Hayden Munro: Big tax cuts vs social services likely to dominate election

Simon Bridges learned that there has to be room in the Budget for social spending. Photo / Mark Mitchell

OPINION:

This week's revelation that Simon Bridges opposed big chunks of National's tax plan because he feared it would make the party look reckless is vindication for critics of the policy.

The news came in journalist Andrea Vance's new book, Blue Blood, examining the National Party's internal divisions over the last few years.

In it, both Bridges and John Key's former Health Minister Jonathan Coleman reflect on their belief that persistent underfunding of social services was a problem in the second half of the previous National government.

Coleman tells of battling behind the scenes against the underfunding but never getting the hundreds of millions of dollars extra he believed the health system needed to keep up with demand.

The reason given for this refusal to fund the sector what it needed was simple: senior politicians wanted the money for tax cuts and paying down debt faster.

For Bridges, it must have felt like history was repeating itself this year when Christopher Luxon proposed a record amount of tax cuts, fully half of which was targeted at the already wealthy and which left no room in the Budget for the social spending that Bridges had learned was needed.

That's not to say the policy was all bad. Half of it – lifting tax brackets in response to inflation, was good policy and even better politics. It had been a vote-winner when Bridges announced it in 2019 as leader and seemed even more timely in the middle of an inflation spike.

The problem was the other half of the policy – abolishing the top tax rate for those earning $180,000 or more a year and restoring tax advantages for those who own multiple properties. Those elements pushed the price tag for the plan north of $3 billion a year, every year.

For Bridges, who had hoped to bring his considerable brain power to the job of being a reforming finance minister - applying a modern centre-right philosophy to tackle New Zealand's entrenched social problems - the tax debate appears to have confirmed his view that this wasn't a project the modern National Party was interested in.

Bridges would have every right to feel vindicated – National's MPs very rarely mention the tax cuts for the wealthy policy anymore. Their market research is likely showing the plan goes over poorly with the middle-income voters who decide elections. Polling from Talbot Mills for example shows that just three out of 10 New Zealanders support Luxon's proposal.

Now, no one begrudges people doing well and being successful. And there are plenty of people who own multiple properties who aren't professional landlords – they might have inherited a second home from a parent, for example.

The question is, if we all want to have good roads, schools and hospitals shouldn't those who can most afford it kick in a bit more to pay for them than people who are living payday to payday?

After all, if you've worked really hard and got a good job, paying an extra six cents in the dollar on income over $180,000 isn't going to break the bank or stop you from living the good life. But it does mean there's more money available for the social investments the country needs.

This question of big tax cuts versus the need to protect social services is likely to dominate the election next year.

There was clearly a philosophical difference between Bridges and Luxon on this question - but I wonder if there wasn't also a clash of political instincts.

Bridges, for all the chaos of his time as leader and his missteps on Covid-19, usually had a good sense of how issues would play with the public - it's what made him such a good attack dog.

Luxon, on the other hand, seems to have been unable to imagine how people on middle incomes would react to a plan that gives someone on his salary an extra $18,000 a year while giving someone making $40,000 a year just two dollars extra a week.

That skill - the ability to put yourself in other people's shoes - is hard to teach and vital for sustained political success.

Luxon's wrong call on tax is a reminder that Bridges took more than just the hard-earned lessons of National's last time in office with him when he left.

Hayden Munro was the campaign manager for Labour's successful 2020 election win. He now works in corporate PR for Wellington-based firm Capital Communications and Government Relations.