General elections are significant events with many ramifications.  They not only determine (in most cases) which party will form the government – they also set the political agenda for both winners and losers over the three years until the next election.

Particularly in cases where the government changes, that agenda will be dominated by the new challenges created for the major parties by the changed role they must take up.

For the winners, especially if they have been out of government for some time, there will be a host of new challenges.  As Labour is discovering in the wake of their 2017 success, they must take over the government of the country without a core of experienced former ministers.

As I know from my own former political experience, being in opposition is a very different matter from shouldering the responsibilities of government.  In opposition, you can pick and choose your issues – and the choice is usually an easy one; you can head straight for those issues where the government is under pressure or where public opinion is demanding new answers to high-profile problems.  There is less need than there is in government to have an answer to every question.

In government, however, everything you do, or fail to do, is rightly assumed to be on behalf of the government.  You cannot say, if caught out doing or saying something that you would rather keep out of the public domain, “that’s my business”.

Jacinda Ardern has had an uncomfortable few weeks largely because of mistakes made by one or two ministers who are enjoying their new status but who have not realised that new standards of responsibility are also expected.   The good news for her is that the passage of time, and growing experience of what is required, should remedy these failings – and Jacinda herself will no doubt learn lessons as to the best way of dealing with ministers who fall short.

But the change of role is not just a problem for Labour.  The transition for National – in their case from government to opposition – is, if anything, even more difficult.  They have suddenly lost the status that comes with calling the shots and being in charge, and they have lost not just the perks of office (such as the chauffeur-driven limousines) but more importantly the advice and support of usually highly competent civil servants.

They need to rely much more on their own judgments as to what points to make and how a particular issue is likely to develop.  They have to work much harder to set the agenda – journalists no longer hang on their every word.  And they have to strike that difficult balance between holding the government to account and seeming to be perpetual nit-pickers and nay-sayers – all the while trying to persuade the voters, with an eye on the next election, that they could do so much better a job next time.

And, as in the case of National at present, they might also have to bear the burden of skeletons in their cupboard coming to light, as issues and problems that had previously been buried far away from the public gaze get an airing.

There is a further problem for National.  A general election defeat, leading to the loss of the government benches, can often mean that a number of long-serving members will call it a day, finding little reason to stick around in opposition.  And so it has proved with National this time.

With the departure of Bill English and Steven Joyce (Jonathan Coleman may not count for this purpose), National has lost a good deal of experience and ballast. It is not just Labour that needs to re-build in terms of experience.

As they face up to the twin challenges of being an effective opposition and getting fighting fit to contest the next election, National are suddenly looking somewhat lightweight.  It is not just the loss of their heavyweights but the fact that Simon Bridges has yet to make much of an impression – let alone a favourable one – that leaves them looking a little short of fire power.

New governments usually find it easy to grow into the role – it’s not so easy for recently defeated oppositions.

Bryan Gould

14 April 2018

It was Charles Dickens’ Mr Micawber who famously defined the principles of successful economic management, when he said “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Most people, with experience of running their own household accounts, will nod in agreement.  But while Mr Micawber no doubt got it right for individuals and households, he may not have been so percipient when it comes to public finances.  A government’s role in managing the country’s economy is very different from running your own affairs.

We have had until recently a government whose most important goal was, it seems, to run a “surplus”, and most people would no doubt again agree that a surplus has to be preferable to a deficit.  But, as we are beginning to find out, a surplus is not all unalloyed benefit.

The surplus we are talking about, first of all, is not the country’s surplus (that is quite a different matter – the country has been in deficit from one year to the next over a long period) but the government’s, and whether there is a surplus or a deficit in the government’s finances will impact rather differently from what one may expect on the lives of most citizens.

If the government is in surplus, it is really just another way of saying that it takes more from us in taxation than it spends on public services – it takes spending power away from us, in other words, but doesn’t make good the loss to the economy as a whole by increasing its own spending to compensate.  The result – from the viewpoint of the economy rather than the government is not necessarily benign – we are likely to have a smaller economy and a lower level of economic activity than would otherwise be the case.

There is also, of course, a potential downside if the government runs a deficit.  It will then in all likelihood have to borrow in order to finance the shortfall, and that will come at a cost, assuming that someone can be found who is willing to lend – though this will not normally be a problem since lenders like lending to governments (often at low rates) because their credit is good.  Borrowing – so often frowned upon – is a perfectly sensible policy option if the outcome is a more vibrant economy and it is even more sensible if the borrowing is for capital rather than current expenditure – something many of us are familiar with when we borrow on mortgage to buy a house.

