Mr HATTON (12:20 PM) —I concur with the member for Reid (Mr Laurie Ferguson) in his criticisms of the Taxation Laws Amendment Bill (No. 7) 1997, which is before the House today, and the support that he gave to the opposition amendments. I will begin my remarks today by referring to one aspect of this bill, which covers a range of areas, in relation to the savings rebate, and will then look in turn at the question of superannuation and choice.

In regard to the savings rebate, I have a substantial concern in terms of who will really benefit from the measures provided and what the real intention of the government is. The savings rebate is a device which lowers the tax for all types of unearned income—that is, interest, dividends, trust and partnership distributions, rent and so on, superannuation pensions and eligible termination payments.

The savings rebate scheme which is proposed by the government in this bill specifically operates in regard to unearned income. So we are not dealing here with people who work hard, put in their eight hours a day and then improve their situation. This scheme relates to unearned income, including interest, dividends, trust and partnership distributions.

We know there is a significant problem in the trust area, with income splitting and so on. This exacerbates that problem in terms of the budget. Less money will be coming back to the budget because of what is provided in this bill in relation to the savings rebate.

This bill will not ameliorate the problem with national savings. National savings will not be increased by these proposals; they will in fact be decreased. They will be moved from national savings to private savings. That, of course, lies in conjunction with most of the moves by this coalition government to move from national benefit to private benefit. The reward here is for those people who live off savings rather than those who engage in savings—except for savings that relate to superannuation contributions.

The thrust of these measures is not to fix the problems we have with the key area that was addressed by the former Labor government: how to increase national savings. I want to look at this particular measure—where there is an increase in private savings but a diminution of national savings—because it forms part of the question about the superannuation schemes that operated and were extended during the Labor period of government and what has happened with superannuation schemes since then, based on what this federal government has done.

The Labor superannuation model was extended over a long period of time. The former Treasurer took a number of decisions which fundamentally changed the impact, import and extent of superannuation provision in this country. When we came to office in March 1983, the extent of coverage was largely limited to government employees and those in management positions in the private sector, together with those in the small business sector. Through a series of reforms, Labor brought superannuation coverage to a large part of the work force which had never had that coverage previously, and they did so through the superannuation guarantee and award superannuation. It was in fact the intention of the government to continue that expansion and to move to a situation where a greater percentage of contributions was put into superannuation funds for employees by both employees and industry.

It was a drive to increase national savings through superannuation by expanding the coverage to most of the work force and increasing the percentage of coverage for those people in the work force through their own contributions and contributions from employers. Through the operation of the award system, a number of industry superannuation bodies developed over more than a decade during Labor's period of office. This bill seeks to diminish the value, the extent and the work of those industry superannuation bodies.

This bill talks about choice in relation to superannuation funds that employees can put their superannuation into. A direct target is the existing industry funds. This goes to the question of how those funds are seen by members of the coalition, and essentially they are seen as being ideological. The fact is that, because of award conditions, the major funds are supported by the unions, unions are represented on the management of those funds, as are employers, and many billions of dollars in superannuation are covered by funds where unions have a direct role in supervising the funds. Ideologically, the coalition is against that.

The government has taken a number of decisions in an attempt to completely redraw the superannuation system that existed under Labor. Firstly, there was a decision to abandon Labor's three plus three per cent co- contribution and to pay part of it in the form of a savings rebate—which, as I said at the outset, will do nothing to increase overall public or private savings levels. Secondly, there was a decision to introduce retirement savings accounts—low return products which result in lower retirement incomes for many of the people who use them. In the first iteration of what the Treasurer (Mr Costello) intended in regard to this—where he had five choices of fund, and retirement savings accounts were one of those choices—the probability was that a great number of people would have been forced into those low return funds.

On 25 November 1997, from memory, the Treasurer put out a statement which indicated that that provision would be taken out. So, from a choice of five different sorts of funds, employees were down to a choice of four funds that they could put their money into. That, I would think, is a bonus because the probability that people would be driven into those low income funds is now that much less.

Thirdly, a decision was made by this government to introduce the superannuation surcharge tax. As the member for Wills (Mr Kelvin Thomson) indicated in a speech that he gave on 25 March, the tax is likely to be as successful as the guidelines of the Prime Minister (Mr Howard) in the ministerial code of conduct. A direct result of the government decision to bring in that surcharge was that a lot of people on incomes higher than $70,000 have chosen to go out of superannuation coverage and to provide for themselves in other ways. Fourthly, a decision was made to include superannuation assets in the means test for over-55s. That will see many low and middle income earners—older Australians—having to line up for the aged pension after they have run down their hard-earned retirement savings. So the coalition has made major changes in those four areas.

In the bill before us the coalition seeks to change the emphasis that there has been on industry or award superannuation funds and to substitute choice. Choice is a key and central word for the coalition, and it has been throughout the time the Liberal and National parties have been in existence.

The Senate Select Committee on Superannuation brought down a report in March this year called Choice of fund. A number of the provisions that the report spoke about are contained directly within this bill. The Labor senators had a different view from that of government senators, and were joined by the member for Wills (Mr Kelvin Thomson), our spokesman on this, when they said, `We think an alternative model should be put in place,' and our amendments go to that.

Labor are convinced, based on the experience of our time in government, that superannuation is an extraordinarily important vehicle for increasing national savings and increasing the capacity that individual employees have to live a better retirement than would otherwise be the case before our schemes came into place.

