John Armstrong: A muddle in the middle

The National Party is probably in no mood for lectures, but the Katherine Rich fiasco and its undermining of Don Brash's welfare reform agenda ought to teach it a timely lesson.

National is not going to win the September election by fighting populist battles on the right of New Zealand politics.

What the party must confront is Labour's relentless monopolisation of the middle ground. Otherwise, National will effectively be shut out of the election campaign - Labour's obvious intention.

National must retaliate against increasing Labour's incursions into its territory - the latest being Helen Clark's "ownership society" - by mounting raids behind Labour's lines.

Brash's Orewa speech would have been truly audacious had it done that. It would have really caught Labour off-guard. It would have shattered perceptions of Brash as an inflexible ideologue of the right.

That would have required going a lot further than just neutralising issues on which Labour has held the advantage, such as Michael Cullen's superannuation fund, for example, to which National has now signed up.

Perhaps National will show the necessary daring with tax cuts far more generous to low- and middle-income earners than Labour's complex Working for Families package.

While we await the detail, and though she never intended it, Rich has probably killed off welfare reform as one of the big issues National had been punting on to swing votes.

If Brash thinks he can resurrect welfare reform, he should think again. Doing so will only raise awkward questions best left unanswered.

If Brash's own welfare spokeswoman could not swallow his more hardline ideas, what hope does he have of convincing the rest of the country of their validity?

And more seriously, if National MPs are bickering openly so close to the election, what hope of the party running a united, disciplined Government afterwards?

So don't go there.

For the meantime, Brash and his advisers will be more exercised on how National can rebound after this painful episode wrecked what had been a positive start to the year.

They took the not-unreasonable gamble that Brash's stringent prescription for those on the domestic purposes benefit was also populist enough to resonate with low- and middle-income earners and shake them loose from Labour.

That did not happen. This week's Herald-DigiPoll survey shows those income categories were largely unmoved; Brash instead picked up more support among the well-off.

Not what he wanted - but a delight for Labour in its campaign to marginalise Brash as a right-wing ideologue whose policies will only make the rich richer.

The sacking of Rich inevitably overshadowed Clark's state of the nation speech in which she sketched the outline of an "ownership society". But you can expect to hear a lot more about incentives to help those on low and middle incomes build up their assets.

The concept - currently in vogue internationally - has a dual purpose for Clark.

It muscles in on core National Party values of wealth accumulation, while offering a means for Labour to reinvent itself in government.

Having been in power for five years, Labour has reached that danger point when governments start to run out of steam. Clark's unwillingness to contemplate anything remotely controversial this side of the election risks increasing the chances of such a perception taking hold.

Moreover, Labour has also reached the point where much of what it promised in 1999 - things like income-related rents, the rewriting of labour laws, boosts in financial support for families, and more accessible primary healthcare - is now in place.

As a recent party newsletter noted, there might still be argument about whether more should be spent on these things. But they were the policies of the 1990s, leaving the question of what should be the substantive policies to take Labour through a third term and beyond.

Enter Clark's "ownership society", which would see individualised accounts set up to help people save for a deposit on their first home, their children's tertiary education or a retirement nest-egg.

Like Labour's 1999 pledge card, this idea has been largely borrowed from Britain's Tony Blair, who is establishing subsidised savings accounts for every child at birth. These accounts will get government top-ups at regular intervals but cannot be drawn upon until adulthood.

The New Zealand version may differ, but Clark and her chief of staff, Heather Simpson, have initiated what is understood to be "intense" policy development on a "co-ordinated lifetime approach to savings", although nothing specific may emerge until after May's Budget.

The beauty of the "ownership society" for Clark is that she can stick to arguing the economic rationale for boosting household savings - that New Zealand's low level of domestic savings is restricting economic investment - while quietly reaping a political dividend in the process.

That dividend comes from the "ownership society" playing to Labour's left, right and centre. More poor people are housed; Labour is seen to support conservative notions about asset accumulation; middle-income anguish about getting on to the first rung of the home ownership ladder is tempered.

Encouraging personal savings is consistent with the right's self-help ethos of personal responsibility, while giving the lie to the claim Labour policies always encourage dependence.

Labour is suddenly talking the language of "aspirational politics" - Brash's language.

So far, however, this raid by Labour is only a raid on the language. The actual detail of Clark's grand plan is still some way off.

Yet, National has sat back and done nothing major to counter it, even though it has been patently clear since last November's Labour Party conference that Clark intends making the scheme a core feature of her party's re-election campaign.

Whether National's failure to match it speaks of a mindset still marooned in the purist economic policies of the 1990s is a moot point.

What is not in doubt is that National's responses are too slow and too predictable - and so easy meat for Labour's ruthless pragmatism and lightning-quick reactions.

National won't lose the election because of a one-off stumble such as this week's sacking of Rich.

But it will not win it either unless it starts thinking faster, thinking smarter and thinking laterally.

Time is running out.