Thursday 26 June 2014

Cramped And Conventional: Labour's Alternative Budget Fails To Impress.

Labour Apologist? David Parker's Fiscal Plan is cautious in conception, orthodox in construction and singularly lacking in political inspiration. It's as if Parker felt the need to apologise for being a member of the Labour Party by constantly reassuring his readers that when it comes to controlling expenditure his plan is as fiscally responsible as the Finance Minister’s.

CONGRATULATIONS to the Labour Party for releasing an Alternative Budget well ahead of the General Election. Allowing the voters to quite literally get the measure of Labour’s economic ambitions is an entirely praiseworthy gesture which will, hopefully, be emulated by all the other parliamentary parties.
The document itself is less deserving of praise. What David Parker has produced is a Fiscal Plan that is cautious in conception, orthodox in construction and singularly lacking in political inspiration. If the document can be said to reveal any sort of vision at all it is of the most cramped and conventional kind – as if Parker felt the need to apologise for being a member of the Labour Party by constantly reassuring his readers that when it comes to controlling expenditure his plan is as fiscally responsible as the Finance Minister’s.
Responding to Labour’s Alternative Budget, BusinessNZ Chief Executive, Phil O’Reilly, noted that its costings and commitment to frugal spending would likely be welcomed by the business community. But Parker’s centrepiece – an increase in the top personal tax rate and trust rate to 36 percent – was unlikely to aid competitiveness and would penalise those who tended to invest most.
“Higher income and trust tax along with a new capital gains tax are not good signals for anyone wanting to invest in New Zealand’s growth.” Said O’Reilly.
But this rote rejection of higher taxes on the wealthy is of much less importance that the generally positive noises that preceded it. Clearly, Parker’s Budget is one that offers very little with which New Zealand capitalism could take serious issue. Indeed, the risible addition of 3 cents to the top tax-rate almost certainly occasioned a massive sigh of relief on the part of New Zealand’s top 2 percent of income earners.
On the afternoon he announced his candidacy for Labour’s leadership, David Cunliffe’s response to the inevitable question: ‘Do you believe in higher taxes?’ had been an unequivocal “You betcha!” Ever since, New Zealand’s wealthiest citizens have almost certainly been anticipating an aggressively redistributive fiscal strategy from the Cunliffe-led Labour Party. The announced top rate of 36 percent – 9 percentage points lower than Australia’s – must have them shaking their heads in disbelief. Their party was not so sparing of New Zealand’s poorest citizens.
Parker’s refusal to give effect to the confiscatory fiscal impulses of Labour’s membership is emblematic of everything that has gone awry with Cunliffe’s leadership. Elected on the promise of restoring the Labour Party to its core, democratic socialist, values (and being rewarded with a 37 percent poll rating by an electorate hungry for political substance) Cunliffe has failed utterly to build on the ideological momentum of his historic victory.
It is now clear than in the months following his win Cunliffe spent most of his time attempting to pacify his caucus colleagues. Rather than using the inevitability of constructing a left-wing coalition government to bring obstructive Cabinet aspirants to heel, the new leader attempted to construct some form of policy consensus. Parker’s Alternative Budget is proof of just how successful his caucus colleagues have been in forcing Cunliffe to abandon his democratic socialist promises.
The brutal fact of the matter is that Labour will go into the 2014 election with an economic policy package considerably to the right of its 2011 manifesto. In trying to unite his caucus “team”, Cunliffe has abandoned the very principles that had caused the Labour Left to embrace him as their champion. If Parker’s warmed-over “Third Way” social-democracy (with neoliberal characteristics) fails to inspire the voters, and Cunliffe leads Labour to defeat, it is likely the membership will punish their erstwhile champion’s apostasy with much more severity than the ABC faction’s admirable consistency.
Parker is at pains to paint his deeply conservative economic policies as a progressive “Economic Upgrade”. It is, he tells us in his introduction, “an ambitious set of goals” which, sadly, have required some “tough choices”. Among these, presumably, is the tough choice to compulsorily acquire a portion of a worker’s meagre wages and place it at the disposal of private investment companies until that worker turns 65. Or should that be 67? Tough, too, must have been the choice to build the 100,000 highly subsidised private dwellings the middle-class wants, rather than the 100,000 affordable state houses the working-class so desperately needs.
In the dreary tone of a latter-day version of the British Labour Party’s infamous Depression-era  Chancellor of the Exchequer, Phillip Snowden, Parker informs us that “not all the policies we would like to do can be funded”. The priority, as always, must be “getting the government’s books in order” and “getting the economy growing” after six years of National Party rule. Hardly the sort of message to get the masses flocking to the polling booths!
Cramped and Conventional: Philip Snowden (1864-1937) was Britain's Chancellor of the Exchequer at the onset of the Great Depression. Unable to think outside the box of laissez-faire capitalist orthodoxy, this Labour politician oversaw a programme of retrenchment and austerity which succeeded only in making the economic crisis worse.
What’s missing from this Alternative Budget is any hint of a political movement determined to change the overall direction of national policy. There is no plan to bring the ideas and aspirations of working-class people back to the centre of the political stage. No pledge to repair the damage inflicted upon the poorest and most marginalised New Zealanders by successive governments (including the last Labour Government).
There is not even an attempt to make good on the promise at the heart of Labour’s 2011 election campaign: the pledge to “Save Our Assets”. For Labour’s parsimonious finance spokesperson, the notion of “buying back the farm” clearly comes a poor second to “getting the government’s books in order”.
And yet there exist vast capital reserves that a bold and radical Labour-led Government could devote to housing the people and putting the unemployed to work. ACC does not need to be a fully-funded scheme. Were it to return to the pay-as-you-go scheme it was originally intended to be, then the $20 billion taken from levy-payers to transform ACC into an insurance company fit for privatisation would steadily become available for the improvement of New Zealand society.
It is the manifest lack of imagination, the stunted ambition, the absence of excitement and inspiration that makes Labour’s Alternative Budget so disappointing. The wealthy and the powerful will praise it – remarking on Labour’s surprisingly responsible approach to economic management. But for those who look to Labour for the opportunities that helped their parents and grandparents enjoy a more abundant life, Mr Parker’s Fiscal Plan risks being seen as just another reason to stay at home on 20 September.
This essay was originally posted on The Daily Blog of Thursday, 26 June 2014.


