KiwiSaver – let’s call it Kiwi Slaver by PAT O’DEA & VAUGHAN GUNSON In Budget 2007 the Labour government came down openly on the side of capital. The corporates were delivered a $1 billion dollar tax cut when the company tax rate was lowered from 33 to 30 cents in the dollar. Or to put it another way, companies operating in New Zealand were gifted a 10% boost to their profits. The other “flag ship” initiative was the government’s announcement of a major extension of the KiwiSaver retirement income scheme. There’s plenty of spin coming from Labour as to how KiwiSaver will benefit the country. The reality for workers is something else. As Matt McCarten quite rightly said in his column for the NZ Herald (20 May, 2007): “The KiwiSaver idea is sold on the basis of securing pensions for retired workers. But what it really signals is that the welfare state, as we know it, is finished. The principle of superannuation and other societal benefits is now being replaced by individual, user-pay schemes run by private investment corporations.” The carrot Labour has dangled in front of workers is a $1000 one off government contribution to KiwiSaver for everyone who signs up. You’ll then have to make regular contributions of a minimum 4% of income into a KiwiSaver account. This will be matched by 4% payments from employers, to be phased in over the next four years. Unlike workers, employers will get a tax credit from the government when they do. The scheme will only be a cost to employers in the case of high wage earners. The money will be managed by approved KiwiSaver providers, private banks and investment companies. You won’t be able to touch it until you turn 65, except to use for the purchase of a first home or to pay for critical health treatment. High cost for workers The cost to low paid workers will be high. Someone earning $25,000, as many workers currently do, will have to pay $19.20 a week into KiwiSaver. This is a big chunk of money to someone already struggling to pay the bills. Michael Cullen admitted on Radio NZ that “we are unlikely to see low income people opt in to Kiwi Saver.” If workers do sign up they can choose which investment firm their money goes to. If they don’t, the money will go to “default providers” selected by the government. These private investment companies can invest the money where they wish. What’s not being widely publicised is that this money is not secured by the government. If an investment company goes belly up, workers will lose their contributions. Cullen has said: “The government doesn’t provide a guarantee for private savings.” Despite workers having few options for securing a decent retirement income, and workers starting a new job will be automatically signed up to the scheme, by arguing that KiwiSaver is voluntary the government protects itself from any liability. Evidence so far from KiwiSaver providers is that it’s older and wealthier people who are signing up. The scheme favours those on higher incomes. Auckland economist and poverty campaigner, Susan St John, says KiwiSaver will increase income inequalities. Green Party MP Sue Bradford, says KiwiSaver is evidence that: “There are two New Zealands emerging, – one enjoyed by those who can afford to save for retirement, and one in which low paid workers and beneficiaries are barely keeping their heads above water. Michael Cullen has simply walked away from traditional Labour concerns about the low wage economy and inadequate benefit levels – in favour of corporate tax cuts and savings schemes for the relatively well-to do (18 May 2007).” Workers see hidden stick Opinion polls show workers aren’t excited by KiwiSaver. Workers, however, will be feeling the pressure to join, because the message has been coming though loud and clear from politicians that the country can’t afford National Superannuation anymore. Many workers are resigned to joining KiwiSaver at some point, because they fear there won’t be a pension when they retire. Workers are not so much taken by the carrots offered, but can see the hidden stick. When asked by Radio NZ if KiwiSaver would eventually replace National Superannuation, Michael Cullen replied: “Definitely not. Because we must realise how low National Superannuation is.” An admission from Cullen that current pension payments are inadequate. The policy direction is towards a privatised model where the current pension system becomes increasingly irrelevant. KiwiSaver will force workers to take a pay cut now in order to achieve a level of income in retirement that used to be a right. For low income workers who can’t afford the 4% pay cut, and beneficiaries (who won’t get the government subsidised employer contributions), the future is even worse. They’ll only be eligible for a pension that by the time they retire has been eroded to virtually nothing or has been scrapped altogether. Combine this with an increasingly user pays heath system then old age looks like being a nightmare for most working class