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Michael Cullen Speech - Central North Island Lab.

Saturday 1 April 2000

New Zealand Labour Party
Address to Central North Island
Regional Conference,
Wanganui


4.30, Saturday 1 April

Today, Saturday 1 April is a good day to be looking at how we are going so far in government with our coalition partners, the Alliance.

It is a good day because today is the day that New Zealand senior citizens get a pay increase. Married superannuitants couples will start enjoying an increase of over $20 a week. That is the measure of the gap between life for senior citizens under a Labour-Alliance government and the maximum they could have hoped for under a National-Act one.

Restoring the level of the pension was one of the seven commitment card pledges. The National Party used to call it the credit card. Well, it has turned out to be all credit as far as we are concerned.

Of those seven pledges, three are already in operation only one tenth of the way through our first term in office. We have also already put in place a fairer loans scheme for students. We have removed interest while people are still students, made it easier to repay and kept the interest rate below what it would have been under a National-Act government.

We have also implemented our tax pledge. That is another piece of legislation that starts today. Cabinet Ministers will be paying about $90 extra a week in income tax. Helen will be coughing up about double that. But everybody earning less than $60,000 will be paying no more.

On the other four pledges real progress is underway. Jim Anderton, Pete Hodgson and I have been working closely together in the formation of the new Ministry of Economic Development and our industry assistance delivery agency, Industry New Zealand.

Income related state house rentals will be introduced before the end of the year. At the same time, a massive state house selling programme has been stopped.

In the budget we will be providing resources to address our other two pledges: reducing waiting times for elective surgery and cracking down on burglary and youth crime.

So, by the end of this year it will be seven out of seven on the commitment card score board.

But, of course, we have already fulfilled more pledges that that. I am proud of the fact that we have held our nerve and reversed National's unmandated plunge into a private competitive market for accident insurance.

We have ensured the survival of a no-fault, 24-hour cover accident compensation system. Now we can begin to restore a fair and comprehensive one in which all New Zealanders can have confidence.

We have introduced the Employment Relations Bill. The Employment Contracts Act is going to be repealed. A new philosophy of good faith bargaining and the promotion of the mutual interests of employers and employees will replace it.

At the same time, we have lifted the minimum wage for adult workers to $7.55 an hour.

From the sound of Tory heads being bashed against the Wailing Wall one would think the end of the world is nigh. The truth is that any employer that cannot work effectively within the framework of the Employment Relations Bill doesn't deserve to be one.

We have also introduced, as we promised, legislation to stop Members of Parliament defecting from their party.

But these are just the biggest headline, biggest ticket items. Major progress has been made in a vast range of other areas.

In education and training we are well advanced on the preparation of the new apprenticeships legislation. We have removed the attempt to bribe school principals into individual contracts. Bulk funding is on the way out. We are in the process of setting up the new Tertiary Education Commission.

The Royal Commission on Genetic Modification is being set up and the terms of reference are nearly finalised. We have honoured our pledge to stop the proposed beech logging on the West Coast. We have set up a new marine park in the Hauraki Gulf.

The F16s are going. We will at last, be able to sit down and work out a sensible defence strategy for New Zealand that is about our best contribution to world peace and our immediate regional needs.

We are moving to strengthen competition law in New Zealand. Already the telecommunications inquiry has paid off with a one billion-dollar investment programme by Saturn and Telstra. The Electricity inquiry is up and running and a proper take over code is on the way.

In health we have reinstated funding for a 24 hour Plunket helpline. The Health Funding Authority is being disestablished and the establishment of district health boards is underway

So too is the preparation of the review of the operation of monetary policy. Terms of reference are approaching finalisation. Work is beginning on the preparation of the overall structural review of the tax system.

I could go on for a good deal longer. What is overpoweringly significant about all of this is that it is what we said we would do.

In other words, the first few months of this government have been spent doing what we said we would do before the election. We haven't spent the time finding all the excuses why we should break our word on all our major pledges. Nor have we had a hidden agenda which only now is being revealed.

The contrast with the actions of the Douglas-Prebble group in 1984 and National in 1990 is huge. There are still people who can't quite come to grips with it – notably the National Party and its more strident allies in some of the organised big business sectors.

Some of those people seem to have been working on the assumption it does not matter who wins the election – they still win the government. The result has been some extremist and silly rhetoric quite unrelated to the substance of what we have done or are doing. The Employment Relations Bill is not a charter for revenge or for irresponsible exercise of union power.

It is about good faith bargaining principles that cuts both ways. Bad employers and bad unions will find themselves equally in breach of the letter and the intent of the law.

So when spokespeople for employer organisations call for a strike on employment growth or investment I say to them, get off the grass. You are the dinosaurs who are going on as if the earth has just been struck by an asteroid.

