What A National Government May Entail - Part Two

Wednesday, 25 June 2008, 5:25 pm
Article: Kevin List

Unless we get a few choice email leaks from John Key’s office - yoo hoo, ready and waiting - we can only estimate what National’s policies will be in government by checking its public statements to date. That’s all there is to go on, besides hunches and tribal grievances. Oh, and besides this ridiculously spare 2 page summary of its policies to date which, as The Standard blog points out, is shorter in its entirety than the Greens’ industrial relations policy.

Unfortunately, National is refusing to inform voters about its major policies and their costings, because it is tactically convenient to stay out of the policy spotlight.We can either sit around and wait for the official version ( and thus tacitly, become part of the grand strategy) or we can try to figure out what the new order might be, based on the party’s speeches, statements and press releases.

Apologies then, if it wasn’t clear from the outset that this exercise is a speculative one. Though, since I’ve relied almost entirely on statements by John Key and his caucus colleagues, it shouldn’t be too far from the final version – otherwise, voters are being kept even more in the dark than it seems. Oh, and since some people have sensed a pro Labour bias, I suggest any compulsive balance seekers should check out my previous posting on the government’s Immigration Bill.

Monday’s post looked at health, education, the economy and law and order. Today, it is telecommunications, the environment and industrial relations. Because private public partnerships play such a major part of National’s plans in almost every area - personally, I think National’s PPPs will have more wide-ranging effects for longer, than its tax cuts - I’ll be looking at them in greater detail in a later post, with inputs from overseas.

In passing though, there would be far less trouble with PPPs if the contracts between these state and private sector were open to scrutiny. Or if the contracts were written and managed in a way that ensured the private sector did actually shoulder the burden for any cost over-runs, inefficiency, contract failures etc. Daniel, who posted a reply about my Monday comments on PPPs, reasonably assumes that the normal, open and shut disciplines of contract law would apply.

Unfortunately, PPP contracts tend to be secret, even when public money is involved. Commercial confidentiality is a readily available excuse for any Cabinet Ministers inclined to be non-transparent in their dealings over PPPs, and what would stop politicians from ducking behind it? Furthermore, successive governments have shown little ability (or stomach ) for challenging the state’s arrangements with major players in business. Offhand, David Cunliffe is almost the only exception since the 1980s I can think of, via his antitrust moves against Telecom.

Roading seems a particular minefield. Here’s how it can work. In March 2007, Cabinet papers released under the Official Information Act showed that Michael Cullen, Helen Clark and Pete Hodgson essentially invited Transit NZ to create a wish-list of roading projects, with virtually no constraints on subsequent cost blow-outs. As Jeanette Fitzsimons said at the time, “the Government issued a blank cheque to fund the 5 year package of state highway projects that Transit had been invited to ‘mock up’ regardless of cost escalation.”

Treasury had flagged the dangers involved. On page eight of the Cabinet papers, Treasury had pointed out : “Committing the government to funding a package regardless of cost represents a significant fiscal risk for government.” Furthermore : “committing the government to funding projects regardless of cost and changes in priority makes it much harder to achieve value for money…which is an important goal of government, and a focus for the transport sector. If project proponents consider funding for a project is certain, they will have no incentive to adjust the project to meet budget constraints..and this removal of financial discipline could also extend to other activities.” Exactly.

Point being, if a Labour government that – in 2002 at least – had been critical of PPPs could behave like this, why should we expect better from National - given its light handed regulatory approach in the past and its enthusiasm today for PPPs in health, education, prison construction, and roading ?

Moreover, the OIA release that exposed the above example to daylight will not occur automatically in future. Not unless in the name of accountability, John Key would commit during the election campaign to the public release of any PPP contracts ( worth say, over $20 million) entered into by his government. That would be a useful gesture towards transparency. Key may be willing to give voters this kind of assurance, but don’t hold your breath.

To sum up : with PPPs we (a) may never see what the contracts contain even though they commit our money (b) the contracts commonly run for decades, beyond any political term of accountability and (c) the state, under both Labour and National has shown little inclination to treat the private sector with healthy skepticism. The fates of Air New Zealand, Tranzrail and our crumbling financial services sector show the dangers of being ideologically smitten by the private sector’s claims to greater efficiency.

