RESEARCH PAPER SERIES, 2021–22   20 December 2021

Myths of entitlement: a history of the Age Pension and the National Welfare Fund

Don Arthur

Social Policy

Contents

Introduction

The stolen pensions myth

Entitlement to the Age Pension

Safety net or earned entitlement?

The debate over contribution

Proposals to replace the Age Pension

Coalition proposals

Figure 1: ‘Chifley the greatest social service illusionist on earth’, Liberal Party advertisement, 15 September 1946

Labor proposals

Figure 2: 1947 newspaper headline on Chifley’s superannuation fund proposal

Removing the means test

The National Welfare Fund

The National Welfare Scheme

The creation of the National Welfare Fund

How the National Welfare Fund worked

1944–45 changes

Creation of unemployment and sickness benefits

Inclusion of the Age Pension in the National Welfare Fund

Creation of the Social Services Contribution

Changes by the Menzies Government

1950—Merging the Social Services Contribution with income tax

1952—Changing the way income is credited to the National Welfare Fund

The birth of the myth

Changes by the Fraser Government

Hawke Government abolishes the National Welfare Fund

Conclusion

Appendix: Timeline of policy changes relevant to the National Welfare Fund

1 

Introduction

For decades an urban myth has circulated that accuses politicians of misappropriating funds meant to be set aside for today’s pensioners. The myth weaves historical fact and misconception into a story designed to reinforce claims the Age Pension is an earned entitlement rather than a ‘welfare’ payment. In one version of the myth, former journalist Brian Hale claimed:

… most pensioners worked and spent a lifetime paying for their pensions. It’s not welfare and, when it was introduced, it was actually meant to be an entitlement. A 7.5 per cent tithe was taken from wages to put into a fund to pay their pensions. Just as workers now have superannuation collected.¹

At the centre of the myth is the National Welfare Fund, a trust account set up by the Curtin Government in 1943 as a conduit for social services spending. The Social Services Contribution was a levy set up by the Chifley Government in 1945 to provide revenue for the National Welfare Fund. Both the National Welfare Fund and the Social Services Contribution were real but neither performed the roles given to them by the myth.

According to the myth, the National Welfare Fund was set up as a kind of government superannuation fund where workers paid the Social Services Contribution along with their income tax and this money was meant to accumulate in the National Welfare Fund to pay for a non-means tested pension when they retired.²

By falsely casting the National Welfare Fund as an early superannuation scheme, the myth suggests that the Age Pension was funded in an entirely different way to other social security payments, such as the JobSeeker Payment. In doing so it implies older Australians have a special kind of entitlement to income support. Some age pensioners may turn to the myth to fend off claims they rely on a ‘welfare’ payment and are living at the expense of today’s taxpayers.³

A common element of the myth is the claim that successive governments have ‘stolen’ the National Welfare Fund’s accumulated balance and then denied retirees the payments they were entitled to.⁴ Claims about ‘stolen’ funds turn the myth into a conspiracy theory. The myth has circulated widely on internet forums and in letters to newspapers, sometimes alongside much more extreme theories.⁵

Misunderstandings about the National Welfare Fund are not limited to fringe groups and conspiracy theorists. Even members of Parliament have become confused. For example, in 1984 former Whitlam Government Minister Clyde Cameron said the fund meant:

… everybody would make some contribution and everybody would then have the right to call upon that fund without a means test to entitle them to a pension. Now in a way it was a kind of national superannuation scheme.⁶

The long-standing debate over the Age Pension means test has added to the confusion. For many years the Australian Labor Party promised voters it would abolish the Age Pension means test. Some may have thought this had something to do with Labor’s creation of the National Welfare Fund.⁷ In reality, the major obstacle to removing the means test was always finding the extra money needed to pay for it.

The history of the National Welfare Fund is both more complicated and less dramatic than the myth suggests. The fund was set up to pay for a range of social services including unemployment benefits and when it was first created it did not include the Age Pension. But the most confusing feature of the trust account is the way it held funds. The National Welfare Fund was not a vault filled with pound notes, gold bullion or share certificates. Instead, the fund’s balance was held in the form of internal treasury bills. Unlike investment instruments such as treasury bonds, internal treasury bills could not be bought or sold on the market. They were just a way of moving paper balances between various government funds.⁸

When the National Welfare Fund accumulated a positive balance, it immediately ‘lent’ it to the Government and received internal treasury bills in return. If the Government wanted to ‘raid’ the National Welfare Fund, it first had to come up with the money needed to redeem the internal treasury bills.⁹ The National Welfare Fund was not a separate store of funds that existed alongside consolidated revenue, it was a political commitment by a government that it would spend a certain amount on social services in the future. It was a bookkeeping arrangement where every dollar credited to the fund was cancelled out by a dollar of liability somewhere else on the government’s books. Opposition Leader Robert Menzies dismissed it as ‘a ledger account in the treasury-books’.¹⁰

Over the years several MPs and journalists have tried to dispel the myth by explaining how the National Welfare Fund worked.¹¹ This paper adds to these responses by outlining the myth’s key claims and then providing a more accurate and complete history of the development of the Age Pension and the National Welfare Fund.

1 The stolen pensions myth

The idea that the Age Pension is an entitlement earned through a lifetime of contribution to the community is common in Australia. One source of contribution is tax. According to a 2018 survey, around a third of voters see the Age Pension as a repayment of tax rather than a safety net for people who have not saved enough for their own retirement.¹² Politicians and commentators have often endorsed this view. For example, in 1982 former Social Services Minister William Wentworth argued that retirees should be entitled to a non-means tested pension because their taxes had been invested in productive infrastructure such as schools, roads, ports and telephone networks.¹³ These kinds of claims are opinions about what retirees are morally entitled to. This paper does not attempt to take sides in that debate.

The stolen pensions myth goes beyond claims of moral entitlement. Rather than just asserting that today’s retirees have earned a pension through their past contributions to the community, the myth attempts to strengthen this claim with a misleading account of legal and administrative history.

Most versions of the myth claim the Chifley Labor Government set up the National Welfare Fund to accumulate funds that would later be used to pay Age Pensions. The money for the fund would come from the Social Services Contribution and enable the Government to abolish the means test as well as increase the pension rate. The myth goes on to claim that governments have ‘stolen’ the contributions that were meant to accumulate in the National Welfare Fund. As a letter published in the Burdekin Advocate put it:

Let’s get the facts straight. Pensioners are already being robbed of their actual pension entitlements by a succession of governments that have plundered the age pension funds that were collected as part of the National Welfare Fund begun by the Ben Chifley Government. Robert Menzies as Opposition Leader at the time insisted the funds raised by a levy of 7.5 per cent be held in a separate trust fund.¹⁴

In another telling of the myth the anonymous writer argues that the ‘theft’ of retirement savings from the National Welfare Fund is part of a larger plan by government that ends with the privatisation of the income support system and the suspension of the Age Pension:

Considerable public relations investment prepares Aussies for this event; generally in the form of proselytising the myth that the younger generation is being stuck with the burden of financing pensions for the ageing baby boomers. The reality could not be more different. This is the story of a different kind of privatisation… outright theft on a multi-billion dollar scale; the appropriation of an entire age pension scheme. We don’t even know where the money went.

The history of the Age Pension Fund is not-well-known and it goes back to 1945, when Prime Minister Ben Chifley became aware of grinding poverty amongst the elderly. He was shocked, and a referendum was put to the people of Australia; and the outcome was a welfare fund contributed to by every Aussie worker, at a rate of 7.5% of gross income (at the time, in Australia and New Zealand, one and sixpence in the pound). This was a fund that was very specifically owned by the workers and declared as such; a fund in which government could not interfere; and from which it could not even borrow. Money could only be paid out as an indexed and non-means tested pension upon retirement at age 65 (60 for women).

To ensure the public was reminded of its investment, and so no government could interfere with the Fund, the amount appeared at the top of every income tax form and was calculated before income tax. Actuaries have calculated that this fund should currently be yielding at $6000 per year more than the current age pension.¹⁵

The writer goes on to claim that subsequent governments took the money invested in the fund and ‘imposed means testing; on worker’s own savings’.¹⁶

Part of the point of these stories is to differentiate the Age Pension from ‘welfare’ payments like JobSeeker and to refute what Hale calls ‘the disingenuous line that younger workers are paying tax to support pensioners’.¹⁷

Most versions of the myth include a chronology that begins with the creation of the National Welfare Fund by the Curtin Labor Government in the 1940s and ends with the Hawke Labor Government’s abolition of the fund in 1985.¹⁸ Some, like Hale’s, include references to the relevant Acts of Parliament. While some of the material in these chronologies is accurate, it is woven into a larger narrative that is misleading.

