Tuesday, May 10, 2011

Gutting KiwiSaver

Back in 2008, John Key ran for election on a platform of maintaining Labour's popular KiwiSaver and Working for Families policies. On KiwiSaver, their policy [PDF] was crystal clear: while they would alter the minimum contribution rate and allow employers to discriminate against KiwiSaver members, they would retain the scheme intact from a saver's point of view. The policy specifically enumerated the parts of the scheme which would remain untouched, including the $1,000 kickstart and the member tax credit, by which the government matched member payments into the scheme.

Over the weekend, they began softening us up for massive cuts to the scheme in next week's Budget, specifically targeting the kickstart payment and member tax credit. Supposedly, this is necessary to balance the budget. Meanwhile, National's tax cuts for the rich - which benefit only a tiny proportion of the population and have not worked as an economic stimulus - remain intact. So, as usual, National is looking after its rich mates, and screwing over everybody else in the process.

There are two issues here. The first is that this is terrible policy. As people keep reminding us, New Zealand has a savings problem. If we want to solve this problem, then we are going to need some pretty strong government incentives (because, contra brash et al, the market faeries will not magically solve it for us). But these cuts will effectively remove all incentive to participate in the scheme. If the government doesn't kick in, then its no better than a bank account (and in fact much worse, as you can't access your money until you are 65). And if your employer regards their contribution as part of your pay, then you might as well take that money in the hand.

But more importantly, there is a clear issue of political deceit here. National made a commitment to the electorate in 2008, and were elected on the basis of that commitment. Now it seems that they have lied to us. This is not behaviour we should tolerate from politicians, and National need to be punished for it. But it also has consequences for this year's election. National has promised us something and lied to us. How can we trust the promises they make this year?