Fran O'Sullivan: Election is now Clark's to lose

The Herald's DigiPoll survey has sliced through Labour's confidence like a hot knife through butter.

Just 12 weeks out from the election, Helen Clark - the self-styled (and probably this is true) "most popular and competent" prime minister New Zealand has enjoyed in recent times; the woman whom experienced political pundits were just months ago eulogising as odds-on to take her party to a third, or even fourth term in Government, and a record to mirror that of long-time National Prime Minister Keith Holyoake, not to mention Australia's record-breaking Liberal Prime Minister John Howard - could herself be on the international job market far earlier than she has planned.

Make no mistake about it: the DigiPoll result which has seen National (40.1 per cent) and Labour (36.2 per cent) reverse their respective ratings in just one month has put the election "in play".

Labour power brokers can't quite fathom how Don Brash, the bespectacled former Reserve Bank Governor who appears to them like some political Klingon, has managed to bump his party up the ratings table on the back of some rather flimsy pledges.

Pledges which on past performance he tends to resile from - and sometimes even reverse - once the heat goes on.

Inevitably it will prove to be a combination of many small issues - rather than any single egregious political sin - which has sparked the electorate to do a double-take where the Clark regime is concerned.

Clark herself is still New Zealand's most preferred prime minister.

But the election is now hers to lose.

Brash - who this week yet again displayed a propensity to make clunky statements with his comment suggesting gays are not part of mainstream New Zealand - is acquiring more personal support. But Clark (48.7 per cent) still outranks Brash (25 per cent) two-to-one.

Taxation is a major election issue for many New Zealanders as a raft of political polls are now confirming. Finance Minister Michael Cullen - who repeatedly used logic to successfully browbeat business into submission over its calls to lower the company tax rate to 30 per cent - was hoist on his own petard with a pledge of miserly personal income tax cuts in three years' time.

After years of trumpeting multi-billion-dollar budget surpluses the public just does not believe him when he puts on Mother Hubbard clothes to argue the coffers are bare.

Quite why Cullen would expect a populace that binges on personal debt to fund its over-lavish lifestyle and ridiculously out-of-whack property prices, to continue to forgo today's pledges in order to earn a better tomorrow, has always seemed to be dangerously out of sync with New Zealanders' underlying ethos.

What New Zealanders want is more cash in their pockets so they can continue to fund their habit of living beyond their pay packets.

If they can't get it through wage rises, then another avenue must be found.

Brash has played to New Zealanders' hip-pocket drives with promises of firstly "substantial", then "realistic" tax cuts if National gets in the driving seat.

But he will not put any details on the table until Clark blows the whistle on the election date. Brash is clearly betting that the heat of a four-week campaign will not allow much time for the public to focus on the trade-offs a tax-cutting budget inevitably implies.

It is of course deeply ironic that a former central banker who himself tut-tutted over previous governments' propensity to buy off the electorate with its own money could resort to such base politics.

But Brash is rapidly becoming a politician.

Such inconsistencies will not bother him for long. Any major gaps between National's stated aspirations and New Zealand's economic reality can be glossed over in a post-election "opening the books" exercise which, if the Treasury covers off its bets, will put forward several options.

Treasury has argued for personal income tax cuts to fuel economic growth in background papers.

But if the post-election books show increased spending by the Labour-led Government has deprived an incoming Government of budget flexibility - a likely scenario - Brash would still have options.

A National-led Government could either make immediate spending chops to fuel tax breaks, or borrow to do the same while it tackles spending over a longer timeframe.

The latter option assumes that tax cuts will produce dynamic economic growth to boost overall revenues so the quantum of spending cuts is reduced.

It is a tough call as the economy is becoming more constrained. If Labour is returned - which can't be ruled out - Cullen can either go with the status quo or dream up some more appealing scenarios.

One thing is certain: he will have to improve his own relations with the business sector to retain confidence.

The key issue for Clark and Cullen is the mounting electoral disquiet with Helengrad's arrogant "we know best" approach.

The Clark Cabinet has not been substantially renewed during its nearly six years in office. While this presents an image of stability and enables Clark to maintain control over her caucus, it has a major downside.

Cabinet Ministers are fast accruing political baggage.

Even ministers like Jim Sutton, who is usually even-tempered, are acting out of character.

The ridiculous attack on National aspirant Tim Groser for deciding to abandon his World Trade Organisation role for a political career and the attacks on Federated Farmers over its policies on rivers and lakes access are cases in point.

Particularly when public opinion is not on his side, as Labour's own focus groups would have shown.

A Sutton of old would have laughed the first matter off and had private talks with the Feds over the latter - not exploded in pique.

This might seem small beer. But it is when the competent ministers like Cullen and Sutton start falling down after their less competent colleagues that a government is in trouble.

In Clark's case the situation is compounded through her own loyalty and reliance on a very close circle of advisers.

Like Tony Blair with Alastair Campbell, the PM's relationship with her spin doctor Mike Munro has long passed the point of utility.

Mistakes are being made. Journalists are reporting obvious manipulation attempts. Key messages are getting lost.

Likewise, she is not being sufficiently challenged by either her personal staff, nor by her Cabinet.

The public knows the Government is running out of steam.

That is why it is refusing to confront the real issues relating to National's own competence.

* Next week: Who's got the right stuff? Fran O'Sullivan runs her ruler over the political leaders.