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Thursday, 12 April 1973
Page: 1379

Mr WENTWORTH (Mackellar) - Mr Speaker,a few moments ago it was intimated to me that the Leader of the House (Mr Daly) would not allow debate on this matter to proceed to any length unless I gave him an undertaking to withdraw another motion standing in my name. With the very greatest reluctance, but in view of the importance of the matter now before the House and my desire to push it through to a vote, I now give the Leader of the House the undertaking that today I withdraw the other motion standing in my name.

Mr Daly - 1 rise to order, Mr Speaker. The situation is that the honourable member for Mackellar (Mr Wenthworth) has 2 motions standing in his name to be put before the House today. One motion makes allegations against you which no responsible Government could allow to remain on the notice paper. We desire to proceed with both motions today, but it is impossible in the time available to do so. Consequently it was suggested to me by the honourable member's Leader that he should withdraw the motion relating to you, Mr Speaker, and let this debate proceed. But if the intention of the honourable member is to put the point of view which he has just expressed I ask him to proceed with both motions this morning because the Government intends to deal with them and we will not agree to the withdrawal of the motion against you. Mr Speaker.

Mr WENTWORTH - I now proceed with the motion which is before the House standing in my name relating to the abolition of the means test. It is of very great importance. I have said that I will withdraw the other motion standing in my name relating to Mr Speaker, so that is that. I ask leave to withdraw that motion.

Mr Daly - Leave is not granted. We could not trust the honourable member for Mackellar in an iron lung.

Mr SPEAKER -Order! If the honourable member for Mackellar wishes to withdraw his notice of motion relating to Mr Speaker, he must submit his withdrawal in writing to the

Clerk. (Mr Wentworth having submitted in writing his withdrawal of notice of motion relating to Mr Speaker)-

Mr WENTWORTH - I now proceed with the motion before the House relating to the abolition of the means test, which I believe is of extreme importance. I move:

That, in the opinion of this House, if the means test on social services is not abolished for all persons aged 65 and over by the time of the next Budget, then -

(1)   A further substantial relaxation should be provided in the next Budget.

(2)   The Government should announce its scheduled program for total abolition with the least possible delay.

(3)   Total abolition of this means test should not be made conditional upon or involved with the implementation of other social service proposals of the Government.

As is known, the previous Liberal Government at the last Budget made the decision that the means test for people aged 65 and over should be abolished in the lifetime of the present Parliament. It gave no pledge that it would take the whole of the lifetime of this Parliament to do that and I believe that if we had been returned to power and, most certainly, if I had been Minister for Social Services, the means test would have been abolished in the Budget of 1973. The Australian Labor Party followed that pledge. In the policy speech of the now Prime Minister (Mr Whitlam), an undertaking was given to eliminate the means test in the life of this Parliament. This motion is necessary for 2 reasons. First, there is an immense discrepancy between the policy speech of the Prime Minister and the statement put out recently by the Minister for Social Security (Mr Hayden). On page 12 the Prime Minister's policy speech states simply this:

The means test will be abolished within the life of the next Parliament.

But the statement put out by the Minister for Social Security on 20th March 1973 read:

Mr Haydenstressed that the committee of inquiry would have to incorporate the Government's objective of abolishing the means test for those aged 65 and over in the life of the current Parliament.

It is quite obvious that the Labor Party has once more adopted the policy of the Liberal Party. But what has also been made obvious is that the Labor Party put forward false pretences in its policy speech. It said something in its policy speech which it does not intend to do. The pledge - like most Labor pledges, worthless - was that the means test will be abolished within the life of the next

Parliament, not just for people aged over 65, which is, of course, what a Liberal Government would have done. Once again, false pretences.

The second reason why this motion is necessary is a more important reason. There is a suspicion of some fine print in the Government's policy because it looks as does not really mean to abolish the means test at all. What it means to do is to have some overall policy for guaranteed incomes or some kind of earnings - related superannuation scheme. It will be a very complicated scheme the impact of which will be to water down and make inoperative the simple pledge which the Labor Party made in its policy speech and which - this is important - was fraudulently made.

