Act at sixes and sevens on super

Superannuation is a policy area with a lot of baggage for this country’s main political parties, including the new ones.

In Act's case this is largely because of the history of its leading members.

At seven years old the party is a political fledgling but leader Richard Prebble, and influential senior members such as former finance ministers Roger Douglas and Ruth Richardson, have plenty of history on the issue.

The influence of those former custodians of the public purse have given Act an unusually strong focus on the numbers behind any policy. On super though, the numbers are different. On this issue, Act is a party is at sixes and sevens with itself.

Act has long been split between two groups. These can be variously termed the purists and the populists, the bishops and the bookies, the roundheads and the cavaliers, or to use a handy New Zealand historical analogy, the whalers and the missionaries.

Those on the purist/roundhead/bishop/missionary side of the divide – those behind the party’s recently launched "Liberal Project" – are keen to push the ideologically correct line of small state, low taxes and so forth. That group has been in retreat ever since the party abandoned its initial policy of abolishing income tax prior to the 1996 election.

The populists are keener on day-to-day headlines, particularly if it involves them fronting a scandal involving public money. Finance spokesman Rodney Hide is the leader of this group. Hide has studied closely the man who has been a past master at this approach to politics for the past 15 years – New Zealand First Leader Winston Peters – with a view to emulating Peters’ successes but avoiding his mistakes.

Prebble has tended to favour the populist approach, but he is at times a more complex politician than he is given credit for, and occasionally he will lean the purist way.

The one thing the two groups can agree on is tax cuts, which is why the party’s policy on almost everything from super to business development to youth suicide is tax cuts.

On super, Act favours raising the entitlement age to 68, and it reckons the country could afford to maintain payments at current levels and lift the age.

Act has also argued that putting the super fund on international sharemarkets is folly – not a line which the party’s purists are particularly happy about.

The rest of the party’s policy is attack. Act, whose members tend towards the younger cohort of New Zealand’s centre-right voters, is also playing to that younger group. The party has criticised the government ‘s pre-funded scheme on the grounds that it is a smoothing mechanism that will help the baby-boomers over the hump, with the help of the savings from those under 45.

"A baby born today will pay into the account via taxes all their life, but when they retire the scheme will be exhausted," l Prebble said in a speech earlier this year. The party is playing to that inter-generational tension - Prebble has explicitly raised the prospect of a tax revolt which would essentially be those under 50 rebelling against their parents. He has also frequently cited a government report which shows that those over 65 are already, on average, better off than younger New Zealanders.

"We have a system whereby many people are much better off financially when they turn 65," Prebble said in the same speech.

How far the party is prepared to push that approach, which runs the risk of stirring up inter-generational resentment, remains to be seen. It may go down well amongst the more excitable young right-leaning voters that Act is inclined to attract, but that is likely to come at a cost.

And the party’s missionaries are on the march. (The move at the last election to bump corporate lawyer Stephen Franks up the party list was generated by that wing of the party). Franks was seen as a possible successor to Prebble, if and when the leader decides to call it a day, and was brought in largely to counter the rise and rise of Hide. Thus far Franks has made numerous solid and well thought out contributions to various issues, particularly on issues around corporate law and regulatory issues, but in terms of political impact his approach has been maybe too purist.

But as his advent so far up the list was aimed at not being too populist, a splurge of headline-making outbursts would have been somewhat contradictory.

The ‘Liberal Project’ venture, as already mentioned, is another sign that Act’s evangelical wing is banging its metaphorical tambourines again. Whether that group will address super remains to be seen. But it is a sign Act is rethinking its first principles again, and that its more thoughtful wing is making a comeback. If it doesn’t readdress this issue, it is a sure sign the party’s tensions have not been reconciled.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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