The Labour Party will restore the entry date of agriculture into the Emissions Trading Scheme to 2013 in order to boost Research and Development tax credit spending and enhance New Zealand's 'clean, green brand,' leader Phil Goff says.
Prime Minister John Key attacked the move, saying it would raise the price of domestic dairy and meat products, an argument which Goff rejected on Monday. Goff said he and Labour finance spokesman David Cunliffe met with Fonterra on Monday morning, with the dairy co-op's executives telling the Labour leader that domestic milk prices were set on international markets.
Goff made the announcement in a speech to the Labour Party's congress in Wellington on Sunday, where he moved to attack the National-led government's handling of the economy.
Goff also announced Labour would raise the minimum wage from NZ$13 currently to NZ$15 in its first year in office if Labour were re-elected on November 26.
ETS changes to pay for tax credits
The government's decision to delay agriculture's entry into the ETS would have cost NZ$800 million over five years, Goff said. Including agriculture by 2013 would free up that money to put toward a research and development tax credit rate of 12.5%, he said.
National had pushed out Labour's original date of 2013 for inclusion of agriculture under the ETS, to 2015.
"Yesterday on this stage, New Zealander of the Year Paul Callaghan outlined 10 New Zealand companies which are leading the world but we need 100 more like them. Labour brought in an R&D tax credit to promote this. We recognised that having R&D a third of the level of comparable countries wasn’t good enough," Goff told the congress
"Our third largest sector in the economy is hi-tech industries which produce NZ$6.5 billion worth of earnings each year – 78% from exports," he said.
"But National, against the advice of Treasury, killed Labour’s scheme. No wonder our economy isn’t delivering. I want to formally announce today that Labour will introduce a research and development tax credit."
Labour would look to focus on clean-technology, which, together with including agriculture emissions under the ETS at an earlier date, would enhance New Zealand's clean, green brand, Goff said.
"In Clean Tech, there is enormous potential from companies like Lanzatech, Aquaflow, Flotech and Windflow. PriceWaterhouseCoopers predict that this area could add NZ$7-22 billion more a year in value for New Zealand economy. This is the vision that Labour will have in its Budget," Goff said.
"But R&D is not cheap."
"We will introduce a R&D tax credit initially at 12.5%. That will cost an average of NZ$160 million a year - NZ$800 million over five years. This confirms Labour’s commitment to a smart economy. But it is a lot of money. It has to be paid for and the deficit means no new money is available," Goff said.
"So we have to find savings. Today I am announcing how we will pay for it."
'Tax the farmers earlier'
"In another example of poor economic choices, National left every New Zealander having to pay for their transport and electricity emissions, but exempted farming from paying for their agricultural emissions. That is not fair. Having the taxpayer meet the cost simply means that the pollution goes on for longer," Goff said.
"The exemption removes the incentive to agriculture to move more quickly to reduce global warming gasses which account for 48% of New Zealand’s greenhouse gas emissions," he said.
"Labour is proposing to restore the entry date of 2013 for agriculture to come into the Emissions Trading Scheme. This means farmers will pay for just 10% of their 2005 agricultural emissions, plus any growth since then."
Labour did not believe this was asking too much.
'Need to enhance clean, green brand'
"Agriculture is important but all sectors need to pay their fair share. National’s delay costs around NZ$800 million over 5 years. We, as taxpayers, are paying for this. By reversing the delay, we can transfer this money to pay for the R+D tax credit," Goff said.
"Boosting R+D can help our farming sector to be at the leading edge of work to reduce agricultural emissions. More R+D will mean more jobs, higher incomes and more revenue," he said.
"Both the R&D investment and bringing agriculture into the ETS in 2013 will enhance New Zealand’s clean green brand."
Key: consumers will pay more
Prime Minister John Key attacked Labour's announcements, saying New Zealand consumers would pick up the tab for imposing higher costs on farmers.
"Ultimately New Zealanders will pay more for milk, butter, cheese, meat and all the staples of a New Zealand diet. How that can be good for the New Zealand consumer is beyond me," Key said.
Goff rejected Key's claim on Monday, saying he and finance spokesman David Cunliffe met with Fonterra executives who told them the price of milk in New Zealand was set by what it attracted on international markets.
In a media conference on Monday afternoon, Goff said he did not ask Fonterra whether it thought its farmers could handle earlier ETS costs, but said he thought they were able to.
(Updates with Goff rejecting Key's price claim, Key comment, link to text of full speech)