The Labour Government’s poor record on policy delivery has undercut its standing with CEOs as it heads into the 2023 election. But the scepticism is not confined to Labour.
The proposed funding of National’s $14.6 billion tax cuts package has dominated political debate during the election campaign.
Chief executives rated the proposal at an average 3.17/5 on a scale where 1 equals “not credible” and 5 equals “very credible” in the Herald’s Mood of the Boardroom CEOs Election 2023 survey.
But there was considerable scepticism over Willis’ refusal to provide National’s full working calculations.
“Failing to disclose the details behind their calculations of the package increases the risk that this is just more political rhetoric,” said Mainfreight CEO Don Braid. “Fix the fundamental issues around the economic malaise rather than trying to be cute with tax breaks.”
From Queenstown Airport chair Adrienne Young-Cooper, “the independent analysis does not stack up. And this speaks of short-termism.
“Addressing inflation head-on is what is required on an ongoing basis. And proving a deeper much more thoughtful strategy for economic growth that protects our unique precious biodiversity and natural environment.”
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There is exactly zero possibility of these tax changes being funded from the intended sources. Particularly not given their coalition options. The idea that they would be able to obtain public service cuts of 6.5 per cent without affecting frontline services is populist nonsense.
The National Party’s proposal includes adjustments to personal tax brackets, an extension to the independent earner tax credit, and increases in childcare and in-work tax credits.
National plans to fund these tax cuts through public service cuts, tax changes (including a 15 per cent foreign buyer tax on the purchase of houses over $2 million, taxing offshore-based online gambling, user-pays immigration levies and ending commercial building depreciation tax), and through the Emissions Trading Scheme. Rural Land Co chair Rob Campbell says there is no doubt an intention to make cuts, but “No certainty they will be as described. No credibility in funding.” That was a sentiment echoed by many who said the maths does not add up.
Precinct Properties Craig Stobo said the problem was that the proposed “tax package” is isolated from the main fiscal issues which are ballooning government expenditure and public debt.
“The self-funding options for the tax package either lack consultation with the sector (such as tax deductibility of commercial building expenditure on depreciation), or are unable to clearly articulate credibility of the volumes of sales of houses over $2m and expected house price inflation from foreign buyers of New Zealand houses; or the most favoured nation tax treaty implications for all New Zealand citizens who want to buy a $2.1m home in New Zealand.”
Economist Cam Bagrie observed, “we should aspire to reward work by having a low tax burden, subject to generating sufficient revenue for delivering key services”.
“Tax cuts are however the wrong policy response at this juncture,” said the CEO of Bagrie Economics.
“The package by itself is inflationary. Even if it was fiscally neutral (and the numbers stacked up — which I doubt), that does not make it inflation-neutral.
“The foreign buyer tax is new money into the NZ economy. The need for fixing bracket creep appears to have been usurped by politics and the desire to deliver a sizeable tax cut in one year.
“Interesting to see a recent poll with almost half saying they would save any tax cut. This suggests pressure on the squeezed middle is over-blown.” And from the head of a business-related organisation, “the projected revenue from the two new taxes could turn out illusory.
“It is not good policy to end the commercial building depreciation tax break. In fact, this is not a tax break but a normal kind of depreciation, so abolishing it makes no sense.
“National should not have found it difficult to find savings in government expenditure since Labour has increased spending dramatically over the past six years. But National was unwilling to do that and so it resorted to some unrealistic tax plans instead.”
There is another strand to the debate.
Devon Funds executive chairman Paul Glass said the economy is flat at best, and business and consumer confidence is down. “As a nation we’ve lost our mojo. Even though the tax changes are modest, hopefully they will start to improve sentiment.
“The media seem to be obsessing over small funding details in National’s tax plan when we are all aware of the massive scale of the wastage that is currently occurring in government expenditure.
“If National don’t raise enough through the foreign buyer tax, there must be plenty of scope to make up for it though shrinking New Zealand’s bloated government bureaucracy.”
Deloitte chair Thomas Pippos added, “standing back the issue is how to ensure that the overall economy performs, and that Government expenditure is efficient and effective. The current debate looks to deflect from this for political gain.”
Some repondents suggested other mechanisms.
From Jarden’s Silvana Schenone: “the focus has been on the 15 per cent foreign buyer tax. Personally, I think this is not high enough (it’s 60 per cent in Singapore and working well!) and should have been higher.”
When it comes to Labour’s own $4 billion spending cuts programme, announced ahead of the pre-election economic and fiscal update — some 80 per cent of CEOs were sceptical Labour would manage debt down.
The cuts were slammed as too little, too late. “If they were really intentional about any of the above it would have all been addressed much earlier. Its is all vote buying and political positioning with very little authenticity.
“One only needs to look back on what they campaigned on last election and the one before to know that all of these are empty promises that they will not deliver on. They don’t know how to deliver and are un-capable of delivering. They obviously think the electorate is thick and can’t see through it. Why would anyone choose to believe a group of people who failed so spectacularly to deliver anything they said they would. Voting for Labour again would be like going back to an abusive partner!” said an Auckland-based CEO.
From a logistics boss: “Too little too late. I don’t trust they will deliver anything. I am still waiting for 1cm of the light rail to Mt Roskill Jacinda Ardern promised in her first campaign. Seriously no business case after 6 years.”
National has unveiled further election commitments. Some of these include:
· Immigration: An international graduates visa, a new global growth tech visa, a digital nomad visa (12-month visa to attract skilled mobile people).
· Transport: Invest $257 million over four years in electric vehicle (EV) chargers, end the clean car discount and “ute tax”.
CEOs were asked whether they had any comments on these or other policies released since the survey went into the field.
Here’s what they are saying:
· “Increasing skilled migration is smart, let’s hope it’s not a sacrificial lamb in coalition negotiations.
· ”Agree with ending the euphemistic “clean car” discount (since production of EVs is much more carbon intensive than petrol cars). But why does National commit to spend $257m of taxpayer’s cash on EV chargers? Why can’t the private sector set this up ?” — Craig Stobo
· “I’m not sure about the EV charger investment ... shouldn’t this be in hands of private sector?” — Silvana Schenone
Labour has unveiled further election commitments:
· Health: Free dental care for under-30s by 2026, raise breast cancer screening age from 69 to 74, introduce a national endometriosis action plan, make cervical screening free between ages 25-69.
· Energy: Rebates of up to $4000 on rooftop solar panels and battery installations, and an extra $20 million for community energy projects.
Here’s what the CEOs are saying:
· ”I think voters are just accepting a change in financial management is needed. It is very hard to vote for the people who created the problem. I think it is as simple as that. It is ludicrous that $53 billion was borrowed for one health initiative, Covid.” — Private equity boss
· ”Dentistry change is long overdue.” — Michael Lorimer
· ”Excellent initiatives that the Nats if in government should also adopt.” — Adrienne Young-Cooper
· ”I fully support more equitable health outcomes for Kiwis. I also support making green energy decisions more affordable/accessible for the average family household.” — Andrea Scown
Many business leaders rate the Opposition Finance Spokesperson highly.