National is not Act and Act is not National. Audrey Young looks at where the tensions could lie in any coalition negotiations.
Law and order is likely to be a relatively easy one but approaches to the Treaty of Waitangi are likely to be more difficult.
First, some of the things National and Act agree on. They have both pledged to reintroduce the Three Strikes laws, they both have policies focused on dealing with young offenders and plans to crack down on gangs. The one area they disagree on is whether to abolish the firearms registry, as Act wants, or to keep it, as National wants. And Act wants the youth justice system for young offenders to be run by Corrections instead of Oranga Tamariki.
Other policies in harmony include phasing in an increase to the superannuation age from 65 to 67.
They both support abolishing the clean-car discount, which incentivises the purchase of electric cars.
They both want to re-introduce partnership schools, also known as charter schools.
They both want to reinstate tax deductibility on mortgage interest for landlords. Act wants to abolish the bright-line test to tax capital gains on investment properties and National wants to take it back to the two years it introduced in 2015.
The extent of any dispute between National and Act would depend on myriad factors, including the numerical strength of each party, the distance between their policies, and what concessions have been made on other policies.
But it could also depend on the emphasis each party placed on particular policies during the campaign. Not all policy would be worth dying in a ditch for.
Act, for example, has an education policy reminiscent of the voucher system which would give every child a life-long learning account. Parents would use the account in the public or private education systems.
But Act has not campaigned strongly on the policy and there would be no expectation of a complete overhaul of the education system along those lines.
Similarly, in the area of sale of state-owned enterprises, Act has identified seven SOEs (Transpower, Kiwibank, KiwiRail, NZ Post, Kordia, and AssureQuality) it wants partially sold under the mixed ownership model - a 49 per cent float - as happened to three power companies under the John Key Government. And it wants Landcorp 100 per cent sold.
National is not proposing any sales, but neither has Christopher Luxon or Nicola Willis ruled it out. It is the sort of policy that could legitimately emerge in a coalition agreement between National and Act. Opposing another party’s policy does not necessarily preclude it from being accepted, especially if it raises revenue.
However, there are at least six policy areas in which Act and National could have disputes, even where there is agreement in the broad general direction.
Both National and Act want tax cuts, but because both sets of tax cuts are quite different and have different ways of being funded, it would be impossible to simply integrate their plans.
The unwritten rule under most MMP governments has been that the larger party’s tax plan has prevailed and smaller partners have got their gains in other areas, sometimes handsome gains.
Some of Act’s big-spending promises that would put pressure on National’s own fiscal plan include giving 50 per cent of GST revenue from the construction of new homes to the local government body that consented them, helping the council to fund infrastructure. Act’s own budget puts the cost of that policy to government revenue at $4 billion over four years.
It has also promised $1b over four years for a teaching excellence reward fund (distributed by principals to excellent teachers), which National would be unlikely to object to on principle.
It has also promised a 13 per cent increase in GPs’ capitation grant, at a cost of $715 million over four years.
Act also sets out ways in which savings could be made. While they are not supported as National policy, unless they are categorically ruled out by National before the election, they could be considered as ways to fund Act’s policies.
They include stopping Government contributions to the Super Fund, stopping Government contributions to the venture capital fund, income-testing Government subsidies to both Kiwisaver and the winter energy payment, and indexing superannuation to the CPI, instead of wages.
Both parties will produce a fiscal plan, setting out their headline spending promises and tax policy, and how they would fund them - largely from cuts in current spending, or from new revenue plans.
Act has already produced an alternative Budget but it will issue a revised one in light of Treasury’s Pre-Election Fiscal and Economic Update last week. National says it will have its fiscal plan out before advance voting begins on October 2.
Both National and Act want to raid the Climate Emergency Response Fund (Cerf - Govt revenue from the Emissions Trading Scheme, the ETS) - to help fund tax cuts or give taxpayers a tax credit.