2 Entitlement to the Age Pension

Safety net or earned entitlement?

Debates over entitlement to the Age Pension began even before the scheme was created. Politicians and commentators argued about whether the scheme should be seen as a safety net for the poor or an entitlement earned through years of contribution to the community.

Supporters of the earned entitlement approach did not want recipients to feel they were receiving a ‘charity dole’ or that the pension stigmatised them as ‘paupers’. This position was difficult to square with a means test that excluded many retirees who had worked and paid taxes all their adult lives.

An early supporter of the earned entitlement view was the Bulletin. In an 1897 editorial the magazine insisted:

Even though the applicant for a pension may have contributed toward it as a taxpayer for a period of 50 years, the suggestion that it should only be payable to him if he is poor and of good character makes him a pauper.¹⁹

Western Australian MP John Forrest took the opposing view arguing that the pension should be restricted to those unable to maintain themselves. During the debate over the 1908 Invalid and Old Age Pensions Bill, he said:

… under this Bill no one is to receive an old-age pension unless he is unable to maintain himself. That provision means that old-age pensions are to be paid to the deserving poor who have served their country well, and whom Australia will not cast aside, and neglect in their old age.²⁰

Some Labor MPs resisted this approach, with James Catts objecting to the clause restricting the pension to a person who is ‘unable to maintain himself’ and arguing that it stamped the pension ‘as a charity dole’. While the clause was removed from the Bill, the means test remained.²¹

Similarly, Labor member Josiah Thomas took a stand on the means test arguing the only way to remove the stigma of charity was to make the Age Pension universal. He argued ‘unless old-age pensions be made universal—unless they apply to rich and poor alike—there must be a tinge of charity’.²²

In 1908 Parliament passed the Invalid and Old-Age Pensions Act and the first Old-Age Pensions were paid in 1909.²³ The scheme included income and assets tests. While Labor members and senators voted for the Bill, they continued their criticisms of the means test.²⁴ However, cost was a major obstacle to removing the means test in the foreseeable future.

The cost of the Age Pension became an even more pressing issue during the Great Depression. The Depression rekindled debate over whether the pension should be seen as an earned entitlement or a safety net. According to TH Kewley, between 1912 and 1930 spending on invalid and old-age pensions increased from £2.1 million to £10.8 million.²⁵ The Auditor General, CJ Cerutty, questioned whether this level of spending was justified. In his 1930 report he suggested that the pension was sapping the independence of the people, discouraging thrift, and placing an unfair burden on those who saved for their own retirement. He regarded many recipients as undeserving of support.²⁶

In contrast, Labor leader James Scullin continued to defend the earned entitlement view:

… the old-age pension is a right earned by the old people who have worked for and served this country. It may be asked— if the pension is a right, why should it not be paid to all persons of eligible age, irrespective of their income? The answer is that Commonwealth finances could not provide for such an expenditure; but the right is there, and we should not lose sight of it.²⁷

Cerutty’s argument was that not everyone who received an Age Pension had served the country. He claimed some had ‘led dissolute and lawless lives’.²⁸ One way to limit the Age Pension to those who had worked hard all their lives was to link eligibility to a history of contribution to a pension fund.

The debate over contribution

While many Labor MPs wanted to keep the tax-funded pension system but remove the means test, some of their opponents proposed replacing the existing Age Pension with a contributory scheme.

Contributory, or social insurance pension schemes are usually financed by payments from workers, employers and government. In a purely contributory scheme, if a worker has made the required level of contributions to the scheme, they are eligible to claim benefits when they reach retirement age. In a contributory scheme, the amount of benefits a person receives may be linked to their earnings and contributions. There is no means test in a contributory scheme.

One of the major arguments against the means test was that those who had contributed through taxes were denied benefits from the scheme. Means testing was unpopular and advocates of a contributory system promoted their plan by arguing that it would be possible to remove the means test by funding the scheme through contributions rather than taxes.²⁹

Together with advocates of a universal tax-funded system, supporters of a contributory scheme argued that the means test was stigmatising because it marked recipients as poor and needy as well as subjecting them to humiliating investigations of their private affairs.³⁰ For example, in 1911 the senior Opposition member Joseph Cook told the Parliament:

The more I think of it the more convinced I am that we must come ultimately to a form of national insurance which will give every man—the millionaire as well as the poor man—who has subscribed to his own insurance fund the right to receive that insurance, without taint of pauperism or charity, in his old age.³¹

Advocates of a contributory scheme were not always clear about how they would remove the means test. Whether it was done with taxes or contributions, meeting the cost of a non-means tested Age Pension would require more money. One solution was to raise revenue from lower-paid workers—people who paid little or no income tax under the existing system but would pay a social insurance contribution under a contributory system.

Proposals to replace the Age Pension

Coalition proposals

In 1923 the Bruce-Page Government announced plans to develop a comprehensive social services system that would ‘remove altogether the taint of pauperism’.³² A royal commission looked at options for a new national insurance scheme and recommended a flat-rate contributory superannuation scheme.³³ The Government introduced a Bill for national insurance in 1928 but left office without making it law.³⁴

In the late 1930s, the Coalition Government headed by Joe Lyons introduced legislation to create a contributory social security scheme that included a new Age Pension. Although Parliament passed legislation for the scheme in 1938, the Government later abandoned it.³⁵ The Labor Party opposed the scheme arguing that the burden of paying for the scheme fell unfairly on low-income earners.³⁶

The Curtin Labor Government introduced a more comprehensive national welfare scheme that included payments for widows, unemployment and sickness and promised health benefits.³⁷ The Liberal Party under Robert Menzies continued to advocate a contributory model for social services.

The Liberals went to the 1946 federal election promising to introduce a contributory social insurance scheme.³⁸ The party’s newspaper advertisements pledged that ‘The Liberal Party will maintain pensions without the means test’:

The Liberal Party maintains that the Means Test is humiliating, and a penalty for thrift. It contends that social benefits should be enjoyed by all.

When social services are placed on a contributory basis, the Means Test can be abolished.³⁹

Another advertisement portrayed Chifley as an ‘illusionist’ who took people’s taxes but unfairly denied them benefits (see Figure 1).

Figure 1: ‘Chifley the greatest social service illusionist on earth’, Liberal Party advertisement, 15 September 1946

Source: Liberal Party of Australia, ‘Chifley the greatest social service illusionist on earth’, Liberal Party advertisement, The Sun, 15 September 1946, p. 10.

After losing the election to Labor, Menzies seemed to lose enthusiasm for the idea of a contributory system of social security. Ahead of the 1949 election he continued to insist that a contributory scheme was the only way to abolish the means test but promised only to ‘further investigate this complicated problem’.⁴⁰

Sometime between winning office in 1949 and contesting the 1954 election, the Coalition decided it could not abolish the means test. In a 1954 campaign launch speech, Menzies explained:

Without increased production the earning groups just cannot go on carrying the enormous burden of age benefits which accrue to an increasing proportion of our population every year. We have therefore decided that it is not practicable completely to abolish the Means Test, but that we will continue vigorously the work of modifying it …⁴¹

In his 1965 history of the Australian social security system, TH Kewley suggests that part of Menzies’ motivation for moving to a contributory system was to ensure that those who benefited from social services also paid something for them.⁴² In 1943 he argued that the ‘idea that you are to divide the community into two sections, those who pay and those who take, is utterly destructive of democracy’.⁴³ It may be that the extension of income tax to lower earners helped alleviate Menzies’ concern. In addition, from the beginning of 1946, the Labor Government had separated the income tax into two levies, naming one the Social Services Contribution. This would have created the impression that low-income earners were paying for the social services they received.

