Labour running out of time to sell its master plan

Election? What election?

You could be excused thinking that two rather pressing matters - a seemingly static poll rating and the onrushing election - might have sparked a tad more urgency on Labour's part regarding the unveiling of the key planks which would drive a Phil Goff-led government.

A week may be a long time in politics but Labour has precious few of them left to acquaint the punters with its master plan, let alone persuade enough of them of its merits to make for a serious contest on election day.

The Rugby World Cup kicks off in early September. For the following six weeks politics will truly struggle for coverage. Other than door-knocking at electorate level, politicians will be wasting their time trying to attract the attention of media whose focus will be elsewhere.

By the time the official four-week election campaign kicks off a week or so after the final cup match, it may well be too late for Labour to make serious inroads into National's current lead, which stretches from between 13% to 25% points in the major polls.

Labour effectively has to narrow that gap significantly within the next 10 to 11 weeks. Yet the party is not planning to start releasing major policy until around the middle of next month.

Mr Goff is biding his time.

Labour has its own timetable and it is sticking to it. This seems to have little to do with the traditional Opposition party's fear of fresh policy being a stolen by the rival governing party. It is certainly not the case on economic and tax policy with the two major parties heading down increasingly diverging routes.

It does have a lot to do with the country's current straitened fiscal circumstances. Labour somehow has to make an electoral silk purse out of revenue-deficient sow's ear. This takes time. Labour has to get its numbers absolutely right - or its credibility will evaporate overnight.

It has two choices. The first is to live within the confines of National's broad tax settings albeit with some tinkering of the top and bottom personal tax rates.

However, because Labour is committed to paying off debt as fast, if not faster than National, the net impact is that it will still have little cash available for new policies.

Some flexibility might be achieved by re-prioritising spending in some areas.

Labour will do that. But the big bills which have to be paid regardless - national super, hospital funding, benefit payments and so on - make this an exercise that can only produce relatively small gains in savings, more so given National's cap on the funding of Government departments has made things so tight.

The spending constraints will also see Labour phasing in some of its new policies over a period of years rather than in one go.

There is also the no small matter of the gaping hole which will be in Labour's balance sheet from National's banking of large portions of the money it expects to reap from partial sales of state-owned enterprises like Meridian and Solid Energy. This money - which could total around $7 billion - is designated for capital spending. As it is not selling those assets point blank, Labour will have to find the cash from other sources.

The net result of all this is to severely limit Labour's ability to present and promote an alternative vision for New Zealand which will capture voters' attention without blowing the budget.

Go down this path, and Labour is consigning itself to defeat.

Its vision has to be big, bold, brassy and ballsy. And that requires taking the second choice - broadening the tax base to raise extra revenue. That would require a capital gains tax or a land tax.

Lifting the top personal tax rate on incomes above $100,000 simply does not raise enough cash.

Victoria University's Tax Working Group estimated a capital gains tax, which exempted owner-occupied housing like the family home, could bring in close to $4 billion in revenue.

It would be a very big call. Promoting a capital gains tax has long been seen as a ticket to oblivion. However, while the the Greens are the only party openly advocating for such a tax, politicians are these days less tentative about discussing the idea.

Back in 2009, Mr Goff even offered Labour's backing for any National-initiated legislation imposing a capital gains tax on investment properties.

When asked since whether Labour would go it alone and introduce such a tax, Mr Goff's replies have intimated the idea has been the subject of serious debate within Labour's policy machine.

Labour might add further exemptions to ensure the great bulk of low to middle-income earners did not pay the tax. Its target is the well-off - especially those who structure their financial affairs to avoid paying any tax at all.

A capital gains tax fits perfectly with Labour's sloganeering that tough times require everyone to do their fair share to get the country fully back on its feet.

Selling a new tax during an election campaign is not for the faint-hearted, however.

While Bill English has made the occasional dispassionate remark about the virtues of a capital gains tax, National's natural inclination would be to rubbish it as as unworkable and punitive.

John Key has already been painting his party and Labour as "the politics of aspiration versus the politics of envy".

Labour's pushing of such a tax would also be seen by National as further evidence alongside Labour's raising the minimum wage that the old enemy is more concerned with not losing its base support than winning the election.

National might well be misreading Labour's intentions, however. A capital gains tax would be the kind of big, bold initiative Labour needs to really shake up the status quo and make a fight of it.

And it might turn out to be the first of several if Mr Goff is really going for broke.

 - John Armstrong is The New Zealand Herald political correspondent

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