KiwiSaver Budget Measures Bill

Thank you for the opportunity to speak to clause 5. Labour has moved a number of amendments that I think are well worth considering and would actually be worth having some debate on. The first is in the name of Kris Faafoi and it refers to the ability for the kick-start payment of $1,000 to continue to be accessed by babies, essentially. This is designed to ensure that those with newborns are encouraged to take up this scheme so that a savings fund can be established for the child as they grow up, with the aspiration that out of it they may be able to afford their first house or they may in some way be able to supplement themselves in retirement. However they do it, it kicks off a savings habit, and that, of course, is what the $1,000 was intended to do.

So that amendment in the name of Kris Faafoi, a very good amendment, would allow children up to the age of 6 months to be enrolled in the scheme and still be able to access that $1,000 kick-start payment. The second amendment that has been moved is in the name of Jacinda Ardern. It proposes that people who are starting a new job should be allowed to access that $1,000 kick-start payment.

These are all, as you will appreciate, variations on parts of what is being cut. They are preserving different things according to the principal aim of the Act, which is to encourage a savings habit. This amendment in the name of Jacinda Ardern makes it possible for people, when they start a new job, to receive the kick-start payment so they are off to a flying start in their savings regime. It will encourage them not to opt out, because they will see the opportunity there to continue and grow their savings at the time they are thinking about those things—at the time they start a new job.

The third amendment that is proposed is in the name of Annette King. It provides an option for people who have been in the same job for the whole time since the KiwiSaver scheme started—since 2006, perhaps, or earlier—and who may well think to themselves, having watched what has happened during the Budget, that this kick-start thing is something that they do not want to pass by. They have been in the same job for a long time and if the Government takes away the right to get that kick-start $1,000 payment for people who are starting a new job, this amendment enables them to say: “Well, actually, now I am going to grab that opportunity. I am going to grab that opportunity, because my retirement savings are important to me.”

These are all measures that are designed in some way to ensure that people can access that $,1,000, so that the half a million people who we are told will miss out in the next 4 years are limited—so there will not be half a million people who will miss out; it will be fewer. These are sensible amendments from Labour and I think they are worthy of consideration, if not lengthy debate. They are certainly worthy of consideration by this Committee, and I think that members opposite should think about voting in support of some of these if they really believe in their heart of hearts that they want to increase savings in this country.

I just wanted to follow on from David Clark’s contribution. The Green Party is also moving an amendment, Supplementary Order Paper 81, to clause 5 of the KiwiSaver Budget Measures Bill, which reads: “Replace clause 5 (page 2, lines 22 and 23) with: 5 Section 226 amended (Crown contribution: kick-start contributions)—In section 226(1), replace ‘is a member, or must become a member as provided by section 15(1)(b) or 36(1)(b),’ with ‘is a member, or must become a member as provided by section 15(1)(b) or 36(1)(b), and holds a community services card issued pursuant to the Health Entitlement Cards Regulations 1993,’.” The intention here is to retain the $1,000 kick-start for people who hold a community services card.

If you look at the original intention of the primary Act, it includes the language that the purpose of the original Act is to support “asset accumulation by individuals who are not in a position to enjoy standards of living and retirement similar to those in pre-retirement.” In other words, what we are trying to do is to say that if the Government is committed to reducing the cost of the overall KiwiSaver programme by cutting the $1,000 kick-start contribution, then, at the very least, the amendment should not undermine the original purpose of the Act, which is to support asset accumulation by individuals who are not in a position to enjoy those standards of living, so the amendment to retain the $1,000 kick-start for people who hold the community services card would enable the original purpose of the Act to continue, to still be fulfilled.

We chose the community services cards as the proxy for low income. We realise that there are others—there may be others that have more specificity to them—but part of this is to make it easy to administrate. So, when someone is choosing to open a KiwiSaver, if they are able to present their bank or KiwiSaver provider with a community services card, then that is just very easy to administer as opposed to having to prove their income levels at the date at which they applied for the card, and so on. We do not believe that this would add significant cost to the Crown, because, first, so many people are already in KiwiSaver. There are about 600,000 community services cardholders who are not already superannuitants. Many of those people will already be in KiwiSaver. Of the ones who are not in KiwiSaver, some of them simply will not open an account because they do not believe that they have got the income to do so. But for those people who do, then the incentive would remain in place. As we know, the incentive scheme has worked extremely well, so it would just ensure that those people retain some of that support.