Labor proposals

As Prime Minister, Ben Chifley was sceptical about the Coalition’s plans to abolish the means test on pensions and benefits and challenged opposition members to explain how they would pay for it. Speaking on the 1945–46 Budget he said:

I should like any honorable member who advocates the abolition of the means test to get down to tintacks, and show me a method by which his object could be achieved. It should be perfectly clear to honorable members that pensions and other social services must be paid from revenue. They cannot be paid from bank credit.⁴⁴

However, Chifley had his own plan for removing the means test by creating an entirely new national superannuation scheme, along with increases in taxation to fund it. In a speech to the Australian Labor Party Conference in November 1945 he said:

I believe that the objective of the Labor Movement should be to work steadily to have universal superannuation. If there is to be a universal right to all the benefits, then there should be a universal contribution …⁴⁵

‘Universal contribution’ involved further raising taxes on low-income earners. Chifley pointed to New Zealand where ‘there is collection of a great amount of money from persons who are not even taxable in this country’.⁴⁶ The idea was to introduce a flat rate tax that would apply to all earnings.⁴⁷

Although mostly forgotten now, the plan was widely reported in the newspapers. According to The Telegraph (Brisbane), Chifley’s ‘ultimate intention’ was ‘to jettison the present old age pensions system with its objectionable means test …’⁴⁸

Figure 2: 1947 newspaper headline on Chifley’s superannuation fund proposal

Source: L McDonnell, ‘Chifley Plans National Superannuation Fund’, The Telegraph (Brisbane), 8 March 1947, p. 2.

In 1947, Chifley asked an interdepartmental committee to look at options for setting up a national superannuation scheme.⁴⁹ It was clear from the committee’s draft reports that the existing Social Services Contribution would not be enough to fund a non-means tested scheme.⁵⁰ According to a 1948 report in The Mercury, the new scheme would cost an extra £48,000,000 and ‘The experts had estimated that an additional 10d in the £ flat rate tax would have to be imposed on all income earners at present paying social services contribution.’⁵¹

Before the 1949 election Chifley made it clear that abolishing the means test could not be funded by the existing Social Services Contribution. In his budget speech he said ‘It is of no use attempting to fool the people with promises. These things can be done only by the imposition of additional taxes’.⁵² According to a later media report, Labor dropped plans for a national superannuation scheme because the cost was too high.⁵³

Removing the means test

Labor lost office in the 1949 election and failed to regain it in 1951, after which Chifley was succeeded by HV Evatt. Under Evatt, Labor adopted a different policy on the means test. In his speech on the 1953–54 Budget he announced:

We shall pursue the objective of total abolition of the means test within the shortest space of time. I confidently believe that we can terminate all its vicious and evil features within the lifetime of a single parliament.⁵⁴

According to academic Geoffrey Sawer, this ‘represented a change in Labor policy, since their tendency would be not to redistribute wealth from upper to lower income brackets, but to maintain existing inequalities beyond the retiring age’.⁵⁵

Under Gough Whitlam, Labor took a policy to abolish the means test into the 1969 and 1972 election campaigns along with a promise to introduce a new National Superannuation Scheme.⁵⁶

In 1972, Labor was joined by the Coalition in opposing the means test. Ahead of the 1972 election the Liberal Party announced ‘The means test is to be completely phased out within 3 years and considerably eased now’.⁵⁷ The Liberal Party also announced ‘the possible introduction of a national superannuation scheme’.⁵⁸

After winning the 1972 election, the Whitlam Government began phasing out the means test on the Age Pension starting with those aged 75 or more.⁵⁹ However, the change was short lived. In the 1978–79 Budget the Fraser Government began to reverse these arrangements.⁶⁰

While the means test was never abolished, it was eased. Between 1946 and 1980 successive governments made changes to the means test allowing more of those of pension age to receive at least a part pension. According to previous Parliamentary Library analysis, around 32 per cent of the aged population received an Age Pension up until World War II. That proportion rose to a high of 77 per cent in the late 1970s before dropping back again.⁶¹ In 2019, around 65 per cent of people over Age Pension eligibility age received the Age Pension.⁶²

3 The National Welfare Fund

The Curtin Labor Government’s rationale for creating the National Welfare Fund had nothing to do with the Age Pension means test. The fund was announced as part of the Government’s National Welfare Scheme, a major expansion of the social security system that included new payments including unemployment and sickness benefits. The Government also planned to include more spending on health.⁶³

Planning for the National Welfare Scheme took place during World War II when consumer goods were scarce. As historian Rob Watts explains in The foundations of the national welfare state, the Government was concerned about inflation and sought to limit the amount of money consumers were able to spend.⁶⁴ The Government also needed to raise money for the war. The solution to both problems was to raise taxes on lower-income earners.⁶⁵

According to Watts, the National Welfare Fund was created to manage the political difficulties caused by imposing income taxes on lower-income earners—something the Curtin Government had promised not to do.⁶⁶ By transferring a share of this additional tax revenue to the National Welfare Fund, the Government was able to say it was setting the money aside to pay for the planned National Welfare Scheme. In the meantime, the funds would not sit idle while waiting to be spent, the Government would borrow these funds and use them to meet the costs of the war. Watts called it ‘a scheme of taxation tied to a smokescreen of a social security system’.⁶⁷

The National Welfare Scheme

Before World War II the Australian Government’s social security system was limited to age and invalid pensions and maternity allowances. In February 1943, Treasurer Ben Chifley announced a major expansion of social security and health services—the National Welfare Scheme.⁶⁸ The Government’s plan was to progressively build up payments and services starting with maternity allowances and funeral benefits and expanding to include unemployment and sickness benefits and comprehensive medical services.⁶⁹

Chifley argued that one of the advantages of funding social security from general revenue was that a progressive income tax system meant ‘the burden is being distributed in strict accordance with ability to bear it’. While higher income earners paid a higher proportion of their income, Chifley argued that everyone contributed something. Even those paying no income tax contributed through indirect taxes.⁷⁰ This meant ‘benefits under the National Welfare Scheme are not in any sense, therefore, to be looked upon as a charitable dole; all have contributed to the Scheme according to their individual capacity.’⁷¹

Rhetorically, Chifley was drawing on the principle of benefits earned through contribution but combined it with a commitment to redistribution. As Labor MP Charles Jones put it in 1959: ‘We believe that the principle to be observed should be, “From each according to his ability, and to each according to his need”’.⁷²

The creation of the National Welfare Fund

The National Welfare Fund was created in 1943 as a trust account under the Audit Act 1901. Initially the fund was created for spending on ‘health services, unemployment or sickness benefits, family allowances, or other welfare or social services’.⁷³ This was spending the Government planned to do after the war. Existing payments such as the Age Pension were not included.

The National Welfare Act 1943 stipulated that money for the National Welfare Fund would come from consolidated revenue.⁷⁴ As Chifley explained, it would be ‘an annual sum of £30,000,000, or a sum equal to one fourth of the total collections each year from income tax on individuals, whichever is the lower’.⁷⁵ The Government announced that it would raise the money for the National Welfare Fund by increasing income taxes. Lowering the income threshold at which tax became payable brought lower income earners into the income tax system.⁷⁶ According to law professor Geoffrey Sawer, Chifley’s tax increases faced strong opposition from the Labor left.⁷⁷

Chifley made no secret of the Government’s intention to spend the money credited to the National Welfare Fund on the war. In announcing the fund he said:

In its early stages the fund will build up some credit balances which will be used later when the welfare scheme reaches full operation. For instance, in the first year a substantial credit may accrue. These balances will not be allowed to remain idle but will be invested, and will thus provide a useful source of temporary finance for war purposes, which will be replaced by long-term borrowings when the moneys are required later for welfare purposes.⁷⁸

Prominent Opposition MPs regarded the arrangement as a trick to allow the Government to avoid admitting that it had raised taxes on low-income earners to fund the war effort.⁷⁹ Liberal Party MP Percy Spender described the Government’s funding arrangements as ‘shadowy and nebulous’ saying:

A trust account is to be established into which £30,000,000 is to be paid. Apparently the next day the money will be drawn out of the account. In other words, the Government will lend the money to itself. This is the first time that I have ever heard it proposed, among reasonable men, that a trustee shall be entitled to lend trust money to himself. Apparently, the trust account is to be established, but it may be extinguished the next day. I cannot imagine any parliament in any country, agreeing to such a shadowy and nebulous scheme.⁸⁰

