'You’ve failed quite badly haven’t you?'

See also: David Seymour explains ACT's new environment focus

[Below is Matthew Hooton's speech to ACT's annual conference, being held in Auckland this weekend. In it, he recommends the party attack what he sees as corruption in John Key's government - Editor]

This speech is about the complex relationship, that I think most of us in this room have, with John Key – and how Act might manage it better to your advantage in the future.  The relationship is complex because, on one hand, John Key has massively exceeded any reasonable expectations as Prime Minister.  But, in another way of looking at things, he’s also failed to live up to them.

John Key first came to prominence when he smashed Michael Cullen in the finance spokesmen’s debate in 2005, when he was broadly and largely loyally promoting Don Brash’s economic policy.  And it became pretty clear he would become the next leader of the National Party when he gave an insightful speech on Singapore to the Auckland National Party conference in 2006.

To those of us in our 40s, who are now grey-haired, our political awakening had happened with the liberating social and economic changes of the mid 1980s and early 1990s.  But we had to accept that if John Key was positioning himself to be New Zealand’s Lee Kuan Yew he wasn’t going to be the radical free-market liberal we might want.

But, if he were to be Lee Kuan Yew, he would be extremely ambitious for New Zealand.  He would radically invest in infrastructure.  He’d be an enemy of welfarism and sloth.  He’d ensure New Zealand was open to the world and lightly regulated, at least in an economic if not a social sense.  He’d be one of those driven, Asian-style, uniting yet transformational leaders.  When it comes to the Lee Kuan Yew test, you can really only give him a “C” – maybe a “C+” on a good day.

But, on the other hand, as you get grey haired, the importance of reigniting the excitement of radical reform declines a bit.  And it’s replaced with the over-riding need to keep the absolute lunatics in an Andrew Little-Grant Robertson-Matt McCartern-Metiria Turei-James Shaw-Winston Peters-Te Ururoa Flavell-Marama Fox-Hone Harawira-Laila Harre coalition out of office.

These are people who are mainlining their international trade policy from Jane Kelsey.  They have been running around promoting an economic model from Tufts University, which I had never heard of, that assumes that all labour and capital is perfectly immobile.  Under this model, the people who lost their jobs in 1998 at the Mitsubishi Plant in Porirua, the Nissan plant at Wiri, the Honda plant in Nelson and the Toyota plant in Thames are apparently still going to work each day, carrying their lunchboxes, and they sit staring at the machinery with which to assemble cars, and then go home at the end of the day.  And they have been doing this for 18 years now, because, you know, labour and capital are perfectly immobile.  Under Labour’s Tuft’s University model, no worker ever gets a new job.  No machinery is ever decommissioned or used for something else.  No one ever innovates or responds to new circumstances in any way.  And this is seriously the sort of economic assumption that Labour and the Greens have been using to say the TPP would be bad for New Zealand.  So keeping those lunatics away from office is absolutely paramount.

You could say – again when you are feeling charitable – that John Key has been like Lee Kuan Yew in establishing political hegemony for his party in New Zealand.  And you could also say, that that’s what the National Party is for.  It’s why it was formed:  to keep Labour out of power.  And so there is absolutely no point in being critical of Mr Key for doing exactly what his party was formed to do.  And he is doing it with extraordinary success, compared with Jim Bolger and Jenny Shipley, especially given MMP.  And he is doing it without quite lurching all the way to full-scale Muldoonery, although only because Steven Joyce hasn’t got there yet.

So what does Act do?

Well, we have a prime minister who is applying the median voter model more rigorously than any other I can think of anywhere in the world.  And, as Labour heads ever more to the extreme left, John Key will follow them, because that’s what the median voter says to do.  It’s not his fault that Labour’s not playing the same game.  The median voter model says Labour should head to the centre but they’re not.  But, given that, the median voter model says John Key should follow them all the way to the extreme left and that is what he will do left unchecked, because that’s what the model says he should do.  So Act’s role is to have enough gravitational pull on the right to try to at least slow John Key’s inevitable and logical drift to the left, eventually maybe even stop it and keep him in a steady state or – here’s hoping – one day even pull him slightly back towards sound policy.  Of course we all know this, and we’ve talked about it for years.

The good news is that we can now see it actually working with charter schools.  There are only – what? – half a dozen of them.  One was a disastrous failure and they stole the money and has been shut down.  A couple of them are outstanding successes.  The others are doing just fine: good, decent neighbourhood schools.  But the very fact they are there works as a check on the system.  The teacher unions can’t get their friends in the bureaucracy to further dumb down the national curriculum, because there’s an independent free-market check, that at least some parents can access free of charge.

Public policy is ultimately an averages game.  What is pretty clear is that, on average, charter schools are going to teach kids better and meet community expectations better than state schools.  And slowly the percentage of schools which are charter schools will grow.  And that will also improve the quality of the state system.  And that will progressively improve the life chances of more and more disadvantaged children.  And that will enable them to thrive as people, and also to do better as part of the economy.  And that will break down intergenerational disadvantage, and reduce poverty and misery.  And you can see its classic John Key incrementalism in practice.  And you can also see why the teacher unions need to put a stop to this right now.  God knows where it could lead.  That one example is a microcosm of where Act should be in the political system.