My colleague Jan Logie earlier referred to an Inland Revenue Department report, which pointed out that 92 percent of the public have recognised the $1,000 kick-start incentive—that they were aware of it and that was a good reason for them to sign up. There are real substantial issues here to do with embedding inequality, because if you are essentially saying to people that KiwiSaver is really, honestly, a preserve of the middle and upper classes, and for people who are on lower incomes it does not really matter and we do not really care about getting them into the programme, then, in fact, not only does that undermine the original intention of the whole KiwiSaver programme to start with, it also further embeds and deepens inequality in this country. When people are in different starting positions and then some of them have got a very attractive KiwiSaver scheme and the rest do not, then by the time they get to retirement age those who are on low incomes will be absolutely destitute whereas the wealth of the middle and upper income people will have grown over the course of their life. So, we think that this Supplementary Order Paper to retain the $1,000 kick-start for community services cardholders is a way—not the only way; but it is a way—of trying to prevent that deepening inequality from happening.

I want to make just a brief contribution and to answer some of the questions the member James Shaw has raised. First of all, there is a certain irony about debating a bill about savings, when the very purpose of the KiwiSaver Budget Measures Bill is to help get the Government’s books back into the black. And all I hear, consistent with every one of the 7 years we have been the Government, is criticism from the Greens and from Labour as to why we are not spending. I am yet to hear a single member opposite give an idea as to how the Government might save money and get the country into the black. Members on the Government benches firmly support encouraging people to save. The Budget for next year provides for $643 million of Government support for saving. But there is a very important difference. Do we subsidise people opening accounts? Or do we subsidise people to save? There is a difference. What we are saying is that providing Government support for saving is something we support. Just opening a bank account actually does not get us far.

Now can I specifically respond to the question from James Shaw. James Shaw asked a very pertinent question. He claimed that the number of people in KiwiSaver will decline over the next year. So I checked with the officials. There are currently 2.4 million people in KiwiSaver. Can I make another interesting point. When KiwiSaver was introduced in 2006 Dr Cullen said that “In the year 2015 we project there will be 700,000 people in KiwiSaver.” In other words, our Government has been successful in better embedding a savings culture, with three times as many people in KiwiSaver, than what even Dr Cullen projected. But here is the rub, and here is the answer for Mr James Shaw. Currently, there are 2.4 million people in KiwiSaver. How many are projected to be in KiwiSaver in 1 year’s time? One hundred thousand people more. One hundred thousand people more, Mr Shaw, will be in KiwiSaver in 1 year’s time, because the Government is providing ongoing subsidies amounting to $521 every year for a person in KiwiSaver.

I want to make one further point because I would love to get an answer from members on the Opposition benches. I use this quote—it is a word for word quote—“Is it right that a person over 65 on a full-time income should get this income supplement? There is a fairness question there. I cannot commit to keeping New Zealand superannuation universal.” That is word for word by Andrew Little. Does David Parker agree with that? Does Annette King agree with that?

💬 Hon Annette King: I raise a point of order, Mr Chairperson. It was my understanding that in the Committee stage of a debate we ask the questions and he answers them.

The CHAIRPERSON (Hon Chester Borrows): Not a point of order.

The point of order by Annette King speaks volumes about the embarrassment on the faces of every one of those Labour members. Let me ask the question again. Do they agree with the statement from Mr Andrew Little: “I cannot commit to keeping New Zealand superannuation universal.”? Does Annette King agree with it? Does David Clark agree with it? Does the deputy leader agree with it? Their silence is stunning. The silence is stunning. Can a single Labour member put their hand up if they agree with Andrew Little? Can a single Labour member put their hand up if they agree with Andrew Little? Well, can I come to my members. Is there a single member on National’s side who agrees and supports John Key’s statement? Could they put their hand up? Yes, indeed. You see, that is the difference. We are united. We know what we stand for. What we do not have is a single member of the Labour Party who will support the statement on superannuation from its own leader.

