The Labour Party has broken new ground in election campaigns by announcing cuts to spending that it had not announced. Leader David Cunliffe and finance spokesman David Parker called a press conference to say they had shaved $300 million from their plans after seeing the Treasury's pre-election fiscal update last week. They said they had dropped six of seven commitments they had been planning to announce during the campaign, but they would not now say what they were.

What are voters to make of that? The politicians obviously hope it will make them appear fiscally responsible, but without knowing what they have cut it is hard to give them that credit. The programmes might have been wasteful, like their free doctors for everyone of superannuation age which they have decided to delay by six months in view of the slightly lower economic growth figures from the Treasury.

That policy was the centrepiece of Labour's campaign launch only 10 days ago. Trimming the costs of such a signature programme, even by so little, suggests the party leaders are changing the thrust of their campaign. It is now more important to them to appear fiscally responsible than socially generous. That could mean they rate their chances of becoming a government rather higher than they did before they saw the full effect of "dirty politics".

More than likely the unnamed plans they have abandoned involved more "universal" benefits like the free healthcare they are offering the over 65s. Labour has a philosophical attachment to the principle of "universality" -- benefits that carry no means test -- and the further the party feels itself from power the more it tends to indulge that preference.


It does not mind being accused of "big spending" when it is in electoral survival mode, appealing to its core voters. But if it senses a contest becoming more even, it will try to appeal to the middle ground with budgetary control.

It is good for the country that both major parties are now claiming to be the more fiscally responsible. National is running on its return to surplus but it will be another three years before its capital borrowing will start to reduce. This is no time for National to be talking about tax cuts, even vaguely. The Prime Minister and Finance Minister have been giving different signals on this subject. John Key clearly wants to give some sort of conditional undertaking to reduce the lower rates of income tax if he is given a third term. Bill English sounds resigned now to some such offer during the campaign.

Alternative Prime Minister and Labour leader David Cunliffe talks about his values and his party’s in a Herald Hot Seat interview with NewstalkZB host Rachel Smalley, Herald columnists Toby Manhire and Fran O’Sullivan and political editor Audrey Young. The interview was conducted on August 6.

Labour is committed to raising the top rate to 36 per cent and introducing a capital gains tax on residential rental property. It also wants to use surplus revenue to resume contributions to the NZ Superannuation Fund, which would boost domestic savings. Without more big spending announcements, its claim to fiscal responsibility is getting better by the day.

Mr Cunliffe said Labour still had proposals to announce, "some that involve further spending and some that don't". Whatever they are, National will paint them as profligate. It will also remind voters that if Labour is in a position to lead a government after the election the Greens will be a large part of it. The Greens want to increase the top tax rate to 40 per cent and run larger surpluses than National plans.

Alternative budgets are one thing, their credibility is another. National has managed to restore the current account almost to balance without making deep and obvious cuts in public spending. That record will be hard to beat but Labour seems to be making an attempt.

The programmes it has dropped may be phantoms, but the stunt has said something worthwhile.

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