SUPERANNUATION: THE ACT POSITION
SUPERANNUATION: THE ACT POSITION
Monday 13th Nov 2000 Richard Prebble Speech -- Economy
The ACT Party have, at the coalition’s request, given careful consideration to the superannuation plan presented by the Finance Minister.
ACT MPs accepted the government’s offer of a Treasury briefing on the plan and Dr Cullen’s offer of a personal briefing. ACT has also consulted widely inside and outside the party on this issue.
ACT realises that currently the coalition does not have a firm commitment of votes to introduce the legislation. Labour and the Alliance are a minority. The Greens have withheld support. Mr Peters has indicated that New Zealand First may or may not support the legislation’s introduction. National has criticised the plan and have not given any indication.
So ACT’s nine votes today are crucial and may be the balance for the legislation.
ACT, as the pro-business party, is the coalition’s strongest critic. Some within the Party have not wanted ACT to give the coalition any support. There are valid criticisms of the proposed scheme, but opposing everything the government does is first-past-the post party politics.
ACT has instead approached the question from first principles.
Is there a real problem? Yes there is. As the baby boomers retire the ratio of retirees to taxpayers doubles. It will be very hard to sustain a generous pension using the current tax based super scheme.
Second, is savings-based super a core ACT policy – yes it is.
ACT, from its founding by Sir Roger Douglas, has continually warned of the coming superannuation crisis and urged a comprehensive saving-based superannuation scheme. ACT believes in individual responsibility and believes the present tax burden has made it impossible for most New Zealanders to save for their retirement.
Third - Is a savings-based superannuation scheme more sustainable? Is saving for retirement a solution? Yes it is.
Fourth – have New Zealanders saved enough for a secure retirement? No we have not. 80% of all New Zealanders have little or no savings at all.
Fifth – does the Cullen scheme move towards or away from solving the problem?
ACT has debated this issue. The Cullen scheme is not a permanent answer. As proposed, the scheme only smoothes out the problem for baby boomers like the Finance Minister. A twenty-year old will pay into the fund all their working life only to find the fund will ‘dry-up’ when they retire!
Cullen’s scheme is a government scheme, which means it’s under the control of politicians. Already the Alliance and Greens have proposed political directors to ensure ‘ethical’ investments regardless of return. The scheme will become political.
The fund is huge. 50% of GDP - in today’s dollars, over $50 billion will mean the scheme could own over half the shares in most public companies. It’s socialism by superannuation.
Dr Cullen plans to put only $600 million into the fund in 2002. Treasury figures show this is $1.5 billion short. When he is then swept out of office his scheme will require finance ministers to put in an average $2.8 billion a year into his scheme for the next 20 years.
ACT is also critical of the way the scheme is being presented, as if it were something for nothing! The claim that it will all come from surpluses, that it’s therefore a `free lunch’. It is not. There are only two ways to fund Cullen’s scheme – increase taxes or cut government spending. The money will come from taxes that could otherwise be spent on schools, hospitals, or as ACT would prefer, as it’s the taxpayers’ money, by the people themselves.
These are significant issues. ACT believes that even with these concerns, the plan is better than doing nothing.
Surveys show that over two-thirds of all voters want a savings-based super scheme and more co-operation between political parties. So the ACT Caucus is going to vote for the introduction of the Cullen scheme and for its referral to a Select Committee.
The Finance Minister indicated to our Caucus that the government would look at amendments.
ACT advocates that the scheme become a genuine saving scheme, free from political control.
The way to do this is to make it possible for people to take responsibility for their own retirement by having savings in their own name in private superannuation. In fact, the scheme that MPs already have for themselves.
I would like to make one thing clear. This is not ACT's superannuation policy. ACT is committed to forging a multi-party agreement on super. We are simply pointing out what we believe are the flaws in Dr Cullen's scheme, and detailing amendments that would create a superior super scheme for all New Zealanders.
ACT will move such amendments and if unsuccessful will accept Helen Clark’s promise to make superannuation an election issue. Labour’s present policy does nothing for those under 35, except make them pay twice.
ACT is also not going to sign pledges attempting to bind future Parliaments. Such measures are contrary to the Westminster constitution where one parliament cannot bind another. All we can and must do is to guarantee the position of the present retired and those soon to retire.
We can only give security by saving. ACT will campaign on superannuation and put forward the principles we believe a sound superannuation scheme must contain.
Savings-based in individual’s own name – the ability to give the maximum choices, including the ability to opt out.
Any scheme must not be at the expense of those who have already retired.
Those who already have adequate retirement schemes should not be compelled to save twice.
What ACT does not support is free-loading. Those who could save, choose not to save and then expect generous state super are free loaders.
ACT sees superannuation as more than just a plan for retirement. A majority of adults today own no more than their clothes and personal possessions. They have no stake in their own country.
A savings scheme in their own name will make New Zealanders stakeholders in their own country and transform how people feel about themselves and their nation.
When I visited Chile and spoke to the Socialist Minister in charge of their scheme, I asked, “did he support the savings-based scheme?” He replied, “when it was introduced I fought hard against it, but now I am in favour.” “Why,” I asked, “what changed you?” He thought for a moment and said “the official answer is our savings rate, the country’s better economic performance and the fact we are no longer dependent on foreign capital,” he said. “But then,” he said, “this is the real reason.”
He reached into his desk and pulled out a letter. “This is a letter from my super fund – I got it last month. It says how much money I have saved. I look at it every day and I look at the financial pages to see how my fund is doing. It’s made me an owner” – and this was from a socialist.
Yesterday I got a letter from Colonial – telling me how much is in my MP’s superannuation scheme. The scheme has done well. I want every New Zealander to have one, and to feel that they have a share of this country.
For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at email@example.com.