Colin James: Travellers on the same road - but with different maps

Workplace productivity is the key phrase on one side, tax cuts and deregulation is on the other. The 2005 election battle lines on policy for business are drawn.

They represent different beliefs about the path to prosperity. They promise different operating environments for business.

For all that, much is now agreed between National and Labour - free trade, budget surpluses, an independent monetary policy to contain inflation, a relatively clean tax system, pre-funding national superannuation, four weeks of holiday.

There is also agreement that the Government has some role assisting business, although there is still wide disagreement over what and by how much.

National's Max Bradford was getting into business assistance in 1999; Jim Anderton has taken it far further, and with less rigorous oversight, than Bradford would have done.

Also in 1999, Bradford initiated a programme to boost and refocus research and development, a theme which Labour has developed into a strategy (although underfunded).

So there is a base agreement there - though, again, also variations on how and what. National's policy is due for release in February or March and will argue that, in biotechnology, Labour has taken far too regulatory an approach and that is driving researchers overseas.

Largely uncontentious also is Labour's recognition of the need for a programme to build or rebuild the infrastructure, particularly in energy and transport, although again National has different perspectives.

Then there is an issue that was not on any party's horizon (except perhaps the Greens) in 1999 - the need to develop new ways of allocating and managing water rights.

That, like infrastructure, is under Deputy Prime Minister Michael Cullen's oversight: some papers have been developed and there is work behind the scenes but no policy is expected before the election.

The issue is to find the right mix of administrative allocation and tradeable rights. A National-led government would likely be bolder than a Labour-led one on tradeable rights.

Overall, the differences are narrowing, election by election. Labour accepted the great bulk of the 1980s and 1990s reforms, despite its rhetoric about "failed policies".

National has accepted some of Labour's post-1999 "corrections", notably the Cullen super fund, four weeks' holiday and the 2000 labour legislation. And new issues are emerging.

Labour-led governments since 1999 have made their biggest breaks with pre-2000 policy in four areas:

* Tax: they lifted the top personal tax rate, allowed fiscal drag upwards through the $38,000 and $60,000 thresholds and imposed a range of higher excise taxes and Government charges.

* The environment: they signed the Kyoto protocol, banned logging, expanded marine reserves and held fast to the Resource Management Act, which National was on the verge of reforming in 1999.

* Local body law: they have given more scope for action to councils.

* Re-regulation: this has been principally in the workplace (labour law, occupational safety and health, holidays and parental leave), telecommunications and energy and intellectual property.

On all of those, a National-led government would revert at least partway towards the pre-2000 position.

National has yet to give details of its tax policy - as with almost all of its policy, it is "work in progress".

But, in essence, the policy is geared to slowly reducing personal and company income tax while maintaining budget surpluses net of financing the Cullen fund at the present 2 per cent-of-GDP rate.

One unknown is what it would do with the tangle of tax credits and rebates in the Government's "working for families" package, which it has heavily criticised but not yet committed itself to junk.

If it keeps that package or much of it, its room for manoeuvre would be limited because the Treasury's projections show the fiscal cash position going into deficit in 2005-06 and staying there.

One option, which leader Don Brash has floated, is to finance more of the infrastructure spending through loans and private sector investment than Labour is prepared to do, thereby leaving some room for cuts.

Cullen has not absolutely ruled out company and personal tax cuts, although he has vigorously presented the case against and worries that cuts become irreversible and, when the economy turns down, drive spending cuts. So rate cuts are unlikely.

His tax programme is built around simplification and "things that affect the cost of money" (capital) to companies, such as depreciation rates.

Generally, Labour feels it needs higher taxes to pay for what it thinks people want from the government.

National thinks Labour has been wasteful, has bloated the government and does not have rigorous enough accountability for money spent. Expect state services staff cuts with a change of government.

On the second item, the environment, National would see through the country's commitment to the first phase of the Kyoto protocol, to 2012, but not the second phase and without the carbon tax Labour plans for 2007 (the level of which it will announce around Budget time this year).

Generally, National said it would tilt the balance in environment policy more towards development and that would be the driver in its Resource Management Act rewrite.

