John Armstrong: Gutless politicians won't tackle pension crisis, we need a Royal Commission


It is never going to happen. And more's the pity.

But a royal commission of inquiry now looks ever more essential in filling the gaping vacuum left by gutless politicians who refuse to confront the looming crisis in the funding of state pensions.

Our political editor had a go at Bill English over how he thought the baby boomers weren't paying their fair share of it.
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Such an august body - or something very akin to it - is needed to provide a comprehensive and impartial assessment of whether New Zealand is at serious risk of a fiscal meltdown from the super-sized superannuation bills which will fall due in coming years.

In the week or so since the Prime Minister floated his intention to raise the age of eligibility for state-funded super payments from 65 to 67, politicians in parties other than National have shared one thing in common.

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They have effectively abdicated. They have either castigated Bill English for raising a matter which they deem (correctly) to be equivalent to juggling dynamite.

Or they have taken the view that raising the age of eligibility solves the problem.

In other words, she'll be right. To put it bluntly, they are not doing their job.

But as long as they all agree to do nothing, the problem can be swept under the carpet.

English's crime was to break this self-serving gentleman's agreement. He certainly deserves credit for making even a limited excursion into what is universally acknowledged to be the Valley of Death in political terms.

But any medal for political bravery must put on hold given his tinkering with pension eligibility will not take effect for another 20 years.

In the meantime, everyone can pretend that existing pension entitlements will remain affordable.

This is nonsense. Anyone spouting it should be given a one-way ticket to La-la land.

For starters, politicians don't factor in the equally humongous demands which will be placed on the health budget if they still want to keep services to the elderly at current levels. That population cohort is rapidly expanding and it already uses the lion's share of such services.

This is is not Affordability Street. It is the road to penury.

The Treasury has said as much, although far more politely. Its crystal-ball gazing is persuasive in arguing that maintaining current entitlements and eligibility for the state pension will require trade-offs.

Those include such things as increases in taxes, new taxes, less government spending in other areas, raising the age of eligibility, changing the way payments are indexed, or applying an income or asset test.

The Treasury is also insistent that whatever trade-offs are favoured, they need to take effect now, rather than when it might be politically convenient. The latter stipulation is another way of saying "never".

Acutely conscious that its political masters will find nothing that is politically appetising in its smorgasbord of trade-offs, the Treasury prefers to talk about "options''. Rather than backing its ministers into a corner by making hard and fast recommendations.

The result is that the Treasury is only really gently prodding whoever is the government of the day towards making the desired response.

No such constraint would apply to a royal commission.  It could do or say what it liked.

What is important is the status and authority imbued in a royal commission as of right, and, even more crucially, the weight and moral suasion of its findings and recommendations.

A royal commission might not tell us anything more than what is already contained in the truck-load of reports produced by a plethora of working parties, periodic review groups and task forces that various governments have set up to examine superannuation policy.

1 NEWS Political Editor Corin Dann and Political Reporter Katie Bradford examine the Govt's big plan to increase the age to 67.
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The big difference is that it is far more difficult for a government to ignore or brush aside the views expressed by a royal commission.

The findings of a task force may be history by the following day's news cycle. The findings of a royal commission are etched in history and remain a major reference point for as long as the subject matter at hand stays on the political agenda.

Were a royal commission to develop a more realistic and sustainable pension model, that could be a first step in building a much-needed consensus across Parliament.

But that is not going to happen. Handing control of policy levers to outsiders is simply not part of the mindset of Cabinet ministers.

Their prime consideration is to concede nothing that might end up being to their opponents' advantage.

Being successful in politics demands control of everything that can be controlled. It demands control of the day-to-day agenda.

That thinking was evident in this week's argy-bargy between English and Andrew Little on the merits of cutting taxes versus spending more on fixing dilapidated parts of the country's social infrastructure.

We sampled public opinion about whether Super age change policy have public support come election time.
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Next to no light was shed on the detail which the two major parties will put in front of voters at September's election.

It was a case of staking out the territory upon which those parties intend fighting the election campaign. It was a matter of putting some pegs in the ground in advance.

National needed to send a message that revised forecasts of the Budget surplus meant tax reductions, more particularly changes in tax thresholds, were now part of the mix.

Labour needed to send a message that it would not be raising taxes. It had to assure voters that the Greens' penchant for both newer and higher taxes will not be part of the mix it would be pushing at coalition negotiations after the election.

This ritualistic dance was testimony that political parties will be consumed by the short-term this side of September.

The focus on the short-term is yet another excuse for ignoring the long-term, however.

In the context of seriously flawed pension policy, the current talk about tax levels is about as useful and relevant as auctioning off the deck-chairs on the Titanic just as it began to sink beneath the waves.

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