An election to decide the middle ground?

Colin James on the political year ahead for the Business Herald 30 December 2004 First of two

All election years are crunch years because they decide the next three years’ policy direction. But this year’s election may decide a bigger question: whether if re-elected, Labour can then embed its policy parameters so that for some time ahead future governments have less room for manoeuvre.

That makes this coming election potentially of strategic importance for business, subjected as it has been since 1999 to higher taxes and tighter regulation.

Already the parameters have narrowed. National under Don Brash has signed up to the Cullen fund, four weeks holiday, the 2000 workplace re-regulation and a softer tax reduction programme.

Brash has done this — against the precepts with which he came into politics and the leadership — because his colleagues reckon that not doing so would alienate too many middle-ground voters who have become accustomed to the Labour policy settings.

In short, National has accepted that some of the changes Labour has made are now part of political wallpaper. It has decided it cannot be the lead party in the next government unless it gives ground.

In part this is tactical. By neutralising Labour’s advantage on some economic positions, National aims to concentrate on differences with Labour it reckons are favourable.

One difference is on Treaty of Waitangi issues, where National has taken a resolute line against consultation with Maori, any programme it can plausibly call race-based, some Treaty settlements and official deference to Maori spiritual and cultural values. As the public reaction to the Appeal Court decision in mid-2003 and then to Brash’s Orewa speech last January demonstrated, there is political hay to be made in the suburbs with such a stance.

Other differences National has selected to highlight are on criminals and welfare beneficiaries.

But there are two risks in these hard lines.

One risk is that Labour itself toughens its line, so National has to become even harder to maintain a clear difference — which might take it away from the middle ground.

And in fact Labour has begun closing down “race-based” programmes. It has progressively hardened criminal law. It is gradually upping the temperature on getting beneficiaries into work. And this might actually be winning it more mainstream territory.

Doesn’t this just stack up problems for Labour among its majority liberal-left activists? History may be a guide: National’s activists became tow-ey in the early 1970s after just such a mainstream-hogging strategy in the 1960s and that disaffection contributed to Labour’s win in 1972. A decade later Sir Robert Muldoon’s populist raid on Labour’s wage worker voting base spawned Bob Jones’s New Zealand party in protest and it took 12 per cent of the vote in 1984, mainly from National.

Is Labour beset by similar fractiousness? No, or at least not yet.

Drop into a Labour party conference these days. Yes, the special interest groups — Maori, gays, ethnic groups, women, unions, the disabled — who dominate the conference want more action on their agendas. But, so far at least, they want to stay in power more.

There is every reason to think that will hold good through to the election and good reason to think it will hold through a third term, provided there are modest indications of progress on the agendas.

That gives the Labour leadership a lot of headroom. It also gives it time to develop a rationale — and a language — around its positioning that redefines the middle ground in ways favourable to itself.

It has already shown it aims to do that by latching on to words such as “balance”, “opportunity” and “ownership society” and a claim to be representative of all in the country, all notions on which National once had a mortgage with language of its own — remember the “property-owning democracy”?.

Labour will hone this language over the next few months. And it will add a nationalistic dimension, built on ideas of heritage and national culture.

There is another potential problem for National in its tactical neutralisation of some economic policies and ever-harder line on other matters. That is that its core voters might get a mixed message from National. Mixed messages are not good vote builders.

Here is where ACT comes in.

National’s paramount need after the numbing 1990s was to recover its core vote. Bill English, a centrist conservative, couldn’t do that, even with a far more ambitious tax policy than Brash’s and a closely similar line on the Treaty. Brash, bringing freshness, authority and clarity, connected instantly with core voters through his Orewa speech last January. ACT got badly squeezed to the point where its parliamentary future is in doubt.

Might Brash’s new softer economic line open up space for ACT? Can ACT make something of a line that goes: “If you want the real Don Brash, you have to vote ACT”? Might some core Nationalists drift back across the line — as they did in numbers in 2002?

That would be fine for National if it delivered a 5 per cent-plus ACT vote, and so a support partner, in the election — but only if it was not also at the expense of a creditable result for National.

Nearly every ACT vote is a vote National doesn’t get. So some high-ranking Nationalists want ACT’s vote kept low. (Which makes any attempt at an arrangement to get ACT an electorate seat or encourage National voters to donate party votes to ACT likely to cause ructions.)

