The Liz Truss of the South Seas

Written By: - Date published: 9:43 am, April 21st, 2024 - 35 comments
Categories: Christopher Luxon, david seymour, Economy, nicola willis, Shane Jones, treasury, treaty settlements, uk politics, uncategorized - Tags:

Readers will no doubt recall Liz Truss, the former UK Prime Minister who enjoyed the shortest reign in the office and who was famously outlasted by an iceberg lettuce.

She has recently released a book ominously titled “Ten Years to save the West”.

Reviews of the book that I have read treat it with the same level of derision that was poured onto her reign as PM.

This review in the Guardian by Stuart Jeffries is a piece of fine art. Especially this passage:

The then prime minister is livid about how a cabal of Cinos (pronounced “Chinos” – Conservatives in name only) and other blob-adjacent political invertebrates were trying to nobble the week-old mini-budget she devised with her chancellor of the exchequer Kwasi Kwarteng. By means of this reform, a new globally competitive post-Brexit Britain would emerge. This “unchained Britannia” would be unconstrained by planning regulations, free to frack as never before and able to explore the North Sea for oil despite the ululations of virtue-signalling eco-zealots and the rest of the anti-growth wokerati. This would be a Britain where the super-rich were less hamstrung by corporation or inheritance taxes, and in which the 45p income tax rate (what she calls here the “anti-success tax”) would be little more than a bad memory.

What Truss didn’t seem to understand, now as then, is the handbrake had long ago come off and that both she and Kwarteng, like some latter-day approximations of Thelma and Louise, were barrelling towards oblivion. At Birmingham, in the face of objections from fellow Tories and serious market jitters, Kwarteng U-turned on that tax break for the rich. Later, the pair’s whole plan for growth was junked. Why? Truss is keen to tell us it wasn’t her fault. It was the fault of the economic establishment, apparently, whose members include the Bank of England governor Andrew Bailey, her fellow Conservatives, the IMF and President Biden, not to mention the Office for Budget Responsibility whose “overegged” prognostications of the disastrous impacts hastened speculative panic. They were the reason Britannia had to be chained back up again.

The primary feature of the budget was a massive tax cut for the rich funded by borrowing. The theory was that the rich would then invest all of their newly found money into the UK economy and generate huge growth rates and we would all be rich. It was in essence yet another version of trickle down.

The plan failed. The markets were spooked, the pound slumped, interest rates spiked and it all ended in tears. Truss sacked her old friend and Chancellor of the Exchequor Kwasi Kwarteng by tweet. Shortly after this she was also gone. The longest surviving entity was the lettuce.

In Aotearoa New Zealand we are going through a not dissimiliar experience. The Government is laying waste to the public service, non Government Organisations, Housing Corporation, the enviroment, families with members who have disabilities, in fact just about everyone you can think of.

The onslaught of bad news is profound. Just this week we have witnessed the following:

And that was just this week.

And in news indicating how bizarre things are getting:

  • The Government announced it is investigating a 4 kilometer tunnel under the middle of Wellington so that MPs can get to the airport slightly more quickly.
  • David Seymour wants kids who are sick to toughen up and go to school more often. They can stay home if they have Covid however.
  • Shane Jones and David Seymour were criticised for breaching Section 4.13 of the Cabinet Manual after criticising the Waitangi Tribunal decision to hold an inquiry into the proposal to remove a reference to the Treaty of Waitangi from the Oranga Tamariki Act 1989. Jones described the Tribunal as operating as a Star Chamber and Seymour accused it of “race fanaticism”. Luxon showed his weakness by saying their comments were ill considered. In other cabinets Ministers have been sacked for such behaviour.

Perhaps the most jaw dropping piece of recent news is that Willis is planning to borrow to pay for tax cuts. She is trying to say that since the cuts in services will pay for tax cuts and the Government will then be borrowing for new initiatives the tax cuts will not be inflationary. I am sure the market will disagree.

Craig Rennie describes her concession in these terms:

“This admission is in direct conflict with the statements made by Nicola Willis in opposition that the tax plan requires no additional borrowing. Yet today we discover that additional borrowing will be happening,” said CTU Economist Craig Renney.

