'Tax switch' the real test for National

BY COLIN ESPINER, POLITICAL EDITOR

OPINION: All the world's a stage, as the playwright once said, and we all have our exits and entrances.

Former Housing and Fisheries Minister Phil Heatley would no doubt concur as he exited stage left last week, his time in the limelight categorised more by scandal than seriousness; by superficial expense claims for burgers and lattes rather than raising the living standards of the country's state tenants.

That is a pity. Heatley was not a bad or even an especially proud man. There are far more venal and calculating politicians than the member for Whangarei, and few who would chastise themselves as deeply as Heatley for their failings.

Heatley's crime was more stupidity and carelessness than deceit, but in politics those are crimes nonetheless - doubly so when one is the holder of a ministerial warrant.

But Heatley's quick exit once his character became that of the political sideshow has spared the Government much of the embarrassment it would have incurred had he hung around.

And there would have been more. Fairfax still has unused documents obtained under the Official Information Act on the former minister's expenditure, which no doubt the Auditor- General will now peruse.

In the meantime, there's little point kicking the man when he has fallen willingly onto his sword.

If the former Labour government's experience with ministerial resignations is anything to go by, the Heatley saga won't damage National in the polls, either. The public has become used to errant ministers either walking the plank or having it sawn off for them.

Compared with the likes of former ACT MP Donna Awatere-Huata or former Labour MP Phillip Field, both of whom served time for fraud and corruption, respectively, Heatley is a relative saint.

So it won't be the trials and tribulations of the unfortunate Heatley worrying Prime Minister John Key as he begins the two-week parliamentary recess. No, Key is more worried about a clapped-out old Labour Party bus winding its way around New Zealand over the next fortnight.

Labour kicked off its Axe the Tax bus tour yesterday, and for once Labour leader Phil Goff's timing is impeccable. Evidence is growing that the public are none too fussed with National's plans to raise GST to 15 per cent, and now Goff has two weeks to hammer Labour's opposition home in a forum that really matters - local communities.

Several official polls show strong public opposition to a rise in GST - even when accompanied by a promised tax cut.

That opposition is running at about 70 per cent on average, which means even people who voted for National at the last election are dubious about the proposal.

Of course, if you poll anyone about a tax increase you're normally going to find strong opposition. But Key has packaged the GST rise as being much more than another tax impost.

To the Government, it's the central tenet of a "step-change" in the economy; the way in which lower personal taxes and other changes to the tax system can be funded.

It's also an important psychological message that National is keen to send to the public - that consumption needs to be reined in and saving and investment encouraged.

However, the flip side of raising GST is that almost everything goes up in price. That's the bit voters are having trouble getting their heads around.

National knows this, which is why, from the outset, it has been promising to ensure low-income earners and superannuitants are no worse off after any rise in GST. Labour has been warning just as loudly that they will be. So far, the Government is losing the public relations war.

This is obvious from the rhetoric emanating from the ninth floor of the Beehive, which has become increasingly shrill. Key has begun promising that virtually no-one will be worse off from the "tax switch" - as he has begun euphemistically calling the rise - and even challenged the media to find someone who would be, once the Budget was announced.

On Friday, he took the battle directly to the powerful elderly vote, telling Grey Power in Auckland that superannuation payments would rise by 2 per cent immediately GST was raised, without them having to wait for the annual inflation adjustment. They would also benefit from the same tax cuts as anyone else, resulting in, as Key put it, a "double whammy".

When put alongside the fact that if tax cuts result in the average after-tax wage increasing, which is highly likely, and super will rise anyway (it cannot drop below 66 per cent of the wage for a married couple), Key's offer is extremely generous.

He told reporters after his speech that the offer was worth "hundreds of millions" of dollars, which goes to show just how important winning the GST battle is to the Government.

National just has to be careful it doesn't promise more in compensation than the GST rise actually generates in revenue.

It must also keep an eye on Labour's old bus as it chugs around the country. It might be a hackneyed way of communicating with the public, but it works.

ACT, a minor party with a handful of MPs, managed to change the former administration's mind on several policies, including "fart tax", with publicity gained simply on the back of a bus.

National will point out at every opportunity that it is a little rich for Labour to campaign against a tax that it introduced - and raised. It will also ask whether Labour is prepared to campaign next year on the prospect of cutting GST and raising personal income taxes.

Those are legitimate questions. But they are questions for another time, and another year. It is National that must mount the case for a GST rise, and National that must decide whether or not to pull the pin if it becomes too risky politically. Clowning politicians is one thing. Key can shrug off the Heatley debacle and even profit from it, since his resignation gives the appearance of high ministerial standards. GST is a far more fundamental issue that affects everyone.

There will be winners and losers, whatever Key says. And you can bet the latter will make the most noise.

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