Spokesperson : Maurice Williamson

Telecommunications is the one major policy area where National has both a policy of sorts, and a tentative costing. Here’s the basic fibre-optic to homes ( by 2015 for $1.5 billion ) message as outlined by Key :

National's medium and long-term vision is for a fibre connection to almost every home, supported by satellite and mobile solutions where it makes sense to do so. Our initial goal is to ensure the accelerated roll-out of fibre right to the home of 75% of New Zealanders. In the first six years, priority will be given to business premises, schools, health facilities, and the first tranche of homes

Key lists five principles by which this will be done. None indicate how he will avoid the risk he also mentions : that any injection of taxpayer funds can “end up lining the pockets of incumbent industry players.”

More than once, Cunliffe has stressed the monopolistic fears that exist on that score, since Telecom is the incumbent that already owns most of the network, and is putting another $1 billion into fibre. Therefore, say its critics, National is not only putting all our eggs into the one fibre optic basket - by doing so, it stands to undo most of the competitive gains that are now starting to flow from local loop unbundling. Essentially, the proposal stands to re-create a monopoly position for Telecom, and take us back to the dark days of the 1990s. Only the National Party’s good friend Roderick Deane would be happy at that prospect.

As Jordan Carter of Just Left says,

It is an intriguing difference in approach: a more-market Labour solution and a more-state National one….One is to allow for the evolution of broadband services in a market-driven, technology-neutral manner, with government support on an opex basis (grants) to extend and accelerate reach of high-speed systems.

The other is to mandate a step-change through capital investment of public funds in a new, technology specific (fibre-optic) manner.

Is this feared virtual monopoly inevitable? Not in theory, or in best practice. To that extent, I agree with Russell Brown’s initial reservations about the monopoly bogey , >. As Russell said back on May 9th :,

Multiple operators interconnecting on reasonable (and if necessary, regulated) terms seems fine to me. Look at what's happening up north -- Northpower recently announced a partnership with TelstraClear on the rollout of its new fibre-optic network. TelstraClear is spending $1 million on the link from Auckland to Whangarei, and now, I'm told, Kordia has come into the picture with a proposal to expand and extend Northpower's network with its own wireless services. This is a brilliant result for Northland. And I think it demonstrates the possibilities of stepping out of the telco-only paradigm.

Fine. The trouble is, stopping the dire monopoly outcomes that Cunliffe predicts would require a Minister with the kind of backbone and regulatory skills that gave us local loop unbundling – and friends, where is that soldier ? If National wins the election we face having the whole shebang being steered by Maurice Williamson, aka Telecom’s Footstool. Russell Brown, in the comments thread on this site yesterday was critical of the ‘unutterably vague’ National plan : which, as he says, is more like a spending proposal than a policy, and has Key currently going around New Zealand making ‘bullshit’ promises to kids in rural towns that they’ll soon be able to download movies in seven seconds…

On telecommunications, voters will be faced with choices - between National’s Think Big option, and Labour’s humbler $500 million Broadband Investment Fund targeted at rural communities and business.

If National wins the election, it could well may take up to two years to write and pass the legislation that its proposal will require. In turn, this will create an almost impossible schedule to meet the 75% of the country broadband target by 2015. The $1.5 billion price-tag may not be enough, either – the costings per home, as Jordan Carter says, do look on the low side, but since homes are the last item in the queue cited above by Key, then provision to even the first tranche of homes could wind up being dropped right out of the timeframe.

Distance is our trading curse, so it is about time we got telecommunications policy and pricing right. Every home and business in the country suffered because the Labour government sold Telecom in the 1980s without putting proper safeguards in place for the consumer –and everyone suffered some more when National then sat on its hands throughout the 1990s. as Telecom pillaged the country for the benefit of its shareholders.

Given this background, suspicions die hard. Averting déjà vu will require National to show a willingness to regulate the sector aggressively to make sure that it stays strongly competitive, open to diverse solutions, and wedded to capital re-investment. Telecom was a joke in that respect during the 1990s, and we can’t afford to be held hostage by them again.

