The super way to boost business

There is a paradox at the heart of the government’s business policy. Council of Trade Unions economist Peter Conway fingered it on this page on Friday.

“There is a good argument for a quantum leap in economic development expenditure,” Mr Conway wrote, “but such notions have to compete with superannuation pre-funding as well as the spending pressures because of the huge social deficit that has developed over the past two decades.”

Mr Conway ducked the corollary: if the government were revving up the knowledge economy in a Singapore sort of way, super pre-funding or social spending would have to give. Instead it is relying mainly on exhortation or fortuitous synergies.

As Roger Kerr has pointed out, the sums for research and business development are so small they will make only a marginal difference – certainly not enough to transform us into a high-tech powerhouse.

Michael Cullen acknowledged this “modesty” in a recent speech. Some work requires not huge grants but facilitation, he said. Also “we are building new programmes and therefore it is important to monitor those to see they are working.” And (in what reads like a sly dig at Jim Anderton’s enthusiasms) “we do not want the temptation of throwing large sums of money at industry development when we are not even very used to throwing small sums of money in this area.”

All good and valid points. But he did not add that super pre-funding will keep the sums “very modest” even when (if) the programmes are proven and the prospect of success supersedes temptation.

Spending all this year’s pre-funding on business development would be a waste, as Dr Cullen implies. But if the government truly believes its propaganda about intervention, in a few years large sums could be working wonders – with some left over to close the “social deficit”.

And does Dr Cullen actually have to be so self-denying? In a revealing comment in another recent speech, he said: “We recognise that changes in life expectancy and medical science may lead some future government to consider raising the age above 65 but would expect that any such review would be 25 to 30 years away.”

But isn’t 25-30 years away the point in time we are pre-funding for? If some future government might well raise the age anyway, why pre-fund potentially to no avail?

One option is to update a 1960s idea. Super could become available as a sort of age benefit at 65, generously means-tested (at least initially), then universally from 70 – with, say, a 10-year transition period.

Initially the vast majority of 65-70-year-olds would be on the age benefit and only some in the workforce. But as health status improves and life expectancy extends over the next 20 years more would likely want to work rather than twiddle their thumbs in humiliating dependency with 20 or more scrapheap years stretching before them.

Moreover, as the ratio of under-65s to over-65s falls, demand for 65s-70s to work on is likely to grow anyway to keep workforce numbers up – logically (as political priorities evolve), “encouraged” by tighter means testing.

We could thus be entering the baby boom retirement years with both an affordable super scheme and a bigger workforce than the demographers are flagging.

And able-bodied 65-70-year-olds still in well-paid employment would not be dipping into government funds that could be fixing kids’ glue ears or plugging them into the knowledge society.

Of course, this idea will not fly, though a smattering of MPs are attracted to it.

First, super pre-funding goes down well with credit rating agencies and the IMF because it demonstrates the fiscal prudence investors demand. And in time it might reduce the investment income deficit which is wrecking our balance of payments and even fund some high-tech projects.

Second, Labour and National have been spooked by aged anger over the super surcharge. Labour found that even though very few of the old in their voter catchment ever paid it, all saw the surcharge as an attack on all aged. So they cannot even flag changes. Meanwhile, with grim illogic, Michael Cullen doles out super to the super-rich while skimping on nurses’ pay.

What is this? It is the politics of today’s aged. Which is what super has been about since 1975.