LABOUR PAINS
Simon Wilson’s verdict on the Government’s first six months
Transformation was the promise. Prime Minister Jacinda Ardern went to Waitangi and declared, “I believe in the power of change.” She campaigned through the election on the promise of warm dry homes, better healthcare, better wages for workers and more economic opportunity for all. She said schools would become more fit-for-purpose in the modern world. Overflowing prisons would no longer be our shame. Climate change was the great cause of her generation.
So, six months in, how transformational is this Government?
It was never going to be easy. For one thing, Labour needs the support of both the Greens and NZ First for every single piece of legislation. It’s hard to reform when, on many issues, your partners want to pull you in different directions and they cancel each other out.
The Government also has to be mindful of what happens if you go too far too fast, or if the public comes to believe you have no mandate for your policies. The monetarist reforms of the 1980s and 90s provide the lesson: by 1996 they had generated such revulsion we even changed our political system to MMP to ensure such extremism could not happen again.
The Government today — if it is serious about reform — needs to act in such a way that it wins and wins again at election time. And it needs to bed in its work, so it will not be undone by the next government.
Transformation requires much new legislation but it is not, fundamentally, about the laws you pass. It’s about a shift in popular culture — our sense of who we are and what we value for ourselves and for our country.
Transformation works when the citizenry buys in.
Remember also that not everything the Government does involves radical change. The new TPP deal, for example, would have been signed whichever major party was in power. I’m looking here at areas where the Government promised to chart a very different path from its predecessor.
Oil and gas exploration
There’s no better place to start than with the decision to end new offshore oil and gas exploration. For a model of how to introduce radical change without giving those affected good reason to panic, it’s hard to beat.
No new licences: a decisive move. But no curtailment of existing licences: the industry and affected regions were given time to adjust.
Sure, they did their best to panic anyway. National MPs Jonathan Young and Todd Muller called the policy “economic vandalism”. Some commentators said the policy would scare offshore investors away and others declared it was pointless because it would not reduce greenhouse gas emissions. None of that was true. What all the critics really seemed to think was that doing nothing would be better, which rather undermined their arguments.
We learned something very instructive from that exercise: the fuel industry, and the National Party, seem quite happy to pretend they have their heads buried in the ironsands.
They all know the days of burning fossil fuels are coming to an end. Petrol and diesel vehicles will actually be banned in Britain, France and elsewhere by the time the existing licences here run out. Even China knows the days of burning coal are numbered; even Saudi Arabia knows the same for oil. So why didn’t the fuel sector leaders here stand up and say yep, we’ve got this, we’re transitioning already?
Why didn’t they play their role in helping New Zealanders understand this new reality?
Something else we learned: the importance of the Green Party in setting the Government’s transformational agenda. This was Greens policy, not Labour policy, and it was Greens co-leader James Shaw who made it stick.
The Greens have also been instrumental in other big enviro-initiatives, including rolling back mass irrigation schemes, reorienting transport policy and setting up the Independent Climate Change Commission (ICCC).
The ICCC, announced just this week, has had a remarkably friendly reception. Federated Farmers welcomed the move. Business NZ did too, and noted the committee would be looking at how and when agriculture enters the Emissions Trading Scheme. That points to the biggest climate challenge facing the Government: to establish a Countrywide Coalition of the Willing.
That’s my term, not theirs. An ongoing hearts and minds and money campaign that draws in all of us. Transport, agriculture, manufacturing, energy, scientific and technological research, metro and regional, town and country. The whole country, engaged together in the long and difficult process of reducing our carbon emissions to zero.
The aim is not just to combat climate change. It’s to ensure that doing so does not tear us apart but draws us together. To ensure not merely that we cope, but that we have the resilience, the resources and the imagination to make the most of the new opportunities that arise.
Achieving this will be down to the Green Party, far more than Labour, if only for the simple reason that it won’t happen unless farmers trust the Greens, and vice versa.
It will not be easy. But success with that grand coalition will provide an excellent measure of the transformational power of this Government. Not the only one, but one of the few that really matters.
Economic health
Heard about the Living Standards Framework? It’s an economic analysis that asks whether we can measure our economic health, not simply by the amount of economic activity (GDP, or gross domestic product), but by a collection of measures.
The framework proposes “four capitals”.
