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Why The Alliance-Left Rebelled

With the Alliance party poised to break up in a classic Left-Right split, most of the media are at a loss to understand the cause of the fall-out, and few of those from the Alliance-Left are talking about it publicly. Huw Jarvis outlines why the Alliance-Left is standing up to Jim Anderton.

The Alliance-Left has been on a collision course with the Right of the party for at least a year, and this finally became apparent over the US war against Afghanistan. The collision course has been a result of two factions pulling the party in two different directions: one wants to continue to roll back the economic and social reforms of the New Right, the other faction wants to contribute to a stable Labour Government.

Formed in 1991 in order to overturn the New Right economic and social reforms of the 1980s and 1990s, the Alliance now finds itself in an administration that is committed to the continuation of the very policies that the party opposes. The split in the Alliance has occurred simply because the Alliance in government has been incredibly conservative, thereby breaching many of the principles and policies that the party was formed to progress. The Alliance caucus has repeatedly signed up to the Labour Party’s continuation of Rogernomics-with-a-human-face. Party activists and officials have become increasingly uneasy that the Alliance may be responsible for giving a conservative government a human face and a stamp of leftwing approval. Their fear is that while the Alliance ministers have pushed Labour slightly more left than they would otherwise have been, the Alliance’s real legacy in this government has been to validate Labour’s conservatism and protect it from leftwing criticism.

Having abandoned their "socialist" policies in favour of a strategy of marketing government stability and reasonableness, the Alliance has found that voters see no point for the party’s existence. Once the party was popular because of its freshness, radicalism, consistency and principled-nature, but after throwing these things away, it has become irrelevant – which is reflected in the latest opinion poll which put the party at 1%.

By no longer challenging the New Right economic framework of Labour the Alliance has undermined its raison d’être. As Chris Trotter aptly put it, “Jim Anderton's contention that ‘one day in government is worth a thousand days in opposition’ makes sense only if the government you belong to is genuinely committed to advancing the causes you fought for as an opposition politician.”

With a few minor exceptions the New Right reforms have actually been embedded by this government rather than challenged. In continuing the policies of Lange, Douglas, Bolger and Richardson, the Labour-Alliance government has ensured that the neo-liberal framework will stay in place, finally becoming the status quo. So although the Alliance has been both heralded and criticised for moving the government to the left, the party has in fact been critical in keeping Labour to a path compatible with Rogernomics. The Alliance-Left, however, have refused to accept the New Right status quo, and want the Alliance to continue to organise for the roll-back of these policies rather than simply being Helen Clark’s compliant poodle.

Tiring of waiting for the benefits of Anderton’s softly-softly strategy to eventuate, and having to justify the party’s repeated backdowns and u-turns, the Alliance-Left finally said “enough” in 2001 and began organising to push the party back towards its former leftwing position. This strategy clashed head-on with the trajectory of Alliance-Right, who were comfortable with the conservative rewards and respectability that the party’s moderation had delivered to them. With disagreements festering, the decision by the Right of the party to support New Zealand military involvement in the war against Afghanistan proved too much for the Alliance-Left. The fragile peace between factions broke, events gained a momentum of their own, and a split became inevitable.

Not a Government of the Left

Conservative commentators and opinion-makers have deemed this government to be an extremely leftwing one. Simon Upton has declared that it is “the most left-wing government anywhere in the world in the last 25 years – second only to the Mitterrand government in France, which re-nationalised industries”. Roger Kerr of the Business Roundtable has argued that “Actions such as the re-nationalisation of ACC, the freeze on tariffs, the increase in the top personal tax rate, the re-regulation of the labour market and the reestablishment of a State bank are almost without parallel internationally”.

It is difficult to see how they could reach this conclusion, and such evaluations from the Right seem dishonest or disingenuous. In the first year of government there was actually very little substantial reform. Despite having had nine years to research and fine-tune its policies, the Labour-led government has been mostly just reacting to events rather than instigating reform, and it didn’t take long for the new administration to run out of steam. Structurally, the economy has been left alone, and any reforms have dealt only with peripheral matters. While there has been the appearance of a more moderate monetarist approach to economic management, in reality the overall economic strategy is still driven by a tight monetary policy aimed at maintaining 0-3% inflation. The obsession with running substantial surpluses and allowing the market to operate unimpeded still structures cabinet decisions. It’s as if Roger Douglas never left the Labour Party.

