Cablegate: Pm Clark Promises Tax Cuts, Climate Change Leadership, And

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DE RUEHWL #0809/01 3130453
ZNR UUUUU ZZH
R 090453Z NOV 07
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 4883
INFO RUEHNZ/AMCONSUL AUCKLAND 1543
RUEHBY/AMEMBASSY CANBERRA 5032
RUEHDN/AMCONSUL SYDNEY 0604
RHHMUNA/CDR USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 WELLINGTON 000809

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STATE FOR STATE FOR EAP/ANP
PACOM FOR J01E/J2/J233/J5/SJFHQ

E.O. 12958: N/A
TAGS: PGOV PHUM NZ
SUBJECT: PM CLARK PROMISES TAX CUTS, CLIMATE CHANGE LEADERSHIP, AND
CONTINUATION OF INDEPENDENT FOREIGN POLICY

1. (SBU) Summary. During the November 2-4 ruling Labour Party
annual conference, PM Helen Clark's keynote speech emphasized
sustainability and Clark's determination that New Zealand will be a
leader, not a follower, in the climate change arena. She promised
tax cuts at the next budget ahead of the 2008 election. In a thinly
veiled swipe at the U.S., Clark warned that New Zealand's
independent foreign policy would become a dependent policy under a
National Government. The media and the opposition National Party
expressed skepticism as to whether meaningful tax cuts will be
delivered and openly questioned Clark's integrity on the matter.
The conference was also marred by loud protests by opponents of the
recent police terror raids. End Summary.

Labour Hoping for Boost in Polls
--------------------------------

2. (SBU) Emboffs attended the ruling Labour Party's annual
conference in Takapuna, Auckland, November 2-4, 2007. Labour Party
MPs and delegates met to discuss policy and party strategy in the
lead-up to next year's election and hear speeches from party leaders
and invited guests. The mood of the delegates was generally upbeat
despite the Labour Party trending 10 points behind the National
Party in the latest political polling and recent unfavorable press
over a ho-hum cabinet re-shuffle and senior cabinet minister Trevor
Mallard's scuffle with a National MP.

Sustainability: Clark's Vision for New Zealand
--------------------------------------------- --

3. (SBU) Clark's keynote speech outlined Labour's vision for New
Zealand beyond the next election. While Clark talked about the core
Labour Party values of social justice and fairness, she framed her
speech within three broad and interlinked themes: sustainability;
national identity, and economic transformation. A key pillar of the
speech was the government's emerging climate change platform. Clark
linked it to all three themes and asserted that going forward being
the world's first carbon neutral country, sustainable and green will
forever be part of New Zealand's national identity. Furthermore,
being green will inevitably lead to economic transformation as more
home-grown businesses develop eco-friendly products and more New
Zealanders save money on lower power bills and minimize waste.

New Zealand to be Green Leader, Not Follower
--------------------------------------------

4. (SBU) Clark also maintained that New Zealand should aim to be
global leaders in climate change and sustainability efforts. Using
New Zealand's history of being a world leader in suffrage for women,
social security, workers' rights and being nuclear free as examples,
Clark asserted that New Zealand should similarly strive to be world
leaders as a truly sustainable and carbon neutral nation. She
indirectly disputed criticism from the New Zealand Institute, a
leading New Zealand economic think-tank, that New Zealand risked
damaging its international economic competitiveness if it got too
far ahead of the rest of the developed world on climate change. The
NZI instead recommended that New Zealand be a climate change
"fast-follower," moving along with, or even a bit behind, other OECD
economies' environmental efforts, rather than leading.

5. (SBU) Clark's remarks during a small reception for members of
the diplomatic corps observing the conference were also heavily
focused on climate change, rather than on social or economic issues.
During that reception, her criticism of the NZI was much more
direct. In surprisingly strong terms, she discounted NZI chief
executive David Skilling's "fast follower" argument, displaying
clear sensitivity to any criticism of what she may well consider her
most important political legacy.

