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Upton-on-line: Confidence Tricks

Upton-on-line June 8th

Confidence Tricks

Upton-on-line has been hunkered down on the farm this week. Perhaps there really is some truth in the old belief that rural virtue is pitted against city vice. Perhaps it’s just having to rely on the media. But from the depths of the provinces, the gyrations of the Government’s confidence-building offensive appear truly facile.

Last week we were assailed with fairly hard evidence of plummeting business confidence. Confidence is a slippery thing. In upton-on-line’s experience economic confidence can be destroyed in weeks but it can take months if not years to recover. There’s a cast-iron asymmetry about it.

Which is why Michael Cullen’s reported comments today are so naïve. Having spent six months assuming that the government could ignore the people who take the investment decisions that drive the economy, he seems to believe that a week’s worth of hectic assurances that the government will go slow on any further policy initiatives that add to business costs will just make the gloom evaporate.

Like so many of his ilk, Dr Cullen really believes that when politicians speak, people listen – and believe them. His claim that business confidence “appeared to be recovering after the Government signalled it was listening to business” is what he and his spin doctors would like to believe is happening.

Even more implausible is his claim that “we have had messages to this office from various business leaders that they think things are going better.” Give us a break! A week after the surveys things are suddenly going better because the Minister has taken fright and made a few soothing noises?

The world doesn’t work that way. Upton-on-line has had a fair bit of experience and he can assure readers that people don’t ring ministerial offices to let them know things are going better. Most business people – most people in fact - ignore politics. They ring ministerial offices if they’re exasperated beyond belief. Most importantly, they judge politicians by their actions not their words.

But just in case anyone is following the Government’s words still, there’s a slightly sinister sting in the Prime Minister’s assurances. Helen Clark has been careful to make it clear that some of the more costly policy proposals like extra holidays and paid parental leave are “not appropriate to push at this time”.

Clark always chooses her words carefully: the message to business is very simple:

“We’ve implemented as much anti-business policy as we can get away with for one parliamentary term. We want to win the next election because there’s much more we’d like to do – and we will given the chance. By 2002 the union movement will be a much more powerful influence in the workplace and it will be easier then to promote more 'progressive' policies. In the meantime, we’re happy to appear moderate to keep the Alliance in its place.”

Like Helen Clark, upton-on-line chooses his words carefully. We have maintained from the outset that this is the most left-wing government elected in the developed world for nearly 20 years. The present pause is a tactical one. No-one should be fooled by claims that people are spontaneously phoning Dr Cullen’s office full of the joys of spring.

Tax Breaks & Mandates

For almost a decade, upton-on-line was lobbied by scientists and business people alike to consider tax breaks for R&D. For almost a decade the reply given was the same: that tax breaks for R&D, quite apart from being a selective and discriminatory boost to one type of economic activity compared with other equally valid investments, was a very costly thing for the government to get involved with.

If there are special concessions worth having, you’d be crazy not to get your accountant to arrange things to maximise their availability. That has been the experience wherever these things have been tried – most proximately in Australia where the value of the tax breaks has had to be reduced to contain the hole they were creating in the revenue base.

It’s a funny old world, but human nature doesn’t seem to vary much when it comes to tax. If there’s a hole in the fence, people will try to squeeze through it.

Which is why upton-on-line was intrigued when Labour went with tax breaks as part of its election manifesto. They’d had nine whole years to explore this one in detail – look at the overseas schemes, talk to the Australians, get inside the minds of accountants and businesses. Upton-on-line wondered what new intelligence Labour’s Pete Hodgson had stumbled upon. Were there unturned stones that had sheltered magical new self-policing tax schemes?

Well, er … no, it seems. Dr Cullen is busily explaining that the government is to set up a grants scheme later in the year after having been advised that the tax breaks it had promised mightn’t help new businesses.

Sorry folks, all that was known throughout. It just sounded good on the campaign trail and now that the fiscal reality is starting to bite, Dr Cullen and Mr Hodgson are casting around for excuses.

By the way: there have been grant schemes throughout the last decade and they were increased as recently as September last year as part of the Bright Future package. So could we please have a statement from Dr Cullen announcing that he now concurs with the advice tendered to the previous administration?

In the meantime, the prize for the most devastating commentary on this little policy reversal goes to the Northern Employers & Manufacturers Association. They have, very fairly, stated that the Government has a mandate to introduce the tax breaks and business expects that mandate to be honoured “with the same enthusiasm it has shown over ACC and the Employment Relations Bill.”

Game, set and match! Take a bow.

When Old Friends Fall Out

Jim Anderton says the Greens have not shown themselves to be reliable when it comes to keeping confidences shared with them. So the Alliance is not prepared to sign the protocol that the Government had hoped would govern its dealings with the Greens on whom it relies for a majority (unless of course its relying on Winston Peters which it does more often than not).

Rod Donald gave a really fascinating interview on Canterbury TV where he spelled out the excellent relationship the Greens believe they’re developing with Helen Clark. But when it comes to their old ally, Jim Anderton, things sound pretty grim. Here’s how Rod – one of the most likeable members in the House – put it:

“What we’ve .. said to the Alliance is, look there are a whole host of areas where we’re closer to you than you are with Labour. Why don’t you work with us to try and advance those. The Alliance hasn’t responded to that. But with Labour, I think there have been occasions when they’ve not been so sure where the Alliance is going to be on an issue and they’ve sought our agreement to give them a bit of leverage with the other side. It’s a fascinating relationship.”

Fascinating indeed. What on earth did Rod and Jeanette do to Jim to earn this sort of paranoid relationship? Or can Jim not stand the thought that the Greens are holding up in the polls while the Alliance has all but disappeared? One thing is clear: the Alliance is potentially a source of major instability to the stability of the Government.

A Bouquet

Upton-on-line salutes the Government’s decision – piloted through by Sandra Lee – to give a major boost to pest and weed eradication programmes. It means the Biodiversity Strategy – developed by Nick Smith and Simon Upton – stands a real chance of turning the tide in the battle to halt the on-going extinction of our indigenous plants and animals.

This is a spending priority that upton-on-line wholeheartedly supports – provided the money is wisely spent. The trick, now, is to see that the resources are used to encourage a similar response on the part of private landowners.

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