Unveiled today, a new Labour-Greens pledge aims to convince voters the two parties can be trusted with the economy. Liam Dann reports

They aren't revealing tax policy detail or spending plans, so what exactly have Labour and the Green Party cooked up with the Budget Responsibility Rules they're signing up to today?

The parties have formally committed to staying in surplus, paying down debt and keeping core Crown spending at about 30 per cent of GDP.

"It's an important signal," says Labour finance spokesman Grant Robertson.

"We understand that voters in September are looking for parties that are responsible with the finances but will also address the big issues around housing and health and education."


The rules aren't specific on policy - for example, the statement on tax is pragmatic and vague enough to allow the Greens to keep campaigning on a carbon tax.

But they do represent a statement of intent, one which is politically notable for the way it has been handled, in tandem by the respective party machines.

The message is clear, simple and directed at business and the financially comfortable middle classes who have been stubbornly loyal to National for the past nine years: vote for us and we promise won't ruin the economy.

Robertson and Green Party co-leader James Shaw arrived together at NZME's Auckland offices for a joint interview, which in itself reveals a new level of co-operation between the parties.

Before we get to the details, I ask, is this part of a new closer working relationship?

"It's a framework, we're still separate parties," says Robertson. "We've still got different policies that we'll be taking to the election but this is going to give New Zealanders confidence that we'll be responsible with their money."

Shaw, who looks more comfortable in a pinstriped suit and tie than any Green MP in history, is likewise unconcerned that this pre-election commitment might limit his party's potential gains in coalition talks after September 23.

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Liam Dann talks with Labour’s Grant Robertson and the Green Party’s James Shaw about their new joint economic strategy.

"I think it is really helpful in terms of forming a coalition after the election, that we're able to say in advance what the shape of that coalition will look like," he says.


Shaw has a business background; with a degree from the Bath School of Business Management, he worked for several years as a management consultant at PwC.

He presents a credible image for those who fear the radical idealism of the Greens, a safer bet for Labour to buddy up with as it looks to pitch itself into the middle ground of the electorate.

It certainly looks like a conservative set of rules. In fact, at first glance, the document looks as if it could have fallen out of Bill English's briefcase.

But Shaw and Robertson bristle at suggestions this might be a political publicity stunt - albeit a logical one - to grab the centre ground from National.

"The National Party didn't invent fiscal responsibility," says Robertson.

"The last Labour Government was extremely responsible. It delivered nine surpluses and got debt down very low as percentage of GDP. We think you can have an operating surplus, lower debt and also make the really important long-term investments that I just don't think National has made."

Shaw is equally adamant.

I get pretty annoyed by the idea that fiscal responsibility is a centre right [thing].

"I get pretty annoyed by the idea that fiscal responsibility is a centre right [thing]. Actually, it's just a function of being in government. The Greens have always said you should control spending, you should control debt and you have to be, for the sake of future generations, accountable and transparent. Environmental sustainability, social sustainability, and economic sustainability - those are three legs of a stool and you can't take any one of them away or the whole thing falls over."

Regardless, the Budget Responsibility Rules include notes that offer a few subtle but key differences from English's famously conservative approach.

"Our surpluses will exist once our policy objectives have been met, and we will not artificially inflate surpluses by underfunding key public services," the document says in relation to rule number one.

This isn't a Roger Douglas-style transformation in ideology for either party. Labour and the Greens plan to spend more on social services and argue they can do that within the parameters of the new rules.

"There's no doubt about that," says Robertson.

"Look at the deficits we've got in housing, 41,000 people homeless, in health where people are not getting the operations they need, schools asking parents for more and more donations. There's no doubt those deficits have risen but so have they in areas like infrastructure. So we're not prepared to say: it's great to have a surplus, if people are living in cars and garages."

Labour Party finance spokesperson Grant Robertson. Photo / Marty Melville
Labour Party finance spokesperson Grant Robertson. Photo / Marty Melville

And although Shaw doesn't like the implication that the Greens are radical or extreme in their thinking, it is a party that believes in social change - that we need to make sacrifices to ensure a sustainable future.

Can the Greens stick to these rules and still change the world?

"Yes," he says. "And we wouldn't have signed up to it unless we were confident we could do that. If you look at what the Greens have done in the last two election cycles, we've gone in with a package of policy priorities which have been costed and independently verified by organisations like BERL and NZIER."

Some of that independent assessment has been picked up in this joint strategy.

A Labour/Green Government would establish "a body independent of Ministers of the Crown who will be responsible for determining if these rules are being met," the policy document says. It would also "have oversight of government economic and fiscal forecasts, and provide an independent assessment of government forecasts to the public."