Tax Cuts Confirmed for Pre-election Budget
------------------------------------------

6. (SBU) Clark also confirmed that the next budget will produce
long-awaited tax cuts. Since taking office in 1999, the Labour
government has been extremely reluctant to cut personal tax rates,
despite years of large budget surpluses. This has cost Labour over
the years as it subsequently found itself repeatedly accused of
overtaxing New Zealanders. The National Party, whose policy of
broad personal tax cuts is extremely popular with voters, and many
political commentators have repeatedly poured scorn on Clark and, in
particular, her Finance Minister, Dr. Michael Cullen, for what they
regard as unwarranted parsimony. Ironically, Clark's tax cut
announcement at the conference was greeted with warm applause by
the attending party delegates, most of who were from left-wing
backgrounds, mostly out of relief that this longstanding political
issue and vulnerability will be addressed before the next election.

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Throughout her conference speech she derided National as a
"one-trick pony," that its only policy is tax cuts - and that Labour
will be the party that delivers those cuts.

7. (SBU) Clark credited DPM Michael Cullen for providing the
economic policies that have produced the surpluses to underwrite any
tax cuts, and claimed that formal advice characterizing the
surpluses as "one-offs" had been too conservative. She noted that
had Labour been provided correct advice earlier, the tax cuts
promised now would have come earlier. National and other media
analysts have dug deeply into their files and pulled quotes from as
early as 2000 to illustrate that Clark's remarks do not match
historical record. When Parliament reconvened on November 6,
National Party leader John Key confronted Clark with some of her own
words - which characterized tax cuts in earlier years as the
"promises of visionless and intellectually bankrupt people."

Terror Raid Protest Mars Conference
-----------------------------------

8. (SBU) The conference was marred by a number of protestors voicing
opposition to the recent police terror raids. The protesters were
confined to a small area outside of the conference venue, but were
nonetheless very vocal and received wide media coverage. (Note: In
full view of the media, one protester was struck on the head by a
visiting Labour Party delegate and trade union leader as heated
words were exchanged outside of the venue. End Note). Clark made
only a brief reference in her conference address to the terror
raids. The ongoing investigation restricted how much she could say
on the subject, and she limited her remarks to defending the police
and calling for ethnic tolerance.

New Zealand's Independent Foreign Policy in Danger
--------------------------------------------- -----

9. (SBU) Clark briefly discussed foreign policy; she focused on New
Zealand's Pacific neighborhood as well as its proud peacekeeping
record. She did not elaborate during her reception for diplomats,
instead concentrating on her climate change legacy. Also, both at
the end of her speech and during the diplomats' reception, she made
a point of defending Trevor Mallard, the minister who took a swing
at an opposition MP just off the floor of parliament. While
sensitive to suggestions that she let Mallard off with a slap on the
wrist, Clark has continued to defend the embattled MP as someone who
has contributed much to the Party over the years.

10. (SBU) More significantly, Clark warned Labour delegates that
New Zealand's independent foreign policy would become a dependent
foreign policy under a National government. While unable to accuse
National of intending to roll back New Zealand's anti-nuclear
legislation (as National's foreign policy paper explicitly says the
legislation will remain untouched under National), Clark
nevertheless tried to tar the National Party as beholden to foreign
(i.e., U.S.) interests.

Comment
-------

11. (SBU) Since the convention, the skepticism leveled at Clark's
tax cut declaration by political opponents, the media and the public
has completely overshadowed Clark's lofty vision of New Zealand's
environmental future as a climate change leader. Repeated cycles of
budget surpluses followed by qualified refusals by Cullen to
significantly lower the tax burden has left many Kiwi middle class
taxpayers embittered. Even when Cullen did adjust the tax brackets,
the adjustments proved so minor as to further irritate the public.
As a result, the public regards Labour as a tax tease. Many New
Zealanders do not believe that they will receive any meaningful tax
relief at the next budget, even if it comes in an election year.
The mistrust was strengthened by a comment made by Cullen preceding
Clark's announcement, when Cullen downplayed expectations and
cautioned that any tax relief is likely to be small.

12. (SBU) Comment continued: The next major polls will come at the
end of November, at which point we will see if the Labour Party gets
the much-needed bounce in the polls that it hopes with the tax cut
announcement. End Comment.

McCormick

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