Richard Downing National Superannuation A policy before its

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Richard Downing: National Superannuation A policy before its time? Paper presented to the History

Richard Downing: National Superannuation A policy before its time? Paper presented to the History of Economic Thought Society of Australia Conference Australian National University, September 2017 Benedict Davies

Keynes’s scheme of deferred pay 2

Keynes’s scheme of deferred pay 2

Investigation • Explore intellectual foundations of Australia’s retirement incomes policy • Review the ideas

Investigation • Explore intellectual foundations of Australia’s retirement incomes policy • Review the ideas of Richard Downing, the leading exponent of superannuation policy in the post-war period up to his death 1975 • Imagine what Downing might think of Australia’s current retirement incomes policy 3

Downing’s early thoughts • Can trade unions be induced to encourage workers’ savings and

Downing’s early thoughts • Can trade unions be induced to encourage workers’ savings and to take part of future wage increases in the form of contributions to welfare, pension and guaranteed wage funds? • Should the Age Pension…be free of the means test which, at present, removes much of the benefit low income groups might derive from savings? • Should a national superannuation scheme be introduced? ‘The Australian Economy, March 1956’, Economic Record 4

Downing’s early thoughts • Can trade unions be induced to encourage workers’ savings and

Downing’s early thoughts • Can trade unions be induced to encourage workers’ savings and to take part of future wage increases in the form of contributions to welfare, pension and guaranteed wage funds? • Should the Age Pension be free of the means test which, at present, removes much of the benefit low income groups might derive from savings? • Should a national superannuation scheme be introduced? ‘The Australian Economy, March 1956’, Economic Record 5

Downing’s early thoughts • Can trade unions be induced to encourage workers’ savings and

Downing’s early thoughts • Can trade unions be induced to encourage workers’ savings and to take part of future wage increases in the form of contributions to welfare, pension and guaranteed wage funds? • Should the Age Pension be free of the means test which, at present, removes much of the benefit low income groups might derive from savings? • Should a national superannuation scheme be introduced? ‘The Australian Economy, March 1956’, Economic Record 6

Four broad phases of Downing’s superannuation research & advocacy 1. Global pensions policy survey

Four broad phases of Downing’s superannuation research & advocacy 1. Global pensions policy survey (1956 -58) National superannuation: Means test or contributions? (1958) Joseph Fisher Lecture 2. Supplementary superannuation (1962 -1967) Taxation in Australia: An Agenda for Reform (1964) Downing, Arndt, Boxer & Matthews 3. “Substituting” superannuation (1968 -1975) National superannuation: Means test and contributions (1968) Economic Record 4. Downing vs Hancock’s National Superannuation Committee of Inquiry (1972 -1975) 7

National superannuation: Means test or contributions? (1958) • Downing reviewed emerging pensions systems around

National superannuation: Means test or contributions? (1958) • Downing reviewed emerging pensions systems around the world (with help from Max Wryell) • Argued that Australia’s means-tested Age Pension arrangements were not necessarily inferior to compulsory national superannuation systems operating in other countries • Outlined case for improving the existing system including: – up-rating the basic rate of pension automatically to an index of earnings – increases to the single rate to something more like modern OECD equivalence scale of 1. 5 – comprehensive means test (i. e. replacing Assets & Income tests) based on amount of income that could be purchased from a representative annuity rather than actual income earned 8

National superannuation: Means test or contributions? (1958) • Downing reviewed emerging pensions systems around

National superannuation: Means test or contributions? (1958) • Downing reviewed emerging pensions systems around the world (with help from Max Wryell) • Argued that Australia’s means-tested Age Pension arrangements were not necessarily inferior to compulsory national superannuation systems operating in other countries • Outlined case for improving the existing system including: – up-rating the basic rate of pension automatically to an index of earnings; – increases to the single rate, using something like modern equivalence scales; – comprehensive means test (i. e. replacing Assets & Income tests) based on amount of income that could be purchased from a representative annuity rather than actual income earned. 9

Taxation in Australia: An Agenda for Reform (1964) • Written jointly with Arndt, Boxer

Taxation in Australia: An Agenda for Reform (1964) • Written jointly with Arndt, Boxer & Matthews • Includes a proposal for supplementary pension scheme • Pension proposal clearly authored by Downing who had argued for an almost identical proposal in his ANZAAS Presidential address in 1962 • “…hardly a ripple in academic, government or business circles” Boxer quoted in Brown (2001) Richard Downing: Economics, Advocacy and Social Reform in Australia 10

Taxation in Australia: An Agenda for Reform (1964) “…hardly a ripple in academic, government

Taxation in Australia: An Agenda for Reform (1964) “…hardly a ripple in academic, government or business circles” Boxer quoted in Brown (2001) Richard Downing: Economics, Advocacy and Social Reform in Australia 11

Ripple one – Bentham or Burke? “They turn out to be a party of

Ripple one – Bentham or Burke? “They turn out to be a party of the mildest antiquarians, and their offering a charming pastiche of an Olde Englysshe report. ” David Bensusan-Butt, ‘Taxation in Australia: An Agenda for More Reform’, Economic Record, 1964 12

Ripple two – who bears the burden The IPA Review, July-September 1964 13

Ripple two – who bears the burden The IPA Review, July-September 1964 13

Supplementary superannuation scheme (1964) • Downing outlined a system of compulsory contributions for workers

Supplementary superannuation scheme (1964) • Downing outlined a system of compulsory contributions for workers between 21 and 65 • Graduated contribution up to a max of 10/- a week (£ 26 pa) • Basic wage was 365/- (£ 950 pa) • Max contribution of 2. 75% • To provide a benefit of aprox £ 2, 000 in value made up of: – £ 200 capital sum – Income 3/10/- (£ 182 p. a. ) • On top off means tested pension of 5/5/- 14

