Editorial: National takes incoming fire on its flagship policy

National deputy leader and finance spokeswoman Nicola Willis. Photo / Alex Burton

Editorial

With a leaders’ debate next week and early voting starting in just over two weeks, National’s leadership is strenuously proclaiming confidence in the party’s flagship election policy.

Politically, they can’t step back from the likely vote-winning promise of $14.6 billion worth of tax cuts - even if a group of economists have highlighted a $2.1b hole over four years in the plan.

Leader Christopher Luxon has called the party’s costings “rock solid”. Deputy leader Nicola Willis said: “National is confident in our figures”.

Plenty of voters will focus on the sales pitch rather than on some economists’ doubts about how realistic are National’s plans to pay for the policy.

On current polling National looks like getting over the election line because of tax cuts and crisis fatigue. Maybe most voters are just too fed up after the pandemic, cost of living and other struggles to care about economic details.

But some might find the “trust us, we know what we’re doing” routine inadequate, especially as more focus goes on economic credibility and the country’s challenges over the next three years.

Herald deputy political editor Thomas Coughlan compared how the party is handling the plan workings, which were done by consultancy firm Castalia, with how it dealt with its tax policy in 2020.

“Last election, Judith Collins and Paul Goldsmith released a massive event for the release of their tax policy, gave people a couple of hours to look at it and digest the numbers, [and] they released the full report from NZIER which went into detail on whether the National Party’s numbers were correct.

“This year, National did nothing of the sort. It handed the numbers out half an hour before it published them.“

A Castalia spokesperson said that: “National’s modelling is based on the experience New Zealand had before the [foreign house buyer] ban. We reviewed this modelling with reference to foreign buyer taxes in other jurisdictions ... We believe the forecast number of sales to foreign buyers in National’s tax plan is reasonable and supports the overall revenue forecast in the plan.”

A headache could come later in government if the tax plan doesn’t work as promised - perhaps resulting in a deeper slice of austerity spending cuts or extra borrowing to make up for any revenue shortfall from the untested New Zealand foreign house buyers tax.

Major reductions in public sector spending are already factored in as part of the tax plan, but immediate job cuts would incur hefty redundancy costs.

The opening of the books this week outlined the minefield still to be navigated of debt, high interest rates, and inflation, and how current high migration is propping up the economy. Then there’s the possibility of costly events occurring, such as another weather disaster, to add to the strain.

These are difficult times and the question of who do voters trust most to pull the country through is increasingly relevant.

At an election finance debate on Thursday, Act leader David Seymour said he wanted to cut 15,000 public sector jobs, reducing total numbers from 62,000 fulltime workers to the 2017 total of 47,000.

The general topics of spending and job cuts gained attention this week with a social media frenzy over the comments of Australian businessman Tim Gurner who said at a media event: “We need to see unemployment rise ... We need to see pain in the economy.” Low unemployment has been crucial to families getting through this cost of living crisis around the world.

If the tax plan costings don’t stack up post-election there would be political consequences given questions are being raised about the tax maths now. There would be no fallback excuses if it turns into a face-palm for a National/Act government.

At the finance debate, minister Grant Robertson asked Willis: “If you are so confident, where are the actual costings?”

For her part, Willis took aim at the rise in government spending under Robertson’s watch. “I hear a lot of professors of hindsight economics up here who seem to think we didn’t go through Covid,” Robertson countered.

The tax revenue concern, government spending, and the job market may seem less central to voters than cost of living pressures but they are part of the same situation.