Speech To The National Party Central Divisional Conference

We're a political party and this is election year. That means a contest with the centre left parties.

Today I want to outline for you where that contest will be fought.

It is going to be a unique political year. After three terms in office National is looking at a new century with a new leader and a new generation. These circumstances are unique in New Zealand political history. We intend to take the contest to the Labour Party and today I want to talk about three very important areas where we will do so.

* social policy
* tax
* differences in political strategy.

This last point is probably the most important. Labour has made its strategy clear. It started with dirt, it's moving on to misery, and it's publicly outlined its intention to run the dirtiest election campaign for many many years. It'll be focusing particularly on personal attacks on our leader, Jenny Shipley - but I'll come back to that.

Let's start with one of the most obvious differences and that is tax.

National has made it clear it believes in lower taxes.

We are a broad based party and we stand for anyone who has aspirations. I visited a Pacific Island training organisation last week in South Auckland. I asked them what was in the minds of the 16-year-olds who came out of an education system with no success and into their establishment.

They told me their young people have exactly the same aspirations as any other 16-year-old.

They want a job. They want to do better than their parents who may have been out of work for years. They want to be part of the mainstream of New Zealand community life.

Labour has also made its position clear. It stands for increasing taxes. Let's see how this story has run in recent months.

Dr Cullen has given a cast iron guarantee that they will increase only income tax and only taxes for those who earn over $60,000. So far so good. Labour saw its position as a neat balance between the internal pressures of its Caucus and the Alliance to aggressively increase taxes on the one hand, and on the other hand the need to appear moderate to business and middle New Zealand. So what happened next?

It became clear that Dr Cullen did not understand his own tax policy despite five years as a Finance Spokesman. Under pressure from National, he conceded that Labour would also have to increase the fringe benefit tax. This breaches the cast iron guarantee. First because it increases a tax other than income tax and secondly because it affects people who earn under $60,000. Fringe benefit tax is a tax paid by employers on any kind of non-cash benefit to any employee regardless of their income.

Having made this concession and broken the cast iron guarantee, Dr Cullen then provided another cast iron guarantee to business that there would be offsets for the additional costs of FBT. No-one knows what those offsets are. We can only guess that he was more concerned than anyone that the cast iron guarantee was losing its credibility.

And there are other taxes that will have to be increased if we're not to create a messy tax system that allows high income earners to juggle their affairs in order to minimise their tax payments. So much for the cast iron guarantee. It's already been cast off before any of the pressures of Government or Coalition making. Dr Cullen is wrestling with a very large snowball at the top of a very long hill.

I've been told that Dr Cullen is now actually telling business audiences that while direct taxes won't be changed immediately, his cast-iron guarantee doesn't stop him having a go at indirect taxes. Expect cigarettes and alcohol to go up straight away. Dr Cullen needs to come clean on all these things. Earlier this week he was having a go at National over user charges. He can't have it both ways. Either he's going to reverse all those charges, which means doing things like bringing back taxpayer-subsidised passports, or he agrees they're a fairer idea.

But that's not the worst of it. The worst of it is the review. How many of you have been in communities where someone came and said to you in the last decade we're going to review your hospital services? We all know what that means. Well Dr Cullen and his fellow Finance Minister, Jim Anderton, intend to review all other taxes.

The only apt description I can think of for this process is taking two alcoholics to a well stocked bar with a pocketful of cash and telling them they're not allowed to have a drink. As we can see on FBT issue Dr Cullen has already downed the first drink. Jim Anderton has made his intentions very clear if there is a review. Estate duties and a capital gains tax are top of the list. Labour would almost certainly end up increasing GST. That's what they did last time when their spending got out of control and that's what they would need to do to keep any credibility at all on the income tax promises that they have made but broken already.

Do you think that the Alliance and the Labour Party would review all other taxes and then say no we're not going to increase any of them? No-one believes that. The question to ask about their tax position is, who's next?

