Is the budget fair? The National party says emphatically it is. The Labour party says emphatically it is not. How can they both be so sure? Because inequality is not what inequality was.
Individuals on higher incomes get much more each from Bill English’s tax cuts than individuals on lower incomes. That’s not fair, says Labour.
Welcome to the Key-English tax world. The changes are the biggest since 1986 and bigger than analysts expected. But Bill English himself told the media they will change incentives “at the margin”.
This is the tension at the heart of the budget. Will New Zealanders give up their decade and a-half’s love affair with debt and houses and instead channel most of their tax savings into actual savings and actual productive investment?
China’s climate change ambassador, Yu Qingtai, is visiting right now. Two weeks back Climate Change Negotiations Minister Tim Groser was in Beijing, personally invited to a select meeting of a handful of large developing-economy countries. What’s going on?
What’s going are two sea-changes. In that context Thursday’s budget will be mainly a pre-sea-change affair.
John Key plausibly excuses the lack of strategic impetus in Bill English’s first budget last year on the grounds that he had to fight the recession. Now Key claims to be plugging the huge hole English left in that budget: innovation.
Key has discovered the economic commonplace that it is innovation, not bulk, that durably drives up real incomes.
There is an assumption behind the government’s preparations for next week’s budget: that business as usual is on the way back. That is a risky assumption.
Sure, the unemployment rate fell. But the survey is “volatile” and unemployment benefit numbers fell only slightly. Far more important was the turmoil on the world’s “debt” markets.
This is John Key’s big month. The budget on Thursday week is the pivot of his government’s first term, a major test of his “ambition for New Zealand”. But what is his ambition?
His government is busy. The flow of legislative and regulatory changes designed to make doing business easier and more profitable and enhance sectoral opportunities has momentum. National parks are to be prospected and explored.
It is inappropriate for any government, being composed of only some political parties, to offer a political journalist an honour (however disinterestedly intended) and it is improper for a political journalist to accept such an offer.
The big business lobby against mixed-member proportional representation (MMP) is backing John Key’s preferred alternative, supplementary member (SM), in Simon Power’s cumbersome double referendum on the voting system. That effectively inters the pre-1996 first-past-the-post (FPP) system, the one the lobby really prefers.
Trust is a vital commodity in politics. This is not trust as honesty. It is trust that the politician will act effectively and, broadly, in voters’ interests. Losing that trust loses office. A report this morning highlights a rising trust issue for politicians.
Phil Heatley showed us what political trust is. He spent small sums of taxpayers’ money on personal items. It was a lapse of personal probity and a bad look. But Key affirmed his trust that Heatley can do the job by reinstating him as soon as he had an excuse. Key calculated Heatley’s peccadilloes will not count against National in the next election.
Bill English’s budget this month has two points to prove. He must demonstrate he is holding spending enough to get on a credible path back to surplus. And he must encapsulate the government’s broad economic policy thrust.
The first is straightforward. English is determined to stick to his $1.1 billion limit on new spending (adjusted for inflation in future budgets).