Bill English Finance Minster Bill English was pressed on the Government's refusal to discuss raising the age of eligibility for New Zealand superannuation yesterday when he appeared before Parliament's finance and expenditure select committee.

Labour finance spokesman David Parker pointed to Budget forecasts that by 2016 superannuation, at $12.4 billion, will cost as much as spending on all levels of education from early childhood to the tertiary sector.

Thirteen developed countries, including the United States and Australia, are raising the age of eligibility for the pension to 67, or have decided they will raise it.

Parker asked English if he agreed with the Treasury that New Zealand also needed to raise the age.


"The Government's position on that is quite clear. We are not increasing it," English said, with some asperity.

Parker then asked if he thought people needed to be given advance notice if the age of eligibility were to be raised.

"If it was going to be lifted then, yes, advance notice would be a good idea," English said.

But it had been known for a long time that the cost of national superannuation was going to go up, he said.

"We have had a 30-year debate about what the structure of the system should be.

"Where it has arrived is a universal pension, pay-as-you-go, supplemented by two things: the New Zealand Superannuation Fund and KiwiSaver," he said.

"That amounts to a reasonably significant allocation of the total economic resource supporting people over the age of 65."

Of course there was potential for adjustments to that system at the margin, English said.


But the Government took the view a while ago that stability in those arrangements was desirable.

Any shift in the entitlement parameters would have a marginal effect on the cost, which was driven primarily by the demographics, English said.

"You need a bigger cake so that the share that is available for those over 65 is going to give them a reasonable standard of living."

The Government was concentrating on some of the other and more difficult long-term fiscal costs such as health care and welfare dependency, he said.

Treasury Secretary Gabriel Makhlouf told the MPs the Treasury's view was still that the age should be raised.

But he added: "My expectation is that as time goes on the issue of the age will become less significant as people increasingly decide to stay in employment once they pass the age of 65. We are seeing [labour force] participation rates for the over-65s increasing."

Parker also raised the issue of a capital gains tax, another measure long advocated by the Treasury.

English said that while the Treasury advocated a capital gains tax its problem was politicians would not put in place the pure version it wanted, which was comprehensive, adjusted for inflation, and paid as the gains accrued rather when the assets were sold.

"As you go through a political process that knocks out [owner occupied] housing, takes away inflation adjustment, ditches accrual [treatment] because people can't pay tax out of money they don't have, you end up with a muddle.

"And then exempting small businesses or people over 55 or whatever. It is a bit of a politicians' feast ... which would not achieve the underlying objective."

That was not to deny the underlying issue a capital gains tax was supposed to address was important, he said, which was to shift incentives in the economy away from more consumption and asset price inflation to more production, investment and exporting.

"That is a legitimate objective to be pursuing."