Behind The Mask: When businessmen can no longer distinguish between National's and Labour's spokespeople, it's time for left-wing voters to start asking searching questions about the true beneficiaries of Labour's policies.
“IF YOU CLOSED YOUR EYES and just listened to Parker speaking – it could just as easily have been someone from National.” The business leader who said this of Labour’s finance spokesperson, David Parker, was being complimentary. And why not? The prospect of the two main political parties offering similar economic policies possesses charms to soothe the most savage capitalist breast. With nothing untoward to beset it, electorally, the business community can plan its future with confidence.
Labour supporters, however, have every reason to feel suspicious when businessmen heap praise upon the Opposition. The last time Labour pulled New Zealand capitalism’s irons out of the fire, the “Rogernomics” period of 1984-1993, still lies within the living memory of at least two-thirds of New Zealanders. Considerably less than half of them have cause to recall the economic disruption of those years with any fondness.
Much of the reason why Mr Parker’s speech to the “Mood of the Boardroom” breakfast in Auckland fell so mellifluously upon his wealthy listeners’ ears is attributable to Labour’s unwavering commitment to raising the age of eligibility for New Zealand Superannuation from 65 to 67. The opportunities which this policy opens up for the financial services industry (especially when combined with Labour’s pledge to make Kiwisaver compulsory) are considerable. Among the broader business community, however, Labour’s Superannuation stance represents an unstated promise not to pay for the pension by raising business and personal income taxes.
The one substantial tax measure Labour is promising, a Capital Gains Tax (CGT) enjoys strong support among certain sectors of the business community. The manufactured exports sector, for example, will welcome its ability to re-direct much needed investment away from the property speculation which has become New Zealand’s royal road to riches. Many other business leaders will welcome the CGT as a means of filling up the fiscal hole left by the 2010 tax-cuts.
For all those tax-payers born after 1966, however, Labour’s policies on NZ Superannuation, Kiwisaver and a CGT may well result in a reduction of living-standards.
As it stands, Labour’s plans to lift the age of eligibility for NZ Super will more-or-less exempt the so-called “Baby Boomers” from contributing to its “rescue”. Though described as a way of preserving “intergenerational equity”, and in spite of the Opposition’s increasing recourse to rhetorical Boomer-bashing, Labour’s carefully phased increase will still allow the Boomers to kick-back at 65. It is Generations X and Y who will have to work an extra two years for a purely inflation-adjusted and quite possibly means-tested pension.
A compulsory Kiwisaver Scheme, administered by the private sector, has the potential to not only reduce the actual take-home pay of already hard-pressed low-paid workers and their families, but to further strengthen the finance sector’s already unhealthy grip on the New Zealand economy. Were these savings to accumulate in a state-owned and run investment fund, then workers’ deductions could be classed as contributions to the social wage. Sadly, Labour will not countenance the creation of such a fund. (Too much like socialism, perhaps?) It may, however, allow employers to offset their increased contributions to the workforce’s Kiwisaver accounts against future wage rises.
Labour’s decision to exclude the family home from its proposed CGT, may yet lead to an even more rapid escalation in house prices. Rather than purchasing multiple properties in expectation of pocketing substantial tax-free capital gains, wealthy home-owners may instead decide to redirect their investment into the house (or houses) their family lives in. Labour could have avoided such behaviour by setting a family home valuation above which the CGT would apply. Instead, by opting to exempt them, it’s exposed both itself, and young people trying to buy their first home, to the perverse law of unintended consequences.
Why, then, does Labour persist with these business-friendly, Rich List-cossetting policies? Why not adopt fiscal measures more in keeping with its social-democratic principles? Throughout the 1950s, 60s and 70s, when the top bracket of personal income tax was frequently well in excess of 65 percent, New Zealand enjoyed the longest period of sustained economic growth in its history. The provision of social needs like old-age pensions, entry-level housing, ready access to health and education services and cheap utility prices were all predicated on citizens paying their fair share of tax.
Not any more. Rather than making the case for full employment and a just distribution of the nation’s wealth through a genuinely progressive system of taxation, Labour seems determined to base its economic programme on the fiscal status quo. Such a position cannot help but make it difficult to distinguish Labour’s finance spokesperson from National’s finance minister.
Poverty cannot be eliminated by cossetting wealth. Living standards cannot be lifted by reducing workers’ take-home pay. Homes cannot be made more affordable by offering tax-free rewards for making them more expensive.
Labour cannot serve labour by turning itself into National.
This essay was originally published in The Press of Tuesday, 31 July 2012.