caucus was meeting at 10am on Tuesday – an hour before Workplace Relations Minister Brooke van Velden revealed the pay equity changes – Prime Minister Christopher Luxon and Finance Minister Nicola Willis considered it significant enough to give its MPs more warning.
The pay equity reforms would have inevitably raised questions with MPs about how to sell the legislative change, particularly to women voters, and how to answer media questions about the rationale behind the decision-making.
National has been under fire for the changes, that will generate savings to the tune of billions of dollars, and help plug a big hole in the Budget to be released in two weeks’ time on May 22.
Speaking to reporters at Parliament this afternoon, Willis confirmed the Sunday briefing, and said officials had warned ministers of “legal risks” if the government had talked about its intentions to make changes to pay equity laws ahead of the new legislation being passed.
The risks were associated with “the fact there were already claims being progressed, and due to the impact that could have both on bargaining behaviour and the initiation of new claims,” she said.
On becoming Finance Minister in late 2023, Willis said she discovered the full forecast cost of pay equity claims.
“That number blew my mind… it seemed disproportionate to what I thought Parliament had envisaged when it passed the Pay Equity Act in 2020.
“I was advised that one of the factors that had led to an escalation in those costs was a decision by the previous Cabinet that they would indicate that they would fully meet the costs of claims made by non-government employers, where those employers were government-funded.
“And the impact of that was that it affected the bargaining approach of those employers, because essentially, they knew the government was paying the cheque.”
At that time Willis said the government was not putting aside funding contingencies, it had been put in forecasts “but not fully disclosed to the public what those figures were”.
As a result, in April last year a paper went to Cabinet that was intended to address the issue of non-government employers’ pay equity issues being funded by the taxpayer.
She said that was the first time Cabinet considered pay equity changes and that led to a Cabinet strategy committee being set up in December.
“It was at that time Cabinet expressed a preference that we should deal with the underlying issues and amend the law.
“It was an issue we explored over a number of months and ultimately we have made decisions coming out of a strategy meeting in December, and we took those decisions in due course.”
Willis said in March – two months ago – Cabinet signed off on the pay equity reforms announced this week.
She defended the complete secrecy surrounding the government’s tightening of the regime designed to help women get fair pay.
The decision to not produce a regulatory impact statement ahead of the law passing through urgency this week came down to the risk of it making its way into the public domain.
“Once we had made the decision that we would amend the Act, we were aware that there were significant risks that if that information entered the public domain, then that could affect bargaining behaviour and legal behaviour. So we wanted to make sure that we progressed it rapidly,” Willis said.
Asked whether ACT had strong-armed National on going further on pay equity changes, Willis said: “not at all”.
“For a number of months it was becoming clear to me that the way the pay equity scheme had developed had departed from its original, I think, very important intent, which was to correct for gender-based discrimination.
“That is a very important goal. But it had become clear that other market-based factors had entered bargaining, that the incentives on some of the parties in those claims weren’t fully aligned, that the costs had escalated well beyond what people had originally envisaged, and it was clear that those issues would require addressing in some way.”
In April last year, the government changed the framework that “provided guidance about the circumstances in which government would pay for the cost of claims against private sector employers”.
“Our view was that the taxpayer has an obligation where the government employs someone that if they have discriminated against them, then yes, the government should pay for the settlement of that claim, but where it came to providers in the private sector, we believed the issues were more nuanced, and we were also concerned that, of course, the government wasn’t at that bargaining table, so we weren’t in a position to test the claims.
“The advice that we’d had from officials was that they were very concerned with the way the process had evolved,” Willis said.
