Drawn

A ballot for a single Member's Bill was held today, and the following bill was drawn:

• Employment Relations (Protection for Kiwisaver Members) Amendment Bill (Tracey McLellan)

The bill is a nice little minor amendment which would prevent employers from discriminating against Kiwisaver members, restoring a protection repealed by National in 2008. Its a good member's bill, but you kindof have to wonder why the government hasn't done it already as part of its numerous amendments to the Employment Relations Act.

There were 68 bills in the ballot today.

No investments for criminal industries

Over the weekend, the government banned default Kiwisaver funds from investing in fossil fuels and weapons banned under domestic and international law. And predictably, both the fossil fuel industry and the climate change deniers in the National Party are losing their shit over it.

Apparently, the government shouldn't be telling people what they can and can't invest in. Except it does, all the time: you can't invest in child pornography, for example, or in heroin production, because those things are crimes (as is investing in cluster bombs, BTW). And in this particular case, these are government-established schemes, which are already subject to all sorts of regulation about risk and reporting and so forth. The government already forbids providers to gamble with default customers' savings; its no great extension to say that they also shouldn't expose them to the risks of the carbon bubble or of having their funds seized for investing in illegal weapons. And on the flip side, I hardly think its onerous that if you want to invest in the destruction of the planet and killing your fellow human beings, you actively choose to do so, so people know you're an arsehole.

The fossil fuel industry should be grateful that the government is allowing continued investment in their toxic, destructive industry at all, rather than sticking them all in jail for ecocide. Simply being told that the government won't provide suckers to hold the bag when everyone recognises that it has no future and is valueless seems fairly moderate compared to what this criminal industry deserves.

A blind bit of difference

Last year, in an effort to meet its artificial and arbitrary budget surplus target, National removed the $1,000 KiwiSaver kickstart payment. At the time, Prime Minister John Key said that the removal "will not make a blind bit of difference to the number of people who join KiwiSaver".

He was wrong:

The number of people signing up to KiwiSaver has slowed significantly since the removal of the $1000 kick-start, bucking a statement from Prime Minister John Key that the change would "not make a blind bit of difference to the number of people who join."

Analysis by the Herald shows the average number of people signing up to KiwiSaver per month was 15,029 in the year to June 2015 and 16,976 in the year to June 2014.

But since finance minister Bill English scrapped the kick-start incentive in last year's May Budget sign-ups have fallen to an average of 8996 per month with the lowest sign-up level, in October, below 8000.

The change has also made a dent in the number of children in KiwiSaver with nearly 10,000 fewer under-18s now in the scheme.

But this wasn't just a mistake - Key was advised that this would happen. He did it anyway, and tried to lie about its effects. People should be asking whether that's really how they want their Prime Minister to behave.

A blind bit of difference

[T]he removal of the $1,000 kick-start contribution will not make a blind bit of difference to the number of people who join KiwiSaver

That's what John Key said when questioned about his decision to can the kickstart payment in this year's Budget. But it turns out he was wrong: KiwiSaver enrolments have dropped 50% in the last month:

But ANZ, which has a 26 per cent share of the KiwiSaver market, said that in the month since the measure had been announced, enrolments had dropped by "more than 50 per cent".

The bank declined to give further details. However, IRD figures have showed that the net increase in people in the KiwiSaver scheme nationwide was running at about 15,000 a month, meaning the change could have put off thousands of people.

ANZ Wealth managing director John Body said the removal of kick-start had hit confidence in the retirement savings scheme.

Which makes sense: the kickstart payment was the big incentive to join KiwiSaver, and without it it is far less attractive. And ignoring that was just stupidity.

Budget advice is due to be proactively released next month, so it will be interesting to see if Key and English knew and ignored it, or if Treasury ignored reality because they wanted to make cuts.

For a KiwiFund

Over the weekend, NZ First leader Winston Peters laid out his bottom line for coalition negotiations: turning KiwiSaver into a government-backed "KiwiFund", which would invest in New Zealand rather than overseas. Naturally, John Key has panned this policy, likening it to communism, but its an excellent idea. Here's why.

