Don’t Walk Away, Chippy – Labour Can Beat National On Tax.

Go Hard, Chippy! Being a magnet for every piece of bad news going is why Prime Ministers cannot afford to just sit still and hope for the best. A do-nothing government is a doomed government. If Chris Hipkins truly wants his government to survive October’s electoral winnowing, then he has to do something.

THE QUESTION upon which the forthcoming election will turn is: “How brave is Chris Hipkins?” If saving his government requires Hipkins to strike out boldly, with policies designed to seriously disrupt the status quo, does he have the cojones to do it?

There is nothing in his political career which suggests that he has what it takes to shake things up. He has succeeded by playing the percentages. Trimming his sails when he had to. Betting the farm when he was handed a sure thing. And it has worked. He is New Zealand’s prime minister. Not by dint of hard-won policy achievements, but by being a political cork. Chippy has floated to the top.

An important aspect of this political buoyancy has been his indifference to how well, or how badly, his policies are performing. Minister of Education for five years, he did not appear to care whether the measures he authorised were actually working. Having implemented party policy, he never looked back.

His pet project, Te Pukenga, was persisted with long after it became obvious that the forced amalgamation of the country’s polytechnics was a very bad (and eye-wateringly expensive) idea. Evidence that New Zealand was tumbling down the international education league-tables, and that the nation’s children were struggling to master the 3Rs, or even turn up to class, failed to produce a serious reappraisal of the Education Ministry’s performance.

Chippy’s choice, when things go wrong, is to keep on walking. It’s a remarkably effective tactic. Don’t hang around, don’t look back, just put as much distance between yourself and whatever is failing as you possibly can. Guilt and proximity go hand-in-hand. Ergo – don’t be found near the scene of the crime.

The problem with being the Prime Minister, however, is that there is nowhere to walk away to. Hipkins’ office is the destination for everything that has gone, is going, or will go wrong in New Zealand society. It’s the place where all the chickens of political failure come home to roost – even when, strictly-speaking – they’re not Chippy’s chickens.

With every passing week, New Zealanders are greeted with more evidence of just what an easy-osey administration Jacinda Ardern superintended. Stuart Nash, Michael Wood, Kiri Allan: how many more ministers and MPs will the news media find cowering under the rug with their fingers crossed? One can’t help wondering whether Ardern, herself, took a leaf out of Chippy’s playbook. Certainly, being able to say “Jacinda has left the building” has its upside – not least for Jacinda!

Being a magnet for every piece of bad news going is why Prime Ministers cannot afford to just sit still and hope for the best. A do-nothing government is a doomed government. Nor is it enough to simply throw unpopular government policies overboard – not when the person doing the throwing had a significant role in formulating and implementing the very same policies! No, if Hipkins truly wants his government to survive October’s electoral winnowing, then he has to do something.

In practical terms, Hipkins needs to announce new policies. Policies that provide the voters with a convincing reason for keeping Labour in office.

Like what?

Given that the 2023 General Election will be held in the midst of a cost-of-living crisis, and that Hipkins’ opponents are proposing to relieve the burden of constantly rising prices by lessening the voters’ tax burden, it would seem that fiscal policy is the battlefield upon which Labour, the Greens and Te Pāti Māori must take the fight to National and Act.

Hipkins’ and Labour’s most obvious first move, tax wise, is to adjust the tax thresholds to offset the impact of rising inflation, thereby eliminating “fiscal drag”. At a stroke, National’s flagship policy would be neutralised. Christopher Luxon and Nicola Willis might (with some justification) claim credit, but they would still be left gasping for political air.

Hipkins’ and Labour’s next step would be to address the Greens’ fiscal policies. Citing the extreme practical (not to say political) difficulties entailed in extracting significant revenue from the richest individuals and families on the Rich List, Finance Minister Grant Robertson should rule-out introducing a Wealth Tax. To soften that blow, however, he would signal Labour’s adoption of the Greens’ policy of making the first $10,000 of personal income tax-free.

On a roll, Robertson would then announce the re-instatement of the policy Labour took to the electorate in 2011: the removal of GST from basic food items. This measure would offer immediate cost-of-living relief to New Zealand’s poorest citizens.

Naturally, National’s finance spokesperson, Willis, and the Act leader, David Seymour, will demand to know how Labour proposes to fill the revenue hole created by such significant reductions in the overall tax-take. What spending plans are Labour planning to curtail and/or eliminate in order to pay for them?

One can easily imagine Hipkins asking Robertson the same question when Labour’s campaign team are war-gaming the party’s radical fiscal strategy. Recalling John Key’s killer line from the 2011 General Election, one can hear the Prime Minister commanding his Finance Minister to: “Show me the money!”

This is the point at which Hipkins will be required to step out of his political comfort zone and embrace a policy that would shake New Zealand’s neoliberal order to its very foundations. The same point Jim Anderton’s Alliance arrived at back in the 1990s when it, too, was tasked with filling the fiscal hole created by its even more generous tax policies.

And, no, the answer is not a Capital Gains Tax (CGT). Upon the foundation of tax-free capital gains New Zealanders have constructed a politically sacrosanct economic model. It’s what keeps the small business-person working all the hours God sends. It’s what underpins the financial security of home-owners in their old age. Capital gain is the pot-of-gold at the end of the Kiwi rainbow – and governments will tax it at the peril of their political lives.

The answer Anderton and his Alliance came up with, the fiscal instrument adopted to fill a gaping fiscal void that would otherwise have to be filled by cuts in government spending so savage that publicly funded health and education could hardly survive them, was the Financial Transactions Tax (FTT).

The FTT is a levy on legislatively designated types of financial transactions. Infinitesimal in itself, when multiplied by the millions of financial transactions which take place every day an FTT soon mounts up to serious money. What’s more, the institutions from which FTTs tend to reap the most spectacular revenue harvests – the banks and finance houses – seldom elicit much in the way of sympathy from the general public. On the contrary, most voters are of the view that the banks “have it coming”.

Indeed, it is difficult to imagine a proposal more likely to inspire fear and loathing at the big end of town that an FTT. Those big-enders will tell you that an FTT would crash the markets, derange the banking system, provoke capital flight, and utterly fail to achieve the objectives of its promoters. Many of the bankers’ objections are rehearsed in an excellent video on the FTT (a.k.a the “Robin Hood Bank Tax”) fronted by the incomparable Bill Nighy. Watch it here.

This, then, is the challenge confronting Hipkins. To embrace a suite of policies that offer genuine cost-of-living relief to the overwhelming majority of New Zealand taxpayers, while, at the same time, stripping National and Act of their principal election sweetener, and throwing into the sharpest relief the difference between tax policies designed to assist the rich, and tax policies intended to uplift the poor.

Not an election strategy for the faint-hearted, it would call upon all the courage and political skills this government and its allies possess. If successful, however, it would, at long last, allow the New Zealand Left to shatter the bonds of neoliberalism and break free into open ground.

Don’t walk away from this one, Chippy.

This essay was originally posted on The Daily Blog of Friday, 30 June 2023.