John Armstrong: Election year rethink on cards for National

Finance Minister Bill English. Photo / Mark Mitchell

A politician of Bill English's calibre should never have got into the pickle he land-ed himself in this week. Normally it just wouldn't happen. As English and other politicians are fast discovering, however, these are no longer normal times.

The Minister of Finance trapped himself in the old "won't rule anything in or out" refrain when asked what sacrifices the rest of the country would have to make so the Government could fund its share of the gigantic bill for rebuilding Christchurch.

English's fuzziness on a couple of sensitive options for raising cash generated the wrong sort of headlines, forcing the Prime Minister to intervene.

Yes, John Key confirmed, it was likely those on high incomes who currently get Working for Families payments because they have a lot of children would no longer qualify. No, the Government would not be reintroducing interest payments on student loans.

English's fluffing of things might be excused on this occasion, however. He's in the middle of writing (or, more likely, now rewriting) this year's Budget.

With the Treasury now estimating the recessionary impact of the earthquake will slice some $5 billion off the tax take, English must grasp some big political nettles to satisfy the international credit rating agencies, while simultaneously avoiding throwing the nationwide economy into full-scale recession in an election year.

The likely postponement of major infrastructure projects raises the question of the extent to which the earthquake has derailed National's carefully calculated election agenda.

At his weekly news conference, the Prime Minister was left gasping for examples that were medium-term projects and thus less affected by this year's fiscal constraints.

He cited state sector restructuring and welfare reform as areas where it would still be full speed ahead.

But even in these cases, the earthquake has rearranged the political furniture.

While the fiscal thumbscrews applied to the chief executives of Government departments might well be tightened even more mercilessly, the earthquake has revealed the fallacy in National's approach to state sector reform.

National's restructuring of the state sector is ideologically driven. But that's been disguised by its argument that it is bolstering the frontline with extra staff to get better services from state agencies.

This is being done by drastically reducing the number of "backroom" bureaucrats in Wellington.

National knows that outside the capital there is little sympathy for public servants even though they have endured round after round of job shedding driven by real cuts in departmental budgets.

National has reinforced that view, portraying the Wellington-based public service as chronically over-staffed, ridiculously under-worked and pathologically inefficient.

It is easy, but cynical, politics. Last month, English - knowing full well that state servants cannot answer back - accused them of producing "waffle" in the policy papers which come before the Cabinet.

Then came the earthquake. With the offices of several Government departments damaged or destroyed, frontline officialdom in Christchurch simply could not function.

Suddenly, it has become patently clear why those Wellington-based public servants are so essential. The lights have burned late into the night in departmental head offices across the city. The Herculean, but largely invisible efforts by head office officials have underpinned what has, so far, largely been an effective and well co-ordinated response to getting Christchurch back on its feet. No prizes for guessing who will be basking in this success, however.

Will the public have noticed what has happened? Probably not. The public service is necessarily its own worst enemy. Like the dog who is ever loyal to its master, it endures every kick in the behind and then dutifully comes back for more.

The earthquake's impact on welfare reform was more immediate. The report of the welfare working group, chaired by former chairwoman of the Commerce Commission Paula Rebstock, was released less than an hour before the quake struck.

It has received scant attention since. Those of centre-left persuasion argue that should remain the case. With its recommendations for a tightening of the distribution of hardship grants, getting sole mothers back to work as early as 14 weeks after giving birth, refusing additional financial help for beneficiaries who have another child while on a benefit, and beneficiaries being given ready access to long-acting contraception, the report is more to the right than an Act manifesto.

Such fringe ideas can and will be dismissed by National. Harder to ignore is the working group's call for a new model for welfare - one which switches from a "passive" system concentrating on providing income-tested financial support to one where the emphasis is on a rapid return to paid work.

Many of its recommendations here are pretty conventional. But to achieve success requires application of most, if not all, of them. And that costs big money.

The working group is urging a change of mindset - and not just on the part of beneficiaries.

Tackling so-called welfare dependency requires employers to come out of the Dark Ages and start offering sole mothers flexible work hours, for example, so they have no excuse for not using available childcare.

But the biggest shift in thinking is required by the Government. So far, stemming welfare dependency has been done in a patchwork fashion. The working group's view is that the state has to dramatically lift its game and start providing help across-the-board so beneficiaries have a much better chance of landing jobs.

It answers critics who say there are no jobs by arguing beneficiaries should get that help so they are well-positioned when the economy goes into upturn.

The report is now in the hands of the Government, the Prime Minister thought to want resources devoted to early years intervention to break the cycle of inter-generational dependence on welfare that is seen as crippling young people's lives.

That's all well and good. The report, however, goes further. It offered a rare opportunity for serious public debate which might have seen the main protagonists take a less blinkered view. That opportunity now appears to have been lost. Blame that on the Christchurch fault line.