Even traditional Labour and Alliance planks like import tariffs are unlikely to be returned to. For instance, Labour shows no signs of overturning the APEC agreement to zero tariffs by 2010. The freeze on existing tariffs is of little consequence since the imports which currently have duties attached only constitute 4 percent of the value of all imports.

In the education sector, the government continues to short-change universities of the funds they need. The government has not reduced student fees by a cent, despite Labour’s earlier promise to cap fees at $1000 and the Alliance’s policy of free education.

As nurses and other health workers can testify, nothing much has changed in their sector either. After campaigning on the destruction of the public health system for ten years, Labour is now not prepared to do anything serious to fix the system. In 2001 health minister Annette King crowed about a 56% reduction in hospital waiting lists – until it became apparent that Labour had actually reduced them by kicking patients off the lists. And in 2002 the planned health expenditure is actually going to be down on 2001 spending.

There has been a relatively high degree of policy continuity between the Fourth and Fifth Labour governments in non-economic policy areas as well. Even on issues like foreign policy, the Labour-Alliance administration has essentially continued National’s policies. Certainly the tradition of following the lead of the US, Britain and Australia continues, as evidenced by the praise given by the American government to New Zealand for being so supportive of the US war of terrorism in Afghanistan. Crucially this involvement in the war was a move supported by the Alliance, despite the party being opposed in the past to similar US-led wars.

Even on liberal issues like foreign aid, the Labour-Alliance government has been ungenerous. Whereas both parties previously had a goal of providing 1% of GDP in foreign aid, only a quarter of that is given by this administration. And although Helen Clark was able to appear as a great internationalist and humanitarian when she accepted 150 refugees from Tampa, the fact is that she required that the 150 be part of New Zealand’s annual refugee quota of 750, which means that she has continued National’s very limited intake of refugees. Even when anti-immigrant Winston Peters was Deputy Prime Minister he let this number of refugees in. And by ordering that families be selected as refugees, Clark calculated that this would reduce the likelihood of add-ons arriving later to join the refugees.

The Fifth Labour Government has mostly been a status quo administration rather than radical reforming one. If there has been any anti-market reform, it has merely amounted to minor adjustments to the discredited neo-liberal project, rather than actually ditching the New Right reforms. As Clark has put it, “Overwhelmingly the fundamentals favoured by the business community remain in place. The Reserve Bank and Fiscal Responsibility Acts are intact. The government is budgeting for, and will maintain, surpluses. Government spending as a proportion of GDP is falling.”

It is indeed instructive that the first budget achieved a decrease in government spending as a proportion of GDP – amounting to a continuation of National’s economic stewardship. The Labour-Alliance Government is now spending less than Ruth Richardson did – in fact as a proportion of GDP the 2001 budget contained the lowest state expenditure since 1978. The government has also outlined how it aims to reduce government expenditure to below 35% of GDP over the next 10 years, reduce net debt to below 20% of GDP and to achieve large budget surpluses for the foreseeable future. And furthermore, by implementing Michael Cullen’s compulsory superannuation scheme, the Labour-Alliance government has ensured that all future budgets will be severely limited in social spending.

Increased Spending?

According to both the Labour-Alliance government’s critics and supporters, social spending has increased since 1999. Over the course of its first term in office, the Government has planned to increase education spending by $300m, $412m on health, and $600m on housing. Furthermore the Government committed $114 million over the next four years to close the gaps between Maori and Pacific communities and others. It has also restored "the floor for New Zealand Superannuation to 65% of the average ordinary time net wage.”

But such expenditure increases are in reality not substantial. When allowance is made for inflation, such nominal increases will result in real expenditure levels remaining virtually unchanged. As commentator Richard Harman has pointed out, even the last government increased expenditure by similar amounts if not more, as was the case in health: “On a real dollar per capita basis Labour is spending barely more than National did in its last year in office. Indeed from 1996 on, National was substantially boosting spending on health. On a real dollar per capita basis spending went up 4.5% in 1997-1998, 6.5% in 1998-1999 and 2.2% in 1999-2000. In contrast, Michael Cullen's first Budget increased real expenditure on health per capita by just 0.7%.”

Furthermore, in every other area the government continues its drive to lower its expenditure. Most of the increased expenditure announced is actually incredibly modest because it has been stretched out over four years in the Budget documents.

The Employment Relations Act

Changes to the labour market regulations were never going to be significant, as both Labour and the Alliance took very conservative industrial relations policies into the 1999 election. As Laila Harre said, “Labour's policy will make a minimal difference. And I'm not saying ours is going to make a huge difference. It's a very conservative policy really”. Similarly, after the new Employment Relations Act was passed, Helen Clark commented: “This is really a very moderate piece of legislation. If I had been implementing this in 1990 I would be labelled as a traitor and a destroyer of the trade union movement”.

