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Analysis by Dr Bryce Edwards – New Zealand Budget Analysis: Explaining National’s apparent shift to the left

[caption id="attachment_13635" align="alignleft" width="150"] Dr Bryce Edwards.[/caption] National’s 2017 Budget is a very centrist affair and it involves implementing many of the types of decisions that might be expected of a centre-left Labour-led government.
The political left sometimes portrays the current National Government as a radical rightwing administration that is determined to screw down the lot of working people. And there’s certainly an element of truth to this. But by and large, this government is mostly quite centrist, which is why Labour has had such a hard job in opposition. The reality is most of the public – rich and poor alike – simply don’t see the government as evil and uncaring. And whenever it has carried out austerity reforms over the last nine years, these have generally been accepted by the public in the context of a global financial crisis forced upon them.
A Centrist shift into Labour territory
Yesterday’s Budget by Steven Joyce will cement perceptions that National is pragmatic, sensible, and perhaps even relatively caring. So how are we to understand this shift? Is it significant or barely noticeable? Is it mere electoral calculation, or something more principled on the part of National?
First, it’s worth establishing how much of a shift to the left Steven Joyce has taken. Four leading political editors have suggested National has moved into Labour’s left territory with the Budget.
Fairfax’s Tracy Watkins focuses on the impact of the Budget on lower socio-economic groups: “There are shades of the infamous chewing gum tax cuts for those on the lowest incomes – someone on $15,000 a year won’t even scrape up enough for a Big Mac, qualifying for just $1.30 a week. But whopping increases to the accommodation supplement and – to a lesser extent – working for families make up for it. The Working for Families and accommodation supplement changes are deliberately targeted at those on the lowest incomes, and those living in areas where soaring house prices have resulted in more families living on the breadline. Some families could be as much as $145-plus a week in the money, depending on where they live, once based on the accommodation supplement changes alone. That will make big inroads into New Zealand’s child poverty rates, an area that are increasingly troubling even wealthier voters” – see: Tax threshold move an election bribe eight years in the making.
Herald political editor Audrey Young sees this focus on the poor as being bad news for Labour: “It is a Budget that makes life better for many low and middle-income Kiwis and it makes life worse for the Opposition. The design of the $6 billion package to lift incomes over four years makes it difficult for the Opposition to complain. Under the package 50,000 fewer children would be in low-income households (as measured by the OECD) at April next year – a 30 per cent reduction in that particular measure of child poverty” – see: Bill English the cat that got the cream.
On TV3, Patrick Gower also emphasised how Joyce had “gone further with a major incursion into Labour territory with the changes for low and middle income earners – the ‘Kiwi battlers’ living on ‘Struggle Street’. The 1.3 million Kiwi families are the exact same families National wants to target with its election advertising – and what better advertising is there than cash?” – see: Budget 2017 ‘The Cash Bribe Budget’.
Similarly TVNZ’s Corin Dann pronounced “It’s pretty bold stuff for a conservative National government and a clear foray into Labour territory in election year” – see: Joyce loosens the purse strings in a bid to play catch up.
Even the satirists were singing the same tune. Raybon Kan summed it up like this: “if you’re a child with behavioural issues, in a low-income family, supported by an average worker, and your mental health issues are due to an unrequited, burning desire for a City Rail Link, then yesterday’s Budget was a love letter to you. Hurry up and get old enough to vote!” – see: Budget about as exciting as a chores roster.
Kan says Labour are the real victims of National’s shift to the left: “even if $15 to $30 a week isn’t a lot of (cliche alert) avocado toast – it looks like National might just have eaten Labour’s lunch. Along with low-income families, one of the main winners yesterday was ‘the average worker’ – by definition, Labour’s target market. Game on.”
It all means that National can go into the election campaign was a more social democratic message than might otherwise have been possible, suggests Tim Watkin: “The ‘family incomes package’ is designed to tick all the boxes Steven Joyce’s campaign manager (oh, that’s right, it’s him) would want. It’s created with campaign lines front of mind, such ‘putting money into the pockets of those at the bottom’ or ‘sharing the benefits of growth’.” – see: Is it enough? Budget 2017 dissected.
He considers it a very smart ideological repositioning by National, especially in the absence of their previous poll-winning leader: “this Budget feels like a start of something: The post-Key era. Budget 2017 – the Key-less Budget – is perfectly timed for a third term government which as lost its star act; instead of selling competence with a sprinkle of John Key stardust, National will now sell the message of a social dividend after the hard years. Without Key to show “heart”, the party’s “head” – in the form of Bill English and Steven Joyce – is using policy and spending to show National cares and hasn’t gone all boring and businessy without ol’ JK.”
Those with the most to complain about are on the political right, says Watkin: “Act’s David Seymour can reasonably argue that National has lost touch with its roots. This is a budget that must have driven Ruth Richardson and Don Brash spare.”