Firstly, and most importantly, it would almost certainly increase returns to savers. Firstly because it would immediately free up the $385 million the ticket-clippers and shysters have taken from kiwisavers in fees over the last fives years, and secondly because the government is simply better at managing money than the market is. The latter is heresy to the political right, but the facts speak for themselves: most Kiwisaver funds return between 5.5% and 8% over three years. The New Zealand Superannuation Fund returns about 11.25%. You need to be with a very good "aggressive" fund to beat that, and then you have to deal with the fact that your retirement savings could disappear with one bad bet. The NZSF is safe and risk-free.

Secondly, because it removes a large chunk of risk from the equation. At the moment if your Kiwisaver fund goes under, because its managers made poor bets with other people's money, or simply decided to take the lot on holiday to Las Vegas and Monaco, you're screwed. A government guarantee solves that problem for individual savers, and gives us certainty. A government provider is the cost of that guarantee, but it seems like one worth paying, especially since the government is unlikely to decide to "invest" your funds in horse-racing and hookers.

And thirdly, because investing more of the funds in New Zealand will have wider economic benefits. Our long-term problem as an economy has been a lack of capital for development, meaning that successful small businesses have trouble turning into large ones. Directing superannuation savings towards domestic investment will solve this problem, and give kiwi businesses access to the capital they need without having to go begging overseas.

There's a lot to like here, and no real downside. The only question is implementation. The easiest method would be to establish a public provider, and make it the default; people could choose lower, riskier returns if they wanted, but only motivated morons would. Kiwisaver allows transfers, so those who are already signed up to poorly-performing private schemes can shift over. The public provider could then outcompete the private ones, and the parasitic NZ "savings" industry can die a natural death. And those that don't suffer that fate will avoid it because they're offering a combination of risk and return equal or superior to the government option and offering positive benefits to their customers, earning their fees rather than merely clipping the ticket. Either way, its a win for savers. The only loser is the underperforming finance industry which can't live up to its own rhetoric.

Will it happen? On recent polling, Winston is irrelevant anyway, but the Greens are sympathetic to the idea, and I don't think it would be hard to convince Labour to introduce a government option to force the market to lift its game. So we may see some version. The question is whether we'll see them go the whole way into default provider territory - but that might just be a matter of giving it a few years for the government provider to prove itself...

The other half of the policy

Labour has announced the other half of their retirement and savings policy: compulsory KiwiSaver, with gradually increasing employer contributions. That's not a terrible idea, and the latter is something they should have been doing from the beginning. The question is why they decided to tie it to a third rail increase in the retirement age. Its not as if the two parts go together, after all. You don't need to increase the retirement age to boost KiwiSaver, and neither half adds anything to the other. So why?

And again, I'm drawn to my earlier conclusion: this is simply a cynical political ploy to wedge National and boost Winston, an empty threat designed purely to be vetoed. You can admire the Machiavellian evil of it, but I prefer my political parties to be less deceitful in their promises.

Against automatic KiwiSaver enrolment

When KiwiSaver was introduced, Michael Cullen engaged in a bit of social engineering, signing people up by default when they switched jobs, and letting them opt out. Since then, 1.75 million kiwis have joined the scheme. But more than a million remain outside it. And now, the government is considering automatically enrolling them and forcing them to opt out.

I can understand why they want to do this: a low savings rate has been one of our long-term economic problems, and wider KiwiSaver uptake will boost it. At the same time, I don't think its a good idea. Why? Because its just not the right time for such a move. KiwiSaver has always had low uptake at the bottom end because people on low wages living paycheck to paycheck simply can't afford to save. And in tough times, with stagnant wages, a rising cost of living, and more people feeling squeezed, trying to force people to sign on to save 2 - 4% of their income isn't such a good idea. Not only do you make them actively worse off; you also suck money out of the economy, deepening the recession.

(I am of course assuming that they don't opt out, because that's how its meant to work; the whole idea of opt-out enrolment is to exploit people's laziness so that they don't. And that seems to be borne out by the numbers; two thirds of automatic enrolees stay in the scheme, with only a third opting out)

So, how can we boost savings and encourage enrolments then? The obvious answer is to make the scheme more generous by boosting the employer contribution. At the moment, this is set at a mere 2%, compared to 9% in Australia. Gradually increasing it would significantly boost the scheme, and wouldn't cost the government a cent. Sadly, I don't expect to see such a policy from National. The question is whether we'll see it from Labour.

