Date posted: 19/10/2020

Accelerating? Please give us a map first

New Zealand’s new Labour Government says it has a “mandate to accelerate”. New Zealand Country Head Peter Vial FCA says sound policies are required that stack up against our six principles and knit together to form a coherent plan.

Well, that was predictable. Labour won.

Despite unusual and challenging times, the election campaign and the election result have produced an overwhelming feeling of ‘business as usual’.

Now we need unpredictability – or at least a break from what was on offer by the major parties, who campaigned on some inspiring goals, but no overall cohesive plan for economic recovery and a sustainable future.

On election night Prime Minister Jacinda Ardern indicated the new Government will accelerate, but in what direction?

The thankfully completed campaign felt more like a traditional pre-election lolly scramble than a commitment to delivering the coherent, fair and sustainable plan the country needs.

Cases in point would be the tax policies announced by the two main parties.

Now we know we will get Labour’s 39 percent marginal tax rate for 2 percent of taxpayers. That will bring in some useful additional revenue, but falls completely short of addressing the issues related to the taxation of capital that were highlighted by the Tax Working Group last year.

Some of the 2 percent of kiwi wage and salary earners affected by the proposal will be happy to contribute more, but may be disappointed that high-wealth individuals not earning a salary, but making significant capital gains, will not also contribute.

We won’t be getting National’s proposed temporary tax cuts designed to stimulate the economy for 16 months. That policy also fell short of addressing the issues with the fairness and coherence of our tax system. It would have given all taxpayers extra money, including those who don’t need it and would prefer that the funds are spent on health and education and targeted Covid-19 support.

In the past political parties have got away with the type of politically driven mish-mash of policy initiatives through a combination of good luck and good management. Lofty aspirations have been enough.

But that approach will not work at a time of unprecedented stress on the economy, businesses and the lives of New Zealanders. COVID-19 has not only blown out Government debt, it has highlighted long-standing issues of inequality and with the state of our health system and our environment.

This next Government faces once-in-a-lifetime challenges … and opportunities.

Now, more than ever, we need a big, hairy plan. A plan that is transformational and bold. A plan that allows itself to be a little bit radical. A plan that does not rule out sound policies just because they may be hard to sell politically.

And that plan must be delivered via a coherent evidenced-based portfolio of policies which together support sustainable long-term prosperity, a productive and competitive economy, and inter-generational equity.

Policies must:

  1. Collectively enhance long-term shared prosperity, looking to the next 30 years, not just the next three
  2. Be fair to both current and future generations of New Zealanders
  3. Promote sustainability, recognising that the economy and the environment are inextricably linked
  4. Provide clarity, certainty and coherence
  5. Be evidence-based and
  6. Be fiscally robust and costed in a transparent and measurable way.

New policies also need to be underpinned by fiscal and environmental sustainability, international competitiveness, enhanced productivity and the stability of New Zealand’s financial markets.

“But we do have a plan”

Of course, the new Government will say “we do have a plan” and that plan is fair, sustainable, costed, coherent and so on.

But it is not a plan in the sense that most individuals, businesses and organisations are familiar with. Good plans impose discipline on choices.

Individual policies and promises, untethered from a coherent plan, often seek to scratch political itches rather than provide any deeper long-lasting solutions.

As mentioned, the tax policies of the two main parties are good examples of the political approach to planning.

If there were ever a time for bold reforms to tax and welfare, it is now.

“There is not only a mandate to accelerate, there is a crying need to do so.”
Peter Vial FCA

No longer will one-off election promises, such as additional funding to cover DHB debt (however sensible) cut it. We need a clear plan about how this fits into 21st century health delivery and infrastructure.

Similarly, the proposed education policies seem piecemeal and not part of a bold plan for delivering 21st century education outcomes for pre-schoolers, primary, secondary and tertiary students; and vocational training.

What we need across all portfolios – whether they be revenue or expenditure focussed – are sound policies that stack up against our six principles and knit together to form a plan.

That plan needs to be visionary.

In a throwback to a phrase that emerged after the 2017 election, please do not give us a “modified status quo”.

First published in BusinessDesk.

NZ election 2020

Chartered Accountants Australia and New Zealand calls for the new Labour Government to put in place a coherent plan for economic recovery and a sustainable future.

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