It would keep that act, despite some of Brash's stronger statements, but would make more use of national standards, would deal more harshly with vexatious appeals, would replace references to Maori cultural and spiritual values with references to all cultural and spiritual values, stop councils delaying proceedings and introduce tradeable resource rights.

On local body policy, Brash has said National would redefine councils' role to focus on infrastructure and efficient services - so no more "social welfare" such as subsidised housing) - reduce planning law compliance costs, remove Treaty of Waitangi requirements, improve financial reporting, require rates "to be determined on the basis of who gets the benefit of the services", rewrite the Local Electoral Act to bring local body elections under a consistent voting system and consider giving the Electoral Commission the job of managing the poll.

Workplace law is the sharpest regulatory point of difference. Essentially, National sees the central issue as efficiency based on holding costs while Labour increasingly sees it as lifting real wages and salaries in pursuit of a high-income economy.

National has said it would broadly keep the 2000 Employment Relations Act, the 2002 workplace safety law and four weeks' holiday (with an opt out), but amend unfair dismissal laws and suspend them for a probationary period for new employees, junk most of this year's amendments to the 2000 act, make the Occupational Safety and Health Service more employer-friendly - Labour Secretary James Buwalda is trying to do that - and soften the restrictive public holiday and overtime penal pay provisions.

Labour Minister Paul Swain has said that this year's bout of legislation was the last in the post-1999 workplace re-regulation programme.

 

It is hard to see workplace productivity enhancement as controversial, although National has said little about it.

Former Business New Zealand chief executive Simon Carlaw was the prime mover in getting his organisation, the Council of Trade Unions and the Government together to work on it, and his successor, Phil O'Reilly, has endorsed the emerging programme.

In office, National would be bound to back it, whatever changes it made to workplace regulation.

Where National would baulk, at least initially, is at Labour's linking of the workplace productivity drive with "work-life balance".

This can be seen as a women's rights initiative, especially since Women's Affairs Minister Ruth Dyson, on the left of the Cabinet, is in charge of it.

Labour will try to present it as serving a productivity drive by drawing in and retaining more women in the workforce.

This raises a bigger question which both main parties have approached only piecemeal - increasing the workforce. Labour is still focusing principally on skilling and immigration.

Australia is debating a population policy and its Government is paying a cash bonus for every newborn Australian.

New Zealand First has talked about population policy but only in the context of limiting immigration.

Energy will be a point of contention in the election and beyond. It has two main dimensions, security of supply and efficiency and conservation.

The Government, despite its green credentials and Green supporters, has not pushed efficiency and conservation hard. Outgoing Energy Minister Pete Hodgson was planning to increase the pace this year. Incoming minister Trevor Mallard is still coming to grips with the portfolio and wouldn't comment.

Security of supply is part of a more general concern with infrastructure. National's policy approach in mid-2004 was to change the law to give electricity lines companies the ability to generate more power than regulations now allow, encouraging more investment in energy infrastructure.

It would adjust the Resource Management Act to ensure new generation capacity isn't held up by frivolous objectors, and give transparency in billing for electricity consumers.

Long-term saving is likely to emerge during the year as an issue as the balance of payments deficit heads into the stratosphere and highlights how much New Zealand depends on other countries' savings for its investment and consumption.

Negative household saving rates and low holdings of financial assets are not a recipe for strong sustainable growth, still less for personal security in old age.

They also work against Cullen's attempts to lower the cost of capital.

Until now, the Treasury has been lukewarm on the need or value of Government intervention to boost savings and Cullen has been similarly dubious.

But he is likely to implement Peter Harris' suggested tax-based long-term savings plan this year in some form, though he has yet to resolve some major details, including whether there should be a sweetener and/or whether there should be an option to withdraw.

He mused on other initiatives to boost savings to a press conference in December, but refuses to indicate what they might be or even whether he would actually follow through.

As Commerce Minister until the election, Hodgson has been left a considerable programme of work by his predecessor, Margaret Wilson.

Her Securities Legislation Bill is working its way through Parliament. An Insolvency Bill is due in March - probably initially without provisions on who can be a liquidator, to be finalised by an amendment at the committee stage.