According to Sawer, an ‘element of deceit was present, but the National Welfare Fund was far from being a complete sham’. The Government did intend to expand social services after the war and the fund ‘constituted a political promise of considerable weight’.⁸¹

How the National Welfare Fund worked

While critics like Spender were broadly right about how the National Welfare Fund worked, there was nothing unusual or improper about the way it operated. The National Welfare Fund was established under Section 62A of the Audit Act 1901 (Audit Act) which allowed the Treasurer to invest funds held by the trust account in Government securities and to close a trust account and transfer any credit to consolidated revenue.⁸²

When funds credited to the National Welfare Fund were invested in government securities, these were not securities like Treasury bonds that could be bought and sold outside of government. Instead, the fund held its investments in the form of internal treasury bills. As critics of the fund pointed out, these were essentially IOUs where only the Treasury could ‘buy’ them back. Country Party leader Arthur Fadden argued that:

The fund is bankrupt, because it has been used for the general purposes of finance, and the amount withdrawn has been replaced by Treasury I O U's. I concede that it is neither illegal nor improper for the Treasurer so to act, because the Audit Act provides that such funds may be represented by government securities, which are defined as including treasury-bills or the I O U's to which I have referred. Nevertheless, I ventilate the matter so that no one will be deceived as to what has happened to the fund. The fact should be made clear to the public that the money contributed to the National Welfare Fund has been used for purposes other than those intended. In fact, the taxpayers will contribute twice for the social benefits which ultimately they will receive.⁸³

Funds credited to the National Welfare Fund were not an asset the Government could draw on as an alternative to taxing or borrowing. To spend these funds, the Government would first need to redeem the internal treasury bills with cash. To do this, it would first need to find the cash.⁸⁴

The balance of the National Welfare Fund had no effect on social security claimants’ legal entitlement to payment. Entitlements to payment are grounded in social security legislation. Parliament could change these entitlements or abolish the National Welfare Fund at any time. The funds credited to the National Welfare Fund did not belong to future social security claimants in any legal sense. Chifley freely admitted this when he said:

… when the Commonwealth Parliament decides that certain moneys shall be placed in a trust fund it pledges itself to ensure that that decision shall be carried out. I do not deny for one moment that it is possible for Parliament at any time to alter the laws of its own making or that a pledge made by legislation can be broken by other legislation. No Parliament can bind its successors.⁸⁵

As US public policy academic Eric Patashnik notes, government trust funds establish a political contract rather than an economic one.⁸⁶ The Curtin Government attempted to establish such a contract when it linked tax increases to entitlements under the new National Welfare Scheme. Because voters had been told that they had already paid for benefits under the scheme, it would be politically difficult for any future government to refuse to pay them.

1944–45 changes

Creation of unemployment and sickness benefits

In 1944 Parliament passed legislation for unemployment and sickness benefits.⁸⁷ These payments were a key feature of the Government’s National Welfare Scheme. Chifley had insisted that benefits under the National Welfare Scheme were not a ‘charitable dole’ because everyone had contributed the scheme through taxation.⁸⁸ However, during debate over the Bill, Leader of the Opposition Robert Menzies disagreed, arguing that any tax funded system with a means test was ‘pauperising’.⁸⁹ The implication of this was that the Age Pension was also a dole.⁹⁰

Inclusion of the Age Pension in the National Welfare Fund

In 1945 Parliament passed legislation to include the Age Pension as one of the payments to be made out of the National Welfare Fund. Amendments to the National Welfare Fund Act added invalid and old-age pensions, widows pensions and child endowment.⁹¹

Before this change, invalid and old-age pensions had been paid from another fund created under the Audit Act—the Invalid and Old-age Pensions Trust Account. This had been created to allow the Commonwealth Government to retain surplus revenue and avoid having to return it to state governments.⁹²

Creation of the Social Services Contribution

That same year the Chifley Government separated income tax into two levies, a general income tax and a Social Services Contribution. Rather than being funded from consolidated revenue, income for the National Welfare Fund would now come from the new Social Services Contribution and payroll tax.⁹³

The Social Services Contribution was not a new burden placed on taxpayers, nor would it be levied on the lowest earners. As Chifley explained in his 1945–46 Budget speech it was offset by income tax cuts:

… the Government has decided to make special provision to meet the cost of social services by introducing a social services contribution entirely separate from the ordinary income tax and, at the same time, to reduce the rates of income tax so that the combined charge on individuals, including members of the forces, for income tax and social services contribution will, on the average, be about 12½ per cent lower in a full year than the present charge for income tax alone.⁹⁴

In his second reading speech on the Social Services Contribution Bill 1945, Chifley again made it clear that ‘no person shall be required to pay as Social Services Contribution an amount, greater than he would have paid in income tax at present rates after receiving the income tax reduction that has already been announced’.⁹⁵

Changes by the Menzies Government

When the National Welfare Fund was first established, the Government expected spending from the fund would soon grow to match receipts. However, a strong economy resulted in higher tax revenues and fewer claims than expected, and the implementation of some new payments was delayed. As a result, by 1950 the National Welfare Fund accumulated a substantial balance.⁹⁶

Within Treasury, there was concern about the size of the fund’s balance. Treasury official Richard Randall wrote to his superior, Frederick Wheeler, about the future of the National Welfare Fund. Randall was an influential official who would later go on to become Treasury Secretary.⁹⁷ He argued that politically the fund had to continue, however ‘… the existence of the Fund and the size it has reached create a standing temptation to lift social service rates and set up new services, and official resistance to such moves is weakened’.⁹⁸

To limit the size of the fund Randall suggested it might be possible to allow it to ‘waste away’ over time, ‘but if that happens it must seem to come about through natural causes’. The Government was considering re-combining the social services contribution with income tax and this raised the issue of how to feed the fund. Randall’s preference was against allowing the balance of the fund to grow. He remarked, ‘we should not mind taking a risk that ten years hence the Fund might have ceased significantly to exist’.⁹⁹

1950—Merging the Social Services Contribution with income tax

In 1950 the Menzies Government merged the Social Services Contribution with income tax. This was part of a plan to simplify the income tax system. The Treasurer announced that the then new single levy would be called ‘income tax and social services contribution’:

This title will serve as a constant reminder to taxpayers that a substantial proportion of their payments will be devoted to Commonwealth social services. Provision will be made in a separate Bill for special appropriations from the single levy, to ensure that the element of social services contribution in each person's payment shall be appropriated to the National Welfare Fund, and that that fund will have an assured income to meet its purposes.¹⁰⁰

This was the end of the Social Services Contribution as a separate levy. In his book, Social Security in Australia, Kewley argued that the Social Services Contribution had served a useful political purpose by enabling the Menzies Government to impose income tax as far down the income scale as the Social Services Contribution.¹⁰¹

1952—Changing the way income is credited to the National Welfare Fund

Absorbing the Social Services Contribution into income tax simplified the tax system but created a new problem: how to allocate revenue to the National Welfare Fund.

Between 1949 and 1952 the balance of the National Welfare Fund had grown from £99 million to £185 million.¹⁰² The Government may have shared Randall’s concern that a large balance would encourage political demands for increased spending on benefits. As Kewley notes:

This substantial annual increase would not be without some embarrassment to the Government in that it provided a regular reminder that the Government was not spending on the social services the amount it was allocating for that purpose. The Government may thus have formed the opinion that, if the Fund were allowed to continue to build up credit balances, demand for increased benefits would become imperative and, moreover, that these could be met through the Fund only by action of a kind, in the circumstances of the time, would have inflationary effects.¹⁰³

The Government decided to slow the growth of the fund. With the passage of the National Welfare Fund Act 1952, the amount going into the fund in each financial year matched the amount paid out in that financial year.¹⁰⁴ Because the fund earned interest on the treasury bills it held, the 1952 amendment did not completely stop the fund’s balance growing and by 1964 it had risen to £209.2 million.¹⁰⁵

The birth of the myth

The 1952 changes created some controversy. An organisation called the National Welfare Fund Association had formed to push for the abolition of the pension means test, arguing that the National Welfare Fund should have sufficient funds to make this possible.¹⁰⁶ The association lobbied members and senators throughout the 1950s, including ahead of the 1952 changes.¹⁰⁷ In 1954 the Association’s chairman said:

