John Armstrong on politics

John Armstrong is the Herald's chief political commentator

John Armstrong: Labour confined to a fiscal straitjacket

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Labour Party leader Phil Goff. Photo / Sarah Ivey
Labour Party leader Phil Goff. Photo / Sarah Ivey

The message is simple - but one Labour knows it must drill into voters' minds relentlessly this side of the November election.

The message is Labour - if it wins - is not going to spend money the new Government will not have. Phil Goff is not going to make promises in advance he cannot keep.

That message was hammered home by both Goff and deputy leader Annette King during the party's election-year congress at the weekend.

The yawning chasm of the Budget deficit meant there was no new money to spend. Some cherished policies would have to be introduced progressively - rather than in one go. Savings would have to be found; sacrifices would have to be made. And so on.

Goff is in a tricky position. He must present Labour as bold, visionary and willing to tackle what he called "ticking time-bombs" such as Maori and Pacific youth unemployment. That requires money - and lots of it.

But he is advocating from the confines of a fiscal straitjacket - a straitjacket he must don to convince an electorate currently very averse to political spendthrifts that Labour is credible when it comes to who manages the Government's books.

The interesting bit will be watching the contortions as he tries to free up money to fund new policies by cutting existing programmes or exploiting some other avenue for revenue-raising.

The latter was the case yesterday with some lateral thinking allowing Goff to announce Labour will introduce research and development tax credits at a cost of some $160 million a year. This will be funded by bringing the agricultural sector into the greenhouse gas emissions trading scheme in 2013 - two years earlier than National has stipulated.

Goff cited the announcement as an example of the "hard" decisions Labour would have to make in Government .

In fact, this would probably be one of the easier ones, given farmers are hardly a Labour constituency.

With barely six months until polling day, pressure had been intensifying for the party to spell out exactly what it would do differently from National.

Labour had come under similar pressure to spell out in detail how it would fund its alternative policies.

However, the party is not expected to release its policy costings and fiscal framework for another month to six weeks. It wants to ensure those costings are politically watertight.

Yesterday's R&D announcement fills the vacuum - but it won't for long.

Holding the congress in the wake of last Thursday's Budget only put more acid on the party to display fiscal rectitude.

Labour, however, needs to drastically rethink the utility of the congress which differs from the party's standard non-election year conferences in meeting largely behind closed doors to prime delegates on campaign strategy, fundraising and other election-related tasks.

Given guaranteed media coverage, the congress was a platform begging the unveiling of an important policy plank - one not necessarily with fiscal repercussions.

Sure, R&D is critical in creating jobs down the track. But when paired with the emissions trading scheme, it would be difficult to come up with a combination less likely to get voters' collective mojo working.

- NZ Herald

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