Election year battlelines: National, Labour clash over health and tax - Dynamic Business

Now they are starting to talk about the future. The KiwiSaver policy was the first evidence of that.

Meanwhile, Labour has obviously identified National’s negativity as a weak spot, and it too is starting to talk about aspiration and hope.

So the focus of political rhetoric next year will swing towards the future.

But that will be the campaign.

In the meantime, the Government will have to confront some unwelcome realities, and Labour may find that with its increasing optimism will also come increasing scrutiny and some hard questions.

The Government’s big challenge will be the Budget.

Finance Minister Nicola Willis has already set the operating allowance for next year at $2.4 billion, which, though it is up on the $1.3b of this year, is still at a level last seen in 2008.

At issue will be health spending.

Willis has already pre-committed a $1.37b increase in the overall health baseline budget, but in the last Budget, the total increase in the health spend was $7b.

That was a 21% increase.

That has still not been enough to stop health worker industrial action, calling for more pay or continued complaints from the various doctors’ professional bodies that the system is chronically understaffed.

The insurance brokers, Aon, have calculated that New Zealand’s health price inflation rate is running at 14.25%, which suggests that she is still going to need a few more billions just to keep health ticking over.

That points to more departmental savings and very limited resources available for other initiatives.

But health not only faces a fiscal challenge, but the report in late February on Part Two of the Royal Commission into Covid is also likely to raise credibility issues about the Ministry of Health during the Covid-19 epidemic.

The Part Two report will focus on vaccines, including the procurement process and the use of lockdowns and managed isolation.

Hipkins was Minister of Health and Minister for the Covid Response during most of the relevant period, so the report is unlikely to be helpful for him.

However, Labour’s promise to ring-fence the revenue from its proposed capital gains tax and use it only for health may give the party an edge in any debate on health spending.

The tight Budget will limit other big vote-winning proposals, such as the roads of national significance.

In a recent speech, Transport Minister Chris Bishop candidly set out the challenge.

Based on current estimates, delivering the Roads of National Significance programme in full over the next 20 years would cost $56b,” he said.

“Funding this entirely from petrol tax and road user charges would require a one-off 70% increase, equivalent to a 49c per litre increase in petrol tax.

“To be clear, this 49c per litre increase would only allow the roads to be delivered.

“It would not provide any funding for other major transport projects such as the Second Waitematā Harbour Crossing, or the Northwest Busway.”

Bishop pointed out that petrol tax is already due to go up 12c a litre in 2027, then 6c the following year and thereafter 4c a year.

He dismissed the idea that tolls could make a substantial contribution, saying our traffic volumes were simply too small to generate the kind of revenue we would need to meet all the proposed roads.

The Government thus appears to be faced with a simple choice: back off on some of the proposed roads or increase the petrol tax by even more than what is currently proposed.

Bishop is also about to unveil the Resource Management Act reform proposals.

Some clues to his thinking have come with his proposal to scrap regional councils and a proposal to amend the Fast Track Approvals Act.

The Regional Councils’ move to have a committee of local Mayors replace them may seem like shuffling the deck chairs, but it has met with the approval of Federated Farmers, which may give some clues to its genesis.

The Feds want to see rural and urban governance separated and contained within one authority.

However, Bishop will go further if the amendments he has introduced for the Fast Track Approvals Act are anything to go by.

He would have the Minister give directives to the Environmental Protection Authority panels considering fast-track applications.

The Parliamentary Commissioner for the Environment, Simon Upton, has described Bishop’s proposal as akin to Sir Robert Muldoon’s invocation of the 1948 Economic Stabilisation Act to implement his wage, price, dividend and interest rate freeze in 1983.

Bishop’s cheerful disregard for constitutional niceties may win support from the developer lobby (and possibly New Zealand First’s Shane Jones), but in what Act leader David Seymour calls “villaville” - that part of Auckland that stretches from the Tāmaki River to Point Chevalier - his moves have antagonised villa owners in the suburbs’ leafy streets.

Seymour is taking up their cause (after all, he is the MP for Epsom) and Bishop may find that he comes under political pressure next year to back off some of his more extreme positions.

Within the coalition, the National Party is well aware of the danger of getting offside with the urban, environmentally conscious middle class. They have seen and studied what has happened to the Australian liberals with the flood of support that has gone to the independent Teals and their highlighting of the need to take action on climate change.

National’s climate change minister, Simon Watts, is opaque on how New Zealand will meet its Paris Accord 250 obligations to reach net zero emissions.

The Government is currently consulting on a proposal to remove agricultural emissions from its second Emissions Reduction Plan, but beyond that, it has been vague about how it will get to the 2050 target.

Prime Minister Christopher Luxon has recently told Parliament that the Government has not yet made a final decision to purchase international carbon credits (known as offshore mitigation).

Luxon and Watts have both affirmed the Paris target, but their coalition partners (specifically NZ First) have previously expressed opposition to buying offshore credits.

Officials have warned the Government that a large emissions gap of 84 million tonnes currently exists, which would likely require offshore purchases to meet the 2030 target.

When pressed on how the target will be met without these purchases, Luxon’s Government has focused on domestic action, but critics argue this approach is insufficient to close the existing gap and that deferring the decision makes future compliance more difficult and potentially more expensive.

This is likely to become the focus of more political debate next year.

And, of course, it will be politics that will dominate next year.

Labour will come under pressure on how it proposes to fund its promises.

Their finance spokesperson, Barbara Edmonds, told the party’s annual conference that she would “never waver in my commitment to fiscal responsibility”.

National meantime will have the added pressure of the Half Yearly Economic and Fiscal Update, putting pressure on them to reach fiscal surpluses and a “prudent” debt level.

They will have to balance that against the increasing demands from both providers and consumers of health, education and other parts of the public sector for more spending and more delivery.

Next year in politics will be tense.