Newsroom Pro's 9 things at 9: Joyce sticks to his guns despite being spiked; National launches land tax attack

Bill English tells reporters at the Bob Scott retirement village that Labour may bring in a land tax. Photo by Lynn Grieveson

In today's email we watch National double down on their claim of a $11.7 billion hole in Labour's fiscal plan and throw threats of a land tax into the mix.

1. Joyce keeps digging in $11.7 bln hole

Steven Joyce and Bill English doubled down and continued to insist there is a $11.7 billion hole in Labour's fiscal plan, but the weight of opinion across the economic spectrum is that National has over-egged the pudding with its claim of an accounting mistake.

The guts of the dispute is that Joyce said Labour had not rolled forward its operating allowances for new spending to account for population and cost pressures. That meant, he said, that there was simple mistake in its calculations worth $9.4 billion of the $11.7 billion. The trouble for him is that Labour had included those cost pressures for health and education in its 'modernising health and education lines'. That accounted for $8.6 billion of the 'missing' $9.4 billion.

Joyce was also wrong when arguing Labour had not accounted for its paid parental leave spending or three months of its families package spending.

However, he was right in arguing that Labour is relying on containing spending growth in areas outside of Education and Health to make its numbers add up. Grant Robertson said on Monday Labour planned to reprioritise spending in areas such as Defence and Justice to give it room to deal with those pressures.

The problem for the Government is that the narrative flipped yesterday from being about a potential budget black hole for Labour to National being accused of scare-mongering and insisting Trump-style that white was black.

I pointed out on Monday evening before the debate that there was not a budget black hole and that it was really a political argument about spending priorities and whether Labour could control and reshuffle costs outside of Education and Health.

Others, including Brian Fallow, Keith Ng, Vernon Small, the New Zealand Initiative and ANZ's Cameron Bagrie have argued that Joyce's $11.7 billion figure was massively overstating the issue. Ganesh Nana from BERL, which checked Labour's fiscal plans before they were released, described Joyce's claims as "fiction."

Both TV networks hammered the Government yesterday and Steven Joyce was on television and radio again this morning to defend his decision to use the $11.7 billion number.

It remains to be seen how the public has viewed this debate about fiscal mathematics. Some may just have heard the 'Labour has a $11.7 billion hole' claim and not the rebuttal or the independent views. That may reinforce their views about Labour's fiscal skills. Others may have seen National's shouting as another scare tactic that reinforces their views about the need for change. The floating voters may not be watching television or have noticed at all. I suspect debates about fiscal issues are an excuse for most voters to reach for the remote.

Robert Muldoon was fond of saying the public would not recognise a budget deficit if they fell over one. I'm not sure of that, but the pushing and shoving is likely to continue. National know they could lose and shouting is one way to get through to voters in an increasingly atomised and splintered media environment.

The risk for Joyce is that he is seen as the Minister and Campaign Manager who cried wolf. He has used up some of his undoubted credibility over the last couple of days, although his continual engagement and lack of grumpiness has limited the damage.

2. The land tax debate begins

Elsewhere on the campaign trail yesterday, Bill English visited Ryman Healthcare's Bob Scott retirement village complex in Lower Hutt yesterday to announce a slight increase in orthopaedic surgery targets.

Newsroom's Lynn Grieveson and I went to the event and the subsequent 'stand-up' news conference in the lobby of the complex that lasted a good half an hour. Just off the lobby, an elderly lady was getting her nails done in a salon with the door open so she and the nail filer could listen in. They both applauded Joyce and Jonathan Coleman (and the media) after the stand-up finished.

The discussion ranged across English's child poverty target announcement in the debate on Monday night and Joyce's $11.7 billion claim. But it soon settled on Jacinda Ardern's less-than-definitive comments to Guyon Espiner in an interview on Morning Report yesterday about whether a land tax could be applied to the land under the family home. The key exchange is from the 8 minute mark on.

