PM's speech: Time for a scrap

Key's likeability is about to be tested as he tells voters that GST is on the rise. At last parliament has something tangible to get its teeth into

You could see it in Phil Goff's face... "at last", it seemed to say. At last the Opposition has something to kick against. At last the government is spending some political capital, venturing into political realms that will upset some of those who voted for National in 2008.

You could see it on John Key's face as well... the nervousness of action, the tension that comes from choosing one path over another. He still fudged on GST and income tax, but by ruling out land tax and a capital gains tax, he has nowhere else to go. Now it's just a question of how he can manage these "significant changes" to our tax system in a way that makes "the vast bulk of New Zealanders better off". That's a high hurdle indeed.

First impressions? Politically, Key has mis-stepped by more or less announcing details of the increase in GST ahead of details about personal income tax cuts. Until such time as voters hear how they will be compensated for the GST increase -- presumably in the budget on May 20, three months away -- the story that sticks in their minds will be "GST is going up". As Russel Norman said, New Zealanders will pay more for everything, and that's the headline that will be remembered.

The positive for Key is that he showed some mettle in the speech -- science and innovation will be the priority come the budget in May, our capital markets will be reformed, conservation land will be mined, beneficiaries can expect an uncomfortable time, and there was a repeated commitment to fairness and "across the board" tax cuts. Some good, some bad in there, but it was decisive. Of course such decisiveness will alienate some supporters, and losing supporters will be a new experience for him.

Initial response from the right has been less than encouraging. David Farrar seems underwhelmed and Bernard Hickey has put the boot in. On the left, No Right Turn and The Standard see the speech as, respectively, a return to the '90s and "very, very weak".

Me? I'm struck by the words "across the board" tax cuts. Those three words are crucial. Purely cutting the top tax rate won't sell on the back of a rise to GST. If those on top tax rates benefit from this "step change" while those at the bottom are told to pay more for their bread, it could be National that ends up paying the price. So what's the alternative? A cut at the bottom? No tax up to $5000, or somesuch?

Key has built a government on his likeability, but likeability is a fickle thing. Support for this government is immense, but potentially soft. Key can't blame the recession anymore, so if voters don't see a justification for higher GST, or at worst see his fiddling as 'no better than the last lot', it could start to ebb. I suspect the only way is down now, poll-wise. But how far?

Oh, and I wouldn't like to be a beneficiary this year. They seem likely to be the political football of choice, and time limits on the dole is going to be massive battleground.

This gives Labour a toe grip; can Goff exploit it? It was an impressive start in the House this afternoon. He looked and sounded like a leader for a change. If he wants to enter the election campaign next year with any kind of shot, he now knows where the political faultlines will be.

Key's was a speech that was always going to be a sketch; the detail comes in May, and they will be tweaked depending on the politics of the next few months. One thing we know for certain about this government is that it doesn't do anything without sticking its moistened finger in the air first. What we still don't know is whether these are the bests ideas Key and his Cabinet have, or just the ones they think they can get away with. Would Key cut taxes further and de-regulate more if he thought New Zealanders would back him?

The picture of New Zealand that I see emerging is one that first and foremost wants to increase revenue and cut costs. Balance sheet politics, ho hum. In good Tory fashion it reads like a business plan, not a vision for a better nation. It lacked inspiration, but then New Zealanders tend to like that. Helen Clark was rewarded with three terms for her 'solid management, no vision' approach.

What voters will now judge Key on are those lines about fairness and the vast bulk of New Zealanders being better off as a result of his government's actions.

At least National has shown its commitment to one of its core principles in this speech: competition. At last, the phoney war is over and the politicians have something specific to debate. Let the games begin!