Brian Fallow takes a look at what policies Winston Peters might want enacted in return for propping up a National or Labour led government, - and what they may cost

By Brian Fallow*

As the two major parties rev their engines for what Bill English is calling the drag race, it is time to play the four Ws game: What Will Winston Want?

Which way Winston Peters would go in exercising the balance of power he looks likely to hold is anyone’s guess.

National might take comfort from the fact that the tap root of his politics goes back to that party. But it was Rob Muldoon’s National Party and he remains vociferously opposed to the neo-liberal policies of the past 30 years.

“Decades of neoliberalism have split and divided this country and denied tens of thousands of New Zealanders opportunities and a standard of living which was once the norm”, he said in a speech in Hamilton last month. That sounds more like Jacinda Ardern than Bill English.

On the other hand in backing Jim Bolger for a third term in 1996 and Helen Clark for a third term in 2005, he went with the party that had won the most seats. On current polling this time that looks more likely to be National.

But in case it comes to an auction, a contest about which of the major parties will give New Zealand First more of its policy agenda, let’s look at some of those policies and – to the limited extent possible – what they would cost.

Quietly scaled back

One longstanding policy, dropping the GST on food, seems to have been quietly scaled back. In the past New Zealand First has costed the policy at $3 billion a year (to be funded by a crackdown on tax evasion and the black economy), which would be consistent with the only exemption being restaurant and takeaway meals.

But in a speech last Friday this had become dropping the GST on “basic, essential foods” and price tag cut to $600 million or $700 million.

The party also wants to drop the GST on local body rates on residential property – a tax on a tax – which would cost around $500 million a year.

And a consistent theme in Winston Peters’s speeches in provincial centres in recent months has been to return to the regions (somehow) the GST paid by tourists visiting those regions to fund roads and other infrastructure. He puts this at $1.5 billion a year and rising.

This is starting to mount up: a $2.7 billion bite out of a GST take of around $20 billion a year.

Then there is the tertiary education policy, under which student allowances would no longer be means tested and people could clear their student loans by staying in New Zealand and working for the same number of years they were students. New Zealand First reckons this would only cost around $500 million a year more than the status quo – costing the Government disputes.

As for existing student debtors, “For every year they stay in New Zealand and pay off a dollar we will match this with a dollar writedown.”

So there would be a hit both to the Government’s operating statement and to its balance sheet.

Limited fiscal headroom

New Zealand First also wants to see the minimum wage raised to $20 an hour, from $15.75 now, over three years with the cost to employers “negated” by unspecified business tax reductions. A back-of-the-envelope estimate of that cost would be $600 million.

It proposes a corporate tax rate of 20 per cent for “new export net income” and the reintroduction of research and development tax credits.

Even with the Government’s books back in surplus there is limited fiscal headroom to accommodate too much of this fiscal shopping list.

Peters says he is not interested in other parties’ self-imposed and misguided spending limits. But the other parties cannot ignore them.

And New Zealand First does have to confront the fact that policies which increase the amount the Government would have to borrow runs up against the reality that the majority of its debt is held by foreign bondholders.

That will continue to be the case so long as the tax system tells New Zealanders that the best way to provide for their retirement is not to save money but to borrow money and bid up the price of residential real estate.

Policies which will increase the flow of interest payments to the foreign holders of New Zealand Government bonds are a bit hard to square with economic nationalism.

Monetary policy plans dead on arrival

Some of New Zealand First’s policies are likely to be dead on arrival at the post-election negotiating table.

Its desire to rewrite the Reserve Bank Act so that monetary policy would target an exporter-friendly (and consumer-unfriendly) exchange rate got short shrift from both Steven Joyce and Grant Robertson on last Sunday’s Q&A debate.

One would expect a similar fate for the proposal to renationalise the former SOE electricity generator/retailers and recombine them into a single entity. The price paid per share would be the price at which they were floated.

The confiscatory, reputationally ruinous and fiscally costly nature of that policy is likely to rule it out pretty swiftly.

Throttling back net immigration to 10,000 is a more drastic reduction than the “breather” levels Labour has foreshadowed and way below the levels the National Government is evidently comfortable with.  