Spokesperson : Kate Wilkinson

National is not planning a workplace revolution of the sort it ushered in with the Employment Contracts Act in the early 90s. In March, its industrial relations spokesperson Kate Wilkinson had this to say to the Industrial Relations Conference :

National does not intend to repeal the current Employment Relations Act, but we do intend to change the direction away from more and more detailed prescription of the bargaining process and more attempts to legislate against necessary processes of change in the commercial world.

We do not share the current Government's drive to export to the private sector the kind of large inflexible multi-employer agreements they favour in the public sector.

The question is how far National will swing the pendulum back towards ECA – like provisions. The language used by Wilkinson in a speech to the Lexis-Nexis Employment Law and Human Resources Conference in May was one of “refining the Employment Relations Act [so that] we can produce a piece of legislation which creates the right balance between the rights of employees and the rights of employers.”

On what points will this ‘right’ balance be struck ? CTU president Helen Kelley, in her speech to this year’s Labour party annual conference gave a list of issues that she felt were up for change if National gets elected : (a) reduced employment rights for workers in small and medium scale businesses (b) 90 days of no rights on starting a new job (c) reduced statutory holiday pay (d) the flexibility to "swap" the extra weeks leave for cash (ie, selling annual leave) (e) a reduced ability to accrue holiday leave and (e) privatisation of ACC.

Some of these positions can be gleaned from Wilkinson’s speeches eg “Reducing compliance costs is easy to say – harder to do, but do it we must. The Holidays Act is often cited as an example of increased compliance costs...” In addition, there is some dog-whistling that sounds like the ECA in voter friendly garb :

“Workers should be able to offer their services to an employer on terms and conditions that they want. Unions are an option available as bargaining agents…Thus we believe that workers have the right to bargain collectively and to be part of a collective agreement, whether or not they are a member of a union and we will be looking at restoring those rights.”

However, the 90 page probationary period is the only industrial relations policy cited in National’s two page policy summary document. This is a doubly redundant measure, if it is intended as a solution to a non-existent access problem. In 2006, the OECD listed New Zealand as 4th out of 155 countries for the ease of employers starting or ending an employment relationship. Secondly, Sue Bradford’s Minimum Wage Amendment Bill last year was changed (after some select committee tinkering by Labour) and passed with provisions that allow for 16 and 17 year olds to be paid lower rates during their first 3 months on the job, or 200 hours employment, whichever comes first.

Thus, it is hard to find the ‘access to employment’ question for which National’s only industrial relations policy is the answer. Unless, of course, the policy is merely a tool for enabling employers to hire and fire people at will during their first three months on the job, and usher in a new lot on the same ‘ no rights, no access to personal grievance’ basis.

The Jafapete blog posted a solid summary last Monday of the likely National policy on industrial relations. Clearly, the government’s mooted ERA changes to give casual, temp and contract workers some security on wages and conditions, will not survive a change of government. As Business Council chief executive Phil O’ Reilly says of the these changes “ Large infrastructure projects such as roading rely heavily on the labour hire industry and we could see delays in building new infrastructure.”

With National (and Labour for that matter) committed to large PPPs in roading, the changes must be on the endangered list for that reason alone, along with the related powers for labour inspectors to designate whether a worker is a casual or permanent worker.

Beyond that…National will not have needed Crosby/Textor to tell them that neo-liberal workplace reform played a significant role in the defeat of John Howard last year. So, it is likely to proceed quietly, quietly on this front. As Jafapete says, expect the 90 day probationary period to carry the ideological banner and feature in a new National government’s initial amendment bill on industrial relations. He’s also probably right that the legal protections for workers when the business is sold to a third party will be scrapped. Jafapete concludes his analysis with this interesting observation :

“The worst predictions of the right when the ERA was introduced never came to pass – remember Prebble’s dire warning of jack-booted unionists marching through workplaces up and down the country ? Even the dreaded Good Faith provisions have made little difference to practice. So, why change something when you don’t need to, and you run the risk of bringing your real interests into sharper focus? I’m picking relatively little change in industrial relations.”

Where does one start? It would be a cheap shot to begin with John Key’s former incarnation as a climate change denier but then again… it is kind of irresistible. As Key told RNZ’s Kathryn Ryan in November 2006, “I firmly believe in climate change and always have.”

