Shortest tax cut in history a harbinger of our own future political difficulties?

Real change can be a profound shock.

One response is to hunt for the trigger.  Another is to point out the contrast with past ultimately-failed efforts to shore up the status quo (and marvel at all those ‘total overhauls’ of the deckchair sector).

This could be a useful framework to examine the ferocious response – both from the political establishment and the British public – to the Truss government’s start of a real overhaul.

Two sharp and sympathetic commentators have acutely dissected the tactical and presentational failures of the new UK government (and to re-emphasise, it really wants to be a new government – in a way that the Ardern government did not). Both Charles Moore and David Frost are worth reading in full.

Per our posts last week, the immediate economic impact of the British government’s package hardly justified the opprobrium heaped on it.  The political impact was something else.

Because the public drew some powerful implicit messages from the announcement.

One was that hard times are likely to be coming (with the inevitable risk that the announcement is perceived as the trigger.)  Secondly, that some of the pain will come from the government stepping back from the ‘we can protect everyone’ mantra.  Thirdly, the government is no longer pretending that the highly productive (sorry the high earners) are going to carry all the pain.

Even for folk who think this necessary, it was a surprise to realise that it is starting now and that their own position is – shall we say – uncertain.

Hence the government’s rapid withdrawal of the proposed reduction in the top tax rate.  Far more serious is the split engendered in its parliamentary support, over the very question of the need for change.  

Well, at least you can say that the problem is out in the open and they are having a robust debate.  With luck, they might eventually get to better policy settings.

Is the absence of such turmoil in NZ a blessing?  Well, compare and contrast this fine piece by our own Gary Hawke in the East Asia Forum

It’s so thoughtful, that on a first pass you might underestimate the force of its critique:

“The government began to appear ineffective …

“Public confusion is fuelled by failure to distinguish between changes in relative prices and a process of cumulative inflation … 

“Price increases followed the relaxation of fiscal discipline to counter COVID-19, whether the direct result of public spending or the consequences of other policy responses …

“Major political issues add to the sense of ineffectiveness … 

“The government’s response to problems is to centralise control in a way that suggests nostalgia for a world of ‘clocks’ and predictable engineering rather than a world of ‘clouds’ and digital networks.

“Changes announced by the government have proved impossible to implement and the COVID-19 response was muddled.” 

Hawke concludes:

“The underlying issues are deep. Domestic politics have become a minefield for Ardern and communication abilities cannot substitute for policy analysis.”

So if we’re lucky, the government’s best policies are merely ineffective and their worst are destructive.  Meanwhile the public is confused (or perhaps yet to be confronted – as the British have been).

But note that the government is still operating in the conventional framework and certainly hasn’t admitted failure. 

At least that means leaving the panic to the UK for now.

Truss and her fellow rafters have screwed up their courage (and perhaps one or two other things) and paddled enthusiastically for the whitewater.  It’s harder than they thought and the passengers are scared.

But it doesn’t mean that the rest of us won’t have to face the rapids.

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