Key lied on KiwiSaver

Last week, John Key cut KiwiSaver. But he claimed he was keeping his election promise not to change the scheme [PDF] because the changes wouldn't kick in until after the election.

He lied. And its right there in black and white in the law: section 7, which halves the member tax credit, comes into force from 1 July this year, and

appl[ies] for calculating a tax credit for the year starting on 1 July 2011 and later years.

Tax credits are paid at the end of a tax year, but accrue daily. So National are cutting KiwiSaver before the election, and stealing your tax credits every day from July. Its not what was promised, and its not what they said they were doing. I guess they thought that no-one would notice, and that they could bury it with some clever spin.

This is a foretaste of what is to come if National wins a second term: not just the cuts, but the deceit, the fundamental contempt for the electorate. If you want to stop that from happening, you know how to vote in November.

Digesting the Budget

What to make of the Budget? Firstly, it will make you worse off. If you're receiving Working For Families, in KiwiSaver, or planning an education, you've just been shafted. On the first, while the WFF cuts were not as bad as feared, the government will be slowly reducing your payments (either directly or by inflation) through a combination of lower thresholds, higher abatement, and a payment freeze. Their carefully chosen examples, which show lower-income people receiving higher payments, do that because they're counting the inflation-adjustment, not because they've actually made the scheme more generous. In real terms, their entitlements have been cut. On the second, the government has just legislated you a 1% pay cut from 2013, plus another 1% if (like many) your employer rips KiwiSaver payments directly out of your wages. Plus, they're cutting their contribution, while sticking a stealth tax on your employers (meaning, in fact, that you will be no better off due to their increase). And if you're planning an education, you're not going to be allowed to do it part-time unless you meet your course-related costs. Which makes it far more difficult for those already in the workforce to better themselves.

In addition, we have health cuts, thanks to a sub-inflation increase, education cuts, thanks to the Ministry of Education having to meet superannuation costs out of its own budget, and selling the family silver. And all of this so the government can reach surplus one year earlier (if everything goes right). I remember when government's delivered surpluses without these sorts of cuts. But that was back when we were governed by competent people, rather than self-interested looters.

But don't worry! Good times are just around the corner! Treasury says so, so it must be true! Oddly, though, they're projecting record 4% wage growth [PDF; Table A3.1], while at the same time sticking the screws on public servants through the requirement to internally fund superannuation. So who is going to get these supposed wage increases? Un-unionised wage-slaves on 90 day contracts? Somehow I don't think so.

All told, this is going to make people worse off. The government is cutting spending while the economy is stagnant. This is likely to make things worse, rather than better - just as Ruth Richardson did in 1991.

As Stuff notes, John Key has put his job on the line over this. If you don't like his cuts and his privatisation, you can vote him out and have them reversed. I suggest you do so.

Handwringing for privilege

On Thursday night, 3 News pointed out the yawning gap between MP's superannuation scheme and ours, with the implication that if they are cutting KiwiSaver, they should share the pain and cut their own superannuation contributions too. Over on Kiwiblog, DPF responds by arguing that there's no point - the Remuneration Authority sets salaries on a total remuneration basis, so any superannuation cut would just result in a pay rise.

Bullshit. Firstly, Parliament can always change the law. But secondly, they don't even need to do that. In 2009, the Remuneration Authority deferred MP's usual annual salary rise in response to a request from Parliament. It could do the same again. The power is entirely in MPs' hands. DPF knows this, but as usual, he's just handwringing for privilege.

I've said before that our MPs work hard and should be well-paid for it. At the same time, they must lead by example. If they're cutting the taxpayer contribution to our retirement savings by 50%, they should do the same to themselves. Anything less would simply be hypocrisy.

Superannuation cuts for us but not for them

The government is cutting KiwiSaver, slashing the government contribution to people's superannuation savings. Meanwhile, MPs enjoy a gold-plated scheme, which sees the taxpayer contribute $2.50 for every dollar MPs put in, up to a maximum of $26,000 a year (so, about 26 times what we get). Tonight, 3 News cornered Finance Minister Bill English and asked the obvious question: will the government be doing to itself what it is doing to the rest of us? And they received the obvious answer: yeah, right. Apparently, its not something they've thought about. Superannuation cuts are only for little people.

