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Monday, 22 April 1985
Page: 1584

Mr LEO McLEAY(4.4l) —As honourable members will be aware, the National Welfare Fund was established as a trust fund in l943. At that time it was proposed that a levy taken from people's taxable income be paid into that Fund out of which would be paid various social security benefits. I guess that in l943 there were people in the Parliament, as there are in the Opposition now, who believed that we should have a funded welfare system. Fortunately for the Australian people it took the national Parliament only a short period-that is, until about l952-to realise that it was not really possible to have a funded welfare system.

Mr Rocher —They didn't try.

Mr LEO McLEAY —Later on attempts were made under the Fraser Government and other conservative governments to reintroduce some type of levy funded welfare system. A member of the Opposition interjected a moment ago that the governments never tried to have a funded welfare service. I suppose that it is fair enough for someone who is quite wealthy, as are most members of parliament compared with people who are in receipt of social security benefits, to say that governments never try. However, governments throughout the rest of the Western world have not succeeded in this respect. That great proponent of monetarist policies in theory but not in fact, Ronald Reagan, at one stage was going to let the United States social security service go broke because it was not funded on a proper actuarial basis. He talked a lot but did nothing. Governments of both the East and West have realised that a measure of a government's capacity to assist its people and a measure of a government's civilisation are its ability to take care of those in society who are least able to care for themselves.

The propositions put forward by members of the Opposition about a funded welfare system go hand in hand with a system of tax deductibility for the contributions that people of thrift-and we hear a lot of talk about people of thrift-put aside for themselves. It is very easy for people on good incomes to put aside money for their future retirement. However, it is very difficult for people on very low wages or, indeed, as we are seeing in Australia and other parts of the Western world at present, people on no wages, to put aside anything. These people would have to pay more under a funded system. People on good incomes can afford to contribute to such a system because they receive tax deductibility in respect of their superannuation payments. I must say that as a member of Parliament-and no doubt, you, Mr Deputy Speaker, would agree with me-the largest single tax deduction that I have is my superannuation payments. The largest single tax deduction that I had when I was a public servant was my superannuation payments.

Some people are fortunate enough to be able to invest up to $l,200 a year in superannuation schemes which they can claim as a tax deduction. This is a pretty good investment for people who are being taxed at a high marginal income tax rate of 60c in the dollar because every year they get back $720 of the $l,200 that they have put away for their retirement. But where does the $720 come from? It does not come from all of their colleagues who are doing all right out of life because they are able to contribute $l,200 in superannuation payments. The money comes from the low income earners and people who cannot afford to put aside $l,200 per annum, or $24 a week, to fund their superannuation benefits which they will receive at some later date. I guess that all of us would like to feel that the whole of society was wealthy enough to be able to put aside $24 a week for retirement purposes and to receive a 60 per cent tax deduction. Unfortunately, many members tend to lose touch with reality when they come into this place. A vast number of people out there in our society do not have anywhere near that type of disposable income each week, each year, for the rest of their lives. So what the proposition put forward by the Opposition for a funded welfare service tied in with tax deductibility does is provide a very substantial tax benefit to those people on high salaries. The people who pay for that tax benefit are those on low and medium salaries. The poor unfortunates who are not receiving any income at all, other than welfare payments, do not even get into the race.

Members of the Opposition would take us back to l943 and say: 'Well, we need to have a funded system'. It does not matter to them that even a Liberal government in l952 decided that a funded system would not work. Like King Canute, they really think that they can turn back the tide. We hear a lot of bleating from members of the Opposition who, in attempting to frighten governments into adopting a funded system, say: 'Well, of course, if you do not do something about this, the aging of the population is going to bury you all in the high cost of welfare payments'. But they are the same people who say that the family allowance is sacrosanct, that we have to keep paying a non-means tested family allowance to middle class and wealthy women. They do not want to look at the equity in that case but they are trying to make the aged contribute to a funded welfare system.

There is no sense, justice or consistency in the argument put forward by most members of the Opposition in support of funded welfare services. I must say that the previous speaker, the honourable member for Sturt (Mr Wilson), has done a lot of work over a long period to convince his colleagues that they should advocate such a system. Fortunately for those who are not so well off in Australia, he has not been able to convince many of them. I hope that he will not be able to do so for some time to come.

The Opposition has always taken the view that somehow or other-and I am sure that the honourable member's colleague who is seeking to interject will have something to say about this in a few moments when he speaks in this debate-there is something good to be said about people contributing to their retirement. I believe that people contribute substantially to their own retirement through the taxation system. I think that the tax system, as a mechanism for attempting to bring about some levelling up in society, is a far better way of funding welfare services than levies. I must say that I and some of my colleagues thought that one of the more successful propositions put forward by honourable members opposite when they were previously in opposition was to strike down the Medibank levy. As a result, that scheme had to be funded out of Consolidated Revenue. I had hoped that they might have done the same thing again, but unfortunately they did not. So there are inconsistencies in the point of view taken by the Opposition.