Supplementary superannuation scheme (1964) • Downing outlined a system of compulsory contributions for workers

Supplementary superannuation scheme (1964) • Downing outlined a system of compulsory contributions for workers between 21 and 65 • Graduated contribution up to a max of 10/- a week (£ 26 pa) • Basic wage was £ 18/5/- a week (£ 950 pa) • Max contribution around 2. 75% • To provide a benefit of aprox £ 2, 000 in value made up of: – £ 200 capital sum – Income 3/10/- (£ 182 p. a. ) • On top off means tested pension of 5/5/- 15

Supplementary superannuation scheme (1964) • Downing outlined a system of compulsory contributions for workers

Supplementary superannuation scheme (1964) • Downing outlined a system of compulsory contributions for workers between 21 and 65 • Graduated contribution up to a max of 10/- a week (£ 26 pa) • Basic wage was £ 18/5/- a week (£ 950 pa) • Max contribution around 2. 75% • To provide a benefit of approx. £ 2, 000 in value made up of: – £ 200 capital sum; – Income £ 3/10/- (£ 182 p. a. ); • On top of means tested pension of £ 5/5/- 16

National superannuation: Means test and contributions (1968) • Downing now proposed a quite different

National superannuation: Means test and contributions (1968) • Downing now proposed a quite different scheme – Non-contributory means-tested Age Pension; plus – Graduated contributions according to means to a scheme that paid earnings-related benefits, broadly maintaining relative income position; – Benefits up-rated by an index of average earnings. 17

National superannuation: Means test and contributions (1968) Of his 1968 proposal, Downing: …later conceded

National superannuation: Means test and contributions (1968) Of his 1968 proposal, Downing: …later conceded was, ‘socially and morally inferior’ but at least had a chance of implementation. Quote from Brown (2001) p 242 18

One final phase of Downing’s superannuation advocacy • Downing vs Hancock’s National Superannuation Committee

One final phase of Downing’s superannuation advocacy • Downing vs Hancock’s National Superannuation Committee of Inquiry (1972 -1975) • By the 1970 s, Downing’s redistributive model appears to be at odds with the broad policy ideas being canvassed 19

Hancock’s National Superannuation Committee of Inquiry (1972 -1975) CHAIRMAN: You seem to have moved

Hancock’s National Superannuation Committee of Inquiry (1972 -1975) CHAIRMAN: You seem to have moved away from that sort of [redistributive] scheme? DOWNING: No. You helped to move me away. What I fear is that if you go to a national superannuation scheme available for everyone, that we will do it meanly…. in such a scheme I would want built in also graduated contributions so as to retain this concept of redistribution to lower earners. Transcript of Downing’s evidence to Hancock Committee (from Downing Archive) 20

Hancock’s National Superannuation Committee of Inquiry (1972 -1975) Downing’s preference for employer contributions vs

Hancock’s National Superannuation Committee of Inquiry (1972 -1975) Downing’s preference for employer contributions vs member contributions played out during the Hancock Committee: National superannuation is paternalism rampant. Fathers, unable to hide castor oil behind orange juice, have given up trying to administer it. But bitter pills still need sugar-coating. The whole point of employers’ contributions is simply to hide the cost of such paternalistic interventions. Downing, ‘National Superannuation’, Australian Economic Review (1974), also quoted by Hancock Committee 21

What, if anything, from Downing remains? • Means-tested Age Pension continues, a comprehensive means

What, if anything, from Downing remains? • Means-tested Age Pension continues, a comprehensive means test has been proposed numerous times • Wage trade-off paid for superannuation employer contributions out of rising income was introduced in the 1980 s in the National Wage Case – The industrial history of this is currently being written & Downing appears to be but a footnote; – Latrobe Economics Department, however, has been noted, particularly Donald Whitehead for influencing Bill Kelty.

What, if anything, from Downing remains? • Currently, there is a Bill before Parliament

What, if anything, from Downing remains? • Currently, there is a Bill before Parliament to enshrine the objective of superannuation in law: • What would Downing make of that?

Issues for further investigation • • Further work in Downing archive based on a

Issues for further investigation • • Further work in Downing archive based on a number of other things of interest – Downing’s ideas of home mortgage reforms – Downing’s work on Child Endowment policy Whitehead and Latrobe’s role in superannuation policy 24

Contemporary accounts [At] the same time I was at university, I’d been lectured by

Contemporary accounts [At] the same time I was at university, I’d been lectured by Professor Whitehead and he and I had long discussions about superannuation in terms of wages systems. In fact he wrote a book about wages and he was an advisor to the Liberal Party, an advisor to Conservatives. He had a view about superannuation which, I think, in part came from him and part came from me that was part of the industrial works [and] should be out there to be negotiated. He then put forward the view that what the country should do is to make sure that there was superannuation [coverage]. So, intellectually it [i. e. , the idea of extending superannuation coverage] had a base and industrially it had a base. 28 “So if you’re looking for the two catalysts for modern superannuation …the most important is Fitzgibbon [in] getting us started industrially. The other is La. Trobe University’s Economic Department. Bill Kelty quoted in Mary Easson’s Master’s thesis (2013)

Contemporary accounts We were looking at it because I was involved in doing ‘industrial

Contemporary accounts We were looking at it because I was involved in doing ‘industrial relations’ and politics and economics and Professor Whitehead and I developed a very good relationship. He nurtured me and took me from being an ordinary student to a good student. He was a great teacher. So if you are looking at the role of the university nurturing ideas, I think La Trobe University is a catalyst for nurturing industrial superannuation. Bill Kelty quoted in Mary Easson’s Master’s thesis (2013)