Josie Pagani: Hipkins' signature policy a highlight in no frills, no spills Budget

Thursday, 18 May 2023

Prime Minister Chris Hipkins is targetting Christopher Luxon’s leadership, after the National leader signalled a back-down on the MDRS.

Josie Pagani is a commentator on current affairs and a regular contributor to Stuff. She works in geopolitics, aid and development, and governance.

OPINION: This is a good Labour Budget for children, parents, the sick and the young. But won’t someone spare a thought for the trust funds. No? Me neither.

Avoiding tax by hiding income in a trust fund will no longer be an option. Trust-funders will have to pay the same rate as everyone else earning a similar income. No-one is going to occupy Parliament grounds for that. Well, no-one other than MPs.

If anyone tries to claim that taxing trust funds punishes the wealth-makers and the job-makers, then they’re not being clear about the way trust funds are used.

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Unlike the shambles of last year, which saw the Government catch up with the rest of us and pivot rapidly to the cost of living, this year the Budget avoids spraying one-off payments to dead people and French backpackers.

This is a better Budget because it delivers on some core Labour values. Free medicine is a brilliant policy. It is very hard to muck up the delivery of free prescriptions. The benefit will reach the wallets of living New Zealanders.

This is Chris Hipkins’ best signature policy so far.

It is good policy because it also reduces the cost of prescription medicines overall. Less will be wasted on over-prescribing or in prescriptions going uncollected by people who can’t afford to pay the pharmacist.

Classical economics says making products free causes over-consumption, but people will only over-use medicine if you believe people choose to be sick. Doctors are gatekeepers, and we can observe what has happened in the real world: imposing a cost on patients for their medicine did not reduce demand.

Making prescribed medicine free to the patient helps prevent illnesses getting worse.

Like the glaring gap for dental care in our health system, taxing sick people for their medicine always felt punitive, counterproductive and ideological.

An extension to free early childhood education, free public transport for kids and half-price for under-25s, will help people. These are basic Labour policies to direct our social resources where they create better social outcomes for people at the time of life when they need it most.

For those expecting the long-promised transformation, time to face facts. Unlike the shampoo ad, if it didn’t happen overnight, with a majority government and a madly popular leader, it was never going to happen.

Some 150 days out from the election, even under a new leader, they weren’t about to risk a Michael Joseph Savage programme of reform, and probably lose the next election.

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To be fair, even those of us who have called for structural change would not attempt it in a Budget this close to an election.

The toughest question for any government to answer is – how would you beat yourself if you were the Opposition? If I were the Opposition, I would stop trying to scare voters with the prospect of more tax under a Labour government. A recent Newshub poll shows that 53% of us support a wealth tax, which is a result consistent with international polls in similar countries.

The majority of voters in rich countries, for the first time in polling, want fairer distribution of wealth and support a “tax switch” to achieve it: Cut tax for the struggling middle, and pay for it with an increase on those who can pay a bit more. Inflation has been a political wrecking ball. Voters have changed their views on a lot of things.

Instead, the Opposition could attack the Government by saying “this is as good as it gets under Labour. The fact that they announced such a modest Budget means they are satisfied with the way things are going”. Then they would be in tune with the 55% of voters who think the country is headed in the wrong direction.

The Government is constrained on three sides. It can’t spend more because of inflation. It can’t spend less because of social deficits. And it can’t promise structural change when the election is fewer than 150 days away.

In the circumstances, it has managed a pretty good Budget. No frills, but no spills either.

Grant Robertson said this was a Budget “appropriate” for the times we’re in. He is probably right. But that does not make this an election-winning Budget.

He will be hoping for a different fate to that of UK Chancellor Norman Lamont. Nearly 30 years ago, Prime Minister John Major famously described his chancellor’s Budget as “the right Budget, at the right time, from the right chancellor”.

Ten weeks later both were sacked by the voters.