Fourth Labour Government of New Zealand

The Fourth Labour Government of New Zealand was the government of New Zealand from 26 July 1984 to 2 November 1990. It enacted major social and economic reforms, including reformation of the tax system. The economic reforms were known as Rogernomics after Finance Minister Roger Douglas. The government also enacted nuclear-free legislation, which led to the United States suspending its treaty obligations to New Zealand under the ANZUS alliance. The government was led by David Lange for most of its time in power, and lasted for two three-year terms.

Significant policies

Economic

• A range of economic reforms collectively known as Rogernomics. These included:

• Floating the New Zealand dollar.
• Removing farming subsidies.
• Introducing GST (Goods and Services Tax).
• New banks were allowed.^[1]
• Reducing income and company tax.
• Removing controls on foreign exchange.
• Abolishing or reducing import tariffs.
• Corporatising many State owned enterprises such as the Post Office, Telecom and Air New Zealand to be more like private businesses. Some of these were later privatised.
• Enabling the Reserve Bank to autonomously pursue an inflation target.
• Improving the reporting and accountability for government expenditure (Public Finance Act 1989).

Foreign policy

The government's most notable foreign policy initiative concerned nuclear weapons and the ANZUS alliance. Many New Zealanders (especially within the Labour Party) wanted to make New Zealand a nuclear-free zone. However this would mean banning American warships as it was US policy to 'neither confirm nor deny' whether individual ships were nuclear armed or powered. The warships had been visiting New Zealand as part of the ANZUS alliance, and most people hoped that the alliance could be preserved even if the nuclear ban took effect. The issue came to a head shortly after the 1984 election, as a proposed visit by the USS Buchanan was on the cards. Lange announced that the Buchanan would not be welcome, and the US suspended its treaty obligations to New Zealand under the ANZUS alliance. The issue became a cause célèbre in New Zealand, perhaps primarily because small countries rarely stand up to larger and more powerful countries in such a way. In America, those on the right called for trade sanctions against New Zealand while those on the left idealised the country. New Zealand's diplomatic relations with America have never returned to their pre-1984 status, although the nuclear issue is becoming less important.^[2] The government also reinstated a diplomatic representative resident in India (Muldoon had closed the High Commission there) and appointed Edmund Hillary to the post.

Constitutional

• Created the Royal Commission on the Electoral System (1985).
• Constitution Act 1986 — codified important constitutional conventions in one enactment.
• New Zealand Bill of Rights Act 1990 — enumerated civil and political rights.

The government's constitutional reforms were primarily the work of Geoffrey Palmer, a constitutional lawyer who for many years had been concerned about New Zealand's lack of a written constitution and the 'unbridled power' of the executive.^[3] These concerns came to the fore when the Government was elected to office, and led to the Official Committee on Constitutional Reform, which reported back to Parliament in February 1986 and led to the 1986 Constitution Act. Ironically, Palmer's government would provide a key example of the executive abusing its power, as one faction in cabinet exerted power disproportionate to its numbers (see Division over Rogernomics, below). Palmer's plan for a written constitution and entrenched Bill of Rights was derailed partly by public indifference but mostly by opposition from Māori who believed that the Treaty of Waitangi would be sidelined in the process.

