Opinion: Alex Tarrant on why we need to keep an eye on the Green Party's spending promises as well as Labour's (clue: it's due to MMP)

Opinion: Alex Tarrant on why we need to keep an eye on the Green Party's spending promises as well as Labour's (clue: it's due to MMP)

By Alex Tarrant

The exchange between John Key and Phil Goff this week on Labour's spending promises has set the ball rolling for what the election will be fought on - fiscal responsibility.

Does Labour have a NZ$17 billion hole over the next four years? Does it have a NZ$14 billion hole? Does it have a NZ$2.6 billion hole when you only look at the next Parliamentary term?

We do need to keep asking these questions. The public should know what the respective political parties are offering and how much it will cost in these tight times. It's called fiscal responsibility.

Labour is set to release costings of its election manifesto later this morning, and Goff pre-empted that on Thursday by saying if National were looking to borrow NZ$13 billion over the next three years, under Labour that was looking to be NZ$15.6 billion, "but we'll keep our assets".

So that's a NZ$2.6 billion hole, but we'll wait and see David Cunliffe's spreadsheet.

Don't just look at Labour

Now, seeing as we're in an MMP environment, we shouldn't just be talking about National vs Labour when it comes down to spending promises.

It should probably be National vs Labour, the Greens, probably the Maori Party, and for a bit of fun you could always throw New Zealand First in there as well.

You could add ACT to National, but they want to cut spending, don't they. Of course the other possible coalition partner for the Nats is the Maori Party, but they didn't kick up any fuss in the term just been, so we should expect them to quietly go about their coalition business behind the scenes.

The Greens are key

If Phil Goff is Prime Minister, then the Green Party will have to be part of the government. They're not just going to stand back like they did when Helen Clark offered them a Ministerial position. If, as the latest Herald-digipoll numbers show, they get 13 MPs into Parliament, then they're going to want some seats around that Cabinet table, and/or some pretty impressive 'associate' portfolios.

So when we're looking at Labour's spending promises, we need to take the Green Party's coalition priorities into account.

Worried? Perhaps there's no need to be so much. The Greens are certainly not going to behave like Winston Peters did when it comes to supporting the government.

The Greens say they are well aware of the fiscal straight-jacket New Zealand is in. Their co-leader Russel Norman, who handles the financial side of things for the party, could easily lay claim to Opposition Finance Spokesman given his displays in Parliament recently. Even Finance Minister Bill English, although in a prod at Labour, praised Norman in the House for his understanding of the fiscal side of things even if he didn't agree with him.

Now this of course doesn't mean the policies they want to get through Parliament next term won't cost anything...

Costings

The problem Labour found themselves in on Thursday was they were not able to provide any estimates of how much their election manifesto so far would hit the government's books. They told us before the election campaign that their manifesto would be fully costed. I naturally assumed that they would just update us every time they released a policy as to how this affected the fiscal side of things.

But it has turned out their strategy (?) was to do this for the tax package announced a couple of months ago (showing a NZ$1.9 billion hole in the government's revenue stream over the first five years), but then stop doing it with subsequent policy releases.

Instead, Labour have chosen to talk about the long-term situation - they say after the initial years, their tax switch will drag in more revenue than the track Treasury is forecasting under National.

National is making it look like they've forced Labour to put their heads down to provide a spreadsheet of how much their policies would cost versus their revenue stream over the next four years. Great politics from Joyce and Key, and terrible foresight from Labour.

But back to the Greens

When they released their economic plan back in September, the Greens provided a 'fiscal implications' page detailing what their highest priority policies would cost, and what they think can be done to bring in the revenue to cover that. See page 19 in their policy document here.

Not only that, they made provisions for policies they hadn't yet announced, like their conservation policy to be released today.

Co-leader Russel Norman is the first to accept that some of the numbers presented may not be bullet-proof. For example he says the NZ$519 million expected in extra tax revenues the government could receive from raising the minimum wage to NZ$15 could be out (he says by 10% possibly), because the government employs people on the minimum wage (and will therefore face higher costs), and that the corporate tax take could fall due to higher costs to business.

In the Greens' priorities - policies they would consider bringing to the table if they were in coalition talks - there are seven to raise revenue, and ten that will incur costs. However, they say this is just a list to choose from, and are not likely to demand them all be implemented within three years.

