Tuesday, November 25, 2008

Compare and contrast

The UK and NZ governments responses to the international financial crisis make an interesting contrast.

In the UK, Chancellor Alistair Darling has just announced a package of tax-cuts to stimulate the economy. But these are not your usual tax cuts. Instead of focusing on the rich, he is instead temporarily reducing the rate of VAT (the UK's version of GST) from 17.5% to 15% - a change that will primarily benefit the poor. And to pay for it he's hiking the top tax rate from 40% to 45%. This is not, as DPF is trying to spin it, another example of how NZ Labour was "out of step" on tax cuts. Rather, it is UK Labour finally finding itself and reconnecting with its left-wing roots. Taking a page from the neo-liberals book, they are using the crisis as an opportunity to shift the tax system in a more progressive direction, taking from those who can afford it to help those in need. I doubt DPF would welcome such moves if they were replicated here.

Compare this with the NZ response. National's tax package, signalled long before the election then spun as a response to the crisis, focuses on top-income earners. The half of New Zealand who earn below the median income get practically nothing, while the top 11% of taxpayers, those who need it least, get 40% of the package. In other words, it's the 90's "trickle down" theory all over again - and we saw how well that worked last time. But this doesn't just show that National is still in the grip of a dead ideology - they're also simply not interested in responding properly to the crisis. Instead, in classic neo-liberal fashion, they are trying to use it to enrich themselves and their supporters at the expense of the rest of us. And it will be interesting to see how that flies with an electorate promised centrism and moderation.