Luckily the vast majority of businesses and employers are ignoring the hysterical rhetoric and blatantly anti-New Zealand drivel which is coming from some of these sources. And so they should for the rhetoric is, at base, profoundly anti-democratic. It shows that very contempt for the clearly expressed will of the people which lies at the heart of the collapse of trust in the governmental process in New Zealand.

New Zealand deserves better and is getting it. We have a Prime Minister in Helen Clark who is soaring to new heights in terms of public support and confidence. On issue after issue Helen has accurately reflected the public mood in exactly the opposite of the way Mrs Shipley has missed it.

But let us also recognise the major contribution to the stability and success of the Coalition Government of our Alliance partners and Jim Anderton.

It is not an easy thing to be the minority partner in a coalition. Initially, there is a tendency for the success of the government to be credited to the much larger partner. But the fact is that a coalition government cannot work effectively if the minority partner is obstructive or difficult.

That has not been the case in the Labour-Alliance partnership. The Alliance has pushed hard to ensure its priority issues have been at the forefront of the agenda. At the same time, they have properly recognised the preponderance of the Labour position in some areas where there are differences of approach while seeking compromise positions where that is possible.

This is not simply a Labour government with Alliance support. It is a coalition and we must continue to acknowledge and respect the role of the Alliance within it. And, at a personal level, I want to recognise the extent to which Jim Anderton and I have been working together on a range of matters, even where we begin from markedly different positions.

Before us lie some huge tasks. If we think of ourselves in this first term as running in the 1500 metres final at the Olympics we have so far got off to a great start over the first 150 metres. We look in superb shape. And we aim to do a few 1500 metre races end on!

So our first task is not to get too carried away with how well we have done so far. We must continually remind ourselves that we hold government in trust from and for the people and, however well we are doing, not by some divine right. In a democracy, the people giveth and the people take away.

Moreover, we face huge problems with no more than limited means to solve them. We have to be realistic about our capacity in that regard and ensure that we have and maintain the understanding of the public.

In that respect I want to dwell a little on three issues: the economy, superannuation and savings, and closing the gaps. The extent to which we succeed on all three will determine, more than anything else, how many gold medals we win in those consecutive 1500 metre races.

Some commentators still seem to be of the view that we have inherited a strong economy. Perhaps the best answer to that view is to reflect that Mrs Shipley's newly hired economic adviser thinks that unemployment is 'worryingly low' at 6.2 per cent. Clearly these people have a different view of what a strong economy is!

Certainly the economy is growing strongly at present, perhaps too strongly to be sustainable. But the fundamental structural problems remain: a horrible current account position, inadequate medium term export performance, excessive reliance upon commodity production, poorly focussed skills development and low productivity growth.

The answers to some of these problems have to be found in well-targeted government investment in growth and development. But, again contrary to the remarks of many commentators, our government is not flush with cash.

If we had continued with National's tax policy we would only have had about $350 M to spend this coming year on everything not in current baseline spending as at the change of government and allowing for a prudent operating surplus. And much of that $350 M was already taken up with deliberate failures to make the necessary provisions for the ongoing unchanged services of government; including Inland Revenue, the Children, Young Persons and their Families Agency, Defence, the arts and a number of others. And we would have to continue an aggressive asset-sales programme and accept other policies we reject.

What would have been left would have covered only a fraction of the costs of inflation. In other words, there is no money tree we only have to shake to pay for our programmes.

The tax changes give us about an extra $800 M in the coming year. Take out restoring the level of pensions, the moves on student loans, income related state house rentals, some funding for elective surgery, the commitment of our troops in East Timor, removing full cost recovery border charging, the maintenance of present police capacity and we have about $350 M left for all other initiatives. And that includes the provision of a contingency amount for new spending or emergency spending decided upon after 1 July.

That equals about one per cent of present total government spending. Clearly not all priorities can be funded in this coming year. Equally clearly, Ministers have to look at existing spending to see what is and is not consistent with the priorities of the new Government.

What is very important, therefore, is that we recognise the need to achieve maximum bang for our bucks in terms of economic development. We will be developing tightly monitored programmes of industry assistance to achieve maximum effect. Equally important will be finding resources to devote to improving our performance in resource and development and exporting.

We could, of course, spend up to the hilt now by running zero or even negative operating balances. Sometimes this is described as putting people before money.

In reality, what that means is piling up debt for the future which our children and their children will have to pay off or service. In other words it is putting ourselves before those who come after us. And it is an easy habit to slip into, a hard one to get out of.

The true historical traditions of this party are fiscally prudent ones. Nash and Nordmeyer were not fiscal wastrels. I have no intention of being one either.

That is particularly so because of the need to get to grips quickly with the long term obligations a good society should meet with respect to superannuation.