There are many reasons for the abolition of the means test. I do not intend to go into them at present because I spoke to the Minister before this debate and he gave me permission to have some documents incorporated in Hansard. In accordance with the Minister's undertaking, I now ask leave of the House to have a document incorporated in Hansard.

Mr SPEAKER - Order! Is leave granted? There being no objection, leave is granted. (The document read as follows) -


As a general principle, people should be encouraged to make provision for themselves in their old age, and to avoid reliance upon Government assistance.

Nevertheless, it should be recognised that some old people, through circumstances beyond their control, have been unable to make adequate provision for themselves, and are entitled to Government assistance. Furthermore, it is generally agreed in civilised society that even those whose failure to make this provision has been due to their own improvidence should not be forced to live below a certain standard in their last years.

In Australia, the basic age pension rate makes no distinction between the worthy and the unworthy. The amount of the age pension is from time to time determined at some point substantially above a minimum level - a point which has not been immutably fixed, but has moved upward with changes in national productivity.

It should be recognised that the higher the basic pension, the less is the spur of want in persuading people to make provision for themselves: and it would seem essential that, In order to avoid the conquences which might flow from this, nobody should be discouraged from raising himself above the Australian basic pension level by his own current efforts or his own past thrift.

Thus three principles would apear to be fundamental in the evaluation of Means Test policy -

1.   All Government pensions reduce Individual incentive towards thrift, self-help and self reliance; but it is generally conceded that no member of a civilised community, however unfortunate or improvident, should be reduced below the minimum level; and Governments (including the Australian Government) generally and quite rightly set the basic rate of pension substantially above this level.

2.   The higher the Government pension above the minimum level, the more it acts as a disincentive.

3.   The more the Means Test acts as an impediment to an individual raising himself by thrift or work above any given level of Government pension, the greater is the disincentive effect.

Current Practices

In Australia we impose a Means Test on age pensions which restricts them to those 'in need' and thus reduces our total budget outlay. This raises the inherent difficulty above described - the operation of a Means Test cannot avoid a 'levelling' effect, because it reduces the gap between the provident and the Improvident and therefore lessens the incentive to make provision for oneself.

Because it eliminates or reduces the advantages which people obtain from their own effort or thrift, the Means Test is by its very nature a socialistic device, whereas (presupposing that some basic Government pension is given) the universal availability of the age pension would seem to be more compatible with a free enterprise system.

If pensions were included in the taxable income of those people whose incomes were high, and excluded from the taxable incomes of those people whose incomes were low, the revenue would be protected, equity would be maintained, and the principle of free enterprise would be preserved.

The Case Against the Means Test

The arguments against the maintenance of the Means Test on age pensions may be summarised as follows* -

1.   The Means Test is inequitable, lt deprives people of the benefit of their own thrift and efforts. It presses particularly upon annuitants and superannuitants, who are already suffering unfairly from the effects of inflation. It is unfair to those who have suffered war injuries and who, through it, lose their compensation in their old age. It is a disincentive to thrift, selfhelp and self reliance.

2.   The administration of the Means Test involves anomalies. Even today, retired people with incomes of $20 per week lose 50% of their next earnings through the operation of the Means Test alone; and the combined effect of Means Test and income tax so penalises people over quite a substantial range of low or modest incomes that they lose some 70% of any additional income - which is equivalent to the marginal rate of income tax paid on top incomes. Indeed it sometimes happens that old people actually become worse off when their income rises, because they suddenly lose substantial fringe benefits. Anomalies such as this are inherent in a Means Test which has 'cut-off points', in contrast to the finely-graduated income tax scale.

3.   The Means Test debars or discourages retired people from taking casual or part-time work. In this way it can be detrimental to their mental and physical well-being; and surely it would be conceded that even the elderly have a 'right to work' if they so choose. In addition, loss of their potential output reduces productivity in the Australian economy.

4.   People tend to arrange their affairs so as to escape the Means Test. This discourages thrift among people of working age (who say, 'Why save, when savings disqualify you for a pension?'), and encourages dis-saving among retired people (who spend their savings on such things as trips overseas or expensive cars in order to qualify for a pension). These practices may sometimes be based on popular misconceptions, but whatever their basis, they are now quite widespread, and weaken the Australian economy.