Dr Cullen has tried to achieve two things. First of all make tax an envy issue. That is, isolate the increases to those who he believes are seen by all New Zealanders as the undeserving rich. I want to tell him that every New Zealander aspires to an income of $60,000, particularly our young people. He's already tried to push out the tax argument across two elections - 1999 and then 2002 by saying they won't make any other changes without going through an election to endorse them. Well Dr Cullen, let me tell you, the died-in-the-wool big spenders who you've been recruiting for the last three elections won't let you get away with it.

Middle New Zealand knows Labour will come after them. It's just a matter of time.

To move onto social policy.

One of the reasons Labour has found itself in such a jam on tax is because of the extravagant expectations it is raising around the countryside with respect to social policy.

I'm advised that Labour MPs are frequently turning up at business audiences sounding very moderate, and turning up in front of social audiences sounding very extravagant.

I believe it and you better believe it. Do you really think Steve Maharey is standing up in front of audiences of people concerned about benefit levels and telling them he's got nothing to offer? No he's not. He's hinting - but he's doing more than a nod and a wink, he's break-dancing on the floor. They believe Labour is going to, as it says, 'restore New Zealand's torn social fabric' and that they will do so by spending billions.

National on the other hand will be spending more because people need secure high quality social services and sometimes that needs more money. But we will be focusing much more on the quality of that spending and whether it works for the people who are intended to benefit by it.

I want to say something that the National Party has found hard to say. I'm proud of our social policy. I'm proud of the way that we have instilled some strong principles in the education, health and welfare systems.

Our social policy has been based on local solutions to local problems; on organising services around people instead of people around services; of getting the decisions about the resources as close as possible to where the need actually is and where people know how to solve the problem.

I'm proud of what we've achieved in health, in education and in welfare and I can tell you today that the Ministers of those portfolios have embarked upon a nation-wide programme talking about our social policy. You may be surprised to know that among those parts of the community who are most concerned about social policy, much of what we have done has much broader

support than our partisan vote. Roger Sowry can stand in front of a large crowd where there may only be one or two votes for National, but where there is almost unanimous support for the things he is doing with Strengthening Families. Nick Smith is bringing to education an energy that builds on the positive environment created by Wyatt Creech to focus on teacher performance, on standards and on technology. Wyatt Creech is driving into the health system National's fundamental belief in the capacity of people to look to their own communities and to their own way of life to solve their health problems.

So what of Labour? Why is Labour regarded as the social policy party? This is the 1990s not the 1930s. Labour has got nothing to say on poverty except Labour have had only one new idea on social policy since 1972 - tomorrow's schools - and the reason is simple.

Labour believes its core constituency to be those salaried professionals who work for state organisations. Labour's social policy is in the grip of those who say they represent all teachers, all nurses, all firemen - those groups are keen to corner the resources to keep systems centralised, rigid and unionised.

Our policy is about the people who use the services, keeping it localised and flexible.

The best example of this has to be education. You wonder if the Labour Party has talked to a parent in the first eight years of their long term in Opposition. Helen Clark announced the other day that they would abolish the Education Review Office. We want every New Zealand parent to know about that undertaking. We want every parent of a secondary school child to know that in Labour's future it is the PPTA not the Education Review Office who will decide on the standard of education.

On education Labour is simply the mouthpiece of the conservative, old-fashioned, aggressive end of the teacher union movement. They're not the mouthpiece of all teachers - that's for sure. Many teachers have moved on. They're certainly not the mouthpiece of parents - that is National's territory and we are going to contest it.

National will be advocating its social policy vigorously and we should be confident. We're not campaigning against Nelson Mandella or Norman Kirk here.

That brings me to the issue of political strategy.

There is probably no greater difference between the parties than the contrast between their political strategy.

Labour has made its strategy quite clear this year. In fact it's even been boasting about it. It started the year on dirt. Can you remember the dirt files - the piles of paper - that Labour boasted in the House it had on National Ministers? We expect to see more of that this year. A recent article in Metro magazine was crystal clear - Labour intends that this is going to be a "straight knock-down, drag-out slugfest between the Opposition

Leader and the Prime Minister". Labour intends attacking the Prime Minister's credibility at every opportunity. Labour may now be wishing it hadn't done the kind of background interviews with Bill Ralston for that article that it did, but that's not our problem.

