Bill English

National Finance Spokesperson

Wednesday 11 October 2000

The monster fund will eat all other priorities

Cabinet papers show that pre-funding superannuation will put pressure on health, education and other priorities, National Finance spokesperson Bill English said today.

"In Parliament today Dr Cullen did not explain just what other policies would be affected by his super scheme.

"There is no free lunch with taxpayers' money. If we want to find $2 billion each year to put into the fund, then we need to know what we are trading off to find it.

"Dr Cullen's own Cabinet paper warned that 'other spending policies' would face greater risks and could be compromised if the Government commits billions each year to superannuation. (See 'Pre-Funding New Zealand Superannuation: Funding Arrangements,' page 5)

"I hope the Government has investigated thoroughly just where the risks are, because those pressures will start next year when the first contributions are put into the fund.

"Surpluses are essential to achieve the certainty the Government seeks. To pre-fund superannuation to the level Dr Cullen is proposing we need large surpluses, and the records show governments have seldom done that in the past. (See attached chart.)

"Today in Parliament Dr Cullen pointed to the 1999-2000 surplus, which National produced, as evidence that surpluses can be achieved in the future. In fact, recent years show vividly the risks of assuming that surpluses will keep coming. The Asian crisis saw big surplus forecasts crash to a barely-balanced budget in reality.

"The current Government will not be able to meet the contributions it is planning, despite forecasts of good surpluses, and the scheme sets very tough targets for future governments," Mr English said.

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