National rethinks Super fund

By JOHN ARMSTRONG and HELEN TUNNAH

The National Party is now talking of keeping Labour's burgeoning superannuation fund after promising to scrap the scheme two years ago.

It is also pushing any prospect of personal tax cuts well into the future as it tries to budget for all its likely spending commitments, including the cost of more prisons under its tough new crime policy.

The potential u-turn on superannuation was flagged at National's annual conference in Auckland yesterday by the party's deputy finance spokesman, John Key, who is responsible for developing economic policy for next year's election.

Keeping the fund, which will have snowballed to $9 billion by the election, would remove the highly contentious issue from the campaign agenda and deprive Labour of a platform to attack National.

"It's a line-ball call," Mr Key said, referring to the pros and cons of the fund in terms of its ability to meet some of the cost of pensions for the baby boom generation.

But he said he was putting it on the agenda for the National caucus.

If a National government opted not to fund superannuation costs in advance, it would have to either increase borrowing, raise taxes or reduce spending in other areas.

"There's no free lunch here."

Prefunding pensions "was worthy of consideration" as long as the fund generated adequate returns from investing the money. But Mr Key said tax incentives for superannuation savings didn't really work.

National would cut company tax from 33c to 30c in the dollar as soon as it became the government.

But Mr Key saw little room for further reducing that rate during National's first term.

He said the price of reducing personal tax rates was not "excessively large" but had to be considered beside other decisions like retaining the fund and the costs of social spending priorities like reducing crime.

Leader Don Brash has already indicated voters may have to wait a little longer for personal tax cuts than some had predicted.

He told the Weekend Herald that decisions over tax cuts and increased spending were "very tricky".

"What I've said publicly is there are higher priorities than tax cuts.

"We're already saying reducing crime is a hugely important issue and if that means deferring tax cuts for a year or two, so be it."

Auckland City Mayor and former National Cabinet minister John Banks opened the conference by telling the party that, with sound policies, it could capture the hearts, souls and votes of Aucklanders.

He called National's crackdown on crime, launched last week, "the best law-and-order policy for the last 30 years" - even better than he managed as police minister.


THE CULLEN FUND

* Created 2001.

* May pay 15-20% of the future cost of NZ Superannuation, according to Treasury estimates.

* Cost to taxpayer: About $2.2 billion a year until mid-2020s.

* Size now: $3.7 billion (May 31).

* Ultimate size: an estimated $105 billion by 2024, $300 billion by 2050 and $600 billion by 2080.

* Return in 8 months since investments began: 6.04% (before tax).

* No withdrawals allowed before 2020.