Ahead of the Budget on Thursday and the release of a new biography, John Roughan looks at the legacy of former Finance Minister Bill Birch and we publish an exclusive extract from the book, Minister of Everything by Brad Tattersfield.
Sir William (Bill) Birch, whose biography is published on May 18, achieved something rare in politics. He defied the adage, "the soufflé doesn't rise twice".
Birch's 27-year career spanned the turbulent last quarter of the 20th century as New Zealand was transformed from a state dominated economy to an open market. Birch played a prominent role in governments of both directions.
As Energy Minister in the Muldoon Cabinet he had charge of its signature policy, "Think Big", large public investments in alternative fuels to reduce the country's dependence on imported oil.
Rising oil prices in the 1970s were predicted to continue because, it was said, the world's oil reserves were running out. By the mid-1980s that had proved wrong. Oil prices returned to normal and alternatives were rendered uneconomic just as they were coming on stream.
Think Big became exhibit A in the new Labour Government's case for letting markets, not governments, "pick winners".
Birch not only carried the baggage of Think Big into Opposition but as National's finance spokesman he attacked free market reforms such as the floating of the dollar. Struggling for traction, Opposition leader Jim McLay eventually dropped him from the front bench, causing Birch to engineer a coup that put Jim Bolger into the leadership.
But by the time National returned to power in 1990 Birch and Bolger were reconciled to economic reform and their Government set about extending it. As Minister of Labour, Birch introduced the radical Employment Contracts Act that decimated trade union membership by allowing direct bargaining between a company and its employees.
His biographer, Brad Tattersfield, writes, "The obvious conundrum is how he managed to hold powerful positions in two such ideologically distinct governments, just a few years apart. Did he have a 'Road to Damascus' neoliberal conversion?
"For Birch," he answers, "politics was about getting on with the task in hand, not angsting over whether it fitted a particular policy theory or visionary construct. If the Government agreed that building a new hydro dam or lowering taxes was the best thing for the country right now, then Birch was the man to do it – calmly, carefully, consultatively and doggedly."
Throughout the 1990s he was indeed "Minister of Everything", the title of the book. Birch was the senior minister every government needs, trusted to step into any portfolio to solve a problem or at least take the political heat out of it.
But Finance Minister was "the job he loved most", writes Tattersfield, and it was the job he had to share after the 1996 election, the first to be held under MMP. The way Birch managed to work with Winston Peters, his polar opposite in temperament and application, is described in this extract.
Bill Birch – Minister of Everything by Brad Tattersfield
Edited extract:
In late 1995, while Bill and Rosa walked the Abel Tasman track with the Bolgers, Bill agreed to postpone his planned retirement. He had promised Rosa that the current term would be his last, a prospect she relished.
Finally she could look forward to quality time with her husband after all the years of prolonged absences, sudden departures and meetings cut short by politics. Birch's staff recall her frustration when scheduled private dinners with him were repeatedly squeezed or cancelled.
Sometimes she would march into the office, open Birch's diary and write "no meetings" in red pen across a date that, for once, she wanted to spend fully with him.
But once more the call of duty beckoned. Bolger wanted his reliable old mate at his side for another term to support him through the challenges of the first MMP election, a fractious caucus and rivals lurking in the shadows.
So Birch was there for Bolger a year later as they reviewed the election result which, as predicted, put Peters in the driver's seat. All eyes were now on Winston and he was determined to milk his moment in the sun.
He went to ground the day after the election, going fishing while politicians and journalists fell over themselves trying to divine his intentions. His evasiveness that day set the tone for the next eight and a half weeks. The pundits were reduced to speculation as negotiators came and went from closed door meetings. Government went into limbo and MPs wandered Wellington's streets and cafes lacking anything to do.
Peters' determination that nothing leak from the talks bordered on paranoia – for example, he insisted the meeting room at Parliament be swept for bugs.
While he avoided much of the negotiating on policy details, Peters did take great interest in the tricky discussions on the size of the Cabinet and his own place in it. The possibility of sharing the prime ministership with Bolger was considered but rejected, then Peters asked for Finance.