The degree of cuts to the public service and where they occur is likely to be a point of contention. Both parties have campaigned strongly on cuts, or savings as they call it, to public service spending to both fund tax cuts and to reduce the size of government.
Under National’s tax plan, outlined by shadow finance minister Nicola Willis, it has identified 24 Government agencies from which it initially wants, on average, 6.5 per cent cuts amounting to $594m on so-called back-office functions to fund tax cuts and to have it done before Christmas.
There would be unders and overs but at 6.5 per cent, the cuts would amount to
- $106m from the Ministry of Social Development;
- $81m from MBIE, the Ministry of Business, Innovation and Employment;
- $60m from the Ministry of Justice;
- $58m from the Ministry of Primary Industries;
- $47m from Inland Revenue;
- $46m from the Department of Conservation;
- $36m from the Ministry of Foreign Affairs and Trade;
- $21m from Land Information New Zealand;
- $17m from the New Zealand Customs Service;
- $16m from the Ministry for the Environment;
- $16m from Statistics New Zealand;
- $9m from the Treasury;
- $8m from the Crown Law Office.
Luxon has said it would be up to chief executives to work out how to make the cuts, which is perfectly in order so long as the details are released. And finance spokeswoman Willis has said some agencies would be exempt: the Ministry of Health, Te Whatu Ora - Health New Zealand, Corrections, Oranga Tamariki, the Education Review Office and the Ministry of Education.
The Public Service Association has already dubbed the initial savings programme the “Christmas chainsaw massacre”. Act would have little difficulty with such cuts.
But Act wants the cuts to go further and deeper. Its policy is to cut the current numbers employed by the public service to 2017 figures. The current number of fulltime equivalents of public servants is 62,710 and its policy would see that cut to 47,252 - a 24.6 per cent reduction or by 15,158 jobs.
However, the cuts would be more explicit in some ministries than others. It wants to abolish several agencies altogether: the Ministry for Women, the Ministry for Pacific Peoples, Te Puni Kōkiri (the Ministry of Māori Development), the Ministry of Ethnic Communities, the Office for Māori-Crown Relations Te Arawhiti, the Human Rights Commission and the Energy Efficiency and Conservation Authority. National does not want to abolish any of them.
Act wants to explicitly halve the number of bureaucrats working at the Ministry of Education, which it claims would save $240m to put into frontline services, whereas National would exempt it from the cuts required.
The number of fulltime equivalent staff working for the Ministry of Education is 4379. Other agencies identified by Act leader David Seymour as ripe for cuts are the Ministry of Business, Innovation and Employment with 6123 staff, and the Ministry of Social Development with 9104 staff.
Act has long railed against what it calls corporate welfare, which allows ministers and/or officials to pick winners by giving companies or projects taxpayer-funded subsidies.
The most significant in recent years was the $3b Provincial Growth Fund in the Labour-New Zealand First Government, which was downscaled in Labour’s second term. That would go under a National-Act Government that did not need New Zealand First. But Act’s razor would extend a lot further to areas in which it would be difficult to see any agreement from National. Act says it would save $6.4b over four years by abolishing “corporate welfare”, including:
- Callaghan Innovation;
- The R&D tax credit;
- Domestic film subsidies;
- International film subsidies;
- The regional events fund;
- The major events fund;
- Workforce development councils
This is likely to be one of the problem areas for National and Act because National’s position is closer to Labour’s than Act’s. They all support the Emissions Trading Scheme but Act wants the Zero Carbon Act repealed and the Climate Commission abolished.
National was in Government when New Zealand signed up to the Paris Agreement, which is all about limiting increases in global temperatures to 1.5C. It supports the Zero Carbon Act and the commitment to reduce net emissions of all greenhouse gases (except biogenic methane) to zero by 2050.
National also supports the nearer-term 2030 target, nationally determined contributions (NDCs) to reduce net emissions to 50 per cent below New Zealand’s gross 2005 levels by 2030.
National supports the Climate Change Commission, which gives advice to enable the Government to set carbon emissions budgets - how much carbon should be emitted in a five-year range - and set its plan for carbon emissions reduction.
