Kieran Madden

By Kieran Madden - 18/09/2017

Kieran Madden

By Kieran Madden -

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Taxes, trust, and transparency

“When the facts change, I change my mind. What do you do, sir?”

This, apparently, was economist John Maynard Keynes’ retort to an official who grilled him for being inconsistent on economic matters. In a bid to stem political hemorrhaging, Labour Leader Jacinda Ardern has changed her mind too, reversing her “captain’s call” to leave the door open to major tax changes before the next election. Backing down was the right move; making the call in the first place was the mistake. Voters need to trust leaders, and leaders must be transparent with voters.

So, what facts changed in this case? It wasn’t Ardern’s conviction that the housing market needs its wings clipped pronto. Nor was it because she thinks introducing bold measures without a mandate were wrong. It was the fact that she realised voters were spooked—they wanted off that Stardust Express if they couldn’t be sure of where it was going. Voters now have certainty in the policy and uncertainty in the leader.

Labour need to learn from this. One fact won’t change—votes follow trust, and transparency is a cornerstone of trust. I wrote in a previous column that character, not economics, will decide this election. I stand by this. It wasn’t necessarily the economic policy that dented Ardern’s credibility, it was her reluctance to front up with the details that caused the damage. I respect her for reversing her position, but had she been more open initially this could have been avoided.

Another policy that might have Ardern saying “let’s undo this” again, as columnist Toby Manhire put it, is Labour’s proposed industrial strategy. Overshadowed by the taxation gymnastics, Labour’s Fair Work Agreement could, according to Business NZ CEO Kirk Hope, “be the largest systemic change promoted by any party this election.” Like the tax working group, the details are similarly sketchy, but it appears to open the door to the return of collective employee bargaining in certain industries. This isn’t the space to argue the merits of the policy, but it is important to encourage Labour to be absolutely clear with voters on the details. We need to talk.

“The reality is, from opposition it is very hard to make policy”

In Labour’s defence, “the reality is from opposition it is very hard to make policy,” as Grant Robertson said. Here, I agree with the New Zealand Initiative’s recommendation (and Labour and Greens policy) for the introduction of an independent fiscal council like the Parliamentary Budget Office in Australia. While Treasury has done well at independent fiscal forecasting, it will only assess costs and benefits of campaign spending promises at the behest of the incumbent government party’s Finance Minister. Along with reducing the Government’s home-ground advantage by impartially assessing all party promises, an independent fiscal watchdog might even help avoid the astronomically boring back-and-forths about the existence and size of black holes too.

Building and sustaining real trust and transparency in our democracy—in our leaders and our institutions—takes more than financial facts and figures. But would be a worthwhile place to begin.

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Kieran Madden

By Kieran Madden -

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