Problem

The problem is, some of the Greens' revenue streams are already included in Labour's tracks due to them having the same polices - raising the minimum wage to NZ$15 an hour, for example.

Another policy which is similar, but not exactly the same, is capital gains tax. The Green Party's revenue expectations from its capital gains tax policy would be higher than Labour's because they want to tax people at their marginal tax rates, whereas Labour's would be a flat rate of 15%.

The Green Party's call to reprioritise spending on motorways has also been partly taken into account by Labour - they want to use the money being spent on the Puhoi to Wellsford highway put toward an inner city rail link in Auckland. The Greens also want inner city rail in Auckland, but didn't include it on their priorities page (see it below).

One that Labour looks like it wouldn't agree to is the Green Party's earthquake levy on income tax - Labour has already released its earthquake policy.

So seeing as some of these revenue streams and spending cancelations are already incorporated into Labour's fiscal tracks, and others wouldn't be accepted, it would appear the Green Party has less room to move than if they were the only partly touting these policies.

They've tried to give themselves some room by saying their revenue policies would raise twice as much as their spending policies. At least they gave this a go before the election campaign began, unlike Labour.

By taking out those policies mentioned above, it looks like the Green Party would have to forego some of their policies which require spending, whilst getting Labour to also agree on additional revenue streams such as a levy on the commercial use on water and additional mining royalties.

Would Labour agree to those? They might have to - the Greens will say one or two out of seven ain't much to ask for.

See all of the Green Party's policies in our party policy page here.

What about NZ First?

Given their only hope of getting into Parliament is winning 5% of the general vote, it's less important we incorporate New Zealand First's spending priorities into Labour's tacks.

But, for fun's sake, let's say Winston Peters is in a position to form a government with Labour and the Greens (and actually let's face it, Labour might be toast if NZ First isn't there to help them in). Which policy of more subsidies for old people, or writing off half of student debt should we be taking into consideration?

Here's the Green Party's fiscal page from its economic plan:

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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44 Comments

As a green party member (let alone everyone else!) the Green's spending wants worries me greatly.....most of it strikes me as not green spending but left wing spending.....and short term....

Their maths is also a worry....a CGT at the full rate sounds way over the top....it suggests its worse than PAYE....a huge change that I cant see being fair and practical.....

Some things I agree with though...an irrigation levy should come in...user pays....to quote National.

regards

Yeah, If the green's stuck to campaining on "green" issues, rather than the current mix of green and left wing I would vote for them. As it is I can't really do so. Now is the time for fiscal pridence, and a tight budget.

BTW, the greens support the auckland rail link more than labour, and want central goverment to contribute 60% of its cost. I think its a great project that will boost aucklands productvity.

So what's Labour's and the Green's, Rich Prick's tax for today, then, Steven? Have they announced it yet?

We'll be world leaders in Clean, Green and the Watermelon economy.

Don't know about Labour and the Green's but I heard ACT are in favour of introducing congestion charges to fund solutions to the Auckland traffic problem.

 

 

Steven:  Your comment "CGT at the full rate sounds way over the top"

I think that is how the current "CGT you have when you don't have a CGT works".  That is, if IRD assesses that you sale is liable to tax, it is at your marginal tax rate. 

... & I agree, that is totally over the top.  So as it is, you either pay a horrendous tax on your capitail gains, or none at all.

Bloody stupid system

Cheers.

They will be spending like...mmm it's not my money, so who cares!  Well I do... 

Transit estimated the proposed rail link will only take 1400 car trips out of 30,000s going into Auckland CBD each day.  A big fat white elephant in my view and I am paying for that via my rates thank you very much!

So what do you think of the holiday highway.

Transit calculated the benefit-cost of that project using its standard discount rate and found the project cost more than the expected benefits.

it was only with "adjusting" the discount rate and adding more benefits that it got to a low positive benefit-cost ratio.

A big fat white elephant perhaps?

I think I trust the Business case peer review done by the following international experts: PricewaterhouseCoopers,  Parsons Brinkerhoff, John Bolland Consulting,  M.E Market Economics, Beca, GHD,  Ascari,  AECOM and the UC Berkeley Transportation Centre over an internal review done buy transit.

It concluded there were far greater benifits from the link than the transit report did.