New Zealand First wants caps on family reunification visas and on the older immigrants it sees as a burden on the health system.

Possible areas for some traction

Other policies might gain more traction, however.

Raising the minimum residency requirement for eligibility for New Zealand Superannuation from 10 to 25 years (after the age of 20) is also recommended by the Retirement Commissioner.

Labour went along with Jim Anderton’s Kiwibank so it might not baulk at KiwiFund, a state-owned KiwiSaver provider.

A policy to “restrict ownership of houses… to New Zealand citizens and permanent residents who are exercising their right to residency” would at least overlap with Labour’s policy of restricting purchases of existing houses to people who live here or are entitled to.

And New Zealand First’s policy of a much more rigorous national interest tests for foreign purchases of farm land is not entirely without support, even within Federated Farmers, among those who worry about the future of the family farm.

How much of this would survive the Government-forming process remains to be seen.

------------------------------------

*Brian Fallow is a former long serving economics editor at The NZ Herald. This is the latest article in an election year issues-based analytical series on economic policies he's writing for interest.co.nz.

His first article is here. 
His second article is here. 
His third article is here.
His fourth article is here.
His fifth article is here.
His sixth article is here.

His seventh article is here.
His eighth article is here.
His ninth article is here.
His tenth article is here.
His eleventh is here.

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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49 Comments

Mr. Peter's problem is that he flip flops a lot and has no concrete principles to fight for Do or Die --- he is the master of negotiation as well as the master of withdrawal when things get tough ...

In my view, This article clearly sums up what we would expect if NZF holds the balance of power...
A fiasco of horse trading and blame games is awaiting us if that happens!!

Those NZF voters who would like WP to go with the right, should Vote Nats ... those voters who would like him to join the left, should Vote Labour ...
By that we achieve one popular party to lead ( whichever it is) , while keeping NZF at its 5% level where it belongs.

My yesterday's statement still stands:
Vote for either one of the Main Parties as you please, let us prevent another Mess for the next 3 years ...

up
10

At least you are now acknowledging the mess of the last 3 years - Eco.
And what an embarrassing mess it is.

I did not acknowledge a Mess in the last 3 years or the 3 years before that -- you miss read what I said ...

I was talking about ( and would like to prevent) the Mess that will happen in the NEXT 3 years if we have WP hold the balance of power ...!!

A good mess to have ....

If WP can get in and drain the swamp there's going to be a mess anyway - that'd be a good mess

Winnie is trump like. i have no doubt he will just pick a few easy to do policies when he gets in...the rest will languish and be blammed on the partner.

Im tempted by his immigration stance, but due to any delay in impact, he could be in and gone again before anyone realises the numbers haven't changed.

Eco Bird,

Either your english or your honesty is deficient. You wrote Another mess and you cannot have that,without a previous one. Ergo,either you don't understand the meaning of the word,or having been caught out,you are being dishonest-like Trump.
Miss read may be a young ladyof your acquaintance,but the word you were perhaps looking for is misread.Jut trying to be helpful.

Problem is Eco is that neither the right nor the left will do what is required. Winnie is NZF's biggest asset and biggest liability. His reputation for flipping is what holds people back from supporting him. He sees what is needed to be done, but as the king maker cannot force the parties to do it so has to negotiate for what crumbs they are prepared to offer. If the election is close, he becomes more powerful, and then it will get interesting .

Agree, the problem is however neither will WP do / participate in "what is required". All he will do is support the status quo while collecting as many goodies for himself and his voting block so he gets re-elected to collect more goodies for himself.

Pity really as NZF actually has the centralist position that I could vote for, if only they had some principles, integrity and no WP.

Indeed Steven, "" if only they had some principles, integrity and no WP"" ... very well put

Correct, but what is needed to be done is very different of what can be done .. and he knows that ! ..but likes to fiddle around with people's emotions and empathy when knows quite well that he will only be given some crumbs if he ever gets into that position.

Then with a very thick skin, he would take it all on the chin and spins his way out of his hypocrisy - and blaming the others for not coming along his way!!
the only ones who will be disappointed are the naive people who believed him in the first place...and voted for him!!

