Thomas Coughlan: Next election shapes up as battle for Labour’s soul

OPINION:

The next election will be our 10th under the MMP electoral system. Depressingly, it looks set to be a right vs left drag race between National-Act and Labour-Greens.

Te Pāti Māori will provide some interest, but not much; Labour isn’t keen on having the party in its government, but Te Pāti Māori co-leaders don’t want to go with National either. It seems destined to remain on the cross benches.

The only thing to pique this columnist’s interest is that on current polling, after 10 MMP elections, 2023 looks set to deliver the first solely Labour-Green government in history (it could also, though this is less likely, deliver the first purely National-Act government).

Former Labour leader Helen Clark was known to prefer building coalitions to her centre rather than to her left (after her experience with the crumbling Alliance between 1999-2002, who could blame her), but incumbent Labour leader Jacinda Ardern doesn’t have much of a choice.

A Labour-Green government will challenge Labour to work out what sort of party it wants to be.

Since the 1990s, Labour has cautiously supported tightening regulatory conditions to combat climate change, but it has also shown enthusiasm for using free-market measures to clamp down on the cost of living, like free trade agreements, deregulating sectors like telecommunications and beefing up the Commerce Commission to encourage competition.

Benign economic conditions over the past three decades have meant Labour never had to choose between increasing the cost of environmental regulation and combating rising living costs. Indeed, Labour’s only serious environmental addition to the cost of living was the fifth Labour Government’s emissions trading scheme, something households have survived with for more than a decade.

The lucky compromise will break down before the election when, later this year, the Government publishes its first Emissions Reduction Plan, its plan to tackle climate change under the Zero Carbon Act.

Not all the policies in this plan will increase the cost of living, but some certainly will. The draft plan’s suggestion of a renewable energy target, developing a circular economy, and mandatory energy performance certificates for commercial and public buildings won’t come cheap.

In ordinary times, selling these policies would be difficult; in an era of the highest inflation in three decades, possible emissions reductions policies look like an act of political hubris. Tackling climate change is vital to our survival, but it’s difficult to make the case to struggling households that a crisis of the future is worth foisting costs on struggling families of the present.

Labour should care more about this. A report commissioned by the Government last term from the Interim Climate Change Committee found that the tiny benefit gained from going from 99 per cent renewable electricity generation to 100 per cent would avoid only 0.3 Mt CO2 at a cost of more than $1200 per tonne of CO2e avoided. Struggling households would be quite right to ask why the Government is foisting extra costs on them for so little gain.

The politics of emissions reduction will get even more difficult at the election, when Labour will be in no position to comprehensively rule-out any high-cost emissions policies promoted by the Greens. The Greens leadership will be keen to promote such policies to their own members, who have had to sit on their hands for the previous two terms of government as NZ First and Labour shot down any serious environmental change.

Labour should not be blasé about inflationary pressures in the economy – increases in the cost of living hurt its low-income supporters more than anyone.

In the three months to September 2017, National’s last months in office, the annual cost of living increase for beneficiary households ran at 2.3 per cent, it was 2.6 per cent for low-income households, and 1.8 per cent for Māori.

In the three months to September 2021 (excluding the record inflationary quarter we saw in the three months to December), inflation was running nearly twice as hot in those groups.

Beneficiary households saw annual costs go up 3.9 per cent, low-income households saw costs increase the same, while Māori households saw inflation of 4.1 per cent.

The Greens have an answer for this. Co-leader James Shaw, when announcing the draft emissions reductions plan, said climate policy had to look at redistribution, in other words forcing the wealthier to pay their share and alleviating cost burden from poorer households.

The Greens have a wealth tax policy – previously ruled-out by Labour – that would take wealth from the rich and redistribute it to the poor, including the beneficiaries who won’t enjoy the effects of Labour’s fair pay and pay equity agreements, which are likely to push up incomes.

But serious redistribution really isn’t what Labour gets up to in the 21st century. Its 39 per cent income tax rise was designed and marketed as a way of taxing as few people as possible. Politically, passing newer, more equitable taxes is far more difficult than enjoying the effects of bracket creep, the process by which wage inflation drags people on ordinary incomes fall into ever higher tax brackets. Yet another cost borne disproportionately by people on lower incomes.

All of this puts Labour in an almost impossible position this year and next.

Ruling out higher, more redistributive taxes has given Labour an impressive electoral coalition, stretching from poor households to the upper reaches of the middle class.

It’s now got to find a way of keeping that together or picking a more cohesive group of voters to target. Can it keep costs low for people on low incomes, while adhering to its climate agenda, and not raising taxes on the very wealthy?

Unlikely.

Labour has to find a way of muddling through; likely by trimming back on the ambition of some climate policies, and awakening itself to some milder form of redistribution (possibly resulting from David Parker’s research into how much tax is paid by the wealthiest New Zealanders).

How Labour chooses to address the costs of climate change will give some insight into what sort of party it wants to be this century.

If it cannot make the case for why it is improving the lives of its working-class supporters while curbing emissions, those supporters will likely continue to flee the party they’ve backed for more than a century.

It could, of course, decide its future is as a centrist, middle-class party, leaving low-income people politically homeless, but giving Labour a good shot of winning middle-income cities and suburbs like National does.

Labour should be wary, it’s easier to lose a voter than to win one back.

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