Matthew Hooton: Key forced to protect Banks, for now

The prime minister had little choice but to handle the John Banks donation affair the way he did. The government budget is due on May 24 and any serious question over its safe passage would risk an immediate credit downgrade, threats to the government’s debt-raising programme, a political crisis unknown since the winter of 1984, and probably a snap election.

John Key and his strategist Steven Joyce won the 2011 general election by the narrowest of margins.  Had Gerry Brownlee’s work in Christchurch not increased National’s vote in that strong Labour city, the government would have been out.  As it happened, it limped back, dependent on both Mr Banks and UnitedFuture MP Peter Dunne on every vote.

Copping opprobrium

In considering his options this week, Mr Key knew that had Mr Banks resigned from Parliament or gone feral on the backbench, Bill English would not have had a majority for his budget without the Maori Party.

Those associated with Mr Banks since he entered Parliament in 1981 say there is no way he would have passively accepted a sacking.  He has endured too many ups and downs to go down without a fight.  To his mantra this week “nothing to hide, nothing to fear” could be added “nothing to lose.”

For its part, Maori Party support for the budget is meant to be guaranteed under its confidence and supply deal with National – but that was signed after National was already assured of a majority without them.

The Maori Party is already struggling to retain support in a battle with the Mana Party over claims it is National’s poodle.  Had Mr Banks fallen, Tariana Turia and Pita Sharples would have had no choice but to re-open negotiations on the budget at a time when it is already being prepared for printing.

There is no way the Maori Party could allow its votes to be the ones necessary to implement, say, Mr Joyce’s plans to make entry-level chefs pay off their polytechnic loans faster, while still refusing to charge interest on the loans of orthopaedic surgeons.

Retaining credibility with its remaining base would have required it to at least get more money for Whanau Ora and Maori economic development and force National to abandon the budget’s overall “zero” spending theme.

No government could risk such economic and political instability three weeks from a budget.

Mr Key has acted responsibly by copping the public opprobrium associated with backing Mr Banks, despite the latter’s bizarre public behaviour and patently absurd explanations of events.  His decision not to speak directly to Mr Banks or even have him asked any searching questions prevents his hand from being forced.

Banks doomed

Mr Banks is unlikely to survive much beyond this month of course.

Mr Key needs his vote for legislation on the budget, mixed ownership of SOEs and perhaps dairy industry restructuring.  After that legislation is passed, Mr Key can tip the tea table all over Mr Banks.  If Mr Banks could be forced to resign from Parliament, National would easily win an Epsom by-election which would bring an extra National MP into Parliament, strengthening its position.

Even if Mr Banks were to choose to remain in Parliament, opposing National from the right, Mr Key and Mr Joyce are nearly ready to buckle down for the 2014 election anyway.  There is unlikely to be anything sufficiently controversial on National’s agenda that it can’t rely on Maori Party support.

What’s more, becoming dependent on UnitedFuture and the Maori Party would give Mr Key and Mr Joyce the perfect excuse with which to placate elements in the business community and National caucus becoming irritated by the lack of a serious economic programme.

A new Bob Jones?

The saddest part of Act’s final chapter is that there is a greater need for a free-market, classical-liberal party than at any time since Bob Jones set up the New Zealand Party in 1983 to oppose Robert Muldoon the following year.

Mr Key and Mr Joyce are well on their way to replicating Muldoonist statist economics, with five-year plans, mega-bureaucracies and government ministers deciding which business plans should proceed and which should be prevented.

If ever there was room on the political spectrum for a 21st century New Zealand Party, it is now.

Matthew Hooton is a public affairs consultant and columnist for the NBR.