The Finance Minister in waiting

Back at the beginning of last year, it seemed Labour was about to embark down an adventurous new economic policy path which would deal with the changing workplace, and the predominant role asset wealth plays in the development of inequality.

It started okay with Grant Robertson’s Commission on the Future of Work with a big conference in Auckland and talk about a Working Party on Tax and then the whole programme perhaps succumbed to the fact that it could not be easily explained in a sentence or two.

Leader Andrew Little referenced the Commission in speeches; he took on the spokesmanship on the New Economy himself and promoted research tax incentives and regional development grants but those measures seemed to get overwhlemed by the here and now of Opposition where a catalogue of the current Government’s failings with the 90,000 or so young people not in employment, education or training more readily made headlines.

The space Robertson’s report defined for self-employed start entrepreneurs and the Tax Working Party did not make the media which is maybe why it seems to have come as a surprise to so many people this campaign. 

The two prongs — the future of work and the distorting affect that asset wealth has on equality in our society form the basis of what the Ardern Labour Party wants to do with the economy.

Grant Robertson is at the centre of this, possibly more influential than he was under Little.

The Wellington Central MP is a disarmingly modest and engaging person.

During a day with him in his electorate, at one point in a meeting with a group of doctors about a proposal they have to make their practice work better, he suddenly perks up and reminds himself, as much as them, that in a few weeks he might be Minister of Finance.

That might change his view on whether their proposal should get some Government funding.

But he has a big agenda.

First, there’s the much discussed  post-election Tax Working Group.

In many ways, this is really only required to work out HOW to make a Capital Gains Tax work. It is not a group that will go a ground floor up review of taxation.

“Obviously it has to think about the whole of the tax system, but the point we have made consistently is the mandate we are giving it which is how do we create a better balanced and fairer tax system, particularly between assets and income,” he told POLITIK.

“We’ve been clear about what we’re not prepared to put into that which is the family home and land surrounding the family home, but we can’t narrow it down completely because that would be ridiculous.

“It’s a more focussed group than what you have seen before.

“That’s because there is a particular set of issues we are trying to address.

“We are trying to address a housing market that is horribly unbalanced; that’s unfair; that’s shutting first home buyers out and that sif New Zealanders who go to work every day and pay tax on what they earn and look at someone flipping ther third property and say why is that person not paying tax.

“We will take the Brightline text out to five years which is what Treasury recommended and essentially one of the core questions for the group is whether that is enough.

“Is that enough to ensure that we start to rebalance the system or is there something more that we need to do.”

But statistics for August sales in Auckland issued by Barfoot and Thompson show that the average sale price was $958,000 — that would require a mortgage of over $4000 a month to service.

There can surely be no resolution to the Auckland housing crisis until those prices start to come down?

“No, our view is that they need to flatten and that people’s incomes need to rise.

“No one is suggesting this isn’t going to take a while to sort out, but our view is that if we attack supply vigorously with builds that are for first home buyers  and whatever we can do on the demand side so it’s a tough nut to crack, but you can’t crack it unless you start.”

Getting people’s incomes to rise though, is not an easy proposition either.

Given that it is widely argued that mortgage payments should not exceed 40% of gross income, Auckland house buyers would need an annual income of $120,000 a year to pay the mortgage.

Nationwide the average household income in 2015 was $76,000.

Of course for many people, the figure is much lower.

So how would Labour raise incomes?

“Lifting wages is a combination of a whole lot of things.

“It’s no one thing.

“The Government has got a direct role lifting the minimum wage and trying to become a living wage employer ourselves, so that leads to more other employers doing that.

We need productivity improvements and if you look at it internationally, then lifting that skill level is one of the big drivers in lifting wages.

“And if we have a slightly different mix of people coming in that might help as well, but I wouldn’t say it is one thing.”

Lifting productivity brings Robertson back to his Commission.

He has some practical ideas to try and get our economy more diversified. He sees MBIE playing a big role, but he also wants to encourage investment capital into startups.

There is, however, a potential tension between Labour’s industrial relations policy which seeks to impose national “Fair Pay Agreements” will be agreed by businesses within an industry and the unions representing workers within that industry. They will set basic standards for pay and other employment conditions within an industry.

Robertson rejects this proposition.

“Whatever form of work you are in there are certain things that you should be able to expect; that you will be safe; that you will be rewarded fairly for the work that you do and that you will have opportunities to train and get new skills.

“There is no contradiction between that and supporting people to start their own businesses.”

In the meantime, though Robertson will have to be at the centre of Labour’s post-election negotiations and two issues are beginning to emerge this week as possible deal breakers.

First, there’s Labour’s water tax.

NZ First Leader Winston Peters was raising questions about it at the weekend.

The Prime Minister is holding a campaign meeting in Ashburton today which is obviously designed to exploit rural anger at Labour’s proposal.

Robertson points out that the party has committed to a consultation process about the tax after the election.

He is similarly sanguine about the TPP. He says Labour remains committed to securing the right for New Zealand to stop foreign investors buying New Zealand houses.

He won’t say whether Labour would walk away from the agreement if it failed to get that right.

He says he’d be very surprised if the TPP11 agreement was ready to be signed at APEC in November.

“So I think there is plenty of scope for New Zealand to get across our point of view.”

What is not clear is how Labour will run its Finance portfolio.

There has been some speculation that David Parker rather than Grant Robertson would take it because Robertson would be needed for a super political management role.

But presumably, Parker will be in the mix somewhere as will  (at some point) Deborah Russell, the Massey University Taxation expert who is in the safe New Lynn seat.

Given Robertson’s overall vision and the technical knowledge of Parker and Russell, the three would make a powerful trio in Finance, not forgetting that Michael Cullen is in the background offering his own experience of nine years in the portfolio.

Meanwhile, Robertson will continue to need to keep reminding himself that he may be only a few weeks away from the biggest job in the New Zealand Government next to being Prime Minister.