Fran O'Sullivan: Goff goes for broke with no-tax proposal

Phil Goff's plan has a focus on innovation and R&D and upskilling the young unemployed. Photo / Paul Estcourt

Phil Goff's election-year "action plan" creates a vital point of difference between Labour and National.

His "tax-free zone" for Kiwis - essentially making the first $5000 they earn tax-free - is slick marketing.

But helping to pay for the new zone by putting the squeeze on tax dodgers looks a tad self-serving when the Labour leader has only recently been caught renting out his own Wellington flat (a private superannuation policy).

Perhaps Goff - and all those other keen investors on Labour's side - should make full disclosure of their own tax affairs and family trusts before getting hyperbolic about others.

And it's hard to see how Goff can credibly claim a Labour government would get the worrying net debt-servicing bill of $120 million weekly under control, when the very policies he wants to introduce will create yet another billion-dollar revenue gap which has to be funded from somewhere.

This is a classic money-go-round. But unfortunately not enough cash will come from Peter to pay what Goff and his team want to give Paul.

This speaks to the heart of Labour's credibility as an economic manager.

I suspect Goff - or more likely finance spokesman David Cunliffe - is betting on New Zealand finally posting a post-recession economic growth spurt in 2012 which will get the tax revenues flowing again. But Cunliffe will have to flesh out the numbers much more carefully as the election countdown gets underway.

Quite simply, this is not the time for either major party to dish out new tax breaks unless they can be fully funded, or swingeing expenditure cuts made elsewhere to offset them.

That said, there is much within the package that could and should be debated.

For instance, the focus on a clean-tech agenda is long overdue. This is something the business community tried to tempt the present Government to do to little avail. It is potentially a winner for an economy which needs to start backing winners. And even more to the point, it is modern and progressive.

The proposed strong national test to encourage high-quality inbound foreign investment is arguably rather similar to Australia's. But it's hard to see anyone getting too excited about overseas purchases of more than 25 per cent of monopoly infrastructure where the interest is worth $10 million or more. The threshold is too low.

A renewed focus on innovation and R&D is timely.

But the most valuable policy shift is to get some strong focus on skilling up our young unemployed so we don't create yet another lost generation. This is the kind of activist government we do need to see a bit more of.

A forensic scientist would make great sport of Goff's speech. It's all very well banging on about nasty property speculators who have leveraged up their assets to acquire even more when you are the leader of a party which baulked at implementing capital gains taxes during the bull market when asset values ramped way, way up.

Does Goff seriously believe that whacking the so-called speculators will induce them to invest in "productive assets" when there is no tax incentive here to offset the risk of doing so in this under-regulated market, or to incentivise them towards export markets.

Chafing at the escalating cost of food is essentially fruitless (excuse the pun) unless you are prepared to take steps so food giants like Fonterra don't exploit consumers in their home market. Food security is as much a concern for Kiwis as the Japanese or any other Asian consumer class our dairy giant hopes to target.

Building Kiwibank into a full service, full-scale domestic banking institution is obvious. But why not allow Kiwis to buy shares as well?

There is much that will have to be decoded well before the election. For instance, just what does Goff mean when he says the Reserve Bank would have to get more aggressive in tackling currency issues? Is Goff proposing that the Reserve Bank apply a fee to currency transactions? If not that, then what?

Keen students of politics find Goff's overall sloganeering vaguely familiar.

It was British Labour Prime Minister Gordon Brown, after all, who just last year shamelessly thrashed the "many not the few" theme that Goff has adopted as he unsuccessfully plumped for his party to win another turn in government.

Goff was quick to get onto that bandwagon - but like Brown he is by no means as adept at the rhetoric as Brown's predecessor Tony Blair, who used the slogan well before either of them.

Given John Key's admiration for all things David Cameron, you would surmise his speech writers are already looking at how the present British PM turned the tables on Brown.

Cameron used classic counterpoints: it was "the many who were victims of Labour's recession - the deepest since the Second World War"; "the many who had seen their taxes blown on pointless programmes and initiatives", and "the many who would be paying Labour's debts back for years to come".

But it is hard to credit that Goff - a highly ranked Cabinet minister in the very Labour Government which presided over the explosion of an economic bubble fuelled by cheap credit - would see the irony.

But if it works for Goff he won't worry about being ribbed on this score.

What he should worry about is when the international credit rating agencies get all huffy at the notion that Labour is prepared to blow the nation's accounts even further out to get back into power.