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Peter Wilson: It's Time For John Key And His Ministers To Deliver

Contributor:
Peter Wilson
Peter Wilson

On Tuesday in Parliament John Key will make the most important speech of his political career.

The prime minister's address, a set-piece event at the beginning of each parliamentary year, will outline the National-led government's agenda for 2010 and define its economic recovery programme.

For Mr Key and his ministers, it is time to deliver.

It is time to tell the country how they are going to achieve the "brighter future" National successfully campaigned on in November 2008.

This year is going to be a lot harder than last year.

Mr Key's benign, cheerful occupation of the Beehive's ninth floor has worked -- so far. National is high in the polls, well ahead of Labour, and the prime minister's personal popularity is exceptional.

He has managed to please most of the people most of the time, building up a considerable store of political capital.

Now he must be prepared to spend some of it, because he isn't going to be able to be so accommodating when he makes the hard calls that lie ahead.

Helen Clark didn't like having to deliver the prime minister's address and kept it generally bland and without much detail.

Key has indicated the opposite, saying he is going to list the Government's objectives and his plans to achieve them.

By far the most important are the changes to the tax system that the Government has been working on. We might have to wait for the budget to see the fine print, but Key should give a clear indication of which parts of it are going to change.

The Government has been secretive about this, while at the same time acknowledging the tax working group's conclusion that "the system is broken" and has to be fixed.

Key and Finance Minister Bill English have consistently refused to rule anything in or anything out. Their statements have rested on words like "fairness", "robust" and "enduring".

English has repeatedly said it will have to be fiscally neutral. He isn't prepared to weaken the revenue base and he can't be expected to with future budgets still facing heavy deficits and the Government's huge borrowing programme.

What he gives with one hand he will take with the other. There are sure to be winners and losers -- and the losers won't like it.

There is strong speculation he will lower the top tax rate of 38 cents in the dollar. That was imposed by Labour and denounced by National at the time as an unfair "envy tax".

Since it was introduced, many more people have been caught in the bracket as their income increased. English could choose to raise the thresholds, so he still hits very high income earners but gives the rest a bit of a break.

He could raise GST, another of the options that is seen as a strong possibility, to make up for what he loses through changes to personal income tax. That would give Labour a strong platform on which it could be the champion of struggling families who already find it hard to manage.

He could introduce some sort of land tax, or hit the property speculators who own rental properties and use them to reduce their tax bills.

Whatever comes out of Key's speech and the May 20 budget, 2010 isn't going to be a win-win year for the Government.

Last year was mainly taken up with dealing with the global recession and its impact on New Zealand. Opposition parties accuse the Government of having done hardly anything to protect jobs, but there's not much doubt it could have been much worse if Key's "rolling maul" of initiatives, relatively minor as they were, hadn't been implemented.

Although National came to power at a very difficult time because of the recession, in some ways the economic situation also gave it an easy ride during 2009. People started the year very worried about their jobs, and weren't much focused on anything else.

Although the effects of the recession still exist -- the latest unemployment statistics were evidence of that -- the Government now has to grasp the longer-term problems of an economy that for years has grown mainly because consumers have been spending borrowed money, usually gained through rising house prices.

English talks about "a step change" and says he wants to change the borrow and spend mentality. If he goes ahead with that, a lot of people are going to find themselves out of step with his new regime.

It is going to be time for the Government to show some steel, and to demonstrate it isn't going to restrict its policies to measures which don't damage its popularity.

Some damage seems inevitable. Unlike national standards in schools, its current battleground with the teacher unions where it clearly has strong backing from parents, the measures it is about to announce won't necessarily be greeted with majority support.

And no one is awaiting Tuesday's speech more eagerly than Labour and its leader Phil Goff, who has been saying for months that political cycles change and the Government will be found out when it has to come up with ways to deliver on its election promises.

The time for the bipartisan approach which was necessary when the recession was in full flood is over. From now on, no quarter will be given and Parliament is going to be a rough and rowdy place, as Labour tries to end Key's year-long honeymoon.

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