The gentle art of keeping political promises

Political philosophers will tell you that while governments gain their agency from voters, that agency becomes worthless if voters are misled or lied to.

Which makes next Wednesday’s Budget Policy Statement a significant moment for National in being seen to keep its promises.

This week saw the softening of language and expectations around the biggest and shiniest of those promises, its $14 billion Back Pocket Boost tax plan. There’s only one interpretation for the miasma of double-talk from Christopher Luxon; there’ll be tax cuts, possibly by July 1 and they may be smaller than promised.

While doubts were raised before the election as to whether National could “fully fund” its tax cuts plan, those doubts have become concrete five months later.

The term “fiscal hole” reappeared this week, being variously estimated to be between $5.6 billion and $3.3b short, either the result of National’s capitulation in coalition negotiations or policies that had been poorly costed during the campaign.

The biggest is NZ First’s scrapping of the foreign buyers’ ban, which cost it $2.91b, while restoring interest deductibility for landlords is calculated to cost $800 million more than forecast.

The revenue from the online gambling tax will bring in $500m less than forecast and indexing benefits to inflation, expected to save $2b, is now only $67m.

Meanwhile, the Climate Change Commission warned the Government that the estimated $2.3b from the Emissions Trading Scheme – earmarked for tax cuts – couldn’t be counted on.

Which goes some way to explaining why, if voters didn’t trust the last government, then that lack of trust has been established relatively early with the present lot.

Yet another poll, the Ipsos NZ Issues Monitor, rated the Government at 4.6 out of 10, where ‘0’ equates to ‘abysmal’ and 10 is ‘outstanding’. The fact that 37% of respondents gave a low score, which the report’s authors described as “significant”, while 29% gave a mid-score and 30% a high score indicates the polarising effects inequality has on an electorate.

The equation is simple; poorly performing economies produce voters in a world of financial pain who vote governments out.

National will be buoyed by the fact that in 15 of the 20 areas NZers are worried about, respondents backed National to solve them, but 4.6% is hardly expressing voter confidence this early in the electoral cycle.

But the report that outlined the most serious deficiencies in the Government’s tax cuts arrived mid-week, courtesy of the International Monetary Fund (IMF).

Noting that despite tight monetary policy, inflation remains high, at 4.7 %, “current fiscal policy is more expansionary than in most other advanced economies”.

Budget 2024, the IMF warned, should deliver a tight fiscal stance in FY24/25 to support disinflation.

The problem is that tax cuts are aimed at low and middle-income earners and families with children, who will spend it, and drive up inflation.

The message from the IMF was that the Government is spending too much, that tax cuts shouldn’t be paid for by borrowing more, and that putting more money into the economy, as the cuts will, increases inflation.

Next Wednesday will reveal whether the Government has listened and acted.

With the country officially in recession, be prepared for utterances not about broken promises but about changed circumstances, all in the public interest.

Janet Wilson is a regular opinion contributor and a freelance journalist who has also worked in communications, including with the National Party in 2020.