National needs better sales pitch for its ideas

BY COLIN ESPINER, POLITICAL EDITOR

Talk about highs and lows. Prime Minister John Key has had more ups and downs in the past week than a Gold Coast theme-park ride.

From the dizzying heights of Super Tuesday to the height of embarrassment within 24 hours - and that was just by hinting at raising GST.

There will be gratitude in some quarters of the National administration that the pressure on Key has been eased by media interest in the commercial value of the Prime Minister's doodling ability and his attractiveness in a condom-maker's survey.

Key and his Government have had to contend with everything from sneering indifference from some economic commentators, who felt his speech at the opening of Parliament was all Judy and no Punch, through to outrage from community groups representing the low-paid, who fear raising GST will increase the gap between rich and poor.

Of course it will. Giving taxpayers more of their own money back through tax cuts and letting them choose how to spend it (spend it and pay more tax, save it and be rewarded) is always going to favour higher income earners.

It might stimulate the economy and raise productivity overall, which will eventually make everyone better off (a rising tide lifts all boats, and other such cliches), but in the short term, it's National voters who stand to gain the most from the economic package outlined by Key last week.

There is nothing wrong with that. National won the election, after all, and its preferred recipe for growing the economy is hardly a surprise to anyone.

What is a surprise is that the Government wasn't a bit smarter in selling its ideas to the public. The success or failure - politically - of Key's plans will rest on whether they are judged to be fair. But the big problem with outlining one's economic initiatives without providing the detail of how they will work is that it allows one's political enemies to make it up for you.

So, while Key got credit for being frank and up front with the public in his speech to Parliament last week, keeping back vital pieces of the puzzle until the Budget in May gives Labour three months in which to happily muddy the waters over what National is actually planning and how it will be delivered.

Key assures us that no-one will be left worse-off by GST rising to 15 per cent, because the Government has plans to compensate low-income groups, including beneficiaries and superannuitants.

But by not saying how he will accomplish this, we're all free to indulge in weeks of speculation.

Raising benefits and pensions to cover a GST rise isn't too difficult, but putting money back into the pockets of low- wage workers is harder. That's because they pay less tax, so any cuts to the lower personal tax rates have to be proportionally bigger. Those with children mostly pay no tax at all, meaning adjustments to the Working For Families scheme will also be needed.

Despite Key's assurances, there will be winners and losers, regardless of the fiscal soundness of the Government's plans.

It's up to National to ensure it has some answers when the losers start figuring out who they are.

So far, National's response has been to say wait until the Budget. That's partly because it wants to save its gunpowder for the big day, but mostly because it doesn't actually know yet.

Key's speech was full of ideas, but behind the headlines there is a lot of unfinished business. Treasury is still doing the numbers on a variety of scenarios for GST compensation, tax cuts, and the closure of various rental property rorts. In addition, no- one's quite sure just how the economy is going to fare in the next few months (let alone the next year) so the Government still doesn't know how much money it has to play with.

That's why Key left himself an "out" by saying the Government was only "considering" a GST rise.

However, the reality is that a rise is now priced in to the political marketplace, and Key would be left looking silly if he changed his mind now.

Actually, he'd look worse than silly, given the embarrassing video clip that has surfaced showing him ruling out a GST rise just before the last election. He'd look downright indecisive.

Labour hasn't been able to contain its delight over the discovery of the clip - or Key's clumsy attempt to explain it away by saying he only meant he wouldn't raise GST on a wet Thursday in August (well all right, he actually claimed he wouldn't raise it to fund deficits, but it's an equally ridiculous excuse).

The fuss left Key looking mealy-mouthed and put the Government on the defensive for the rest of the week, when it should have been basking in the glory of public gratitude for returning personal tax cuts to the table.

If that wasn't bad enough, it appeared no-one in National had thought to check what the Maori Party, the Government's crucial ally, thought about raising GST.

"Not very much at all" was the answer, delivered through backbench MP Rahui Katene, while the Maori Party's co- leaders stayed well hidden.

For a short time on Friday, after Key intimated on radio that he wouldn't put his Government's relationship with the Maori Party at risk for the sake of a GST rise, it almost looked as if he was teetering on the brink of dumping the idea, before his office "clarified" his remarks.

National doesn't need such basic errors when it already has a difficult job on its hands selling an economic programme that could contain the most radical changes the country has seen in two decades.

There's little question the economy is in need of some sort of "step-change", as Key calls it, but being bold brings with it political risk, and National has this week let Labour back in the game.

That was more than Labour had hoped for this time last week, and worse than National had probably imagined.

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