But if ACT doesn’t figure in the next Parliament, National’s chances of leading the government would be slim. It would need more than 40 per cent and probably nearer 45 per cent, a daunting leap from its sub-35 per cent scores in the past four elections.

Even to be a strong opposition in the next Parliament, National needs a vote in the upper 30s this election. That would also put it back in the game for 2008. But if ACT scores too well, the makes the upper 30s more difficult to achieve.

That’s National’s tactical conundrum. The strategic danger is greater.

Some longtime observers sympathetic to National think 2008 may be too late for National to regain the ascendancy it had for decades after 1949. They think that by 2008 Labour would have embedded itself as the normal party of government and that National would then get only brief spells in government, like Labour after 1949.

One reason for thinking those observers might be right is that the Labour leadership is keen to ride what it sees as an emerging popular pride in the nation.

Does it see right? The reaction to the Tomb of the Unknown Warrior is maybe one clue. The interest in a new flag — surely a likely project for a third term — is another. If the foreshore and seabed law works, that may spell the early beginnings of a new accommodation across the Treaty of Waitangi divide and a firmer national identity.

If so, Brash’s resolute Treaty line would be going out of date by 2008.

So, by the way, would Tariana Turia’s Treaty line, demanding more rights for Maori. The foreshore and seabed settlement is the high-water mark in the tide in the indigenous rights push. By the end of 2002 some senior ministers were muttering about the need to put some pegs in the ground. Brash at Orewa made that need urgent.

And it just so happened that down at Te Puni Kokiri in 2002 Leith Comer was hatching a focus on Maori economic development on to which the cabinet has latched. There is to be a hui taumata in early March. Not for nothing is Shane Jones, a development-oriented Maori leader, top of Labour’s list for new MPs.

Of course, Brash is development-oriented too. That is at the root of his thinking. His and National’s risk, however, is that as Labour brings development more to the fore, he will again look to be me-tooing, not leading the debate.

Of course, first Labour must actually win the election. That is, it must get enough votes to command the government-making after the election.

The current evidence suggests it will. Households look set to be still flush at election time, with unemployment still low, real incomes rising and the second tranche of the tax credits promised in the 2004 Budget working through.

That will offset interest bills, outweigh niggles on education and health and law and order and ease some of the unease, fear and anger over Treaty issues.

But current evidence does not include shocks — which could derail Labour’s re-election train.

Last year’s shock was domestic: Brash’s Orewa speech. It is unlikely he can generate a similar impact this year. If there is to be a domestic shock, a house price collapse might provide it, especially if triggered by offshore instability. Other possibilities are yet another ministerial scandal or Treaty-based racial strife.

An oil spike is one offshore possibility. A sudden upset in international financial markets if Asians stop funding the United States´┐Ż twin deficits is another.

But even such a shock might not evict Labour this year. The impact of an offshore-generated or economic shock is usually lagged. And in any case voters might, as in the Depression in 1931, huddle with the devil they know.

There remains the possibility Brash might work magic with National. The Orewa impact last year says: don’t rule that out. He does have authority. He is fresh to politics. He shoots straight and stands against excesses of liberal-left political correctness.

But the evidence of the last eight months of 2004 is not promising.

Still, the die is not necessarily cast if Labour “wins”. Getting the most votes does not lead automatically to long-term government and policy dominance. Much would hang, post-2005, on the shape of the government it forms — whom it has to work with.

Labour’s ideal is a repetition of the post-1999 scenario: a majority arrangement with United Future, with Peter Dunne and another MP in the cabinet. Two cabinet spots are being kept open now for just such an eventuality.

That would be business as usual, with Labour’s liberal-left kept in check and a strengthened claim to the middle ground.

Labour’s least desired outcome is an arrangement with the Greens alone or the Greens plus the Maori party. That would open up ground for National to recover the middle ground — and to build itself as the normal party of government post-2008 (provided it gets that high-30s vote this time).

There is another possibility, one opened up by New Zealand First in 2004. That is for Clark to run a genuinely minority government that does not have a commitment from another party to provide a majority on confidence and supply votes.

This would require the government to build ad hoc voting coalitions for each such vote, including on the Budget.

Is this far-fetched? No. The Foreshore and Seabed Bill was a measure of such importance that failure to pass it would have seriously weakened the government. It was close to a confidence vote.

And who came to the rescue? Winston Peters, with Dail Jones doing the spadework. Both were once National MPs. National tacticians, casting about for a miracle cure to the party’s woes, might ponder that over the rest of the summer.