Some commentators have pointed out how the legislation is particularly moderate by international standards. One business writer has said that “on international terms much of the proposed legislation is unremarkable. A European employer, in particular, would probably find the [ERA] a much freer framework in which to work”. They pointed out that even the controversial financial disclosure element of the ERA was actually more moderate than that enacted by the British Conservative Party in 1992.

By local historical local standards, too, the ERA is very conservative. In fact the legislation is to the right of Labour’s previous set of regulations: the Labour Relations Act 1987, which was introduced by the neo-liberal Fourth Labour Government. Related to this, it is significant that the Labour Party now deems the Fourth Labour Government’s pay equity legislation – which was repealed by National – as being too radical to return to.

While the new industrial law makes a few tweaks to the old Employment Contracts Act, essentially this so-called leftwing government has just legitimised the previous right-wing industrial relations framework. At most, the ERA was “restorative rather than radical”. The part it restored, though, was mostly that which advantaged trade union officials rather than the average worker.

In fact the ERA leaves the essential features of the industrial relations system created by the ECA in 1991 in place, and with respect to the crucial right to strike provisions it is, if anything, even worse than the ECA. In particular, the freedom of workers to strike is severely curtailed by the Labour-Alliance act. In the words of a recent CTU leaflet, Labour's employment relations legislation "is more restrictive on industrial action than the Employment Contracts Act". Under the ERA, New Zealand workers still face tougher legal restrictions on the right to strike than workers anywhere else in the Western world.


Much has been made of the state asset programme of this government. Yet the purchase of Air New Zealand was not undertaken for any principled reasons or as part as any leftist political agenda, but was a pragmatic economic decision forced on the government by dying national carrier. The National Party in power probably would have done the same.

The establishment of the Kiwibank, too, will make little difference to working people. Rather than any radical nationalisation exercise, it is a state owned business that will operate not as a public service but purely as a commercial profiting making venture. Like the other banks it will have few branches and will charge fees on accounts.

It has served both the Labour-Alliance Government as well as its opponents to paint the changes to ACC as radical – the Left has wanted to believe that the “re-nationalisation” of ACC is radical and progressive, while the Right have argued that the reform is radical, ideological, and a step backwards. Both sides are wrong, as the move by the government is essentially relatively moderate and unremarkable.

Rather than carrying out nationalisation in the true sense of the world, the government has merely re-regulated the accident compensation market and returned a monopoly to the state provider – they have not taken public ownership of any private business. Whether this results in better cover for workers and employers is a technical matter that has been painted as an ideological one. Yet it is unlikely that reforms will make any substantial difference, and significantly the new government has not reversed the run-down of the ACC that has occurred over the years. The new ACC payout figures announced by the government are also substantially less than those established under the Fourth Labour Government.

The Government has also made much of its refusal to carry out further privatisation. However, not only does it seem happy for currently privatised assets to remain in private hands, it has also essentially brought in privatisation through its sale of the radio frequency spectrum. Current legislation relating to local government, meanwhile, opens up the way for ‘partnership’ deals between local authorities and private capital in areas, such as water, which effectively amount to a form of privatisation-by-stealth.

Tax Increases

The National Party’s low tax regime has largely been adopted by the new government, with only a minor change. After the National regime of 1990-99 implemented tax cuts, the Labour-Alliance Government has accepted the new taxation system, choosing not to reverse the cuts. Although this government has not actually implemented this new regime itself, it has made a conscious choice to continue National’s policy.

While Labour and the Alliance have implemented a small tax increase for those earning over $60,000, this will not raise much more than $300 million per year. The tax increase is very moderate, the rich are still pay less tax than they did a few years ago. To underline this moderation, Cullen has argued that the new tax affects only 5% of taxpayers and New Zealand still has the third lowest top income-tax rate in the world. Cullen has also pointed out that the tax take under a Labour government is only 1% greater than under National – hardly a substantial alteration of policy. Meanwhile, continuing National’s tax cuts for the wealthiest New Zealanders means that the current government has about $2.4 billion less to spend each year.

In comparison to the very small increases in tax for wealthy income earners, the poor have suffered a drop in their standard of living under the Labour-led government. Most wage earners obtained little or no wage movement since 1999, while inflation has been running at 3-4%. Future statistics are likely to show that during this term in government the gap between rich and poor has become greater.

