What is the super fund?
Questions have been raised over the accounting treatment of the Government's proposed super fund.
Friday, February 23rd 2001, 3:51PM
by Rob Hosking
Is the government’s proposed superannuation fund an expense or a capital item?
That issue was the subject of a major spat between Minister of Finance Michael Cullen and National finance spokesman Bill English at this week’s finance and expenditure select committee meeting.
Cullen has been saying since late last year that the fund should be included as an additional expense on the government’s balance sheet.
The problem with this, he told MPs, was to do so would not meet GAAP accounting standards, which would require the fund to be listed as a capital item.
"In common sense terms, I would prefer to see it listed as part of government spending," Cullen said.
Under the GAAP standards, transfers to the fund would be treated as a capital item and offset by the asset being built up.
"I think that while that is correct in accounting terms in common sense terms it's being a bit cute," Cullen said. "It does raise the possibility you could borrow the whole lot and transfer it to the fund."
That comment drew fire from the National opposition because of its implications for the official size of the government sector.
The Labour Alliance regime has a target of 35% of GDP for the size of the state sector, compared to the target of 30% which held for much of the previous nine years under National.
The current level is about half way between the two. However if the superannuation fund is treated as the GAAP standards say it should, the Labour Alliance government is unlikely to reach that target without a considerable rise in government spending.
That was English’s target.
"Treasury uses a definition in accordance with well-established accounting rules designed to promote transparency," he said. "Cullen's own personal definition is intended to avoid the embarrassment Labour would feel by announcing it had reduced its government spending target.
"Over the next four years, the difference between the two is $6.5 billion, almost as big as the whole health budget."
The government will, in this year’s Budget, be more explicit about the discrepancy, Cullen said, although he gave no details of how this would be achieved.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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