I think you’re missing the point relating to removing cars from the road. The Auckland rail link is about moving more people, rather than replacing cars. This is important when you consider how fast Auckland’s population is predicted to grow.

Yeah, It wasn't long ago that people said  Britomart would be a white elephant, and look at at now.  Come February next year we will be running the maximum possible number of trains, with no room for any increases.

I don't really know why National keeps persevering with Puhoi – Wellsford. There are much lower hanging fruit when it comes to roading.

Because it is a National strong hold and the roads got neglected for years by Labour. Honestly the roads in Rodney were disgraceful. Like most things there is always an over correction.

But what does this "Holiday Highway" really achieve?

A few minutes time saving from Auckland to Wellsford, and then there comes the bottle neck of the Brynderwyns. 

Ha!

I am not arguing for it, just explaining it:)

Cars have nearly had their day, so it will become an expensive bicycle track.

The Gummster isn't usually a sucker for conspiracy theories , but this one is a hum-dinger :

NZ Labour are backing the rail link , as a bribe to get the voters of Auckland Central to elect Jacinda Ardern .

... Phil Goff wants to spend $ 1.2 billion of  the nation's tax monies ( 50 % of the rail-link project's cost ) , simply to buy a seat for Ms Ardern . And to oust the sitting National member of parliament .

[ .. disclaimer : GBH doesn't believe this BS himself , I merely make it up .. ]

An article of idle speculation which concludes with the blistering obvious: ... it looks like the Green Party would have to forego some of their policies ....  

Does any party expect to get all that it wants if elected?  Especially if a minority partner in government?  

You could add ACT to National, but they want to cut spending, don't they.

Yes and the implication of that is more austerity, an economy that retracts even more, a double dip, and generally the end to the National fantasy about balancing books by 2014-2015, controlling borrowing, a "brighter" future ....

I'm tired just reading the policy statement.....some of this stuff should involve pixies with wands.....it's not a transition but a complete reform being signposted...so I think some of their costings are understated to say the least.

Luckily many landlords will not read the policy statement or clause (7) to realize their up for some pretty hefty refit costs........I don't think it's unwarranted but a huge ask.

 

There are at least one million substandard 

homes in New Zealand, and rental properties 

are generally the worst. To complement the 

Heat Smart home insulation programme, 

the Green Party will introduce minimum 

energy performance standards for rental 

properties. By 2015, all residential rental 

accommodation will be required to have an 

energy efficiency rating which is provided 

to potential tenants. By 2018, all such 

accommodation will need to meet minimum 

energy performance requirements. Landlords 

will be able to use the Heat Smart subsidy to 

help meet these standards. 

 

47 to 65000 green jobs as upsteam effects take hold.......? you would need to factor in strong resistance to healthy  profits from unclean activities to lobby enough to put those ideas in traction.

I think the major sticking point for any policy input by the Greens in a Labor lead coalition would be overcoming farm reforms both with water and effuent.....I think it would draw the tail out to attack the dog.

A little too much Green power would probably lead to a snap election should that coaltion be successful under MMP.

I'm not saying they don't have some desireable directional policy.....I'm saying voters and lobbyists (business) have to buy into it.

 As Dairy and the soon to be powerful Mining lobbyists interests will be somewhat styfled by a strong potential Green vote I fear even if successful their position would become untenable.

 result snap election.

I didn't realise that it was business lobbyists that decided whether there would be a snap election or not.  

Can you give an example of where this has happened in the past?  

I'll do my best to hunt that up for you Andrew R........business lobby especially the size of the Fonterras the Fletchers and so on have  a very real impact on the political process...political planning...the lanscape of things political in general...not  to mention the influence of Foreign owned Banks and their meshing interests with large Corporates.

 But I will give it a go.....I'm sure historically it will only be implied.

 I might go ask skudiv...he's pretty up on that sort of thing.

Andrew R.

New Zealand has had three snap elections, in 1951, 1984 and 2002. The 1951 snap election occurred immediately after the 1951 waterfront dispute, in which the National Party government sided with shipping companies against a militant union, while the Labour opposition equivocated and thus annoyed both sides. The government was returned with an increased majority. The 1984 snap election occurring during a term in which the National Party government had a majority of only one seat. An election was called by Prime Minister Robert Muldoonafter he lost patience with his less obedient MPs. Announcing the election to national television while visibly drunk, Muldoon's government subsequently lost and the Labour Party took power. Labour Party Prime Minister Helen Clark called the 2002 election after problems with coalition partners, but denied it was a snap election. Although the election was held within the expected period, its date was announced with much less advance warning than was normal. The National Party was caught unprepared and suffered its worst ever result (20.9% of the party (popular) vote), and the government was returned with an increased majority. 

