Gareth Morgan: No one deserves a fat state pension

There is no case to suggest that because we've paid taxes we deserve a fat government pension. Photo / Thinkstock

Opinion

Gareth Morgan looks at the morality and practicality of continuing the present system of superannuation.

When we look at our social welfare regime it is full of inequity, so much so that it can be viewed as a tax on poverty. We maintain a mix of targeted benefits, including the dole, invalids, solo parent, Working for Families, and universal entitlement (NZ Superannuation) benefits.

This suggests that on the one hand the point of the welfare in New Zealand is to alleviate poverty and encourage people to make themselves available for paid work - while at the same time enabling one cohort (the baby boomers) to feather our own nest with the most generous of the benefits - with no questions asked.

Proponents of NZ Super insist it's not a welfare benefit but rather an entitlement in recognition of the elderly's contribution to the economy.

The incredulity of such a claim has been gathering momentum for years and politician after politician has accepted that NZ Super is "unsustainable" as the ratio of eligible to taxpayers rises inexorably with the ageing of the baby boomers.

Michael Cullen tried to head off the inevitable disaster with his Cullen Fund which at least partly pre-funded the largesse. But John Key, recognising that baby boomer votes were to remain a rich vein of electoral support until our large numbers started to die off, stopped that. Because of the intergenerational subsidy, Mr Key can count on our undying support until we are no more.

How many times have you heard recipients of NZ Super argue that because they've paid taxes all their lives they "deserve" the dividend of super, our welfare regime's highest single benefit? The claim sounds good but it is vacuous.

One way to test the veracity of that claim is to see if the Government has, over the years of tax contribution by the generation now receiving super, built up a cash surplus through budget surpluses or an asset base with all that tax revenue it received. The answer is neither.

Most years the Government has run a deficit and there is no evidence of an income-earning asset base that has been built up to provide the surplus in future years even pre-NZ super payments. To the contrary, the tax revenue has been spent largely on social services and transfers (health, education and welfare) - indeed for many years it's been more than spent resulting in a deficit and a rise in government debt.

What about the tax flows? Perhaps past governments have invested in the economy to an extent that the present tax flows will be able to withstand NZ Super for baby boomers until we pass on.

Any maths on that will show that the demographics work the other way - the tax flows will struggle to pay our health bill, let alone our NZ Super. Which of course is why governments of recent times have been so committed to not allowing the government debt situation to get any worse. They know there's a tsunami coming and when that hits they will be plundering the coffers well and truly.