Don't be distracted by Helen Clark's response to my speech last week - Labour is going after the Prime Minister personally. Not going after her policies, but going after her credibility, her motives and her capacities.

Labour expects to be able to this without its leader, Helen Clark, having to take responsibility. Helen Clark cannot escape responsibility for Labour's policies and Labour's campaign approach, even if she isn't proud of it.

It's not our way to cause personal offense. But we have to make sure there is no double standard. Mrs Shipley is someone who we expect can take it, so she has to put up with it. Helen Clark is over-seeing a campaign of attacking the Prime Minister.

It's obvious Labour is running a negative, attacking strategy. Why can't we criticise Helen Clark for heading it?

And when Labour's not on dirt it's on misery. No-one in this country wants New Zealand to do worse this year than the Labour Party. Every success is a problem for its political strategy - every sporting success, every economic success, every personal success. In fact Labour has taken on the characteristics of a party that can't handle success. This is not the great reforming Labour Party of the past.

There is no David Lange.
There is no line-up of competent experienced and visionary Ministers.
There is no fire
There is no enthusiasm
There is no passion.
There is only moaning.

But perhaps worst of all there is a lack of courage. If everything that has happened is so bad, then why is it that the policies Labour is offering are so timid and it's strategy so negative?

Labour MPs have even taken to boasting about how they're going to run their election campaign. The front page of the last edition of the Metro makes it clear. "Attack - Labour's Secret Strategy". They're taking advice from hardened professional political advisors who are telling them that even if the public doesn't like attack, that it changes peoples minds and they're working the focus groups in the polling to find out where to attack the hardest and they're going to do it two ways they tell us in the Metro.

First they're going to attack National's record on issues like growth, employment, education and health. We're very happy to contest that ground for as hard and as long as we can.

Secondly they're going to attack our leader.

To quote the background interviews in Metro, Labour's strategy has been described as a savage knocking campaign intended to work in tandem with Clark's one-on-one demolition of Shipley. Insiders say that Labour's advertising campaign will spare little in the way of sentiment - emotive shots of old folk behind bars and a war cry such as "National's history".

I think that's a disgrace. A disgrace for a party which is setting out unashamedly to lower the credibility and the standards of politics. This is perhaps Labour's biggest gamble. Even a bigger gamble that its tax policy. If the public will run with dirt, misery and denigration, then Labour will win the election.

If the public want to run with pride, with aspiration, with a new view of a new century then National will win the election.

There are many things you can be proud of. Here's just a few.

Every week the National Party has been in office nearly 600 New Zealanders have found a new job. Every single week.

Home ownership - if National believes in anything it believes in home ownership. Home ownership is now more affordable for New Zealanders than in the last 40 years.

Tax reductions - you can be proud of our tax reductions. We've managed the Government's finances sufficiently well to be able to increase spending on social services and provide tax reductions particularly for low and middle income New Zealanders. I've put out some information about this in recent times and journalists have been ringing my office telling us they don't believe the numbers.

A truck driver on $30,000 with two older children is $101 a week better off than two years ago because of tax reductions and extra family assistance. A family on $35,000 with four children is $118 a week better off than two years ago. Add to that the reductions and interest rates which give those families anywhere from another $40-$70 a week more in disposable income and you can see why there is a moderate economic recovery underway.

And it's not all over. Tax reductions are not something that happened years ago. Inland Revenue tell me there are still 50,000 families who haven't picked up their tax credits for the last tax year. Over the next three months those 50,000 families will on average pick up $3,400 in tax credits. The cheque will be in the mail.

You should be proud of these things.

National is the party of can and do.

We are behind. The election is not ours for the taking. So far it belongs to the centre left but if you do the work we can win because pride and aspiration and courage are going to beat dirt, misery and fear.

Thank you