Labor has laid down a series of principles in choice of fund, which I will now go to. Labor is supportive of the principle of employee choice of fund, provided that any model meets certain underlying principles. Firstly, employees should benefit from choice. Secondly, employers should not be disadvantaged by it. Thirdly, choice should be consistent with broader retirement incomes policy. Fourthly, individuals must be able to make an informed choice. Fifthly, the choice of fund should be based on true employee choice and not driven either by ideology or vested interest. Sixthly, choice should not be forced on either employees or employers. Seventhly, choice should be simple to understand and to administer and should not place onerous compliance burdens on employers or employees. Lastly, an independent arbitrator should be able to resolve choice of fund disputes between employers and employees.

Labor believes that if these fundamental principles in regard to choice are fully in place—and they will not be in place under this amendment bill that we see before us—then choice could be successful in the Australian superannuation system as we now know it. It would avoid the disasters that have occurred in other countries—in particular, in Chile and the United Kingdom—where provisions such as are contained in this amendment bill were put into place. Those provisions meant that people in those countries had much lower retirement incomes than could otherwise have been the case.

In terms of alternative models, a former member of this parliament, Mr David Connolly, the former member for Bradfield—who, prior to exiting the parliament, was the coalition spokesman on retirement and superannuation matters—spoke about a choice of fund model. He spoke about that alternative model widely within the community, but that alternative has not been followed by this coalition government.

When Mr Connolly spoke about it, he envisaged that super funds should be made to offer mandatory investment choice options from within the funds so that, where you had an existing industry superannuation fund—instead of the fund managers determining how they would mix the investment in property, bonds, interest gaining investments and also in the share market—it should be open to any individual employee to determine, on the basis of the advice that he got from a financial adviser, whether he could have a different mix.

In the private sector and in funds such as the 23FB funds which are available with the GIO and which were available previously under the Members of Parliament (Staff) Act, an employee can determine what the mix will be. They can make an assessment as to whether they want to have more in the share market or more in the property market, whether they want to change and mix the balance, or they can choose to have the fund entirely managed by the Government Insurance Office of New South Wales. BT and a number of other funds offer just that flexibility.

Most people continue to choose a fully managed aspect because they do not have a lot of background in this area. However, instead of Mr Connolly's approach, the government has chosen the choice of different funds. Primarily it has been a question of the employers' choice and not the employees' choice.

The great change we saw between what the Treasurer had proposed previously and what he proposed on 25 November 1997 was not just a cut from five choices down to four but, because of the pressure that was put on him by employers, there was a change on the question of onus. Employers were concerned that they could be liable if they made a wrong determination in relation to which fund an employee should go into, which would mean that an employee could in fact take action against the employer for not being careful enough on the choice of fund.

That was one of the reasons the RSAs went out. Secondly, it is a reason for the major change. The onus in this bill is on the employee and not on the employer. Labor argues that there is a much simpler and more effective way to implement the change from David Connolly's model to the model of choice that we see before us in this bill. The Labor choice model provides something that is direct, open, simple and easy.

Labor specifically argues in our amendment for a better choice model; in fact, there is one already in existence. The New South Wales Industrial Relations Act 1991 allows employees to have superannuation contributions paid into the fund of their choice—approved by the employer—despite any award or agreement. Whereas, currently, primarily the industry superannuation funds are at the behest of the employer and also, in certain cases, the majority of employees, if we are to adopt this model which is successfully operating in New South Wales there would be a choice of fund for employees. They would be able to choose their own fund, whether or not there is an award or an agreement in place.

What simple steps have been outlined by the member for Wills in relation to signing up to this? The first proposition is that the employee should make a nomination in writing and sign it. Secondly, the fund should be a complying fund. Thirdly, the employer should provide written approval of the nomination. Fourthly, the employer should retain a copy of the nomination.

This is an entirely simple and straightforward process—so simple, so straightforward, so practical and working so well in New South Wales that it should be adopted here. The government should withdraw their proposals in relation to choice of fund and accept the amendment that Labor has put forward today. It is simple and it works. The government's provisions within this bill that there should be choice of fund in fact still provide choices for employers and not employees. I would argue here that we could substitute for this complexity and uncertainty a dramatic onus on the employee, who is not in a position to make an educated, discerning choice about what fund he or she may choose to put their superannuation savings into. The employee is not in that position because the funds are simply not available to run an adequate education campaign in conjunction with the provisions of this bill. That has already been indicated by a number of speakers in the past. It is a very real problem.

I have been dealing with two matters in relation to this bill—and the bill covers a large number of provisions. Firstly, the savings rebate concentrates on unearned income. It concentrates effectively on moving from national savings to private savings.

Secondly, superannuation choice for employees is very limited, because our preferred model isn't acceptable to the government—that simple, straightforward model which exists in New South Wales. It is limited, even though they have four major choices placed before them, because they are not in a position, given the complexity of what they are asked to look at, to make a readily informed choice.

There is, here, another agenda which relates directly to the move from ensuring national savings and ensuring the superannuation future of people providing funds. That move means that people will have less attachment to saving for their future through superannuation.

If the government were to rethink their position, if they were to adopt the alternative model provided by Labor—that simple, straightforward, balanced and sensible model—it would provide true freedom of choice for employees and true guarantees that they would be able to put their savings aside for themselves in the future, either in an industry fund or in any other fund, and be absolutely and completely certain that those funds would be run well and run properly and that their choice could be entirely satisfied. (Time expired)