What an interesting contribution from Nick Smith. It is timely that the Minister mentioned who on that side of the Chamber agrees with John Key. I wonder whether members on that side of the Chamber would agree with John Key when he said the following: “The second issue that I raise is that if Michael Cullen thinks that 25 percent of New Zealanders will have a serious KiwiSaver account in 5 years’ time, he is deluded,” That was in 2006—in 2006. So hands up how many members on the National side of the Chamber agree with John Key. Come on. There are no hands up. They do not agree with John Key one bit.

I have got another option for them. I have got another option. Members on that side of the Chamber either think that Michael Cullen was deluded that there would be 25 percent in KiwiSaver or agree with John Key when he said that Michael Cullen was dreaming about 25 percent. They are the two options. No one is putting their hand up. On that side of the Chamber the guilt and the shame is that by the time the KiwiSaver Act passed in 2006, there was one party left in this House opposing KiwiSaver—one party. Can you guess which one it was? Do you think it was the ACT Party? Was it the ACT Party?

💬 Hon Members: No.

No. Was it the Māori Party?

💬 Hon Members: No.

Was it New Zealand First?

💬 Hon Members: No.

Was it the Greens?

💬 Hon Members: No.

It was National. The only party left that was opposing KiwiSaver in 2006 was the National Party.

That is what this is all about—that is what this is all about. The National Party has never liked this scheme, which allows ordinary hard-working New Zealanders to get some extra dignity in retirement. It wanted to keep that only for its mates, who could already afford it, not a scheme that actually gives all hard-working New Zealanders the chance for that little bit extra in retirement. National asks: why not take away the incentive? Why should we not take away the incentive? I say: because the very people for whom that will make the biggest difference are those low-income New Zealanders, those young New Zealanders who find it hard to begin saving.

We can come back to John Key, because he had an awful lot to say about the KiwiSaver Act 2006. I will also ask Government members whether they agree with the following statement John Key made about Michael Cullen in 2006 and the KiwiSaver Act: “If the Minister of Finance had not been so lazy, he could have gone and had a look at what President Bush did.” That is always a good idea, is it not? Go and have a look at what President Bush did. That went well! There are no hands up on the National Party side of the House. They do not support John Key on that one, either.

Here is another one. Here is another from John Key. He said: “Michael Cullen knows full well that when there is mortgage diversion”—

💬 Hon Dr Nick Smith: What year?

2006. Keep up, Dr Smith. 2006. I am sorry Dr Smith does not remember that, because at that exact moment, John Key was trying to take over the leadership of the National Party, and Dr Smith was doing Bill English’s numbers. That is why he does not remember. He was too busy doing Bill English’s numbers. Here is what John Key said: “Michael Cullen knows full well that when there is mortgage diversion,”—

💬 Hon Dr Nick Smith: What year?

—2006. Keep up, Dr Smith.

💬 Hon Dr Nick Smith: Oh, you can’t agree with what your leaders did yesterday.

I am sorry that Dr Smith will not remember that because at that exact moment John Key was trying to take over the leadership of the National Party and he was doing Bill English’s numbers. That is why he does not remember. He was too busy doing Bill English’s numbers. So here is what John Key said: “Michael Cullen knows full well that when there is mortgage diversion, a savings account is turned into a chequing account.” Rubbish! National members are not here today saying “Let’s get rid of that.” They are not here today saying “Let’s not have people borrow for their first home.” What they are doing is what they think they can get away with, which is undermining the incentives to be in the scheme.

The reason we are here under urgency, the reason the National Government put this bill in as retrospective legislation, is that this incentive works.

That is why, because it knows if it waited and the bill went through the normal process and there was a proper select committee process, thousands of New Zealanders would sign up.

