Christopher Luxon speaks to media.
Video / NZHerald
OPINION
The drawn-out negotiations between Chris Luxon, David Seymour, and Winston Peters have seen a loss of face for our incoming CEO/Prime Minister and reflect fundamental differences between the parties that are going to continue to be difficult to bridge once the new Government is finallyinstalled.
The underlying tensions between Seymour’s neoliberalism, Peters’ economic nationalism and Luxon’s managerialism will only be heightened by the cash crunch that’s coming.
Let’s face it, Winston Peters has humiliated Luxon and Seymour over the past week and a half. Delaying meetings, dragging them down to Wellington to see him, ditching the planned three-way meeting, and then making them follow him back to Auckland for a photo-op. Wily Winnie knew exactly what he was doing – he was showing Luxon and Seymour who is boss.
New Zealand First leader Winston Peters arrives at the Cordis Hotel in Auckland for further coalition talks with National. Photo / Dean Purcell
The word is that Luxon made an insulting initial offer to the old master – an offer that reflected the fact National will have six times the MPs as New Zealand First. That displayed a lack of political nous from Luxon. Because, in this new Government, it doesn’t matter if you have eight MPs or 48 - the votes of each party will be needed every time to make a majority in Parliament. That gives each party the veto. That means Luxon needs to treat the others with respect, and the power goes to the person most willing to exercise that veto and collapse the Government.
By dragging Luxon and Seymour around by the nose, Peters has shown where the power lies. You only need to look at the picture of the meeting – Seymour with a half-smile, Luxon with a strained grin, and Peters beaming ear to ear.
Peters has reminded everyone that, no matter what the deal is on paper, he retains the ability to nix any part of the new Government’s agenda at will.
It is going to be fascinating to see how he exercises that power, because this Government will contain fundamental contradictions on economic policy.
Seymour’s Act is a neoliberal party that believes in selling assets, de-regulating, and pulling back on public services. National is also essentially neoliberal but not wanting to scare off Middle New Zealand – it’s business first, but with interventions for favoured industries and handouts for the middle class.
Act Party leader David Seymour and deputy leader Brooke van Velden speak about coalition talks. Photo / Alex Burton
New Zealand First, on the other hand, is the inheritor of Muldoon-style economics. They believe in making big investments to enable our world-leading industries to flourish and export so they can pay good wages, investing in strong public services, keeping key assets in public ownership, and protecting the country against becoming a mere profit centre for foreign capital. In choosing to go with Labour over National in 2017, Peters said capitalism must “regain its human face”.
New Zealand First’s economic outlook is actually much closer to Labour and the Greens’ than National and Act’s (more than a few on the left are looking to Peters as the best hope to prevent water privatisation and the return of foreign house buyers). While the party might be closer to the right-wing on social issues, it’s these economic differences that tend to matter more.
NZ First leader Winston Peters, National's Christopher Luxon and Act's David Seymour in coalition negotiations. Photo / Winston Peters
We only need to look back to the last time National and New Zealand First tried to work together in government to see what can go wrong when a government is divided on economic ideology. That coalition collapsed over the sale of Wellington Airport – privatisation being a core tenet of neoliberal politics, but anathema to economic nationalists.
The new Government is going to face some tough economic and fiscal choices immediately.
National’s tax plan relies on getting $3 billion over four years from foreign house buyers and $2.4b from carbon credit sales. Peters looks set to block the first and the market is buying the latter. On top of that, the new Government is going to need to find the thick end of $6b for pay equity for nurses, care and support workers, not to mention pay rises for police.
A billion here, a billion there. Soon you’re talking serious money.
How the new Government faces this cash crunch will be a key test of the parties’ ability to work together. Cut more from public services? Renege on pay equity? Borrow more? Abandon the tax cuts?
It’ll be Luxon and Nicola Willis as Finance Minister who will have to try to put together a Budget and make those tough choices. But they’ll need to remember Peters can and will veto any plan that breaks with his party’s values.
After the lesson of the past week and a half, Luxon is unlikely to forget.
