SOCIAL INSURANCE

Evening Star, Issue 23048, 29 August 1938, Page 7

SOCIAL INSURANCE

IS SCHEME SUPERIOR? PRINCIPLES EXAMINED ALONGSIDE AUSTRALIAN PLAN The claim made by the Government that its Social Security Bill is greatly superior to any other national insurance scheme in the world reads strangely alongside au official booklet which has just been published by the National Insurance Commission of Australia, giving a summary of the main principles of the Australian National Health and Pensions Insurance Act, which was passed into law last month (says a statement by the Associated Chambers of Commerce of New Zealand). This booklet brings into sharp relief fundamental injustices and weaknesses in the proposals which are now before the Dominion, and demonstrates how the Australian measure rises superior to the New Zealand plan on the basic and vital principles of national insurance. ' COMPUTING THE RISKS. The following are passages taken from the Australian booklet referred to, with notes in parentheses giving the corresponding position in New Zealand : 1. “ The first principle of national insurance is that it is insurance, and its details are therefore based on actuarial computations of the risks which it covers” (says the Australian Commission). “ Insurance is in effect the same thing as assurance, and it would not deserve the name if it did nut assure to its insured persons the benefits which it undertakes to provide.” (The Minister of Finance, Hon. W. Nash: “ If we look after 1940 1 think 1941 will look after itself.”) 2. “ This, .in turn, implies two things; (a) That the costs of the benefits promised will not be in excess of the funds to be available; and (b) that the funds will be available as and when they are required. The actuarial evidence provides the information for determining these two things, aijd is the basis for deciding the relations between contributions and benefits.” _ (The Minister of Finance has arbitrarily reduced the estimates of cost prepared for New Zealand by the British Government actuary, Mr G. H. Macldex, with whose outlook be disagrees. The reductions the Minister has made amount to £3,400.000 for the first year—including £1,790.000 for war pensions and war veterans’ allowances, although this sum still has to he paid. The Minister then says: “I have no doubt that if our figures are correct our ordinary national income will expand to an extent that will enable the necessary money to be found without any increase in taxation in tho ordinary way.”).

SCHEME NOT UNIVERSAL. 3. “ The second principle of national insurance is that within its range it is national in scope and universal in its application.” (Tho New Zealand scheme is national in scope, but it is universal in its application only as regards: (1) health services, and (2)‘ thc modest “superannuation” payment, as from April, 1940, to everybody aged over 65 years, of £lO a year, with annual increases of £2 10s, without a means test, and taking xnore than 27 years to reach the maximum of £7B a year. However, as regards the age benefit of a maximum of £7B a year at age 60, this is not universal in its application because of the income bar.) (4) “The contributions arc compulsory and the benefits are available to all, without any condition other than the conditions of insurance. . . . The national scheme, being an insurance scheme, relates its benefits to its contributions, and has no ‘ means test.’ ” (A “ means test ” operates in the New Zealand' scheme. It was introduced after the Government had promised there would bo none. There is no equitable relation of benefits to contributions, tho principles of insurance being thereby denied. Those making the least contributions are likely to receive , the largest benefits, and vice versa.) (5) “ National insurance, because it is compulsory, sets limits to tho ‘ cover ’ which can be purchased. Both the contributions and the benefits are standardised.” (The only standardising in the New Zealand plan is in the limitation of the available benefits. Contributions are not standardised, but are without limit, being a percentage of income.)

(6) “ The benefits of national insurance will not be conditional upon poverty or necessity, but solely upon insurance rights . No question of income or property will arise, and there will bo no penalties on thrift' or selfreliance.” (The New Zealand plan does not give tho age benefit as of right, but goes so far as to debar .it to the thrifty ami self-reliant to reward those who may not have been thrifty ami self-reliant.) (7) “ The object of national iiisur ance is not to nationalise all thrift, nor to provide all the security which prudent people will desire to provide for themselves. ... If - they choose to save shore, and can do so, they will not be penalised when pension time comes.” (The age benefit proposed for New Zealand is to be 1 reduced by £1 for every £ by which the private income a person has provided for himself or herself exceeds £52 a year—thereby progressively penalising thrift.) ASSUMPTIONS AND RISKS. (8) “ The principle followed is that national insurance cannot deny the benefits of inclusion to any class of employees who are eligible to be protected by it, no matter how generous or secure their privately guaranteed bemefits may be at present, or are likely to remain, and that it cannot be adapted to suit the convenience of innumerable private schemes varying widely in their arrangements.” (Those persons already covered by private

schemes, and who aro brought into the Australian national scheme, are nevertheless assured of the full benefits of the national scheme. Persons in New Zealand who are already participating in private schemes are being brought in as contributors under the national plan, but among their number will bo those who cannot hope to secure all or any part of the national age benefit payment because of the very benefits they are due to draw under their private schemes. (9) In discussing the future growth in the number of persons of pension age and the relative decline in the number of persons of working ago, the Australian Commission says: “To ignore that problem is to assume that the national income will not only increase as it may reasonably be expected to increase, but that it will increase in proportion to the increase of persons of pension age, and that the taxable capacity of the working population will be doubled in 40 years. It is thought that to rest on such an assumption would bo cither to risk the future pensions of our young people or to risk the crippling of capacity to maintain and extend other welfare services.” (Mr Nash: “ If the same ratio of increase in exports over the last 40 years is maintained in' the next 40 years the costs of the scheme can be met.” The Minister of Lands: “There is really no limit.”) These comparisons do not support the view that New Zealand is leading the world with a, sound and equitable social insurance scheme.