people. Labour is creating this nightmare situation for workers because, once again, it’s the health of business profits that concerns them most. To give billion dollar tax cuts to business Labour is reducing the same amount each year that would have been available for healthcare, education, public transport, or anything else that might benefit grassroots people. KiwiSaver delivers a 4% wage cut for up to 50% of the working population and allows the government to trim spending on National Super and give it to business in the form of tax cuts. KiwiSaver should be re-named Kiwi Slaver. Economic tool to boost profits Privatising retirement income delivers the first benefit to capital. The second benefit is the hoped for impact on the economy. Capitalist economists have long been worried about the low levels of domestic saving within New Zealand, which puts upwards pressure on interest rates, increasing the costs to New Zealand capitalists wanting to borrow to invest in their business. Cullen will be hoping that KiwiSaver will lower interest rates, because banks and investment companies will now be rolling in money that’s been levied from workers’ pay packets. According to Treasury estimates KiwiSaver will deliver a quarter of a trillion dollars into the control of private investors by 2028. Mark Weldon, chief executive of NZX, New Zealand’s biggest stock market firm could barely hide his greed when he gleefully described the KiwiSaver fund as “a wall of cash”. Weldon says KiwiSaver in its revised form, on top of recent tax changes, including those for portfolio investment entities and overseas investments, have given businesses a rare opportunity. “Put all those things together,” says Weldon, “and you have a substantially meaningful long-term wave of money forming that will be available to the New Zealand corporate sector broadly and largely through the stock market.” Weldon was quoted in an article in the Business Herald (May 26 2007) titled “Up, up and away”, a catch cry first attributed to Dick Turpin as he mounted his horse, Black Bess, after a successful highway robbery. For Cullen, the hope is that workers’ money can be redirected into profitable investment rather than spending today. Workers make the sacrifices while business gets it on plate. Cullen has even had the gall to suggest that the employer contributions – despite being covered by tax credits should be factored into wage bargaining. This continues Cullen’s repeated statements last year that workers shouldn’t demand wage increases because they were inflationary and damaging to the economy. Union leaders praise KiwiSaver If this is wasn’t all bad enough, the leadership of the CTU and affiliated unions are right behind KiwiSaver. No matter that KiwiSaver disadvantages low income workers and excludes beneficiaries, and clearly signals the more towards the privatisation of superannuation. “KiwiSaver is good news for many workers” says CTU secretary Carol Beaumont. “There is strong interest in KiwiSaver from workers, and unions are working hard to make sure their members know about their entitlements and get the best opportunities to benefit from KiwiSaver.” In a glossy leaflet produced by the CTU and widely distributed to union members it says: “KiwiSaver does not replace NZ Super. But, as many New Zealanders now find that NZ Super does not provide enough for them to comfortably retire, KiwiSaver aims to help workers save for a better standard of living when that time comes.” Union leaders who are acting as cheerleaders for KiwiSaver are doing just what Helen, Michael & Co want, they’re deflecting attention away from the corporate tax cuts and the further erosion of public services that will occur. The enthusiasm for KiwiSaver coming from union leaders is the result of years of pushing partnership between workers, bosses and the government. All the rhetoric around KiwiSaver is about how it’s going to be “good for the country”; it’s going to be a “team effort”, as it says in a government brochure on KiwiSaver. It’s the same stuff many union leaders are happy to repeat, even though the “partnership model” is increasingly out of step with the anger that exists amongst workers, combined with a growing willingness by sections of workers to fightback. Many workers will see the CTU’s glossy leaflet on KiwiSaver for what it is: an attempt by the union hierarchy to sell workers a dodgy deal. It raises more questions in workers’ minds about why the leadership of union bodies like the CTU are prepared to back Labour when that party is most often playing the role of taking away from workers and giving to big business. As more and more workers learn the lessons of the struggles against Progressive and Spotless, this will undermine the politics of partnership coming from union leaders who maintain close ties to Labour politicians. Just as partisan unionism is the way forward on the industrial front, so is partisan politics the way forward for workers on the political front.