And politicians wonder why we regard them all as self-serving arseholes...

Update: Added link. And to add insult to injury, English thinks that the scheme "is pretty similar to what everyone has available to them". Which is the sort of worldview you get when you've been in Parliament for over 20 years.

Bait and switch

With the government's planned changes to KiwiSaver, the entire scheme seems to have turned into a gigantic bait and switch scam. First, offer people incredibly generous terms to get them to sign up. Then, unilaterally change those terms, leaving them locked into a scheme which isn't the deal they were told it was. If a private company operated like this, they'd be being prosecuted. Unfortunately, the Fair Trading Act apparently doesn't apply to the government.

Understandably, people are pissed off about this and want to quit the scheme. Unfortunately, they can't - once you're in, you're in, and forced to contribute until you're 65. And with employers now allowed to treat KiwiSaver contributions as part of your pay, then the government's proposed higher contributions effectively mean a legislated in-the-hand pay cut as well.

Meanwhile, Labour is incoherent as usual. They oppose the changes, but Phil Goff says they won't reverse them. So what does their "opposition" mean? Nothing. And on an issue where the government is potentially creating 1.7 million enemies, and turning the election into an explicit referendum on their policy, that's even more stupid than usual.

Collapsing revenue

John Key has confirmed that he is going to cut Working for Families and KiwiSaver, thus breaking his 2008 election promises. His excuse? We can't afford them anymore, due to the collapse in government revenue since 2008.

So, what has caused this collapse in revenue? The recession carries some blame, certainly, leading to lower revenue from GST and company taxes. But the prime culprit here is the government's 2010 "tax switch", which radically cut the top tax rate. While the rise in GST - something else Key promised not to do - was supposed to compensate for this, the recession meant that it didn't. The result has been a billion dollar a year hole in the government books, all of which has been effectively redistributed to the richest New Zealanders.

It speaks volumes that rather than plugging this hole and reverse the top-rate tax cuts, National is instead taking more money from the poor by cutting KiwiSaver and Working for Families. In their eyes, we are not all in this together. The recession is just another opportunity for them to pillage the state for the benefit of their rich mates.

Meanwhile, its a bit rich for Key to complain that the government is "no longer running the big surpluses that the previous Labour Government thought were there". Those surpluses weren't just a figment of Michael Cullen's imagination, they were real. National undermined them with its constant calls for tax cuts, then delivered the death blow by handing over money to the rich the moment it gained office. And as a result, we're now running record deficits. National has no-one to blame for that than themselves. They inherited a government on a very sound financial footing, and promptly pissed it away in bribes to their mates. And now they're pleading poverty in an effort to get the rest of us to pay for it.

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?

Robbing from the poor to pay the rich

National has finally unveiled the fine print of its KiwiSaver plans, and it includes cancelling the $40 a year fees subsidy and removing the tax-free status of contributions above the new 2% maximum. The effect on the latter will be to increase taxes on people using KiwiSaver, by up to $400 a year. Where will the money go? Straight into tax cuts for the rich. So National's first act as government, the very first bill it passes, will be to rob from the poor to pay the rich. You don't get any more National than that.

The KiwiSaver cut

Yesterday, National funded a program of tax-cuts for the rich in an effort to buy their way to power. A key way of paying for this (though that's a misnomer, since they still plan to run enormous deficits for ten years, with no real improvement on the current path) is cutting the employer tax credit for KiwiSaver. That's a cut I agree with - its money employers should be paying, not the public. But National has gone beyond fiscal policy here and has also reduced entitlements under the scheme, capping the employer contribution at 2%, and effectively reducing it from a "4+4" scheme to a "2+2" one. This in turn has flow-on effects for the employee contribution, effectively halving the matching government contribution there as well.

The net effect of these changes is to make everyone in KiwiSaver substantially worse off under a National government. How much? Enough to more than cancel out National's tax cuts, even at the top end; for most people (meaning the 70% of us who earn less than $40,000 a year), the net loss after National's tax cuts is well over $20 a week, though receiving National's "independent earner rebate" can reduce it to as little as $10. At the top end, it just goes up and up and up. And this assumes that employers don't take their cue from National and rip the "employer" contribution right out of their workers' pay packets.

