Wednesday, 28 August 2019

Crank up the pipe organ! The superannuation merry-go-round is starting up again. In 2014 Labour proposed lifting the age of entitlement to 67 years, but National was opposed to it. But in 2017, it was National wanting to lift the age to 67 years, with Labour opposed. Now, National has revived that promise, and the merry-go-round is whirring into life all over again, promising everyone under the age of 48, at least a two-year longer wait until they can collect their New Zealand Superannuation.

Generations of New Zealanders have been adversely affected by superannuation changes since the infamous 25% surcharge imposed by Labour in 1984, and its even tougher replacement regime introduced by National after 1990. There was a brief period of truce following the uncomfortable Accord negotiated by the two big parties in 1993, more to get superannuation and their pitiable records off the election agenda than to provide stability and certainty for retiring New Zealanders. Finally, universal non-means tested superannuation from the age of 65 years was restored in the late 1990s, but almost immediately there began to be whispers about long term-affordability and sustainability, culminating in the two big parties returning to their old tricks in the last few years.

Neither seems to realise they have no credibility anymore when it comes to superannuation. So, every time one or other of them raises the prospect of changes to superannuation they raise also the spectre of their mutual historic duplicity, with the consequence that no-one believes what they have to say.

It is time to draw a clear line, and rule out once and for all any further tinkering with the age of eligibility. At the same time, to address affordability and sustainability issues, two other steps should be considered.

First, now that most New Zealanders of working age are in Kiwisaver, it is time to make that a compulsory national savings scheme, with minimal exemptions. Boosting people’s Kiwisaver accounts would reduce the long-term pressure on New Zealand Superannuation as the major source of retirement income. In turn, that would enable governments to consider whether, from about 2040 or 2045 onwards, the value of New Zealand Superannuation could be reduced for new retirees, while retaining universality from the age of 65. If, as a result of changing work patterns, the age 65 cut-off for Kiwisaver was moved upwards, moving the age of New Zealand Superannuation upwards in line with that could also be considered, but only at that point. 

At the same time, fresh consideration needs to be given to a scheme known as Flexi-Super to meet the particular needs of those who often do not enjoy long retirements – manual workers, Maori and Pasifika, for example. Flexi-Super is a voluntary scheme that allows people to take a reduced rate of New Zealand Superannuation from the age of 60, or an enhanced rate if they defer taking up their superannuation until the age of 70. In reality, that would mean those taking superannuation from the age of 60, would be paid about 66% of the full rate of superannuation for the remainder of their lives, and those waiting until 70 would receive about 130%. The scheme would not be compulsory, although once a choice had been made, there would be no option to review it.

The key point of Flexi-Super is individual choice. If one was unwell or utterly fatigued, the option of a lower rate of superannuation for what might only be a few years (and might not even be as far off as 65) would be very appealing, especially as there is virtually nothing for them at present.

Various polls have indicated Flexi-Super resonates with many New Zealanders, but three main arguments have been raised against
it, although none have a great deal of merit. The first is that it will have little impact on overall costs. By itself, that may be true to some extent, but if it was accompanied by compulsory Kiwisaver as proposed above, it would most likely see a steady voluntary increase in the uptake age of New Zealand Superannuation until around 67, thus reducing the long-term cost of New Zealand Superannuation.

Others say, that it would be politically unsustainable to tell someone who has opted for the lower rate of superannuation at age 60, they will remain fixed on that lower rate once they reach 65. That ignores the fact that they will have had an effective five-year advantage over those who wait till 65. Also, it has to be assumed that in reaching their original decision people would have been made fully aware of the long-term implications. People are used to having to make hard calls in life, and Flexi-Super would be no different. But it is only an option for people to choose, if it suits them, not a compulsory requirement. 

The third counter-argument is the most novel and comes from the Treasury. It opposes Flexi-Super because it sees it as an incentive for everyone to opt in on the lower rate at age 60, bank the money as essentially free money and then derive the benefit at 65 or whenever, of what they see as a tax-free government retirement subsidy. They overlook two obvious points; first,  in the most unlikely event their scenario were so, there would be no additional superannuation payable to those people from 65, so there would be no additional cost to the government, beyond what was paid out from age 60. And second, because people would be taking the discounted, not the full rate, of superannuation, the long-term costs to the government would actually reduce by about one third.