Anonymous said...

The Greens and IMP should make it clear that they will not support such a budget if it is presented to the house in May of next year.

Wayne Mapp said...

Kind of makes your previous post on filling town halls around the country a bit pointless.

If this budget is the end of the "neo - liberal experiment", I guess Bill English must also be disenchanted with the last 30 years, since clearly he and David Parker are virtually on the same page (capital gains tax excepted).

Does it forecast that a coalition on the left would be extremely fractious, as the comment above implies?

Chris Trotter said...

That would be "Yes", "Yes" and "Yes", Wayne.

If they took this dog on the road I can't see many people patting it on the head.

Unbelievable really.

Peter Kennedy said...

I read David Parker's alternative budget, and thought, why? Nothing in it for the working classes. 30 years later Labour still has to reconnect with its core constituency. Again my vote will be going elsewhere.

Kat said...

Can you provide one shred of evidence that Labour would be now enjoying a "37% poll rating by an electorate hungry for political substance".

Restoring the Labour Party to its core, democratic socialist, values is fine in principle but is no guarantee of winning the election in September 2014. Various talking heads could spend the next decade defining the perfect practical policy manifestation of those values.

In the Meantime National gets to enjoy more destructive time at the helm.

A little economic 'pragmatism' at this point is more about not frightening the horses than any welching on social democracy or democratic socialism.

Chris Trotter said...

Obviously, Kat, I cannot supply you with evidence of something that has not occurred.

But the fact remains that Labour's highest poll rating in five years followed three weeks of campaigning by leadership aspirants preaching a return to Labour's core values of equality and social justice.

Nor is it possible to disguise the fact that, following his victory, David Cunliffe went quiet - and the polls turned against Labour.

There is a world of difference between pragmatism and simple cowardice. Your loyalty would be admirable - if there was a Labour Party that was worthy of it.

But, from where I'm standing, there isn't.

I wish it were otherwise, Kat, I truly do.

Clemgeopin said...

