Chris Hipkins holds a post-Cabinet press conference. Video / Mark Mitchell
OPINION:
In 1959, Sir James Fletcher wrote to the leader of the National Party, Keith Holyoake, warning that unless National hardened up on its economic policy by lowering taxes, import controls and boosting migration, the country faced certain ruin.
He had a point.
Holyoake was what we’d call a “wet”,but the letter, coming from Fletcher, was a bit rich.
Fletcher had, perhaps more than any other New Zealander, done very well out of the left-wing Labour policies Holyoake was likely to retain.
Labour’s first prime minister, Michael Joseph Savage, had promised a drastic home-building scheme but feared the Public Works Department “could not build a fowlhouse, let alone a £5 million housing scheme”.
Fletcher had written to Savage, the day after his election, offering to assist with Labour’s state housing programme. An enduring partnership was born, which saw Fletcher expand massively and the state ultimately guarantee Fletcher’s overdraft.
There’s a lesson in this for the current Labour Government.
Sometimes there’s really nothing you can do to appease your natural enemies - not even gifting them one of the juiciest construction contracts in the country’s history. The clue is in the name: capital has no love for Labour.
Prime Minister Chris Hipkins will be hoping that Wednesday’s mammoth policy shake-up, appeasing businesses by scrapping the costly Social Unemployment Insurance scheme which would have hit them with a 1.39 per cent tax on wages and salaries paid to employees (along with a 1.39 per cent tax on the employees themselves).
The big question is whether that will be enough to bring voters Labour has lost back onside.
Labour must surely know it’s not likely to win back business. Labour can’t offer the tax cuts and minimalist regulation of National. Overtures to business are probably more in the interest of maintaining cordial relations than a serious attempt to win votes. Businesses will bank their wage subsidies and try to make sure it’s someone else’s taxes that pay down the debt that funded them.
Scrapping the insurance scheme probably will help with Labour’s election chances.
The other two policies binned or kicked to touch on Wednesday are tokenistic. The TVNZ-RNZ media merger had no real champion apart from its minister and faced significant opposition, including from within the organisations set to be merged.
Ditching it was purely political. The merger was unlikely to sway votes for or against.
Likewise hate speech reforms. It’s a sad fact of public life that a highly-charged election year is not an environment conducive to the sober discussion of the finer points of where people’s free speech rights begin and end.
Those reforms have been kicked to the Law Commission. The official reason is that it’s hoped the Commission might find a way of reforming those laws in a way everyone agrees with.
In reality, those who don’t support the idea of adjusting hate speech laws will continue to do so. This solution is simply an elegant way of taking the reforms off the agenda during a “bread and butter” election year.
The Government is unlikely to suffer greatly from this.
The changes are purely about public perception. Giving the Government the space to spend more time talking about things it wants to talk about and less time talking about things it doesn’t.
Hipkins’ Government deck clearing raised three problems he must move swiftly to address.
The RNZ-TVNZ merger is dead. Image / RNZ
Wednesday’s changes were not the only policies the Government intends to refocus into oblivion. Hipkins said they were the “most significant”, but other policies are still up for debate.
This places almost all of the Government’s policy agenda in limbo until Hipkins is able to draw a line under the refocusing and move forward. This needs to happen sooner rather than later. It’s not tenable for there to be question marks hovering over everything from light rail, to the fuel tax review, to the Lake Onslow hydro scheme, to the future of local government review.
This is especially true of infrastructure projects, where the sector has long complained of the stop-start uncertainty of New Zealand’s short electoral cycle. Uncertainty hanging over these policies could be both toxic and costly.
At some point, the Government must shift the conversation from what it will not do to what it will do.
The second issue is tax. The minimum wage increase, which will reassure Labour voters that this is still a left-wing government, pushes those earning the minimum wage full time perilously close to the 30 per cent tax threshold, meaning if they take on extra work a sliver of their income will be taxed at 30 per cent.
Bracket creep is slowly flattening the tax system and making a mockery of progressive income tax rates. Labour doesn’t need to cut taxes for high earners, but eventually it will need to address the fact that people on low incomes are paying too much in tax.
The third problem is that voters may not believe that these policies are truly dead.
This is partly true; only the TVNZ-RNZ merger has been completely killed, the others simply have one foot in the proverbial grave.
If Hipkins isn’t careful, the election could turn into a referendum on these half-binned policies. If the Government is convinced they are truly harmful to its electoral prospects, it may be forced to bin them entirely.