And indeed, Seymour attacked the Budget in Parliament, saying it was “the type of budget we used to expect from Michael Cullen”, and that “Finance Minister Steve now proudly wears the hammer and sickle on his sleeve”.
Many business leaders also identified the Budget as shifting politics to the left. For instance, Deloitte NZ chief executive Thomas Pippos stated that “In many respects the Government has moved further left, with the right needing to be content with debt reduction and a plan to achieve greater social cohesion” – see: Budget throws blanket over middle NZ. Pippos explained that National “are looking to occupy even more space across the traditional political spectrum including by looking to occupy even more of their non-traditional ground.”
A Pragmatic electoral manoeuvre 
So, are National hoping to win over leftwing voters? Unlikely, but according to Richard Harman, the Budget’s compassion focus “was intended to reassure nervous National Party supporters that this was a Government that not only cared but which could also confront Labour in its heartland” – see: The political strategy behind the Budget. He elaborates: “sources close to the Government say that what also worries the Beehive is that sections of the party’s support base have become disillusioned at what they see as growing inequality, difficulty getting health care (particularly mental health care), rising crime rates (particularly in Auckland) and a failure to get to grips with the massive immigration-inspired population increases in Auckland.”
The NBR’s Rob Hosking argues such a centrist shift shouldn’t be surprising, as traditionally National is quite comfortable in the middle of the political spectrum: “It’s been flagged, in some quarters, as National acting like a Labour government but this analysis only really applies if you think the first two years and the last two years of the 1990s National governments were the norm and not, in fact, an aberration. National has – like other conservative parties around the world – always been quite happy to lift social spending if it sees a need to boost the public well-being and general social cohesion. And if, perchance, that boost to wellbeing and social cohesion helps re-elect National governments, well that’s just one of those happy coincidences” – see: No lolly scramble in the Budget but sweeteners a-plenty (paywalled).
Similarly, Liam Hehir says the same shift is happening with rightwing parties all over the world: “All this fits within the global pattern of Centre-Right governments trying to bring Centre-Left voters into the fold. Communal conservatism is on the rise and market individualism is being pushed aside. This Budget is a continuation of the trend, not a revolution in and of itself” – see: Not a chewing gum budget or communism by stealth.
This pragmatism is also endorsed by former National Cabinet minister Wayne Mapp, who says the Budget signals National is sticking with the middle: “Budgets are not just about who gets what. They also signal the philosophical direction of government. In this instance a relentless commitment to middle New Zealand. National has to hold on to around 45 per cent of the vote if it wants to govern. Forty-five per cent is a big number. It covers many more people than traditional National voters. Keeping swinging voters is a difficult art, especially for a third-term government. It can only be done by a careful balance between giving voters a direct financial benefit while ensuring that hard pressed lower-income New Zealanders get a fair deal, especially in housing, and real opportunity to get ahead” – see: Budget shows a relentless commitment to middle NZ.
Such a shift has been brewing in National for a while, and in a very strategic way, says former National spin-doctor Ben Thomas: “Over the past year, with mounting budget surpluses projected, National has absorbed criticism from the opposition that it is underinvesting in families, neglecting infrastructure heaving under the weight of immigration, and allowing social services to be run down. And today National punched back, promising increased spending in almost every area conceivable. Across the board tax cuts. Increased social spending. Enormous investment in roads. Even more money for Radio New Zealand!” – see: The rope-a-dope budget: Ben Thomas reviews Budget 2017.
Thomas suggests this Budget is a hard one for Labour to respond to: “Labour can’t complain – this is what they asked for. So now they will be forced to specify exactly what they want to cut throughout the election campaign when they promise new spending. Andrew Little looked flatfooted and defeated in his third budget speech as opposition leader.”
But is the Budget really so generous?
The strongest critique of the Budget is by author and researcher Max Rashbrooke, who actually gives some applause to the Budget, saying “There is, admittedly, much to commend in the Budget, for what it does to support New Zealanders and to increase fairness” – see: A Government trying to make up for past neglect. Rashbrooke suggests, also, that the Budget will help stop the more “compassionate National supporters” from deserting the party.
However, he says the problem with the Budget is that it only plays catch-up, rather than deals more robustly with the deeper problems: “In today’s Budget the Government seems to be playing the role of a parent who, after years of providing minimal support, turns up at their child’s birthday party bearing presents and hoping to be showered with praise.”
Rashbrooke points out that expenditure by National is still low: “Calculations by Victoria University and the New Zealand Institute for Economic Research show that, from 2009 to 2016, core government spending actually fell on an inflation-adjusted, per-person basis – only by 0.7 per cent, hardly the slash-and-burn some on the Left would claim, but a cut nonetheless”.
Richard Harman also looks at these figures: “Education spending is projected to fall by 1.6% in the 2017 budget year, with spending falling about population and inflation by 7.9% by 2021. Real per capita spending in health will fall slightly the coming Budget year (-0.1%), but over the forecast period is projected to fall to 7.9% below current levels by 2021. Those areas seeing significant increases during the new Budget year include law and order (+5.3%), defence (+2.0%), and welfare (excluding New Zealand Superannuation) (+0.9%)” – see: The political strategy behind the Budget.
