Michael Bassett: Reflecting on the Fourth Labour Government

This is the text of a speech delivered yesterday to a conference at the Stout Research Centre at Victoria University. The conference dealt with the Fourth Labour Government which came to power in 1984 and brought radical economic change to New Zealand.

Dr Michael Bassett is a former Minister of Health and Minister of Internal Affairs, as well as a former history academic who took detailed notes during the term of the Fourth Labour Government.

There are two essential bits of back drop that we need to appreciate if we are to understand the selection of the new Cabinet that took place on Tuesday 17 July 1984.

1. There was a crisis. The Reserve Bank closed the foreign exchange market on the evening of Sunday 15 July pending a decision on devaluing the New Zealand dollar. There had been a run on our exchange rate since the beginning of the election campaign starting 14 June. In all, the RBNZ borrowed $1.7 billion over the four weeks of the campaign to prop up the dollar. The Bank had been advising Prime Minister Muldoon to devalue for a long time, and it repeated its advice during the campaign, but he refused. Therefore, a decision had to be made immediately after the election. Since there would be an interlude of at least ten days before a new Cabinet was sworn, the incoming government needed to be selected early so that a decision could be made which Muldoon's cabinet would have to implement.

The sense of crisis grew during Monday 16 July when Muldoon eluded RBNZ and Treasury officials, and then played games, hoping that David Lange could be persuaded to agree not to devalue, and a bi-partisan statement against devaluation would close the issue. This was no answer to the crisis, as Lange bluntly told Muldoon in an acrimonious TV encounter on the Monday evening.

So there was urgency to selecting the new Cabinet. A decision on devaluation had to be made as soon as possible. What made a Tuesday cabinet selection doubly urgent was that Jim Anderton, president of the Labour Party, was circling Parliament Buildings on the Monday. He hoped to put off the selection of the new Cabinet for as long as possible in the hope that he could muster a majority amongst the new Labour caucus of 56 members against devaluation.

David Lange and his closest supporters knew that delay would magnify the possibility of confusion emerging within the new government. Devaluation was a matter for the executive, in any event, and the sooner the incoming Cabinet was chosen the faster that key decision could be made, and the foreign markets opened again.

That sense of urgency won out, because any leader is always going to be in a batter position to decide a caucus date than a party president who is no more than a less-than-humble back-bencher.

The second factor which is vital to understanding that process of Cabinet selection is the extraordinarily tense relationships which existed between the leadership of the Labour Party (Lange) and a majority of the caucus on the one hand, and the President of the party (Anderton) and two or three of his acolytes whose power base was the party executive - principally Margaret Wilson and Helen Clark. There was an intermediary between the factions in the form of Stu McCaffley, senior VP of the party executive, but he always had difficulty keeping the party executive in line.

Over Monday and Tuesday morning, both camps were working hard on lists of acceptable candidates. Those camps, and the tension behind the process, harked back to 12 December 1980 and to the trouble with Bill Rowling.

Anderton whose plan had been to retain Rowling in the leadership as long as possible until he could get into Parliament to replace him, helped sustain Rowling that day by 19 votes to 18. But Rowling lost ground to Lange over the next two years and Lange sauntered into the leadership of the party on 3 February 1983. There were some policy differences between the camps, but in my view raw ambition was the principal issue motivating both camps, and by July 1984 Lange had the numbers, albeit by a narrow margin.

The numbers built in Lange's favour between 1984-7 as new MPs came up to speed with the changes being recommended by the Cabinet, and Anderton's faction collapsed. After June 1985 there was little cooperation between Wilson and Clark on the one hand, and Anderton, and he became a rather lonely figure in the wilderness.

The selection

After preliminaries, and a humourous report from Lange about his encounters with Muldoon over devaluation, balloting for the Cabinet began at about 11.30am on Tuesday 17 July. Lange told us he wanted at least two women in the new Cabinet, and two Maori. In a slice at Anderton, he declared that no newly-elected MP should be considered for a Cabinet slot.

There were 56 MPs, 17 of them new to the caucus. Most of them were less caught up in the intrigue, although Anderton had hoped, without success, to use any extra time to persuade them. A total of half the caucus plus one was necessary for someone to get into Cabinet - ie 29 votes.

Lange and Palmer were declared automatically in the Cabinet, and the ballot was to fill the 18 other positions. John Wybrow, party secretary, Mick Connelly and Bill Rowling were appointed scrutineers. An alphabetical list of all the caucus names was circulated. People were given the opportunity to have their names deleted. Most of the newly-elected did so. Anderton didn't.

Everyone was then invited to cross out all but the 18 names he/she wished to vote for.

At 12.42pm it was announced by the scrutineers that 14 out of the 18 positions had been filled, and those with five votes or less were removed from the next ballot.

The 14 were Bassett, Caygill, Colman, Douglas, Hercus, Hunt, Marshall, Moore, Moyle, O'Flynn, Prebble, Rodger, Tizard and Wetere.

Balloting for the final four places took several more hours with the bottom-polling candidates removed each time. Finally the ballot paper which by now had most names crossed off before each new ballot, was disposed of.

Blank bits of paper were handed around on to which the remaining few names still in contention for the final four places were written down, and then all but four were deleted.

Twelve names remained viable at this point: Clark, Isbey, Jeffries, Goff, Shields, Tapsell, Wilde, Woollaston, Anderton, Burke, Butcher and Cullen. Of these, Woollaston, Cullen, Butcher and Isbey fell off over the next couple of ballots and Kerry Burke was then elected as the fifteenth successful.

Anderton and Wilde then fell off the ballot paper over the next couple of ballots. Then Goff and Tapsell together won selection as sixteenth and seventeenth members, and Jeffries dropped off.

