Michael Cullen is pathologically clever. He is a wonderfully sarcastic wisecracker. He can perform cartwheels of logic while others are still rubbing the sleep out of their eyes. He scarcely needs fifth gear to speed alongside the best brains in the Treasury.
This makes him a formidably important member of the Clark cabinet. Nowhere has that been better demonstrated than in his superannuation scheme. But has he been too clever? That question will be at the centre of a fierce battle this month [February] and next.
The scheme’s first cleverness, as spelt out in the bill, is to clamp the spending inclinations of Cullen’s colleagues. That is because the bill makes the fund a legislatively required first charge on the budget — before health, education, housing and all the pet projects nurtured through nine long years in opposition.
As official papers make clear, this means that swings in the economy and so in the revenue would have to be absorbed in other spending — or by going into deficit, which would undermine the integrity of the super fund by increasing government debt.
This warning from officials appears not to have been widely debated by the cabinet. When the penny drops, ministers may shed some of their enthusiasm, especially in the Alliance, which was not keen on the fund to start with.
But in the meantime Cullen has managed to devise the ultimate in spending prophylactics.
The second cleverness in the scheme is the work of the Treasury: tight criteria for appointing the Board of Guardians which is to manage the fund. Guardians must have “substantial experience, training and expertise in the management of financial investments” and be recommended by a nominating committee of at least four people of “proven skills or relevant work experience” appointed by Cullen.
On the face of it, this severely limits the sort and number of people who can be appointed, especially if there are potential conflicts of interest when the guardians appoint (at their discretion) funds managers to do the detailed investing. There may be only a handful of people who truly qualify — and they will not include the political hacks parties usually park in such perks.
Then the guardians will be tightly constrained in investing the fund. They must do so consistently with “best-practice portfolio management, maximising return without undue risk to the fund as a whole and avoiding prejudice to New Zealand’s reputation”. The minister may give instructions to the guardians but not to do things inconsistent with the criteria.
In short, clever Cullen looks to have politician-proofed the scheme. This is important if it is to gain credence with its captive investors (voters).
Which brings us to the third Cullen cleverness in the scheme: it puts National on the spot.
National doesn’t like the scheme. It would rather cut taxes (to increase wealth-creation now and in that way build resources for sustaining future oldies) or pay down government debt and build up reserves, which can be drawn down when needed (which some reckon better for growth in the short term).
But to oppose the scheme risks getting offside with today’s oldies, who are ferocious voters when roused, as both major parties found when they tampered with super in the 1980s and early 1990s. The nub question for National is whether it will be driven by today’s electoral imperative or by a strategic assessment of policy options.
The answer to that question will lie in how the select committee process goes, which in turn depends on how well National can stimulate submissions to the select committee that challenge the strong endorsements likely to come from investment funds firms, now circling like friendly vultures for a slice of the action.
The answer will also depend on how many doubts National can plant in the minds of the oldies’ minders, such as Greypower, and thus in the minds of the oldies themselves. This will require considerable cleverness, a scarce commodity in the National party in recent years.
Cullen’s counter-thrust will be to accuse National of being a nark, blocking political consensus on a thorny issue voters want settled. This is not just one-up politics: Cullen needs National onside, however reluctantly, or public credence will be tepid and the scheme will be forever in doubt. A bare majority achieved by swinging either the peskily principled Greens or erratic New Zealand First in behind will not do.
Clever, Cullen certainly is. So clever he has set up a couple of months of gripping parliamentary theatre.