Social policy

• Legalised sex between males over the age of 16 (Homosexual Law Reform).
• Liberalised immigration to New Zealand in 1987, particularly for skilled migrants.
• Passed the Children, Young Persons, and Their Families Act 1989, introducing Family Group Conferences.
• The death penalty was fully abolished.
• Rape within marriage was criminalised.
• A new family support benefit (introduced as the family care benefit in 1984) raised the incomes of some poor families.^[4]
• Disability benefits were improved, with the 1985 budget increasing the Handicapped Child's Allowance by 31% and the disability allowance by 80%. A special earnings exemption of $20 per week was also introduced for severely disabled beneficiaries as an incentive to personal effort.^[5]
• The Social Assistance programme was reformed (1986) with the introduction of a guaranteed minimum family benefit. This fixed an income floor above the statutory minimum wage for persons with dependant children in full-time employment.^[6] Known as the Guaranteed Minimum Family Income, it guaranteed working families roughly 80% of the average post-tax wage, although its impact on participation rates was limited by rising unemployment and high effective marginal tax rates.^[7]
• The abatement level for most benefits was raised to make it easier for social security beneficiaries to enter the workforce without fear of losing their benefits until they were more established.^[8]
• Social assistance programmes were expanded and consolidated.^[7]
• The 1987 Labour Relations Act was passed with the intention of increasing unions’ relative power while at the same time decentralising bargaining to the ‘enterprise’ (firm) level. Unions were bolstered by the passing of this legislation.^[7]
• The 1988 State Sector Act and the 1989 Public Finance Act established private sector-style wage and work disciplines in the traditional welfare state and in those ‘non-commercial’ agencies still overseen by the State Services Commission, leading to “more customer-friendly service delivery in many instances”.^[7]
• Spending on education and health was significantly increased from 1985/86 to 1988/89, by 24% and 9.6% respectively.^[7]
• The closed shop for private sector unions was reinstated.^[7]
• Social service spending for public sector unions was expanded.^[7]
• In tertiary education, the Fourth Labour Government introduced charges equaling 10 percent of tuition costs, although students on low incomes were compensated with targeted allowances.^[7]
• Public funding of day care was increased substantially and maternity and paternity leave were extended (feminists inside and outside the New Zealand Labour Party helped bring about these developments).^[9]
• A Ministry of Women’s Affairs was established (1986) to promote equality for women.^[10]
• The Nurses Amendment Act (1990) ensured that midwives regained autonomy as independent practitioners and provided them with the same levels of pay as doctors who practiced obstetrics.^[11]
• The government subsidy of general practitioner care was increased in 1988 and again in 1990 for the elderly, children, and the chronically ill. From September 1990 onwards, practitioners were provided with the option of joining “a contract scheme which offered an inflation-adjusted subsidy for all consultations in return for limits on user charges and the provision of patient information for a national database”.^[12] This scheme was abandoned by the Fourth National Government^[12]
• Improvements in education were made, as demonstrated by the expansion and strengthening of early childhood education, significant increases of teaching staff at kindergarten, enhancement of teacher education, attention to special education and support for Taha Maori, and funding for a measure which allowed for the universalisation of three year integrated childcare and kindergarten teacher training.^[13]
• The Parental Leave and Employment Protection Act 1987 extended coverage to women and their partners or spouses to take unpaid leave from their employment.^[14]
• The Education Amendment (No.2) Act 1987 amended the 1964 Education Act so that persons with special educational needs (whether by reason of disability or otherwise)had the same rights to enrol and receive education at institutions established under the Act as persons without such needs.^[13]
• Multi-cultural education was encouraged via increased levels of recruitment of teachers from minority cultures, and this policy resulted in a considerable increase in the number of applicants accepted for training as well as in more minority teachers for primary, secondary, and multicultural schools.^[13]
• Access to extramural study was significantly expanded.^[13]
• The fee for overseas students was reduced from $1,500 to $1,000 in 1984 and then abolished in 1987.^[13]
• Vocational opportunities for school leavers were significantly expanded, as characterised by the merging of various vocational programmes into a single Training Assistance Programme (1985).^[13]
• The Department of Conservation was established (1987) to “…manage endangered, vulnerable, rare, and protected plants, animals, and ecosystems to ensure their long term viability”.^[13]
• The housing package in the November 1984 budget introduced flexible loans levels which reflected individual family circumstances and regional differences in house prices thus granting access to mortgage finance on a fairer basis.^[13]
• Early childhood teacher training was extended.^[13]
• Skills training programme were continuously developed, as characterised by the Access programme, which trained 60,000 people a year by 1990.^[13]
• The housing package in the November 1984 budget introduced flexible loans levels “reflecting individual family circumstances and regional differences in house prices thus granting access to mortgage finance on a fairer basis”.^[13]
• The Homestart programme (introduced in 1986) gave families and individuals on low to middle incomes a first home start with subsidised assistance to bridge the deposit gap.^[13]
• Changes to loan and formal experience requirements for settlement and other land purchase made it easier for young and new farmers to acquire land.^[13]
• Standards of road safety standards were improved through tighter enforcement for substance-affected drivers.^[13]
• A Ministry of Consumer Affairs was established (1986) “to advise the Government on matters affecting consumers; to promote and participate in the review of consumer related legislation, policies and programmes; to promote awareness among consumers and the business sector of their rights and obligations in the market place; and to support and co-ordinate non-Government involvement in consumer issues”.^[13]
• Government departments were required to meet the “demand for the placement of people with disabilities in the Public Service.” Sixty places were “allocated for the Employment of Disabled Persons scheme” and by the end of the government's first term, 57 had been filled.^[13]
• The government introduced ‘A New Deal in Training and Employment Opportunities’ (1985) which represented a shift “to an active longer term labour market approach, centred on training and skill development and integration into the workforce”.^[13]
