Just what can Labour do on regulation and tax?

Last week’s bagging of the Greens by business overlooks two facts: the Greens are not the government nor even a major influence on it and even Labour will not have a firm majority for its agenda.

Most discussion since the election has been on the makeup of the government’s support on crunch confidence-and-supply votes. But that says little about day-to-day support on policy and bills.

In the 2002-05 Parliament Helen Clark could count on the Greens to support most of her social agenda. Re-regulation of the workplace and keeping the tax take up had near-automatic majorities on the strength of the Greens’ nine seats.

And on policies at which the Greens jibbed — genetic modification, free trade, the foreshore and seabed — Clark could turn to Peter Dunne or, in the foreshore case, Winston Peters.

But if Clark’s government is to go full term in this Parliament it will have to pay more attention to middle New Zealand and to middle parties in Parliament. That has important implications for tax and regulation.

Start in the workplace. Labour went into the election proposing a raft of tighter laws, notably to increase protection for dependent contractors, legislate to ensure protection for vulnerable workers in succession contracts (after an adverse Employment Court decision negated that provision in the 2003 legislation), protect and make portable workers´┐Ż entitlements to leave and superannuation when they change jobs, strengthen protections for workers employed by temporary work agencies and labour hire companies and tighten the minimum code to prevent exploitation of children and ensure meal and refreshment breaks.

Jim Anderton will vote for all of that. So probably will the Greens. But that totals 57 votes. A majority is 61.

Since United Future is askance at the workplace re-regulation Labour has already done, no votes can be expected there. So Clark will have to persuade New Zealand First and/or the Maori party to abstain or vote for any new bills.

New Zealand First’s Peter Brown is not a hardline labour market deregulator. The Maori party is an unknown quantity. So both might be persuadable on some counts. But both have focused on a big rise in the minimum wage rather than strengthening the minimum code and New Zealand First’s official policy insists on “fairness, flexibility and neutrality between the parties”, which implies limits to regulation.

So, unlike in 1999 and 2002, Labour’s workplace policy is not a blueprint.

Widen the regulatory focus: while Labour has generally left light-handed generic regulation in place, whenever it has struck a problem — telecommunications, electricity, leaky homes — it has reached for the rulebook.

This is not United Future’s instinct. Nor are New Zealand First and the Maori party automatic regulators.

Next, the carbon tax, due to come in in 2007. Is there a majority?

Again, count Anderton and the Greens in. But not United Future. New Zealand First’s policy is to “ensure implementation policies for the Kyoto protocol are in harmony with those of our major trading partners” — which seems to rule out a carbon tax. And the Maori party?

Of course, tax is not just any old policy. It is constitutionally touchy.

New Zealand First’s position before the election on the National party’s grand tax plan illustrates that point. At least according to the party’s officials, if New Zealand First had agreed confidence-and-supply with National, it would have voted for its tax cuts, regardless of its belief expressed during the campaign that they were unaffordable. Tax rates are a confidence issue.

So Labour could in theory crunch any party committed to confidence and supply — as New Zealand First might be — to vote through the carbon tax.

But to drive it through in that way is not a recipe for harmony and helpfulness over the longer term. Confidence-and-supply agreements last only as long as support parties want them to.

Turn the question around. If Labour has heard nothing else from the clamour of the campaign, it must have heard a desire for tax cuts.

It can say, on the basis of the election result, that that desire was tempered among many voters by doubts about National’s carry-through and worries about public service cuts and debt. But it can’t conclude that tax is off the table.

Even though there will not be the fiscal room for National to offer such big cuts next election, voters may well be prepared to throw out a Labour-led government which persists in its pre-election deafness on tax.

Moreover, there is now a majority in Parliament for lower income tax — and that majority includes the Maori party if some of its campaign rhetoric is to be believed. Michael Cullen in fact acknowledged the principle, if not the substance, of the majority’s position with his miserly 2008 adjustment of the thresholds in the Budget.

The fact that there is a majority for lower tax doesn’t automatically translate into legislation. The government has the power to kill a bill or an amendment dead if it involves spending more or losing revenue. And it can demand confidence-and-supply support parties line up on its side.

But, again, those are last-resort measures and not recipes for stability. So an intriguing question will be whether Cullen himself moves on tax by, say, bringing the threshold indexation forward to next April, returning taxpayers to their 2003 positions.

Fiscally costly? Yes. But that is government, MMP-style.