“The Minister is still insisting that the additional borrowing will not pay for tax cuts, even though it’s clear that without these tax cuts, additional borrowing would not need to take place. The obvious lesson from all of this is that the government is borrowing to pay for tax cuts.

“The economics of this make no sense. Given the economic circumstances that New Zealand is in, if we are borrowing, it should be for investments that will lead to long-term productive growth. It should be for infrastructure, R&D, and public services. Instead, we are providing yet more money for landlords, and more money for higher-income earners.

We have deteriorating confidence and increased unemployment. Important infrastructure required to address climate change is being cancelled. Thousands of public servants have lost their jobs and the flow on effects of the job losses and of cuts to services will be disastrous.

The budget could be for Christopher Luxon and Ncola Willis their Liz Truss and Kwasi Kwarteng moment. Their relentless pursuit of tax cuts for landlords and rich people has the potential of wrecking the economy.

35 comments on “The Liz Truss of the South Seas ”

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  1. Kay 1
    21 April 2024 at 10:11 am

    Nicola said she’d resign if she didn't deliver tax cuts. Nicola doesn't want to resign. How the tax cuts happen is irrelevant, so long as she doesn't have that particular promise hounding her from all directions.

  2. Ad 2
    21 April 2024 at 11:03 am

    Very hard to see a massive and sustained depression in the Wellington region being worth a minor income tax bracket adjustment (unless you're a landlord of course in which case the payoff is stupendous).

  3. AB 3
    21 April 2024 at 11:07 am

    At least Truss was transparently daft and unintentionally hilarious. Whereas Willis just radiates menace and Luxon flaps around SE Asia like a hyperventilating turkey.

    • Anne 3.1
      21 April 2024 at 12:19 pm

      A hyperventilating turkey! Perfect description of him. Might I borrow the phrase and maybe others as well? If someone could persuade one of our excellent cartoonists to draw him being a hyperventilating turkey on an auspicious occasion even better.

  4. Robert Glennie 4
    21 April 2024 at 11:19 am

    Liz Truss lasted all of 50 days. Nicola Willis has lasted a bit longer than that, but should we be marking the day of the Fiscal Budget this year as potentially the last day of her as Finance Minister? And if so, who would replace her?

  5. Patricia Bremner 5
    21 April 2024 at 11:28 am

    National always play the "Shock and Awe" card. As the wealthy gain from it, they keep quiet as a rule, however when the Head of your Business Delegation is anxious about comments and direction, dissension in the ranks has begun.

    PM Luxon's puff pieces say he has met his KPIs. If Killing Public Interests was the goal he is sure doing that. None of their actions are without huge impacts on those least able to cope.

    Now we see Ministers in his support Party flouting Parliament's rule book. Such blatant threats and attacks on a legally set up Tribunal drew a mild rebuke from Luxon, which was revealing as the more experienced Jones toned down, but Seymore showed his passive aggressive side, using what is left of the Press to publicly strike back.

    The fact their goals are now not aligning will lead to further infighting. The Budget will lay the bare cupboard for all to see, and actions within it such as borrowing to replace lost tax take may extend the interest pain. Businesses and Landlords will be less than impressed.

    Those receiving a "Squeezed middle " tax cut, will quickly pay it out in Rates and Insurance hikes.

    We were supposed to have a "Little Dip" in our economy, now it appears it could be a long slip down with one pundit saying thousands of jobs could be lost, and far from backroom, they appear to be losing critical long term skills from the front room, and are even applying the old "sinking lid" of hiring freezes.

    It is hard to see skilled people being treated as "waste" in the system, which has quickly swung from people's wellbeing to capital. The new hires appear to be working for PM Luxon on Tik Tok.

    The debacle of the destructive "Fast Track" shows no room for democracy, and the Wards issue is burdening many Councils who are now questioning that edict.

    The house of cards is facing many winds from a variety of directions. I have bought my popcorn.

    • Tony Veitch 5.1
      21 April 2024 at 11:59 am

      Add in Winnie's propensity to pack a sad and pull a swifty, and we will probably see a snap election within 12 months!

      Here's hoping!

  6. Champagne Socialist 6
    21 April 2024 at 11:52 am

    And yet. When the next election comes around . . . If you want a template of what is happening look to the UK. Despite a decade of horrific austerity UK voters have returned the Conservatives to power over and over.

