New Zealand: Free market laboratory

Ever since the mid-1980s when a Labour government under David Lange initiated an extraordinary decade of change in the country's politics, economy and administration, New Zealand has been a sort of Pacific laboratory for free market reformers.

A stream of visitors from the United States and Britain have made the pilgrimage to Wellington to see how far the reforms favoured by President Reagan and Prime Minister Thatcher - but never quite implemented - could be pushed.

Under Lange and his Treasurer, Sir Roger Douglas, government spending was radically retrenched, supports for farmers cut and trade liberalised. The New Zealand dollar was allowed to float.

After the Lange government imploded and the National Party took over, reforms continued: the central bank governor and permanent secretaries were placed on performance contracts, social wel- fare sharply cut, nationalised industry sold off and schools and hospitals placed under local autonomous boards. Freedom of information legislation was introduced and, last year, proportional representation applied to national elections.

If she has her way, Jenny Shipley will continue the trend: as transport minister she has favoured a proposal to force farmers to maintain rural roads by imposing tolls.

It has not however only been right-wingers who have been attracted by the New Zealand experiment in pulling government back. Among recent visitors was Dr David Clark, Labour Chancellor of the Duchy of Lancaster, in New Zealand to study freedom of information and pick up ideas about government organisation for his forthcoming White Paper on the civil service.

Visitors to Wellington do not always realise, however, that in New Zealand itself, the gloss has long worn off reform. The National Party-New Zealand First coalition is doing badly in the polls, which pick up public resistance to further free market reforms. In a referendum on a radical plan to abolish state pensions held in September the government plan was defeated by a margin of more than nine to one.

New Zealand's system of PR - which produced a coalition government last autumn - is also under severe criticism. Recent polls suggest that if another referendum is held New Zealanders will vote for a return to first- past-the-post.

After losing power, New Zealand Labour has been striving under its new leader Helen Clarke to reinvent itself as a centrist alternative. Under Tony Blair, British Labour has become something of a role model and there has recently been much NZ Labour traffic to London.