How John Key tried to do a 'Reagan' on Labour, and failed

Labour was meant to have been caught in a fiscal trap, but with its capital gains tax it has wriggled free and got back on track

It was my intention this week to scribble about the voluntary side of political parties, but that can wait while we look at what might well have been a week when political fortunes turned.

Labour must be well pleased with the result of the Te Tai Tokerau by-election.

Hone Harawira’s thirty three point general election lead over Kelvin Davis was slashed to nine percent.

Despite Harawira’s narrow win, the result was a disaster for the nascent Mana Party, which will now have to focus its resources on holding on to one seat against a rejuvenated Labour Party instead of marching outwards to conquer Maoridom in November.

Harawira was reduced to flattering his opponent by invoking Davis’ sitting member status – “vote for me and you’ll get both of us” – and whining about getting out- organised by Labour.

In my West Auckland backyard both the Mana and Maori parties were heavily outgunned by Labour, and a large bouquet should go to organiser Robert Gallagher, the media shy party councillor who also played a pivotal role in the Mt Albert, Botany and the super city elections.

The Maori Party was humiliated with less than nine percent of the vote and will struggle to hold more than a single seat in November.

If no agreement can be reached between the Mana and Maori Parties, and that seems very likely given the personalities of those involved, Labour will recover most, if not all of the Maori electorates in November.

The old adage “united we stand, divided we fall” seems lost on the Mana/Maori Party activists – if Willie Jackson runs against Pita Sharples in Tamaki Makarau the result on the Te Tai Tokerau numbers is plain – a clear win for Shane Jones and Labour.

Most tellingly, this result confirms Labour’s ability to hold or improve its support in real contests.

In every by-election except Mana where Kamikaze McCarten drew some of its votes, Labour has improved on its 2008 support.

Labour also managed to catch National off-guard with its leaked capital gains tax proposal.

It seems like an odd way to launch a policy. Matthew Hooten on “Nine to Noon” cleverly observed that Labour was treating the electorate like huge focus group – testing the water before actually announcing the policy.

National’s response was shrill and clearly unrehearsed as it dawned on them that Phil Goff had avoided a carefully constructed fiscal trap.

I’m betting that John Key is a student, not of Rogernomics, but of Reaganomics. With this strategy a right-wing government cuts tax for the rich and creates at “strategic deficit” which it then uses as a reason to attack social and redistributive spending.

This strategy relies upon the opposition having to restore tax rates for the wealthy in order to promise any new spending.

This is not likely to be saleable, not because the numbers in the top tax bracket are relatively small, but because, as one Reagan aide put it, everyone thinks they’re going pay the top rate some time soon.

The only way out for an opposition party is to find an acceptable new source of government income and that may well be what Goff, Parker and Cunliffe have done with their capital gains tax proposal.

It must be a long time since a Labour Party policy has been welcomed in editorials in both the Herald and Dominion Post, plus by Gareth Morgan and the deservedly influential Liam Dann, editor of the Business Herald.

This election will be much more fun than anyone thought just a fortnight ago.