Compulsory Kiwisaver and Flexi-Super are the real superannuation issues we ought to be discussing and debating now, rather than scrambling back on the faded old inter-generational betrayal merry-go-round of ensuring today’s income earners continue to pay for their parents’ New Zealand Superannuation, with no lasting guarantee there will be anything  there for them when they retire. That is the most short-sighted and unsustainable of all positions.

Wednesday, 21 August 2019

At first glance, Simon Bridges’ strident opposition to the government’s proposal to establish an independent office to cost political parties’ election spending plans looks childish and petty.

The proposal, advanced by the Greens, not Labour, that there be independent scrutiny and corroboration as appropriate of the various spending policies put forward at election time has much to commend it. There has been too much peripheral debate over recent elections about the cost of policies being promoted, rather than their content. Steven Joyce’s discovery of a $11.7 billion hole in Labour’s proposed Budget at the last election, or John Key’s “Show us the money, Phil” taunt to Phil Goff in 2011 were great attack weapons at the time, but in the absence of independent verification voters were left none the wiser as to their accuracy.

A politically independent statutory office, able to verify or debunk such claims, to help resolve voters’ uncertainties about the veracity and accuracy of claims like these, would have been welcomed at the time. Ironically, and assuming such an agency genuinely understood the intricacies of government financing, it is more likely than not that its judgement would have erred on the side of the National Party in 2011 and 2017, making Mr Bridges’ current reaction that much more puzzling.

However, the government is not planning to set up such an independent body, with all the statutory protections it has spoken of, until 2021, meaning the first election it will workable for is in 2023. In the meantime, the government is proposing that the Treasury undertake the function for the 2020 election.

This is where it starts to get more difficult. Treasury’s recent conduct over this year’s Budget leaks has raised serious questions about its competence and judgement, as well as its ability to respond calmly under pressure. It was Treasury, after all, that erroneously stated the leak was the result of a deliberate hack by an external organisation – by its implications the National Party – when we now know the leak came about because of the Treasury’s own ineptitude in managing its website. The thought that this agency could presently be relied upon to provide accurate and impartial credible assessments of political parties’ spending policies is beyond belief.

But there is another reason why the use of Treasury in this way in 2020 should ring alarm bells. As a public service agency, Treasury’s primary role is to serve its Minister, the Minister of Finance, in the implementation of government economic policy, and to report and recommend appropriate actions to the Minister accordingly. Over the years, various Ministers of Finance, of all political hues, have sought advice from Treasury on the cost of proposed Opposition policies, which Treasury has provided as dispassionately as it can. But it has still reported to its Minister in the first instance, in the full knowledge that the information provided is likely to be used politically to advance, if possible, the interests of the government. Requiring Treasury to act in 2020 as an independent policy costing review agency, while still being required to serve the interests of the government of the day is neither possible nor tenable.

Nevertheless, the establishment of a genuinely independent review office would be an important step forward towards more credibility and transparency. Both Labour and National, as well as other parties, should have a genuine interest in and commitment to making this happen, sooner rather than later. They should be prepared to work together in a bipartisan way to make this a reality.

However, if it cannot be achieved in time for the 2020 election – and it is a little unclear why this seems to have been ruled out – the current apparent default position of relying on an interim, half-baked idea like using the Treasury in 2020 should be ruled out altogether. The suspicion is that were Labour to rule out the Treasury option, National would be much more willing to engage on developing a viable long-term solution. Far better to have a proper regime in place in 2023, even it means having to stay with the status quo next time around.

In that context, Grant Robertson’s hysterical reaction to Simon Bridges’ obstinacy looks equally childish and petty. But it does raise the question of why is Labour so hell-bent on using the Treasury this way in 2020, if the independent agency cannot be established before then? It is a chilly reminder of the government’s recent decision to transfer the power to decide government referenda questions from Parliament where it currently resides to the Cabinet, but for the 2020 election only. Are they coincidentally unrelated, or are they part of a wider, deliberate strategy to tighten control of the political environment to boost the government’s election prospects next year? Cabinet deciding referenda questions is one thing, but effectively empowering the Treasury to cost and report on other parties’ election policies is something else altogether.

If Labour and the Greens are genuine in their view that an independent budget review office is an important step forward, and not just a clever political stunt, then they should withdraw the Treasury idea, and focus on working across the Parliamentary aisle to bring the new agency together as quickly and robustly as possible.

Otherwise Simon Bridges’ hitherto apparently childish and petty comments will quickly be seen to be comments of substance and judicious warning. 


