SOCIAL INSURANCE

Franklin Times, Volume XXVII, Issue 108, 14 September 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 an 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 actual 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 not assure -to its insured persons the benefits which it undertakes to provide.” (The Minister of Finance, Hon. W. Nash: “If we look after 1940 I 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, and 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. 11. Maddex, with whose outlook he disagrees. The reductions the Minister has made amount to £3,4 00,000 _ for the first year—including £l/790,000 for war pensions and war veterans’ allowances, although this sum still has to be paid. The Minister then says: “I have no doubt that if our figures are correct our ordinary natural income will expand to an extent that will enable the necessary money to be found without any increase in taxation in the 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.” (The New Zealand scheme is national in scope but it is universal in its application only as regards (1) health services, and (2) the modest “superannuation” payment, as from April 194 0, to everybody aged over ('».> years, of £lO a year, with annual increases of £2 10s, without a means test, and taking more than 27 years to reach the maximum of £7B a year. However, as regards the age benefit of a maxi-

mum of £7B a year at age of 60, this

is not universal in its application, because of the income bar).

() “The contributions are 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 +he New Zealand scheme. It was introduced after the Government had promised there would be none. There is no equitable relation of benefits t.c contributions, the 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 the ‘cover’ which can lie 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). (G) “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 be no penalties on thrift or selfreliance.” (The New Zealand plan does not give the age-benefit as of right, but goes so far as to debar it to the thrifty and self-reliant to reward those who may not have been thrifty and self-reliant). (7) “The object of national insurance 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 more, and can do so, they will not be penalised when pension time comes.” (The age-benefit proposed for New Zealand is to be 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 benefits 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 are 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 be those who cannot hope to secure all or any part of the national age-benefit 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 age, 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 in 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 be either to risk the future pensions of our young people, or to risk the crippling of public 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 to the income of the country”). These comparisons do not support the view that New Zealand is leading the world with a sound and equitable social insurance scheme. j