The government recently released a figure of $78 billion as the ‘lifetime cost’ of the benefit system. That number is the estimated answer to the question: ‘how much would we have to have put aside now to pay for the expected future cost of benefit payments to all current beneficiaries’. But the really question is: why would you want to know that?
It’s the same concept as ACC’s fully funded model. ACC has $19.5b in the bank and rising to $24b, which is intended to pay the future entitlements of all current claimants. ACC spends $3b a year.
The only point in having full-funding for ACC is privatisation – because private insurers have to be fully funded to be solvent. The plan goes: first get ACC running on the same financial basis as private insurers with reserves equaling its liabilities – then sell it.
So, what does that say about the benefit system? It, too, can be seen as a kind of insurance system and could be privatised in the long-run with everyone compelled to pay an income insurance levy to a private insurer, just like they dream of doing with ACC.
As with ACC, it wouldn’t make any fucken sense to privatise it from the point of view of the country as a whole or the ordinary joker because private insurance is inherently more expensive and you would lose the nice counter-cyclical changes in net government spending. But, it would be good for National’s private insurance friends.
With ACC they ‘only’ have to build up $24b of reserves to cover the existing claimants’ costs, which the private insurers would never want to be burdened with. But building up $78b for fully-funding the benefit system prior to privatisation? That’s crazy talk. Isn’t it?
Unless. Maybe, it’s what they plan to do soak up the money once they start running surpluses again – which are forecast to total over $70b by 2025 under National’s tight spending projection. That would pave the way for privatisation and simultaneously allowing them to keep the chokehold on public services spending. That could be the long-term option they’re exploring with the exercise.
Of course, more likely, they’re just bene-bashing.