• The 1985 Tax Reform Package reduced the tax burden for low and middle-income households and left most New Zealanders better off.^[13]
• The 1985 Budget made the benefits system fairer by introducing more generous income exemption limits and benefit abatement. Although benefits became taxable, the budget also gave price compensation to beneficiaries for the introduction of GST and included them in Family Support payments. Altogether, these measures meant that beneficiaries were actually better off on the introduction of GST and this in turn reduced inequalities.^[13]
• Government departments were required to meet the “demand for the placement of people with disabilities in the Public Service.” Sixty places were “allocated for the Employment of Disabled Persons scheme” and by the end of the Fifth labour Government’s first term, fifty-seven had been filled.^[13]
• In 1988/89, OSH (Occupational Safety and Health) sought to emphasise health in the workplace by “enforcing compliance with the standards established by regulation or in Codes of Practice.”
• A pilot fund was put aside for financing housing projects aimed to help low-income women and families.^[13]
• Encouragement was given to local authorities to purchase existing homes for modernisation and re-sale. Purchase and rehabilitation loans authorised for local authorities increased by over 3465% between 1985-7.^[13]
• The government proposed to lodge bond money with an independent authority which would invest it in authorised institutions rather than it being held by landlords, and claimed that: “Interest on this money will be used to cover the costs of the tenancy tribunal.” The subsequent Residential Tenancies Act 1986 “legislated for all interest paid out of the bond fund to be used in payment of all salaries, wages, fees, allowances, expenses, costs, and disbursements payable to the Tenancy Tribunal".^[13]
• The University Entrance (UE) examination was abolished, which had a far-reaching significance for the education of students in the senior forms of secondary schools. “Instead of being seen solely as preparation for university study, the courses leading to Sixth Form Certificate (SFC) provided a wider and more general education. This award more satisfactorily accommodated the diverse needs of students in Form 6, and thus recognised the changing, broader composition of the student population at that level”.^[13]
• In 1985, the National Film Library initiated “a video cassette loan service alongside its traditional 16 mm film services.* This measure provided schools with “access to the wide range of programmes being produced in video and television format”.^[13]
• Funding was allocated to early childhood education, which allowed for the universalisation of three year integrated childcare and kindergarten teacher training.^[13]
• The Education Amendment (No.2) Act 1987 altered the 1964 Education Act so that persons with special educational needs (whether by reason of disability or otherwise) had the same rights to enrol and receive education at institutions established under the Act as persons without such needs.^[13]
• The government set out to encourage the Broadcasting Corporation to provide appropriate facilities and to recruit and train sufficient staff already fluent in the use of Maori and Pacific Island languages. TVNZ’s commitment to the development and strengthening of an independent and indigenous production presence on screen was demonstrated “in the appointment of a Commissioning Editor to pursue an increase in the acquisition of independent productions, and in the setting up of a Maori Programmes Department whose Head had a special involvement in establishing a training scheme for Maori broadcasters.” Similar encouragement was also provided for Pacific Island broadcasting with Tagata Pasifika first screening in 1987 with Pacific Island staff involved in its production.^[13]
• Four minute reading and reading recovery, the teaching procedure which reduces the incidence of reading failure among 6-year-old children, was extended to a further 200 schools between 1985 and 1986.^[13]
• Superannuation and other benefits were increased (1984).^[15]
• Accommodation Benefit was increased (1985).^[15]
• Universal payment of the Family Benefit was abolished to target families most in need.^[15]
• Family Benefit capitalisation limits for first-home seekers were increased (1985).^[15]
• Spending on the General Medical Services and immunisation benefits was increased (1985).^[15]
• Changes were made to National Superannuation (1988) by ensuring that “all new superannuitants would be paid the same rate, regardless of age of spouse”.^[15]
• Increased assistance was provided to veteran pensioners and single superannuitants (1990).^[15]
• Annual indexation of war-related pensions, social security benefits, and National Superannuation was restored due to falling inflation (1988).^[15]
• A Special Accommodation Benefit for low-income earners struggling with rents was introduced (1985).^[15]
• Tax concessions were introduced for low-income families within the Guaranteed Family Income and Family Support schemes (1986).^[15]
• The Residential Tenancies Act (1986) provided new guarantees for tenants.^[16]
• Five new Kura Kaupapa schools were commissioned as a means of raising Maori educational achievement (1990).^[15]
• The income tax abatement scheme for interest payments on first homes was abolished (1984).^[15]
• Income-related mortgage repayments were introduced (1984).^[15]
• Expenditure was increased for Maori Affairs department lending, Housing Corporation loans, refinancing of home loans (in extreme difficulty), and the construction of state rental units (1984).^[15]
• A new housing package was introduced, designed to target housing assistance to those in greatest need (1984).^[15]
• More flexible Housing Corporation lending was introduced, with interest rates adjusted to take into account a person’s ability to pay (1985).^[15]
• Increased expenditure was allocated to increasing the construction or acquisition of the Housing Corporation’s rental units (1985).^[15]
• Family Benefit capitalisation for modest-income first-home seekers was increased (1985).^[15]
• A Special Accommodation Benefit for wage and salary earners having problems with paying their rent was introduced (1985).^[15]
• The Rent Limitation Regulations were abolished in order to encourage new investment in the private rental sector (1985).^[15]
• Income limits for Family Benefit capitalisation were increased for modest-income earners (1985).
• Income-related rates and rents were introduced (1985).^[15]
• Expenditure was allocated for New Zealanders unable to find accommodation in the private sector, together with expenditure for state housing rental stock (1989).^[15]
• New policies were developed to address the needs of women and senior citizens, together with general diverse housing needs (1989).^[15]
• The special lending programme was expanded to help community and welfare organisations to provide support housing (1989).^[15]
• Spending on full-time primary, secondary, polytechnic and area sector school teaching/tutoring/teachers college positions was increased (1987).^[15]
• Spending on preschool education was increased (1989).^[15]
• Extra funding was provided for the mainstreaming of special education students (1990).^[15]