💬 Chris Bishop: Past tense—it worked.

And just how bad would that be, Chris Bishop, if thousands of New Zealanders got to enjoy being part of a savings culture? He would rather cut them off at the knees. The National Party has always hated KiwiSaver, and this is just another example.

Order! Just a moment—I will take a call in a moment. I just want to make the point that the last two speakers, Nick Smith and Grant Robertson, strayed a heck of a long way around the park and have given each other a slap. It was one each way and now we are coming back to a more confined debate, giving leeway for the fact that there is no select committee process and taking into account all of the things that I am sure there would be numerous points of order on if I failed to mention them in my preamble to the next call.

I would like to make a few points in relation to the substantive clause of this bill.

💬 Hon Gerry Brownlee: Oh, not briefly again!

I missed Mr Brownlee’s comment. I figure that is probably a good thing. I would like to just address Nick Smith’s comments, though. He thought it was ironic that we seem to have so much concern on this side of the Chamber about debt when this was about trying to keep the Government’s books in the black. Well, he may have noticed they are not in the black. They have not been in the black for quite a while—like, ever.

💬 Hon Nanaia Mahuta: 7 years.

Oh, gosh, 7 years and you still have not managed it. Sorry Minister, it is salt in the wounds, I imagine. If we are talking about debt, I would like to just point out to the Committee a little bit of a history lesson, and I do think it is very relevant to this piece of legislation and what it is doing. Government debt per capita in 1990 was $10,423. In 2008 it was $2,408, and now, in 2014, under this Government’s watch, it is $13,289. For a Government that is supposedly so concerned about its books and its levels of debt, it has been overseeing a massive increase in the level of Government debt, from a very low level when it came to power of only $2,408 per person.

I want to also call out both the main parties in this Chamber, actually, around the trend we have seen with household debt, and with individual debt in this country, which is specifically relevant to this bill. In 1992 the average household debt in this country was $33,920. Now, in 2015, the average household debt is $128,050, and that has been inflation adjusted. We see here a pattern where, in fact, I would argue that Government debt per capita went from, I think, too high levels down to very low levels because it had been transferred to the individual. We are seeing that in the very high levels of personal debt through student loans; increasingly, through speculation in housing; and through the Government’s lack of management of the housing market. There are now unsustainable levels of personal debt. Now we are also seeing, under this Government, escalating Government debt. So both sides of that picture are doing badly. The Government is not focused on getting into surplus. It is not focused on the well-being of our society as a whole. I do want to make a point here around income—

💬 Chris Bishop: Let the professor have a go.

Sorry? Let the professor have a go? Well, we claim our knowledge in different ways in this party. I would like to talk just a little bit about intergenerational inequality in relation to this bill and to reference some common understandings of generational wealth and distribution.

I am just thinking, again, about the situation we are in in New Zealand and the importance of saving schemes. After so much of the costs of participating in society have been passed on to individuals, there is a common understanding that wealth distribution is strongly affected by life cycle. It makes sense that when you are younger you earn less and you have less wealth. There is an expectation that you will accumulate that over time, as you pay off your student debts, and that you have the ability to earn more and that you get your house and you pay it off. So you get to, over that cycle, increase your wealth. Well, I just want to think about that. That is the traditional way it has been done. The reality now is that the average woman who has a university degree will be 50 before she pays off her student debt, and we have the increasing unlikelihood of young people never being able to buy a house in this country. It is the abandoned generation.

This will be a short speech—[Interruption] Again, I would like to take the opportunity to thank the National backbenchers. Specifically, in relation to clause 5, which amends section 226 (3), New Zealand First has put forward in Supplementary Order Paper 86 the proposal that we replace “$1,000” with “$500”. The reasoning behind that is those Government members and Ministers have stood before this Committee, they have argued against their own logic, and they have told us that they cannot afford it. They cannot afford it, despite the fact that they will not acknowledge that they have taken $7 billion in revenue out of our income stream with tax cuts for the high-income earners. They cannot afford it, despite the fact that they have grown Government debt from next to nothing when they came in to approximately $80 billion today—approximately $80 billion.

