UK Prime Minister Sir Keir Starmer has shown New Zealand Labour how to get elected and then tax business and wealth.
Instead of a detailed manifesto, British Labour had several missions, the principal one being to fix the National Health Service.
Starmer pledged that within five years Britain would have the fastest growth rate of the G7 countries. Labour promised not to raise taxes on “working people” and pledged to be fiscally responsible.
It won Labour a massive election victory, though the incompetent Tories probably did more to ensure Labour’s win.
When in office, UK Labour claimed to be horrified by the existence of an undeclared enormous “fiscal black hole”.
There are always fiscal black holes. Policies Governments have announced, and scandals acknowledged, but not budgeted for. Britain has the infected blood scandal and the wrongfully prosecuted Post Masters.
The promise to be fiscally prudent provided UK Labour with an excuse to tax businesses and the wealthy.
The biggest increase is in Britain’s social security tax that businesses pay on every employee’s wages.
The wealthy are taxed by increasing inheritance and capital gains taxes.
Foreign residents will lose their tax exemption on foreign earnings.
Then there are gestures, taxes on private jets and private schools, and a tax decrease of a penny on a pint of beer.
The money is going mainly to hospitals and schools. Increased spending on affordable housing, transport, green energy and to assist Ukraine, an increase in defence spending.
The UK Labour Party has presented NZ Labour with a blueprint to win the next election and then tax the “rich”.
The parallels are remarkable.
In Britain, the state of the National Health System was the number one issue. It will be here, too. Like Britain, we have many schools needing rebuilding. Last winter’s electric power price shock means promising plenty of green energy will be appealing.
Increased global tensions have caused Australia to increase its defence spending. Our only treaty ally, Australia, will insist we follow suit.
Labour could copy and paste the UK budget.
The next Government will inherit a fiscal black hole. Nicola Willis’ Budget was not balanced. There is a $200b infrastructure deficit. As more taxpayers retire the hole in the Budget is going to grow.
NZ Labour has been shown politically how to massively increase taxes. Promise not to tax “working people” while claiming anyone who owns assets is not a working person. Then use the promise to be fiscally responsible as an excuse for a huge tax increase.
We do not have a social security tax, but a New Zealand Government could greatly increase the employer KiwiSaver contribution.
We do not have either inheritance or capital gains taxes. Berl estimates baby boomers are going to transfer $1.11 trillion. A future Government will be tempted to take a big slice with inheritance, capital gains and gift taxes.
We already tax New Zealand residents on their worldwide income. Britain is the world’s largest tax haven. The reason Russian oligarchs, Arab oil sheikhs and many New Zealand rich listers live in London is they only pay taxes on money they earn in Britain.
New Zealand politicians copy overseas politicians far more than they admit.
Copying the UK Labour Party’s budget is very doable.
Of course, economically it will be a disaster in the UK and would be here.
The world’s richest are not going to stay in the UK to be taxed.
The independent office of the budget has downgraded its forecasts for UK economic growth. Interest rates have increased. It is impossible for the state to take an increased share of the nation’s wealth and have the private sector grow faster.
Free enterprise is called capitalism for a reason. Taxing capital is eating the economy’s seed stock. The asset taxes will destroy many family businesses and farms.
Public services depend not on taxes but on the country’s wealth creation. “Working people” in Britain will ultimately lose the most.
The biggest failure will be in health. Both countries have an inefficient, centralised, Soviet health system. It will be like pouring water over sand.
Ask Andrew Little. As health minister, he poured $2b into mental health. There was no improvement. Even the minister admitted to being “extraordinarily” frustrated.
Tax and spend only worked when every year there were more taxpayers. Now it is broken.
The solution is Singapore’s saving-based approach but that is politically challenging.
The easy option of copying UK Labour will prove irresistible.
