Armstrong on the Agenda

John Armstrong writes:

Those arguing John Key’s soaring approval ratings give him licence to live a little dangerously and implement some necessary but unpopular policies are forgetting a few things.

Despite a personal high of 58 per cent as preferred prime minister in last week’s Herald DigiPoll survey, right now Key’s reluctance to run down the vast political capital he has accumulated is understandable.

Implementing the Maori Party’s flagship Whanau Ora programme and settling the foreshore and seabed imbroglio could both end up exploding in his face any time soon.

Add to that volatile combination a less than popular rise in GST. Thursday’s TV3 poll revealed a 74 per cent rejection of an increase in GST from 12.5 to 15 per cent.

This negative sentiment switched dramatically to 45 per cent against and 52 per cent in favour when the rise was compensated by tax cuts.

This is no surprise.

On the same day the TV3 poll was released, Bill English was hosing down expectations that the top tax rate will drop from 38 to 30 per cent.

The finance minister indicated the top rate may fall to 33 per cent, while company tax may be cut from its current 30 per cent, especially if Australia drops its rate below that level.

This seems the smarter option. Cutting the top personal rate to 33 cents in the dollar rather than 30 cents will disappoint some higher income earners in National’s camp, but it will not impact on those earning less than $70,000.

The latter comprise the great bulk of taxpayers. It was going to be extremely difficult to persuade them a bigger reduction for a relative minority earning $70,000-plus was justified, given the impact of a hike on GST at the lower income end of the scale.

It was good timing that iPredict yesterday released some stocks on what the top tax rate will be next year.

The top tax rate should never fo course have increased from 33%. Cullen just wanted to punish the rich pricks. He didn’t need the money.

Politicians are now responding to rising public expectations that state entities justify their existence.

The result is a power shift from the state to its citizenry. Take Sweden’s public health system as an example. Patients have guarantees that if they are not treated within three months by their local health authority, they can go to a private hospital and the local health authority picks up the bill.

The Government here is a long way off adopting that kind of model. But this is clearly the direction in which National wants to head.

What a sensible policy Sweden has!