- Date published:
6:53 am, September 4th, 2020 - 62 comments
Categories: election 2017, election 2020, greens, jacinda ardern, john key, labour, nz first, political parties, Politics, poverty, tax, winston peters - Tags: jim bolger, neoliberalism, ruth richardson, tax working group, working for families
Jacinda Ardern’s second term in office will be more challenging than her first, even accounting for such crises as the Christchurch massacre and Covid 19.
In 2017, when Labour was languishing in the points and her taking on Labour’s leadership just weeks before the election, she had nothing to lose.
As we know, the miracle happened, but Labour was profoundly unready to govern. In its first 100 days it rolled out the Families Package but policy to address the underlying cause of inequality was lacking.
It also had the handbrake of coalition partners, mainly NZ First, which was instrumental in blocking or diluting any radical change, most importantly, the Tax Working Group’s main recommendation of a capital gains tax to make our tax system fairer.
This election will be far different. Polls consistently show Labour has very chance of governing with just the Greens, or outright. No handbrake, no excuses for being unready.
This has to be a scary moment.
Covid and Christchurch have proved Ardern is made of stern stuff, but having the freedom of total parliamentary control is another challenge altogether.
In her rhetoric, Ardern consistently claims her government will be two things – it will deal with climate change as her generation’s “nuclear-free moment” and it will be “transformation”.
On climate change, she and the Green Party have successfully set up a structure via the Zero Carbon Act and the Climate Commission to tackle this issue, even getting partial buy-in from National. But three years have elapsed and the goal of zero net emissions by 2050 is not much closer. So this coming term the hard yards of implementation need to be done.
This challenge will be eased by not having NZ First dragging the chain, but it remains continental in size, made more difficult in an economy beaten down by Covid and now debt-ridden.
Transformation will be equally scary and challenging.
What Ardern means by transformational is open to interpretation but in the context in which she has said it, it is hard to interpret it as meaning anything other than reducing inequality and poverty. In 2017 she set a prime goal of bringing all children out of poverty within six years. Half that time to reach the target has expired.
It is hard to see how, from the progressive side of the political spectrum, you can address inequality without tackling, if not unwinding the underlying structures of neoliberalism that have produced such inequality.
Nine years of Labour governance under Helen Clark did not attempt this. She mitigated neoliberalism by making the tax system slightly more progressive, repealing the hated Contracts Act and introducing the redistributive Working for Families package. But she left the underlying blocks of neoliberalism largely intact – an unfair, regressive tax system, capital gains left untaxed, deregulated labour, electricity and finance markets largely intact, a central bank based on monetarism, government finances restricted by debt ceilings and largely open slather foreign investment.
During his nine years in office John Key undid many of Clark’s mitigations and added his own neoliberal touches.
In 2017, when Winston Peters chose which party to side with, he cited the extremes to which capitalism had reached under the influence of neoliberals as his reason for choosing Labour.
“That experiment – of unbridled, irrational neoliberalism – has transformed what was once one of the most egalitarian societies in the world, into a case-study of acute inequity,” Peters said in a speech shortly after.
Even one of neoliberalism’s prime exponents, former Prime Minister Jim Bolger, whose first Finance Minister, Ruth Richardson, unwound much of the welfare state with her 1990 Mother of All Budgets, has freely admitted neoliberalism has “absolutely failed”.
“They have failed to produce economic growth and what growth there has been has gone to the few at the top,” Bolger noted.
Equality researcher and writer Max Rashbrooke documented this in a recent Guardian article. He cited Statistics NZ’s 2017/18 Household Economic Survey showing the 1 percent hold $140 billion of assets in trusts with a median value of $6.2 million per trust, while another $127 billion is held by the next 5 percent.
In all, the top 10 percent of Kiwis own 59 percent of all assets and the poorest half own just 2 percent. And a major point he makes is that most of the gains from those assets are legally untaxed because they derive from capital appreciation.
He cites IRD research showing half of the Rich List of Kiwis owning over $50 million declare income of less than $70,000. The bulk of their income comes from selling off assets, such as shares, that have appreciated hugely in value, but legally attract no tax.
This well documented and astounding wealth disparity is a major challenge to Aotearoa’s identity as a fair and equal society, Rashbrooke says.
Labour’s Tax Working Group’s main recommendation for redressing what it called an unbalanced and unfair tax system which underpins our newfound inequality, was for a capital gains tax. But Ardern boxed herself into a corner when she succumbed to Peters’ blackmail and not only rejected the recommendation, but ruled out a CGT while she remains leader.
CGT has been her Achilles heel. In 2017 she initially got into trouble via her “captain’s call” not to rule it out pre-election, then she u-turned and ruled it out until the TWG had deliberated. Her decision to permanently rule it out was due to fear of National using tax to spook the electorate in this election.
But something must be done if Ardern is to successfully address poverty. A fairer tax system is today even more pressing, having spent our way through the thick end of $60 billion to address the Covid crisis. That means little or no discretionary spending in many budgets to come.
“As a nation, New Zealand simply will not get through this crisis in one piece if it fails to answer the urgent need for an immediate and massive redistribution of wealth from those whose financial position is reasonably secure to those whose position is not,” says left wing commentator Chris Trotter.
The Green Party has come up with a well-thought, comprehensive poverty policy that would be funded by a wealth tax of 1 percent on individuals with net assets over $1 million, and 2 percent for those with assets over $2 million. It is neat, in that it would also operate as a de facto inheritance tax for asset-rich-cash-poor individuals who want to defer payment, and it also captures most trusts by treating them as individuals.
However, Rashbrooke says Ardern is “distinctly lukewarm” on the wealth tax and he reckons she has little appetite for redistribution, by which I assume he means higher income tax brackets.
Labour, still shy of spooking the electorate over tax, has been very quiet on tax policy and is likely to remain so ahead of the vote.
But, with a huge chunk of discretionary spending, not just for this term, but for the next generation at least, already allocated, the question is, how will Ardern fund her poverty-alleviation program?
Reports are in for working groups on welfare, education and health and, assuming those reports will not be rejected as the TWG report has been, they will result in substantive changes to our society.
But such measures and others such as decolonising the justice system, fall well short of societal transformation in the way that Micky Savage or even David Lange, with the introduction of neoliberalism, revolutionised our society.
Ardern looks poised to have the same opportunity they had and history will judge how well she seizes it.
(Simon Louisson worked as a journalist for Reuters, the New Zealand Press Association, and The Wall Street Journal among media organisations. He also worked two stints for the Green Party as a media and political adviser).