Wednesday, 14 August 2019

PHARMAC’s recent decision to fund two additional drugs from December this year has been widely welcomed by patients and the general public alike. The drugs, Kadcyla and Ibrance, are used in the treatment of advanced lung and breast cancers and will prolong and improve the quality of life of many affected patients who have been unable to afford them before now. Both drugs have been the subject of high profile campaigns from patients and their advocates who have long felt that the system has been too insensitive and slow to act upon their concerns. Against that backdrop, this recent PHARMAC decision was seen as something of a watershed.

The process by which PHARMAC decides which medicines to fund is rigorous and thorough, for obvious reasons, but consequently it is also very slow. Medicines recommended for funding by the Pharmacology and Therapeutics Advisory Committee (PTAC) can often wait months and in some cases years to be approved for funding by PHARMAC. PTAC is PHARMAC’s primary technical advisory committee and operates with an understandable sense of separation and independence.

Critics say that is a major part of the problem, and that a better model to follow would be that of Britain’s National Institute for Health and Care Excellence (NICE). They point out that once a drug has been recommended by NICE for funding it has to be funded immediately. As there is no equivalent to PHARMAC in Britain, it is the National Health Service (the NHS) that has to pick up the tab alongside all the other health expenditures for which it is responsible. As part of its decision-making process NICE does attempt to undertake some cost-benefit analysis and assessment of the cost–effectiveness of new treatments, but funding remains the responsibility of the NHS.

In New Zealand, where there has never been a very strong pharmaceutical industry, even in the best of times, mainly because of our small population size and distance from world markets, controlling the overall level of expenditure on pharmaceuticals has always been a major issue for governments. Until the late 1980s, there was no control; the prices demanded by manufacturers were paid unquestioningly, and the overall pharmaceutical bill was soaring. PHARMAC and its predecessor were established at that time to get some control of the level of pharmaceutical expenditure and the prices multinationals were charging New Zealand suppliers. It is fair to say that in the early years at least it went about its work with a vengeance and independence that successive Ministers of Health came to welcome, because PHARMAC, not the government, made all the difficult decisions, and took all the public opprobrium accordingly. PHARMAC was (and is still) effectively NICE and the NHS rolled into one. Ironically, one of the things other countries and their pharmaceutical agencies look admiringly at is PHARMAC and its independence.

Over the years, starting with the national medicines strategy, Medicines New Zealand introduced in 2007, there have been modifications to PHARMAC and its processes to make it more accountable to both patients and the pharmaceutical sector, although its autonomy remains its cornerstone. However, PHARMAC is still under no obligation to fund any medicine recommended by PTAC within a specific time frame, if at all. And governments generally choose not to intervene in the process.

While the Kadcyla and Ibrance decisions have been welcomed, they are by no means the only medicines in this situation. For example, Adalimumab was recommended for patients with ulcerative colitis in 2018, but is still awaiting a funding priority from PHARMAC. So too with Ustekinumab, another Crohns and Colitis drug, recommended by PTAC in early 2019 but still awaiting ranking by PHARMAC. And, as even a cursory glance at PHARMAC’s on-line application tracker shows, there are many other drugs in a similar limbo, affecting many other patients and conditions.

To deal with this, a government could decide to completely overturn the current system and revert to the previous system of just paying unquestioningly the prices multinational manufacturers demand for medicines clinically approved by PTAC. That would be as foolish as it would be short-sighted. So too would be the establishment of dedicated funds for new, innovative and expensive medicines, which the current government mooted but has now sensibly turned away from. Nor is it altogether desirable to be tacitly encouraging various high-profile and well-organised campaigns, however heart-rending and legitimate their cause, to be lobbying to be treated differently from everyone else. That just entrenches the unevenness and unfairness of existing policy.

What is needed is a much more fundamental consideration based upon sound epidemiological and clinical advice about the spread of medical conditions prevalent in New Zealand, both by age, gender and cultural groupings, and the range of medicines most likely to be needed in this country to deal with them. Then, armed with that information, which would almost certainly include all cancer and bowel related conditions, PHARMAC should be charged with developing a funding strategy to meet those requirements. In turn, the government would need to ensure that level of funding was made available and sustained into the future. The trade-off for any increase in spending on medicines would be the reduction in the need for more palliative services elsewhere.