Treaty of Waitangi and Maori policy

• Enabling the Waitangi Tribunal to investigate Treaty claims dating back to 1840 (Treaty of Waitangi Amendment Act 1985).
• Making Te Reo Māori (the Māori language) an official language of New Zealand, with the Māori Language Act. The act also established the Maori Language Commission, which amongst its objectives include the maintenance and promotion of the Maori language.
• Responded to the 1987 New Zealand Māori Council v Attorney-General ruling of the Court of Appeal by setting out its own principles of the Treaty of Waitangi in 1989.
• The Papakainga housing scheme was introduced, which enabled people to borrow money to construct or purchase housing on Maori land in multiple ownership.
• The Maori attestation scheme, He Tohu Matauranga, was extended to the primary service (1988). The attestation process was administered by the trustees of a marae. It confirmed the candidate’s fluency in the Maori language and understanding of Maori culture. Applicants for primary teacher training could use attestation as an additional criterion for entry to a three year training course. As a result, “Maori enrollments at colleges of education increased by 175 (41%) from 1988 to 1989”.^[13]
• The Runanga Iwi Act of 1990 empowered tribal authorities to deliver government programmes. It was repealed by the incoming National government.

Environmental policy

The Fourth Labour Government made significant reforms to resource management, conservation, planning and mining legislation and local government as well as the state sector. Significant new legislation included:

• The Environment Act 1986, which created the Ministry for the Environment, and,
• The Conservation Act 1987, which created the Department of Conservation.

Geoffrey Palmer initiated the Resource Management Law Reform process which later resulted in the enactment of the Resource Management Act 1991 and the Crown Minerals Act 1991, after Labour lost office in the 1990 election.

Formation

The fourth Labour government was brought into office by a landslide victory in the 1984 election. This was a snap election called by Prime Minister Robert Muldoon after he lost confidence in his ability to command a majority of Parliament. The very short lead-up time to the election meant that Labour had no time to put together a formal manifesto, and this gave it licence to enact many policies which it had not told voters about before the election. Muldoon was extremely unpopular by this time, and most voters had become disillusioned with his economic policies, so it is entirely likely that Labour would have won this election even if they had announced their programme in advance. There was also a major run on the New Zealand Dollar caused by the constitutional crisis following the election, when outgoing Prime Minister Robert Muldoon refused to devalue the New Zealand dollar.

The 1987 election

Although the government gained one seat, two extra seats had been created since the previous election and its majority remained unchanged at 17. Its share of the vote rose from 43% in 1984 to 48%, although voter turnout was down slightly. It had lost votes from traditional strongholds but gained them in formerly National-leaning seats. According to Lange, this alerted him to the fact that the Labour Party was drifting away from its traditional support base. He was particularly alarmed that Labour had nearly won the wealthy seat of Remuera, traditionally a National stronghold. Public support of the government's stand on the ANZUS issue probably also won it votes.

Despite internal divisions, the government managed to maintain a united front before and during the 1987 election. On election night, Lange raised Douglas' hand in a boxing-style victory pose, to convey unity.

