MMP politics is like a jigsaw puzzle, and Phil Goff revealed a few more pieces today, which he hopes will create a picture with Labour back on a Treasury benches. State of the nation? Nah, state of the coalition more like...

And so the dark lines of policy have started to be drawn around Labour's mid-term outines, that Phil Goff began releasing last year. Yes folks, it's election year and Opposition leader Phil Goff has decided to catch people's attention early with his state of the nation speech in Auckland this afternoon.

Goff has bounced off the good press from Ratana and got in ahead of the John Key's speech from the throne and Bill English's state of the economy speech, both of which we'll see next month.

In doing so, he's finally drawn the curtain on what the Phil Goff Labour party will look like and stand for. Following all the hints last year, there are no surprises in today's speech, just confirmation. But the policy list is his own and David Cunliffe's, no longer Helen Clark's and Michael Cullen's.

I've got to pick up my boy from daycare in a few minutes, so I hope you'll excuse me if I resort to bullet points from here on.

  • The takeaway policy from the speech is what Goff has called a "tax free zone"; that is, we all pay no tax on the first $5000 we earn. In other words, ca-ching.
  • The takeaway rhetoric is about price rises. Get used to those two words. Price rises is a drum Labour will beat loudly and repeatedly this year: GST, property prices, rent, petrol, and of course the ubiquitous block of cheese. Although it didn't make the speech, you can today add electricity prices to that list. Oh, and childcare. Childcare's going to be big in the next month or two. It's an ugly list for National to deal with. Of course, much of its not the government's fault, but who said politics was fair? Oh, and the other bit you're supposed to note: John Key lied about GST not going up, so he can't be trusted.
  • The policy changes are all jigsaw pieces that reflect the reality of 21st century politics – that is, MMP and Australia.
  • Australia first: The $5,000 tax free zone 'closes the gap' on Australia's $6,000 tax free zone. How can National reject that and yet still look determined to catch Australian wages by 2025? Labour is also promising a new top tax rate "comfortably" into six figures. That too mimics Australia's tax system. Again, National has talked long and hard about linking our rules and regulations with Australia's and Simon Power has had numerous meetings with his counterparts to that end. Labour's calling their bluff on this one.
  • MMP: Guess which other party has a 'tax free zone' as core policy? Yep, the Maori Party. Hone's not kidding when he says the two parties need to talk more. Tariana Turia might not like it, but Labour's going to make it increasingly clear that it is the Maori Party's natural coalition partner.
  • Goff, as politicians like to do, have created a fictional couple to spin his view of the world. His are called Matt and Lisa. They, of course, live in Auckland. He wants to tap into their frustration. And this is Labour's fear card this year: The Kiwi Dream Denied.
  • Eat the rich. The top few percent of earners are the bad guys in Goff's picture of the world. Some will damn him for undermining aspiration and resorting to class warfare. But this is meant to be the Labour Party, right? Why criticise a fox for stealing eggs? It's what it does.
  • Specifically, Labour is going after the rich with a new top tax rate and a tax avoidance hit squad. It's the least he can do. No, not for class warfare, but to pay for his tax free zone.
  • Goff described his tax free zone thus: "It's simple. It's also fair." He might have added, "it's also expensive". Massively so.
  • And he's bagging National on GST, he has notably – again – failed to wrestle with his own GST policy. Will you cut it or not, Mr Goff? If you've got a tax free zone to pay for, my guess is not a chance.
  • In person, the villain of the piece is Mark, the property speculator. Boo! Hiss! He's stealing the Kiwi dream. He's behiiiind you! Yeah, it's clunky. But the crucial point in that bit of the speech is what's unsaid about the way Mark avoids paying tax on his housing windfall. Goff says only that "Mark is deliberately avoiding paying his fair share of tax but he still
    expects everyone else to pay for his children to go to school and for
    his family to use our hospitals.That’s not only unfair, it’s bad for our economy."
  • What does that mean? Capital Gains Tax, of course. You can lock that one in now, it seems. The Greens will be happy.
  • And Goff talks a lot about savings, which is music to Winston Peters' ears. If nothing else, this speech and policy platform positions Labour as a potential leader of a four party government. Which, of course, is the only hope in Hades that Labour has of being government by the end of the year.
  • Back to Matt and Lisa... Labour has learnt a lesson. The speech implicitly concedes that Matt and Lisa supported National's tax cuts, even though Labour didn't. Hence Labour having to come up with a tax cut of its own.
  • Fact check: Goff says the government is failing to grow the export sector. Not quite right there, actually. It is, however slowly.
  • "The less you needed, the more you got". That's Labour language, and it's a good message for Goff because it's one he genuinely believes in.
  • Goff also gets in a line about how economic future is green tech – or clean tech, depending on your terminology. Didn't I tell you?
  • Goff makes a few promises of what Labour won't do... the sorts of things Labour parties sans Roger Douglas don't tend to do anyway. Most significantly: "Labour will not sell state-owned assets. National would.
    If they got a second term, they would sell off the family silver - our
    public assets like power companies - to pay for their debt.
  • This represents the first attack this year on second-term National. The one that's extreme, the one that will sell state assets, the one that makes you think of Don Brash and Ruth Richardson, even Bill English, not that nice Mr Key. On this, much turns.