But that assessment criterion offers another key difference with the more traditional National Party approach.

It may involve changes to the way economic success is measured.

"Economic growth as measured through GDP alone is an important but not sufficient element in assessing the success of a government," says the document.

Unless we're able to balance the books and pay down that debt, then those most vulnerable in our community will suffer the most.

"In government we will develop a comprehensive set of indicators to assess its progress, such as those in the Public Finance (Sustainable Development Indicators) Amendment Bill and the Treasury's Living Standards Framework."

The Public Finance Amendment Bill, a private member's bill put forward by Shaw and now before Parliament, seeks to enshrine environmental goals in the government's fiscal assessment.

Treasury's Living Standards is a surprisingly "holistic" framework produced in 2011 to integrate social and environmental goals into economic advice.

Robertson accepts that some of the big economic statistics are good right now - on paper, at least.

"There are some positive high-level indicators in the economy, but it's a bit like the car: it can look good on the outside but if you look under the bonnet you sometimes find things that are not so good.

"It's really a question about who is the economy for," he says. "In my view it [the economy] is not an end in itself. It's about delivering a quality of life for New Zealanders. And we think when we look at issues like housing and health and education, we're not doing it right now."

Green Party co-leader and finance spokesperson James Shaw. Photo / File
Green Party co-leader and finance spokesperson James Shaw. Photo / File

But how specifically do you pay for it all?

These rules do allow fiscal headroom, Robertson says.

How much isn't exactly clear. One area is the debt repayment track. Bill English hopes to have debt back to 20 per cent of GDP by 2020.

These rules aim for the same level within five years of the election - so, potentially 2022.
This is an area where Labour and the Greens may have support from economists and business leaders - particularly if this allows for increased investment in infrastructure and payments into the New Zealand Super Fund.

But what about tax?

Labour leader Andrew Little has committed to not raising income tax. Do these rules make that more difficult?

"We know we can deliver the promises we've made under the current [tax] settings," Robertson says. "We've got to see what the Government does in the Budget - that's the caveat on that."

That doesn't mean big tax changes are off the table.

For example, Labour dropped its Capital Gains Tax policy but aims to tackle the housing crisis by strengthening the existing "bright line" test from two years to five.

In other words, if you on-sell some residential property within five years you will effectively be paying a capital gains tax.

"That was the advice that Treasury actually gave Government," Robertson says.

"Don't' do a two-year bright line, it's too easy to get around, do a five-year bright line test. Beyond that we do want the working group to focus on getting a better balance in our tax system."

Shaw argues his party's policies, as they shaped up at the last election, would have delivered tax cuts for 97 per cent of New Zealanders.

That would be paid for with a substantive carbon tax, of course, which is unlikely to thrill farmers and many big businesses.

"We're still committed to that kind of policy," Shaw says.

"We'll have a tax package coming later in the year to update that but it will be broadly in line with what we've said in the past. We think there is some urgency around housing, climate change and water as well, so we would be advocating in the first term of Government for some changes there."

Finally, what about the internal politics? Will party members from the staunchly ideological left cope with this public show of fiscal prudence?

"I think they will," says Robertson.

"We cannot deliver to the New Zealanders who really need the support unless the Government behaves responsibly. The two things go together: unless we're able to balance the books and pay down that debt, then those most vulnerable in our community will suffer the most."

Budget responsibility rules

• Government will deliver sustainable operating surplus across economic cycle.
• The Government will reduce the level of Net Core Crown Debt to 20 per cent of GDP within five years of taking office.
• Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand.
• The Government will take a prudent approach to ensure expenditure is phased, controlled and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.
• The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

Grant Robertson

• Labour finance spokesman
• 45 years old
• Former head boy of King's High School, Dunedin
• President of the Otago University Students' Association, 1993; co-president of the NZ University Students' Association, 1996.
• Studied politics, graduating with honours in 1997.
• Joined Ministry of Foreign Affairs and Trade in 1997. Postings included United Nations.
• Also worked as senior research marketing manager for the University of Otago
Entered parliament 2008.

James Shaw

• Green Party co-leader
• 43 years old
• Attended Wellington High School and Victoria University.
• In 1992, unsuccessfully stood for the Wellington City Council on a Green ticket.
• MSc in sustainability and business leadership at the University of Bath School of Management.
• Worked for PwC as a management consultant.
• Stood unsuccessfully for the Greens in Wellington Central in 2011.
• Entered Parliament in 2014 as a list MP.