Division over Rogernomics

The Labour Party was founded on socialist and social democrat principles and traditionally favoured state regulation of the economy and strong support for disadvantaged members of society. The First Labour Government made major Keynesian reforms along these lines, and subsequent governments continued this system. By the 1970s the system of regulation, protectionism and high taxes was no longer functioning properly, and required ever more regulation to prop it up. Meanwhile the Labour Party, once dominated by the working classes and trade unionists, had attracted many middle class people with its liberal social and independent foreign policies. These new members were interested in international issues such as apartheid and nuclear weapons, and domestic 'identity politics' issues such as the Treaty of Waitangi and feminism. This group held a very wide range of economic views, but the majority had little interest in or knowledge of economics.

When the Fourth Labour government took office, most members accepted the need for some economic reform. Finance Minister Roger Douglas and his supporters felt that a complete overhaul of the New Zealand economic system was required. Initially most of the government supported this, although a number of traditionalists were already suspicious of Douglas. Gradually more and more MPs, including Prime Minister David Lange became alarmed at the extent and speed of the reforms.

Those in the government who wanted to slow or stop the reforms found it difficult to do so. This is partially because few of them knew much about economics, and were thus unable to convincingly rebut Douglas' ideas. It was also because of the structure of New Zealand government. Douglas' faction, which included Ministers Richard Prebble, David Caygill and Michael Bassett, dominated Cabinet. The doctrine of Cabinet collective responsibility requires all Cabinet members to support Cabinet policy, even if they do not agree with it. Since the Cabinet had a slight majority in the Labour caucus, the Douglas faction was able to dominate caucus even though they were a minority. It was later alleged that Douglas and his supporters had used underhand tactics such as introducing important motions at the last minute, preventing serious debate. David Lange also later alleged that Douglas and his supporters formed a faction, known as the "Backbone Club", to ensure victory in caucus votes on policy.^[17]

The divisions within the government came to a head in 1988. Lange felt that New Zealand had experienced enough change in a short period, and that the country needed time to recover from the reforms and from the effects of the 1987 stockmarket crash and the resulting economic recession. Douglas wanted to press on with reforms, and put forward a proposal for a flat tax. Lange initially supported this, but then realised it would inevitably lead to cuts in social services. Without informing his colleagues, he held a press conference announcing that the flat tax scheme would not go ahead. Douglas released a letter and press statement stating a lack of confidence in Lange, and Lange treated it as a resignation. He was replaced as Minister of Finance by David Caygill, who said in an Eyewitness special that he stood for a continuation of Rogernomics.^[18]

The next year saw even greater fracturing. After being defeated in his bid for party presidency, Jim Anderton quit the party to form NewLabour, which stood for Labour's traditional values. Douglas was re-elected to Cabinet, leading to Lange's resignation. He was replaced with Geoffrey Palmer, a Lange supporter and constitutional lawyer. However he lacked the charisma to attract voters, and shortly before the 1990 election he was replaced by Mike Moore.

The Labour Party took several years to recover from the damage of these years and to regain the trust of their former supporters. In the 1990 election, Labour lost many votes to NewLabour, the Greens, and in 1993 to the Alliance Party, which had been formed by NewLabour, the Greens and several other small left wing parties.

Douglas did not stand at the 1990 election, and several of his supporters were defeated. He went on to form the ACT Party, which aimed to continue his reforms. He was later joined by Richard Prebble, who became leader.

Defeat

By the time of the 1990 election the government was in chaos. Lange had resigned and Mike Moore had taken over from Lange's successor Geoffrey Palmer just eight weeks before the election. Jim Anderton had quit the party to form NewLabour, which represented the Labour Party's traditional values.

The election was a disaster for Labour. The party lost nearly half its seats, including one to Anderton. Anderton's NewLabour Party and the Greens took many votes from Labour, although the First Past the Post electoral system meant that their share of the vote was not reflected in the division of seats. The National Party won the election, forming the Fourth National Government. Labour would not regain power until 1999.

The disillusionment of the electorate was also reflected in referendums in 1992 and 1993 which resulted in electoral reform in the form of a change from First Past the Post to Mixed Member Proportional, a form of proportional representation.

Electoral results

Prime ministers

David Lange was Prime Minister for most of this Government's term. In 1989 he resigned and Geoffrey Palmer replaced him. A little over a year later, Mike Moore replaced Palmer, only eight weeks before the 1990 election:

• David Lange (1984–1989)
• Geoffrey Palmer (1989–1990)
• Mike Moore (1990)

Cabinet Ministers

References

• Voters’ Vengeance: The 1990 Election in New Zealand and the fate of the Fourth Labour Government by Jack Vowles & Peter Aimer (1993, Auckland University Press) ISBN 1 86940 078 X

See also

• Governments of New Zealand
• New Zealand Labour Party
• Rogernomics