So, we might conclude that elevating the achievement of a government surplus so that it is the government’s primary goal may not have quite so much going for it as we might have thought – and we haven’t even begun to look at the other side of the equation, which is the price we pay when the government does not spend the money it takes in.

The government’s accounts, in other words, are laid out like any other accounts.  There are two columns – Mr Micawber’s income and expenditure.   It follows that a surplus can be achieved either by taxing more than is needed or by spending less than is needed.

The problem for a government that seeks to achieve a surplus by cutting pubic spending is that there is a cost to such cuts, as we are beginning to find out.  Right across the board – from health care (rotting hospital buildings and all) through to underfunded schools and underpaid public servants such as nurses – the country is worse off and less able to function efficiently.  A properly run economy will need both the public and private sectors working together in unison – each accepting the responsibility that is properly theirs.

A surplus might please the ideologues and be seen as the badge of good government, but even Mr Micawber might see that we will all be better off if we use all our resources – whether in public or private hands – to the best effect.  A surplus is of little use as figures in a balance sheet if the price we pay is that essential services are run down.

Bryan Gould

4 April 2018

Reports that Air New Zealand have been charging Kiwis twice as much for domestic flights out of Auckland as they charge Australians will come as no surprise to those in the provinces who are sadly all too familiar with the priority accorded by our supposedly “national carrier” to chasing the dollar rather than meeting its “national” responsibilities.

There was a time when Whakatane and other regional centres had the benefit of several flights a day to and from Auckland.  But a year or two ago, those flights were ended.  It wasn’t that they had not been well patronised; the 20-seater planes were almost always full, so the service comfortably paid its way.

The problem was that filling a 20-seater was not as profitable as filling a 50-seater, and there was not enough demand to warrant using the larger plane.  So, the service was cancelled, leaving Whakatane and other similarly placed towns in rural New Zealand deprived of an essential service.

In the case of Whakatane, a small private operator, Air Chathams, stepped into the breach, and – within its limitations – has made a creditable job of running the replacement service.  But, far from welcoming this development, Air New Zealand showed no willingness to cooperate with the new provider so as to minimise the loss to its former customers.

Those customers are left with a number of irritations.  There is, for example, no joint booking, so that – to travel from Whakatane to Wellington, a passenger must book first a flight to Auckland with Air Chathams and then make a separate booking with Air New Zealand for the flight from Auckland to Welliington.

There has been little attempt (from Air New Zealand, at least) to co-ordinate timetables to ensure that connecting flights are scheduled appropriately.  And, for passengers who have taken the trouble to join Air New Zealand’s Koru Club, a passenger returning from Wellington and arriving in Auckland (and perhaps having to wait for the Air Chathams flight to Whakatane) will find that access to the Koru Lounge is barred because the passenger does not have a ticket for an onward Air New Zealand flight.

All this is, sadly, evidence of Air New Zealand’s cavalier attitude to claiming the privilege of being regarded as our “national” carrier (though they are quick to expect loyalty from Kiwis when it comes to international travel).  How and why did this sad state of affairs arise?

Air New Zealand is of course owned by the government and the annual profit they returned to their principal shareholder was no doubt of great value to a government that was obsessed with showing its financial accounts in a favourable light.   That is why it was not enough that the Whakatane service should show a profit – the profit had to be a humungous profit, so that it earned plaudits from the Minister of Finance and therefore bonuses for the senior executives.

Since a full 20-seater plane, while financially viable, is not as profitable as a 50-seater – and services of this kind dragged down the average profit on capital employed – the Whakatane service (however valuable it was to Air New Zealand’s customers), and others like it, had to go – a classic case of profits being put ahead of the customers’ interests.

The consequences of these decisions are far-reaching.  A town like Whakatane becomes a less attractive place to live and work in the absence of a fully functioning air travel service.  As Shane Jones, the Minister overseeing the new Provincial Growth Fund, has pointed out, the withdrawal of services from regional centres across the country runs counter to the policy direction the new government wishes to take.  If matters remain as they are, the handicap represented by the Air New Zealand withdrawal of services will remain and will hamper the regions in their drive to build their local economies.

Fortunately, the remedy lies in the Minister’s hands.  He can, as the representative of Air New Zealand’s principal shareholder, make it clear that a bumper profit is not the only criterion of success that the government wishes to see.  He can instruct that the airline must pay more attention to other goals, and particularly to ensuring that our “national” carrier is national at home as well as abroad, so that significant parts of the country are not marooned as a result of being denied the services that are essential to their prosperity and well-being.

Bryan Gould

20 March 2018