Government Superannuation Fund Amendment Bill (No 2)

Dr Lockwood Smith had a very good point last night when talking about how only 800 adults and 19 children were affected by this bill. But even though it affects such a small number of people, it is still very important legislation, which is why New Zealand First will support the bill in its entirety. We support the aim of the bill, which is to repeal the provisions of the Government Superannuation Fund Act that suspend the payment of benefits to widows or widowers in the event of remarriage, and provide for the restoration of suspended benefits under those provisions. We also want to put on the record that we support the replacement of the prescribed fixed allowance paid to children of deceased members under the old scheme with the inflation-adjusted allowance provided for in the new scheme.

Once again, we feel this is a very important bill. It does not really matter how many people it affects; it is still very important legislation, and I am very proud, on behalf of my New Zealand First colleagues, to support the bill.

We are privileged now to have the Minister of Finance, who has deigned to return to the Chamber to sit in the chair on his bill. Maybe we might now get some answers, now that the muzzled John Tamihere is no longer in the chair.

Part 2 spells out the details of this bill, and there are a couple of issues I would like to ask Dr Cullen about. He will note that during the work of the select committee, clause 4(6)(b) was struck out. The commentary states that the committee struck it out to avoid confusion. I would like the Minister to look at that and satisfy himself that it was the right thing to do. Subclause 6(a) spells out that a person is entitled to an annuity under the provision of the principal Act, but as I read clause 4(6)(b), the amount of that annuity should be as if the person had been in receipt of all the adjustments to the annuity over time. In other words, if those adjustments are not taken into consideration, is the Minister satisfied that the legislative provision for the amount of the annuity is secure? When the bill was originally drafted, it is pretty clear that subclause 6(b) was put in there to make sure that the amount of the annuity that would be paid was clarified—not just that a provision was being made to pay an annuity, but that the amount was to be at a level that included all the adjustments made since the new schemes came into being in 1985. I would be interested in the Minister taking a call to advise us whether he is satisfied that clause 4(6)(a) on its own covers that aspect. I think it is quite important. We do not want to be passing legislation that provides for an annuity but does not actually tell the recipients how much they are entitled to.

During the earlier debate, Opposition members asked a perfectly valid question about the cost of this legislation. It is important because payments under the Government Superannuation Fund are defined benefits, so regardless of what happens to the fund, the benefit will be paid out. It is an important protection to those who receive annuities from such a scheme. Now with the scheme having lost so much money in the last 14 months—what is it, $380 million?—there is an issue about whether taxpayer funds will have to be used to enable the scheme to meet all its commitments. It is a defined-benefit scheme, and commitments have to be met. If they cannot be met from the scheme directly, as I understand the law, they must be made up by the Crown.

Those are the two things I would appreciate the Minister answering in respect of Part 2. The first is whether he is totally satisfied that the omission of clause 4(6)(b) does not leave any loose ends about the amount of an annuity a remarried spouse, or any children, might be entitled to under this bill. The second thing is whether, given the fact that the Government Superannuation Fund has lost a lot of money and is a defined-benefit scheme, there are any fiscal consequences for the Crown from this legislation, as we look ahead.

Those are perfectly reasonable questions to be asking, and I hope the Minister of Finance is in a better position to answer them than the Minister of Youth Affairs, who had been instructed that he was not allowed to make comments on areas outside his own portfolio. I guess he was too muzzled to answer our questions, and somewhat punished by being put in the chair on a bill that was not his. I am sure that if those questions could be answered, there would be a fair bit of satisfaction in the Chamber that Part 2 is in reasonable shape and therefore worthy of the support of the Committee.

I think the member has raised a couple of quite reasonable questions, and I apologise for not having been in the chair. I have been to the dentist, so I apologise if I am slightly incomprehensible; the effect of the injection I had is still wearing off.

I am perfectly satisfied about the consequence of the removal of paragraph (b) in subsection (6) of clause 4. That means that the full amounts will be paid. Certainly, the Government Administration Committee was told that there could be a conflict of interpretation between paragraph (b) and paragraph (c), but, clearly, the full amounts will be paid, backdated to 1 July 2002.

The fiscal issue is quite an interesting point, but it is not affected by the short-term performance of the fund. Indeed, an appropriation had to be made for that particular provision, in any case—obviously in the 2002 Budget—because it comes into force on 1 July. The technical issue surrounding it was whether we had to accrue the full long-term net present value, if one likes, of the change in benefit. That would have been counted—I think it was $25 million—in one lump, which would have been quite difficult to do in any one year. In the end, it was determined that under the accounting rules it could be done on an annual basis—I think between $2 million and $2.5 million. But it is fully an appropriation, because it would not under any circumstances affect the amount to be transferred from the fund, so the additional amount has to be borne by the Crown account.

I rise to ask another question about Part 2. I do so aware that the Government Administration Committee may have examined this matter, and that there may be members present in the Chamber who could easily answer the question. However, the Committee stage is the right time to find out about it.

There is a statement that the purpose of the bill is to restore fairness and equity. I am never quite sure, in this context, whether those words mean anything other than the same thing, or, indeed, whether they mean anything at all. They seem to be thrown in when people want to say “this is a good thing”, and it is not clear at all that they had a particular unfairness in mind. But in a bill that is achieving fairness and equity, I am puzzled by the fact that the adjustments are backdated only to 1 July 2002. Surely if it is unfair now, it was unfair before that date. If it was unfair sufficient to justify what, from the perspective of the recipients, must be a windfall—because they will now have an entitlement that they never had before—then why do we limit the redress of unfairness to 1 July 2002?

That is particularly interesting, because one imagines that the Government Superannuation Fund—at least when it was originally established—had some sort of actuarial foundation. There was some kind of relationship between the trade-off members made in their primary salaries and what they saw as the benefit of their pensions. At the time when members were paying into the fund, it was seen as fair that one provided for a spouse, but that spouses who remarried would be provided for by the new partner. Therefore, there was no perceived unfairness at the time. What we are doing now is revisiting history to apply our current ideas of what is fair and unfair across financial arrangements that were made in quite different circumstances.

I am quite prepared to accept that the conscience of the Government sees it as important to change the rules now and apply a new sense of fairness, but why is there no back-payment? What is the justification for choosing 1 July 2002 as a cut-off date and not 1 July 2001, or 1 December, or any other date? If this were not just a matter of politics, if there were some reason that it is fair from 1 July 2002 but not before, I would have expected the select committee to mention the principle on which it made that assumption in its report. Instead, there just seems to be assertion, as though it were absolutely self-evident.

Not having sat on the select committee or been present in the earlier part of the debate, I imagine that that is the sort of thing the Minister in charge of the bill should be able to address very easily in the Committee stage. He should be able to explain exactly what that principle is, how those members’ sense of fairness is not outraged by their loss before the start date, and how they feel assuaged now—to the point where not only is inequity being addressed but also unfairness, whatever the difference between those two is. Perhaps the chairman of the select committee that advised that this bill achieved fairness and equity could help us by explaining what the committee meant. Certainly there are members of the select committee present, including its deputy chairperson. I am sure she would be quite happy to explain, in terms of removing discrimination, just what was significant about the date of 1 July 2002.

Of course, when the word “discrimination” is thrown in, we are all supposed to genuflect and suspend reason, because discrimination of all kinds is inherently wrong—even, according to this Government, discrimination against bad people. We are not to discriminate against criminals.

I move, That the question be now put.