Chris, You are missing one very important point in your analysis.

One can make any policy including one with a much higher tax rate and even stiffer CGT provision. But there is a small huge problem.And that is, any policy has to be at least a little palatable to ensure sufficient votes to form a government. That is why there is the need for caution and pragmatism.

I think Parker and Cunliffe have taken the most risk they can possibly take at this stage in our political history.

Olwyn said...

While I can see the alternative budget has allowed little room to move, I shall withhold judgement until I see what David Cunliffe's congress speech contains.

It could be that he has caved to caucus pressure - he has had very little time to rally the troops in favour of his vision and deal with the subsequent caucus tensions. But it could also be that the budget has walled off a line of attack that the speech would otherwise fuel.

Victor said...

I don't particularly want a socialist Labour Party.

But I would like a genuinely social democratic Labour party, wedded to Willi Brandt's adage:

"From the market all that the market can deliver and from the state all the things that the market can't deliver".
(approximate translation)

Sadly, Labour is no longer such a party.

There are now only two questions worth asking about New Zealand politics.

The first question is whether a third term National-led government will continue down the path of comparative moderation, with which Key seems comfortable or will it finally go feral.

The second question is whether and how a realignment will take place on the left prior to the 2017 election.

Poor, poor Cunliffe!

BTW Chris: I thought that you and Rodney Hyde were both excellent on 'Willy & Ali' today. Well worth listening to.

Davo Stevens said...

Been saying this all along Chris. The Labour Caucus is divorced from the reality that most of us live in.

So we'll get another Gnat term, more destruction of Kiwi's way of life, Johnny Boy will slide away about mid-term and Judith Collins will become queen of the cess pool. That seems to be what the Cunliffe Gang want.

Kat said...

I don't believe the current 'polls' reflect anything other than what is being driven by the main stream media and that includes the period during Labours leadership campaign.

Chris, lets dispense with the 'loyalty' platitude. I regard perseverance as being more admirable, something you may remember our parents and grandparents had that got them through tough times of depression and war.

The Labour party is being rejuvenated, maybe not as fast as you would like but that's not reason enough to just throw out the country's oldest political force like some toy from the cot.

Andrew R said...

At least we can now work out who will be National's support partner. Way to go Labour.

TM said...

Labour have a fundamental lack of vision. Surely the way to get votes is to paint a picture of what NZ could be - short hospital waiting lists, government provided jobs for those who struggle to find work, comprehensive and low cost public transport so those on low income or who cannot drive can fully participate in their communities, etc, etc, etc. It might require a bit of extra tax, but many of us would be more than willing to pay this.

Anonymous said...

"But the fact remains that Labour's highest poll rating in five years followed three weeks of campaigning by leadership aspirants preaching a return to Labour's core values of equality and social justice."

Yes, but then the news media started a hate campaign against Cunliffe that has yet to end, almost none of it about policy. I honestly can't remember anything this bad and I am quite old now.

lprent said...

Hey Chris, you're falling into the same silly trap as Farrar tried to do all of the time.

Income tax changes aren't the underlying problem. The lack of a capital gains tax is.

We simply don't need a deeply progressive tax system at the upper end if we actually collect the taxes. At present much of it is diverted away into hard to tax capital gains.

What we actually need is a more progressive tax at the bottom end. That requires money that can't be taxed from the upper end when they have the capital gain loophole, and is probably not required anyway once that loophole is closed.

Fix the most urgent substantive problems first. Not just doing the ones that are the easiest to do because they are the easiest to do.

Anonymous said...

"Income tax changes aren't the underlying problem. The lack of a capital gains tax is."

The lack of a capital gains tax is not the problem. The problem is the lack of direct taxes on capital. A land tax would be more appropriate since it would be easy to collect. And making interest not deductible for tax purposes would also help. Making income tax rates more progressive wouldn't do any harm either.

Guerilla Surgeon said...

Capital gains tax is one of those weird anomalies. Like – you are allowed to pretty much by and sell anything legal, except sporting fixture tickets. That's called scalping for some strange reason. Similarly just about any form of income is taxed, unless it happens to be from a capital gain. Again strange. I don't know how much capital gains tax would bring in and I honestly don't care, but if we had won it would help to produce that so-called "level playing field" that Roger Douglas was always crapping on about.

