Martin Kay

Police may be given more scope to bug phones and intercept text messages as the Government moves to fix discredited anti-terror laws.

Prime Minister Helen Clark said yesterday that several options would be put to the Law Commission as part of its review of the Terrorism Suppression Act, which drew severe criticism from Solicitor-General David Collins.  They include allowing police to use electronic surveillance under the Arms Act and other laws covering potential terrorist activity.

Dr Collins refused a police bid to charge 12 people arrested in connection with alleged terrorist training camps in the Ureweras.  He said that though there was evidence of "very disturbing activities", it did not reach the high thresholds required, and the Terrorism Suppression Act was confusing and virtually impossible to apply domestically.

His ruling meant hundreds of pages of intercepted evidence police acquired during their year-long investigation could not be admitted in court, as it was gathered using warrants under the act. Evidence obtained using a warrant under one law cannot be used for prosecutions under another.

The 12, and four others, face several charges under the Arms Act, which does not allow interception warrants.  Miss Clark signalled that she favoured boosting that law and other legislation, rather than overhauling the domestic provisions in the Terrorism Suppression Act. "... a possible course to consider is whether there should be a greater list of offences under the Arms Act, where prosecutions mounted for those offences would be able to draw on intercept evidence."

At present, police can obtain interception warrants in very limited circumstances, such as for serious violent crimes with a sentence of more than seven years' jail or suspected drug dealing.

Miss Clark said the Government would push ahead with amendments - including making a "terrorist offence" a specific crime - to the legislation tonight.

Workers on the average wage will be saving at least $100 a week by 2011 if they sign up for KiwiSaver, but the decision to force employers to contribute is likely to dampen pay rises.

After weeks of hints that the Government planned tax incentives to kick-start KiwiSaver when it goes live on July 1, Finance Minister Michael Cullen dropped a Budget bombshell with the news that employers will be made to contribute.

Under the revised scheme, workers who sign up for KiwiSaver - meaning they pay either 4 or 8 per cent of their gross pay toward retirement or a first home - will have contributions matched by the Government up to a cap of $20 a week.

Employers whose workers join KiwiSaver will be made to pay a further 1 per cent of their gross wages into accounts from April 1 next year, rising by 1 per cent each year to a maximum of 4 per cent by 2011. The Government will reimburse employer contributions up to a maximum of $20 a week.

The plan means that by 2011, workers on the average wage - expected to be about $52,000 - will be saving at least $40 a week, with $20 a week from the Government and $40 from their boss.

Workers who put aside 8 per cent of their pay will be saving $140 a week.

The Government subsidy will also apply to people not in work - such as stay-at-home parents and students - who independently open accounts, provided they contribute $20 of their own.

Everyone who opens a KiwiSaver account will also get a one-off $1000 kick-start and those who use accumulated funds to buy a first home will receive government grants of between $3000 and $5000.

From July 1, all new employees will be automatically enrolled in KiwiSaver, though they will be able to opt out.

Employers must also offer schemes to all existing employees. The Treasury estimates up to 50 per cent of all workers will join.

The plan received a hostile response from business groups and was attacked by National, which said the plan would punish the lowest-paid who could not afford to sign up.

"In the end there is only one group of people who will pay the bill for all of this, the average New Zealand wage and salary-earner and the lower-income self-employed," finance spokesman Bill English said.

National leader John Key said employers would use compulsory contributions to deny or resist pay rises.

Dr Cullen conceded that compulsory employer contributions were expected to be taken into account in wage rounds, but said the scheme would address New Zealand's current account deficit - the difference between what the country spends and earns overseas.

The Budget seems set to include tax breaks for workers - but only if they put the cash toward saving for their retirement.

There has been mounting speculation that Finance Minister Michael Cullen will unveil tax incentives tied to deposits in KiwiSaver accounts as he seeks to kickstart interest in the scheme, but he has jealously guarded the details.

However, NZ First leader Winston Peters - who is in a confidence and supply agreement with Labour - said incentives to encourage savings would be announced in the May 17 Budget and would be a step toward the compulsory superannuation scheme he favours.

He told TVNZ's Agenda programme on Saturday that the incentives would benefit the "great bulk of wage and salary earners who opt to be smart about this" - suggesting they would come with conditions. "Some of the good news in the Budget is that there will be a greater savings drive and incentivisation in this Budget and I'm pleased to say that at long last New Zealand is addressing a serious deficiency, a void in its economic planning for the first time.

"I think we should go much further, but nevertheless it's heading in the right direction."

Dr Cullen was in Australia and would not discuss what was in the Budget. However, he is thought to be considering a range of options to give momentum to KiwiSaver, which starts on July 1. Channelling tax cuts into savings would allow him to deliver them while minimising the inflation risk.

The Government has already announced plans to make employers' KiwiSaver contributions tax free to a maximum of four per cent of pay - instead of taxing them at 33 per cent as for other workplace superannuation schemes.

The scheme will see all new employees join KiwiSaver with an eight-week opt-out period. Those who stay in will save a minimum four per cent of their income, with a $1000 kickstart from the Government. KiwiSavers will also get $5000 after five years for a deposit on their first home, but other than serious financial hardship, that will be the only time they can make withdrawals before they retire.

There has been speculation the Government could offer tax incentives as radical as across-the-board cuts for every worker, say $10 a week, which would go to only those with KiwiSaver accounts and would be paid directly into them. That would cost about $1 billion a year.

However, National finance spokesman Bill English said that would be too close to a compulsory superannuation scheme, which Dr Cullen has shown little sign of favouring. He believed the more likely route would be to allow workers to deduct their KiwiSaver contributions from their gross income. That would mean a worker who earned $50,000 a year and saved $2000 would be taxed on $48,000.

But Mr English said that would benefit high-income workers and run contrary to Labour's philosophy