However, as Scoop’s Kevin List pointed out at the time, this was not the impression given by Key in mid - 2005, when speaking in the House about the Climate Change Response Amendment Bill. Back then, he said : "The impact of the Kyoto Protocol, even if one believes in global warming—and I am somewhat suspicious of it—is that we will see billions and billions of dollars poured into fixing something that we are not even sure is a problem. Even if it is a problem, it will be delayed for about 6 years. Then it will hit the world in 2096 instead of 2102, or something like that. It will not work," explained Key.

Fast forward to the Agenda interview of April 12 this year http://www.agendatv.co.nz/Site/agenda/transcripts/2008/April-12.aspx and you find Key trying to square the circle, in this hilarious exchange with Guyon Espiner :

GUYON: But isn't it true that National has basically changed its tune on just about every major public policy platform, you look at climate change, you look at….

JOHN No.

GUYON It absolutely has changed its opinion on climate change, you were calling it a hoax just a couple of days ago. A couple of senior members of your party don’t even believe it's true, even your potential transport spokesman.

JOHN No, Guyon, you need to go and read the transcripts.

GUYON I have.

JOHN I have not said climate change is a hoax, I've said Kyoto is a hoax.”

For the record, National opposed the carbon tax and the emissions levy and in mid May it withdrew support for the Climate Change legislation and its Emissions Trading Scheme centrepiece. When the Bill was reported back from select committee, No Right Turn’s verdict on June 16 was, as usual, right on the money:

The National Party has their expected whiny minority report, in which they profess concerns for the aims of the ETS, then propose systematically gutting them in favour of polluters and donors. Still, they've at least recognised that agriculture can't be exempted, and they seem to be supportive of early entry for fertilisers. Which suggests some possibilities for amendments during the committee stage…

On the Biofuels Bill the story is much the same. Early professions of support, with Nick Smith even claiming ( wrongly) at one point to have invented the policy before Labour, and then a belated opposition to the whole idea. Again, its impossible to top No Right Turn’s conclusion here:

With the ETS bill they simply pretended that the committee had not amended the bill or addressed the concerns they raised, confident that the media would be obliged in the name of balance to repeat their talking points regardless, and they used that same tactic here. They're also claiming that oil companies need to know the sustainability standard - how fuel is produced, not what it is - before they can invest in infrastructure, which is simply bullshit. But it would let Shell, Mobil] Caltex and the others get away with doing nothing for a while longer (and I'm sure a National Minister of Energy would oblige them by dragging their feet). It's all a little odd, coming from a party which just last year was claiming to have invented the biofuels policy, and that the government wasn't moving fast enough in implementing it. Now we're getting the same free-market, non-intervention, "the ETS (which we oppose) will sort it all out" mantra which resulted in no policy in the 90's…

[ Footnote: to be fair, to Mobil, it did start making bio-ethanol blended petrol available in June, ahead of the legislation, and its 10 % ethanol component is derived from Brazilian sugarcane that will not affect world food prices]

Moving right along…in its two page summary of policy, National does promise that it will ( somehow) cut our carbon emissions back by the year 2050 to half of our 1990 levels - and you can rely on Scoop to be checking back after the next 15 elections, to ensure National delivers on that iron clad promise.

Amusingly, the two page National policy document claims to support an ETS – but only one that “ balances our environmental responsibilities with our economic opportunities.” Obviously, the ‘no gain without pain’ principle does not apply here. No definitive word on what happens when the planet’s needs infringe on our business opportunities, but one can make an educated guess.

This may explain National’s stance outside Parliament, whenever it is talking to its friends about the perils of getting ‘locked’ into the embrace of the ETS. “ The effect of the emissions trading scheme,” National’s agriculture spokesperson David Carter told a shocked Federated Farmers gathering in Wanaka in early June, “has the potential to be more devastating than the reforms of the 1980s.”

National also promises to reform the RMA “ to boost renewable energy.” No word on whether the same RMA reform mightn’t also happen to make the RMA consent process a bit more amenable to those business opportunities, and somewhat less open to challenge on environmental grounds. Post the Marsden B litigation, does it support local authorities having the power to consider climate change factors when issuing consents ?

Also in play : National says it plans to double the solar water heating grants and to “ simplify” the regulatory process involved. “ National’s policy is to increase the grant to $1,000 per household,” Nick Smith explained in mid March : “and simplify the grant approval scheme and to replace the need for a building consent with a requirement for a ten year warranty. National would require all systems to be installed by an accredited supplier.” Trouble is, this policy may already be some months out of date. On 23 May, the government announced the grants had doubled from $500 to $1,000.