Victor said...

Beware of arguments that if we had this tax we wouldn't need that tax.

A more progressive income tax regime should not mean no CGT or vice versa. Both are needed to reset our economy, provide essential social services and rebuild our perilously tattered infrastructure.

Meanwhile, there's one tax that needs to be reduced immediately and that's GST, the rise in which has had a severe impact on the living standards of poorer citizens.

It's a shocking indictment of Parker et al that they've come up with proposals that are more tight fisted than those of the Clark-Cullen administration, during its complex and convoluted step-back from the absurd neo-liberal excesses of the 80s and 90s.

Anonymous said...

Governments like CGT because there is money readily available, from the sale, from which the tax can be paid. Also the amount of the gain is easily ascertainable. However a capital gain is not really income since if I sell a property and purchase an equivalent property elsewhere I am no better off. And it is of course the claim that CGT is "income" that is the alleged justification for the tax.

CarbonGuilty said...

Labour has two simple problems in my biased view, only one of which is fundamental. A generally unattractive leader, who not just old ladies and reality TV watchers fail to warm to. Yes many people are that shallow. Always have been, always will be.

More significantly, Labour comes across as the party of envy & spite, as do most of your bloggpersons I have to say. Kiwis are mostly feeling positive at the moment and so they respond well to a positive and attractive leader, currently, and negatively to 'it's all the fault of rich pricks' policies. Simple.
So get a nicer leader and change your attitude to positive and drop the envy and spite. Hard I guess as it is a core Labour value I think, hence my permanent distaste for that party.
Their Nat-lite budget is just an attempt to appeal to the middle, which I agree Chris, is a mistake. The middle are very happy with the status quo. Labour should take aim at the Greens who have taken 10% off them.

manfred said...

Hi lprent. What does this sentence mean: 'That requires money that can't be taxed from the upper end when they have the capital gain loophole, and is probably not required anyway once that loophole is closed.'

Are you saying that tax cuts on the first 20-30,000 become possible when capital gains are taxed?

jh said...

I like the way he plans to keep a budget and put money aside for population growth because while the left praise increasing population the cost is kept out of consciousness.

Anonymous said...

I caught this on 'Eggheads' quiz show, Harold Wilson on the British Labour Party: 'if it isn't a moral crusade then it is nothing' (Daphne thought it was the leader of the Liberals who said it).

I agree exactly with your Willi Brandt quote Victor. I have always intensely opposed the 1984 settlement--the increased influence of the rich--without being convinced by full socialism. Tho it can be a slippery term--a Swede I met was quite overt in calling her govt socialist, which didn't meet my definition anyway.

Brendon Harre said...

A capital gains tax doesn't get to the heart of the problem either. The problem is the ever inflation of unproductive capital at the expense of the rest of society. Fix that problem and workers will be better off. As explained here

Guerilla Surgeon said...

"Envy and spite" – wow – I thought it was more social justice than envy and spite. To be honest, there's nothing more spiteful than a right wing pundit these days, particularly when frustrated :-). They do tend to cloak it with a mask of superficial humour and a patronising I "of course this is the way things are" attitude – but spiteful nonetheless. Actually, you couldn't get much more spiteful than Muldoon. :-)

jh said...

What makes you think a Keynesian approach is appropriate Chris? Don't we have a high overseas debt?
I think NZ has long ago reached it's production possibility frontier (apart from more dams and dairying).
What we are seeing is growth through property development with funds earned offshore. When the music stops we will have more people utilising the same resources. The government is banking on agglomeration benefits and whether they show up or not (oh goodie!) their friends will benefit on the way.
I get the feeling Parker has his head screwed on; it is the Labour Left who don't. Parker has listened to Reserve Bank, Treasury and the Savings Working Group; it's Labour Left who hasn't.
No wonder the media are excluded from the Labour Party Conference!?
My guess is that Labour left have designated car-parks and live in leafy suburbs. The closest they came to being workers was when they were at varsity?

jh said...