It is not engaging in scare tactics to recognise that, in the long term, the costs of New Zealand Superannuation will rise rapidly as we go through the demographic transition created primarily by the falling birth rates from the early 1960s onward.

There is a great deal of less than straight talking on this matter. Many of those who have opposed our policy simply are not prepared to state in clear unequivocal terms that their solution is to cut the relative level of the pension and/or to introduce rigorous income and asset-testing.

They oppose our policy simply because it is the best bet to ensure an adequate, universal superannuation payment. And adequate does mean the present floor in relations to other incomes. When National lowered the floor last year it was enough to push many senior citizens below the poverty line.

The challenge for those on the right is therefore clear: do they support an adequate, universal pension or not? Or do they only support a very minimal safety net supplemented by tight income testing or even no universal safety net at all? Blathering on about the need for consensus is not a satisfactory alternative to stating one's basic position and bottom line.

An alternative position is that somehow an increase in long term productivity growth will make the problem disappear. But this has a number of major flaws. The first, of course, is to bet on an outcome, in this case increased productivity, which may not eventuate. If it does not it is too late to work out what Plan B is in 2030. But the most important flaw in their argument is this: as long as there is a clear relationship between New Zealand Superannuation and other income, productivity growth simply chases its own tail as far as the cost of NZS is concerned. For, as real incomes rise with higher productivity so does New Zealand Superannuation payments. And so they should.

Productivity alone is only an answer if either the pension only increases by the cost of living, with superannuitants falling further and further behind other New Zealanders or if a disproportionate part of increased government revenues goes to the elderly. In that case it is the teachers, nurses and all other government employees who lag behind instead.

Neither seems either socially just or politically robust. Sooner or later the rising tide of resentment would swamp such a low-lying edifice.

The only other serious objection put forward to Labour's proposals is that we should concentrate solely on paying off debt. But the truth is that alone is not sufficient in the long term. And as debt tracks towards zero so it gets harder and harder to sustain surpluses which have not clear and dedicated purpose.

What is needed is to build up a sufficient pool of assets to ensure that we can take a large part of the cost of paying NZS eventually off taxes because we have other streams of income to assist.
It is not really a novel idea. It is simply the idea of saving to establish a claim on future income as part of the share of that income that goes to capital.

To achieve that requires a dedicated fund which is not at the disposal of the government of the day. Surpluses over the next twenty-five years will be held in the fund and will multiply to provide a broad asset base.

The right wing has been going through amazing contortions to find every possible problem. Let me repeat. That is because they do not want to see an adequate universal pension. Their agenda is different from ours and they will only accept our solution once it is in operation.

But there are certainly people in the National Party who take a more moderate view. I am hopeful that we can establish lines of communication before the nakedly political take control of National Party policy development.

We do not have very long to solve this issue. The partial prefunding option we have proposed does not have a large window of opportunity in front of it. With each passing year it becomes more and more difficult as the highly favourable situation we now experience begins to disappear.

Finally, let me turn to the issue of closing the gaps. This is the phrase we now use to express the fact that on a broad range of social indices the gaps between Maori and Pacific Island New Zealanders and the rest of the population are intolerably wide.

Closing the gaps is not a matter of trendy political correctness. It is the fundamental duty of a New Zealand government committed to social justice and to our obligations under the Treaty of Waitangi.

It is not something that is going to be characterised by overnight success. We are talking about deep and profound inequalities which by now have complex roots and characteristics. But we have to make progress – we do not just have a mandate to do it, we have an instruction to do it.

To follow that instruction we will need a strategy structured around imperatives. The first is to build the capacity and understanding within the state sector about the nature of the issues and the approaches that are required to be taken. This means strengthening the capacity of Te Puni Kokiri – the Ministry of Maori Development – to have an oversight role in relation to the rest of the public sector.

The second is to build capacity amongst whanau, hapu, iwi and other Maori organisations. It is clear that an approach which concentrates on main-streaming programmes is not going to succeed.

But, there is no point in developing resources and responsibilities in such a way as to set Maori up for failure. The vultures are always circling looking for signs of weakness. We have a clear responsibility to both Maori and pakeha to ensure that the capacity is there to be able to deliver effectively.

The third is to review all our existing programmes to ensure that they are actually going to be effective in closing the gaps.

The final element is the increase in resourcing over time to help make a real difference. I deliberately put this last because it is not the most important. Without the other three elements more resources may simply be wasted as so much has already.

Underlying all of this is an unspoken tension. It is the tension between being realistic and what we wish to achieve for the future.

Both are important to the Labour Party. We are a party of ideals and a party of government and experience. We have begun our journey in great heart and with conspicuous integrity. Now we must build that combination of humility, purpose, and dedication we need to guide us on down the road.


ENDS

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