Other projects are: insurance markets regulation; a wider review of the Securities Act, to be started this year, focused on initial public offerings, supervision and regulation of fund managers and responses to the recently established financial intermediaries taskforce; reviews of credit unions and special partnerships, which has started.

This programme is technical and, thus, uncontroversial by comparison with the changes in the first five years. More controversial is intellectual property law reform, in Judith Tizard's hands. National opposes special deference to Maori.

Tizard's focus is on digital IP, particularly downloading music off CDs on to computers and iPods, a narrower definition of patents to stop catchall patents, and protection of "traditional knowledge", meaning Maori knowledge, including of native plant uses, which is the subject of a long running claim before the Waitangi Tribunal.

Wilson also injected more urgency into transtasman regulatory alignment. This includes mutual recognition of securities offerings and company registration and regulation of financial services. She was clear: New Zealand does not want Australia's prescriptive approach.

Elsewhere, as far as the Government is concerned, regulatory initiatives are limited.

Energy and telecommunications are settled for now, with special commissioners - new Communications Minister David Cunliffe is focusing on getting broadband use widened so that it is "mainstream" and implementing the digital strategy.

One regulatory shift he is flagging is in allocating radio frequencies. The secondary market has been thin, and national channels operate on multiple frequencies, which annoys listeners.

As associate SOE minister, Cunliffe is working on a revised governance protocol and continuing his review of SOEs' capital strategies and scope. He has done "six or eight".

Aside from Wilson's two bills, there is not a lot of business legislation on the parliamentary order paper. Bills modernising the oversight of lawyers and conveyancers and architects are in the final stages.

In transport, there is the Railways Bill, which introduces a tough safety regime, and the Land Transport Amendment Bill dealing with commercial operators' licensing and driver standards and oversight.

Cullen introduced his Overseas Investment Bill, tightening the regulatory arrangements but loosening some of the criteria, this month.

Only five other bills of substance are on the order paper or before committees, the lightest offering in five years.

This portends a potentially important shift in focus if Labour leads the government after the election.

While it would still probably overreact to "crises", as it did to the leaky homes saga (by way of a sledgehammer Building Bill and a new department) and to the electricity shortages (by way of an interventionist regulatory regime), regulation would not be central to its programme.

That is inherent in the central position workplace productivity occupies in its thinking.

Recognition that lifting productivity growth requires more investment has led Cullen to accelerate depreciation rates for short-lived assets, notably computers. And this month, he highlighted research and development and assistance for "enterprising businesses" as priorities for more spending.

But what of the smaller parties, some of which will have an influence after the election.

The Greens will work only with Labour. Their four priorities for post-election negotiation are: genetic modification, in effect to perpetuate the moratorium since there will have been no approved releases come election time; safe food, a local regime or at least the capacity for New Zealand to make exceptions to the joint transtasman food safety and therapeutics regimes; energy, with an accent on conservation and efficiency and rejection of coal-fired electricity; transport, with an accent on alternatives to roads.

United Future favours tax cuts- with the emphasis on company tax, income-splitting for couples and/or a lift in the threshold - which it will use as a bargaining chip if it is crucial to Labour's majority post-election. Its general economic stance is relatively close to National's.

United Future is also the driver in the select committee review of the constitution, and will wave the interim pre-election report at voters as evidence it can play a nation-building role.

Business might want to take an interest if constitutional change becomes an issue in the next term.

So far National has shown no interest in a constitutional innovation suggested by the Business Roundtable which could be of value to business - entrenched and/or referendum-based limits on taxing and spending.

Act will work only with National and would push for lower taxes, extensive deregulation and privatisation of most remaining state-owned businesses.

New Zealand First's role after the election is likely to be as a free agent, which could be important if neither major party is able to form a committed majority. Generally, Winston Peters' party favours lower taxes and a less regulated workplace than Labour, but otherwise it is probably closer to Labour than National.

Where it differs from both is in its suspicion of free trade, foreign ownership and immigration.

The Maori party's influence, like its likely number of seats, can only be guessed at - except that on most issues it will line up with Labour.