Time for the long view for a third (and fourth?) term
Colin James's NZ Herald column for 9 November 2004
Who is that who has just popped up on the government's right? Jim Anderton, promoting a 30 per cent company tax rate. Whatever next?
Two years ago once-protectionist Anderton embraced freer trade. He had observed the burgeoning of high-valued-added niche-market textile and clothing exporters who found tariffs, if anything, a constraint.
What does he observe now? That the headline company tax rate is 3 per cent higher than Australia's 30 per cent and one of the highest in the Asia-Pacific, though Australian add-ons such as compulsory subsidies to employee superannuation and capital gains tax push the effective rate above 33 per cent.
Anderton agrees that "it's unlikely the headline corporate tax rate alone will cause investors to switch to New Zealand" but insists a cut will "improve New Zealand's prospects as part of a set of attractive policies".
Anderton notes that company tax is essentially a withholding tax and would eventually be paid by shareholders on correspondingly higher dividends -- unless it is reinvested in research and expansion of the business. That is what he believes most businesses would do, so boosting economic growth, profits and wages down the track.
Perhaps -- among local companies. The problem, as his senior partner in the government points out, is that the foreign owners of a large swathe of the economy might well take the money and run. Anderton will not get his 30 per cent tax rate while Michael Cullen is at the Treasury.
What, then, should we read into his switch?
First, it might give Anderton more kudos among small businesspeople, many of whom, judging by the New Zealand First conference last weekend, are attracted to that party. It will suit Labour if he succeeds.
Second, Anderton has not forsworn his Progressive party's steeper personal income tax scales. And on Sunday the party recommitted itself to "free" tertiary education and proposed to pay graduates' loan repayments for three years if they stay and work here. (It needs a lift in the polls.)
Third, Anderton is not so much "left" as traditional Labour. That shows in his conservative attitudes on some moral issues, notably drugs. That this Labour traditionalist backs freer trade and lower company tax illustrates the shift in Labour's centre of gravity as it seeks to command the centre.
Labour's opponents have trumpeted a leftwards shift during its five years in office. This is based essentially on policy elements such as: higher taxes, a bigger public service and more spending; recentralisation of social services, with less flexibility and choice; re-regulation of the workplace; laws that ban smoking, legalise prostitution and allow something akin to gay marriage; and fiddling with the constitution.
But the government has also, among other non-left moves, pursued free-trade agreements, lowered tariffs, kept student loans, maintained a regulatory environment for business that is still less cumbersome and constricting than Australia's, kept the top tax rate below Australia's and run large Budget surpluses.
By the standards of European social democracy and pre-1984 Labour, to preserve which Anderton set up his breakaway party, Helen Clark's Labour is a party bent on holding the centre. She aims to command so much of the electorate that National is wedged into "extreme" stances.
But in politics just being somewhere is not enough. A government must also be going somewhere. In politics there is always more to be done. If the politicians don't think so, the voters do.
That is Clark's challenge at Labour's conference this weekend: to project where the government is heading. She aims to respond with a programme of social and economic development reaching through and beyond a third term.
Rule out more moral liberalisation. Dead or alive, the Civil Union Bill is the last big such initiative for some time. Also rule out big constitutional changes, though opposition parties will make hay out of the looming stocktake.
Rule in more social spending but also policies to encourage people to build financial assets.
Rule out more big concessions to Maori outside the historical claims process. Henceforth the Maori focus is on economic development. (John Tamihere's cabinet spot, by the way, will stay vacant until after the election, thus easing the entry of ministers from another party then.)
Rule out more workplace regulation. Rule in getting workplaces more productive by tax changes, skilling, best-practice examples and making work more attractive, especially to women outside the workforce -- hence exhortations for pay equity and "work-life balance". The peak unions are onside: higher productivity growth means higher real wages, higher tax revenue and so better infrastructure and social services.
And higher wages would mean contented voters in elections beyond 2005.
Of course, first Labour must hold power in 2005. But this weekend's conference, united and habituated to governing, will ooze confidence that can be done.