OPINION:
The Government's U-turn on foreign seasonal workers has come too late to help it avoid political damage, writes Jane Clifton.
How many handbrake turns can you get away with before your car gets sent to the crusher?
The rubber was still emitting smoke at the Beehive this week, after a massive policy reversal on seasonal workers, when the latest opinion poll dropped. It projected that the great car of state was highly likely to be confiscated. National and Act could very well be seizing the car keys and re-pimping the ride next election.
![Prime Minister Jacinda Ardern at the Auckland Film Studios in Henderson on October 4. Photo / Dean Purcell](https://www.nzherald.co.nz/resizer/v2/22VFS74CCM4D56ERWUG47YKHDU.jpg?auth=9711fc0facd032710ad9eb4b4d7b3a3a44aaca6c3557214c90f964473a5ac188&width=16&height=11&quality=70&smart=true)
This suggests the Government's increasing penchant for butt-saving U-turns is now officially in vain. It has prudently dialled back a number of its dearest ambitions to preserve voter support, the capital gains cancellation its biggest sacrifice.
The change of direction on importing seasonal workers, coming after years of warnings to employers to stop depending on cheap foreign labour, was in a different and more honourable category, first elucidated by John Maynard Keynes. When the facts change, as the economist said, it's smart to change one's mind. The prospect of businesses failing and crops rotting for want of local workers is not, the Government has now accepted, just greedy employers bleating. The labour shortage is global and apt to hit this small, distant economy harder than most. The inconvenient reality has finally trumped Labour's ideological allergy to cheap labour imports.
It will hurt the party grievously to park the underpinning of its entire workforce policy. But the bigger pain may be that the U-turn is too late to help it avoid political damage.
!["The prospect of businesses failing and crops rotting for want of local workers is not, the Government has now accepted, just greedy employers bleating." Photo / Paul Taylor](https://www.nzherald.co.nz/resizer/v2/NQS6GQWBYLHBLIGTE3X44SZT4E.jpg?auth=01852da3087066d8de7614f7cde808da2fb64cf3d041cec41d7398d86d86c49e&width=16&height=11&quality=70&smart=true)
The New Zealand Herald's annual Mood of the Boardroom survey of business leaders disclosed an unprecedentedly negative view of the Government's stewardship, well entrenched. A chief complaint was uncertainty. The Government appears not to get points for backing off controversial reforms. By the time it retreats, the disgruntlement and uncertainty caused by the initial intention have set solid.
The Beehive's Flip-Flop-O-Meter is now probing Finance Minister Grant Robertson's labour of love, the social insurance scheme. This won't be implemented until late next term, and has had the curious distinction of being guardedly supported by business, while the unions are only lukewarm. If adopted, it would dock 1.4 per cent more from pay packets from about 2025, to give the jobless much more generous income support. Unsurprisingly, no one has marched in the streets over it.
What has suddenly put its pot on now is the surprise re-emergence of tax rates as a global issue.
Persistent inflation, labour and supply shortages, a widespread energy crisis and rollercoasting currency markets have made governments everywhere feel dangerously impotent. When politicians get this desperate, they suddenly remember that they can still flex their fiscal biceps.
Since trade pacts have increasingly made subsidies and other protectionist policies a no-no, tax is the only big, quick-acting tool left. It was once thought the only way was up, but countries that tried fiscal austerity to ease the global financial crisis of 2008-09 lived to regret it. Making everyone poorer, even while assuring them it was for their own good, turned out not to be socially – or electorally – sustainable.
In Britain, the Conservative government only survived that experiment because its Labour opposition was in chronic disarray.
Tax-cut bonanza
Now, everyone is watching Britain again – though this time more as one might watch a harness-free tightrope walker crossing an Amazon alligator habitat. Peeping between our fingers with hearts racing, we're witnessing the biggest tax-cut bonanza in several decades. Flung into the snarling teeth of monster inflation – up to 18 per cent – last week's mini-budget will either blow up in Britain's face or rocket-fuel it to prosperity.
New Conservative Prime Minister Liz Truss has gone back to the Thatcher-Reagan-era growth menu, determined that putting more of people's earnings back in their pockets will bulldoze Britain through its cost-of-living crisis and back into strong growth. It's head-clutchingly risky at a time of vaulting debt-servicing costs and with geopolitics teetering on Vladimir Putin's testosterone levels. The tax cuts' companion-piece is also scary: sweeping deregulation, most controversially, lifting bans on development in the equivalent of our conservation-estate lands.
![British Prime Minister Liz Truss at the Conservative Party annual conference in Birmingham on October 2. Photo / AP](https://www.nzherald.co.nz/resizer/v2/PY7W4FJOFDURY6RKK4H7IVBCQE.jpg?auth=e19911593cf5684d60a0a5f36bd73a3277022d880faf8b646f62a6c053c3df06&width=16&height=11&quality=70&smart=true)
This is the economic equivalent of a soap opera cliffhanger. Appropriately enough, the last time this sort of economics was considered orthodox, people were still excited about who had shot JR, the tax-dodging billionaire anti-hero of 80s TV series Dallas.
Today's spectacle is more like cartoon viewing. The pound went over a cliff faster than Wile E Coyote and his anvil after the mini-budget's announcement, and Labour leader Sir Keir Starmer whisked past Truss in the polls with a Roadrunner-esque chortle. Debate between economists is distinctly Tom and Jerry. Some say the expected downsides – debt and a long hiding for the currency – will be worth it; others fear any lift will be consumer- rather than productivity-driven, causing more harm than good.
Cold feet
Truss' gamble already appears to have restored some lead to National's pencil, with its new campaign against what it wants people to call the Jobs Tax: the proposed job insurance scheme.
Till now, it has scarcely bothered about the proposal, which on the "jam tomorrow" scale is merely a wee bit less jam, the day after the day after tomorrow. With employers supporting it, there seemed barely a dog in the hunt.
But with tax rates creeping back on to the agenda, Business New Zealand has developed cold feet, and National sees a catchy electoral wedge.
Tax rates have been a diminishing voter concern for the past several elections, with people considerably more exercised about housing affordability, stagnant pay, climate change, health and education.
Accordingly, both main parties had until recently set their feet in semantical concrete on the issue. The Government vowed "no new taxes" this term, and National has promised only to restore tax-bracket relativities, after abandoning an earlier tax-cuts pledge for exactly the reasons Truss has been lambasted for making them.
If Britain looks even faintly like succeeding, suddenly tax cuts will be the new black.
As with our other old friend, inflation, however, we may have a peculiar skills shortage: people who still remember how to speak 1980s and comprehend what's meant by trickle-down, pump-priming, deregulated supply-side economics and the Laffer Curve. At this rate, it's not surprising that shoulder pads have already made a comeback. Duran Duran and Jane Fonda workouts can't be far away.