Labour had explicitly ruled out giving up that role, Bolger realised a concession on this could swing the deal for National. The compromise solution was to share it. Birch was asked to work out a job-splitting arrangement along the lines of Australia's system, with Peters in the senior Treasurer role and Birch as Finance Minister.
While Birch was disappointed at having to play second fiddle in the job he enjoyed most in politics, Bolger says (in an interview for this book), "We had no acrimony at all. I said, 'You understand what we've got to do here, Bill. I know you'll do most of the work and you'll be the lead finance spokesman'.
"I thought it was one of Bill's finest hours. He just accepted that this was the reality of the new form of government and he was working with it."
Broadly, the arrangement gave the Treasurer overall responsibility for economic policy and the Budget, with the Minister of Finance having operational responsibility for bringing the Budget together. But unlike in Australia, the ministers would not be served by their own departments – both would be supported by Treasury and each minister would be shown all the agency's reports at the same time.
As the term got underway, Peters and Birch worked together on most things with relative ease, sharing the same information and playing to their complementary strengths. Peters' working style was the polar opposite of Birch's a fact that paradoxically helped the relationship work well. Peters steered clear of the laborious work on policy detail that Birch lapped up.
An advisor to Birch at the time illustrates the point: "I recall going into Winston Peters' office for meetings. There'd be a stack of paper there, it had that green material around it and he'd undo it, he hadn't read any of it."
Peters' limited understanding of the intricacies of his portfolio sometimes caught him out. His poor answers to questions from economists and journalists on the March (1997) Budget Policy Statement caused one economist to doubt whether he had even read the document.
Perhaps influenced by that episode, Peters took himself to Hong Kong during the traditional post-Budget round of speeches later in the year, leaving those to Birch and other senior National ministers.
Birch's diary records April and May 1997 as an "extraordinary period" with "several areas of tension with Peters". One was over legislation defining the Treasurer's role. Another was over the right to a financial veto of legislation, traditionally the preserve of the finance minister. Birch says Peters wanted to exercise that himself but "I persuaded him to take a more flexible line".
Birch managed these and other challenges quietly and efficiently, largely keeping them out of the public eye. He was helped by a good working relationship between their offices, which adjoined each other.
Peters' senior private secretary, Mary Anne Thompson, adroitly took care of her minister's needs and cleaned up after his shortcomings. Birch recalls that on several occasions she would ask him to meet one of Peters' early morning delegations because the Treasurer hadn't shown up for work.
Today, Birch says by and large the relationship worked well, mainly because Peters accepted National's recommendations on most things and left the detailed work to him, while he in turn supported the Treasurer in the presentational aspects of his role.
"I got on pretty well with him. I respected that he was the senior person in the relationship and he had to be satisfied with the outcome and had to present it to the House with some conviction . . . I had to liaise with him, he had to be in the loop all the time.
"It wasn't terribly hard with Winston, he's a pretty easy-going guy. He never trod on my toes, never called me up and said, 'what the hell are you doing?'."
By mid-1997 the coalition government's seemingly endless string of bad headlines had it bogged down in defensive mode. The Budget contained few surprises, the Government being constrained by the worsening economy and sliding surplus forecasts.
The previously deferred tax cuts were confirmed for 1998 but the Budget cast doubt on the third round that Bolger had flagged earlier, saying they could depend on the outcome of Peters' referendum on a compulsory super scheme.
Peters' backing of compulsion was gamely supported by Bolger while other National MPs were either silent, like Birch, or openly opposed, especially as polls began showing the proposal would be soundly rejected.
Jenny Shipley, buoyed by her first appearances in opinion polls as a leadership contender, gave a major speech in May attacking compulsory super, positioning herself opposite Bolger as the chief parliamentary campaigner against the scheme.
The super referendum delivered a sound defeat for Peters with a massive 92 per cent vote against the compulsory scheme. Both he and the coalition were now down to low single figure support in the polls.
Bolger was battling to keep his caucus and the wider party onside. Shipley says discussions on replacing Bolger started early in 1997. She was asked in March whether she would stand and during the Easter break she talked with her family about the prospect of becoming Prime Minister.
The plotters did their work expertly, without alerting Bolger or his core loyalists. Signature gathering started in October, soon after Bolger had left to attend the Commonwealth Heads of Government meeting.