There are misapprehensions, too, in the general population about what should be done with the welfare system. Many of those misapprehensions go back to the concept behind the National Welfare Fund Act l943, because people who are now aged and who have been contributing for many years to what they thought was that fund are of the view that everyone is entitled to a pension because everyone has paid taxes. It is very important that the Government is now repealing that legislation. It has not really been in effect since l952. No one has contributed since 1952 to any fund for pensions through the government system, but there is still the view, reinforced by some of the changes to the social security system that the Opposition made when in government, that people are paying into some levy fund and that they are entitled, by virtue of that, to a pension.

We have this universalist approach in the community. The Opposition contributed to that when in government, as did some of my colleagues when in government in the past, by doing away with the income test on the pension so that some people, as the Minister for Social Security (Mr Howe) told the Parliament a couple of days ago, had assets in excess of $lm and managed to collect a social security pension. The guidelines for getting a pension provide that one should not have much income. However, people got around that by converting income into capital goods and then using them up as it suited them. Having no assets test on the pension contributed to this concept that it was the right of everyone to have a pension. I do not think it is the right of people, except for financial reasons-that they do not have the means to support themselves-to get a pension.

There should be equity in the social security system, which should provide support for those in need and not for those who rearrange their situation so that the system is helping them-not because they are needy, but because they are greedy. The present Government has attempted to redress some of the more overt rorts involved in that system by bringing in the assets test and by providing for taxes on lump sum superannuation payments. Members of the Opposition have suggested that the Government should encourage more private superannuation schemes, but in the past the response of the employers and private superannuation firms to a privately funded superannuation scheme was to come up with lump sum systems. When that was coupled with the capital goods provisions of the social security system, people could retire on a lump sum of $l00,000 or $200,000 and still arrange their affairs so that they got the pension, when they should have been investing that money and getting a weekly income so that taxpayers did not have to subsidise them.

As one of the previous Opposition speakers has said, we even had a means test-free pension for people over 70. We had the ludicrous situation of a former Prime Minister, a recognised millionaire, receiving the age pension. That idea comes from a party which believes that we ought to put equity into the system. The Opposition's idea of equity and the idea that ordinary Australians have of equity are quite different. The sort of system in which people contribute to funded schemes leaves itself open to the worst types of abuse.

The private superannuation system has never voluntarily addressed itself to paying weekly pensions to people in the schemes. It has always wanted to pay lump sums because that suits employers and that suits it. Now that the Government has placed a tax on lump sum payments, some superannuation organisations are looking to fund annuities. They are saying to the Government: 'You have to help us more. You have to allow us to have indexed bonds so that we can fund this'. The response by the private superannuation industry, which members of the Opposition suggest can really help us fund the responsibility for the aged, has been to say: 'The Government has to give us another perk'. It is not good enough that the Government gives a tax deduction of up to $1,200 a year for those in private superannuation funds, in fact in all superannuation funds; the industry now wants indexed bonds.

If the Government ever decided to allow private entrepreneurs and private insurance companies to run the Government's social security system, constant demands would be made on the Government to change the system, because these companies would say: 'We cannot go on any longer'. In my opinion, it is up to governments to fund and control the social security system. If governments ever step out and leave it to the market place, those who are less able to fend for themselves will be thrown on the scrap-heap once again. I do not know where we would find a private superannuation group that would fund the supporting parent's benefit or a private superannuation group or, indeed, a workers' compensation insurer that would fund sickness benefits.

Too frequently, constituents have said to me that the doctor, or someone else in the workers' compensation field, has told them that they ought to get on to the invalid pension after they have received a workers' compensation payment. The lawyers never tell them that the workers' compensation payment is supposed to provide income for the rest of their lives. They use up a fair amount of it and find themselves a burden on the public purse. If the private insurers who run not only workers' compensation but also superannuation schemes were so socially conscious, one would have thought that they would have been saying to people on workers' compensation payments: 'Really, this payment is to help you out for the rest of your life. It is not to pay for your house, to buy a new car or to go on an overseas trip'.

We have seen the failure of the private sector to address itself responsibly to being able to fund the welfare service in Australia. The moves that the present Government has made to put more equity into the system are to be commended. I find it repugnant that the Minister for Social Security had to tell us in the House last week that, through the assets test, the Government had discovered that l2 millionaires were receiving the pension. Some of the Opposition members then interjected: 'Only l2?' I think that one millionaire receiving a pension is a terrible reflection on the type of social security system that the Opposition would like Australia to have. The government is there to provide a safety net and to help those in need.

This Government's move to repeal the National Welfare Fund Act l943 says once and for all that governments accept that, through Consolidated Revenue, they have an obligation to fund the country's welfare system. To my mind and, I am sure, to the minds of other members, to those in society who believe that, somehow, they are entitled to a pension because they have paid their taxes this will make the point that that is wrong and that the Government will put the social security system on a firm footing by funding those in need rather than those whose activity has been motivated by greed.

The way in which private insurers, in both the workers compensation area and the superannuation area, funded their arrangements in the past pandered to those who were greedy. The tax system still provides a substantial benefit to those people who are in expensive private superannuation schemes. I am glad to see that we have finally got away from the ridiculous position which existed whereby some people in the country still held on to the view that somehow or other we had to have a market forces welfare policy in Australia.