Such a sharper and more strategic approach would ensure the focus was far more on providing people with the medicines they need, when they need them. It would be an incredible contrast to the current situation where pharmaceutical funding levels are incredibly ad hoc. The baseline has not been reviewed in years, and the increases that have taken place have been quite arbitrary, usually based on no more than what there is to spare in that year’s Health budget. There has been little evaluation of the efficacy of funding decisions to ensure the right people are getting access to the medicines they need and that those medicines have been effective. PHARMAC has been left to try to work incredible miracles, and then criticised when it sometimes fails to do so.

Without such a change of approach, the only resort available to desperate patients is more of the type of lobbying that preceded the Kadcyla and Ibrance decisions. It is demeaning, debilitating and unfair for people who are often extremely ill. And whatever else, it is no way to make sound clinical decisions about ensuring people get the medicines they need, when they need them.




Wednesday, 7 August 2019

It is often said that leopards rarely change their spots.

On that basis, it will be somewhat of a surprise if New Zealand First manages to survive the current three year term as part of the governing coalition. Staying the distance is simply not in the Party’s or its leader’s DNA.

In 1991, just a year into the Bolger National Government’s first term, Mr Peters was ejected from the party Caucus and dismissed as a Minister. That set off a series of events that led to the launch of the New Zealand First Party in mid 1993, and its success at that year’s election. In 1998, after 20 months of the National/New Zealand First Coalition Government Mr Peters was dismissed as Deputy Prime Minister and Treasurer and his Party left the Coalition shortly thereafter. New Zealand First was able to regroup and recover its polling strength sufficiently to ensure it survived (just) the 1999 election. In 2008, shortly before the election, Mr Peters was stood down as Foreign Minister while Parliament’s Privileges Committee investigated allegations of financial irregularities within New Zealand First. Its critical findings contributed to New Zealand First’s defeat at the ensuing election.

Now, with New Zealand First’s polling declining and ongoing speculation of tension within the present Coalition Government, with suggestions New Zealand First calls all of the shots over Labour and its more natural ally, the Greens, the same questions are being asked again. Is New Zealand First reverting to type and is it about to bring about a fracture within the government to allow it to differentiate itself, and perhaps recover its support, in time for the election next year? Critics are pointing to the confusion over abortion law changes and New Zealand First’s apparently late call for a binding referendum, having not raised the matter during the preceding negotiations on the proposed changes, and its less than enthusiastic support for the government’s position on Ihumatao as evidence Mr Peters may be up to his old tricks again.

While the odds fall heavily on the side of New Zealand First confirming its serial inability to stay the distance as part of a government, Mr Peters, by his very survival to this point, has shown he can on occasion defy the odds. It is just possible on this occasion he will do just that, and that all we are seeing at the moment is sabre-rattling to remind the public and the hapless Labour and Green Parties that he, not the Prime Minister, is in charge and drives this government. At the same time, he is none too subtly reminding his government partners that without him and the way he wants to do things, there will be no government.  Ironically, he may well survive until the election, not because he necessarily wants to, but because the Prime Minister knows feeding this tiger is the best way to ensure her own survival, at least in the short-term. But, if New Zealand First’s polling does not recover, even the desperation of this modern-day appeasement may not be enough to keep the house of cards standing.

The National Party will be watching these disruptions with a strong sense of déjà vu. They will be delighted to see Labour being led by the nose, as they were in 1996-98 and now equally powerless to do anything about it. But they should not get too far ahead of themselves. Of course, they would welcome the demise of the coalition, were it to happen. They might even be in a position to form a minority government to lead the country through until the next election, but they would be no better off as such a government would have to pay the price of relying on at least New Zealand First’s abstention on matters of confidence and supply to ensure its survival until then. Even then, given National’s continuing unwillingness to rule out New Zealand First from its electoral calculations, it would have to face the same problem all over again after the election.

Mr Peters’ periodic restlessness is frustrating and unpredictable, and has never provided any contribution to good and stable government. But for him, those are secondary considerations, because his politics are all about putting himself centre stage. While he has judiciously surrounded himself over the years with Caucuses of the timid and the vacuous, they and age are no longer his friends. People are starting to ask what happens next, once he shuffles on, probably sooner than later. New Zealanders have shown him remarkable tolerance over the generations. Very few people, least of all politicians, get more than a second chance in our society, yet this term of government provides a fourth chance for him to try to stay the course.

The logical incentives must be powerful for him to do so, but the old spots are still there. While Labour and National are left helplessly to watch from the sidelines what irrational, Trumpian alarums he will embark upon next to try to recover his support, Mr Peters, true to form, will see that as utterly as it should be, and he will have it no other way.

It is all about him, after all.