We have gone into the matter very closely, and some hundreds of millions of pounds have been taken out of the Welfare fund and paid into revenue. Had this money been used for its rightful purpose, the means test could have been abolished some time ago.¹⁰⁸

This was the beginning of the stolen pensions myth. In a 1952 edition of Education, the NSW Public School Teachers Federation journal, EW Shields accused the Menzies Government of ‘fraudulent malpractice’ and claimed it had abolished the National Welfare Fund and used the money for other purposes.¹⁰⁹

Changes by the Fraser Government

Despite rumours circulated by the National Welfare Fund Association and others during the 1950s, the Menzies Government had not abolished the National Welfare Fund. What it had done was end the hypothecation of an identifiable share of revenue to social services. However, in 1976 the Fraser Government actually did what critics had accused the Menzies Government of doing—it transferred the unrequired balance of the Nation Welfare Fund into consolidated revenue. This had no practical effect on social security entitlements since the 1952 Act ensured that the fund would receive whatever it needed to meet its obligations from consolidated revenue each year. The Treasure Phillip Lynch told the Parliament:

… no working balance is required in the Trust Account. The Audit Act provides a procedure whereby moneys not required for the purposes of a Trust Account may be transferred to the Consolidated Revenue Fund upon determination by the Treasurer. I intend that the internal treasury bill holdings of the National Welfare Fund Trust Account be redeemed. The cash resulting from the redemption of the internal treasury bills will be paid direct to the Consolidated Revenue Fund.¹¹⁰

The National Welfare Fund was created to serve a political rather than an administrative purpose. In return for higher taxes, lower income earners received the benefit of the Chifley Government’s National Welfare Scheme. When the fund built up a substantial balance it became a political liability to the Menzies Government because it encouraged public demands for additional social services entitlements—in particular, a non-means tested Age Pension.

The Menzies and Fraser Governments had succeeded in eliminating the balance. The Fraser Government was now faced with the problem of what the National Welfare Fund was for. A 1981 Auditor-General’s report pointed out that maintaining the fund created a great deal of administrative work and sought the views of the Department of Finance on abolishing the fund. The Department of Finance was aware of the problem and advised the Auditor General that the ‘the possible abolition of the Fund has been under notice for some time’.¹¹¹

Hawke Government abolishes the National Welfare Fund

The Fraser Government lost office before taking any further action on the National Welfare Fund. In 1985 the Hawke Labor Government introduced the National Welfare Fund Repeal Bill 1985 to abolish the fund.¹¹² The Bill received bipartisan support with the opposition claiming credit for initiating the process.¹¹³

In debate over the Bill, Labor Community Services Minister Don Grimes acknowledged the work of former Social Security Minister Margaret Guilfoyle and illustrated how the fund had become a political problem for both sides of politics:

I, when shadow Minister for Social Security from 1976 and Senator Dame Margaret Guilfoyle as Minister for Social Security in that time, attended many meetings with pensioners. … At almost every meeting I have been to, one or two pensioners have accused me, Senator Dame Margaret Guilfoyle and all those who have preceded us, of locking away in a big vault in Canberra the national welfare fund which was introduced by Mr Curtin and Mr Chifley and was snitched away from them by Sir Robert Menzies and locked up. We are told that the only thing that was stopping the pensioners of this country from getting their pensions doubled was the fact that the national welfare fund was locked away and we nasty politicians had got at it.¹¹⁴

Complaints continued after the abolition of the National Welfare Fund. For example, the 2009 Pension Review (Harmer Review) received submissions arguing that the contributions to the National Welfare Fund ‘were in effect a prepayment of a future entitlement to a pension’.¹¹⁵ Treasury’s 2020 Retirement Income Review noted that the National Welfare Fund and Social Services Contribution ‘may have been perceived by some older Australians as pre-funding their Age Pension entitlement’.¹¹⁶ Both reviews attempted to explain why this view was incorrect.

4 Conclusion

The National Welfare Fund and Social Services Contribution served a political rather than an administrative purpose. In the 1940s the Government encouraged Australians to see social security benefits as something they had earned. For example, in 1948 the Director General of the Department of Social Services wrote:

The fact that a specific social services contribution is now payable has helped to remove from people's minds any association of benefits with charity. However, notwithstanding the realization of the public that they, by production during their lifetime, have in fact created or contributed to the resources from which they may draw benefits, cases are continually coming to notice where those who have led useful lives and created wealth for the community hesitate to make application for a share of the products of their own past labours.¹¹⁷

Today, the Department of Social Services tells retirees that the Age Pension is ‘a safety net for people who are unable to support themselves fully in retirement’ and emphasises that it is ‘financed through general taxation revenue on a recurrent basis’.¹¹⁸

The major parties’ approach to the means test has changed since the 1970s. Some of today’s retirees may remember the early 1970s when both sides of politics promised means test-free age pensions or the early 1980s when former Social Services Minister Bill Wentworth insisted that Ben Chifley had set up a kind of national superannuation scheme.¹¹⁹

The stolen pensions myth challenges the idea that the Age Pension is a ‘welfare’ safety net and re-asserts the idea that it is an earned entitlement. However, in doing so it misrepresents the history of the Age Pension and the National Welfare Fund. The myth goes much further than insisting that retirees have earned a pension by contributing to society through paid or unpaid work.

There are at least three things the myth gets wrong. First, the myth creates the impression that the National Welfare Fund was created primarily for the Age Pension. As the history above makes clear, it was originally set up for the Curtin Government’s National Welfare Scheme. The scheme did not, initially, include the Age Pension. The Age Pension was added later.

If the National Welfare Fund and the Social Services Contribution are understood as conferring a moral right to benefits, it I hard to see how this would not apply to unemployment payments as well. In explaining the new system, Chifley insisted ‘Benefits under the National Welfare Scheme are not in any sense … to be looked upon as a charitable dole; all have contributed to the Scheme according to their individual capacity’.¹²⁰

Second, the myth suggests that the Curtin and Chifley Governments established what amounts to a superannuation-like Age Pension system in the 1940s. The history of the Age Pension presented above makes it clear that the changes of the 1940s did not change the nature of the Age Pension. It was still essentially the same scheme it had been when it was established in 1908. At various times there were plans to replace or supplement the Age Pension with a new government-run national superannuation scheme, but these plans were never implemented.

Third, the myth suggests that the balances credited to the National Welfare Fund represented a store of value in addition to consolidated revenue and could be ‘raided’ by the Government. However, because the National Welfare Fund held its ‘investments’ in the form of internal treasury bills, the only way to spend these balances was to find the money to redeem the treasury bills.

Funds credited to the National Welfare Fund represented a non-legally binding promise to spend a certain amount on social services in the future. When the promised funds were spent, the Government would normally raise the money through taxes or loans. As with unemployment payments, the money for Age Pensions would likely come from taxes paid in the present, not taxes paid in the past.

Legally, the National Welfare Fund had no effect on entitlements to the Age Pension or other social security payments. These entitlements have always been set out in social security legislation and can be changed by the Parliament.

5 Appendix: Timeline of policy changes relevant to the National Welfare Fund

Year

Policy development

Key documents

1908

Old-age Pension created as a means tested non-contributory scheme.

Invalid and Old-age Pensions Act 1908

1928

Bruce Government puts forward a Bill for a social insurance scheme that included contributory superannuation. The Bill was not passed.

National Insurance Bill 1928

1938

Lyons Government puts forward a Bill for a social insurance scheme that includes a contributory age pension. The Bill was passed but the scheme was not implemented.

National Health and Pensions Insurance Act 1938

National Health and Pensions Insurance Act 1939

1943

Curtin Government announces the foundation of a National Welfare Scheme which will include ‘health, sickness, unemployment and many, other associated services’.

The scheme will be funded through the National Welfare Fund.

Financial Statement, 11 February1943

1943

Curtin Government creates the National Welfare Fund.

National Welfare Fund Act 1943

1945

Invalid and Old-age Pensions paid from the National Welfare Fund for the first time.

National Welfare Fund Act 1945

1945

Chifley Government separates income tax into two levies, a general income tax and a social service contribution (the Social Services Contribution become payable from 1 January 1946).

Social Services Contribution Act 1945

1946

Election—Liberal Party leader Robert Menzies promises to create a contributory social security scheme without a means test.

Policy speech delivered by the Parliamentary Leader of the Liberal Party

1950

Menzies Government merges Social Services Contribution with general income tax.

