Whose party is this anyway?

Speech by Colin James to the Institute of Directors, 16 June 2004

1. Start out on the right with Rodney Hide. His job is to make ACT credible: to ACT’s core supporters after a divisive leadership contest; to enough voters to get

ACT 5% of the party vote; to National as a realistic coalition partner. To do this Hide has to acquire gravitas and he has to project ACT’s core values while also commanding attention. He started well the day he was elected leader, declaring he would do less scam-hunting and more promotion of the market-liberal case.
ACT is polling around 2.5%. It has been that low before and recovered. But that was when National lacked credibility and a good number of National voters put their votes with ACT, either to ensure it got over the 5% or out of frustration with National. With Don Brash as leader National has higher credibility with those people so they will be less inclined to switch to ACT, especially if there is doubt it will be in Parliament after the next election.

The great bulk of the votes for ACT are votes National would otherwise get. So National cannot afford ACT to get 3% or 4% and not be in Parliament: that is simply a loss of votes to National-ACT. National officials are adamant they are not ready to offer ACT a seat, not least because when National has done that in the past it has lost party votes. But´┐Ż

2. A stable government needs 45%-48%, depending how large the “wasted vote” is, that is, the vote for parties which do not get representation in Parliament. If ACT gets 4% and does not get seats, 45%-46% will be needed. Without ACT, National realistically has only United Future it can call on to assemble a majority; if United Future gets, say, 3% (Peter Dunne’s electorate seat plus three others), National would need 42%-43%, which is a very big ask. With ACT, it would need fewer votes but overall would need 47%-48% and ACT’s extra votes would mainly be votes denied to National.

3. Neither National nor Labour thinks it can rely on New Zealand First to provide stable backing on confidence and supply. The more votes New Zealand First gets the more difficult it will be for either large party to form a government that has a committed confidence and supply majority.

The same probably goes for the new Maori party if it gets seats, though it is too early to say much with confidence about that party.

United Future could provide stable assurance for either National or Labour, as it is doing this term for Labour. But the special conditions which got United Future eight seats this time will not be repeated. Even though it has acquired some more votes through its merger with the Outdoor Recreation party, it will struggle to do much better than 3%-4% (four or five seats). However, a higher score should not be ruled out.

4. A smaller United Future would mean Labour would find it very difficult to replicate its pivotal position in this Parliament. For a majority with only United Future (as now) it would need at least the 41% it got in 2002 and that would mean defying the usual rule that a governing party loses support the longer it is in office. Though there were some special factors, such as genetic modification (GM), operating against Labour in the campaign in 2002, those factors were at least partly offset by a buoyant economy which will not be so potent a factor next time. Also, most votes for the Maori party will be votes Labour would otherwise win.

5. That arithmetic pushes Labour towards the Greens who might just do well enough to make up the majority — they should once again cross the 5% barrier. But the Greens have large differences of policy with Labour across a wide range of policy areas. In return for a commitment on confidence and supply, they would push hard for a policy agreement that advanced their cause in four policy areas: genetic modification, energy, roads and safe food. They would vote on principle on many others, including social spending, workplace regulation, student loans, defence and foreign policy and free trade agreements, on all of which they are the outlier party farther out to the left than ACT is to the right.

The Greens’ conditions for support would likely be difficult for Labour to accommodate and attempting to do so would draw Labour away from the centre. Labour would probably prefer to chance its arm as a minority government with no commitment on confidence and supply and especially not with Greens in the cabinet. [But in any case the Greens would not want to be in the cabinet unless they got 10% (12 seats) or more, so as not to be swamped — and that looks beyond them.]

The Greens are anathema to United Future, which is anathema to the Greens. A three-way confidence and supply support arrangement is therefore problematic and maybe impossible. Likewise a three-way coalition or a two-way coalition that depended for a majority on the other minor party.

6. The upshot of all the above is that a hung Parliament or an unstable government is distinctly possible after the next election.

Voters tell pollsters they don’t like instability in their governments and support for MMP drops when there is instability. So instability might give Labour and National the opening to put up a referendum to change the voting system so that the party vote is proportional only of the list seats and not the whole Parliament. That would reduce the small parties’ seats and make stable government, dominated by either Labour or National, much more likely.

Hung Parliaments are not usually good for business because they are more likely to produce muddled policy, including fiscal policy.

7. The lesson from all this is that the political situation is far from settled. Predictions at this stage are hazardous. All that can be said is that National is now again a real contender to lead the government in the next Parliament. The Swedish model — of a dominant left party able to go left and right for support and a fragmented right — is dead.

What can be said is that there may well be issues or developments which shake up the numbers again. If so, these are more likely to be a risk to Labour than National.

