Forces gathering to attack super

By VERNON SMALL deputy political editor

Superannuation could become a political football at the next election - yet again - as backing for the Coalition's huge pension fund wavers.

Minor party support for the scheme to partially prefund the cost of baby boomers' pensions is in doubt, and National is preparing for a major assault later this week.

The Coalition, which lacks a majority in the House, is looking to either the Greens or New Zealand First to help it write the scheme into the law books.

In the meantime it has started setting aside cash.

Last week's Budget included a $600 million provision - about $150 per New Zealander - and earmarked $1.2 billion from next year's Budget for the fund.

Prime Minister Helen Clark yesterday reiterated a Labour pledge to fight the issue on the hustings if it cannot get the fund through Parliament before the 2002 election.

The scheme is being considered by a select committee, and the Government's key allies are pressing for important changes.

Both Green co-leader Rod Donald and New Zealand First leader Winston Peters are critical of the scheme.

Mr Donald said yesterday that the public had assumed it would be funded from surpluses. Plans to increase Government borrowing at the same time as it was putting money into the fund would undermine its credibility.

But Green and NZ First opposition on other grounds is also worrying the Government.

Behind closed doors the Greens have so far been unsuccessful in their push for stronger ethical investment rules for the fund.

The Greens will disclose their stance at their annual conference this weekend, but Mr Donald's criticisms suggest they will at best abstain from supporting the superannuation bill's key provisions.

New Zealand First leader Winston Peters, who has said the fund is "better than nothing," has asked officials to find a way to track taxpayers' contributions, making a later transition to an individualised scheme easier.

His total support will hinge on a compromise on that issue.

Meanwhile, National's finance spokesman, Bill English, claimed Dr Cullen did not have enough cash for the fund and would have to borrow to top it up.

Not all of the Government's forecast surpluses are represented by cash because they include revaluations and the retained earnings of state-owned companies.

Up to 2005 the Government plans to invest $19.3 billion, including $6.1 billion for the super fund, but will have only $11.7 billion in cash from surpluses, meaning nominal Government borrowing will rise.

It plans to cover the cash shortfall through borrowings of $4.8 billion and selling marketable securities and deposits.

Dr Cullen said Mr English was "dead wrong" to say the Government could not afford the super fund.

"We have always said the payments would come from the operating balance."

They were sufficient to cover payments into the fund.

He said the Budget showed a small increase in net debt over the next few years but that had nothing to do with the fund.

Instead it reflected a decision to take Housing New Zealand and District Health Board borrowing onto the Government's own books, which would lift gross debt by $700 million in 2001-2002.

The Government also planned heavy capital investment in areas such as transport, defence and prisons, which had been allowed to deteriorate under the previous Government.