John Armstrong 's Opinion

John Armstrong is the Herald's chief political commentator

John Armstrong: Labour's two fingers draw the battle lines

113 comments
Being National-lite won't win the election so spot the difference

National's laissez-faire stance on power prices has left New Zealanders trapped like laboratory mice in a hopelessly flawed neo-liberal experiment. Cartoon / Guy Body
National's laissez-faire stance on power prices has left New Zealanders trapped like laboratory mice in a hopelessly flawed neo-liberal experiment. Cartoon / Guy Body

In the week or so since it revealed its plan to slash power prices, Labour has bared its teeth in venomous fashion at anyone questioning the wisdom of breaking up the wholesale electricity market just as it is showing signs of functioning as intended.

Labour has not deviated one iota from its line that domestic consumers must get a fair go and price gouging by the five big power generators must end.

The party has been unflinching in the face of criticism that in doing so it is turning back the regulatory clock to an era of unrestrained state intervention which created crippling distortions in the economy.

Labour has been equally unrepentant about the policy's effect on the float of shares in Mighty River Power. It has stuck religiously to its script that people have a choice over whether or not they buy shares, but they do not have a choice as to whether or not to buy electricity.

In short, Labour has been delivering two-fingered salutes all around - especially to the broking houses queuing up to rubbish the policy, seemingly oblivious to their obvious conflict of interest.

Labour has ample reason for adopting such an aggressive and uncompromising stance. To win next year' s election, it must pick up a substantial chunk of votes on its right and left flanks.

It must jolt those on low incomes and welfare benefits in South Auckland out of non-voting apathy, as well as engineering a switch in support away from John Key and National in the city's mortgage belt and middle class suburbs. The electricity policy is capable of doing both things.

The policy presents a clear alternative. Labour will lose if it fights next year's campaign with the kind of insipid policies it used in 2011.

The classic examples of Labour's tinkering rather than offering a real alternative were the minor changes in tax thresholds at the bottom end of the income scale - which would have cost a lot in terms of foregone revenue but which were too small to have a noticeable effect on people's incomes - plus the silly policy to remove GST on fruit and vegetables.

That ended up damaging the party's credibility far more than it enticed voters to tick Labour's box.

Where Labour gained credibility, though not necessarily votes, was through policies which involved big structural changes, such as the introduction of a capital gains tax and phasing in a rise in the age of eligibility for national superannuation.

Voters might not have liked a capital gains tax, but they could see the logic in it, whereas the exemption on fruit and vegetables simply opened the door to further weakening of a tax whose value in policy terms lies in its universal application.

Labour must be bold. It will get nowhere being a pale echo of National. Hence its plan to build 100,000 houses over 10 years. Hence its single-buyer proposal to rein in the generating giants and force down power prices to give up to $330 a year in savings for households. Hence the stout defence of that policy. Concede anything to opponents and Labour concedes everything.

Issued in conjunction with an almost identical version produced by the Greens, the policy blunts their ability to siphon off votes on Labour's left.

When it comes to making inroads on the middle ground, Labour is taking much more of a gamble.

National can talk all it likes about Labour taking both a huge step to the left and a leap backwards to a New Zealand of the past. National can quote all the statistics it likes about the actual rate of price rises.

But the public perception, right or wrong, is that National's power reforms of the 1990s have failed to deliver. National could be comfortable about that as long as Labour remained committed to the regulated market model.

Labour's abandoning of that model has suddenly left National isolated on a crucial hip-pocket issue.

The question is whether public unhappiness with ever-rising power bills runs deep enough to offset the secondary effect of the policy - the wiping of hundreds of millions of dollars in value off the "gentailers" and the associated spiking of the partial share float.

Nearly two million New Zealanders are now signed up to KiwiSaver. Those nearing retirement whose funds have invested heavily in Contact Energy will not take kindly to Labour effectively slashing the value of their holding.

Labour's new policy has also undermined the Mighty River Power float, deterring some would-be investors and exposing those who do buy shares to the risk of drops in the share price after the stock has listed.

That would be a disaster for National, possibly crippling the subsequent planned floats of a minority shareholding in Meridian Energy and Genesis Energy and wrecking the centrepiece policy of National's second term.

While Labour would be delighted at any delay forced by its policy, the party risks incurring blame from the voters it is seeking to capture.

But it has a significant advantage in the debate on its policy's merits. It cannot prove the policy will cut prices. But National cannot prove the policy will not work.

That is because it is just about impossible to explain the workings of the electricity market in a manner easily digested by the public.

National has resorted to simple sloganeering, accusing Labour of coming up with something from the "North Korean school of economics", being guilty of a return to "Soviet-style central planning and nationalisation", or just being "barking mad".

By using such language, National risks sounding shrill. But the language is designed to ghettoise Labour in a long-dead era when interventionist policies came close to wrecking the economy.

This is part of National's strategy to make next year's election a referendum on which party can best be trusted with the management of the economy - a matter of some issue where both parties' private polling has Labour far behind National.

To further marginalise Labour, the Prime Minister seized on his opponents' electricity plan to define the election as a contest between the "centre-right and the far left". In other words, vote Labour and you will get the Greens.

Labour's message may be just as potent, however. National's laissez-faire stance on power prices has left New Zealanders trapped like laboratory mice in a hopelessly flawed neo-liberal experiment. At last, help is on its way.

Debate on this article is now closed.

- NZ Herald

John Armstrong

John Armstrong is the Herald's chief political commentator

Herald political correspondent John Armstrong has been covering politics at a national level for nearly 30 years. Based in the Press Gallery at Parliament in Wellington, John has worked for the Herald since 1987. John was named Best Columnist at the 2013 Canon Media Awards and was a previous winner of Qantas media awards as best political columnist. Prior to joining the Herald, John worked at Parliament for the New Zealand Press Association. A graduate of Canterbury University's journalism school, John began his career in journalism in 1981 on the Christchurch Star. John has a Masters of Arts degree in political science from Canterbury.

Read more by John Armstrong

Sort by
  • Oldest

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a4 at 31 Aug 2014 20:46:51 Processing Time: 598ms