You will note that history records the Govt. of the day siding with the shipping interests , but the implication is that the Govt. of the day sided with business interests or the interruption thereto.....just as the Greens policies may cause some serious coitus interruptus for Dairy.

 Hope you can see the point I'm trying to make here....but if not is OK.

So to summarise, you can't give an example where business interests dictated a snap election.

The point surely is that it is for the government of the day to call a snap election (even if drunk at the time) not some business lobbyists who are annoyed with (coalition) government policy.  

Which makes it (in my view) very unlikely that a Labour-Green coalition (if such developed after the election) would lead to a snap election.

Appreciate what your saying Andrew R...but we will disagree there . I think it more likely to lead to that end  because interested buisness lobbyists would become encumbered by  the introduction of certain policies and the effect upon their bottom line when retooling.

 So unworkable for reasons of resistance......Ministers and their business connections would be seeking ways to destabilise that coalition to either force a stronger position for the major party or a change of administration.

I had not said this was regular or historicaly proven ...I said it was a likely outcome were the Greens to hold ...."Too" much power.

 the example of Muldoon was not the one I proffered it was the watersiders of 51.

But since you brought it up ...you may want to go back and read a little on Sir Bob Jones's input to unseating Muldoon......Built on business interests under the guise of freeing N.Z. from a tyrant.

 When satisfied with the new administration Sir Bob lost his sudden interest in our freedoms. 

I have the Jones book here "Memories of Muldoon". Jones states that he started publicly bagging National party policy and that eventually lead to the fall out with Muldoon. 

"Initially my attacks took two forms. They were either clinical in their critical assessment of the governments actions vis-a-vis their party's underlying philosophy (for example in respect of the wage and price freeze, an outrage coming from a supposedly private-enterprise party), or alternatively I used humour to make my point." P138

Jones was also key in putting Muldoon into power in the first place when the labour government changed the tax rules on property investments.

Do you mean to tell me that Bob Jones is motivated by self-interest? Say it isn't so!

So what are you saying, Andrew R? That in a democracy, the only people who are allowed to have input (or who have a legitimate input) into the democratic process are those that you and your ilk approve of?

You make Comrade Stalin proud, my son.

No I am saying much the opposite -- the elected government is the one who decides if there is to be a snap election or not (and take the risk that there would be a backlash).  It is not the decision for unelected unaccountable business lobbyists.

But they infuence just such an event  taking place...majorly when the buisness envionment becomes styfled Andrew R.

 No one is arguing that it is the responsibility of the sitting administration to make the call....but what influences those calls ...particularly when the MMp bedfellow can become difficult to work with.

 No one is arguing that  the tail should not wag the dog....but it is naive to say the least not to think it does not happen and that you live in a truly democratic society....believing that administration serves the will of the people.....when it sees itself as serving the interests of the people.... the difference is subtle but distinct.

 Read my response above concerning Bob Jones's infuence in unseating Muldoon and that was under the beginnings of MMP.

I understand the power of trying to destabilise a government from outside -- remember what happended to Gough Whitlam.  

Or, as you point out, the influence of Bob Jones' party on the 1984 election result.  Bob Jones had nothing to do with Muldoon calling a snap election though -- he just made the most of the opportunity when it arose.

I don't agree that that makes it likely that a Labour-Green coalition is likely to mean a snap election.

Look at what happended when National (Shipley) fired Winston.  No snap election.

Look at what happened in the last term of Labour -- not polling well, not getting good press, plenty of lobbyist pressure.  No snap election (more like hanging on in quiet desperation).

 

Then we'll agree to differ Andrew R and leave it there I think......after all, it's not a biggie just a hypothesis....happy day ...!

...is the English way.... 

Have you dragged out DSOTM recently Andrew? :)

Apt though... 

Like it.

 It is not the decision for unelected unaccountable business lobbyists........And unelected unaccountable members of left wing lobby and/or environmental groups, e.g., trade unions, greenpeace which you seem to have forgotten to add to your list of exemptions.