5.   The nature of the Means Test distorts investment, by inducing people to prefer 'exempt' assets, and thus to undertake wasteful expenditure. It also encourages them to take lump sums in place of annuities for their superannuation which, among other undesirable effects, reduces tax yields.

6.   The Means Test is an invitation to cheating, and puts a premium on underhand practices. Widespread acceptance of evasion is almost a way of life' in this field and must have repercussions in other fields.

7.   The Means Test humiliates old people, because the clerks who administer it must of necessity pry into their private affairs. It makes age pensions a charity, and is 'odious'.

8.   The Means Test impedes socially desirable transfers of property from parents to children, and penalises past transfers in a way which is sometimes inequitable. This is especially important in the case of some primary producers.

9.   The application of the Means Test has become complex, especially after the 1971 amendments to the pensions system. Rates in such matters as boarders, casual earnings, and past gifts are inherently complicated. Confusion causes resentments.

10.   The existence of a Means Test on the basic age pension makes it difficult to formulate a satisfactory scheme of national superannuation.

Of the above ten arguments against the Means Test, the third has great weight. Sudden and enforced idleness at the age of 65 can be very harmful to a man, and lack of purpose is pathetically evident among many of the elderly, who still have their faculties and could be continuing to produce on a limited scale for their own benefit and for the benefit of the community.

Great weight may also have to be accorded to the tenth and last argument. The existence of the present Means Testis an effective bar to the adoption of any sensible scheme of National Superannuation.

Mr WENTWORTH - First, let me go into the history of this matter. The abolition of the means test is fundamentally in line with Liberal Party philosophy and fundamentally opposed to Australian Labor Party philosophy. This policy was stated in the Liberal constitution as it was when I first came into this Parliament, But because of the need to move towards this gradually we instead undertook a plan of gradual, progressive liberalisation aimed at eventual abolition. That plan culminated in the announcement regarding abolition made in the Budget of 1972 by the then Treasurer. This was what was done by the Liberal Party and it was fundamentally in line with the policy of the party. The means test is a socialistic device and its abolition is therefore fundamentally out of line with Labor philosophy.

In 1954, Dr Evatt who then led the Labor Party at an election made a pledge on this matter without consulting the ALP authorities, for vote getting purposes. Members of the Labor Party then and subsequently in the House pointed out that this was out of line with Labor policy. Indeed, it was the bitterness that arose from this that, on Dr Evatt's own statement of 1955, was one of the prime causes for the attitude he adopted which led to the formation of the Democratic Labor Party. However, the Australian Labor Party platform does in point of fact call for the abolition of the means test within the life not of one but of two Parliaments, as well as the use of a national superannuation scheme in order to cover the whole thing up. This is what I suspect is happening.

In the statements which were made by the present Minister for Social Security - he has put out a voluminous packet of statements over the last couple of years - he talked about the abolition of the means test being undertaken over 6 years or 2 Parliaments. That of course is in line with Labor policy. But the Prime Minister in his election speech again went against his Party's policy and said: We will do it in one Parliament'. He was trying to match what the Liberal Party had done and was saying: 'Anything you can do, we can do better'. That seems to be his motto. But I do not want to underestimate this; I should like to put it much more seriously. This action of the Prime Minister which went against fundamental Labor Party policy and which violated the written platform of his Party was taken quite cynically for vote catching purposes and it was effective. The fraud worked. The voters were taken in by it. I suppose the Prime Minister would say as a king of France said once, earlier, when he had to swallow his beliefs: 'Paris is worth a Mass'. The Labor Party is now seated on that side of the House and I suppose that its members feel that their fraud has paid off. The important thing is that once again, there is a suspicion of bad faith in the Labor Party.

