John Armstrong: Politics of envy versus aspiration

Axe the tax? Labour would if it could. But it can't. So maybe the tax will stay. Maybe it won't. Who knows.

Labour isn't saying. And it won't be saying for quite a while yet.

Confusing? Not really. Labour's campaign to halt the projected rise in GST is about the here and now.

In the lead-up to the Budget in late May, the campaign's sole focus is just that - stopping the rise in GST.

Of course, Labour does not have a donkey's chance of doing so. Its MPs will pretend otherwise, but the party's "Axe the Tax" bus tour from Auckland to Dunedin will have zero impact on National's intention to lift the rate of GST from 12.5 to 15 per cent.

In fact, Labour's high-profile campaign has made it that much more difficult for the Prime Minister to backtrack on GST.

That may have been Labour's unstated intention all along. That may be one of several agendas operating below the surface politics.

Come Budget day in late May and everything changes, however. The tax rise will be official.

To borrow Phil Goff's analogy, the egg will be scrambled. It is going to be pretty hard to unscramble it. National's overall tax package will leave Labour nursing a big political headache - how to make up the $2 billion shortfall in revenue if Labour pledges to restore the rate of GST back to 12.5 per cent.

Labour won't say how. But it can hardly talk of raising income tax rates which National will have just lowered.

No party - not least one coming from such a long way behind its rival - can afford to saddle itself with that kind of platform.

So will Labour accept that GST at 15 per cent is here to stay? Labour is unlikely to answer that question either.

National consequently thinks Labour's campaign on GST will increasingly be seen as lacking any credibility unless it says what it would do if it were the Government.

But that is one thing Labour will definitely not be doing. It is not going to be trapped into declaring a position which it might later regret.

Goff has been around long enough to remember National's very own GST-induced political disaster.

When Labour introduced GST in 1986, National felt obliged to come up with an alternative - the long-forgotten "Extax".

With Labour determining no items would be exempted from GST, National saw a gap in the political market. Extax allowed exemptions for basic foods, doctors' fees, local authority rates and some charities. The tax was universally panned as an administrative nightmare.

The ridicule prompted senior National MPs to lose faith in the policy, resulting in mixed messages as to where National really stood on a broad-based consumption tax.

Once the 1987 election was over, Extax was quietly buried and National weighed in behind GST.

Labour has absorbed another lesson from National. At the last election, National got away with not revealing a lot of policy until the formal election campaign - much to Labour's annoyance.

Labour believes it can do likewise.

In the meantime, you can expect Goff and his colleagues to parry awkward questions with generalised statements about Labour developing its spending and tax priorities on the basis of the total picture presented by the Government accounts - thus neatly side-stepping the not inconsiderable matter of the $2 billion shortfall.

Labour believes that rationale will be sufficient to stymie criticism. It might not win the battle.

It will probably have to live with GST at 15 per cent.

But it feels it might win the war: that National will take a major hit if it fails to satisfy public expectations in terms of compensation for GST-driven price rises.

It has to be assumed that John Key would not be proceeding unless he was confident the overall package of tax cuts will satisfy everyone - or almost everyone. Nevertheless, Labour is trying to use his assurances to further ramp up expectations to the point where National cannot meet them.

John Key and Bill English have been very careful not to over-promise, however. National's new modus operandi is to make sure the progressing of controversial policies is done slowly and cautiously so people have accepted them before they actually happen.

That strategy is manifest in National's selling of its GST rise with a three-month lead time between it first being foreshadowed and the formal announcement in the Budget. Normally, there would be little or no warning.

National's intention is to get people so attuned to GST going up that on Budget day they focus solely on the cuts in income tax and other moves compensating for the increase.

The downside is that has given Labour three months in which to reconnect with voters in conditions which for once are very much in its favour.

Perhaps for the first time, the Key Government is doing something for which it lacks any mandate. And, with the notable exception of the anti-smacking referendum, Key for the first time is also striking a strong headwind of public resistance.

Regardless of his public assurances, many voters are deeply perturbed by endless price rises and naturally fear they will be the ones who fall outside the "vast bulk" of people whom the Prime Minister insists will be better off.

Labour is highlighting the ones who will most definitely be better off - those who stand to benefit from the top tax rate falling from 38 to 33 cents in the dollar.

Labour argues National's package takes from the poor to reward the rich and thus fails to meet Key's test of fairness.

What Labour is doing is invoking the politics of envy.

National is invoking the politics of aspiration in the belief that tax cuts for the well-off have greater acceptance among those less well-heeled than Labour gives credit.

However, the debate is being conducted on Labour's terms.

That was illustrated by Key last week assuring the elderly they would get a "double whammy" by way of compensating income increases.

National is finding it hard to escape the charge that the rise in GST is simply the means by which it can resuscitate the tax cuts it was forced to cancel because of the economic recession.

Its economic argument that the tax changes are designed to boost savings and reduce over-consumption by New Zealand households has gained little traction.

Just who gains the most political traction will depend on whether National's tax cuts pleasantly surprise middle-income households. Even if they do, Labour may not be too concerned.

Labour's campaign on GST has been a test run of its ability to condense and sell a message in simple terms. It has been a test of Labour's discipline in speaking in a coherent and united fashion. On both counts it has succeeded.

However, its campaign has a more fundamental objective - rebuilding the party's core vote in lower-income cohorts. If it does that, Labour will be both satisfied and relieved.

Of course, Labour will be hoping to do much better than that among those on higher incomes, especially in polls taken this side of the Budget, given voters will still largely be in the dark about what they stand to get in the pocket in dollar terms.

Those polls will be telling.

If Labour gets no spin-off from the overwhelming public antipathy towards a rise in GST, the party will be left to ponder whether it can ever relax Key's boa constrictor-like stranglehold on the middle ground of New Zealand politics.