    Performative cruelty is an exceptionally effective electoral tool in a democracy because you only need to take care of half the population to stay in power.

    And if you think it's bad in NZ, checkout Argentina – they voted for this.

    • weka 6.1
      21 April 2024 at 3:27 pm

      Mod note: I see you have changed your username. Please stick with this one from now on.

  7. Kat 7
    21 April 2024 at 12:10 pm

    Nicola Willis does not have a finance plan, any plan even a bad plan….Liz Truss at least had one albeit one that was never going to work.

    Tax cuts are just pork barrel politics in action. Willis is just a small bit player with an almost naive religious devotion to trickle down economics and a propensity for spouting the corporate mantra that govt has no business being in business. Political dog whistles such as wasteful spending appeal to the blue choir that sing gleefully from the song sheet of Douglas and Richardson.

    Anyone who believes borrowing to pay for tax cuts in a recession is a good plan and won't influence inflationary pressures needs help….or should be replaced by an iceberg lettuce….

    • Anne 7.1
      21 April 2024 at 12:53 pm

      If you want to know about 'wasteful spending' you should have been around ACT in the 1990s. I saw it first hand. How that came about is another story but I did become a witness to some of it. Waste included a never ending supply of money from mystery sources being thrown around like confetti. Paper was used like it grew on trees (as it does) and the amount of it going through the shredder on a daily basis was massive. Computers sat around the place idle and I was never able to figure out what some of the staff were doing. The headquarters themselves were huge and located in the Finance Building on Albert St. I understand it belonged to Sir Michael Fay. To be fair they moved to more humble premises later that decade.

      Every time I hear Seymore rabbiting on about wastage I think of those days. Talk about extolling one virtue for the ministries etc., when you and your party disobey it themselves.

      • georgecom 7.1.1
        22 April 2024 at 6:46 pm

        given the way David Spendmore is throwing around tax payers money, or wasting it on things like charter schools, he obviously doesn't care much about the budget deficit, not a priority for him

    • Kat 7.2
      21 April 2024 at 1:55 pm

      Oh yes….I have known Muriel Newman and her husband Frank since the 80's, they typify the 'I'm alright Jack, stuff you' mentality, get rich at anyone else's expense, openly anti Maori and derisive of anything not in the Act bible of libertarian individualism and self interest according to the gospel of Thatcher, Reagan, Douglas and Richardson.

      Muriel puts out a far right propaganda sheet(newsletter) under the banner of NZ Centre for Political Research.

      • Obtrectator 7.2.1
        21 April 2024 at 4:43 pm

        NZ Centre for Political Research

        The rule seems to be: the more harmless-sounding the name, the more maleficent the organisation is.

        • Kat 7.2.1.1
          21 April 2024 at 5:44 pm

          Act are an abomination, putting the Tea Party, Jim Crow, NRA gun loving copy cat maleficence aside all they have ever achieved is getting legislation through that provides some lawful assistance with voluntary euthanasia and a pitiful three strike lock em up and throw away the keys law.

          In Act the 'we can help you wither and die' party coupled with National the 'corporate clown party' and NZFirst the 'tinfoil hatters' we have the most motley collection of dangerous seat warmers with their sweaty hands on the levers of power at anytime in this country's political history.

          • Shanreagh 7.2.1.1.1
            22 April 2024 at 7:59 pm

            Kat, you're on aroll and I support what you are saying.

            dangerous seat warmers with their sweaty hands on the levers of power at anytime in this country's political history.

            There is not a true aspiration for the good of NZ/NZers as a whole from any of them, sure aspirations for political mates, donors, richlisters but nothing that says 'we may be facing foul weather but the govt has your back'

  8. feijoa 8
    21 April 2024 at 1:00 pm

    I know someone who was working on the ferry upgrade that Nicola squashed.

    Millions have already been spent.

    Many of the people involved in that project are now working in Canada, on a light rail project.

    They are all gone. The architects, the engineers. All gone.

  9. Mike the Lefty 9
    21 April 2024 at 1:22 pm

    Hell, I'm far from an expert on financial matters but even I can see that borrowing for income tax cuts is a really stupid thing to do at the moment. It will mean interest rates going up further as the Reserve Bank fights higher inflation.