She refused to rule it out for the land under the home in the way she has ruled out a capital gains tax on the family home and a new top tax rate.

Ardern was pressed on whether she would implement a land tax, and if so whether it would apply to family homes.

She said "nothing we’re looking at will affect a family home."

“I’m not going to go into the detail of what our expert working group is going to be able to do themselves - they may actually come back and say as I've said before that what we’ve got in New Zealand is sufficient with our extension of the bright line test but they may not.

“They are going to survey all of the options, I am going to consider all of the options.”

Asked by Espiner to reconfirm her position, she ruled out a land tax affecting the family home, but left some wiggle room about the land under the house.

That left an opening for Bill English to jump in and accuse Ardern of planning a land tax during his stand-up at the Bob Scott village.

English said Labour needed to be clearer about its position on tax so Kiwi voters could be fully informed.

“You take a group like this (referring to the Bob Scott residents), superannuitants all own their own houses, a lot of them own their own houses, but they don’t have much income," he said.

“They already pay rates and now the Labour leader is floating the idea that there’ll be a land tax on top of your rates.

“New Zealanders need to know what they mean by that, otherwise Labour is asking for New Zealanders to give them a blank cheque, that is, ‘Vote us in and we can think of any tax at any rate and you have to pay it, and by the way what we’re spending it on we can’t really show it will make any difference’.”

National’s own Tax Working Group recommended a land tax-for-income-tax-swap in 2010, but John Key chose not to implement it because 1 percent land tax would have meant a 15 percent one-off drop in land prices. Instead, he went for a GST hike for income tax switch. National did not foreshadow the Tax Working Group or the GST hike before the election. Key actually ruled it out before the 2008 campaign.

I challenged English about National's non-disclosure of its own Tax Working Group plans in the standup. He said things changed after the election with the Global Financial Crisis changing the outlook.

In my view, National is not on strong ground complaining about a lack of transparency about a Tax Working Group process when it did not even suggest before the 2008 election (which was already a year into the GFC) that it would set up such a group, or that it would increase GST.

English's suggestion that residents of the Bob Scott village would have to pay land tax is wrong. Residents pay for a right to occupy their unit in the village. The land itself is owned by Ryman. It would have to pay any land tax, although it would argue it would pass that cost on to residents in higher fees over the long run. In the short run, Ryman would have to account for any land tax with a revaluation lower of its land.

(By the way, the Bob Scott village is a luxurious place that made both Lynn and I wonder if we could get early entry. It's been a long campaign and there's still 17 days to go...)

3. What the Tax Working Group will look at

Robertson later told Newsroom's Lynn Grieveson at a disability rights election debate in Kilbirnie that Labour's Tax Working Group would look at the balance of how assets and wealth were taxed, as well as income.

"We are not ruling in things or ruling out things, so it is completely untrue to say. We have no plan for a land tax but we want to listen to the working group about how we create that balance," he said.

"Obviously with the family home, we want to make sure we protect that – but if we are going to do this properly we actually have to look at all of the options, that’s what they are doing," he said.

Robertson said National was scaremongering and a TVNZ poll published this week showed the public were interested in the idea of a capital gains tax.

"We are saying that the tax system is not fair and the direction of travel is there – we are extending the bright line out to five years. So I just think National is just trying to whip up a bit of fear here. But actually I think from that poll we can see that many New Zealanders actually understand."

4. Ardern matches English's poverty pledge

In the same Morning Report interview, Ardern confirmed Labour would match English's surprise poverty pledge from the leaders' debate on Monday night.

English appeared to blindside Ardern, a staunch children’s advocate, with a promise to lift 100,000 Kiwi kids out of poverty during the next term of Parliament.

The Prime Minister said half of that goal would be achieved when
National’s family support package launched next April, with the remainder taking place over the next two years.

