Column: Rod Donald On Green Super Policy
Invest now to Secure our FutureWhy the Greens Support Universal Provision of Super but Not a Fund
By Green Co-Leader Rod Donald
The Green Party has already made public our support for part one of the NZ Superannuation Bill. This guarantees the universal provision of superannuation to everyone aged 65 and over, paid to couples at not less than 65% of the average wage. We stand by this commitment because we believe it is important to give all New Zealanders, especially those who are currently on a pension, a sense of stability and security in relation to their retirement.
However we don’t think that the best way to pay for future superannuation is by building up a large fund and investing it in overseas share and bond markets. The Green Party will therefore vote against part 2 of the Bill, the section that creates a fund, because we believe the current “pay as you go” is sustainable and affordable.
We are not the only ones to think this. Retirement commissioner Colin Blair says that New Zealand has one of the simplest and most efficient tax-funded retirement pensions in the world. As recently as 1997, Alliance leader Jim Anderton said “our present superannuation scheme is a very good one. Not only is it affordable long term, it is by far the best of the available options.”
At best the proposed fund would meet only 14 cents of every superannuation dollar paid, and eventually it would be run down to zero. It is not a silver bullet, general taxation would still have to meet 100 percent of super costs up to 2020 and at least 86 percent of the costs at the fund’s peak.
If you think about the situation facing the Government, it is very similar to the financial decisions facing a family with a mortgage on their house and a couple of teenage children. If you’re lucky enough to have some discretionary income, is it wiser to pay off your mortgage, to educate the kids and to keep the family healthy; or do you give it to an accountant to play the sharemarket?
To scrimp on health and education and maintain a large mortgage in order to build up an investment fund makes no sense. The priority has to be to keep all the family healthy, educated, able to earn a decent income and relatively debt-free – so that they can meet the challenges of the future. Surely the same priorities should apply for our country as a whole.
Last week it was revealed that the Government is borrowing to pay for part of the fund. Over the next four years it’s planning to increase net crown debt by $3.8 billion at the same time as it intends to put $6.1 billion in the super fund. As individuals learned in the 1980’s, borrowing to put money into the sharemarket is very risky. I doubt any financial advisor would tell our family this is a sensible thing to do.
Looking ahead 50 years is like standing in the time when Richard Pearse (or was that the Wright brothers) first flew and trying to imagine the world after World War II. But there are signposts for the road ahead. One is the projected bulge in superannuitants. Another is climate change. Another is the approaching transport crisis. Yet another is the unsustainability of current agricultural practices in many parts of the world.
Locking up budget surpluses in a super fund would not help our economy, or our society, meet any of these challenges – except for super. It would be like tying one hand behind our back. Providing for super is important but so, for example, is preparing for global climate change, which could be just as expensive.
Instead of putting all our eggs, including the borrowed ones, in one superannuation basket, we should be allocating the eggs where they are most useful in the long term. Budget surpluses could be used to regain control of strategic productive assets such as Transrail and Contact Energy, and to invest in new sustainable infrastructure such as solar and wind energy generation, energy conservation, transition to organic farming, public transport, rail and other green policies that reduce government and citizen costs and/or increase revenue.
Budget surpluses could also be used to reduce the net crown debt – currently around $20 billion and costing us a significant amount of interest each year. This is a prudent strategy compared to investing up to half the fund in international stock markets.
Politicians agree on the need to stop kicking the superannuation football, but there is no agreement on how to do this. A true cross-party consensus requires consultation before, not after, a solution is announced. We believe every party which signs up to Part 1 – universal provision at the current age and rate – should be entitled to sit down and discuss how best to achieve that goal.
The Government is now negotiating for Winston Peters’ support to push the fund through with the barest majority. Labour and the Alliance are looking at heading some way down the road towards individualised accounts in return for his support. This is the opposite of the campaign they ran against individual accounts in 1997, and goes against the wishes of the 92 percent of the public who voted against individual accounts in the 1997 referendum.
The Government does not want to move beyond a token gesture towards ethical investment. There will be little effort to ensure the money is invested to achieve sustainable environmental and social outcomes and no effort to invest the money in developing our local economy. In fact most of the fund is likely to be invested off shore, financing businesses which in turn compete with out own capital strapped ventures.
The Greens have not taken the easy route. Ours is a principled decision, not one based on political expediency. The Green solution is about moving away from a model of scarcity and fear to one of opportunity and vision. As the Party that has always looked to the future, we know this decision is about much more than funding superannuation expenditure. It is about deciding what to invest in now to put New Zealand on a secure footing for this century and beyond.