It actually amazes me the amount of people who could be fooled by WP time and again for just dishing out a too-good-to-be-true promise or two ...

Forget the baubles slogan ....

This election will be Winston's moment in the sun - it's his one and only opportunity to fulfill his true destiny

Forget the baubles slogan. NZ is in a precarious situation that the other parties are not willing to acknowledge. The issue is he can't get there on his own and the testing times are going to be what the other parties will be willing to concede, and that will take some time - it will be a case of playing one off against the other

The game will be played out behind closed doors - the desperation of National to retain power so they can continue their subsidy of the influencers and financial elites - the desperation of Labour and Greens to obtain power and so redress some of the damage done by National - and damage there is even if you cant see it

PS:- the greatest power Winston could ever exercise would be to sit on the cross-benches and force a minority government to negotiate every bit of legislation every centimetre of the way on the day according to the circumstances of the day. The mistake is to negotiate an agreement at the outset and find circumstances change in the following months and his hands are tied by the agreement - he could get sidelined

"the greatest power Winston could ever exercise would be to sit on the cross-benches'

This could well be what happens

Surely his parties insane policies is another thing holding people back from supporting him?
Remove GST on selected food? How is that going to work? And apparently it will be free because he will just crack down on those big companies not paying tax (I think he has been reading too many NZ herald articles).

How is that going to work? you ask

Easy - they did it in Australia on unprepared and unprocessed foods - and has worked successfully for 17 years

Yea, the only barrier is the supermarket lobby and whether or not they can be bothered doing it.
It's the same reason we don't have automated price collection for Stats NZ CPI data gathering - Progressive and Foodstuffs won't allow it.
This is the current position we are in - we still send people to supermarkets to record prices of goods every month because Foodstuffs and Progressive will not let Stats NZ scrape price information from their databases.

So the whistle pulls the train and the stationmaster is powerless

It wouldn't surprise me.

All I know is that last year I was part of a proposal to make the CPI collection process electronic. The response we got from Stats was that they had tried for years to do so, but the supermarkets kept blocking them.

unbelievable and unacceptable - that is an example of everything that is wrong - highlighting the power of the powerful

I feel the urge to recommend charging an annual licence fee of $250,000 for every supermarket site operated by any supermarket that refuses to supply said data

They want to hang their shingle out? - pay the fee - and audit them every month - and send around OHS people every week or so - send around the rodent inspectors and hassle their delivery trucks with roadside inspections and portable weigh stations and take an hour to clamber through the load checking to the bill-of-lading

Well you'd be a nasty person wouldn't you two other guys!

Why should supermarkets provide Stats with special access.

I had to complete 21 pages of the Annual Agricultural Production Survey....It is bloody wrong that I have to provision them with such a huge amount of information and in my own time and at my own expense!! No one has the Right to privacy anymore!
I wish I had taken the supermarkets attitude and told them to come get it themselves.....oh and watch the bull in the front paddock!

I'm pretty sure there is much resulting stupidity in Australia - from memory a cut pumpkin has GST while a whole one does not, stupid things like that.
What is the point of it again? Spend $700 million per year to save people a few bucks on Vegies? Why not spend that money to save people a few hundred bucks on rent every week?

No, the main difference was to distinguish between cooked food at delicatessens and hot food places and takeaways and restaurants

All raw vegetables and fruit and eggs and uncooked meats and poultry are GST free

Why are they GST free though? I don't understand the logic?

It is a long story, but it was a political accommodation between the ALP who wanted to introduce a GST in 2000 and the very popular but minor Democrat party who had sway in the Senate. Meg Lees was the leader of the Democrats at the time. That was her demand and the ALP concession. That was her death-knell and the slow death of the Democrat Party. Never recovered.

extract - "They campaigned with the slogan "No GST on food". A majority of the senators in the party room agreed to pass the bill if amendments were made, mostly to exclude fresh food and essential items such as basic medicines."
https://en.wikipedia.org/wiki/Meg_Lees

They already do Jimbo, it's called accommodation supplements and they spend in excess of $2 billion every yer on it. which goes to show that there is not enough money in the kitty to carry on down that road subsidising land lords. The parties would save lots regulating the rental market.

