Labour’s Future Part 1: Economic Credibility

This is the first piece in a three-part series on Labour’s path back to government.

For nine long years, they say, Labour failed to take action. Nine long years Labour had to fix problems, and they wasted it. Nine long years of high taxes and high spending.

It’s a familiar refrain, and one that dates from John Key’s government’s very first days. Journalists and political insiders alike have taken a liking to mocking it, with the Opposition ranks often crowing with delight in response to government ministers laying the blame for current problems at the feet of Helen Clark and Labour.

Certainly, it seems that this particular slogan has reached its use-by date. Of course it is past time for the government to own their record in office – any persistent problems dating back to the pre-2008 era no doubt owe their existence to continued ineffectiveness on the part of the current government more than they do to the failures of its predecessor. After all, we aren’t far away from National reaching its very own ninth long year in office.

However, this completely misses the point of the insistence that Labour couldn’t get things right, refused to own up to reality, and persistently leaves messes for National to clean up. Government ministers have no need nor desire to attack Helen Clark and her legacy. Their enthusiastic (and welcome) support of her for the top job at the UN shows us this quite clearly. What they are enjoying, however, are the repeated opportunities to remind the public about a Labour party that hasn’t learned. When Steven Joyce or Bill English stand up in Parliament and tell voters about all of the reasons why they kicked Labour out seven-and-a-half (long) years ago, what they are really reminding us of are the same reasons why Labour won’t be let back on the Treasury benches any time soon.

The evidence is clear. We are losing. National is comfortably and consistently, at least, ten percentage points ahead of Labour in poll after poll. Any talk of a left-leaning government being elected without a large-scale conversion of hundreds of thousands of voters from National is a fantasy. It pains me to say it, but Labour is currently doing nothing serious to convert these people. In short, the government is right to remind voters of our ‘nine long years’, because we have refused to take heed of the lessons that our time in office, and subsequent spell in opposition, could have taught us.

So, where have we specifically gone wrong, and what can be done about it? The question is in turns both simple and complex – after all, Labour’s last spell in government gave us a record three election victories, and some far-reaching and popular reforms that made New Zealand a much better place to live in. However, it also ended in an emphatic rejection by the voters. Somewhere in there is a tipping point, a point where large numbers of New Zealanders stopped buying into Labour’s vision for government. The greatest and most important task for all parts of the Labour party and the wider movement is to locate this point. What must we do to convince the New Zealand people that we can be trusted with the most important job in the country?

There are almost three million voters in New Zealand, and each of them has their own views and motivations. However, there are three main themes that I want to address. Each of these touches on the deep disconnect we are currently experiencing with voters, and outlines some strategies for Labour to improve, or at least to find out how to. In this first part of a three-part series, I will deal with how Labour can deal with its issues around economic and fiscal credibility.

The Competence Problem

It shouldn’t need saying, but Labour has an economic competence problem. After losing in 2008 in an environment of huge uncertainty, the dominant narrative on the economy has been that Labour can’t be trusted, and National is making the hard decisions to put New Zealand back on track. The 2011 and 2014 elections were fought and decided on this issue, and in each case the voters issued a damning verdict.

Academic and survey evidence backs up the voters’ verdict on Election Day: Vote Compass research shows that the economy was the most important issues for voters in 2014, and National’s management and policies were clearly preferred to Labour’s (Lees-Marshment et al., 2015).

Where does this come from? Certainly, the public finances were in relatively sound shape when Labour left office after delivering nine surpluses in a row. However, Labour demonstrating that is has delivered surpluses in the past and claiming vacuously that we will do it again simply doesn’t cut the mustard. Voters live in the here and now. They want to know that Labour can manage today’s economy, not the 1999-2008 one. In 1999, 2002 and 2005, Labour’s relative strength in the area of economic management was a vote-winner: we had struck the balance between Labour’s traditional goals of a fair go for all with an effective and competent approach to economic development that grew the economy handsomely.

Fiscal Responsibility Today

To be sure, however, the situation today is vastly different from that in 2008. People feel less secure than ever in their financial situation, and don’t want to accept anything that could ‘put it all at risk’ (thanks, Mr Joyce). Labour did cop some flak for running surpluses and not cutting taxes during the boom times in office, but won anyway because things were going well and people felt prosperous.

Since the Global Financial Crisis, however, voters are much more concerned about the debt and deficit, and also want to know that tax settings are such that they will maximise take-home pay and ensure their job is safe in an ever-more insecure labour market. Labour’s policies continue to rely on a pre-2008 high (by contemporary NZ standards) tax and high-spend model to target social, environmental and economic problems. Andrew Little’s recent announcement to eventually spend upwards of $1 billion per annum on free tertiary education is very much in this mould. It’s not that these problems (income and wealth inequality, access to education and lack of equality of opportunity, for example) don’t exist and don’t need fixing. It’s not even that these problems are ignored by voters – on the contrary, the available evidence suggests that concerns relating to inequality and social justice were high on voters’ agendas, and voters were even receptive to Labour’s attempts to address them (Lees-Marshment et al., 2015). Nonetheless Labour’s proposals, even the popular ones, did not translate into votes due largely to concerns about their deliverability and the chance that they would put a fragile economic recovery at risk. Simply telling voters that they were wrong to have these concerns is self-evidently not the answer. This is not a communications issue, it’s a political product one. In short, Labour needs to find a social democracy that works when there isn’t much money to spend, or taxes to be raised.

