Key differences in tax cuts & ETS

John Key and National have neutralised a lot of the issues which Labour might have used to attack them. To avoid the accusation of being Labour-lite they need some key (no pun intended) policies to clearly differentiate the party and they’ve got two in tax cuts and the Emissions Trading Scheme.

 

Tracy Watkins says National will trump Labour with a tax cut worth at least $50 for the average worker.

 

Accountants report sheep farmers are facing losses of up to $200,000 in the past financial year so they won’t be worrying about paying tax but many dairy and cropping farmers will. And regardless of individual balance sheets, everyone will gain from tax cuts if they take a bit of pressure off wages.

 

Critics of tax cuts always say they’ll have to be matched by spending cuts, but the tax take doesn’t necessarily mirror the tax rate. The tax take can go up when the rate goes down because there is an increase in productivity.

Key’s announcement yesterday that National’s support for the ETS will depend on six conditions has gained support from business although the Government is not being swayed.

The Herald reports on the conditions and Climate Change Minister David Parker’s response to them:

ONE
Key: The ETS must strike a balance between New Zealand’s environmental and economic interests. It should not try to make New Zealand a world leader on climate change; Kiwis can’t afford to pay the price for that particular experiment.
Parker: The ETS is designed to balance environmental and economic interests. The Government’s recent delay of the entry of the fuel sector until 2011, and extension of the phase-out of free allocation until 2018, are examples of balancing economic imperatives with the environment.

TWO
Key: The ETS should be fiscally neutral rather than providing billions of dollars in windfall gains to the government accounts at the expense of businesses and consumers. National does not think it is responsible for the Government to use green initiatives to swell the Crown coffers at the expense of Kiwis’ wallets.
Parker: The ETS would not result in a surplus of credits for the Government in the short term, and any surplus that might result later depends on New Zealand’s target under future international agreements. The five-yearly reviews of the scheme are the way to take account of that.

THREE
Key: The ETS should be as closely aligned as possible with the planned Australian scheme, with common compliance regimes and tradability. In my second speech as National Party leader, I called for close co-operation with our biggest trading partner on this, and I continue to call for it. Given the Australian timetable for developing an ETS, I believe it’s still possible.
Parker: New Zealand officials are in close contact with Australian officials as both sides develop their schemes. They are very likely to be compatible, but New Zealand’s priority is to design a scheme that is best suited to our strengths and weaknesses, not Australia’s.

FOUR
Key: The ETS should encourage the use of technologies that improve efficiency and reduce emissions intensity, rather than encourage an exodus of industries and their skilled staff to other countries.
Parker: The select committee and the Government are already considering intensity-based allocation within a cap.

FIVE
Key: The ETS needs to recognise the importance to New Zealand of small and medium enterprises, and not discriminate against them in allocating emission permits.
Parker: This matter is under consideration by the select committee.

SIX
Key: The ETS should have the flexibility to respond to progress in international negotiations rather than setting a rigid schedule. This way, industry obligations can be kept in line with those of foreign competitors.
Parker: This has already been achieved, by way of a five-yearly review that is proposed on the phase-out of free allocation.

 David Farrar answers Parker on Kiwiblog.

 

He’s right and Labour has got it wrong. There is nothing to be gained by New Zealand being world leaders on this. We’ll only risk losing businesses to other countries with less rigorous requirements which will have a huge economic and social impact here while at best doing nothing for the environment and potentially making emissions worse.

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