@ Chris.
Where is Aotearoa/NZ's Peter Hitchen?
Is NZ/Aotearoa too small? Sometimes you aren't bad at holding a mirror up to the left. Do we realize the Standard isn't really the "Voice of The New Zealand Labour Movement"? More likely left-wing lawyers, journalists, ivory towered ones. If they met a real worker they'd reach for the Kleenex?

Victor said...

Carbon Guilty

It's not necessarily spite and envy that drives the call for higher taxes.

It's simply that more revenue is needed to keep the country going.

Making life a mite less harsh for the less privileged is only part of what needs to be done. But it's an important part.

Repairing infrastructure, investing in public transport, aiding regional development and boosting r&d are other goals of significance.

Moreover, fiscal prudence is not the only virtue required of governments with comparatively healthy public debt to GDP ratios but facing looming private debt levels.

CarbonGuilty said...

Yes GS, Muldoon was a spiteful swine, but not at all typical of his party. He was a National socialist. And a disaster.
If Labour's core value is social justice then that is what they should be constantly focused on getting across. But it is not. Most the time they just chip away nastily and sound envious and spiteful, like they want to be a better version of National but can't pull it off. Like that snide private school boy Cullen who will be remembered for saying after the 'stolen' election of 2005 was it: 'We won you lost eat that' (spite) and on occasion referring to Nats as 'rich pricks' (envy). That is standard dullard stuff from Labour over the last little while, including Cunliff. Hardly about social justice, whatever that really means. I bet National would claim they are a party working for social justice, just a different definition of that.

On the subject of capital gains on the sale of an investment house, that will not be popular with many Labour MPs as the register of interests shows it is their favourite investment. Clark famously had about 8 houses was it? Still does probably. Rich prick!

Loz said...

The alternative budget shows that there is no alternative economic strategy and no acceptance of flaws in the laissez faire model. It’s akin to trailing players starting another round of a Monopoly board with a strategy of saving money. All of the resources are privately held and wealth is already heavily concentrated in the hands of a few. Nothing in the budget changes the distribution of economic power nor will it affect the upward redistribution and consolidation of wealth.

The document contains the same assertions that failed to produce results from the 1980’s. “Higher incomes through higher investment, innovation and industry development” clearly states that increasing foreign investment (and ownership) will produce a higher real income for New Zealanders yet the evidence of the past 30 years shows the opposite.

Last week, Oxfam highlighted that 1% of Australians now own more wealth than 60% of the population combined. Over half of all wealth on Planet Earth is now owned by 66 people. Within New Zealand, free market policies of both major parties, in the space of 3 decades, have enabled the top 1% to now hold more wealth than the bottom 70% combined. With such a massive gulf between the new lords and ladies and the struggling masses it’s clear that a tiny section of the country has been greatly advantaged over all others by the free market ethos.

Nothing in Labour’s Fiscal strategy is designed to check the growing economic power of the elite. The document may sound warm and fuzzy but it betrays a mild whitewash of existing processes responsible for an upward redistribution of wealth.

Capital gains tax is set at a rate less than half what is currently carried by salary and wage earners and it won’t impact the dividend payouts being harvested by the top anyway.

Probably the saddest commentary is touted as “clamping down on tax avoidance” where the party would aim to recoup only between 2.8% - 4% of an estimated $5-7 billion in annual corporate tax avoidance by the end of their first term. It offers no real hope to wage and salary earners and is yet a further continuation of the promise of “export led recovery” predicted since the Douglas era.

Guerilla Surgeon said...

Carbon guilty, funny how the right always makes excuses for those who don't fit its positive stereotypes. I think it's a bit of an exaggeration throwing National Socialist Muldoon. Sort of like mentioning Hitler – you instantly lose. Anyway I could have mentioned Margaret Thatcher – really really spiteful, either of the George Bushes, Ronald Reagan, or if you want New Zealand examples – who was it called Winston Peters "not good under the high ball"? Or perhaps you could ask Marilyn Waring which historical national party figures were spiteful. Or for that matter, any of the early national women MPs. Even that awful Jenny Shipley :-).

Guerilla Surgeon said...

Or Mike Minogue?

Jigsaw said...