As to the form of the motion before the House, there are 3 points that I would make. Originally, I had a simple motion to do what a Liberal government would have done, namely, to get rid of the entire means test to those over 65 years of age at the next Budget. Because of the way in which the Labor Party has gone on feeding the fires of inflation and the financial situation which it itself is creating, which is quite different from the proper ordered development which would have gone on had we been returned to office, it may be felt that this is not practicable immediately. The total cost would be somewhere in the bracket of $200m to $250m a year, but the net cost, if the Government, as it should, made it taxable for those with high incomes, would be very much less than that. However, two things must be said. First, the present Government's policy has caused an inflation which could not have been foreseen. Nobody thought that the Government would be quite as stupid as it has been, although I do not believe that the Budget measures themselves or the financial measures taken in the House are the prime cause of the inflation. The prime cause lies, unfortunately, outside this House and in things that the Government is doing outside this House. I do not believe that the prime cause of what is happening is the financial measures taken in this House. Although the means test abolition would be counter inflationary over the long run, in the short run it may add a little, perhaps not a significant amount, to an inflationary situation which is at present coming into existence.

If it is not all to be done in the next Budget, as I am sure the Liberal Government would have done, let there be at least a substantial and positive instalment. We have a right to demand that now and we have a right to demand that the Labor Government should unveil some of its shadowy plans and let us have some kind of a schedule for what it is doing and what it is pledged to do in the next 3 years. The Government should give us some kind of explanation of the substantial difference between the policy speech of the Prime Minister (Mr Whitlam) and the statement of 20th March by the Minister for Social Security (Mr Hayden). However, that is not the main point. The real point of this motion being in this form - why it has been strengthened and put in this form - is that I believe the Gov ernment is plotting another kind of swindle, another kind of fraud, lt will not really abolish the means test. It will say that it will abolish the means test but it will involve this in some kind of new deal, which is dependent upon what will not be called taxation - it may be called a contribution - but what will, in effect, still be taxation. If one reads the voluminous and sometimes mutually contradictory memoranda which the Minister for Social Security put out while he was still a member of the Opposition, people will see what I mean and know what I fear.

The position is this: I frankly do not trust the Treasury advice which the Government is receiving. In the last Government the Treasury fought tooth and nail against the abolition of the means test. The responsible officers of the Treasury told the head of what was then my Department that abolition would take place over their dead bodies. That was the Treasury's view. To the credit of the previous Government it over-rode the Treasury. Cabinet had sufficient strength to stand up and make this decision in the teeth of Treasury advice. It was a good decision and a right decision. Treasury officials were guilty of a good deal of special pleading and duplicity in the material they brought forward. I will not, of course, speak on what they put to Cabinet because it would be wrong for me to do so, but I know what they put to people outside of Cabinet. In this matter the Treasury cannot be trusted. It will be inciting the Government to perpetuate this kind of swindle. I believe that the Minister for Social Security, from his own previous memoranda, will be only too ready and eager to accept Treasury advice in this matter. I would be more confident, of course, in this matter if the Department of Social Security, which used to be my Department, were still under the control of Mr L. B. Hamilton, the former Director-General and one of the most competent officers in the Public Service. He has been succeeded in that position. I know the circumstances of this but I am not prepared to talk about them. He has been succeeded by Dr Wienholt and I am not trying in any way to denegrate Dr Wienholt or write him down but I simply say his ability is not nearly as great as that of Mr Hamilton, the man who has left. This is not meant as a criticism or denegration of Dr Wienholt but as a commendation of Mr Hamilton. Since we have the Minister's new appointment as head of the Department of Social Security and since honourable members know of the Minister's own ambitions I would feel that perhaps the Weight of Treasury advice - if I can put the Word advice in inverted commas - would be such as to induce the Government not to do the clean thing, not to get rid of the means test but to involve the abolition of the means test, in some other kind of financial shenanigans.

It is necessary to separate this question of the abolition of the means test, for which the Prime Minister in his policy speech gave a clear and unequivocal pledge, which I believe he is not going to keep, from the question of national superannuation. I believe and assert that it is important for us to have a scheme of national superannuation. I hope that I shall have an opportunity of bringing a private member's Bill for this purpose before this Parliament in due course but I do not believe that national superannuation should be involved with this simple question of justice - the abolition of the means test. Let this be done cleanly, let h be done altogether in the next Budget, or, if not entirely in the next Budget, substantially in the next Budget, and let a pledge and a clear program be indicated for carrying out the rest of the program.

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