Dr Graham Scott Speech to ACT Tamaki Midwinter Dinner; Monday, 27 June 2005; 7pm.

You might ask why am I standing for ACT New Zealand today? Why am I joining the crew on what the commentators keep telling us is a sinking ship?

The answer is quite simple: I was inspired by ACT’s philosophical base, its whakapapa, its people and its policies.

But above all, I hope to help to persuade more voters than the polls indicate at present will vote for us that, even if they are not as impressed with these points as I am, the hard arithmetic of MMP should lead them to give ACT their Party Vote.

ACT’s philosophy

I was inspired to become an economist by some remarkable teachers at the University of Canterbury in the 1960s. I am especially grateful to Frank Tay who inspired in me a life long interest in the problems of developing countries. He and his colleagues gave us grounding in economic thought that emphasised the place of the classical economists of the enlightenment - although we also studied Marx and others. On balance I preferred the classical approach and its descendents and their emphasis on the role of incentives and markets in explaining economic behaviour. Throughout my career I have found myself at the liberal end of the spectrum of economic thought with the occasional excursion into other approaches.

I have been influenced by philosophical liberalism beyond just economics. By this I mean the philosophy whose roots are in the Scottish Enlightenment – Adam Smith, Locke, Hume, Hutcheson and the Englishmen who followed them, and also the Scots and others who influenced the design of the radically new institutions of government in the US after the revolution. If you want to read one book about these people, read “How the Scots Invented the Modern World” by Arthur Herman

This is what we mean in ACT when we refer to classical liberalism. But although we stand on the shoulders of these giants it was long ago and the contemporary liberalism we stand for now is for today and for the future.

The liberal vision and its practical approaches to government have contributed to a flowering of democracy and prosperity that has yet to run its course, although it all might have ended in the twentieth century were it not for the soldiers, writers and philosophers who fought off the political and intellectual tyranny. Karl Popper the great philosopher who once taught at the University of Canterbury, is one among them and a favourite of our party leader Rodney Hide.

Today liberalism is bringing about the greatest reduction in poverty and extension of democratic values around the globe at the most rapid pace that humanity may ever see. I have been working at its coalface advising the communist government in Viet Nam where progressive liberalisation has brought an astonishing fall in the numbers living in poverty. Most importantly policies that were forged on the anvil of liberalism have contributed importantly to the good economic times New Zealand has been enjoying and they can do more – given the chance.

But real life government is not a contest to try to show that my favourite eighteenth century philosopher is better than yours. It is a practical business about defining a role for the government that works in terms of advancing national welfare. Those who believe in a large state take an ambitious view about what can be achieved using the coercive powers of the state. Liberals on the other hand take a more modest and sceptical view and worry that certain expansions of the realm of the state are as likely to service the special interest as the public interest and that the dead weight of the state can undermine prosperity.

I have spent my life as a public sector guy trying to make government institutions here and abroad work better. The experience has bred in me scepticism based in hard practical experience about the ability of governments to be able to fix everything that goes wrong. Governments just cannot correct all the market failures that arise. As another economist once said of government’s attempts to correct all the market failures, “just because a fish cannot fly does not mean a rhinoceros can do better”. And so I have come for practical reasons to the view that governments should be a bit less ambitious about all the things they can do and a lot more focused on doing what they have to do to a high standard of excellence. New Zealand is fortunate in having some world class public sector organisations. But it needs more of them. We can do much better and we have to find ways to do it for less.

Liberal values and policies are not of course unique to ACT and in fact accord well with the instinctive views and common sense of the majority of New Zealanders. They emerge to some extent in the philosophies of nearly all our political parties. Also it is not often obvious in the daily grind of practical policy making and public administration what the implications of a liberal position would be. Even inside ACT there have been vigorous arguments over how to translate its values into practical policy proposals.

But in other parties liberal values and policies are an optional extra and often ignored. To ACT they are the touchstone of our policy formulation. ACT can give them a safe place to call home and a safe place in the political life of New Zealand.

While the National Party brings you Don Brash today, who is in many respects, a soul-mate to us, it also brought you Sir Robert who raised the tolls on the Auckland Harbour Bridge to diminish Don’s chances of being elected long ago. The Nats also brought you ‘Think Big’ and a coalition with New Zealand First that has worked out better for Winston Peters that it worked for National. Painful as such speculations are for men like me, who of a certain age, who will replace Don in time? What will this person believe? Do the core beliefs and culture of the National Party give you any guarantee?

National is made up mostly of worthy and successful citizens who have a conviction that they are the natural party of government. They are instinctively conservative. And while they espouse liberal policies at times it is not enough for people of liberal persuasion to rely on a passing personal champion.

