Election 2014

Key proves he tries to keep in step with public opinion

11:20 am on 4 November 2011

[4 November 2011]

National Party leader John Key is proving once again how he carefully tries to remain in step with public opinion - even when pushing unpopular policies.

National's plan to partially privatise State-owned energy companies Meridian Energy, Genesis Energy, Mighty River Power and Solid Energy, as well as sell part of its shareholding in Air New Zealand, has failed to garner public support.

Even so, National still remains well ahead in the opinion polls. But clearly, Mr Key and his strategists are worried about the impact that the asset sales programme could have on National's support, with the Labour Party running a strong campaign opposing partial privatisation.

It came as no surprise, then, that John Key tried to sweeten the policy when he formally launched National's election campaign at the beginning of this week.

He announced the money raised from the sales over the next five or six years - expected to be between $5 billion and $7 billion - would go to the Future Investment Fund. The first $1 billion of that would be used to build new, modern schools for the 21st century.

The way Mr Key put it, people who opposed asset sales must oppose investing in education.

It was clever politics - but politics all the same.

As Labour leader Phil Goff pointed out, successive governments had been investing in education without the need of a special fund.

The more important argument from Mr Key was that the $5 billion to $7 billion raised from the sales was money the Government would not need to borrow.

But Labour and the Green Party counter that argument, by saying National would lose half the dividends paid by those companies, and that in the long run it would represent a financial loss.

Greens co-leader Russel Norman points out the return on capital from the State-owned energy companies is about 15% to 17% when the Government can borrow money at 4% to 6%. He asks what economic sense is there in giving away an investment with such high returns when the cost of public borrowing is so much cheaper?

Mr Goff also says a government can only sell its assets once. During the first televised debate of the campaign, he asked Mr Key how would National invest in schools and hospitals once it had sold partial shareholdings in the State-owned energy companies. What was left unsaid was that National would have to sell more.

And that is part of Labour's message: that voters cannot trust National to hold on to majority shareholdings in these companies.

Economic plans

During the week, Mr Key continued to criticise Labour's economic plan, saying during the televised leaders' debate it would add an extra $17 billion to net public debt by 2016.

He continued to question Phil Goff about Labour's costings during the only public leaders' debate in Christchurch on Wednesday night.

Mr Goff was forced on the defensive, saying Labour would release its full costings at the end of the week. But Labour has rejected accusations that its policies are unaffordable.

During a debate on Radio New Zealand's Nine to Noon programme earlier in the week, it became clear much of the difference came down to how the two parties treat Labour's intention of restarting payments to the New Zealand Superannuation Fund.

National's finance spokesperson Bill English has attributed those contributions - about $6 billion to 2016 - as a straight cost to government. But Labour's finance spokesperson David Cunliffe rightly points out that on the other side of the ledger the Crown would have an asset. Net debt, therefore, does not rise.

As well, National adds another $3 billion to the costings on the basis that Labour would not proceed with partial asset sales.

Labour concedes net public debt would rise under its plan - but nowhere near as sharply as National alleges. And from 2016 Labour says debt drops more quickly than National proposes, once the tax take starts to get a real boost from Labour's proposed capital gains tax.

Both parties' figures are dependent on the Treasury having got its forecasts right. And there are equally valid questions about whether National can get the books back into surplus by 2014-15, the same year Labour says it will do so.

Welfare concerns

Later in the week, Mr Key again demonstrated his political balancing act when National announced its welfare policy.

Under the policy, the unemployment, sickness, invalid's and domestic purposes benefits will be scrapped and replaced by jobseeker support, sole parent support and supported living payments.

National says it will place greater expectations on beneficiaries to work, with single parents having to look for part-time work once their youngest child turns five. Anyone who has another baby while on the benefit will have to be ready to work once that child is 12 months old.

The policy will appeal to core National Party voters who believe the welfare system offers beneficiaries an easy lifestyle. But Mr Key has stopped short of adopting the most draconian recommendations of the Welfare Working Group.

And social service agencies question whether a change of benefit names will actually help. They point out there's already a strong work expectation for most beneficiaries.

Will there be enough jobs?

The real question is: will there be enough jobs for National to reach its goal of reducing the numbers of those on benefits by nearly 50,000 in four years.

It also needs to be put in context. From 1999 to 2008 - when the economy was growing strongly - benefit numbers fell by 140,000.

Not only does Labour oppose National's welfare reforms. So, too, do most of the minor parties.

During a debate on Radio New Zealand's Morning Report programme this week, Mana Party leader Hone Harawira, Green Party co-leader Metiria Turei and Maori Party co-leader Pita Sharples were all adamantly opposed to the policy. United Future leader Peter Dunne also had reservations.

But would it influence Maori Party's support for National after the election, particularly given many Maori would be affected by the change?

Dr Sharples was unequivocal, saying post-election arrangements would depend on a number of factors, not simply National's welfare policy.

Hone Harawira was blunt in his opposition - but John Key does not want his support anyway.

Mr Dunne has already tied himself closely to the National Party, arguing that if people want to see a John Key-led government they should party vote United Future, not ACT.

Where was ACT leader Don Brash? His advisers had double-booked him so he missed the debate. Nor is it easy to find out where he is campaigning - all the more remarkable for a party struggling to survive and in need of publicity.

Meanwhile, Greens co-leader Metiria Turei says the gulf between her party and National - on policies such as welfare reform - is too large to expect any formal support arrangement between the two should National lead the next government.

But she doesn't rule out an extended memorandum of understanding between the parties as the Greens continue to try to make gains in areas such as home insulation and the environment.

As the first week of the campaign draws to a close, there is a sense that there is a contest of ideas and not just between the two major parties.