Luke Malpass: What's happened to Labour's political radar?

Friday, 2 September 2022

Luke Malpass is political editor of Stuff.

OPINION: Was this the week we finally learned just how faulty Labour’s political radar has become?

Within 24 hours Labour had tabled and then walked away from a bill that would have applied GST on fees for KiwiSaver. The bill also included levelling the playing field by requiring the likes of Airbnb, Uber and UberEats to pay GST. The policy itself made some good sense: there is no principled reason why these should be exempted from GST.

Yes, consumption taxes are precisely designed to tax consumption, not savings, but the management of funds is not savings itself, but consuming a service.

Anyway, Labour has been stretching the friendship with the electorate on tax since 2020. Getting rid of interest deductibility on investment housing was one, and a new clean car tax on imported combustion cars another that has already gone through in this term. The tax change that was clearly flagged before the 2020 election was an increase in the top rate of personal income tax to 39% for income over $180,000.

**READ MORE:

* How the 'wrong-headed' KiwiSaver fees tax backfired for Labour

* NZ property market now 'less frantic', more normal: Realestate.co.nz

* What on earth was Labour thinking with its ill-advised 'KiwiSaver tax'?

**

But Finance Minister Grant Robertson said clearly at the time that there would be no other taxes. The “KiwiSaver Tax”, according to the Regulatory Impact Statement accompanying the bill, would cost some $103 billion in savings forgone through to 2070.

Whether you look at it as an extension of a tax or a new tax, the outcome is the same. It was an impost.

National leapt into action on what it branded a “KiwiSaver tax” and the changes were literally gone by lunchtime.

Unusually, after Labour discussions over what to do about National’s attack frantically started on Wednesday morning, revolving around how and when to walk back the policy, Prime Minister Jacinda Ardern jumped on a call and killed it. She did not want to have to defend the tax, even once, on her way into the House. There was no point in doing anything but emphatically and permanently putting the issue to bed.

Anything less would have seen Labour hammered day after day but end up with the same result – the policy scotched.

Revenue Minister David Parker duly put out the sort of press release you put out when you don’t want to. Basically it laid out all the reasons for the changes and said that, although the Government had consulted and thought the industry was keen on it, it was now clear that wasn’t the case and that “it is clear from the reaction to this proposal that it has caused concern for Kiwis”.

The thing is that no-one in Labour seemed to really pick this one up. Even a year ago this would have been quashed, long before it saw the light of day, by the more politically acute ministers, such as Robertson, Chris Hipkins and Megan Woods. That it wasn’t speaks to a wider pressure the Government finds itself under.

This will serve as a wake-up call for ministers actually to start to probe more closely the content of bills, and, in addition to any policy upsides, potential political downsides.

This little episode, however, says a lot about the predicament Labour finds itself in.

At the crux of Labour’s problem is that it has not yet settled on a compelling account of what it wants New Zealand to be, aside from fairer. It has a lot on its plate and is doing everything from climate to resource management reform, to health reform and so on.

There is still latent trust in the Government for its Covid management, but voters now are after the next thing.

It is a truth in politics that, while voters might be grateful for things, they do move on to to the next. And now we are in a world of inflation, labour shortages and winter grumpiness. Since Covid, Labour has struggled with its story. Because of the massive borrowing used to fund the Covid response, fiscal performance has become detached from the immediacy of running Budget surpluses – a political device that Robertson put significant stock in before the pandemic.

Not running a balanced Budget after the past couple of years is not a criticism, but the fiscal story has become unanchored from that basic discipline, and Robertson and Labour have not found anything significant to replace it.

The National Party, on the other hand, is forming a compelling narrative of economic turgidity with Labour at the centre of it – whether you agree with this or not. Its narrative is coherent, simple and builds a picture of failure, profligacy and incompetence that the current Government cannot fix.

The jury is out, however, on whether Christopher Luxon will be able to take advantage of these circumstances and continue to push National into the mid-40s for voter support.

And the KiwiSaver tax episode did, ironically, reveal the limitations of National’s current approach. Nicola Willis was at pains to repeat, ad nauseam, that taxes would be lower under National than Labour, that Labour is for more tax and National for less, and so on. That may be true, but it will bring a one-dimensional nature to National’s offering.

The Government is currently reviewing the Covid traffic light settings and then the entire system. There seems little reason, given the current numbers and so forth, for the country not to go into green.

After a long, cold winter, not having to wear a mask everywhere may be just the tonic a grumpy public needs, as will any movement around isolation periods for people who get Covid. Getting this right will be key for the Government in the latter part of the year.

Labour will need to fix up its political radar if it wants to be re-elected in 2023.