KEY POINTS:
On Monday, this newspaper urged the National Party to start announcing serious policy soon. Clearly, one of its backbench MPs, Kate Wilkinson, took this message to heart, telling a business breakfast the next day that rumours the party would scrap compulsory employer contributions to KiwiSaver were correct. As
such, one of the scheme's pillars, and a key reason 600,000 New Zealanders signed on, would be removed by a National government. This was, indeed, serious policy. Within hours, however, National was indicating that Ms Wilkinson had slipped up and that it would retain compulsory employer contributions.
This is, of course, no way to release policy. Quite simply, National will have to confirm its programme on important issues if others of its junior MPs are not to cause similar embarrassment when confronted on policy detail. Certainly, on the matter of KiwiSaver, there is no reason party leader John Key should be saying, "We haven't finalised our programme yet."
National's failure may well relate to a peculiar grievance about the aspect of the scheme touched on by Ms Wilkinson. A year ago, deputy leader Bill English said, "Particularly small businesses feel ambushed by the compulsory contributions." It is true these were announced without warning in last year's Budget. But such a contribution, which employers can set against tax and count in the employee's total remuneration bargain, is standard fare in economies that boast a far stronger savings record than New Zealand. From a broad perspective, the contribution is an important component of a scheme that has the potential to correct an unbalanced economy and to sponsor a far larger pool of domestic capital. This is something most employers seem to understand better than National.
There is a further significant reason a detailed KiwiSaver policy should have been released before now and, indeed, before the scheme started last July. In 1975, a National Government, on being elected to power, cancelled a funded public superannuation savings plan that had existed for only a short time. The country has been wrestling with the issue ever since. Over the past nine years, Finance Minister Michael Cullen has worked assiduously to prepare for the retirement of baby boomers from 2011, developing the Superannuation Fund and KiwiSaver. A far more knowing electorate needs to be reassured that another National government would not devalue KiwiSaver, let alone repeat the Muldoon Administration's error.
Ms Wilkinson's gaffe has extracted one major decision. As Dr Cullen has pointed out, however, there are other aspects of the scheme that National must address. He noted, for example, the $1000 taxpayer kickstart, another key component. National also needs to detail its approach to other issues that will appear as KiwiSaver gathers momentum. One is whether there is not an inevitability about participation in the scheme becoming compulsory for all who have not made their own retirement-savings arrangements. A case can be made for this on several levels. Most immediately, employer compliance costs associated with employees opting out would be eradicated. More fundamentally, New Zealand would be guaranteed the sort of savings culture, and a shift away from property investment as the only way to prepare for retirement, that the scheme hopes currently to promote.
National's confusion over KiwiSaver should be a warning. Indecision breeds unease. It also hands the initiative to the Government. National can avoid this trap only by releasing policy coherently and in quick order.