“Natural capital” covers the natural environment. “Social capital” is about values: the rule of law, Crown-Maori relations, cultural identity and social cohesion. “Human capital” covers the range of our knowledge and skills and also our health: it’s a measure of how well we can participate in society. And “financial and physical capital” covers not just money but houses, roads, factories and all the things that support our incomes and material living conditions.
The classic example of the limitations of GDP is a car crash. A drunk driver smashes into a bridge, the ambulance and tow-truck come, the hospital operates on the passengers who survive, the bridge gets rebuilt, the driver buys another car and so on. Every one of those things contributes to GDP, but society would be better off if the crash didn’t happen.
This way of thinking isn’t new. Robert Kennedy made a famous speech about it in 1968, using car crashes as one of his examples.
But it’s not easy working out how to construct meaningful ways of combining the values of each form of capital. Many agencies around the world are busy with it right now.
Guess who’s introduced it here? It’s not the finance minister, Grant Robertson, although he’s a great fan. It’s the Treasury, led by secretary Gabriel Makhlouf. And guess when it started? In 2011, under the Nationalled Government.
And yet there is little evidence National was going to change the way we measure the economy.
Labour says it is, and as an interim step has already introduced a requirement that poverty will be measured and reported in every budget. Ardern and Robertson are both on record wanting the four capitals to inform the way the economy is measured.
As a journalist writing in the Sydney Morning Herald said this year, Ardern is “planning a world first that could once more make New Zealand a social laboratory for the world”.
Of course, she has to do more than introduce a Living Standards Framework. She also has to get it universally accepted across the political spectrum so it isn’t undone by the next government.
That task will almost certainly take longer than three years to achieve it.
The issue of tax
It’s easy to think the Government will not be transformational on tax because it ruled out so many options prior to the last election.
Plus, the recommendations of the Tax Working Group, led by Sir Michael Cullen, will not be implemented ahead of the next election.
Nevertheless, as Cullen has made clear, various forms of wealth tax could be recommended. Fairness is the value that underpins the desire for reform and if it prevails it will be surprisingly transformational.
Fairness says if you earn money, by whatever means, you should pay tax on it in a way that is equitable across the system.
They won’t do it before 2020, but a National-led Government has avoided doing it at all. Labour is on track to try.
Elsewhere in the economy, businesspeople say they feel anxious about the economy but good about their own prospects. How’s that for disconnect? Herald writer Brian Fallow called it “tribal political sulking over the state of the economy” and he was dead right.
Infometrics says economic activity will slow in the next two to three years due to the Government refocusing its spending — away from so-called Roads of National Significance, for example. But it will be higher than expected after that.
If that’s true, it’s a risk the Government has to take. Spending can’t remain locked into the old National framework just because changing it will impact the election cycle.
The regions are getting an extra billion dollars a year and you can be certain some of the projects that money funds will turn out to be misconceived and/or mismanaged. But that’s not to say the regions should get no help.
The choice is stark. Either we accept that some regions are destined
Next week marks the first six months of the selfproclaimed transformational Labour-led Government. Simon Wilson
gives his verdict.
for ongoing poverty and deprivation, and that people will keep pouring into Auckland, or we recognise the value of building economic activity in those regions. The Living Standards Framework will be immensely useful in establishing the wisdom of this.
And the hardest thing of all, when it comes to the economy? Creating a higher-wage economy without unleashing inflation.
Labour is not committed to a living-wage plan but it will raise the minimum wage to $20 by 2020. That’s a good start. The Employers and Manufacturers Federation said it “could bring the economy to a grinding halt”, but that was demonstrable nonsense and reflected very poorly on them.
The minimum wage is now enormously widespread, especially in the service industries. This means employers who routinely pay their workers no more than the law requires have forfeited to the state their role in setting wages. They can hardly complain when the state tries to keep the minimum wage from falling too far behind other wages.
The minimum wage is also important because it impacts on relativities within companies and industries. That makes it a powerful weapon in the hands of any government wanting to see more money in everyone’s pockets.
And pay equity? The new Government talks a good game but we don’t yet know how it will respond to the first big claim. Teachers and nurses, among others, are making their case for big pay rises. It’s hard to think anyone would deny they deserve it, but that’s not the same as saying they can have it.
A transformative approach to wages might be the hardest thing of all for the Government to grasp.
Getting around
In transport, the draft Government Policy Statement on transport is not the work of people who “hate cars and hate the people who drive them”. But it is transformational.