Periodically liberals do take influential positions in the National Party but history shows that there is always an immune system reaction leading to rejection in time. George Gair made only limited headway with his liberal views on transport regulation and other matters in the 1970s. Derek Quigley who made significant innovations of a liberal kind in housing in the 1970s was dumped for criticising Think Big. Then there were Sue Wood, Jim McLay and Ruth Richardson to name more. And note that these people were political heavy weights not lobby fodder.

There are a few liberals in National who want to see ACT in Parliament for the long haul and as a natural coalition partner. But the conservatives in National want to see ACT off the field of play so they can raid the territories of New Zealand First and Labour’s right wing without the risk that their liberal voters head back to ACT. History shows that National is not a safe home for liberalism.

Let’s look at the other side. Labour is also an unsafe home for liberalism especially in the economic realm. In the 1980s it provided New Zealand with a government that must rank with the best ever in terms of its efforts and its achievements in addressing awesome economic problems - in large part by pursing liberal strategies to thaw the ice age into which the National Party had led us. It should be no comfort that the National Party’s liberals fought a good fight to stop what happened. The fact is that they lost.

The present PM’s constant references to the failed policies of the past belie the fact that even her Finance Minister acknowledged sotto voce in the 2005 Budget Policy Statement that recent economic performance can be attributed to the structural reforms begun in the mid 1980s. Sure mistakes were made, especially in implementation of some policies, but the jury is back. Those liberal reforms made a contribution to our recent economic prosperity. The PM and the Minister of Finance should take more pride in the Labour Party’s past achievements.

One day economic liberalism might flower again within the Labour movement as it has before and ACT could find itself with a choice between a statist National Party and a more liberal Labour Party if history repeats itself. There is a shift in the wind. Jim Anderton is in favour of lower company taxes. But I doubt that liberalism will flower again under this government. Its statist ideology in economic affairs is too ingrained for it to change and this is where it instinctively turns when it faces a knotty policy problem.

Just a few examples: it does not like giving private providers fair access to public funding for public health services and has allowed some bloat in the administration of the health system; it has seen nationalisation as the solution to air and rail transport problems; it has nationalised the wholesale market in electricity and created a central planning agency – the Electricity Commission – which is malfunctioning in precisely the way I predicted it would in my submission to the select committee on the legislation that established it. It is pussy-footing with the introduction of private sector involvement in infrastructure.

This government expropriated the rights of certain forest owners to the carbon absorbing properties of trees and then gave some of them to one of its own state enterprises – quite possibly leaving the taxpayers with a contingent liability. This has undermined the incentives to plant trees and made the Kyoto problem worse.

Prejudice against pricing public services and contracting for them – even with public providers - in ways that make volumes, prices, quality and conditions of access transparent - has lead to the vandalising of the systems that once provided this basic management information. Getting information from the health authorities on exactly what has happened has been for Heather Roy like pulling teeth. What we do know suggests that productivity may have been declining under this government.

Labour renationalised the provision of accident insurance.

This has all happened basically because the state wants to administer too many things from the centre rather than build up rational and effective management systems in the public sector to support efficient and decentralised management; or let private markets seek out better solutions in some areas; or even partner with the private sector productively. Ideology triumphed over common sense in these areas and United Future could not stop it.

Labour in its current guise is more statist than the Labour Party in Britain, where Blair is pushing his party into accepting more private sector involvement in health and other social sectors. The left wing Mayor of London has put congestion charges into Central London with great success. Our Labour Government seems timid by comparison.

ACT’s whakapapa and its people

I want to honour the founders of ACT, who came out of the liberal wing of the Labour Party – Sir Roger Douglas and Hon Richard Prebble.

And also from the National Party – Hon Derek Quigley, who I have admired for his work on housing and in resisting ‘think big’ in years gone by.

Also Hon Ruth Richardson – who like Roger before her ended her career keeping her colleagues bent on the task of fiscal restoration and improving the workings of the public sector. Her Fiscal Responsibility Act was a beacon to the world at the time and has been copied around the globe.

More recently our leader Rodney Hide exposed a cultural problem in the IRD that I believe was driven by ministers who told them to chase every last cent because ministers had run out of push in reforming expenditure and would not raise tax rates.

I’d also like to pay tribute to Hon Ken Shirley, our Tamaki candidate and our host tonight, who worked as a minister in the reforming Labour government, and came to ACT to advance the liberal cause.

