National, for the second time this week, has startled its political allies with another populist economic move.
On Tuesday it angered its coalition partners by announcing tax cuts without consulting them.
And yesterday it announced a plan to break up the Foodstuffs supermarket chains.
That provoked tough reactions from the EMA and Business New Zealand.
And POLITIK has learned the announcement has come after a senior National MP recently told a major stakeholder lobby group that any plan to split the supermarkets would be “bonkers” and would provoke a Caucus backlash.
Foodstuffs also has a powerful National Party influence on its board, former Finance Minister Stephen Joyce.
The tax and supermarket moves are political and obviously intended to pump up flagging support for National 10 days out from its formal campaign launch.
Though the Ministry of Business, Innovation and Employment (MBIE) has been doing work on a supermarket demerger all year, the announcement seems to have been rushed, possibly because Labour announced two days ago that it would have a food pricing announcement to make yesterday.
MBIE’s studies showed that a demerger would give the biggest benefits to high-income households, who would save $1000 a year, whereas lower-income households would save only $500.
The Ministry of Social Development defines any couple with a household income of less than $58,000 and an individual with less than $ 36,000 as low income and calculates that around 16 – 18 per cent of New Zealand households fall within those categories.
That is roughly 300,000 to 350,000 households.
Therefore, the total saving to low-income households would be around $150 million – $175 million a year.
On the face of it, this would seem a dramatic upheaval for a relatively low benefit.
It has been done before.
In 2011 the Clark Government broke up Telecom into two separate companies, Spark (retail and mobile) and Chorus (wholesale network).
Mobile and data prices have plunged since then, but that probably has much to do with the introduction of broadband in 2014, as it did the split.
But the announcement yesterday is only the first step towards the demerger of Foodstuffs.
“National will pursue the separation of the Foodstuffs Cooperative, subject to an independent, detailed appraisal from the Commerce Commission,” the Prime Minister said, announcing the proposal yesterday.
“In practice, this means that Pak’nSave will operate as one nationwide chain, and New World and Four Square will operate another.
“So along with Woolworths, New Zealand would then have three major nationwide grocery chains competing strongly and alongside each other.”
But Finance Minister Nicola Willis said that outcome still had a long way to go.
“If re-elected, National will therefore direct New Zealand’s competition watchdog, the Commerce Commission, to lead that assessment,” she said.
“We will, within our first 100 days of a term, amend the Grocery Act to authorise this work to take place and require the Commerce Commission to report back no later than six months after the directive takes effect.
“The Commission will be able to use formal investigative and information-gathering powers to obtain the additional data it needs to make the implementation plan and assessment, to formally consult affected businesses, suppliers and competitors, and to develop and assess a detailed implementation proposal.”
But that was enough to trigger an uproar from National’s allies and coalition partners. “
The proposal to forcefully break up the Foodstuff’s grocery chain undermined the foundations of business and private property rights, said the EMA.
“It’s not quite nationalising a private business, but it’s too close for comfort,” said the EMA’s Head of Advocacy Alan McDonald.
“And that’s a terrible signal to send when we’re currently trying to attract much-needed international investment through the Government’s open-for-business mantra.
“Seeing a right-of-centre, business-focused political party such as National suggest this type of policy will sit uneasily with businesses in New Zealand.
“It might be a populist policy for a grumpy electorate, but that doesn’t make it a good policy.
“This is a very concerning move by the National Party and sends a chilling signal to businesses across New Zealand that the Government can break up businesses,” said BusinessNZ Director of Advocacy Catherine Beard.
“It also sends the wrong signal to foreign investors looking to invest in New Zealand.
“We consider this to be in the same league as Labour’s ban on oil and gas exploration and New Zealand First’s promise to split up the gentailers.”
ACT, already incensed by the tax announcement on Tuesday, set their objections out bluntly.
“Today’s release of Green-Party style policies from parties to break up supermarkets and ‘ban price-gouging’ shows desperate and visionless campaigning driven more by focus group than economic policy,” said ACT Leader David Seymour.
“ACT agrees New Zealand needs more grocery competition so families can see lower prices, but we need to be confident the solution will leave those families better off. Policies should be judged by outcomes, not intentions.
“The policies produced today are little different from the Greens’ roundly mocked Government-owned supermarket. In a world trying to boost productivity, these policies will actually prevent New Zealanders from benefiting from investment and growth.
“We’ve seen the impact of heavy-handed intervention with the oil and gas exploration ban. When the Government signals that successful businesses can simply be broken apart, potential new entrants are less likely to invest here.”
Seymour said the analysis behind the proposal was weak, noting that it conceded that in some circumstances a demerger could even put up some prices.
Foodstuffs has been preparing for the possibility of a demerger and has had its owner-operators develop close relationships with their local MPs.
The supermarkets and IGA stores have donated food to political fundraisers and hosted the MPs in their stores.
Foodstuffs’ two independent directors, Sir Henry van der Heyden and Stephen Joyce, both have influential networks within the National caucus and party.
It is clear from the report of the National MPs’ meeting with the lobby group that there is significant scepticism about the proposal within the National caucus and outright opposition within the broader centre-right community.
That Luxon has been prepared to take this political risk suggests that the party’s internal polling may not be good.
However, given that what was announced yesterday was really only an announcement to have the Commerce Commission do another study, there could be enough wiggle room to allow National to back off the idea if it forms the next Government.
However, that too would carry a political price.
Either way, Luxon may end up having traded short-term political gain for a long-term political backlash.