Income Tax and Social Services Contribution Assessment Act 1950

1952

Menzies Government changed the way income was credited to the National Welfare Fund to ensure that the amount paid in equalled the amount paid out in each financial year.

National Welfare Fund Act 1952

1954

Election—Labor leader HV Evatt promises ‘Labor will see to it that the iniquitous means test disappears altogether within three years, and that Its worst features are removed as soon as the new Parliament meets and a new Government takes office’. (The Coalition won the election.)

Policy speech by the Leader of the Opposition, H V Evatt

1972

Election—Labor promises: ‘The means test will be abolished within the life of the next Parliament’.

It's time for leadership: policy speech, Gough Whitlam

1972

Election—Coalition promises: ‘The means test is to be completely phased out within 3 years and considerably eased now’.’ (Labor won the election.)

Government’s policies on education health and social services

1973

Whitlam Government removes means test on pensions for those aged 75 years and over.

Social Services Act (No 4) 1973

1975

Whitlam Government removes means test on pensions for those aged 70 to 74

Social Services Act 1975

1976

Fraser Government replaces the means test for the Age Pension with an income-only test.

Social Services Amendment Act (No 3) 1976

1976

Fraser Government transfers the balance of the National Welfare Fund to consolidated revenue.

Report of the Auditor-General — Accompanied by Treasurer's Statement of receipts and expenditure - Year – 1975–76

1981

Auditor-General’s report discusses possible abolition of the National Welfare Fund.

Report of the Auditor-General: Accompanied by the Financial Statements prepared by the Minister for Finance for the year ended 30 June 1981

1984

Assets test for pensions re-introduced.

Social Security and Repatriation (Budget Measures and Assets Test) Act 1984

1985

Hawke Government abolishes the National Welfare Fund.

National Welfare Fund Repeal Act 1985

6 

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Notes

[←1]

.    B Hale, ‘Arrogant politicians should be ready for a pensioners' revolt’, Courier Mail, 11 January 2017.

[←2]

.    One version of the myth claims that money from the National Welfare Fund ‘could only be paid out as an indexed and non-means tested pension upon retirement at age 65 (60 for women)’. See: ‘Who stole the workers’ compulsory pension fund?’, Australian Morning Mail website (nd).

[←3]

.    For example, W Glew, ‘Malcolm Fraser stole your lifetime pension contributions’, Cairns News website, 18 January 2017.

[←4]

.    ‘Who stole the workers’ compulsory pension fund?’, op. cit.

[←5]

.    One internet commentator refers to this as ‘perhaps the greatest heist in human history’ and accuses former minister Jenny Macklin of being in ‘possession of stolen funds and imposing illegal means-testing’. The author also puts forward a number of conspiracy theories involving actors such as the Central Intelligence Agency and ‘Zionist bankers’. T Ryan, ‘How Australia was globalised’, Australia Fights Back website, 2018.

[←6]

.    C Cameron, Reminiscential conversations between the Rt. Hon. Sir John Gorton and the Hon. Clyde Cameron [sound recording], National Library of Australia, 1984.

[←7]

.    HV Evatt (Leader of the Opposition), Policy speech by the Leader of the Opposition, speech, 6 May 1954. In 1952 the Liberal Party member of Oxley, Donald Cameron, argued that the National Welfare Fund created expectations that it could not meet: ‘The existence of a special fund also tends to create the impression that all sorts of benefits can be obtained from it although the necessary provision has not been made by those who designed and originated it’. D Cameron, ‘Second reading speech: National Welfare Fund Bill 1952’, Debates, House of Representatives, 18 September 1952, p. 1710.

[←8]

.    As Treasury official Martin Parkinson explained to a Senate committee in 2002: ‘Under the old Audit Act arrangement, you essentially had a series of funds and you had to move moneys between those funds to comply with the Audit Act. Internal Treasury bills were a means of doing that’. Senate Economics Legislation Committee, Official committee Hansard, 21 November 2002, pp. 116–117.

[←9]

.    As TH Kewley writes: ‘In order to make the balance in the Fund a liquid asset—which would be necessary if it were to be used to meet the cost of social services—the Government would need either to borrow or seek additional revenue. In other words, it would have to take the same kind of action as it would be required to take if the Fund did not exist’. TH Kewley, Social security in Australia, University of Sydney Press, Sydney, 1965, p. 248.

[←10]

.    R Menzies, ‘Second reading speech: National Welfare Fund Bill 1943’, House of Representatives, Debates, 9 March 1943, p. 1372.

[←11]

.    For example, in a 2019 post, AAP FactCheck responded to stories circulating on Facebook and in 2017 Keith Pitt, the Member for Hinkler, responded to misinformation published in a local newspaper. AAP, ‘Future Fund did not receive $170 billion from an “Aged Pension Trust”’, AAP FactCheck, 18 October 2019. K Pitt, ‘Misconceptions about National Welfare Fund and the aged pension’, Keith Pitt MP website, 20 February 2017. Finance writer Noel Whittaker has drawn on work by academic Rob Watts in an attempt to dispel misconceptions about the fund. N Whittaker, ‘No pots of gold at end of the rainbow’, Sunday Mail, 7 August 2016, p. 77.

[←12]

.    According to a 2018 report in the Australian around a third of voters regard the Age Pension as ‘an entitlement after a lifetime of paying taxes’ rather than as a safety net. An even larger percentage of those aged 65 and over expressed this opinion. A Newspoll survey conducted on 22-25 March 2018 asked respondents ‘In your opinion, how should pensions be funded?’. Five per cent of respondents 65 and over said it was the ‘responsibility of the individual’, 48 per cent said ‘should do their best/pension a safety net’, 41 per cent said ‘pay enough tax/pension is repaying this back’ and 5 per cent were uncommitted. D Uren, ‘Pension seen as safety net or tax return’, The Australian, 28 March 2018, p. 4.

[←13]

.    W Wentworth, ‘The mean pension means test’, The Australian, 29 March 1982.

[←14]

.    B Ford, ‘Pensions plundered on one of nation’s greatest heists’, Burdekin Advocate, 10 February 2017, p. 10.

[←15]

.    Quoted in: ‘Who stole the workers’ compulsory pension fund?’, op. cit. The quoted passage was taken from a larger article that also included various conspiracy theories involving the CIA, Zionists, the Rothschilds, Wall Street bankers and the US Government.

[←16]

.    Ibid.

[←17]

.    B Hale, ‘Arrogant politicians should be ready for a pensioners' revolt’, Courier Mail, 11 January 2017.

[←18]

.    For example, a widely circulated post sometimes credited to Albert Caine includes a detailed chronology, some of which is accurate. The conclusion, however, is mistaken: ‘They [the politicians] did amass, secure, invest and manage and the figures were colossal and frightening to them and hence they conspired to hide them back into the consolidated Revenue bucket and to this day, that bucket has been brimming with a 7.5% tax collected specifically and only, for the Old Age Pension’. See: ‘Australian elderly pillaged: the truth about pensions defies the lies of our leaders’, SOS-News website, 13 September 2008.

[←19]

.    Editorial, ‘Old Age Pensions’, The Bulletin, 17(901), 1897, p. 6. See also: ‘Plain English: Old Age Pensions’, The Bulletin, 22(1106), 1901, p. 7.

[←20]

.    J Forrest, ‘Second reading speech: Invalid and Old-Age Pensions Bill 1908’, House of Representatives, Debates, 3 June 1908, p. 11948. Forrest had been Treasurer until 30 July 1907 and held the position again from 2 June 1909. However, during the debates over the Invalid and Old-Age Pensions Bill 1908 he did not hold a ministerial position. See: Biography for Forrest , the Rt. Hon. Sir John , GCMG, Parliament of Australia, 2020.

[←21]

.    The amendment was requested by Labor member James Catts. J Catts, ‘Second reading speech: Invalid and Old-Age Pensions Bill’, House of Representatives, Debates, 3 June 1908, pp. 11976–11977.

[←22]

.    J Thomas, Second reading speech: Invalid and Old Age Pensions Bill 1908, House of Representatives, Debates, 3 June 1908, p. 11958.

