Superannuation vs Education

August 28th, 2013 at 2:00 pm by David Farrar

The Herald reports:

Mr Parker said Mr Key’s position, including his pledge to resign rather than increase the age of eligibility was “just populism” intended as a vote catcher.

“We know that it’s wrong to be spending more on super than , that it comes at the cost of caring for children, and yet he has got his head in the sand.

Vote Education is $12.4 billion.

Vote is $10.9 billion.

I would have though a Finance Spokesperson would know this.

I of course do support increasing the age of eligibility for superannuation, and delinking it from the average wage.

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26 Responses to “Superannuation vs Education”

  1. duggledog (1,353 comments) says:

    They really do seem to make it up as they go along.

    I’m not sure that National’s steady approval / poll rating is all down to ‘Teflon John’, as the Labour strategists seem to think.

    Rather the majority of the NZ Public think the National philosophy represents a pretty fair deal given the way things are in the world right now (most of us have travelled remember) and ‘the other crowd’ are a bunch of untrustworthy, addled half wits as has been so eloquently exposed by our host.

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  2. SPC (5,392 comments) says:

    I also support an increase in age – provided those without work age 65 to 67 are not left in poverty on benefit level support.

    I can also accept an end to a universal rate linked to the average wage (CPI increase only), provided a means tested one at that level continues.

    Another way of reducing super cost is to restrict universal super to a 50% payment level if a person is still working.

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  3. Alan (1,062 comments) says:

    When does treasury predict that cross over between the two will take place ? John Key clearly plans on spending more on SA than education.

    Superannunation costs increased by 6.8% last year, it crazy sums of cash and out of control.

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  4. peterwn (3,157 comments) says:

    And Vote:Health – which John considers an even bigger potential time bomb with an aging population.

    Q3 today – “Do all district health boards have sufficient resources to provide safe, quality health services?”

    The blunt answer (from National or Labour) to this ‘No – they will never have, and it is only going to get worse as the average of the population increases’.

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  5. Richard29 (377 comments) says:

    Eeerrrmmm… “to be spending”

    To me that says future expenditure – i.e. if we leave NZ Super at it’s current level and eligibility then over time it will take up more spending than education….

    That seems very obviously to be the intent from the context of the whole debate.

    But feel free to take his statement out of the proper context and try and spin it as something it clearly is not…

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  6. Weihana (4,496 comments) says:

    Where does 12.4 billion come from? Vote education appears to total 9734 million.

    http://www.treasury.govt.nz/budget/2013/estimates/est13educ.pdf

    While there is no “Vote Superannuation”, the portion of the Vote Social Development allocated to super is 10,894 million.

    http://www.treasury.govt.nz/budget/2013/ise/v10/ise13-v10-pia-socdev.pdf

    Including student loans in “vote education” appears to bring it close to 12.4 billion.

    [DPF: The $12.4 billion is from Key Facts for Taxpayers]

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  7. dime (9,424 comments) says:

    did he mention how much we spend on shit bags who are too lazy to work and the DPB?

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  8. Chuck Bird (4,682 comments) says:

    How about lawyers who make a living off legal aid. How much is spent on legal aid.

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  9. Chuck Bird (4,682 comments) says:

    DPF, If you want to delink it from the average wage what if anything should it be linked to?

    [DPF: Inflation +x%. That way it would always increase in real terms, but be more affordable]

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  10. Alan (1,062 comments) says:

    http://www.wheresmytaxes.co.nz/ has SA at 10.23bn (6 times DPB which fell by 4% last year), Education at $12.38bn, although the Education budget contains capital expenditure where assets such as land and schools are purchased.

    The SA operational spending is already higher.

    At current rates of growth, SA spending will outstrip all forms of education spending by 2019

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  11. Alan (1,062 comments) says:

    “How about lawyers who make a living off legal aid. How much is spent on legal aid.”

    $123m, much less than I’d have guessed.

    Almost exactly the same as judges salaries strangely.

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  12. Weihana (4,496 comments) says:

    dime (7,114) Says:
    August 28th, 2013 at 2:43 pm

    did he mention how much we spend on shit bags who are too lazy to work and the DPB?

    About 5 billion is spent on non-super benefits and about half a billion managing it all. No estimates are given for the proportion which are “too lazy to work” or for those claimants who are “shit bags”.

    http://www.treasury.govt.nz/budget/2013/ise/v10/ise13-v10-pia-socdev.pdf

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  13. scrubone (3,048 comments) says:

    We know that it’s wrong to be spending more on super than education, that it comes at the cost of caring for children, and yet he has got his head in the sand.

    a) why is it wrong? I’d have thought the two things are completely different, with no implied moral connection whatsoever.
    b) Caring for children is not the responsibility of the education system, it’s responsibility is education.

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  14. leftyliberal (642 comments) says:

    The reason for the discrepancy is that there’s a separate Vote: Tertiary Education that is separate from Vote: Education. That consists of around 2.5B.

    So yes, we spend more on Super than on primary and secondary education, which was clearly what Parker was referring to (note his use of “children”).