The new focus is on safety, regional roads, public transport, cycling and walking. New motorways with poor business cases will not be funded.
The policies, on the whole, are good. But the execution will be critical. The road south from Whangarei can be made much safer without going to the hideous expense of building a separated four-lane highway all the way to Auckland.
Light rail between downtown Auckland and the airport precinct will become a major commuter line for tens of thousands of workers and it does not have to destroy the shopping communities of Dominion Rd.
But transformation like that will not be enough on its own. The Government has to win hearts and minds on such projects, or it will simply lose the next election on account of them.
Where we live
Housing proposals are just as radical, but the critical issue is very different. All over Auckland, the Government is sizing up blocks of land to build on. The most prominent to date has been its purchase of parkland on the Unitec site in Mt Albert.
The ambition is big: to put 3000-4000 homes on that site, complete with shops, quality public space and other amenities.
But the ambition is compromised by a ticking clock: housing minister Phil Twyford wants to go into the next election with tens of thousands of new houses built, and most of the critics are at him to show us the numbers.
That’s unfortunate. A mass build of homes that quickly turn into slums is not what we want.
Nor is a mass build of homes not fit for purpose — because, for example, there are too few larger homes for larger families. And yet, to date, we have seen little commitment to enviro-friendly planning or to innovative design solutions.
Building a lot of new homes is good. But at election time in 2020 the government needs to be judged on quality just as much as quantity.
Tomorrow’s schools
In schools, a taskforce is reviewing the whole approach of Labour’s 1980s education reform, Tomorrow’s Schools.
It’s chaired by former PPTA president Bali Haque and the outcome could well be radical.
Minister Chris Hipkins has also signalled an end to National Standards as we know them, and that’s radical too. National Standards were designed to appeal to parents who wanted a record of their kids’ progress they felt made sense, but they did very little to help with that progress.
Teaching has been skewed to the tests. Arts subjects like music, which are not reported in National Standards, have been neglected. Teacher admin has risen and innovation too often goes unrewarded.
But there are no easy fixes in education and the issues that most need fixing — to do with the long tail of failure at the bottom end — are not the issues that wind parents up the most. Transformational policies will Require courage.
Here’s one: make te reo a core subject in primary schools. The reason? Children who learn the language and the culture that inherently goes along with it will become a society that can deal with, and eliminate, so many of the things that now cause us grief. We’d become, culturally, the most resilient nation in the world.
This is not Government policy. Will it ever be?
There is so much more
According to a report on the Department of Corrections website, 91 per cent of prisoners have been diagnosed with either a mental illness or substance abuse problem at some stage in their lives. Are we going to reorient our approach to dealing with them? Jacinda Ardern has spoken of this often enough and obviously gets it. But is it just too hard, electorally, to rethink prisons?
We don’t know the Government’s answer yet.
An inquiry into mental health, another into the historic abuse of children in state care, another into troop actions in Afghanistan. Extension of paid parental leave. Pike River recovery. Restarted contributions to the Super Fund. The billion trees a year plan, which, for those who think that’s preposterous, is only twice the rate of 2017.
And there’s more: transformational projects abound.
In all of them, the Government has to keep growing our understanding and retain quality control over the outcomes.
The biggest barrier to transformation is the Government’s Budget Responsibility Rules. This deal between Labour and the Greens commits them to reducing core Crown debt to 20 per cent of GDP within five years and to holding spending at around 30 per cent of GDP.
The Greens version of the deal assumes greater income from taxation, but Labour ruled that out early. The upshot is that the government lacks the ability to meet some of the major spending demands in housing, health, education, transport and elsewhere.
So progress will be slower than it might have been. But even though loosening the BRR would not hurt the economy, finance minister Grant Robertson is sticking to his promise.
Despite that, keeping or ditching the BRR will not define how transformational this Government really is. The big projects that are still possible will do that. The trick of transformational politics is not to change everything but to win people to those changes. The practice of it is not easy.
Henry Ford is famously assumed to have said that if he’d asked the people what they wanted, they’d have said faster horses. (He didn’t say it, but no matter.) The trick of transformational politics, and of winning elections with it, is to show us the motorcar, but when you do you better be sure it’s a good one.
One more thing. Is it possible to run an effective government powered by kindness?
If Ardern and her colleagues can show us the answer is yes, what would that change?
Almost everything?