A Government for Whom?

The Labour-Alliance government has done very little to improve the lot of their traditional constituency. In fact the Labour Party no longer even talks about re-distribution of wealth. The benefit cuts and tax cuts of the 1990s have essentially been left in place. This government even reduced the entitlement of low-income workers to the community services card by refusing to increase the eligibility-threshold inline with inflation, despite doing exactly this for superannuants. And whenever the Green Party has put forward progressive legislation – such as restoring university students' right to the Emergence Unemployment Benefit in summer – the Alliance has joined Labour in voting these down.

Rather than transforming society in favour of the Labour and Alliance parties’ constituents, the government has been more concerned with promoting the apolitical and vague "knowledge society". The other major policy push of Labour is in negotiating free-trade deals (Singapore, Hong Kong, and the US), which the Alliance-Left believes is not motivated by any type of progressive internationalism but by Helen Clark’s nationalist self-interest, fearing that New Zealand might get left out.

A number of potentially more radical reforms have been scuttled. When business interests complained in 2000 about the damage that the government was doing to business confidence, Clark quickly answered the threat. In order to reassure business, a number of the coalition's more radical policies – such as the minimum wage, increases in workers’ annual leave and employer-funded paid parental leave – were all cancelled.

Reassertion of the Left

Most political commentators acknowledge that Clark has been steadily pushing this government rightwards to head off the National Party’s move into the moderate-right of the political spectrum. As political journalist Jane Clifton has previously noted, “Labour is stuck in the middle, trying to exude middleness with every fibre of its being. Labour has the middle high-ground, and will out-compromise anyone who attempts to muscle in. It is now radically moderate.” It has come as a nasty surprise to Alliance members, activists, and the left MPs is that their leadership has been more than willing to allow the government to accommodate this rightwards shift. To the Alliance-Left it seems that leader Jim Anderton has become consumed with his desire to be a statesman, and likewise the MPs on the right of the party have grown accustomed to their ministerial positions and status so much that they are reluctant to rock the boat.

There can be no doubt that Anderton’s version of the Alliance is a shadow of its former radical self. Any proper analysis of the party’s position over time shows that the political position of the Alliance today is a much diluted one. Unfortunately for the Alliance, such a diluted and blurred image is not a strong brand, and under MMP strong brand differentiation is the key to success.

Faced with the prospect of the Alliance dying a slow and unprincipled death, the response of the Alliance-Left has been to reorganise and reassert itself. Over the last year this faction made sure that it controlled the party organisation and in particular the governing Alliance Council. The faction also encouraged Matt McCarten, Laila Harre and Willie Jackson to assert themselves more and to increase the public profile of the Alliance-Left. This has been seen in McCarten’s high-profile contest of the Auckland mayoralty, Willie Jackson’s capture of the leadership of Mana Motuhake from Sandra Lee, and Harre’s dogged pursuit of leftwing policy trophies like paid parental leave and four weeks annual leave for workers.

It was the view of the Alliance-Left that Jim Anderton’s brand of conservatism has been prevailing for too long, and during his dominance he has driven the party’s popularity to an all-time low. From opinion poll highs of around 30% in the early 1990s and the winning of 18% of the vote in 1993, Jim Anderton’s long-term strategy of moderation had finally lowered the party below the 5% threshold. Despite Jim Anderton trying to pin the Alliance’s unpopularity on the Left, the blame lies closer to home. The Alliance-Left became aware that the party’s blurred brand was causing it a large loss of support. It was apparent that Alliance supporters were increasingly seeing little point in supporting a party that in Pam Corkery’s words was becoming a “cheap photocopy” of the Labour Party. If the Alliance was now trying to be the same as Labour then voters figured that they might as well support the real thing. The feeling inside the Alliance-Left was that the strategy of Anderton and his faction had failed, and that a new direction had to be forged based on original principles.

The Alliance-Right has viewed this flexing of the Left’s muscle as a direct threat. Realising that the Left had the numbers to virtually control the creation of the 2002 party list, the Right acted. In a panic Anderton demanded McCarten’s resignation, fired him and his staff from their parliamentary office, and began a witch-hunt within the party. This hostile act – days after the Afghanistan dispute – set the party’s left and right factions on an unavoidable collision course. Now the Alliance-Left have taken a conciliatory approach and assert that there is room in the party for all the existing political currents. In the end however, this is not the case, and the Alliance caucus will be fighting the general election from within two very separate parties.

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