Some Labour and Green supporters are becoming disillusioned with their parties after a major announcement on economics on Friday. Their joint Budget Responsibility Rules framework is being seen as a significant shift to the right, as it amounts to a major self-imposed constraint on the two parties’ ability to make economic changes if they get into power.

Does New Zealand still have political parties on the left in parliamentary politics? Do the poor and working classes have anyone to vote for this year? These are some of the key questions being asked in the wake of the Labour-Green announcement that they will restrain themselves in government from any significant deviation from the economic status quo.

Leftwing disappointment with Labour and the Greens

The hardest hitting response has come from former Green MP Sue Bradford, who gave an extraordinary interview on RNZ's Morning Report today. Bradford rounded on her former party, saying "The Greens have completely sold out on where they started from in my generation of MPs in 1999" - you can listen to her seven-minute interview with Guyon Espiner: "What Price Power" Former Green MP Sue Bradford slams Greens' deal with Labour.

Bradford explains that the new rules adopted by the left parties - which she calls a "totally business-friendly policy" - will constrain them in being able to depart from the National Government's main economic settings. She despairs of what this means: "So what you see here is the Green Party deciding to go after votes on the centre and the right of the New Zealand political spectrum. It wants business in its corner. It wants your National blue-green voters in its corner. And completely abandoning the huge number of people who are in desperate need in the areas of housing, welfare, jobs, and education".

To Bradford, it's about political opportunism by the Greens, in order to get into government. She asks: "At what price power, if you sell out everything that your party was originally set out to achieve? I mean, this Green Party here is following the same trail as green parties all over the world - some of who have ended up in coalitions and alliance with really rightwing governments".


She suggests that some Green Party supporters "are going to end up like some of us already, who have no one to vote for this year. The Greens was perhaps the last hope. This is the death knell for the Greens as a left party in any way, shape or form. They are a party of capitalism. They're a party that Business New Zealand now loves"

Bradford also expressed her protest on Facebook. This led one Green Party activist and candidate at the last election to comment: "Frankly, I'm very disappointed with the party I belong to for doing this! In fact, I know that many other members (like me) are disappointed and angry. I am reassessing my membership. I knew that this statement was being developed but party members seem to have been largely bypassed in doing so."

Also on Facebook, Laila Harre, who has now rejoined the Labour Party, questions the apparent assumptions behind the announcement: "Who says voters won't buy into tax increases on high incomes? I'm sad that our redeemers are capitulating to that rather than making the case for it. Elections are an opportunity to win support for ideas. Not just frame ideas around putative support."

In a unique move, the Council of Trade Unions has also come out against the announcement, with president Richard Wagstaff giving a CTU perspective: "We support higher levels of Government activity and investment than these rules permit. There is an urgent need. Many countries who are more successful than us socially and economically have much greater government activity" - see Isaac Davison's Higher spend needed than under Labour/Green rules: Council of Trade Unions.

Wagstaff elaborates: "If an incoming Labour/Green Government is serious about fixing the problems we have in our education, health, housing and other public services, if it's going to correct the imbalances we have in terms of pay equity, if we are going to really tackle income inequality and our environmental challenges together as a nation, then it will need to be prepared to invest significantly. That will test these rules as they stand."

Reaction from the right

If anyone thinks that this is just a case of leftwing activists overreacting to the Labour-Greens budget rules, it's well worth reading David Farrar's analysis today. Farrar celebrates the move and says it signifies "a huge shift for the middle ground of NZ politics" - see: Hooray for Labour/Green Budget Responsibility Rules.

Farrar says he's "delighted" with the announcement, and explains: "For the last 20 years or so the parties of the left have campaigned on tax increases and massively increased spending. Now Labour and Greens have said that will keep government spending to under 30% of GDP. In 2008/09 Labour left office with core crown expenditure at 35.5% of GDP. It took a massive effort by National to get it down to under 30% by 2015. Labour and Greens opposed pretty much every one of those spending cuts or restraints yet now they are saying they will stick to a similar expenditure level. Again, this is a huge shift, and a massive victory for the forces of fiscal conservatism."

The National Party blogger then goes through the details of the Labour-Green rules, making some astute points, and concludes that this shift is a major challenge for the parties, since "Over the last two years they have called for billions of dollars of extra spending that would breach these fiscal rules they have just agreed to." He draws attention to some of the big spending promises, and asks which of these policies will now be dropped?


Former Reserve Bank economist Michael Reddell has also blogged to give his analysis of the initiative, which he says represents "an orthodox and fairly sensible approach to broad fiscal management" - see: Labour/Green Budget Responsibility Rules. He is very welcoming of the new fiscally conservative promises, but has some very detailed observations and questions about them.

Smart strategy or mistake?

The new budget rules are clearly designed to win votes, but there's disagreement about whether this will be the outcome. Two leftwing activists have blogged to explain why the move might have the opposite effect - see Mike Treen's Labour and Green's promise to uphold neoliberal dogmas - why?, and Stephanie Rodgers' Why fiscal responsibility is the Bog of Eternal Stench.

Treen says that using "tired dogmas from the past" is no longer appropriate in 2017, as the public vote for politicians who are against old orthodoxies. Rodgers explains that the left parties are buying into a rightwing narrative about the importance of conservative fiscal policy, in a way that will ultimately mean that the public votes "for the party they 'know' are the better economic managers, because that's National's brand".

For a counterview, see The Standard's More thoughts on the Labour-Greens Budget Responsibility Rules.

But Chris Trotter has a very different point of view, suggesting that the reality of modern capitalism is that leftwing parties and governments risk "capital flight" whereby businesses withdraw their investments in protest at the risk of anti-business policies being implemented - see: Not Being Venezuela: The Political Logic of the Labour/Green "Budget Responsibility Rules".

Trotter advises: "So don't be too quick to condemn Labour and the Greens for cautioning their supporters against building-up unrealistic expectations of an incoming centre-left government. Both parties know how important it is to inoculate themselves against the Right's accusations of economic ignorance and irresponsibility."

This is the reason that some other commentators agree it's a good strategy on the part of the left parties. Colin James says: "the detail is less important than the strategy. One aim is to calm potential middle-ground Labour voters' doubts about idealistic Greens. While polling suggests middle-ground voters do want more resources in health, education and housing, they worry that in the wrong hands that might blow the budget. Importantly, the Green Party made the initial proposition for the fiscal framework. The second strategic aim is to convince business (and financial journalists) that fiscal policy will not destabilise the economy, as it has in many advanced-economy countries. The theory is that if business does not go ape with fiscal worries, middle New Zealand is less likely to shy off" - see: Lab-Greens need 'golden rule' strategy.

And today's Dominion Post editorial also agrees the new Labour-Green framework is sensible, explaining that "They want to shake off the traditional charge of "tax and spend socialists" that the Right always throws at them" - see: The Left promises to be fiscally conservative.