So unless Smith now plans on doubling the grant again, in a ‘ “see you, and raise you $1,000 “ gambit, this item on National’s two page summary is already, in its most crucial aspect, part of the government’s existing policy and National simply hasn’t noticed. Which might say all we need to say about National’s approach to the environment.

Summary: Blame it on the former Green media officer in me, but National, as the natural party of business as usual, seems reliably at odds with sustainable environmental economics. National has never shown any sign that it accepts the planet has finite resources. As a result, whenever it comes down to a conflict between environmental sustainability and economic growth, the latter wins out every time, in the name of ‘realism.’

After all, what’s not for National not to like about the current ETS that National looks set to inherit from Labour ? The scheme is already top-heavy with exemptions ( transport out until 2011, agriculture until later etc etc ) and corporate handouts. As the Sustainability Council re-iterated in a disturbing press release yesterday the taxpayer will be picking up the lion’s share of the tab for our Kyoto emissions. In the process, guess who will be at the front of the corporate welfare queue :

“The nation’s largest electricity consumer, New Zealand Aluminium Smelters, will receive the biggest individual subsidy up to the end of 2018. Its payments are likely to total around $600 million, and fellow metal maker New Zealand Steel is likely to benefit by more than $100 million (assuming a carbon price of $30 a tonne). While payments to Fonterra are likely to be around $200 million up to 2018, these represent only a small part of the agriculture sector subsidies under the ETS. The exemption of agricultural emissions (from animals) amounts to a net subsidy to the sector of $1.31 billion for the next five years alone, after account is taken of the charges farmers pay on electricity and fuels. Four major pulp and paper firms can be expected to receive a total of about $400 million up to 2018, nearly all of which arises from electricity subsidies. The New Zealand Refining Company is likely to receive around $70 million during this period.

Yikes. Finally : a prediction in an area that hasn’t surfaced so far in the discussions at all. If National does intend to cull the bureaucrats and dial back government spending in the process, who exactly does it have in mind? When and where is duck season on public service bureaucrats going to be launched ? As they say, nothing focusses the mind like an approaching execution, and you’d think that the whereabouts of the cull would be fast becoming an abiding interest - in the campaign for Wellington Central, at least.

My prediction ? A National government will take the Ministry of Economic Development and fold it back into Treasury, in the name of cost cutting. That won’t be the real reason, of course. The Treasury monolith made the 1980s reforms possible – and splitting it up became a cause among those centre left veterans ( Michael Cullen, Jim Anderton, Helen Clark) who survived that era. Primarily, to ensure the Finance Minister could not be similarly captured in future, would always have multiple sources of advice, and multiple avenues for delivering the economic policy outcomes.

This assumes that the Finance Minister actually wants diversity of opinion, and is not already in possession of the true gospel. Given that the ghastly remnants of the Rogernomics era ( Roderick Deane, Roger Kerr et al) are still hanging around National, I’m sure they will be advising on the need to put the old agenda back together, and will be out to restore Treasury to its former heft and grandeur. Does Treasury still have the right stuff for the job? You bet, as its tunnel vision advice plainly showed today on broadband – leave telecommunications to the private sector ! Yeah, that’s worked so well for us in the past.

I’m not entirely alone in treating this merging as likely. Fran O’ Sullivan, in one of her typically demented recent columns - you know, the one where she was channelling the visions of Bill English and John Key, and enthusing about what a wonderful world that would be - had this to say about Treasury’s current sunken state.

Within Australian senior circles, the NZ Treasury is seen as something of a wallflower - a department that is publicly whipped into submission by Cullen whenever it has promoted obvious economic boosters like personal tax cuts. This suggests that if an incoming National Government wants to mount major new policies it would have to merge the Ministry of Economic Development back into Treasury so all the levers dwell again within one strong department, instead of the current approach, which reduces Treasury to something akin to an accounting organisation.

Fabulous. If you missed the 1980s (or the 1980s revival during the 90s ) they’re coming back again. The same chords, the same crappy synths. Again and again.

ENDS

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