I'm not talking about subsidies, I'm talking about building more houses...

They're not going to do anything that will even remotely have an impact on the cost of housing (other than subsidising the problem) because they are too invested in it themselves. This is a pipe dream. the only way housing costs will reset to affordable is if the market crashes big time, and their interest is in preventing that from happening. So ordinary working class kiwis will continue to lose out.....!

Compliance cost is the issue. I

f you cant charge the gst at counter, it doesnt end there. You then have to adjsut your input gst claims - so the power on the fridge where the icecream is stored cannot have the gst claimed...the share of the fuel the delivery truck used when dlevering icecream and milk can't all be claimed.

Those who propose the reomval on fresh (or whatever their bias is) just think the gst gets coded on the till to zero ....way more complex for a business owner than that.

Its a stupid vote grabbing policy.

And people call Labour the tax and spend party!
Why just remove GST on food and rates, what about other mandatory expenses like power, housing, petrol?
Why just give free public transport to oldies, why not everyone else?
Why just give incentives to students to stay in the country? Doesn't this disincentivise everyone else who will be paying the students debt?

Winnes policies seem to be about spending (or not taxing) huge amounts of money for some pretty random outcomes.

I have a feeling given Winston has declared this his last run, if he is in a balance of power position the negotiations will be focused on the MPs within his caucus and the roles/opportunities for them within the executive branch, as opposed to policy concessions/bottom lines.

That and Northland - lifting the wellbeing of Northland matters more to Winston at this stage than anything, as he really is an old school electorate politician. If he retains his electorate, Shane Jones wins Whangarei and Kelvin Davis and/or Hone Harawira take Te Tai Tokerau and Willow-Jean Prime makes it in on the Labour list - expect progress, massive progress.

This opportunity of power/strength in decision-makers hailing from Northland will, I suspect matter far more to Winston Peters than anything.

A coalition with National hasn't got a chance to my mind. In fact, if the Maori Party don't make it back to Parliament - who will their Minister of Maori Affairs even be? Paula Bennett? Christopher Finlayson?

Kate, when and where did Winston say this would be his last run?

Sorry, my bad, "declared" was likely the wrong word - I'm definitely reading between the lines, e.g.,

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11871540

https://www.stuff.co.nz/national/politics/95647413/In-Winston-Peters-mom...

Diddling with GST is gonna cost plenty: every ERP, every POS, every export/import handler will have to comply with stacked-tax, variable rates according to destination (that Regional GST...).

We would swiftly end up in the US tax regime: tiered city/state/federal tax layers, destination-dependent rates, variable rates depending on goods description. Oh, and a Tax Code the size of three telephone books (remember them?), Oh, and the IRD's typically tender, loving approach to Tax Miscalculations - 'there, there, can't be expected to absorb the Code all at once, run along, try harder' - not.

I foresee a Brighter Future for tax consultants, tax lawyers, accountants, software houses, cloud providers, legions of salespeople who can sniff a commission like a vulture can sniff a carcass, and humble consultants such as my good self, who have to make this unholy mess actually work on the ground.

It's my ticket to a well-remunerated Retirement. Bring it On!

Pity aboot the Productive Economy, though. Still, Eggs, Omelettes......

@ waymad. "Diddling with GST is gonna cost plenty: every ERP, every POS, every export/import handler will have to comply with stacked-tax, variable rates according to destination (that Regional GST...).
In a world where ever more labour is disappearing, creating what is a tiny fraction more work actually adds no cost to our overall economy. It merely spreads our wealth (or should) more equitably; something our society urgently needs.

Agree, Didge - the labour component of such a change isn't a reason to say no to the tax change.

That said however, the real vote winner for Labour and a compromise I think might suit WP would be to immediately reverse out the 2009 "tax switch" that National introduced - restoring GST to 12.5% and looking at variable rates thereafter as part of that tax working group initiative.