[←23]

.    Department of Families, Community Services and Indigenous Affairs (FaCSIA), A compendium of legislative changes in social security 1908–1982, Occasional paper no. 12, FaCSIA, Canberra, 2006, pp. 1–4. H Turley, ‘Second reading speech: Invalid and Old-Age Pension Bill 2008’, Senate, Debates, 4 June 1908, p. 12021.

[←24]

.    TH Kewley, op. cit., p. 83.

[←25]

.    TH Kewley, op. cit., p. 123.

[←26]

.    C Cerutty (Auditor General), Report of the Auditor-General under the Audit Act 1901–1926, Year 1929–30, Commonwealth of Australia, p. 41. Cerutty went on to argue: ‘While it cannot be doubted that many persons have been compelled through ill-health or other misfortune to seek the old-age pension, it is equally certain that many others have qualified for a pension through drink, laziness and general extravagance and waste. The liberal provisions of the law make no distinction between these two classes, and pensions are granted even when it is known some of applicants in earlier years led dissolute and lawless lives. The result is that the saving and thrifty, instead of being able to get the full benefit of their past efforts, are called upon to contribute by taxation to the pensions of many persons whose previous mode of living has been such as to render them quite unworthy of that assistance’ (p. 41).

[←27]

.    J Scullin, ‘Second reading speech: Financial Emergency Bill 1932’, House of Representatives, Debates, 21 September 1932, p. 617.

[←28]

.    C Cerutty, op. cit.

[←29]

.    For example, ahead of the 1946 federal election, the Liberal Party took out newspaper advertisements that claimed: ‘When social services are placed on a contributory basis, the Means Test can be abolished. Liberal Party, ‘All to gain and nothing to lose with a Liberal social security plan—without the means test!’ (advertising), Voice, 27 July 1946, p. 4.

[←30]

.    As Joseph Cook put it: ‘All sorts of inquisitorial inquiries are being made before a man is granted a pension, and the sooner that kind of thing is done away with the better.’ J Cook, ‘Budget’, House of Representatives, Debates, 17 November 1911, p. 2840.

[←31]

.    J Cook, ‘Budget’, House of Representatives, Debates, 17 November 1911, pp. 2840–2841.

[←32]

.    E Page, ‘Second reading speech: Invalid and Old-age Pensions Bill’, House of Representatives, Debates, 24 August 1923, p. 3562.

[←33]

.    Royal Commission on National Insurance, First Progress Report - Casual Sickness, Permanent Invalidity, Maternity, Old-age, Commonwealth of Australia, 1925, pp. 22–3. Under a flat-rate scheme the level of benefits are not linked to earnings. All recipients receive the same amount.

[←34]

.    Kewley, op. cit., pp. 143–49.

[←35]

.    Ibid., p. 159–165.

[←36]

.    Australian Labor Party, Why Labor opposed the Lyons Government's National Insurance Scheme... and how it could be improved, Australian Labor Party, Canberra, 1938.

[←37]

.    JB Chifley, Social security and reconstruction, Department of Post-war Reconstruction, Canberra, 1945.

[←38]

.    R Menzies, Policy speech, Liberal Party of Australia campaign launch speech, Victoria, Liberal Party of Australia, 20 August 1946, p. 21.

[←39]

.     ‘The Liberal Party will maintain pensions without the means test’, Sydney Morning Herald, 4 July 1946, p. 5.

[←40]

.    R Menzies, Joint opposition policy speech, Liberal Party of Australia and Australian Country Party campaign launch speech, Canterbury, 10 November 1949, pp. 22–23.

[←41]

.    R Menzies, Joint policy speech delivered by the Prime Minister at the Canterbury Memorial Hall, Victoria, Liberal Party of Australia and Australian Country Party campaign launch speech, Canterbury, 4 May 1954, p. 18.

[←42]

.    TH Kewley, op. cit., Social security in Australia, University of Sydney Press, Sydney, 1965, p. 253.

[←43]

.    R Menzies, ‘Second reading speech: National Welfare Fund Bill 1943’, House of Representatives, Debates, 9 March 1943, p. 1374.

[←44]

.    JB Chifley, ‘Budget 1945–46’, House of Representatives, Debates, 19 September 1945, p. 5639.

[←45]

.    JB Chifley, in Australian Labor Party, Official report of proceedings of the 17th commonwealth triennial conference, Melbourne, 26–30 November 1945, p. 46.

[←46]

.    Ibid., p. 46.

[←47]

.    Under legislation passed in 1938, New Zealand was slowly phasing in a new ‘universal superannuation’ scheme. According to Dean McHenry: ‘It came into force on April 1, 1940, and was amended in 1949. It makes all persons who have reached the age of sixty-five eligible for a cash benefit. Since no means or needs test was employed, the rate of payments was started on a low scale, £10 rising by £2 10s. per year until the goal of £130 per year is reached in 1988. In the interim until the basic £2 10s. per week were available, the Old-age Pension plan was to be continued in order to provide for the needy aged.’ D McHenry, ‘The New Zealand System of Social Security’ Social Service Review, 25(1), 1951. pp. 48–59.

[←48]

.    L McDonnell, ‘Chifley Plans National Superannuation Fund’, The Telegraph (Brisbane), 8 March 1947, p. 2.

[←49]

.    The committee’s members were FH Rowe, Director-General of Social Services; WC Balmford, Commonwealth Actuary; and HJ Goodes, Assistant Secretary, Treasury. National Archives of Australia, Department of the Treasury, A571 1944/2210 Part 1, Report on National Superannuation, 1944.

[←50]

.    National Archives of Australia, A571 1944/2210 Part 1, Report on National Superannuation, 1944.

[←51]

. ‘Superannuation cost would be £48,000,000’, The Mercury, 4 March 1948, p. 2.

[←52]

.    JB Chifley, ‘Speech: Budget 1949-50’, House of Representatives, Debates, 4 October 1949, p. 831.

[←53]

. ‘National insurance move’, Brisbane Telegraph, 31 January 1950, p. 3.

[←54]

.    HV Evatt, ‘Speech: Budget 1953–54’, House of Representatives, Debates, 15 September 1953, pp. 220–21. According to media reports at the time, some members of Labor’s caucus thought Evatt had gone too far and should only have promised to liberalise the means test. For example: ‘Evatt under fire: means test speech’, Daily Advertiser, 24 September 1953, p. 1.

[←55]

.    G Sawer, ‘Political review’, The Australian Quarterly, 26(2), 1954, pp. 106–-111.

Ahead of the 1954 election Evatt claimed that the means test could be removed without increasing taxation. His plan involved increased government borrowing. However, he denied that the additional borrowing was for the pension arguing that the Menzies Government had been using tax revenue for capital works when they should have borrowed. He argued that borrowing for capital works would free up the revenue needed for a means test-free pension. HV Evatt, Policy speech by the Leader of the Opposition, speech, 6 May 1954.

[←56]

. EG Whitlam, Into the seventies with Labor 1969 policy speech, Australian Labor Party, 1969, p. 16. EG Whitlam, It’s time for leadership, Australian Labor Party, 1972, p. 12.

[←57]

.    Government’s policies on education, health and social services, Liberal Party of Australia, 1972.

[←58]

.    W McMahon (Prime Minister), National retirement benefits, media release, 19 October 1972.

[←59]

.    B Hayden (Minister for Social Security), Free of means test pensions, media release, 5 October 1973.

[←60]

.    M Guilfoyle (Minister for Social Security), Social welfare: directing assistance to those in need, media release, 15 August 1978. The Fraser Government also introduced a new income test and removed the asset test. M Guilfoyle (Minister for Social Security), Introduction of the new income test, media release, 25 September 1976.

[←61]

.    D Daniels, Social security payments for the aged, people with disabilities and carers 1901 to 2010, Background note, Parliamentary Library, Canberra, 2011, p. 31.

[←62]

.    M Callaghan, D Ralston, and C Kay, Retirement Income Review Final Report, Commonwealth of Australia, Canberra, 2020, p. 73.

[←63]

.    JB Chifley, ‘Financial statement 1942–43’, House of Representatives, Debates, 11 February 1943, p. 548.

[←64]

.    R Watts, The foundations of the national welfare state, Allen and Unwin, Sydney, 1987, pp. 94–97.

[←65]

.    Ibid.

[←66]

. Ibid., p. 84.

[←67]

.    Ibid., p. 95.

