John Armstrong is the Herald's chief political commentator

John Armstrong: Pragmatism rules in Tiwai Pt handout

Govt already in retreat from its plan to slash snapper quota

The announcement of the smelter deal has given purists within National's ranks plenty to ponder at the party's annual conference in Nelson this weekend.
The announcement of the smelter deal has given purists within National's ranks plenty to ponder at the party's annual conference in Nelson this weekend.

Just when you think the Prime Minister's pragmatic streak has surely drunk for too long at the well of political convenience, John Key promptly undertakes an even more audacious departure from the ideological ethos supposedly guiding his party.

Labour could only stare in goggle-eyed wonder at the $30 million "sweetener" handed to Rio Tinto-controlled Pacific Aluminium in shameless fashion to keep the Tiwai Point smelter operating for at least another three years.

Well might Bill English try to fudge things, labelling the money a "one-off incentive payment". During English's younger days in the Treasury, the superiors of the current Minister of Finance had a much more basic and pejorative word to describe such devices. That word was "subsidy".

In the intervening years, subsidies became so rare, the word almost disappeared from the political lexicon.

Its return would seem sufficient grounds for economic purists to grab crucifixes and bowls of holy water to exorcise English's office of the evil spirits which have so obviously taken up residence - namely the ghosts of economic interventionists such as Sir Robert Muldoon and Sir Keith Holyoake, the latter incidentally being one of Key's heroes.

The announcement of the smelter deal has certainly given any such purists within National's ranks plenty to ponder at the party's annual conference in Nelson this weekend. Note the word "ponder". They will not likely get any opportunity to voice an opinion on this Great Leap Backwards.

Going on recent years, the two-day gathering is likely to be another over-choreographed affair during which Key will feed the news media with some new policy, while proceedings have any spontaneity sucked out of them by a procession of Cabinet ministers detailing (and thus glorifying) their many achievements in their portfolios.

There is unlikely to be any serious grizzling on the floor of the conference. Nothing succeeds like success.

National's staggeringly high poll ratings will have silenced dissent in the unlikely event that there is any dissent to silence.

Key would anyway rebut any criticism by telling the party that at times, outrageous pragmatism is justified to keep National's support at a sufficient level where a third term in power is still within the party's grasp.

Another pragmatic retreat is already under way on the issue currently taxing the party - proposals by the Ministry for Primary Industries to slash snapper bag limits.

Apart from the no small matters of saving up to 800 jobs and $600 million in exports, the smelter "subsidy" was the clincher which secured the deal which - irony of ironies - might save National's faltering partial privatisation plans.

Without the smelter as a customer, Meridian Energy would have had a huge chunk of generating capacity either shut down or flooding the wholesale electricity market.

Either way, the pending float of shares in the devalued state-owned enterprise would look a lot less attractive as an investment opportunity.

With Mighty River Power shares still trading below their issue price, English already has his work cut out selling the Meridian float - even to the party faithful whom he will address this morning.

The delegates will be more appreciative of the Beehive's speedy and comprehensive handling of the other major event of the week - Fonterra's infant formula contamination scare.

The assured response was in part the result of lessons learned from the Christchurch earthquake, but also from perceptions the Government was slow to react to the grounding of the Rena off Mt Maunganui.

That was not the case from Friday afternoon onwards last week as ministers were first made aware that Fonterra had a major problem.

The Prime Minister was briefed that Friday evening. The next morning, as many as nine ministers, including Key, took part in what was to be the first of four telephone conferences over the following two days, as a co-ordinated "whole of Government" response was thrashed out and then implemented.

Fonterra's continuing difficulty in extracting the data from its computers to find out exactly which cans of infant formula might be contaminated prompted Key to send Steven Joyce what has been described as a "blunt and direct" conversation with Fonterra's senior management.

What has undoubtedly helped to avert any widespread ban on New Zealand products has been the willingness by ministers and officials to be completely open, transparent and honest in their meetings with their foreign counterparts.

Conscious that there has been enough damage to the company's brand, the Government has also deliberately avoided coming down too hard on Fonterra.

Even the Greens have been relatively restrained. They have long had a lengthy list of complaints about Fonterra ranging from so-called "dirty dairying" to failing to make milk more affordable, to importing palm kernels for stock feed and to manipulating the market in organic milk.

Like other politicians, Russel Norman, the Greens' co-leader, is focusing on what went wrong at Fonterra and why the company did not put the affected whey concentrate to one side once it had been found to contain clostridium, and why it took four months to discover the strain of bacteria was the exceptionally potent Clostridium botulinum.

Nothing less than a full commission of inquiry with the power to require the production of evidence and take evidence on oath will satisfy National's opponents.

As much as it is possible to tell, National is leaning in favour of such an inquiry rather than a more limited ministerial one which would have no coercive powers. That is in part to further convince foreign governments of just how seriously Wellington is treating Fonterra's lapse.

The inquiry will focus on the adequacy of Fonterra's product testing and the degree of independent monitoring of the company's laboratories in an industry which has largely been self-regulating.

Labour's Damien O'Connor warns that may have bred a degree of complacency which sits uncomfortably alongside far greater competition as new companies enter the market with the risk some start taking short-cuts with food safety.

Norman speculates that in Fonterra's case, the company was reluctant to besmirch its brand by volunteering the information that it had found clostridium when in all likelihood it would turn out to be non-toxic.

Whatever, the political risk for National in holding such an inquiry hangs on whether the Ministry for Primary Industries gets a pasting and whether its indifferent performance - highlighted by a recent review of its ramshackle response to China's holding up of New Zealand meat shipments - are sheeted home to budget cuts imposed by National.

The most valuable lesson of the week is for Labour to take on board. No matter how difficult it might look for Key to resolve a particular problem, no - repeat, no - possible solution should be ruled out.

- NZ Herald

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