THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JULY 7, 1938 FINANCING SOCIAL SECURITY

New Zealand Herald, Volume LXXV, Issue 23083, 7 July 1938, Page 12

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JULY 7, 1938 FINANCING SOCIAL SECURITY

Honest doubt as to the financial soundness of the Government's social security scheme was frankly expressed by Mr. Forbes, speaking in the House of Representatives yesterday. "Based as it is at present," said Mr. Forbes, "the scheme will crash as certainly as day follows night, no matter how much faith the Government has in the scheme or how good its intentions are." Mr. Forbes is more downright on the subject than most people would care to be, yet he is correct in stating that there is growing apprehension throughout the country over the cost of the scheme. That is not because people are hostile to the whole idea. On the contrary everyone would like to see such generous social provision made. Their doubt is whether the country can afford it, not only next year but also five, ten and 40 years on. That is really the point on which the Government should try to satisfy the people. So far the Prime Minister and his colleagues have said very little about ways and means, which are the heart of the whole matter. For anything the people know, Mr. Forbes may be justified in describing the scheme as being "on a speculative basis." Yet it is difficult to believe that the Government is merely gambling on the future, gambling on the ability of labour and production to support this great, new superstructure of social services that must carry the people in sickness, invalidity, disability, bereavement and old age. If it has any sense of responsibility, the Government must be convinced of the financial soundness of the foundations on which it proposes to build. Some estimates of the cost of the various proposals have been submitted by the British Government's actuary, Mr. G. H. Maddex, but no attempt has been made to prove that the country can pay the cost, in good years and bad. Mr. Maddex's figures were so formidable as to inscribe a large question-mark in most minds. Can it be done? It is for the Government to show that it can be done and how it is to be done. On the Government's original proposals, Mr. Maddex worked out the cost at £17,850,000 in the first year, rising to £20,400,000 after five years and to £21,900,000 after ten years. "Thereafter," he said, "expenditure will continue to increase, though at a slower rate, and an annual charge of about £25,000,000 must be contemplated in 30 to 40 years' time." At the time, in fact, -when young men and women who begin next year paying Is in the pound of earnings will look to the scheme for superannuation. Can they put their trust in the scheme; can they bank on it so far ahead? The Government will have to satisfy these young people and all the older ones who are considering whether it will be safe to rely on social security. Even the original first cost of £17,850,000 was very high, and Mr. Savage's subsequent widening of the superannuation basis has added several millions to that. But if the estimate be kept down to the original and therefore the lowest figure, it is still higher than the total yield of taxation from all sources and for all purposes in the two prosperous financial years 1927-28 and 1928-29, when tax receipts amounted to £17,145,000 and £17,832,000 respectively. People thought tax rates high enough then but will remember how in the depression they were screwed up to emergency levels. For all that, the Minister of Finance was able in 1931-32 to produce no more than £17,405,000 in tax revenue, considerably less than the present Government hopes to obtain for its social security scheme, let alone all the other State services. It is comparisons such as these —and others that might be made—that cause people to doubt.

The Government should be able to resolve these doubts, unless it is financing on hope and putting the people's future on no more concrete a basis than good intentions. In reply to Mr. Forbes, the Prime Minister yesterday denied he had stated the scheme was based on the assumption that the production of the country would be doubled. There appears to be little doubt, however, looking back to the proceedings of the Special Parliamentary Committee, that Mr. Savage and Mr. Nash are relying on expansion in the future at something like the rate experienced in the past. Is their reliance well founded? Stationary populations here and in Britain, New Zealand's chief market, do not offer the best insurance of increasing production and the corollary of expanding markets.. Even if mechanical aids continue to raise productive efficiency in New Zealand, their help will be needed to balance the effects of shorter working hours and a smaller working population. In any case, as Mr. Maddex sagely remarked to the Prime Minister, "the future position depends, not only on production, but on the price of the products and ability to market them." Of course the Government should need no such reminder because Mr. Nash is a foremost and insistent expositor of the fact that income may fall while production increases. Should the national income fall in the future as it has done in the past, will the Government be able to meet the position—to finance its ordinary Budget and social security—in depression as well as in prosperity? That will be the test. When security is most needed, it should be assured. It is for the Government to satisfy the people on this vital point of ways and means, not by large gestures but by a careful accounting of details set down in pounds, shillings and pence.