John Armstrong: Time has come for Key to break a few eggs

Will John Key still be loved come December? Photo / Christchurch Star

Will John Key still be loved come December? Can National's dream run in the polls keep on keeping on through this year and into election year, especially now the economic recession seems to be (almost) over?

What has so far been a comparatively easy ride for Key now starts to get much bumpier. The time has come to do the difficult stuff. The Key Government faces its Waterloo. It will be damned if it doesn't do something major by way of reform this year - especially regarding tax policy. It may be equally damned if it does.

An early sign of Key's willingness to move out of his comfort zone is his taking on the teachers head on over national standards for literacy and numeracy in primary schools.

But the more accurate gauge of his acceptance that doing something means upsetting someone will come next week when Parliament resumes on Tuesday after the summer break and kicks off proceedings with the Prime Minister's formal statement of his Government's priorities and policies for the months ahead.

Neither Key nor his Finance Minister Bill English is giving much away. But as much as can be discerned, the day should be labelled "Big Tuesday", given the apparent scale of the policy agenda which Key will sketch out.

Next year being election year rules out National doing anything then that might spell serious political trouble.

That means the difficult and the unpopular will have to be done this year.

However, Key has also promised action to spur what he calls a "step-change" in the New Zealand economy.

That is going to require something truly special and innovative. The days when National promised to tweak the Resource Management Act as a fig-leaf to cover the poverty of its economic thinking are long gone.

The pressure to come up with policy with real cut-through has been further intensified by the end of the recession.

Last year's sticking-plaster solutions, such as Key's Job Summit, could be excused as the new Government responded to potential economic meltdown. National can no longer postpone tackling what it promised it would fix - the underlying structural crisis in the New Zealand economy.

All of the above is making Tuesday look more and more like a defining moment for Key's prime ministership as his Administration moves beyond implementing its manifesto promises and into fresh territory policy-wise.

Some of the new stuff will be popular. Some of it won't.

The going was inevitably going to get tougher this year anyway as tolerance and patience with a new Government begins to fade. That could be seen by the reaction to this week's unexpectedly high spike in jobless numbers to 1999 levels. It is apparent in the tug-of-war over national standards.

There is a feeling within the Government that the teachers are using their opposition to National's plan as a bargaining chip in impending pay talks.

Like others across the state sector whose pay is up for negotiation this year, they are likely to be disappointed. English simply does not have the money.

National standards, the state pay round, the foreshore and seabed, the ongoing difficulties of cohabitating with the Maori Party, mining in national parks ... the list of potential and actual political headaches will only keep growing.

The political landscape suddenly looks a lot different than it did only eight weeks ago when Parliament adjourned for the Christmas-New Year break.

Labour's miserable 2009 culminated in vague murmurings about Phil Goff's longevity as party leader. He has returned from the summer break looking measured, relaxed and very much in charge. Goff's early focus has been to define the economic and tax debate in terms of what National does for those on lower incomes in the post-recessionary environment compared to how the well-off benefit.

It is an argument about fairness. Goff's game is to paint National as serving only the elite and nudge the crucial middle-income vote to come down on the side of equity.

This was fleshed out in Goff's "the many - not the few" state of the nation speech last month. His announcement that under Labour, no public service chief executive would be paid more than the base salary of the Prime Minister provided the necessary news hook for the speech.

Given existing salaries would not be touched, the policy would be a slow burner in impact. The important thing was the symbolism - that those at the top of the pile should share the pain and that includes those in the state sector who Labour is traditionally seen as favouring.

Key rubbished Goff's idea as dumb. It would have been smarter simply to have ignored it. Goff would have welcomed the Prime Minister drawing attention to what he had said. Goff needs all the help he can get to reconnect Labour with voters - the major challenge still confronting his party.

However, things should get markedly easier for Goff this year, just as they are going to get tougher for Key.

The Prime Minister opted not to give a traditional state of the nation discourse, preferring to wait until Parliament was sitting. Big Tuesday is thus crucial in ensuring National gets the political year off to the right start.

Those who have accused Key of sitting on his hands may find themselves having to re-evaluate that assessment.

The programme outlined in his Prime Minister's statement - required to be tabled under Parliament's standing orders at the start of a new session - is unlikely to disappoint in terms of bulk.

Immediate attention will zero in on what the document says in response to the recommendations of the tax working group which reported to English last month.

Key is expected to give some clarity as to what is on and off the table in terms of potential tax changes and new revenue-gathering devices.

It is vital for National that he does so. At the moment, there is a big fat vacuum regarding the Government's intentions. It is being filled by others making speculative and largely negative assessments of the impact of a land tax or a rise in GST.

As the Government has discovered to its cost with national standards, it needs to get out and start selling its intentions, rather than simply assuming voters are getting the message.

It is no good holding everything back for English's second Budget in May, leaving opponents running amok and shooting down the various tax options in the interim before they have even had the chance to fly.

Whatever Key says in his statement about tax will inevitably raise more questions than he and English are probably willing to answer at this stage.

But it is essential Key gives some firm steer.

Otherwise, Big Tuesday will be followed by flat Wednesday.