Labour’s finance spokesperson Barbara Edmonds says she will follow the lead of Michael Cullen with moderate, long-term thinking on fiscal and economic policy.
Edmonds gave one of her first public speeches at the Hutt Valley Chamber of Commerce on Tuesday morning, responding to an earlier speech by Nicola Willis with the same hosts.
She used the time both to introduce herself and critique her rival’s upcoming budget.
Willis was stuck on short-term thinking and was pursuing tax cuts which didn’t meet Cullen’s four tests. Cuts shouldn’t add to: public debt, service cuts, inflation pressure, or inequality.
She told the business people gathered in the Hutt Valley that the Coalition Government didn’t understand what the public service does.
“A strong public service delivers services for all New Zealanders. A strong public service supports the private sector,” she said.
Her predecessor, Grant Robertson, had been aware the public service had to be downsized after the pandemic response to get the Crown accounts back into balance.
“He had already asked departments to find 2% savings which is a sensible first sweep. These current cuts go too deep, too fast and we are seeing the repercussions already”.
She told reporters businesses as far away as Wairarapa and Kāpiti Coast had told her they were already laying off staff and cutting hours in response to the public sector job losses.
“The choices they are making will leave deep economic scars which will require careful treatment when we come back into government”.
Future-focused
Edmonds said she would take a much longer-term view of government finances when forming policies for the Labour Party.
“How do we achieve intergenerational equity, as we stare down the barrel of an ageing population, climate change, and infrastructure shortfalls,” she asked.
Treasury had estimated that extreme weather events alone could add about 4% to net debt, as a percentage of the economy, over the next 40 years.
“It’s not just Budget 2024 that will define the economic credibility of this government, it’s also their response to these intergenerational challenges”.
The question of how to achieve intergenerational equity was a rhetorical one. Edmonds wouldn’t be drawn on specific tax and spend policies.
She said the “narrow” debate on specific aspects of tax policy were “missing the point” as a single policy change couldn’t solve these long term challenges — all levers must be looked at.
However, she hinted her credentials as tax policy expert and Cullen disciple meant she was not reaching for the most populist policies.
“With Sir Michael’s words ringing in my ears — this is not an eat the rich moment,” she said.
Instead of a “juicy soundbite” on wealth or capital gains taxes, Edmonds gave the audience four foundations on which policy will be decided.
These were cost of living support, leveling the playing field for small and medium businesses, long-term economic planning, and steady infrastructure investment.
Great and small
The closest thing to a policy announcement in the speech was a firm promise to help reduce compliance costs and tackle provisional tax policy for small and medium businesses.
She said her sympathy for small operators dated back to her time as an independent contractor, when she would do her compliance paperwork on the kitchen table at 10pm.
Businesses, particularly smaller ones, were critical to employment and the wellbeing of New Zealand and would be looked after by a Labour Government.
“In the world of tax, like business and finance, certainty is key — unintended consequences and the incidence of where the burden falls, all follow closely behind”.
Governments often listened too closely to large businesses, which could afford flash lobbyists, and didn’t do enough for the smaller ones. She wouldn’t make the same mistake.
“I do not have disdain for wealth creation – I want people to create wealth, but I also want it to be more widely shared, to help tackle poverty, and reduce the inequality gap”.
A member of the Hutt Valley Chamber told Interest.co.nz there was “some truth” to the idea that governments could be captured by large business interests, at the expense of small ones.
But they also said that most in the room would agree the Coalition’s cost cutting programme was needed to put the Government finances back on a sustainable path.
*There's more from Edmonds in a recent episode of our Of Interest podcast here.
51 Comments
Regrettably the status quo ain’t going anywhere else soon. However it goes beyond that. All parties are guilty of introducing individuals to parliament that have been proven not fit to be there. The calibre and integrity in my opinion has worsened since MMP. Parliament itself is being undermined in discipline and respect by the very people elected to uphold the solemnity of office.
Its worsened since public service now requires people to have completely unblemished backgrounds. No longer can people with abrasive personalities, childhood misdemeanors, or volatile personal relationships, put their hand up for public office no matter how talented and skilled they might have been at the job of running the country. Everyone must be personality-less and have lived the life of a monk.
“A strong public service delivers services for all New Zealanders. A strong public service supports the private sector,” she said.
but under last Labour government, spending skyrocketed, and services like doctors, nurses, teachers, police, all gone wildly in shortage.
did that pass the test?
Better tell that to Willis so she doesn't have to borrow 15 billion for the tax cuts next year. Surely she could make the numbers add up if there is so many people standing around not helping?
Sure there is likely a lot of waste, but if simply shrinking everyone's budget and telling the public that whatever happens next is the middle managers fault is a masterclass of CEO management, then maybe CEO's are paid far too much?
Despite being notedly intellectual and highly academically qualified he was more than quick to stoop to some pretty low down gutter sniping which frankly should have been beneath him. For instance a vile personal attack on Merv Wellington and savagely insulting his old school that had been generous enough to provide him with a scholarship. Apparently in cabinet Richard Prebble often reduced him to tears. To quote my grandmother- that will always happen to the smaller bully when he meets the bigger bully.