    I wonder whether there are some, as yet unknown to the general public, proposals to milk more money from other forms of taxation to compensate.

    A rise in GST looks the most likely to me. I'm not sure if they have ever actually ruled that out but it doesn't matter anyway. John Key promised there would be no GST rise in his government but did it anyway after gaining power.

    Possibly also more rises in petrol excise, ACC levies/

    Perhaps the NACTZ plan to bring back death duties and/or stamp duty, departure taxes?

    One thing they won't do, I bet, is bring in a financial transaction tax. That would hurt their rich mates the most and they obviously won't want to do that.

    As I have said before, the government WILL give income tax cuts by hook or crook because they are part of the coalition agreement with ACT and NZ First. To delay or cancel them risks ripping apart the coalition and National have such a lust for power they would rather bankrupt the treasury than lose it.

    • thinker 9.1
      21 April 2024 at 2:38 pm

      I don't think it will mean interest rates going up. It will mean a bigger effort to bring inflation down, meaning more jobs lost, longer period of hard times, more bankruptcies, more mortgagee sales, that sort of thing.

      I wonder how many people have A) Lost/about-to-lose their jobs, or B) seen their small business go under, or C) struggling to keep their homes, who voted this lot in? I would never say "Karma to them" because these things can affect families for several generations, but it is an example of not being fooled by political rhetoric that isn't backed up by fact.

      Time after time, through the election process, Luxon et al wouldn't go into detail about how they were going to do all these wonderful things. Like magicians pulling rabbits out of a hat, whenever they were asked how they were going to perform their miracle predictions, Luxon (particularly) would answer "What I will say is…" then not answer the questions.

      If it sounded too good to be true, it probably was.

      What the left needs to do from now until the next election is to prime voters up to anticipate the next catch-cry, which is "Elect the NACT coalition again because you've had the hard times and now come the good times and if you vote for the left you won't be able to enjoy the good times, blah blah", then they get in and really put the boot in.

      If voters are warned to look out for it, it might knock the wind out of the coalition's sails when they try to spout it.

    • Dolomedes III 9.2
      21 April 2024 at 4:18 pm

      I hope you're wrong about higher GST and higher petrol tax, as both would hurt low-income earners most. Maybe pricing the plebs off the road is part of the government's plan to reduce emissions.

    • James Simpson 9.3
      22 April 2024 at 7:49 am

      It will mean interest rates going up further as the Reserve Bank fights higher inflation.

      You seem to be out on your own in that prediction. No one from the right or left is expecting rates to rise in the near future. All commentators are expecting rates to begin dropping from August (Tony Alexander) or early 2025, (most others).

      • Mike the Lefty 9.3.1
        22 April 2024 at 1:14 pm

        That ignores the fact that keeping interest rates up is the Reserve Bank's main way of limiting inflation. They no longer have to worry about unemployment so I would expect them to do this so that the NACTZ can brag about reducing inflation, never mind if it creates unemployment, homelessness or anything else.

        • James Simpson 9.3.1.1
          23 April 2024 at 12:26 pm

          It doesn't ignore that fact. As inflation comes down and gets back towards and below 3%, the interest rates will come down.

          Why do you think interest rates will rise as the rate of inflation comes down?

          Unless you think inflation is going to go up – which is not expected by anyone.

    • Nic the NZer 9.4
      22 April 2024 at 12:39 pm

      See my comment at 12. The problem isn't with the tax cuts, its the public sector employment cuts.

  10. Tiger Mountain 10
    21 April 2024 at 3:53 pm

    “Dracula’s Daughters”–Willis, van Velden & Stanford…borrowing for tax cuts has to be a double bind of the worst kind…public services slashed while the already well off get a nice top up…David Seymour should be trespassed from any child education facility while he insists on denying some children state funded healthy meals.

    • tWig 10.1
      22 April 2024 at 1:06 pm

      Just to say that lumping these three together on the basis of their sex (use of the term 'daughters') skitters too close for me to attacking politicians for being women, as opposed to taking reprehensiblere political actions.

      • Obtrectator 10.1.1
        22 April 2024 at 6:50 pm

        Yeah, something in that. Attack the characteristics they can change, not the ones they're stuck with.