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  15. leftyliberal (642 comments) says:

    @scrubone: The argument is that if you have X to spend and you need to spend Y on super, then you have at most X-Y to spend on other things (e.g. children’s education). By not restricting the growth in Y to less than the growth in X, you’re necessarily reducing X-Y.

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  16. Ian McK (237 comments) says:

    If a select sector of our community stopped breeding unwanted children for extra DPB payments, then we would have no problem. Once again those that work, save, and succeed, are penalised to keep leeching bludgers of society. Get rid of DPB (except in exceptional cases), WFF, and tighten up on immigrants’ benefits . . . they are frivolously living lives of Riley at NZ taxpayers’ expense.

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  17. leftyliberal (642 comments) says:

    @Ian McK: Ah, the life of Riley on the DPB. It’s so glamorous we give ‘em all a pay rise once they hit 65.

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  18. Albert_Ross (247 comments) says:

    DPF: Your index-linking approach will automatically and very rapidly shift about 40% of pensioners – those who have no income but Super – below the poverty line. That is an artificial construct, arising from the fact that the poverty line is calculated by reference to wages, but it’s one that is likely to resonate politically. NZ currently has one of the lowest rates of old age poverty in the OECD; your approach would move it to one of the highest. Are you up for the political fallout of that?

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  19. SPC (5,392 comments) says:

    Albert Ross, which is why there would need to be two rates

    1. a universal rate increased by the CPI
    2. a means tested rate connected as now to after tax wage levels.

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  20. Duxton (581 comments) says:

    Sorry, DPF, but I’m not sure that I agree with means testing superannuation. All that will do is punish those who have planned for their own retirement, and reward those who haven’t. I have paid taxes for my whole working life (I’ve just turned 50), have only ever borrowed to fund a mortgage (which will be paid off in a few week, 12 years ahead of schedule), I don’t smoke, I maintain a healthy lifestyle, have never appeared in court or cost the legal/justice/police systems, have saved for my own retirement…..so I can’t see why some bludger should get more on the basis that I’m somehow better off.

    Ants and grasshoppers………

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  21. jcuk (583 comments) says:

    If you means test NS you penalise those who held back their expenditure of themselves and family during their working life.
    As with all the narow mided penny pinchers and jealous twits you do not think your ideas through beyond your short sighted view of the haves and havenots.

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  22. SPC (5,392 comments) says:

    jcuk, if the choice was between increasing taxation or a universal reduction in support leaving those without any other means in poverty or some form of means test – what would be best, and if it is a means test – then what form?

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  23. Mark (1,360 comments) says:

    The superannuation age pledge by John Key is arguably his biggest fuckup, albeit the cuppa with Banks and lying about the GCSB CEO appointment haven’t been golden moments for him either. However one suspects if there is one takeback Key could have it would be the superannuation comment. So simple

    Still if Parker wants to make his point he should at least get the basic arithmetic correct

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  24. Albert_Ross (247 comments) says:

    Don’t really see the benefit of that approach SPC, but maybe I’m not understanding it right. Let’s take two pensioners, a very rich one and one who has no income or saved wealth at all.

    Presumably the rich one gets only the universal benefit; and the poor one gets the universal benefit plus the maximum level of the means-tested benefit.

    So the rich one’s total benefit is increased only in line with the CPI, while the poor one’s total benefit increases in line with some average of the CPI and wage inflation. So the poor one’s total income still does not keep pace with wages, so he still falls below the poverty line, albeit more slowly.

    Seems to me that this approach retains the worst aspects of means testing (complexity, likelihood of administrative error, penalising financial competence) and the worst aspects of universality (giving money to people who don’t need it, at the expense of those who do) and forgoes the benefits of either (cost saving on the one hand, and simplicity and incentive-neutrality on the other). But as I say you’ve not given enough detail to be really clear about how it would work in practice so maybe I’m not understanding it right

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  25. SPC (5,392 comments) says:

    You are mistaken as to what I proposed

    It was that the current super continue for those without other means – that is remains linked to after tax wages.

    The alternative for those with other means is a lower rate level super. This on the current base but increased each year only by the CPI.

    Thus over time there would develop a margin between the two – that would effectively become a means tested supplement in top of a lower universal payment.

    In this way there would be a gradual increase in saving on current super cost – so that there is mitigation of the rise in number of people on super over the next 30-40 years.

    PS. There is no system that is incentive neutral and yet provides more help to those with less means. Nor is there any means testing without some administration cost. Complexity is a relative concept, complex compared to what alternative. Just choosing one of two rates (claiming in a declaration one lacked other means so qualified for the higher rate super) when signing up for super is as simple as could be. As super is not a benefit, of course people who do not need it will get it.

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  26. dave_c_ (214 comments) says:

    In the same way that those proposing either later starting age, means testing etc would be inflicting reductions on those who are better off and have been metitculous in their non use of taxpayer benefits all their life – I would only agree with that approach if also those who have received benefits are held more accountable regarding how those benefits are spent !

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