TM - funny we have heard that before, about paying more tax to get shorter hospital waiting lists, only it didn't turn out that way. Remember people being sent to Oz for operations - I think of that whenever I see Annette King going on in parliament. Turned out it was more about cutting out a layer of
bureaucrats to improve the systems and setting goals than just throwing more money at the problem.

Anonymous said...

If that raft of policies from Parker is the best Labour can do in terms of policy as the social democratic party in NZ their existence is pointless.

It is an indictment and they now an insipid are pale blue version of National. A NSW Labour Senator Richardson when asked about voting for policies or party positions in the ALP famously replied " you vote for you mates even when you know they are wrong".

Here the Labour caucus position is such a rejection of the inherent historical Labour creed you can forget that.

Equally it has often been said of Labour " they may be bastards but they are our bastards..."

Given they have white-anted the leader and are visionless-not any more.

Kia Kaha

Anonymous said...

Carbon Guilty - you accuse the left of being spiteful and envious of the "rich pricks". Shows your complete lack of understanding of how lefties actually think. We don't actually envy them their materialistic lifestyle at all. We just object to the fact that they seem determined to see the poor get poorer, while they get even richer. Call us unreasonable, but we don't want to live in a society where a man who has just undergone heart surgery has to live in his car because he has nowhere else to go, or where kids are living in houses so cold they get pneumonia and other second-world diseases. I could go on and on, but you seem fixated on the "envy" tag so this will probably go over your smug head.

Anonymous said...

Labour needs to show some courage and admit that they were wrong and dump David Cunliffe now. From the outside he looked like a complete winner, but maybe the party should have listened more carefully to his colleagues, their lack of support for him was blamed on; jealously, and personal antagonism. Now he has been in the job for six months we can see some of what his caucus knew all along; his personal belief in his abilities are not matched by his actual ability to do the job.
It is too late for him to go on the road, his short comings have already been exposed and his low personal polling shows that, and it is dragging the party down and giving more oxygen to the Greens and IMP.
Labour needs to plan for the future, which it hasn't really done since Helen Clark took over, she may have been a great PM, but she did the party no favours by not allowing a clear succession plan (the Nats seem to be making the same mistake)I think Goff was genuinely shocked to be named as the new leader in her speech on election night.
Forget Robertson, the simple truth is NZ is not ready for an openly gay PM.
I think the party needs to go out on a limb and elect Jacenda (no she is not ready, but she will have 3 years to be ready) and David Shearer as her deputy. They won't win the election but they will look like the future.
As we get closer to election day, the big question will be; can the Labour caucus get rid of DC after the election or will he hang around for another three years. This is a real possibility as he and his supporters seem incapable of admitting that the problem is him.
If he does stay then Labour will have a great opposition leader, he is good at attack politics and glib messages, but he is not a natural leader (his back story hinted at that) and he will never command the respect of his caucus.
This is the turning point for Labour, if David Cunliffe stays as the leader through to next year (in opposition) then he will split the party.

jh said...

Nothing in Labour’s Fiscal strategy is designed to check the growing economic power of the elite.
There are two elites. When Kim Hill discusses the UKIP and (regarding racism) asks "but where do you draw the line"? she is suggesting that people who oppose immigration have a pathology that effects their judgement and therefore people like herself should do the judging.
The same applies to feminists in so far as only certain people are the right types to make the laws, do the decision making etc, the others have a pathology. Therefore only one (black and white) view of the Roastbusters is correct one.
So you have the pure and the unpure (who are the other). The pure left-wing elite in Labour appear to have made it a body that just doesn't relate to ordinary people.

Fern said...

“Nor is it possible to disguise the fact that, following his victory, David Cunliffe went quiet ‒ and the polls turned against Labour.”
(Chris at 26 June, 13:03)
I am Mrs Average out in the provinces, a left-leaning voter who simply wants a decent government. When DC became the Labour leader I read two speeches on his website setting out his philosophy. Man, I was impressed. But now, well, it’s all fizzled out and I’m trying to decide who gets my party vote - Labour, the Greens or Mana. Not the Internet Party though. I do like the fact that KDC’s sole aim, as I see it, is to destroy JK (heh, heh, heh) but I don’t suppose visions of social democracy exercise his mind.