I am glad to see, Andrew, that you agree that business has just as much of an interest in and right to be involved in the democratic process as anyone else.

David - then you better attack and make some critical comments about corrupted multi million dollars lobby groups my son - then little fish Andrew R.

Like what, Kunst, the various National Banks of your homeland, Switzerland?

You are right David, banks which are juggling billions into accounts of corrupt right wing politicians/ lawyers/ scientists/ etc. just to push for the rights of big corporations to grow, to do more damage to our health and environment, which end of the day taxpayers have to pay for.

Read on my son to understand the  issue: http://www.globalissues.org/issue/50/corporations

http://www.globalissues.org/article/55/corporations-and-the-environment#Corporateinterestsandactionscanharmtheenvironment

..and David we don't have to look far, there are some bad examples right here in NZ.

Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.

Good to hear from you.

Of course, billions have never been juggled into the bank accounts of corrupt left wing politicans/ lawyers/ scientists have they, Kunst? Oh no, your lot are more pure than Tinkerbell herself.

David no, no that not what I’m saying - reading (your) previous comments - I just wanted to bring some balance into the argument/ issue.

Of course there are lobbyists on both sides –  “right wings” (I mentioned above) certainly are more powerful/ greedy and do accordingly more damage. While quite often “left wing” try to restore what “right wing” already has destroyed. (e.g. Greenpeace)

Any of the political parties are not "left" or "right".

They are "future" or "now" and are "I deserve" or "We deserve".

Probably the good balance is the best.....

Re adding Greens spending. 

Dont assume that National won't add it to their spending also.  For example they were happy (irresponsible or whatever) to toss them  $0.5B after the last election for the home insulation scheme.  That was just to keep them sweet when they didn't even need their votes. 

National likes to make out that it is labour that wastes our money and national that is frugal.  Facts are that it was Labour that cleaned up the mess that Muldon left and National that was screaming at Labour to spend the healthy surplases that they were running before the last election.  It is this present national government that has plunged us into running unsustainable deficits from a position of healthy surplases. (largely going into the pockets of their wealty mates)

I have no particular respect for either party, but believe that Labour seem to have a natural tendancy to run the ecconomy more frugally.  This is understandable because when we get into financial trouble it is the masses that tend to suffer.  Ask the irish, yanks, poms and greeks.

I think it is good that the spotlight is being put on the Labour election promises.  However I doubt that they would be in a position to spend like a drunken sailor should they win the election (not that that is exactly a plausible scenario)

I will very likely vote Labour at the election, basically because it is clear to most (except of course those with vested interests) that we need a CGT and to raise the age of eligibility to superannuation.

Having said that, knowing my luck, if & when Labour gets in it will get to enact its more hair-brained policies such as dropping GST on fruit & veg, & not the rational ones that the country clearly needs

Cheers to all, bloody windy here.

"we need a cgt".....we already have a cgt...how many times must that truth be told!.....

So you are going to vote for a Party with "more hair-brained policies"....wow.....Go ahead and throw your vote away on losers. They are working hard to achieve the greatest defeat in the history of the labour Party....go figure!

Wolly:  "we already have a CGT".  So what proportion of capital gains, from sales of farms & rental properties etc, is currently subject to the tax?  I have never seen figures, but from my observation, it would be vanishingly small.  2%?  5%? 

Pathetic.  Come up with a better argument.

But you can't, can you, so clearly there isn't one

Cheers

 

Yes there is a CGT, but if you search the archives here at interest.co.nz you will find that the weaknesses in a CGT are it can easliy be (a) avoided, and (b)  evaded. Which answers your point about the amount it collects. The real point is, the "announcement" is a "dog-whistle" political gesture to appeal to the Labour Party Heartland and the great un-washed.

Iconoclast:  hardly a very strong argument on the "weaknesses" of a CGT.

For more specific & expert analysis, view the article earlier on in the Herald:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1073...

This article clearly showed that introducing a CGT is both practical and fair.

Cheers

This is a "groundhog day" subject .. people dont bother to

(a) read the comments
(b) do any research
(c) trawl back through the archives

Mind you, the set up here at interest.co.nz is not helpful when trying to search the archives .. often it's impossibile to re-locate an item seen the previous day(s) .. and if you can remember some of the wording it's easier to use google search rather than the search feature on interest.co.nz