Tony Ryall

Wellington, Jan 29 NZPA - Cutting the salaries of public service chief executives would create a domino effect for other public servants, State Services Minister Tony Ryall says.

Labour leader Phil Goff said yesterday 16 public sector chief executives were paid more than Prime Minister John Key's $393,000 a year and their salaries should be capped.

Mr Ryall said this morning the jobs were "very big and complex" and did pay "very large" amounts of money, but national and international pressures and the size of the job made the salaries warranted.

"I think New Zealanders want to make sure that we get good quality people running these organisations," he told Radio New Zealand.

If the salaries were cut there would be a domino effect, Mr Ryall said.

"It goes further and further down the public service, and every day you have Labour MPs...saying that public service pay should be going up.

"I think this is a case of Mr Goff and the Labour Party talking out one side of their mouth to a crowd in Hamilton and the other side of their mouth to the public servants in Wellington."

The Government had capped the amount of money being paid to departmental chief executives, not specific salaries, and made the State Services Commission pay back money set aside for various increases, Mr Ryall said.

The union which represents thousands of public servants, the Public Service Association (PSA) national secretary Brenda Pilott said it did not seem right for the chief executives to be paid more than the prime minister.

"But our chief concern is not the gap between the PM's salary and these chief executives. It's the ever widening pay gap between the chief executives and their staff."

Those chief executives and their staff had "difficult and demanding" jobs, she said.

"Chief executives are well rewarded for the work they do, their staff should also be fairly paid for providing services the public relies on.

"It's simply not fair for chief executives earning hundreds of thousands of dollars a year, who've had pay rises, to tell their staff on far lower salaries that they can't have a pay rise."

Mr Goff said Labour would not cut the salaries of public sectors bosses, but it would cap them.

"If $400,000 or nearly $400,000 isn't enough for you to be the head of a public service department then maybe you've got to examine what the word public service actually means," he said in a major speech in Hamilton.

Among the top earners in the public sector are Foreign Affairs head John Allen on $610,000, and Ministry of Health chief executive Stephen McKernan, Ministry of Social Development head Peter Hughes and the head of Treasury, John Whitehead, who all earn up to $560,000.

The bosses' salaries are on par with Australian counterparts despite having much smaller organisations to manage.

Mr Goff criticised pay increases for state sector chiefs when others had their pay frozen or lost their jobs.

"Since 1997 state sector chief executive salaries have increased by an average of 85 percent. That's over 8 percent a year."

Mr Key also slammed the idea of capping chief executive salaries as "dumb" and hypocritical.

"There is a high degree of hypocrisy coming from Phil Goff, given the last Labour government spent nine years significantly raising chief executive wages," he told NZPA.

He was not bothered 16 public servants earned more than him and disagreed with linking the pay to the prime ministerial salary.