Editorial: Labour needs to prove its credibility

Phil Goff. Photo / Getty Images

On the issue of economic management, the Labour Party has two major problems.

The first is that National is not being widely criticised for its handling of the economy. Half of those surveyed in a poll this week attributed credit downgrades by two rating agencies to international turmoil and the Christchurch earthquakes, not Beehive ineptitude. Additionally, the global financial crisis has made people particularly debt averse. For those reasons, John Key scored strongly in Wednesday night's leaders' debate in Christchurch when he said Labour had to find at least $14 billion to pay for its spending promises. For the same reason, Labour's fiscal plan will come in for detailed attention when it is released today.

This is an added degree of scrutiny that Phil Goff did not need to invite. It has been obvious for several days that National intended to focus on Labour's economic credibility. It has been demanding answers on how Mr Goff intended to bring the government books back into surplus in 2014-15, the same date as National, while planning to spend more and having no coherent revenue stream to pay for it.

Labour's two big revenue-gathering projects, the taxing of capital gains and a raising of the NZ Super entitlement age to 67, would not hugely benefit the government coffers before the start of the next decade. Finance Minister Bill English was, therefore, merely providing a taste of things to come when he said on Monday that both were just an effort to show that in 15 years' time Labour could "claw back the cost of many billions of promises and extra debt they'll run up in the next three or four years".

Mr Goff did not fill the information void. And when the Prime Minister returned to the attack in Christchurch, he could only prevaricate. Labour would issue a spreadsheet detailing how Labour would pay for its policies, he said lamely. The audience reaction was enough to make even Mr Goff concede that Mr Key had had the edge on him on economic management issues. It was also sufficient to allow National to continue to trumpet that either another tax - on those on high incomes - or more borrowing would be the only way of funding the $14 billion hole arising mainly from Labour's pledge to make the first $5000 of income tax-free and to take GST off fruit and vegetables.

Mr Goff said yesterday that the gap would be closed by more borrowing, but not much. "Over the next three years, the Government has projected it will be borrowing about $13 billion. Under our projections, we'd probably be borrowing about $15.6 billion. But we'd keep our assets," he said. The last reference was an attempt to steer the campaign back to National's planned part-privatisation of four state energy companies and a reduction in its Air New Zealand stake, for which it expects to receive $5 billion to $7 billion. But it was also an acknowledgment this had ceased to be the major focus. That is now Labour's credibility on economic matters.

The fiscal plan will, therefore, have to be particularly convincing. It will be closely scrutinised, for example, for optimistic projections of economic growth. If National's own programme bears that very trait, Labour, having brought this examination on itself, can hardly quibble. There will also have to be more specifics than Mr Goff has provided in his vague references to farmer inclusion in the emissions trading scheme and the funding of the so-called holiday highway.

The latest DigiPoll survey, released yesterday, leaves no doubt about Labour's plight. It has gone backwards after the first week of the campaign, slipping to just 29.1 per cent of the party vote. Further battering of its credibility would surely go a long way to confirming its supporters' worst polling-day fears.