Former Task Force Member Pans NZ Super Bill
A former member of the 1992 Todd Task Force has dismissed the New Zealand Superannuation Bill as an attempted “political fix”. Michael Littlewood presented his submission to Parliament’s Finance and Expenditure Select Committee this morning at a hearing in Auckland.
He says that the Bill is more likely to contribute to future uncertainty on the sustainability of New Zealand Superannuation rather than resolve the issues in the way that the government has suggested.
According to Michael Littlewood, the Government’s proposals are nothing more than political, economic and fiscal window-dressing. They fail the “stability test” because their unintended consequence is likely to be greater instability in public policy over coming decades rather than less.
He describes the Bill as an “attempted political fix to a complex, inter-connected group of economic, fiscal and social issues.” He says that because it’s a fix with no clear philosophical underpinning, it can’t and won’t last.
Before New Zealand discusses how to meet the future cost of New Zealand Superannuation, Mr Littlewood says that we must first settle the benefit design - who should get how much from when and on what terms.
His submission states that “none of the principal elements that define the benefit liability for future generations of taxpayers has been the subject of proper analysis either in the past or in the new Bill. The Bill papers over this policy chasm simply by shifting the benefit provisions from one Act to another. It attempts to lock those provisions in politically without even the pretence of a debate on any key issue.”
Michael Littlewood says that New Zealand must first decide what the “best” design for New Zealand Superannuation should be after, say, 2020. That will leave benefit provisions for current superannuitants unchanged. Only then can we turn to cost considerations and how we might meet the expected increase that will follow the growth in numbers of pensioners. Mr Littlewood’s submission argues that no other process will produce a sustainable answer, around which New Zealand can build a lasting consensus.
Mr Littlewood also says that, regardless of the possible intervention of the NZ Superannuation Fund, the net cost of the present New Zealand Superannuation is expected to reach about 10% of GDP by the end of the century and won’t reduce after the baby boomers have all died. He wants New Zealanders to discuss now whether it’s a good idea to have one tenth of the nation’s output being taken from the working population through taxes and handed over to everyone who’s over age 65. He wants to see if there are there any alternatives that we should be discussing now.
After agreeing on the design of New Zealand Superannuation and accepting the impact its cost will have on future taxes, Mr Littlewood’s submission says that practically the only thing that then matters is economic growth. He says that we know we will have fewer workers supporting more retired so we have to make workers more productive. Growing the economy and making it more productive will create a bigger pie to share out, he says. Nothing in the Bill will contribute to New Zealand’s economic growth.
Mr Littlewood reserves his harshest criticism for the government’s proposals on the New Zealand Superannuation Fund. He describes the Fund as a “facile, political fix”. He says that, at best, the Fund will be a relatively minor contribution to a partial inter-generational smoothing of the government’s cash flows. At worst, it will constrain growth, increase risk, reduce saving and provide governments and New Zealanders with an enormous distraction to the real issues that we should all be debating. It will also limit future governments’ ability to react to changing economic conditions.
He says that the proposed Fund is a cosmetic financial edifice that may win votes from the fund managers who will run the money and might make some New Zealanders feel better but it won’t help New Zealand with the things that really matter. By the end of the century, the net cost of New Zealand Superannuation (on current settings) will probably be more than 10% of GDP but there will be no more money in the proposed Fund. Mr Littlewood questions why the government was so concerned about a 9% net cost in 2050 but seemingly isn’t worried about an even higher number by 2100.
Mr Littlewood concludes by saying “it’s difficult to imagine a less relevant set of ‘answers’ to the issues that New Zealanders face now and into future generations than the New Zealand Superannuation Bill.” He says that the Bill “continues a sorry 25 year history of political opportunism, sudden unresearched, undebated policy changes, and a seemingly deliberate lack of information or informed discussion.”
Mr Littlewood’s submission suggests that the New Zealand Superannuation Bill should be defeated in all its respects. He says “the government should instead be asked to lead a proper discussion on the future shape of New Zealand Superannuation and that it should gather information that might help illuminate that discussion.” He says that, if the government can’t lead the debate, it should find someone who will.
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