The biggest area of disagreement will be on pricing agricultural emissions under the Emissions Trading Scheme, although the two parties may be able to defer any compromise over their differences to later in the term.
Under current Government policy, pricing agricultural emissions under the ETS is not due to take place until the last quarter of 2025, and on-farm measurement of emissions is due to be in place by the last quarter of 2024. National would delay the measurement requirement until 2025 and keep agriculture out of the ETS but implement a pricing system by 2030. Act opposes pricing agricultural emissions altogether unless New Zealand’s four largest trading partners are also doing so.
Treaty of Waitangi
National and Act have common ground on several policies such as disbanding Te Aka Whai Ora - Māori Health Authority, repealing Three Waters reforms including an iwi-council committee to appoint the water entity board, and abolishing laws allowing councils to set up Māori wards. Neither party wants to see government services provided on ethnic grounds.
However, Act would also remove all references to the Treaty of Waitangi from legislation and has a policy to hold a referendum to define the principles of the Treaty. Both would be highly problematic for National because of their inflammatory potential. The trouble is that David Seymour has campaigned very strongly on the Treaty, as recently as his speech at the party’s campaign launch, and that makes the Treaty among the most potentially volatile issues between the two parties.
At the heart of Act’s policy is its rejection of the principle of “partnership”, which is referred to in vague terms in various laws and has been fleshed out by the courts - without any pushback from successive National and Labour Governments.
Act wants to define the principles by way of a shorthand version of the actual articles of the Treaty (which are not universally accepted), to pass a law defining them, and have the Treaty Principles Act confirmed by referendum. The principles would be defined as follows:
1. The New Zealand Government has the right to govern New Zealand.
2. The New Zealand Government will protect all New Zealanders authority over their land and other property.
3. All New Zealanders are equal under the law, with the same rights and duties.
The idea of putting Treaty matters to a referendum at all, let alone a Pākehā-majority referendum, would almost certainly provoke widespread protest. The risk that a National-Act coalition was anti-Treaty would require deft political skills by Luxon to avoid even greater division than Act says already exists. That is not the way National would want to begin a new government.
Both National and Act opposed the repeal of the Resource Management Act (RMA) and voted against its replacements, aimed at simplifying the law, the Natural and Built Environment Act and the Spatial Planning Act. They only passed into law in August.
National wants to repeal the new acts before Christmas as an interim measure, saying while the RMA was bad, the new acts would make it even harder to get things done. It would then come up with its own replacement for the RMA, which clearly it would do with Act. That’s where the battle would be had.
National has not set out exactly what it would replace the interim RMA with, although both parties want to make it easier to get consents for housing and infrastructure and to have a clear law that doesn’t require endless litigation to work out what it means.
Act has well-established and radical policy on what resource management law should be about. It wants a consenting system based on property rights which would allow people to do anything so long as it did not harm others’ enjoyment of property.
It wants building insurance to be used as an alternative to building consent authorities.
Standards for freshwater management would be set at a local level instead of through national policy statements that direct councils to follow.
It wants a pricing system for water allocation. It sees land pollution as primarily a private matter and that where a landowner is affecting neighbours through pollution, they should resort to the courts and the tort of nuisance under the common law.
It does not want council plans set in stone. It would repeal the Medium Density Residential Standards, which allow three-storeyed dwellings on all residential land in main cities, and take it back to two storeys. But it says council densification could be increased if 70 per cent of owners in a block or street agreed.
It wants to allow a property owner to negotiate bilaterally only with affected neighbours for any exemption from certain zoning rules, such as the height of a house or its position, and to have a fast-track, low-cost planning tribunal to handle disputes in bilateral cases with compensation being potentially awarded.
The potential disputes in the six areas identified are not beyond resolution or compromise but some may be beyond the short-term. If New Zealand First were required to form a National-led Government, the complexities would be even greater. They might require the services of a professional mediator.