Craig Foss MP
National Party Associate Finance Spokesman

30 October 2006

Govt ignored officials' advice on KiwiSaver

Officials repeatedly told the Labour Government not to introduce mortgage diversion into KiwiSaver and, after initially agreeing, Cabinet did a U-turn, says National Party Associate Finance spokesman Craig Foss.

He has obtained papers under the Official Information Act which show that in February, Cabinet agreed with officials' advice that mortgage diversion was unworkable and too complex.

"Yet by the end of July, Ministers had had a change of heart and did a U-turn by embracing mortgage diversion," says Mr Foss.

"The papers show that officials were dead against mortgage diversion. One paper warned that the 'issue here is tipping the balance towards a home buying scheme and undermining long-term savings...'

"Another paper said mortgage diversion would make KiwiSaver 'unnecessarily complex', while a third pointed out that more work was needed to allow for non-traditional mortgages like revolving credit mortgages.

"In the end, however, mortgage diversion and the tax-break for employer contributions to KiwiSaver were part of Michael Cullen's late changes to the scheme, announced on 29 August.

"This mess is typical of Labour's cavalier attitude to parliamentary processes and advice from highly-paid officials."

ENDS

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