The New Country

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Banned
Part One: A Great Divide

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Economic reform in New Zealand was a dirty subject for some, the years of trade liberalisation, pri vatization, introduction of tax nasties, and the deconstruction of the decades old protectionist consensus. By 1988 the Labour Party was in a state of paralysis, the two head boys we're at odds, with Finance Minister Roger Douglas refusing to slow down his economic program, whilst his Prime Minister, David Lange wanted more emphasis on social policy. Their opposing ideas came to climax when David Lange, unwilling to continue having internal conflicts with his cabinet, as many Labour MP's returned Douglas to cabinet after a caucus vote, his failing health also had an influence on his decision.

A prolonged recession in the aftermath of the 1987 financial crash afflicted the New Zealand economy as unemployment rose from 4.2% to 7.5% by August 1989, this was compounded by a rapidly rising deficit and debt. All confidence in the New Zealand economy continued to erode throughout that year as all negative indicators of an economy appeared. Even this wasn't enough, that same year maverick Labour Member of Parliament Jim Anderton defected to form his own party.

His successor, Geoffrey Palmer continued with the recommendations of treasury and continued the agenda set fourth by the previous Finance Minister, introducing market mechanisms into Telecommunication services by privatizing it, this directly contradicted the initial reassurance given in the 1987 election that it would not be sold, this had a significant effect on the government's popularity, as it gave the impression of Labour being deceptive. By 1990, the Labour Party was in crisis, it continued to free fall in the polls as its leadership was in question.

The National Party, even after its defeat at the 1987 election was showing strongly in the polls. Its leader, Jim Bolger. While he himself had appointed Ruth Richardson as spokesperson for Finance, he strongly disliked her attitude. And his predecessors perceived preference for her market-orientated ideas, in November 1989 he demoted her to the backbenches.

And he thereafter repudiated her radicalism by appointed the relative moderate, Bill Birch. He then offered her a role outside cabinet, which she rejected as an attack on her personally. Open hostility between the two wings within the National Party remained. Later, rumours began to surface that she sought to unseat him and take the reigns herself. The other wing by Winston Peters was equally threatening to his leadership position.

In order to silence the opposition, Bolger appointed Winston Peters as Shadow Minister of Labour in addition to his other roles in cabinet. Whilst Richardson was now on the backbenches, she and her supporters continuously undermined his leadership. Nevertheless, Bolger remained leader despite the rebellious free market MP's.
 
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Part Two: The Crisis

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The 1990 election resulted in a substantial National majority. The Labour Party, divided by ideology and its unpopularity contributed to the disastrous result. Even while Bolger and his colleagues celebrated the result, a crisis in Wellington required decisive action. The largest bank in New Zealand, the Bank of New Zealand had serious financial difficulties and desperately needed loan guarantees from the incoming government. Over the next few days Bolger summoned his cabinet to draw up an emergency loan structure to be implemented immediately to avert an economic catastrophe. The cost of the loans varied $380 million was immediately approved, however after it was rewritten the cost surged to $780 million. He thereafter instructed his finance minister, Bill Birch to devise a mini-budget for January 1991. After which, Birch informed Bolger and Don McKinnon that many of their promises would have to be forsaken to further trim the ballooning budget outlays.

Whilst waiting to be sworn in discussions continued about what areas should be cut, while some members of the cabinet were enthusiastic about cutting expenditure. Bolger adopted a cautious conservative approach, the GST would be increased to 15% to raise revenue whilst immediate concessions would be made, structural changes were to be introduced in the tax arena, including the elimination of GST on food stuffs and essential goods. Welfare benefits were to be reviewed, in order to simplify them, for some in the middle-upper echelon of society were no longer entitled to receive them. Universal family benefits were to be reduced by a mere $3.70, something which bore criticism for not nearly going far enough to eliminate the budget deficit. User pays in education were also to be continued, with allowances for poorer pupils to buy pens and books. Other user pays such as healthcare were to be eliminated within two years with additional allowances allocated to help underprivileged patients. Most controversially, the superannuation surtax was to be maintained for three years.


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Part Three: Major
Stillborn

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The election of 1992 in the United Kingdom was dramatic, the incumbent Prime Minister John Major faced serious economic issues. The ever deepening recession saw is popularity plummet from his comparatively high rate during the Gulf War of the previous year. This was further exacerbated by the resurgent Labour Party, led by the popular Scottish politician John Smith, and was hailed for his "cleaning up of the Labour Party, projecting a largely centre-left image. Issues such as healthcare and taxation were widely debated.

Labour promised to restore the living standards of the population and increasing spending on healthcare and education. While Major campaigned
predominantly on taxation and immigration, which in both instances, backfired disastrously. As the Conservative campaigned appeared to be alarmist on key issues. The Liberal Democrats suffered a 4.8% swing, as many of its constituency voted for the renewed Labour Party. His capable new Chancellor, Gordon Brown suggested income tax was to be raised to 47% to raise the revenue.
 
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