Hehir praises Labour-Greens fiscal rules

Liam Hehir writes:

Has Labour’s anti-capitalist fever finally broken?

Several weeks ago, Andrew Little made an unambiguous commitment to not increase taxes. This is a significant shift for Labour. Less than a year ago, finance spokesman Grant Robertson was saying tax increases were on the agenda.

Then, last week, Labour and the Greens announced a set of “budget responsibility rules”. These promised to maintain current levels of government debt. It also committed any new government to maintain overall spending rates at their present levels.

These developments have two very positive implications.

First, it shows the opposition sees itself as a serious alternative government. When parties think they have a sniff, they become conspicuously moderate. They run what are sometimes denigrated as “me too” platforms that stress continuity.

It also illustrates that Labour is still a party to the post-Muldoon consensus. It would never use the word, but it remains committed to the basic precepts of neoliberalism. And, through the need to present a united front, they’ve dragged the Greens along with them for good measure.

The Greens have signed up to keeping spending to under 30% of GDP. This is lower than Ruth Richardson or Bill Birch managed. It’s superb that Labour got the Greens to agree to this.

The principles behind the Labour-Green declarations are sound and praiseworthy. They communicate a sense of responsibility. Yet they are not without risk either.

Expensive new and better funded programmes, no tax increases, a budget surplus.

Governments may, as a rule, choose any two of these. Unless they are working from a massive existing surplus, they cannot have all three.

To become prime minister, Andrew Little must master this “impossible trinity”. If he fails to do so, the promises of March could be his undoing.

Over the years, Labour and the Greens have promised many things to many people. There is nothing surprising about that, of course. Promises of more money is what oppositions do.

But meeting these promises will cost billions and billions of dollars. The Government surplus, meanwhile, will be “only” a few billion dollars. Accordingly, there is no way to meet all those pledges without more taxes or borrowing.

I really look forward to costing the Labour and Green policies, so we can see if their policies match their pledge.

Green co-leader Metiria Turei faced criticism for this on Twitter. She responded by claiming that “a shift in current wasteful spending” would enable better funding of social programmes.

Great – the Greens now want to fund new spending by cutting existing wasteful spending. Exactly what National has been doing. Welcome to the club Metiria.

Governments rotate in and out of power. Another Labour government is all but inevitable. It may not happen in 2017, but as the years go on, we will only get closer to the day it recaptures the Treasury benches.

I am nobody’s idea of a Labour supporter, but our democracy would suffer if it didn’t win elections from time to time.

Labour governments are an essential part of our political ecosystem. And if they’re relatively conservative when in power, so much the better.

A Labour/Green Government that pledges to keep spending to under 30% of GDP worries me a lot lot less than a Labour/Green Government with no such pledge.

I’d prefer National to win this election but so long as Labour and Greens kept their word to keep spending below 30% of GDP, them winning would not be a disaster as it would have been in say 2014.