But you’ve failed quite badly haven’t you?

Act was founded as a political party in 1994, and first stood in the 1996 election.  And the year between them, 1995, was probably the peak of good public policy in New Zealand.  So the whole time Act has existed there has been a slow drift to the left – so that John Key now feels comfortable to present policies to New Zealand that a dozen years ago would have been to the left of Laila Harre.  Now, the reason for that is not any particular failure by Act.  The common cause of both Act’s formation and the drift to the left is of course MMP.

But Act has also failed, in my view, because it has appealed so strongly to people like me.  The reason, when it comes down to it, that I always end up ticking Act at least once, is a nostalgia thing.  I’m a sentimentalist.  By voting Act I am reliving the glories of the 1986 and the 1991 budgets.  I thought it was a great idea to make Don Brash leader – you know, back to the glory days when he was governor of the Reserve Bank.  And, Jamie Whyte! Well, he had read all the same books I had 20 years ago.  And this is all so ridiculous really.  Because to be basing a political agenda in 2016 on the thinking and times of 1986 would be like Sir Roger Douglas having got up to deliver the budget that year and bored everyone by talking about the 1951 Waterfront Strike, or Ruth Richardson getting up in 1991 and invoking Nordmeyer.

Act today should regard itself as a 22-year-old start up.  The thing is, just like the old warriors all those years ago – Thatcher, Reagan, Douglas, Richardson – what Act says has to be exciting and new.  They were great people, but forget about those old warriors.  Act will succeed only when people like Jamie Whyte and I are like Statler and Waldorf on The Muppet Show:  still loyal; still showing up to every performance; but muttering how it’s not how it used to be; and not understanding or approving of many of the newer acts.

In David Seymour, Act has a new generation of leader who is capable of doing this.  In my experience, David is utterly ideologically pure.  But he is also a refreshingly cynical and hardened pol.  I don’t believe for a second his talk about the French loving coq was a faux pas.  I think it was a crude publicity stunt that worked superbly well.  There simply isn’t any point in pining for the days of Lindsay Perigo or – god help us – Brian Edwards conducting 30 minute interviews on important policy matters, with the nation huddled around their TV sets.  That’s gone forever, and you have a leader who has adapted to that.

And you have a leader who can identify a long-term, important contemporary issue.  Because how New Zealand its natural resources like water comes down to three options: 1) You can just make it a free for all and the resource will be polluted and depleted, but Act has never been an anarchist party.  2) You can ration them by queuing like the Soviet Union did with bread and advantage existing users over newer innovative ones, but I guess it is fair in its own way.  3). Or you can ration them through pricing, so that those who have the best idea to maximise the value of the natural resources are the ones who get them.  And of course, when it comes to natural resources, not a single other party in parliament is going to opt for the only non-Soviet option, which is the third one.  So let’s see how your new focus on the environment goes.

In the last year, Act has achieved two important things.  Administratively, you issued your “Liberal Tribe” prospectus and got the back office more in order.  And, second, David has won the respect of the press gallery, the Wellington media elites and has a strong platform on social media.  These things are absolutely essential and don’t let anyone tell you otherwise and devalue their importance.  Now, though, it would be a good idea to go and get some votes.

How you go about that is all about that complex relationship with John Key.  I think that you think you’re not as powerful as you really are.  That is, I think that you think you don’t have any leverage over John Key.  I think that you think: “Well, we have this lifeline in the seat of Epsom and if we piss off John Key we might lose it, and then we’ll be toast.”  But I think that is looking at things solely from your own perspective.  Look at it from John Key’s perspective: after all, the guy can count.

Because of MMP, every election is extremely close.  Remember 2005, when Don Brash theoretically could have got the numbers with Act, UnitedFuture, the Maori Party and Peters?  Even in 2002, there was talk in the days before the election of the theoretical possibility of a National-Act-United Future-Peters government.

Today’s media narrative is always that John Key’s National is just overwhelmingly dominant – like some sort of Lee Kuan Yew’s People’s Action Party – but it simply isn’t true.  John Key has won three elections and, in every one, he has just snuck in against the Labour-Green-Peters-Harawira menace.  And he knows it better than the press gallery.  And, as Stephen Mills, the Labour Party pollster I go on the radio with each week points out, it is true that there was a time that John Key had the kind of stratospheric poll ratings close to those of George H W Bush after the 1991 Gulf War – 70% and I think once an 80% approval rating.  But it’s no longer true.  Now, in his third term, John Key is only a little bit more popular than Helen Clark in hers.  And of course she lost her next election, as did George H W Bush.