To the 800,000 members of KiwiSaver, the message is clear: don't vote National.

How they're paying for it

National plans to give away far more money to the rich than Labour by cutting taxes. So, how do they plan to pay for it? Firstly, by canning the R&D tax credit [PDF]. Their research, science and technology policy [PDF] had previously said they would cut it, and distribute the money to universities and CRIs (on the basis they were better at research than business); now they're just killing it. Secondly, by ending government subsidies to employer contributions to KiwiSaver (something which was worth doing anyway - but see below). Thirdly, by promising to "control government expenditure" - which means sacking public servants (starting with MFAT). Overall, this gives them a slight saving on Labour's financial pathway - but its worth remembering that that's a financial pathway which includes all of those things. National is cutting services in order to get more money to hand out to their rich mates.

With Kiwisaver, the actual cut to funding won't make any difference - it was a subsidy to employers to do what they should be doing anyway, and a prime target for cutting. What will make a difference is gutting the scheme so that employers only have to contribute 2%, rather than it increasing to 4% over the next two years. They're also planning to allow employers to discriminate on the basis of membership in KiwiSaver, and effectively pay people less if they join, or rip their contributions right out of workers' pay packets. There are 800,000 KiwiSaver members - and National has just promised every single one of them a pay cut. I wonder which way they'll be voting in November?

An interesting question

Will National's $2.4 billion commitment to fund Kiwisaver register in the next version of the Herald's "porkometer"?

Or is something only "pork" if the government does it?

National backflips on Kiwisaver

Another flip-flop from National: having spent the last year railing against employer contributions to KiwiSaver, they now seem to support them. Responding to a Labour press release highlighting comments by Kate Wilkinson which supported repealing employer contributions, National quickly issued a "clarification" saying:

National will release its KiwiSaver policy later this year, but suggestions that National will do away with compulsory employer contributions to the scheme are incorrect.

As Vernon Small points out, its not the usual way you announce such a major policy change, and has likely undermined another one of National's prepared election-campaign inoculations. It also raises big questions about how they plan to fund their "bigger, faster" tax cuts for the rich, as those employer contributions are effectively paid for by the government via a system of tax credits.

But as great as it is to see the political ground shifting and National committing to continue to implement yet another left-wing policy, its also worth remembering the obvious fact that this is not what National's big business backers are paying them for and not what National candidates are standing for election for. They want a National government which enacts right-wing policy, rather than managing Labour's social democracy. Once you remember that, then its difficult to avoid serious doubts about either Key's honesty with the electorate, or his ability to deliver on his promises.

Helping the rich?

DPF has a typically disingenuous exercise in which he compares the effects of Kiwi Saver to National's proposed 2005 tax cuts, and concludes that Kiwi Saver helps the rich:

For someone on $100,000 there is not much difference. National's tax cuts would give you $4,770 and Kiwi Saver $5,040.

But go to a Marketing Manager on around $130,000. Under National they get $4,770 and Labour gives them $6,240. That is around $1,500 more.

Of course, this glosses over a very important point: most of the benefit in Kiwi Saver comes not from the taxpayer, but from matching employer contributions which naturally rise with income. Rather than being a tax cut, it is instead a redistributive policy, aimed at channeling money from employers to workers. As for the government's contribution, the $20 / week cap on matching contributions makes it clear that they are firmly aiming their assistance at the 50% of New Zealanders who earn less than $25,000 a year.

DPF does raise an interesting question though - how do the benefits compare? Here's a quick graph, whipped up from the spreadsheet Anita did on National's tax cuts back in 2005. Unlike DPF, who consistently shows no interest in the 80% of New Zealanders who earn less than $50,000 a year, and instead focuses his "who benefits" exercises on the 3.5% who earn more than $100,000 a year (otherwise known as "ACT's base"), I've shown the range of incomes from $15,000 to $150,000:

Kiwi Saver consistently delivers more to people than National's programme of tax cuts would have, and (thanks to government contributions) substantially more to those on lower incomes. And it does all of this without causing inflation, or compromising the government's ability to fund public services such as health, education, and social welfare.