What I am asking those members to do is to show New Zealanders some compassion. Government members would not agree that we give some New Zealanders some time. No, we cannot give them time to adjust to these changes—that would be abhorrent! The logic behind their changes, they argue, was that $1,000 is not a cost-effective incentive. They are saying: “Let’s take it away.” But they will not give New Zealanders time to sign up and use it. So they are countering their own argument. New Zealand First has said, well, OK, if $1,000 is too much to contribute to a New Zealander’s start-up into their lifelong saving habits, then show a little bit of compassion. Show a little bit of understanding. Come down off that high horse and halve it—halve it. Make it $500. Give them something. Members on this side of the Chamber spoke about the motivational aspect of this number. It does make a difference. National, please show some compassion.

I just wanted to respond to the Minister Nick Smith, who I am grateful actually responded to one of my questions. That has been a rare treat during the course of the debate—actually having a response to any of the questions that we have put. I just wanted to check that the Minister said that in a year’s time 100,000 more people will have signed up to KiwiSaver—

💬 Hon Dr Nick Smith: Correct.

—because the member tax credit will be remaining in place. So that incentive still remains within the scheme, which I understand. But the Inland Revenue Department report said that the $1,000 kick-start contribution was the most effective incentive of the package of incentives within the scheme. I just wanted to refer to the regulatory impact statement, which also said that if you were to, for example, halve the member tax credit, then in the next financial year you would save something along the lines of $339 million, whereas removing the kick-start saves $175 million. So just halving the member tax credit would actually save more money than removing the kick-start, and the kick-start, from all the evidence that we have seen so far, is actually the more effective component in terms of getting people into the programme.

I am just a bit concerned about some of the evidence that we have seen. I recognise that because we are in an urgency process and we are not able to go through the normal standards of scrutiny and hearing from experts, some of the evidence is thin on the ground, but some of the other things that the regulatory impact statement says give me some cause for concern, including page 8. It says that “The analysis has focussed on fiscal savings from changes to KiwiSaver.” We have heard, many times over, the Government make its case for making fiscal savings for the Crown, as opposed to responding to some of the concerns about the impact on New Zealanders. It goes on to say: “We have not undertaken a comprehensive analysis of the effects of these policy changes on other policy issues which have been discussed in the context of KiwiSaver changes in the past.” It says in paragraph 52: “We have not considered the extent to which a reduction in the generosity of the kick start and annual member tax credits will affect the future success (or otherwise) of the HomeStart policy.” In paragraph 55 it says: “it is highly unlikely that the target effectiveness can be materially improved if the target group remains as defined by the Act.” So, in other words, the principal purpose of the Act is being undermined by this piece of legislation.

We get that this will save the Government money. We understand that, and we understand the pressure that the Government is under, and has put itself under, to reduce the deficit and eventually to get the Government books back into the black. We get that, but there are still some real questions about why the Government has chosen the particular mechanism it has in removing the kick-start, rather than other routes that it might have chosen. We have not yet heard a response to the question of why it is that the Government is implementing this immediately, as opposed to over a 6 or 12 or 18-month window to incentivise those who are currently not in the scheme to get into the scheme. We have not yet heard an answer to what the Government’s plan is to increase the savings rate once the incentive to do so is removed.

We have not yet heard a response to the ANZ chief economist, who said that removing the incentive will reduce the rate of take-up—that was actually my concern, that the rate of take-up was going to be reduced. If the Government disagrees with the ANZ chief economist, then what is the plan to maintain or increase take-up in the scheme in the future? We have not yet heard a plan for how we handle some of the intergenerational equity issues that my colleague Jan Logie was speaking to. And we have not yet heard a response to why the KiwiSaver is being cut now, but the rest of the hardship package does not kick in until the next financial year—why there is a gap there. So there are still, I am afraid, a number of questions that we do not have answers to, but I do thank the Minister for his substantive response earlier.

The question was put that the amendment set out on Supplementary Order Paper 81 in the name of James Shaw to clause 5 be agreed to.