National's u-turn on Kiwisaver should not be trusted

The National party attempted to make a swift u-turn today when its Industrial Relations Spokesperson Kate Wilkinson told an employment relations forum that National would do away with the compulsory employer contributions to Kiwisaver. "The National party is not a party of compulsion".

Under pressure from her boss, John Key, Wilkinson issued a later statement claiming she had "misinterpreted the question" (yeah right). "National will release its Kiwisaver policy later this year, but suggestions that National will do away with compulsory employer contributions to the scheme are incorrect.

According to Key, Wilkinson "got it wrong", and added that National's industrial relations spokesperson is not involved in the setting of National's Kiwisaver policy. Perhaps Wilkinson was only guilty of telling National's wealthy backers what they want to hear. Perhaps this is a also a sign many National MPs are currently sharpening their hatchets, desperately looking for ways to cut government spending to fund tax cuts, following a budget that tied up most of the cash.

Despite it not being National's day, I think the media have missed something important, and have subsequently let Key off the hook with his refusal to outline any further detail about National's Kiwisaver policy.

While employers have to make contributions to their employees Kiwisaver accounts, employers also gain tax credits for doing so. These tax credits reinburse 100% of employer contributions up to a maximum of $20 a week. In situations such as the 2+2 scenario (where employees put in 2% and employers 2% to make up the 4% minimum) Kiwisaver does not end up costing employers any money more money (than paying 1%) when the tax credits are taken into consideration (for those earning less than 52,000 a year). Labour have set aside a total of $2.4 billion to compensate employers for their 'contributions' over the next four years.

National's denials come with a pungent stench of weasel. National could keep the employer contributions, but give employers greater tax breaks so a greater proportion of employer 'contributions' actually end up being effectively subsidised out of the public purse. National could pay for this by trimming the government contributions, and dangle the prospect of greater tax cuts. This would be consistent with the comments made today.

The effect of such a policy change would also deliver to National's big business backers, who prefer corporate welfare when they can get it. The 650,000 New Zealanders who belong to Kiwisaver should not take any relief from National's blundering policy announcement today. As far as Kiwisaver is concerned, the National party still refuses to answer the key questions regarding their Kiwisaver plans.

Hat tip for some of the links NoRightTurn.

Costs of insurance for young drivers must be lowered

Jeremy at Aucklander at Large dismisses the call of the Transport Safety Minister Duynhoven for compulsory third party vehicle insurance and says it simply will not work.

Duynhoven claims requiring third party insurance for all drivers would I have an impact on the behaviour of the so called boy racers. "That very soon changes behaviour because people realise they are not in a position to drive if they have a lot of speeding tickets, a lot of vehicle offences or a vehicle which is modified with a very high premium because if they misbehave their premiums then go through the roof."

Like Jeremy I think the Minister is dreaming if he thinks the kids think 'premium' when they are burning the premium unleaded.

But unlike Jeremy would like to see all drivers required to have at least third party insurance, so long as it can be made affordable.

If many young drivers cannot afford insurance, the insurance industry needs to take some responsibility for this. Simply put, by stupidly inflating the premiums on the young, the insurance industry have told young drivers they are not wanted as customers, even if they have a clean driving record.

As a 31 year old male driving a slightly underpowered Mazda Familia station wagon I did not expect to be quoted nearly $700 for insurance*. For the crime of not requiring car insurance for the previous two years (I had been overseas) I did not qualify for any discounts. Now that I have moved to Auckland I am told my premium will nearly double in August, while I will get a 30% no claims discount, my premium it will be more than I paid in Christchurch last year. While the insurance industry may claim it is legal to insist the young pay more, there must also be a point, in terms of degree, where there is a possibility of challenging this under the Human Rights Act.

Before third party insurance could be made compulsory I believe any social democratic government worth electing should first consider intervening in the insurance market to lower premiums. The introduction of the state owned Kiwibank into the banking market has lowered fees and forced the other banks to offer banking packages for those with few beans in the beanbag.

So why not also allow Kiwibank to offer lower cost insurance packages? The only difference between the insurance offered by Kiwibank and Westpac would be the cost.

The irony is that the Government used to operate State Insurance, and this 'brand' is still in use by the private sector many years after privatisation. To my mind State Insurance, and their owners the Insurance Australia Group, continue to trade on the state's good name in false pretences - this has irked me for some years. If 'State' wasn't a commercially valuable brand they would have dropped it by now. Perhaps this also tells us New Zealanders are not as hostile to the 'state' as the far right would have us believe.

Drivers already pay a kind of insurance premium for accident injuries when they licence their vehicles, so why can't government owned insurance cover the vehicles as well? (though ACC need to be told it is not acceptable to adopt the ethics of private insurers)

I have sympathy for requiring compulsory third party insurance as I believe being hit by a driver without insurance can lead to unjust and highly costly situations, for both the person hit and the person having to pay the bill. Messy court action may be required, increasing the costs of time and money for both parties. But more often than not, an insurance company sues or threatens to sue the uninsured driver for everything they have, and then some. If premiums are simply unaffordable, and a car is the only way to get to work - an accidental swipe of a BMW can cause a person to be financially crippled for years - is that really a just outcome?

A parallel argument could be made here about the ability of those on very low wages to afford the 'premium' to be part of Kiwisaver (4% of wages). Will we see a future government blame the non savers for not having the disposable income to make contributions, and use this as an excuse to remove universal public superannuation? Will they be left financially crippled in old age?

I would also like to see more restictions placed on the lending institutions to offer easy car finance - as finance on a fast depreciating asset like a car should be subject to greater restrictions to ensure the banks and the loan sharks are not simply ripping people off. Why not teach the boy racers better saving habits?

If all drivers had complusory third party insurance this would be for the benefit of everyone - a public good - so the use of public money to fund state intervention in the insurance market could be justifed IMHO.

* The quote was from State Insurance - I found a slightly cheaper premium elsewhere.