In response, Ardern said reducing child poverty was “my entire reason for being in politics”, but her own goal appeared less ambitious: matching the Children’s Commissioner’s request to reduce material deprivation by 10 per cent.

Ardern told Espiner Labour would match National’s target by 2020.

"We can lift up about 50,000 as well, when it comes to the extra 50,000 that is something that we of course will have to set targets around in government," she told RNZ.

"He said he'll do 50 [thousand] based on his tax package, the extra 50 [thousand] I'm assuming that means he's going to have another tax package.

"If that means he's going to only target low-income families, look, that's positive. I believe we can match that."

Following up on the issue with media in Auckland, Ardern said English's target was "to be applauded", although she still had questions about how exactly the Government was defining its goal.

"It has taken nine years of course given we’ve been asking for it for some time...[but] it would be wrong of me having asked about it for so long not to say thank you for finally setting some goals in this area."

5. The electoral mathematics of age

One key thing to know about electioneering and electoral mathematics is that there are a lot of older people and they vote at much higher rates than the youngest.

The chart above from the Electoral Commission shows the enrolment rates by age group and shows at least 250,000 18-39 year olds had not enrolled by the August 23 deadline for normal enrolment. Special enrolment is still possible but time-consuming up to voting day. A further 150,000 young people will be enrolled but not vote, going by the voting rates at the last election.

That means it pays off for political parties to target their policies at the elderly, even though the demographics mean there are now more millennials and Generation Xers than baby boomers. The problem for the young ones is they don't vote at the same rates. It's one of the reasons Jacinda Ardern recommitted to Andrew Little's decision to rule out an increase in the retirement age from 65.

National's policy on orthopaedic surgeries also reflects the electoral mathematics of ageing populations and low voting rates among the young. Elderly voters are more concerned for their own knees and hips, whereas spending on primary health care for the young could be more effective in the long run. Coleman defended the Government's record on primary health care spending.

But it's interesting to hear doctors talk about the choices between spending on expensive surgeries versus spending on public health measures to reduce obesity and improve lifestyles many years before knees need replacing, diabetes needs treating or feet need removing.

Coleman also defended the Government's measures on obesity, denying that a sugar tax would reduce obesity. He said evidence from the Mexican experience had not concluded it reduced obesity.

6. 'Show me the hip operations'

Hip operations make a lot of electoral sense.

Coleman said access to elective surgery had increased every year under National, rising from 118,000 a year in 2008 to a likely 178,000 this year.

“Elective surgery makes a real difference to patients and their families – it reduces pain, restores independence and improves quality of life.”

Coleman said National would increase the number of elective surgeries by an average of 5,500 each year to meet the 200,000 target, with $30 million of funding each year to meet that goal.

However, the Government has been attacked by Labour for allegedly inflating its elective surgery numbers through eye injections originally carried out by nurses and GPs - a claim rejected by Coleman.

In response to the announcement, Ardern said there had been "chronic underfunding" in health which Labour would address in Government.

7. While you were sleeping

Donald Trump ended the DACA programme that allows young unauthorised migrants to stay in America and ordered Congress to write a new law to replace it. Voters, politicians and business leaders across the spectrum condemned the move. (New York Times)

8. Coming up...

Bill English visits Invercargill for campaign events today, including a 'stand-up' news conference early in the afternoon.

Jacinda Ardern will visit a Grey Power meeting in Hamilton before visiting Waikato University and the Kinleith Mill. Her 'stand-up' is also scheduled for early afternoon to give time for the TV networks to get their material.

9. One fun thing

Steven Joyce's budgetary claims continued to be the source of mirth on Twitter.

Dave Armstrong: "Quite a few people at Rongotai candidates meeting in Newtown. I estimate about 11.7 billion. #rongotai."

My apologies for the late delivery of the email today. The newsflow is heavy and I wanted to include some of the extra detail on land tax and hip surgeries. I also appeared on the AM show this morning on TV3 to talk about Joyce's black hole claim.