[←68]

.    JB Chifley, ‘Financial statement 1942–43’, op. cit., p. 548.

[←69]

.    JB Chifley, Social security and reconstruction, Department of Post-war Reconstruction, Canberra, 1945, p. 11.

[←70]

.    JB Chifley, Social security and reconstruction, op. cit., p. 11.

[←71]

.    Ibid., p. 12.

[←72]

.    C Jones, ‘Second reading speech: Social Services Bill 1959’, House of Representatives, Debates, 22 September 1959, p. 1259.

[←73]

.    Section 6, National Welfare Fund Act 1943.

[←74]

.    Section 5, National Welfare Act 1943.

[←75]

.    JB Chifley, ‘Second reading speech: National Welfare Fund Bill 1943’, House of Representatives, Debates, 11 February 1943, p. 543.

[←76]

.    JB Chifley, ‘Financial statement 1942–43’, op. cit., p. 548.

[←77]

.    G Sawer, Australian federal politics and law, 1929-1949, Melbourne University Press, Melbourne, 1963, p. 146.

[←78]

.    JB Chifley, ‘Second reading speech: National Welfare Fund Bill 1943’, House of Representatives, Debates, 11 February 1943, p. 543.

[←79]

.    For example, the Country Party’s John McEwen told the Parliament: ‘… one is compelled to voice criticism of a project, which apparently purposes to raise funds for social services, when in fact the money is to be spent upon the conduct of the war. It is to my mind merely political and financial camouflage to describe it as being raised particularly for social services’. McEwen went on to congratulate the Government for extending income taxes to lower income earners. J McEwen, ‘Second reading speech: Income Tax Assessment Bill’, House of Representatives, Debates, 4 March 1943, p, 1183.

[←80]

.    P Spender, ‘Second reading speech: National Welfare Fund Bill 1943’, House of Representatives, Debates, 9 March 1943, p. 1352.

[←81]

.    G Sawer, Australian federal politics and law, 1929-1949, op. cit., p. 147.

[←82]

.    Paragraph 62B(1)(a) allowed investment in government securities. Sub section 62A (4) allowed the Treasurer to close a trust account and ‘thereupon the moneys standing to the credit of the account shall, after all liabilities of the account have been met, be paid to the Consolidated Revenue Fund’.

[←83]

.    A Fadden, ‘Second reading speech: National Welfare Fund Bill 1945’, House of Representatives, Debates, 20 September 1945, pp. 6139–6140.

[←84]

.    As TH Kewley notes: ‘In order to make the balance of the fund a liquid asset — which would be necessary if it were to be used to meet the costs of social services — the Government would need either to borrow or to seek additional revenue. In other words, it would have to take the same kind of action as it would be required to take if the Fund did not exist’. TH Kewley, op. cit., p. 248.

[←85]

.    JB Chifley, ‘Second reading speech: National Welfare Fund Bill 1943’, House of Representatives, Debates, 9 March 1943, p. 1391.

[←86]

.    E Patashnik, ‘Unfolding Promises: Trust Funds and the Politics of Precommitment’, Political Science Quarterly, 112(3), 1997, pp. 431–452.

[←87]

.    TH Kewley, op. cit., p. 265.

[←88]

.    JB Chifley, Social security and reconstruction, Department of Post-war Reconstruction, Canberra, 1945, p. 12.

[←89]

.    R Menzies, ‘Second reading speech: Unemployment and Sickness Benefits Bill 1944’, House of Representatives, Debates, 29 March 1944, p. 2264.

[←90]

.    Labor MP Edward Holloway made this point when he interjected to ask Menzies whether he thought those receiving the Age Pension were paupers. R Menzies, ‘Second reading speech: Unemployment and Sickness Benefits Bill 1944’, House of Representatives, Debates, 29 March 1944, p. 2264.

[←91]

. National Welfare Fund Act 1945

[←92]

.    TH Kewley, op. cit., pp. 71–73.

[←93]

.    Ibid., pp. 240–242. Commonwealth payroll tax was introduced in 1941. It was a 2.5 per cent levy on payrolls. In 1971 payroll taxes passed from the Commonwealth to the states. See: S Reinhardt and L Steel, ‘A brief history of Australia's tax system’, The Treasury website, 2006.

[←94]

. JB Chifley, ‘Budget 1945–46’, Debates, House of Representatives, 7 September 1945, p. 5220.

[←95]

. JB Chifley, ‘Second reading speech: Social Services Contribution Assessment Bill 1945’, House of Representatives, Debates, 12 September 1945, p. 5303.

[←96]

. According to a 1950 statement by PS McGovern, the Commissioner of Taxation: ‘It was expected, when the National Welfare Fund was inaugurated, that expenditure would soon catch up with receipts. This state of affairs has not yet been reached …’ National Archives of Australia, Department of the Treasury, A571 1943/712 Part 1, Social Services in Australia. National Welfare Fund, 1943–1950.

[←97]

.    S Cornish, Randall, Sir Richard John (Dick) (1906–1982), Australian Dictionary of Biography (online), 2012.

[←98]

. National Archives of Australia, Department of the Treasury, A571 1943/712 Part 1, Social Services in Australia. National Welfare Fund, 1943–1950.

[←99]

. Ibid.

[←100]

. A Fadden, ‘Second reading speech: Income Tax and Social Services Contribution Assessment Bill’, House of Representatives, Debates, 18 October 1950, p. 974.

[←101]

. TH Kewley, op. cit., p. 245.

[←102]

. Ibid., p. 247.

[←103]

.   Ibid., pp. 247–48.

[←104]

   The National Welfare Fund Act 1952 amended Section 5 of the National Welfare Fund Act 1943 to read: ‘There is payable out of the Consolidated Revenue Fund, which is appropriated accordingly, for the purposes of the National Welfare Fund, in each financial year, an amount equal to the amount of moneys paid out of the National Welfare Fund in that financial year.’

[←105]

.   TH Kewley, op. cit., p. 248.

[←106]

.   ‘Seeks removal of means test’, Sydney Morning Herald, 29 May 1953, p. 3; ‘Pensions and the means test’, Townsville Daily Bulletin, 10 July 1952, p. 3.

[←107]

.   N McKenna, ‘Second reading speech: National Welfare Fund Bill 1952’, Senate, Debates, 16 October 1952, p. 3255.

[←108]

.   SF Williams (Chairman, National Welfare Fund Association) quoted in: M Kennett, ‘Security in retirement — and a fund’s missing millions’, Education: journal of the NSW Public School Teachers Federation, 35(3), 1954, p. 4.

[←109]

.   EW Shields, ‘Political vandalism!’, Education: journal of the NSW Public School Teachers Federation, 33(15), 1952, p. 111.

[←110]

.   P Lynch, ‘Second reading speech: Loan Bill 1976’, House of Representatives, Debates, 26 February 1976, p. 328.

[←111]

. Auditor-General, Report of the Auditor-General upon the Financial Statements prepared by the Minister for Finance for the year ended 30 June 1981 and upon other accounts, Australian Government Publishing Service, Canberra, 1981, p. 56.

[←112]

. Parliamentary Library, National Welfare Fund Repeal Bill 1985, Bills digest, Parliamentary Library, Canberra, 17 April 1985.

[←113]

. P Rae, ‘Second reading speech: National Welfare Fund Repeal Bill 1985’, Senate, Debates, 9 May 1985, p. 1704.

[←114]

. D Grimes, ‘Second reading speech: National Welfare Repeal Bill 1985’, Senate, Debates, 9 May 1985, p. 1710.

[←115]

. J Harmer, Pension Review Report, (Harmer Review), Commonwealth of Australia, Canberra, 2009, pp. 26–27.

[←116]

. The Treasury, Retirement Income Review, Commonwealth of Australia, Canberra, July 2020, p. 402.

[←117]

. Director General of Social Services, Seventh report of the Director-General of Social Services: year ended 30 June 1948, Commonwealth of Australia, Canberra, 1949, p. 3.

[←118]

. Department of Social Services, email, in FOI 2021-030, Department of Social Services disclosure log, 6 November 2020.

[←119]

.   W Wentworth, ‘The mean pension means test’, The Australian, 29 March 1982.

[←120]

.   JB Chifley, Social security and reconstruction, Department of Post-war Reconstruction, Canberra, 1945, p. 12.