By Duncan Garner
Phil Goff's Labour Party is unlikely to axe the GST increase that will be revealed in next week's budget.
Goff has made a speech in Nelson today, and afterwards said it would hard to reverse the planned increase from 12.5 to 15% - despite months of campaigning against the tax.
Goff says Labour will look at exempting fresh fruit and veges from the GST increase - but he stopped short of committing to it. It's a difficult area for Goff, as a politician he has spent the best part of two decades opposing exemptions for GST - he has always said it must include all goods and services.
But he's justifying his change of heart by saying low income people will be offered little relief by way of compensation from the Government in next week's budget - and something has to be done.
Raising GST will raise $2 billion, and Goff's Labour Party has some seriously big spending promises that it also needs to fund.
And that's why Labour can't 'axe the tax' it's been campaigning against. Goff says he will reintroduce a top rate of tax at 38c for those earning over $100,000. Currently the top rate of tax kicks in at $70,000 but that's likely to next week be dropped to 33c in the budget.
Goff also says a new Labour Government would restore contributions to the NZ Superfund, at a cost of $2b a year. Labour is also promising to restore entitlements to Kiwisaver that National took away. Under Labour, employers would have had to contribute 4% to their employees. National cancelled that. Labour is clearly signalling it will once again force employers to be more generous.
Goff is also looking at making Kiwisaver universal or compulsory. I think that's smart from Goff. Australia has a compulsory scheme. Currently it's a 9% contribution - but it's going to 12% shortly. Savings are crucial to the performance of an economy.
So what to make of Goff's alternative budget?
It's not a full and exhaustive list of what Labour would do. And most of it shouldn't come as any surprise. Goff has signalled already that the top rate of tax would be re-introduced. It's clear middle and low income earners will get extra relief - but how much? No one knows. It's hugely expensive to give tax cuts to the majority. The Superfund restoration is not surprising. It was Labour's baby. The Kiwisaver shake-up is also not surprising - that was also their baby.
The biggest surprise is the GST exemption on fruit and veges. It's a major change for Labour. Michael Cullen never agreed with it, but Labour has to carve out new territory, and Goff is trying to do it.
But is it enough to get the crowds engaging with Labour again? Probably not. Not at this stage. But Goff had to do something pre-budget. The real meat on Labour's policy bones will come in election year.
Labour needs some kind of policy circuit breaker. It wasn't in today's speech, but that wasn't the plan. Labour needs to show next year - it has some kind of alternative thinking, perhaps a couple of big ideas. Exempting apples from the GST hike and restoring old Labour policies is a start - but it's not an election winner.
The real problem for a party that loves to spend - is that there is no money.
If Goff really wants to make ground right now - he should pile into John Key. Key has led Tuhoe down the garden path over its treaty settlement. It looks like he has seriously misled them over title to the Ureweras. Now Key's integrity is being questioned and rightly so. Not just by Tuhoe, but by his coalition partner, the Maori Party. Goff should put policy to one side for now, and use this opportunity to re-engage with the Maori Party and expose Key for the double dealing.
The Maori Party/National relationship is strained. Key's word, his credibility, his integrity is being questioned.
What an opportunity for Goff.