Exemption policy heralds risks, hardball from Labour

Damned if he does; dog tucker if he doesn't. Phil Goff's promise to remove GST from fresh fruit and vegetables might be interpreted as a sign Labour has gone completely gaga.

There is method in the party's seeming madness, however.

The promise has been panned by the political cognoscenti as the act of the truly desperate.

Mr Goff is not looking for plaudits from such quarters.

The voters he is courting probably think the Wellington beltway is a meteor shower in a Star Wars movie.

The capital's well-heeled political elites certainly dwell on a different planet to that of the population of Porirua East, barely 30km up the motorway and one of the poorest suburbs in the country.

This state house enclave is critical to Labour ensuring it not only wins the upcoming Mana by-election, but wins it comfortably.

Mr Goff needed a new and easily understood policy for the by-election which was both identifiably Labour and Labour's alone.

Labour can rebut its critics by pointing to a survey of shoppers conducted by academics from Otago and Auckland universities.

It found that cutting prices by the GST equivalent would result in fruit and vegetable purchases rising by about half a kilogram per household each week.

Research elsewhere suggests those on low incomes are more price-responsive than those on higher ones when it comes to buying fruit and vegetables.

Such findings have Labour claiming the moral high ground on the basis it is doing something concrete to cut New Zealand's shocking obesity rates.

However, more pressing political reasons underlie Labour's ditching of the purist position on GST exemptions.

Aside from the by-election, Labour needed something that kept media attention focused on National's hiking of GST from 12.5% to 15% in the lead-up to the October 1 change.

The message voters are supposed to take from the proposed exemption is Labour is committed to policies that are fair to all, rather than favouring a few.

This fits neatly with the party's sustained barrage on the trade-off between GST going up and personal tax rates coming down.

The goal has been to persuade those on the average income or less that their tax cut has already been eaten up by yesterday's simultaneous rise in GST plus a locust swarm of other price rises.

Labour had to make the most of a rare opportunity to crash-tackle National on the cost of living.

The fact that National has sought to focus the debate on the long-term economic pluses of its tax package suggests Labour has had some success.

The by-election offers a further platform for Labour to hammer the theme that National's Tax Switch is a Tax Swizz.

A comfortable victory in Mana would be a much-needed morale-booster.

The party had been starting to gain momentum through the winter.

Then the earthquake struck.

The Prime Minister grabbed this fortuitous opportunity to vividly demonstrate his Government's all-round competence.

Mr Goff was shut out of the action.

Labour took a consequent knock in the latest TVNZ poll, while Mr Goff's rating as preferred prime minister remains at basement levels.


Little more than a year out from the election, Mr Goff is running out of options.

He can can either play safe and slide to inevitable defeat.

Or he takes risks to grab the initiative.

That entails revealing new, clear-cut policy positions much earlier than he would have preferred.

Even then, John Key's tactic of crowding Labour out of the political centre ground is making it extremely difficult for Mr Goff to establish major points of difference.

A classic example is National's revised policy on land sales to foreigners.

It is unashamedly interventionist in basically allowing Cabinet ministers to veto sales at will.

With National replicating what it would do, Labour has to jump one step further to the left simply to find some breathing space.

Such forces are another reason Labour has abandoned its long-standing opposition to exemptions from GST.

A further, more expedient factor was Labour's "Axe the Tax" campaign to stop the GST rise.

Labour always knew it would not be able to unwind the increase - something Mr Goff admitted when the new policy was officially unveiled last Monday.

That admission got little coverage.

The announcement of the fruit and veg exemption policy has spared Labour's blushes.

But not completely.

Mr Goff has faced charges that this is a difference-for-difference's sake gimmick which would not only be an administrative hassle, but worse, set an unwelcome precedent which would fray the whole fabric of GST.

It will be mighty tempting for a minor party to promise to exempt some good or service and then make that a bottom-line condition for it backing a minority government.

The Maori Party, which had a take-GST-off-healthy-food private member's Bill voted down, might well be licking its lips in anticipation.

The policy switch must have required some in the Labour caucus to swallow hard.

There have been some feeble attempts to justify the abandoning of the party's long-held opposition to exemptions on the grounds that GST at 15% becomes a far more regressive tax penalising the less well-off.

Such arguments cannot shroud the real reasons behind what is a major policy shift for Labour, however.

That change has been accompanied by a major attitude shift.

Labour has distributed a flyer which seeks to deliberately trick people into thinking National is responsible for the entire GST component of their bills.

Just as scurrilous is Labour's bogus assurance the $270 million cost (at least) of foregoing GST on fresh fruit and veg would be funded by the recent rise in excise duty on tobacco.

That money is already accounted for in government spending.

Mr Goff is playing hardball.

He has little option. National beware.

The old enemy is going to be a tougher and rougher election-year proposition than you might think.

John Armstrong is The New Zealand Herald political correspondent.


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