Where do I fit? I would like to be a bridge between those founders – many of whom I was an adviser to – and the current and coming generation of practically minded liberals who want a say in what New Zealand governments do and how they do it now and in the future. I am 63 – I want to make another contribution to what the ACT whanau has done for this country. I’ll take my chances, but I want liberalism to be a permanent feature of the NZ public sector scene and to stay relevant, fresh and new - ready to address new problems in a clear-eyed and if necessary reformist way, and building ACT’s capability in the practical business of government rather than firing philosophical paper darts from the grandstand.

I would like ACT’s liberal vision, principles, values and policies to be there always, to resist ambitious politicians with self important pronouncements about their ‘leadership’ and grandiloquent visions of social engineering or nation-building either from the right or the left. I would like there to be in Parliament a party always to resist the proposition that when we have a problem then the ‘gummint’ must take charge; to resist excessive taxation and the nationalisation of commercial businesses, the exclusion of the private sector from the provision of public services and threats to the security of private property.

I would like a party to be there to acknowledge the vital place in our democracy of our community organisations in the ‘third sector’ and not patronise them as servants of the state; to build a secure safety net that meets the requirements of those in need or who are oppressed - but not a hammock for people to lounge in; to help everyone to get a good start in life but to encourage personal and community responsibility; to treat people as citizens not the fortunate recipients of public money that should never have been taken from them in the first place.

I would like there to be in the Parliament a party to stand against racism whenever it raises its ugly head; to welcome migrants as fellow Kiwis and to keep the instruments of government open, simple, transparent, available to all regardless of their connections and free from bias. I would like there to be in the Parliament a party always to respect the diversity of all New Zealanders as our faces change.

Of course there is much in this list of my wishes that some other parties hold dear also, as they mix and match their policies with diverse ideological preferences and pragmatic objectives. But with ACT what you see and hear from us will be what you’ll get. We only have one brand.

The policies

ACT has done the hard work of developing its policies in 2002 and is currently updating them. If we were the government we would implement them because we have the experience to do so in our ranks and in our networks.

We have the policies to address:

Transport problems

Tax reform

Better public services with better value for money

Sorting out waste in the health sector and improving services

Sorting out the muddle in the electricity sector

Sorting out the muddle about climate change and the Kyoto Protocol

Law and order

Education

Why people should give us their party vote?

It is simple really - MMP arithmetic.

National cannot get elected to government on its own. NZ First has taken too big a bite out of its constituency that outweighs the inroads that Don Brash has made into ours.

NZ First will insist on the increases in expenditure it is promising its constituents on top of National’s promises to preserve social spending while having big tax cuts.

National needs ACT as its coalition partner to deliver on its programme.

At the risk of immodesty, the fact is that I know more about controlling government expenditure than the National front bench. They are talking as though it will be easy to cut enough fat from the state to pay for tax cuts – it won’t be. Believe me I’ve been there and I have done that. The combination of the State Enterprises Act, the Public Finance Act and the State Sector Act, which I helped to design and implement, brought remarkable improvements in the effectiveness of public organisations and lower costs. I wrote a textbook about it. But those systems have not been used vigorously for a while and some slack has got into the system. We can get better value for money but it has to be done with a scalpel not an axe.

They say they are going to cut waste out of the health sector but also preserve front line jobs. Fine, who could object to that, but if they try to do this in a way that interferes deeply into the prerogatives of the DHB Boards and management there will trouble. As the former Chair of the Health Funding Authority I have the experience to know what works and what doesn’t in quest for better value for the health dollar.

Designing tax cuts is child’s play. It is on the expenditure side where all the problems are and where skill and experience are needed. ACT offers New Zealand a better chance of actually getting what it looks like they are going to vote for – tax cuts and better public services.

ACT is not going to form the next government, but we do want to be in a position to hold who ever it is to account from the liberal perspective.

Further, if the result on the night leads National to approach us as its coalition partner, then Don Brash will get what he wants done and get it done better. He cannot do either without us. We need to get 5% for either of these to be even a possibility and 7% for the depth of experience in our team to be active in the Parliament.

ACT stands as a beacon for those who want a government that does the right stuff – a government that works better– a government that costs less.

So in election 2005:

A Party Vote for ACT is a vote to ensure we really get what Don Brash is promising and that it will be done well – not a watered-down version or one obstructed by a coalition agreement.

Only a Party Vote for ACT will bring into Parliament the skills, experience and commitment that are needed to achieve positive change for New Zealand.

And not only for now, but for elections in the years to come, a Party Vote for ACT is a vote to ensure a safe home for the spirit of liberalism and its promise of freedom from bossy governments and for prosperity for all New Zealanders.

Dr Graham Scott

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