  11. roblogic 11
    21 April 2024 at 7:01 pm

    The Dominion of New Zealand is a settler colonial republic and since its establishment has always relied on plunder and extraction, enclosure of the commons or outright theft.

    We are past all the gold-rush money-for-nothing schemes, what is left is either

    a) picking over the carcass of our natural wealth, via the fast-track goon squad

    b) class war, more oppressive rent extraction, and pillage of the state

    c) overhaul the fucked up system that currently punishes hard work and rewards inert wealth

    Tweeter @Musical_Chairs has a brilliant thread up, exploring our woeful productivity per hour worked, and how the numbers have been juiced by various ponzi schemes over the years

    Listened to 'His Luxin' talk about the need to turbocharge NZ productivity and ended up burrowing into the data to see what happened during the labour productivity golden years (pre-GFC) and why things have been flat since. What 'turbocharged' productivity then? Long 🧵[1/n]

    Real estate is 16% of our economy and the 'top of the league' industry for labour productivity. Obviously, it's bollox.
    About 60% of the economic output of this 'industry' is an estimate of the rent owner-occupiers *would* pay to live in a house like the one they own.

    Labour productivity for this nonsensical industry did actually go down between 1990 and 2000. Why? Because we doubled our estate agents and property managers when the housing ponzi kicked off in the mid-90s.

    If you strip out the daft 'imputed rent' component from the calculations, NZ labour productivity drops from $68 to $58 per hour! Oh shit!

    The author then proceeds to dismantle productivity bullshit from several other industries – electricity, transport, technology – all based on sacking thousands of people, deferring maintenance, and taking on insane levels of debt (or, in tech, running an actual ponzi scheme). I guess that's how Luxon wants to "turbocharge" the economy?

    • Obtrectator 11.1
      21 April 2024 at 11:33 pm

      Real estate shouldn't be considered part of the economy at all. It doesn't generate wealth of itself; it's just a mechanism for redistributing it.

      • mikesh 11.1.1
        23 April 2024 at 11:05 am

        Real estate shouldn't be considered part of the economy at all. It doesn't generate wealth of itself; it's just a mechanism for redistributing it.

        This is true; and "expenses", such as rates, insurance, repairs, etc., are not true expenses since they do not contribute to the acquisition of revenue. These are costs which are being passed on to the tenant, as part of the rent, on the basis that it is the occupier of the property who should be meeting them, and paying for them from his own tax paid income; (which is exactly what happens when he pays his rent).

        A case could also be be made for making residential income not taxable, which case there would be no tax deductions at all available in respect of revenue from rent. Willis could also claim that making the rental revenue non taxable is a “tax reduction”.

        It goes without saying, I think, that interest should not be passed on to the tenant since the property belongs to the landlord and not to the tenant.

  12. Nic the NZer 12
    22 April 2024 at 12:35 pm

    "The budget could be for Christopher Luxon and Ncola Willis their Liz Truss and Kwasi Kwarteng moment. Their relentless pursuit of tax cuts for landlords and rich people has the potential of wrecking the economy."

    This final sentence is very miss leading. It's not the tax cuts which will drive the economy down, it's the public sector cuts. GDP is fundamentally a measure of income and these cuts to the public sector will drive GDP down by employing fewer people, it really is that simple. If the government over-eggs this then it may also expand the deficit by lowering the tax take. This would be due to NZ collectively reducing its present consumption spending not only because of the RBNZ policies sapping savings, but also because of the attitudes to spending taken on in response to public sector cuts.

    Tax cuts structured as implied are a very weak way to support for the economy, but if the government committed to very large broad tax cuts it could probably lift the economy in this way, say eliminating GST.

    But the National government is committing the country to a big and entirely unnecessary recession which will likely undermine its objectives even taken on their own terms. This should be called out and described directly, rather than in beltway framing.

  13. SPC 13
    22 April 2024 at 3:12 pm

    The consequences of small government policy 2008-2012 were becoming known by 2012 when this was written.

    https://www.nzherald.co.nz/business/bryan-gould-cuts-come-with-consequences/3474CQP3XIK35TP4D2TC3ZIPIM/