So, what is the solution here? Firstly, we must stop proposing centrepiece policies that do nothing to make anybody think something about us that they didn’t already think. Spending on social programmes signals our commitment to tackle important issues, but we quite obviously lack the same commitment to take care of taxpayers’ hard-earned money – and we continue to reinforce this perception. I think we do ourselves an intellectual disservice by assuming that spending more, rather than spending smarter, is always the way forward. This is not to say that we must not spend, but a much more considered approach and respect for the taxpayer dollar is needed to rehabilitate our image in this area. Justin Trudeau’s Liberals in Canada can show us the way here: yes, he offered a small tax increase on the super rich but he bought the confidence and trust of the voters by spending it largely on a middle-class tax cut and much-needed infrastructure spending to keep Canada’s uncertain economy ticking over. It’s hardly exciting stuff, but it is competent and it is progressive. It’s the way forward.

Growing the Pie

We also run into similar problems when it comes to economic growth. One reason why voters were okay with Labour’s higher taxes and spending in the early 2000s was because this was coupled with a coherent narrative around economic growth. Some increased spending of the economic pie is, of course, perfectly acceptable to reasonable-minded New Zealanders if you can first convince them that you will actually grow the pie in the first place. This area marks Labour’s biggest shift since 2008, but unfortunately, in this area, change was not really needed! Helen Clark’s government was one that encouraged and collaborated with the private sector (big and small business), had a balanced relationship with trade unions, and embraced free trade as a critical component of New Zealand’s export-dependent economy.

Since losing office, we have apparently abandoned all three of these planks that allowed us to credibly claim the economic centre ground. On the first point, key policies such as KiwiBuild ignore the fact that the government has huge power to unlock the efficiency of house-building market in other ways by encouraging private-sector supply and dampening demand. Despite its superficial appeal, New Zealanders will only count on such large-scale direct intervention as a last resort, and we have many more policy options to consider (and still much more than National’s window-dressing in this area) before we reach that point. On the second point, I would argue that the historic and important relationship with the trade unions has been allowed to become a hindrance to the goals of the movement. The response to the 90-day trial employment legislation, or to charter schools, are a case in point. In both cases Labour has the opportunity to effectively advance the interests of the union movement by proposing modified versions of these policies: removing the insidious aspects while embracing the innovative parts. Instead, any chance of progress was lost thanks to a hostile opposition to policies that, frankly, most New Zealanders consider to be reasonable. Voters aren’t keen on their major parties being seen to be controlled too much by specific groups – yes, even Labour and yes, even with respect to the unions. Being seen to reasonably be the voice of organised labour while still taking other concerns into account is critical if we are to win elections.

Finally, there is our opposition to the Trans-Pacific Partnership. TPP has been a nightmare for Labour, pretty much since the day we lost government. Despite originating under the watchful eye of Phil Goff and Helen Clark, this trade agreement has become something of a bogey-man for Labour, even if we didn’t want to say so. The thing is, even if the agreement turned out to be reasonable, in our interests, and largely concerned with freeing up trade (which it, in fact, is), Labour was always going to oppose it. Hiding behind a fear of being unable to regulate in the public interest in areas such as public health and housing (neither of which are affected substantively by the agreement), is a more pervasive hostility towards an ill-defined ‘neoliberalism’, of which free trade is a key part. It is a clear signal that Labour is indulging in a period of ideological oppositionism. This certainly feels good, but it’s not what governments do (at least not good ones).

We have established that free trade through tariff elimination is good and that all of the worst outcomes on medicines, regulatory powers, the environment and labour standards have been negotiated away by our excellent MFAT public servants (don’t we usually support our civil servants?) As such, the only responsible, government-like course of action should have been to support the agreement. The Labour party is one committed to internationalism in government, and has always been in favour of a rules-based global system where state action is limited by agreement for the benefit of all. It’s time we re-embraced this tradition on the question of trade, just like we have on environmental issues, such as the COP21 climate change agreement.

How can we claim to be the party of innovative social programmes if we don’t support the biggest opportunity we have this decade to grow the tax base to pay for them? How can we be committed to our historical mission of helping every New Zealander to be better off if we can’t bring ourselves to be a part of a global bloc dedicated to economic and job growth? Reasonable answers to these questions elude me and, make no mistake, John Key will ensure that they elude the voters as well.

Reference

Lees-Marshment, J., Dufresne, Y., Eady, G., Osborne, D., van der Linden, C., & Vowles, J. (2015). Vote Compass in the 2014 New Zealand election: Hearing the voice of New Zealand voters. Political Science, 67, 94-124.

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