Birch was among the last to find out, the Shipley backers being only too aware of his ability to rally support for Bolger and derail the coup. After Birch was finally tipped off by Clem Simich, Shipley visited him, flanked by supporters, and told him the game was up for Bolger.
Shipley told Birch she was willing to negotiate a position for Bolger as ambassador in Washington. By the time Doug Graham met Bolger at the airport Birch had already called his old friend, telling him Shipley had the numbers and he should stand down and accept the job offer.
Some pundits were surprised Birch didn't immediately follow Bolger out of politics, and people close to Bolger say he expressed disappointment that his old mate hadn't gone with him. But the departure of Bolger turned into something of a personal triumph for Birch, as he enjoyed a rare popularity verging on adulation.
Birch had shone as a beacon of stability amid the turmoil of the coalition government. A profile in the Dominion (November 7, 1997) read, ". . . suddenly the Prince of Darkness has become Prince Charming. Incoming Prime Minister Jenny Shipley wants him, Mr Peters wants him, and even the public is clamouring for him. His office has been flooded with faxes and telephone calls urging him to stay on.
"At a Business Roundtable dinner on Wednesday, Mr Birch was encircled by business leaders chanting 'stay, stay, stay'. . . 'Bill was glowing,' one fellow diner reported."
In large part Bolger was a victim of MMP's growing pains. A lesson of that ill-fated partnership has been learned by later leaders: subsequent coalition agreements have been higher-level statements of general direction rather than detailed policy prescriptions.
Despite his experience, Bolger eventually came around on MMP and does not now favour its removal. But Birch has remained an unqualified opponent. Today he says, "No system's perfect but do you get better policy out of first-past-the-post? I still think you do.
"People don't realise the trade-offs, the horse trading that goes on [under MMP]). You are making policy decisions just to retain the support of the minority party. It's got nothing to do with analysis of impacts or effects. You are doing it just to maintain stability.
"You simply cannot achieve good outcomes when you are making compromises in the quality of policy to satisfy MMP political needs. That's why MMP is really bad for the country."
The Bolger-Birch partnership had been extraordinarily powerful. Their great friendship, built on a quarter century in politics together, meant they trusted each other implicitly and deeply understood each other's strengths and weaknesses.
As leader and right hand man they formed an unlikely radical reform duo, implementing the final phase of the Douglas-Richardson economic revolution and ushering in the MMP government era.
Birch's years as finance minister had firmed his own economic views, diluting the pragmatism of his early career and gradually establishing him as more of a conviction politician, though never an unalloyed zealot.
Birch now shifted gears and swung in behind Shipley. But, like Bolger, she was to find the political going exceptionally tough as the coalition government battled on.
Birch on ...
Think Big: "The oil crisis was almost the equivalent of war – government could not stand by and do nothing. All the advice, and all the evidence, was that this was going to be substantially disruptive."
Muldoon: "He was a great listener. It was sometimes embarrassing talking to him because he listened so deeply, but he would recollect it."
Derek Quigley: "Quigley and I fell out, not because I minded him criticising some of the energy policies but because he went out and publicly said it. I had worked with him and he hadn't actually raised those issues."
Jim McLay: "He didn't grow in the job. He shrank in the job, he didn't make good decisions. I found him very difficult to work with. He was a muddler to a large extent."
Ruth Richardson: "She was a bit treacherous in many ways. If you went along with Ruth you were very bright, capable and competent. If you didn't, she would tell the world you were incompetent, couldn't understand. It was all a bit shallow."
Officials: "I don't think I was ever captured by officials but they sort of overwhelm you."
A Saudi banquet: "When it came time to eat, the Sheikh took Rosa and I, one under each arm, to a sheep which was the central feature of the banquet and said, 'The eye is yours, minister'. I swallowed it very quickly and didn't suffer any consequences."
Politics: "Few, if any, other careers provide the same level of excitement, challenge and sense of achievement than being a government minister charged with responsibility for decision making affecting the lives of all New Zealanders."
Bill Birch – Minister of Everything by Brad Tattersfield (Mary Egan Publishing), is released on Monday, May 18 and retails at $40.