GST going to 15% has had a real psychological impact on household spending particularly with respect to spending savings. I suspect it has a part to play in the reason why bank deposits are growing despite low interest rates on those savings. GST is a direct 15% loss on savings - one that people spending debt don't think about as much as those spending savings.

Didge just give some money to IRD yourself and cut out the middleman and make our society more equitable more urgently. Much more efficient than giving someone a meaningless job - in a world where ever more labour is disappearing.

"The amount of time spent for income tax compliance – 6.1 billion hours – would be the equivalent of more than 3 million Americans working full-time, year-round (or 2.1% of total US payrolls of 145.9 million). By way of comparison, the federal government currently employs 2.8 million full-time workers, and Wal-Mart, the world’s largest private employer, currently employs 2.2 million workers worldwide and 1.3 million workers in the US (both full-time and part-time). At the current average hourly wage of $21.90 an hour, the dollar value of the opportunity cost associated with tax filing would be more than $131 billion, slightly more than the 2016 GDP of Washington, D.C. ($127 billion)."

Didge, thanks for your kind comment. I'm certainly looking forward to my small share of the Labour involved in getting a tiered-tax system up and running for some small fraction of the half-million SME's in Godzone:

As at February 2015....the overall number of small businesses has reached 487,602, representing 97 percent of all businesses in New Zealand.

source http://www.mbie.govt.nz/info-services/business/business-growth-and-inter...

Because, recall, GST is being diddled with (allegedly, DC, Allegedly, so just hold off on them Legal Eagles) along the following axes:

  • Destination-based (to determine the portion of 'regional GST' a Region could receive from the total take)
  • Goods/services Description-based (Food (defined how? - a typical supermarket runs 25-35K SKU's) exempted or lesser-rated
  • Tax-on-tax (GST on a Regional Fuel Tax?)

It's all just perfectly yummy consultancy, sales, software, advice, and professional services fee territory, which guarantees mucho pesos to those who can accomplish such things. Which are, stereotypically, the top 5% in the cognitive spectrum.

So much for Equality.........

No change to GST from Labour - just announced - it too is off the table in terms of the tax working group's terms of reference.

So your chances, waymad, lie only with Winston Peters.

Ah, well, Kate, back to Toiling in the Data Mines.

hey ho, hey ho, it's Orf to Woik I go...

Our GST is the envy of the world why because of its simplicity virtually no exemptions cheap to administer and in the majority of the areas of commerce very easily understood.

Does anyone know if this website is accurate with the costing of the different parties election policy spending promises..?? thks

http://www.taxpayers.org.nz/bribe_o_meter

Good question.
The way they calculate it appears very basic. i.e. all changes considered in vacuum.
"Our analysis includes spending pledges announced between 2014 and now. Given that the purpose of the Bribe-o-meter is to track spending pledges announced by politicians, it does not model the effect of tax cuts or tax increases and the effect they have on households."

This page might highlight any biases they should have...
http://www.taxpayers.org.nz/what_we_stand_for

They seem to include labours $3 billion in superfund as spending (isn't it saving) and $2 billion in kiwibuild (won't they get that back when they sell the houses). If National had 'spent' our money on investing in the super fund and building houses we'd be much better off!

Well ... after this Prefu there is no room to accommodate any of WP costly promises ... the treasury forecasts didn't leave WP any legs to stand on ...hence there is nothing left to ask for or negotiate simply because the money is not there !!

Time for NZF voters to wake up and smell the coffee ...

We will surely see intensified fishing for these voters from the main parties in the next few weeks ... Chips, beer, and popcorn have now became essentials to stock on.

Wouldn't hurt Eco Bird to actually read his policies in full and see how he intends to pay for them. Only one that I can see who has a total handle on the finance side of things and the experience to make them work.

Well We Want Winston to Work out a deal for a Windfall of Worldclass worth for those of who wound up on this earth between World War II and the date The Who had its first hit (1964)

What else would we want ?

Won't get fooled again!
And hands off my MRP and Genesis shares I patriotically bought to save from foreign investors Mr Whiskey Galore.

Winston - NZ's mini-Trump.
Maybe the polls are wrong again, and NZF gets 30%?