The ballot for the last place was held at 3.36pm between the two remaining names: Shields and Clark. That vote saw nearly all of those who had been supporting Jeffries swing behind Shields, and she became the last minister aboard the new team.

Lange had won through by a small margin. He had the Cabinet he wanted except for Bill Jeffries. On the eve of the first meeting of the new Parliament, the Prime Minister announced six under-secretaries: Butcher, de Cleene, Isbey, Jeffries, Neilson and Woollaston.

Anderton and Clark were very sour at being left out and complained publicly.

Their falling out after the Timaru by-election defeat in June 1985 made Lange's life considerably easier.

The new Cabinet was really a rather neatly balanced group. Roughly half of them were close allies of Lange's, and had been since the early 1980s. The rest had come around to accepting that he was the only leader within the caucus. He'd now won an election, and he deserved their support.

Lange's style

Lange's style with his cabinet was much looser than his predecessors, Labour as well as National. Palmer, no doubt, will tell us about that. Patrick Millen the Cabinet Secretary who sat in on all meetings often complained of "loose ends" to decisions which Geoffrey ably tended to. Gerald Hensley will probably tell us about the general disorganisation in Lange's office. For the most part ministers were left to interpret policy and do their own thing, although the Cabinet Policy Committee and the Cabinet Social Equity Committee had strong input when it came to major administrative or legislative changes.

At Cabinet most of us liked Lange's style. In that first term there was unfailing good humour around the Cabinet table. Lange developed his own issues such as the anti-nuclear policy and the fall-out from the Rainbow Warrior and handled them well. He seemed in control of himself. Few knew of the chaos that preceded the severance of defence ties with the US in February 1985 - a subject I have dealt with elsewhere. Nor did we know much about his growing attachment to his speech-writer.

Whenever Lange felt good in himself it transferred to his cabinet colleagues by a form of osmosis. He would support his ministers - to their faces anyway - and he stuck like glue to his Minister of Finance, Roger Douglas. On one celebrated occasion in 1986 he declared that you couldn't put a cigarette paper between the two of them. This showed to best effect in August 1986 when inadvertently Douglas's office dispatched detail about the budget before it was delivered. Lange flew home from Fiji and refused to accept Douglas's proffered resignation.

Generally, most ministers felt they had time adequately to discuss strategy in Cabinet. New or difficult issues would be pushed across to CPC on a Tuesday morning when anything up to the full complement of ministers would attend to discuss issues with officials.

Before Cabinet on a Monday, meetings had usually taken place between the Finance troika of Douglas Caygill and Prebble, and sometimes Lange and Palmer as well. In Cabinet itself the minister with the proposal would speak briefly, and Jonathan Hunt usually felt compelled to comment immediately.

Someone would correct him, Palmer would speak, then Douglas, Caygill or Stan Rodger would comment. Prebble, and Moore if he was present, often lay waiting and would either push the train along, or pick it up and shunt it on to another rail. Unlike Muldoon's cabinets, votes were very uncommon.

Lange seldom had firm views on any policy issues, but he was very quick to sense where the majority on any issue lay. During that first term he was very happy to go along with the will of Cabinet on tactical decisions, and there was an air of co-operation and friendliness.

This camaraderie was cemented over Monday's Cabinet lunch in the second floor Cabinet Dining Room. Since his earliest days in Otahuhu, Lange had enjoyed discussion over meals, and he was usually in rollicking good form at 1pm Monday, especially if he'd just held a press conference. Laughter rang more loudly from the Cabinet Dining Room than the sound of knives and forks.

This remained so until after Lange began showing signs of distraction in early 1987. By this time he was deeply in love.

Reflections

1. Vital to that Cabinet was the ability of its players. It was the best-educated - in a formal sense - of any in New Zealand's history. There were few passengers, although the work-loads were very uneven. As Minister of Health I had neither an under-secretary nor any associate ministers.

Instead, I had an under-secretary for local government that was barely 15% of my workload. Russell Marshall was in a similar situation. Ann Hercus carried a huge load.

2. Assisting with the bonding between us all was the seriousness of the crisis we faced, and the daring - some called it the audacity - of the policy decisions taken. Instinctively we realised that any splits between us would sink the lot of us.

3. That meant it was a tight ship. There were almost no leaks. We sat on Paul Reeves' name as the next Governor General for nearly six months without a whisper getting out.

4. Linked to all this was a growing determination to break the one-term jinx that had affected so many previous governments. At first this seemed an unlikely goal. At the initial informal cabinet held on 18 July 1984 to discuss a 20 per cent devaluation recommended to us by Lange and Douglas with the backing of the Reserve Bank team led by Spencer Russell and Roderick Deane, and Bernie Galvin from Treasury, Hunt and I were sitting together. We said to each other that the changes seemed so momentous that we were bound to lose next time. At least we would be proud that we had done "the right thing," we said to each other.

Doing the right thing, as opposed to the politically easy thing, became that government's leitmotiv - its recurring theme. So unusual was this that it caught on with the public. The country was in a parlous state, and here was a cabinet prepared to risk all to fix things. It was unheard of.

5. It's a pretty bold person now who says that we got it wrong. Sure, there were mistakes. Plenty of them. But the leading lights of that ministry - Lange, Douglas, Palmer, Caygill, Prebble and Stan Rodger - with the others happy to support them, did "the right thing".

As the good economic years now stretch out beyond a decade we can see that New Zealand has been enjoying an average level of growth that is twice that of the preceding twenty years, thanks in large measure to our floating exchange rate since March 1985 that enables us to adapt relatively painlessly to fluctuations in world markets.

That Government, with a few equally courageous moves during the first three years of National that followed, cemented into place a world of lower inflation, less regulation, and a freer climate in which to do business. The wasted opportunities of the 1987-90 government will have to await discussion on another day.