Among the risks are an international shock, either via oil prices or arising out of international economic or security events. What that would do here can only be speculated on.

8. The issue that has brought the possibility of a hung Parliament into focus is the Treaty of Waitangi and the trigger for that has been the foreshore and seabed decision by the Appeal Court a year ago, the government’s attempt to find a solution and Don Brash’s Orewa speech.

The extraordinary reaction to Brash’s speech was not predictable and no one predicted it. But the conditions that produced that reaction have been evident for some time — and were shown in the plunge last year after the Appeal Court decision in the poll readings on whether people thought the country was on the right track or wrong track.

The genesis of the February poll reversal lies in the revolution during the past 20 years in the recognition of Maori culture, Maori claims to special status as first arrivals (tangata whenua), Maori grievances over breaches of the Treaty and other claims under article 2 of the Treaty and Maori influence within the power structure. This revolution has been carried out by the political elite of both Labour-led and National-led governments. The suburb-dwellers were left behind.

This accounts for the extraordinary reaction, at least as measured in polls, to Brash’s Orewa speech. Puzzlement, fear and anger have been given a vent. His assertion of one standard of citizenship and no race-based funding addressed feelings of cultural insecurity. Cultural insecurity was up till then Winston Peters’ ground but he has tilled only the smaller paddock, immigration, and not the much larger Treaty one because he has wanted Maori votes. Brash is reaping a much bigger reward and has reaped a good part of that from New Zealand First.

9. Where does this go from here? The big picture is one of two indigenisations.

In the late 1970s and 1980s there was a sudden outpouring of novels, plays, dance, films and new art. This was unselfconsciously New Zealand and marked this country’s true independence from Britain. Taken with the huge policy changes in the late 1980s and early 1990s in every policy field, it amounted to this country’s independence revolution. The ethnic British/Europeans were becoming indigenous, indigenising themselves.

At the same time through the 1970s and 1980s Maori reasserted their claim to special status. They “reindigenised”. This was, if anything, stronger than the ethnic British indigenisation and contested it. Governments and most non-Maori individuals were uncertain how to respond and in some respects were over-deferent. Hence the Treaty policy revolution.

The tension between these two indigenisations needs to be resolved. This will take a generation or maybe two generations and will involve a high degree of cross-influence by each culture of the other, including (1) absorption of much more Maori culture into the “mainstream” culture and (2) Maori refocusing their attention and energy away from grievance and traditional culture on to being full participants in the international economy and society (which would be Maoris’ focus if they had not been colonised).

If the tension between the two indigenisations is resolved, we will have a nation. If it fails, this country will not be a nice place. An important element in the reconciliation is likely to be the acknowledgement that all New Zealanders are indigenous.

In the meantime, concessions to Maori have reached high tide. From here on there will be some rollbacks, though they are likely to be relatively limited — even, probably, if there is a National-led government.

10. The smaller picture (but still a very big one) is prosperity.

The present government has scaled back its economic ambitions. All talk of getting back into the top half of the OECD rankings in GDP per capita has gone. Now the talk is of a broader mix of measures of quality of life, in which New Zealand ranks better than on GDP per capita.

But Brash’s essential thesis, that economic growth is necessary if we are to have first-world health care and education, is accepted by the government. Its problem is how to get the growth rate up without cutting taxes or regulation. Its answer is more money into research, science and technology, more investment in infrastructure (skills, energy, transport, water), capital to develop ideas into commercial profit, a lot of facilitative assistance for business, some micro improvement of compliance requirements and, more recently, a focus on productivity at the firm level. It will do some reworking of the Employment Relations Law Reform Bill and get some recognition of “national interest” into the Resource Management Act but otherwise it will not move far on regulation or tax.

The point of being in politics for this government is to redistribute: wealth and opportunity. That was why this Budget so delighted Labour faithful. Whether that is acceptable to New Zealand more widely is yet to be discovered.

11. The other side’s response is still far from clear. Rodney Hide made a big issue on Sunday of rescuing Brash from compromises with New Zealand First and United Future but the big issue right now is how far he is compromising within his own caucus. Tax policy is a pale shadow of the 2002 policy. Treaty policy is much less clear than the Orewa speech promised. Kyoto will be accepted for the first term, though carbon charges will not. Resource Management Act changes may well end up a lot less vigorous than the rhetoric. And so on and so on. The OSH legislation will be little changed and the 2000 Employment Relations Act will stay pretty much in place.

We will just have to wait. And then factor in whether it will be ACT or a party or parties to National’s centre that it will be adjusting policy to take account of.

12. Sum all that up and what do you get? Uncertainty. The wobbles in the wake of the huge policy reforms of 15-20 years ago have not yet stopped. But the next Parliament should settle the wobbles down again.