Today’s Dominion Post editorial also makes the case for National’s neglect: “This isn’t a briber’s election-year Budget, although it likes to give an impression of generosity. Many of its measures, in fact, barely make up for the long years of tight budgets and big deficits” – see: The Budget is more of a catch-up than a spend-up.
The newspaper points out that many of the gifts given in the Budget are not as generous as they might appear. For example, “The overall cost of Working for Families has fallen in real terms in the last five years. The changes announced yesterday would restore most of that, but that’s about all. The claim that the changes target low and middle-income earners is also not as simple as it sounds. The widening of the 30 per cent threshold was tiny, from $48,000 to $52,000. And years of fiscal drag have pushed many middle-income earners into higher tax brackets.”
On this issue, Vernon Small also points out that “when the average wage was $49,000, the threshold was $48,000. Now the average wage is $59,000 with the threshold at $52,000. If anything National has gone backwards and the problem is worse than at the start of its watch” – see: Budget 2017 a taster for the election main course.
Similarly, Gordon Campbell asks: “is this Budget really as good as it gets?”, and suggests that a lot of the apparent centrist shifts are done with “smoke and mirrors” – see: On yesterday’s Budget. Campbell says: “Obviously, it is better to have a few crumbs from the table than nothing at all. Yet given the claims by Minister Joyce that sound economic management has finally created an opportunity to spread the largesse around, the rewards look meagre indeed – in terms of addressing existing social need, this Budget looks more like the same old soup kitchen rations than a four year banquet.”
Many commentators focused on what was missing from the Budget. For example, according to Shamubeel Eaqub, “There were two big misses: housing and the social investment approach. There was more money for the accommodation supplement and emergency housing. Both bottom of cliff stuff. There is no material and aspirational investment in significantly boosting housing supply. While the government has talked a lot about its social investment approach, it has allocated more money to building prisons, and subsidies for film-makers than its social investment approach package” – see: ‘A classic election year budget’: Shamubeel Eaqub reviews Budget 2017.
The catch-up nature of many of the Budget changes is also emphasised by economics writer Brian Fallow: “Both the increases to the income tax thresholds and the changes to Working for Families tax credits are overdue. The income tax scale was last adjusted in 2010. So we have had seven years of fiscal drag or bracket creep, where as income rises more and more of it will be in the taxpayer’s marginal tax bracket, delivering a slow but relentless increase in the average tax paid on every dollar earned” – see: The better than nothing Budget.
And, not only are these catch-ups late, they are rather limited according to Jane Clifton: “as even the sectors most benefitting from the spend-up will attest, Joyce has not cured their resource shortages, or even anaesthetised their problems, but rather administered some temporarily-pleasing Botox shots” – see: Welcome to the delay-button Budget. She says, “This is a Budget to scratch all itches – but not as vigorously or instantly as the headline numbers would have the casual observer believe.”
Finally, for more satirical critique of the Budget, see my blogpost, Cartoons about Steven Joyce’s 2017 Budget.
Today’s content
All items are contained in the attached PDF. Below are the links to the items online.
Patrick Gower (Newshub): Budget 2017 ‘The Cash Bribe Budget’
Jane Clifton (Noted): Welcome to the delay-button Budget
Gordon Campbell (Scoop): On yesterday’s Budget
Richard Harman (Politik): The political strategy behind the Budget
Bernard Hickey (Newsroom): A small kitchen sink of a Budget
Thomas Pippos (Herald): Budget throws blanket over middle NZ
No Right Turn: It must be election year
Brian Fallow (Stuff): The better than nothing Budget
Donal Curtin (Economics NZ): Budget 2017 – the big picture
Peter Townsend (Stuff): Budget 2017: Spreading it around
Shane Cowlishaw (Newsroom): Stealthy tax cuts for the rich?
Tom Pullar-Strecker (Stuff): Prudence was the name of the game
Kirk Hope (Stuff): Budget missed tax opportunity
Toby Moore and Murray Petrie (Newsroom): ‘Let’s make the Budget more scrutable’
Audrey Young (Herald): Budget 2017: By the numbers
Martyn Bradbury (Daily Blog): 10 Facts about how bad Budget 2017 really is
Evan Harding (Southland Times): More money for low earners welcomed
Simon Wong (Newshub): Budget 2017: What it means for you
David Farrar (Kiwiblog): Stuff exposes Labour lies
Sam Sachdeva (Newsroom): Mixed response to mental health package
Lynn Grieveson (Newsroom): Budget targets funding at special needs
Mark Jennings (Newsroom): A relieved RNZ gets more money
John Drinnan (Herald): RNZ comes in from the cold
Michael Fallow (Southland Times): The budget as seen from the south