Budgetary musings

The major media and much of the blogosphere has rightly poured scorn on the limpid tax relief announced in yesterday's budget. To think the people earning between $10,000 and $40,000 are going to be impressed with an extra $35 a year(!) in three years time(!!) demonstrates that Michael Cullen dwells in a hitherto unimaginable state of delusion.

Matters were made worse for the government by the Labour Party President, Mike Williams, going around to the papers beforehand and gossiping about tax cuts. If he had actually known the size and proposed date of the tax cuts, I daresay that he would have kept his mouth shut. So why did he do it?

My guess is that some members of the government considered the arguments for tax relief had considerable merit (for example, when Labour was elected in 1999 it promised that the top tax bracket would only catch about 5% of taxpayers - the figure is now 13%) and put pressure on Cullen in the days before the Budget to implement this. They then sent out Mike Williams on a media tour to ensure that Cullen wouldn't renege on any commitment that he had made (something which John Tamihere had practically accused him of doing so in the infamous Investigate interview). Unfortunately having obtained such a commitment, the government members neglected to obtain any information about the size of the tax relief or its implementation date. They simply assumed that Cullen would offer meaningful tax cuts and so sent out Williams to make a fool of himself. I'm also suspecting as a result of all this that quite some distance has come between Mike Williams and Helen Clark. Clark is practically the only person with the authority to send Williams on a media tour and she would have also known what Cullen was intending to do about any intended tax relief.

However despite all their political machinations, Cullen and Clark have made a big mistake. By failing to offer credible tax relief, they have left the door wide open for National to do so even without touching the government's other spending initiatives. I have no doubt that, if elected, National will touch the government's spending initiatives but they can credibly claim to make savings by attacking government waste (for example, a quarter of a billion can be saved right up by letting Te Wanaga go belly-up) rather than propose spending cuts that Labour can attack.

One last thing that I find interesting about the budget is what Colin Espiner writes about the Budget speech:

If budgets can in any way be judged by the reaction accorded them in the House, then 2005 will go down as one big yawn.

Not even the Government benches were full for Cullen's big speech, and the public gallery was half empty.

Government whip Jill Pettis had to orchestrate what little applause greeted Cullen's spending announcements, which were thinly spread through a 40-minute address.

Even if the Budget were itself boring, the fact that some Labour MPs didn't turn up for it and that applause for it was sparse appears to me a rather telling sign of morale within the Labour Caucus.