Brash, the budget and building a new strategy

Here’s what the leader of one of National’s support parties wrote to John Key last Thursday: “a heavy heart”, “mounting dismay”, “totally irresponsible”. With such a friend, Key has no need of enemies.

Don Brash’s letter enumerated six policy areas where he said Key had not carried through the promise of 2008: “wasteful” spending; the youth minimum wage; the emissions trading scheme; “reality” on superannuation, the wage gap with Australia and special arrangements for Maori.

Key, he wrote, is “running the country for the former Labour and Green voters who crossed over to you in 2008”.

Brash’s letter makes sense of his determination that ACT MPs should leave Key’s ministry. John Boscawen has. That Rodney Hide has been allowed to stay on as a minister is in part because he is trying to get National to take seriously his Regulatory Standards Bill but in part can also be explained by Brash’s view of him as “toxic” and not fit to stand for ACT in November.

This is good news for Labour, holding its pre-election “congress” this weekend. While below the radar it has been redeveloping social policy to centre it on children and has a 10-year, four-part economic strategy which it is airing this week, for the election it also needs enemies it can demonise in the election and Key’s good humour, easy affability and middle-of-the-road-ism keeps him out of range.

Labour will aim to persuade voters that with Key they get Brash — a Brash free of the sheep’s garb National focus-group-watchers shoved him into in 2005. Labour is allowing itself to hope that will enable it not only to get out its 2008 non-vote but also pick up some who went to National — the people Brash says National is governing for.

Labour realists know they probably still won’t get over the line in November. But they can realistically hope that National-ACT difficulties next term will dull some of Key’s sheen and open up a route back to power.

Whether they can then hold power opens up a deep question Labour has yet to answer in the wake of the erosion of the industrial working class since the 1970s: can it build a broad, coherent, committed voting base to rival National’s?

But that’s for after the election. Pre-election, Labour’s issue is that middle New Zealand is probably receptive to National’s moderate austerity message because householders are having to do their own budget rebalancing.

For that reason — though we have yet to see the details and Labour last week trod warily in case there is an offsetting savings incentive — the KiwiSaver trim will probably be accepted in middle New Zealand as necessary even if the lolly that comes with it is less sweet than $1040 a year.

Key points to a partial drought last year, the Christchurch earthquakes and the South Canterbury Finance and AMI Insurance collapses and lingering after-effects of the great financial crash to warrant his message that modesty is the new normal.

The zero-net-new-spending line is a post-earthquake adjustment for the higher interest costs to fund the government’s borrowing for the transition and the rebuild. That logically will have an impact on the track for new spending from 2012-13 on if Bill English is not to abandon his target of a comfortable surplus by 2015-16. That in turn will have an impact on actual spending to the extent that chief executives cannot go on finding ways to deliver English’s “more with less”.

That leaves unanswered a bigger question: is there a strategic economic gameplan beyond fiscal consolidation which has dominated the budget’s lead-up rhetoric? The nearest the government has come so far to an answer is more cows and other things water can grow. Last week it announced plans for more water storage to get more irrigation.

It also released a national policy statement which set off a shooting match in parts of the Land and Water Forum.

The forum’s green side — or some of it — saw the announcement, coupled with a 19-year transition to stricter pollution controls at regional council level, as a licence to pollute which will damage tourism and other aquatic activities and eventually the clean-green brand. A BBC interviewer at royal wedding time queried the brand’s validity on the basis of declining water quality and had Key flannelling.

The production side of the Land and Water Forum — or some of it — hit back with an assertion of a “major mindshift” starting among irrigators and farmers generally, with more acceptance of impacts and how to get better environmental outcomes.

The intra-forum exchange is a foretaste of tougher political arguments to come, not just in water but to find and back non-water-based ways to build exports, especially high-wage ones.

Development of a high-wage strategy is the task for Key’s ministry leading up to the 2012 budget, when the fiscal shocks should have stopped coming. That task might be complicated by needing Don Brash’s votes — which good-friend Brash has now made clear will be available only a price.