It is easy – and I’m enjoying it – to mock Andrew Little’s motely crew.  They really are hopeless.  But if they get 25% of the vote, which seems about right, and Winston and the Greens get up to 12.5% each which is possible … well, that’s a government, perhaps with some strange arrangement around the prime ministership like Winston Peters has sought before.  And John Key knows this.

And John Key knows also that bizarre things happen in our increasingly bizarre election campaigns, and there will be some surprise that will threaten his hold on power.  He probably also has the personal awareness to realise he’s not the cool new kid on the block anymore.  If anything, now, our high quality media has decided that’s Max.  But, remember, when John Key became prime minister, Max was a kid at King’s Prep up the road.  Now, he’s DJ Max who gets to date models.  And John Key himself looks older.  The TV news, which used to always have a still shot of him smiling and waving, now uses a still shot of him scowling.  And if you’re voting for the 1^st 2^nd or 3^rd time next year, he’s not cool.

As I say, John Key knows all this.  And that means he knows that the 4^th term he wants so desperately depends on Act winning Epsom.  And that means any good behaviour bond you think you’re on, is all in your mind not his.

John Key has no choice but the reindorse David Seymour in Epsom in 2017 – pretty much no matter what David and Act do between now and then.  That is true if Act is around zero in the party vote, in which case Epsom creates an overhang.  More optimistically, it is even more true if you get yourselves up to 2%, 3% or – most powerfully in terms of a Key endorsement – the magic 4.9%.  If you get above 5%, of course, then maybe my poor old friend Paul Goldsmith should get a chance.

Your best strategy over the next 17 months before the election is to more clearly distinguish yourself from National.  David Seymour, at great personal cost, made that strategy possible when he turned down a higher-paying minister’s job to avoid being more tightly bound to National under cabinet collective responsibility.  I’ve never heard of a politician making that decision before.  It speaks to David’s integrity.

That done, what would happen, for example, if you declared you would not vote for a Budget that expanded Steven Joyce’s corrupt corporate welfare machine, or that included more money for Murray McCully’s corrupt Saudi sheep bribe?  I’ll tell you what would happen in terms of policy: Any plans to expand corporate welfare or fly more sheep over to the Saudi desert would be dropped from the Budget.

And I’ll tell you what would happen in terms of the Epsom guarantee:  Absolutely nothing, except the people of Epsom would be more likely to vote for David Seymour even without a National endorsement.  John Key is not going to say “that David Seymour stopped me flying more sheep to Saudi Arabia so I’m going to chuck him under the bus and jeopardise my fourth term” anymore than he might say “that damn Maori Party won’t back me on the TPP so that’s the end of my relationship with them and we’ll just have to have a Labour government”.  Moreover, around the country, Act would gain respect from genuinely small government people who don’t like the big government corruption we are seeing from the elements in the current government.  And that means John Key’s need to endorse David Seymour again would only grow.

Look to one of the parties you are effectively in coalition with, the Maori Party. Depending on the poll, it’s doing about six times better than you with the voters.  As I understand it, it votes against the National Party in parliament more than Labour.  And, when it makes a fuss about that, it goes up in the polls because that is what its constituency wants.  Yet the Maori Party has a perfectly good relationship with John Key because the one thing he understands is realpolitik.  He understands that the Maori Party may well be essential to his fourth term, and he understands the Maori Party has to do what the Maori Party has to do to be there after September next year.

Now, you’ve got at least one of my votes tied up – usually including the party vote – so you shouldn’t really take advice from me, because I’m a dead cert.  But here’s what I think anyway.  The people who don’t vote for you now, but may vote for you in 2017, don’t want you to do anything to jeopardise John Key’s fourth term.  They want you to support him.  But they also want to see you fight him.  They want to see you fight Steven Joyce’s corrupt corporate welfare machine.  They want to see you fight Murray McCully’s corrupt Saudi sheep deal.  They want to see you fight Bill English’s plans to knock down houses and rebuild Auckland in the form Wellington planners say is best for us.  They want to see you fight a government that has raised benefits but has no concrete plans for tax cuts; a government which has borrowed more money than the net total of all previous New Zealand governments combined; a government which may deliver one surplus and then send us back into deficit again; a government which is proud to have no interest in addressing issues of an ageing population.  They want to see you fight a government which has failed to reform the Resource Management Act, and one which remains far too beholden to indulgence seekers, whether Sky City Casino or powerful iwi bosses.  They will want to see you fight a government that almost certainly plans to corruptly allocate water to existing users rather than more fairly to people with new ideas, because it is a government beholden to the lobbyists from Fonterra and Federated Farmers.  These are the sorts of thing that will drive your party vote up.  It is what will make Epsom a genuinely Act seat rather than something of a gift.  And those things together mean John Key will have no choice but to ensure you win Epsom again.

Like I said at the outset, it's a complex relationship you have with John Key.  But you have absolutely nothing to lose, and nothing to fear, from building on the successes of the last year to more strongly advocate for the things you believe, which just happen to be the things New Zealand continues to so desperately need.