John Armstrong: Going where National has never gone before

John Key's National Government is planning a fundamental reform of the welfare system in an election year. Photo / Mark Mitchell

While displaying a high degree of caution and retaining its right to change its mind up to the last minute, John Key's National Government is clearly steeling itself to go where no National Government has gone before.

It is planning fundamental reform of the welfare system in an election year.

That much - though not much more - could be gleaned from the Prime Minister's reaction to yesterday's release of an "issues paper" produced by the Paula Rebstock-chaired welfare working group charged with reviewing the benefit system.

The paper scopes the scale, consequences and costs - both economic and social - of long-term benefit "dependency". It makes no recommendations. Those will come in a further "options paper" due by the end of the year.

To extend Key's analogy of "kicking the tyres" to see if a policy is working, the rubber will have to hit the road at the start of 2011, election year, in terms of the Government's response to the working group's policy prescription.

Just how much rubber will be the moot point in terms of the Cabinet's appetite for measures which result in a significant and lasting dent in the numbers on benefits.

The welfare working group will not be short of suggestions. Its role - as Key puts it - is to be "free thinking".

The tone and language of the issues paper certainly point to likely recommendations which should sit easily with the National Party's centre-right ideology. Whether they sit so easily with the Prime Minister's more centrist disposition is another matter. National Governments have often talked tough on welfare reform, but wimped out when the going got too tricky politically.

When it comes to the stickability of its decisions, Key's Government already has a very mixed record. Its capacity for reverses and backdowns is only likely to increase in an election year.

It is not that welfare reform is necessarily unpopular. What will wear down the Government's resolve will be the almighty cacophony that tough measures will provoke.

Opponents of welfare reform are already framing the debate in their terms by trying to shift the focus away from getting beneficiaries into work to questions of whether the measures designed to do that actually work or the Government is just being punitive.

Much will depend on the degree of political realism displayed by the welfare working group. It can be as radical as it likes. However, the unhappy fate of the report of Don Brash's 2025 task force looms large as a reminder of the limits on how far this Government is willing to go.

The Cabinet could likewise ignore any similarly austere Brash-like menu produced by Rebstock's group. But having joined the chorus warning of the fiscal unsustainability of current beneficiary numbers, the Government can hardly sit back and do nothing.

Key yesterday carefully avoided "pre-judging" what the group might recommend. Even so, he expected the Government to pick up "at least some recommendations" made by the group. It was the sound of someone engaged in a classic softening-up exercise.