At some point in time, NZ will have to join most of the developed world in having a more balanced tax system-and that will mean a comprehensive capital tax.. If labour opts for a wealth tax-and it will be pushed hard to do so by both the Greens and the Maori party-I doubt if it will be elected. There are good reasons why so few countries have one.
An Inheritance tax would make some sense but I can't see that happening either. I would favour a CGT with tax limited to the non-inflationary part of any gain and a tax on every property sale-a stamp duty.
An Inheritance tax would make some sense but I can't see that happening either
I don't think governments should get paid when people die. It's the kind of thing that gets put into a cost-benefit analysis and then you get all sorts of perverse incentives, like Pharmac stops funding or chooses not to fund things.
"I don't think governments should get paid when people die."
Paid? Did you mean "paid back" for the free stuff that person received throughout their lives? And not just directly, but from everyone that bought the product or service the dead person produced.
With regards the "perverse incentives" you mention. Have you got any examples from overseas (or when we had such taxes) to relay?
The question is not what anybody deserves. The question is who is to take on the God-like role of deciding what everybody else deserves. You can talk about 'social justice' all you want. But what death taxes boil down to is letting politicians take money from widows and orphans to pay for goodies that they will hand out to others, in order to buy votes to get re-elected. That is not social justice or any other kind of justice.
Thomas Sowell
The case for inheritance taxes is that on a long enough timescale, the transfer of inherited wealth becomes a real issue. Take the UK or India for instance, where people are divided into classes by the circumstances of their birth. Once wealth is built up enough it becomes self-sustaining regardless of the merit behind it and reduces social mobility and cohesion.
It's fair enough if you save up for your kids, but at what point does it become problematic? Do we return to a feudal system where a select few own everything and rent it out to the lower classes whose parents weren't able to pass down wealth and property? It doesn't happen overnight but we are seeing this kind of thing starting to take route where your lot in life is not determined by merit but by how wealthy your parents are.
When working hard is no longer correlated to higher incomes the disassociation of effort and reward makes society as a whole more fragile.
+1
Inheritance taxes are totally justified.
An inheritance is income in the recipient's hands and should be taxed as such.
It needs to go with a gift tax to capture pre-inheritance transfers.
The tax system needs to level and fair and these 2 taxes form part of such a foundation.
With regards the "perverse incentives" you mention. Have you got any examples from overseas
Sure, look at what's happening in Canada. People are being "voluntarily" euthanized because they have chronic conditions that could be treated or managed, but the government has either pulled funding for treatment or just won't fund new treatments, because it's cheaper if these people just kill themselves. Add in an inheritance tax and it gets even cheaper still, they'll pay you for the privilege.
She told reporters businesses as far away as Wairarapa and Kāpiti Coast had told her they were already laying off staff and cutting hours in response to the public sector job losses.
Yes, Govt agencies have been holding vacancies for 6 - 12 months. This has been masked in the figures by Govt employing people that they used to have as contractors. The proverbial is hitting the fan in slow motion. And, we're still just getting started.
"this is not an eat the rich moment."
I always chuckle when I hear this. I am reminded of the French Revolution. A point in time when the few rich were massively rich but doing little useful with their riches, and the vast majority were impoverished. They never ate their rich.
It was enough for Madame Guillotine to whop their heads off. (Although I understand at least a few were fed to pigs which no doubt got eaten later.)
Sorry for the black humor. With the High Priests about to deliver even more pain and suffering for anyone who is not rich tomorrow, I feel it's entirely appropriate.
It is an eat the rich moment.
No comprehensive capital gains tax or inheritance tax in NZ means that those able to gather capital assets across their lifetimes are getting a free ride while the rest of society pays the price.
a) The rich don't exist in a vacuum and make their profits within society. Those that don't agree can go to venus and make them there by themselves.
b) A capitalist society will always be a pyramid with a few very wealthy and many poor & an unemployment rate. The argument that everyone can make it to the top is illogical and pure fantasy.
The performance and largely failures of the six years of the 6th Labour government are though squarely on record. No escaping from that. The new coalition government is six months of age. As such they have the advantage obviously of having not much on record yet. However it is not difficult to share your skepticism, if not cynicism. Tends to take you back to the dreadful admission of Muldoon that his ambition was leave the nation in no worse state than when he assumed office. The new government is as well in a different form to previous coalitions. What they have inherited is in no way an easy task to put right and hence my placement of a big question mark about the next 30 months or so.
Quite like her acknowledgement of the importance of small business in NZ, but clearly she's either in denial, or she doesn't understand basic economics. NZ needs and is having to go through a major re set because of the failings of her parties policies.The deep economic scars we are having to deal with have been created by the party she so proudly represents.
Going forward..I will be watching and listening..with interest..
Great. Multi-nationals with their transfer pricing structures will pay a higher tax percentage on a much smaller percentage of revenue than smaller businesses.
Should introduce a financial transaction tax that kicks in when a company's aggregate outgoing fund transfers in a tax year exceed a certain threshold. Task the banks with collecting this on behalf of the Government.
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