"Clearing the decks"

David Cunliffe will start the election campaign next week with a speech on labour's economic direction. But beforehand, he's decided to "clear the decks", dumping the GST off fruit and vegetables and $5,000 tax-free policies:

“We will be removing the previously proposed $5000 tax-free zone and the GST exemption on fresh fruit and vegetables.

“This decision frees up around $1.5 billion per annum.

“While these were worthwhile policies, we believe there are better ways to help struggling Kiwi families.

It will be interesting to see what those policies will be - the GST plan in particular was a policy which convinced me on its merits; OTOH, it may be the case that that money is better spent on housing and basic public health. We'll have to see what he's proposing before we can judge whether this was a good decision or not.

Meanwhile, remember how last year the Labour membership voted against raising the superannuation age and instead demanded the caucus consider other options? Cunliffe has just fucked them, saying that he still plans to raise it to 67. So what does Labour stand for again? Degraded social services and a life worse than the one your greedy, grasping parents enjoyed (oh, and toadying to business by proposing yet more NeoLiberal austerity). Why would anyone want to vote for that?

The tax justice campaign

GST went up today, as part of the government's "tax switch" to transfer more of the country's wealth to rich people like them. In response, the Alliance (remember them?) have set up the tax justice campaign, which is aimed at removing GST from food and replacing it with a tax on financial speculation (in other words, on the bankers who ruined the global economy). They're circulating a petition to Parliament on the issue, and there are stalls around the country set up today and tomorrow to collect signatures. Alternatively, you can download the petition directly from their website [PDF], get your friends to sign it, and post it back.

Their original goal was to collect 10,000 signatures in two days. According to their website they've already collected 12,000, which is impressive if its true. The more people who sign up, the greater the pressure on the government, and the greater the chance of seeing change eventually.

If you're interested, you can join the campaign’s Facebook group here. It has almost 4,000 followers already, which is pretty impressive for a New Zealand political issue.

Water on stone

The biggest criticism of Labour's GST policy is that it won't make any difference. Yesterday, Bill English said it was worth only $1 a week, while today on Public Address Russell Brown argues

But assuming it is passed on in its entirety to consumers – not a given – a 15% move in fruit and vegetable prices is insignificant in comparison to the seasonal movement in prices, or even the gap between different outlets at any time of year.

Sure. And the same can be argued about the effect of the ETS on petrol prices (a 3.5c/l rise is well within the normal fluctuations caused by international supply, demand, and panic). But no-one (and certainly not Bill English) doubts its efficacy. Though perhaps that's because in the case of the ETS it was placed in an explicit market context.

Small changes in price add up to produce big changes in behaviour. That's how markets work. Make something cheaper, and if people want more of it, they'll buy more. Make it more expensive, and to the extent they can reduce demand, they'll buy less. Its like water on stone. One drip doesn't do anything. But let it drip for long enough, you get holes. Its not rocket-science.

Labour's GST policy applies exactly this logic to fresh fruit and vegetables. And the Otago study quantifies the effect. Doubters need to explain why that study is false, and why the same logic they accept everywhere else, for everything, doesn't apply in this case.

Meanwhile, as for retailers not passing any cut on, I think the solution to that is political pressure. At the merest hint of price gouging, the appropriate select committee should declare an inquiry, compel the gougers to appear and explain themselves, and shit all over them with bad PR. Again, its not rocket science - all it needs is politicians with a backbone. Though given the unanimous vote for the Canterbury Enabling Act, I really wonder whether we have any of them left.

Why we should remove GST from fresh fruit and veges

The Otago Daily Times summarises the empirical evidence on the effects of removing GST from fresh fruit and vegetables:

Professors Tony Blakely of the University of Otago, and Cliona Ni Mhuchu of the University of Auckland, gave the proposal cautious support as a move to improve health and reduce inequalities.

"Earlier this year we published research showing an 11 percent increase in purchasing of fruit and vegetables when 12.5% was taken off the price," Professor Ni Mhurchu said.

The finding was from a large randomised trial of 1,100 New Zealand shoppers, and published in the American Journal of Clinical Nutrition.

This increase equates to about half a kilo more fruits and vegetables per household each week, or about six extra servings.

That's a pretty significant effect. As for those who doubt whether its worthwhile, it is worth noting that we already run a 5+ a day programme to encourage healthier eating. This goes beyond mere advocacy to enabling. It would mean the government is putting its money where its mouth is.

Labour's GST policy

Today Phil Goff committed to axing GST on fresh fruit and vegetables if elected. Good. While originally against this idea, I've changed my mind after seeing the evidence. According to research from Otago University's public health department, removing GST from fresh fruit and vegetables increased consumption by 11%. For a country facing an obesity epidemic and an explosion of lifestyle diseases caused by the modern, sugar-rich diet, that seems like a worthwhile goal.

Critics will say the shift is complex and unworkable. Bullshit. Labour has a solid definition of what counts ("unprocessed" and "fruit or vegetable" - no space for quibbling over salad rolls or tinned beans there), and they've committed to providing the necessary support through IRD to make it painless and risk-free for business. The Australians can manage this. Are critics really saying we're stupider than them?

Which really only leaves cost. This policy will cost $250 million a year. Labour says that will be "repaid many times over" from health savings, but that remains to be seen (those savings will also be long-term rather than short-term). Its a hefty cost, but not one that will break the bank, and whether we want to effectively spend money this way is simply a question of priorities. As Goff asks:

If it’s appropriate to put up the price of cigarettes by $200 million a year in tax because you want to discourage smoking, why wouldn’t you spend the same amount to reduce the price of healthy fruit and vegetables to encourage people to eat what is good for them?

(Though I'd put this as "enable" rather than encourage, a removal of a price barrier to healthy eating).

Though if we're looking at ways of paying for it, here's an idea: restore the top tax rate of 39% on the 3% of income earners who earn more than $100,000 a year. This would net more than $550 million a year - more than enough to pay for this change. Plus, it would be a "tax switch" which benefits the poor rather than the rich. Seems like a good idea to me...

"Not viable"

Interest seems to be growing in Rahui Katene's bill to remove GST from healthy food. There's a strong empirical case for the move, and it looks like it would work far better than the current government programme of education. But the government hates the idea. The latest excuse, from Peter Dunne, is that scrapping GST on food is "not viable" as it would cost too much money - about $330 million a year.

But cost doesn't make something unviable - it just means its a question of priorities. The government could afford to do it if it wanted, and (in these tight times) if they chose to forgo other policy decisions. But for National, other things - such as tax cuts for their rich mates and ETS subsidies for farmers and polluters - come first. And that's what politics is about. But trying to hide that fact, and pretend that something is not an option because of cost rather than choice, that's just chickenshit.