But I gotta dash. I'd love to hear your thoughts on the speech, which can be read here.

 

 

Comments (20)

by Claire Browning on January 25, 2011
Claire Browning

Guess which other party has a 'tax free zone' as core policy? Yep, the Maori Party.

It was Green Party policy first, you know. Or maybe you don't. Anyway, it was. Doesn't alter your wider point.

by The Falcon on January 25, 2011
The Falcon

Thanks for the summary Tim, it's good to see you turning a skeptical eye on some parts of Labour's manifesto every once in a while.

You should note there is a glitch on the site that has occurred twice now - your posts come up twice, under your name and Eleanor's name.

And while we're all trying to claim credit for the tax-free threshold idea, I think ACT may have had it before anyone: http://act.org.nz/taxation-policy

Create a tax free threshold of $25,000, saving $3,050 in tax for those people who want to opt out of government provision of accident, sickness and healthcare cover to provide for themselves. Provide an additional grant to those people for any dependants they might have, covering not only accident, sickness, and healthcare cover but also an educational scholarship for dependent children.

by Tim Watkin on January 25, 2011
Tim Watkin

Thanks Falcon. The issue is Eleanor and I using the same computer. Today she was logged in and I didn't bother to log out and in again as me, rather I just changed the name after it had been up one second...

And hey, you pay me to be skeptical, so that's what I offer. Oh, hang on...

Hey Claire, I didn't mention the Greens on this simply because Labour has the Greens lined up for a coalition already. It doesn't need to find new common ground. It's the Maori Party who will be courted by both major parties and who could yet decide the next government. (That kind of political magnetism must make the Greens, well... green with envy. Sorry, couldn't resist).

by Tim Watkin on January 25, 2011
Tim Watkin

Oh, and it seems Key has his own speech ready to go tomorrow, as well as the speech at the opening of parliament (which I know isn't really the speech from the throne, which happens at the start of each term, not each year). Thought I'd get the corrections before you lot!

by Graeme Edgeler on January 25, 2011
Graeme Edgeler

MMP: Guess which other party has a 'tax free zone' as core policy? Yep, the Maori Party.

And ACT. And the Greens. And the Libertarianz.

by william blake on January 25, 2011
william blake

v.  Flacon, you attribute 'the tax free zone' to A.C.T. to the first $25,000, but isnt A.C.T. policy no tax at all? Isn't this some kind of compromise?

I can't imagine Labour getting many votes in offering a policy like this, one that disadvantages the poor, again, by giving with one hand and taking much more with the other.

 

 

by stuart munro on January 25, 2011
stuart munro

Specifically, Labour is going after the rich with a new top tax rate and a tax avoidance hit squad.

I think you'll find that this too was cribbed from abroad. Oz has been doing the same for years. Can't argue with success.

by Matthew Percival on January 25, 2011
Matthew Percival

Good to see a bit of critical analysis, adds a lot of credibility to the site.

The first $5,000 tax free sounds good but really offers little. Once the 10.5% tax rate kicks in next year the taxpayer will get an extra $10 a week under Labour at a cost of $1.1 billion to the nation. Goff also mentions the tax free threshold may be introduced in stages which will further dilute it's impact. An extra $5 a week one year and an extra $5 a week the next year? Taxpayers wont even notice.

Something like 25% of taxpayers pay 75% of the individual tax take (don't have a source just going off memory) and the Goffinator wants to lump more tax on them? If someone is that good that they can command a $200k salary then good on them I say. Take your money and spend it on bringing up your kids and sending them to university. 33% is enough tax already.

National has already dealt with "property speculators" who make losses and offset against their personal income. No more depreciation on buildings (some exceptions) and no more LAQC's. The new LTC regime is quite different and will severely limit the claiming of losses. Not sure what else Goff can do that will have an impact. Get rid of the LTC regime before it gets properly started?

Are house prices any lower in countries with a capital gains tax? Why introduce it? Wont make a difference on high house prices (although our prices are comparatively low when compared with Australia).

I'm also not entirely sure what Goff plans to do with his "tax avoidance" police. Reveal the hidden economy? How? National has already (inadvertedly) attacked the hidden economy with the GST rise. Damn hard to avoid GST at the supermarket and the petrol station.

Overall the speech seemed to set the economy as the number 1 election issue. Not a traditional Labour strength and not one that I believe will gain the Labour party much traction.

Reminds me of a study we did in stage 1 politics. Two election adverts. Mike Moore focussing on the economy and National focussing on families. Anyone care to guess the result of the ensuing election?

