Audrey Young
Political editor Audrey Young blogs from Parliament

Blog: Cullen has a relapse

By Audrey Young

She won. You lost. It must be hard to swallow.

Michael Cullen's comments about tax cuts on TV One's Agenda yesterday may appear to throw Helen Clark's tax cuts promise into doubt, as Bill English suggested on One News last night.

But that's fanciful. If they are not delivered it will be over her dead body. Clark doesn't need to stake her reputation on delivering on the promise. That's a given.

But a week after the promises at the Labour Party conference, Cullen appears to have had a return to his default attitude to personal tax cuts - cautious, reluctant, begrudging. Unless Treasury has reneged on its advice that there's money to burn, structurally-speaking, Cullen's comments were a relapse from the whatever-Helen-says-I agree deputy Labour leader, to the when-I-say-conditions-are-right finance minister.

The trouble is that Helen said last week that the conditions would be right, no matter what the conditions will be.

This is what Cullen said yesterday:

Cullen: [after reciting Labour's tax measures] ...We haven't moved on the personal tax side and Treasury's reasonably confident at this point that there would be room to do that. I emphasise 'reasonably confident' because of course they still haven't locked in the kind of estimates we'll be using in next year's budget.

Guyon Espiner: I thought we have established that these were structural surpluses though.

Cullen: I think it is likely that there are going to be structural surpluses big enough to make moves on the personal taxation side. They will be producing figures in the half-year update [in December], which will have a pretty wide range to them.

Compare that equivocal answer to Clark's unequivocal attitude on tax cuts in her speech last weekend at the Labour Party conference.

Over the years we've been in Government, Labour has been blessed, or I sometimes think cursed with rising surpluses.

Every year officials have sought to explain them away by one-off factors. Now they concede that the surpluses are structural.

They have to be - eight years of growth can't be just good luck based on one-offs.

So that gives Labour more choices - not to break the bank and sacrifice our country's macro economic stability, but to deliver budgets which continue to strengthen the economy and service, and deliver hard working New Zealanders a direct dividend through a personal tax cut.

That will happen under Labour. It will happen under Michael Cullen who has built the economy up so it can happen. He deserves the credit for that.

The fact is that Clark's statement to the conference meant she has won the internal debate in Labour on tax cuts that began before the 2005 Budget.

She actually won back then, too, but left the detail to Cullen to work out.

Both neglected the politics, however, which is how the "chewing gum" tax cuts that gave the low paid 10c a week more to the low paid in three years time turned what had been a massive policy concession for Cullen into a complete disaster.

He never forgave the media, print in particular, for their mockery of it and cancelled them this year before they took effect next April.

Labour's debate has not been a destructive one, a la the 1980s. It has been about whether the principle of losing an election without tax cuts should beat the pragmatism of winning an election with tax cuts. No wonder Clark won.

Cullen's comments on Agenda put a different complexion on Clark's conference speech though. Perhaps she made the tax comments to lock him into the decision. Maybe she really meant "it will happen under Michael Cullen [whether he bloody well likes it or not]."

The potential trouble will be in the detail. After 2005, it won't be left entirely to Cullen.

Final decisions on the design of the tax cuts won't be made until April.

I learned something else on Agenda. Cullen correctly pointed out that the news media at the conference mistakenly believed the audience had applauded at the announcement of the tax cuts. Cullen in a rare immodest moment pointed out that the applause had been at who would deliver them.

"I think the Labour Party Conference felt confident that if I was delivering them, in that there's been attention to those issues of social equity which are close to Labour Party people's hearts - it's what we're there for."

I replayed my tape of Clark's speech and Cullen was right. The applause began after she said it would happen under him, not after the announcement of tax cuts. What's more it lasted a full 20 seconds - about the longest within the speech.

Cullen might have lost the war, but he could still win many a battle in the months ahead.

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