 

 

by The Falcon on January 25, 2011
The Falcon

Come on William, that's like saying the Greens' policy is no private property at all - a bit of an exaggeration. All liberals believe in taxes to fund 1) police, 2) courts, 3) Ministry of Defence. ACT actually takes it further by providing funding for education etc.

by Tim Watkin on January 25, 2011
Tim Watkin

Graeme, see my answer to Claire.

Matthew, fair point re the economy as a strategy for Labour. Except that we DO have the problems with unemployment and the cost of living; it's hardly a success story for National.

Same goes for capital gains tax. That is a fair point if it's true. Goff claims our affordability is worse now than New York and I'm sure I've seen figures that suggest you pay a smaller portion of an average wage for an average mortgage in Australia, so maybe house prices aren't as bad elsewhere after all. I'd be interested to see if you can back up your statement with any evidence.

But the comment that if "someone is that good", good on them if they can get $200k is a nonsense. Even the best teacher in the country can't earn more than $70-odd thousand in the classroom. The best newsroom journalist sure can't get anywhere near that. Or the best cleaner. Or the best sale assistant. Or our safest, most innovative nurse. Lawyers, accountants, doctors and managers are the only folk that statement might hold true for.

Perhaps when it comes to fairness, the better question is why someone on $80k should pay the same percentage of each extra dollar they earn as your lawyer/whatever on $200k. And perhaps you might say, 'take your money and spend a portion of it giving something back to the society that afforded you such success'.

by stuart munro on January 26, 2011
stuart munro

National has already dealt with "property speculators" who make losses and offset against their personal income.

Oh really. The issue is not simply a matter of being punitive to speculators, but of addressing NZ's chronic housing problems. Speculation tends to drive up costs, as it did in oil futures in 2008.

NZ has an aging and inefficient housing stock, with construction below replacement levels, so of course prices have been firm. But in the last generation, home ownership has dropped by over twenty percent - a damning inditement of prevailing economic policies, which have impoverished the lower third of the population. It is among these people, Labour's traditional support demographic, that Goff's outline is likely to be well received.

He is going to the mattresses. And about time.

by Claire Browning on January 26, 2011
Claire Browning

And while we're all trying to claim credit for the tax-free threshold idea, I think ACT may have had it before anyone ... Create a tax free threshold of $25,000, saving $3,050 in tax for those people who want to opt out of government provision of accident, sickness and healthcare cover to provide for themselves.

Not 'free' then, is it. The opposite: user pays.

Thanks for the summary Tim, it's good to see you turning a skeptical eye on some parts of Labour's manifesto every once in a while.

That's what we pay you for, surely.

by The Falcon on January 26, 2011
The Falcon

Not 'free' then, is it. The opposite: user pays.

???

It's a tax-free threshold...

by Matthew Percival on January 26, 2011
Matthew Percival

In the context of current global economic conditions we aren't doing badly. Sure unemployment is high compared with the good times but we can't compare with that.

Nations with capital gains tax include Australia, Canada and the UK.

http://en.wikipedia.org/wiki/Capital_gains_tax

These nations rate comparatively with New Zealand when it comes to housing affordability

http://www.demographia.com/dhi.pdf

Sorry, I haven't mastered your linking thing and it doesn't like HTML either!

 

by Claire Browning on January 27, 2011
Claire Browning

Matthew:

  1. Highlight the text you want to link. The insert/edit link button [in the comments toolbar] will then go live.
  2. Click on the link button. Pop-up box appears.
  3. Paste your link URL into it. Preferably, select 'open in new window'.
  4. Click on the insert button.
by Tim Watkin on January 27, 2011
Tim Watkin

Thanks for the demographia link Matthew. Interesting list, huh?

That could well be where the claim that our housing is less affordable than NY comes from. The US generally seems most affordable, but I guess that the vast number of foreclosures and the number of houses being sold on the cheap is behind that. You can see Atlanta, Las Vegas and Dallas near the top of the 'most affordable' list. That's because they're at the sharp end of the credit crunch.

A CGT won't solve our affordability problem on its own, of course, but it should surely dampen speculation, which is something NZ has always suffered from (since the 1840s!), and that should suck some demand from the market... Stuart's right that the housing problem is chronic and needs some answers.

by Tim Watkin on January 27, 2011
Tim Watkin

Falcon: What Labour and other parties are talking about is cutting income tax at the bottom of people's incomes, whilst still paying for public services out of other tax. ACT is talking about cutting tax, but then having people pay for their own public services.

So the former doesn't incur another household cost; the latter does. That's why Claire says ACT's isn't free. (As if you didn't know).

by Claire Browning on January 27, 2011
Claire Browning

Such patience, Tim. Mine ran out.

by Tim Watkin on January 27, 2011
Tim Watkin

Just obstinance, really!

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