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Frontier Of Dreams

Sundays 6.40am | TV ONE

Labour's Second Term

Labour won the 1987 election with an increased majority and it meant three more years for Roger Douglas to make his reforms work. But now David Lange couldn't ignore the social cost of the Douglas agenda, the unemployment in his electorate and the impact Labour policies were having around the country.

The ensuing battle between Lange and Douglas would turn Labour's dreams into a nightmare.

By 1987 Lange's assurances were starting to have a hollow ring as Douglas began turning government departments into State Owned Enterprises, SOEs. Many came into being on April Fool's Day 1987.

For decades the government had used the State sector to minimise unemployment. Now state corporations had to make a profit. The Post Office was divided into three new enterprises, Coal Corp had its staff cut by 50 percent, the Electricity Corporation by 15 percent, and over seven years the Railways lost almost three quarters of its workers.

Privatisation, or selling off the SOEs, was even more controversial. For some it was like hocking off 'the family silver', like our forests and the country's natural resources. The process gave the largest of New Zealand's companies to overseas interests and those 'chummy' with the government, often at bargain basement prices.

But Douglas had even more radical ideas, proposing massive tax cuts. This meant the government would have to sell more assets and there would be less money for social services. Douglas promised the 'trickle down' effect for those at the bottom of the economic heap. Lange was sceptical and feared the rich would get richer and the poor poorer.

Whatever Lange thought, he'd lost faith in his Cabinet colleagues and, like Muldoon before him, he decided his only option was to go it alone. 

In January 1988 without consulting Douglas or the Cabinet he scrapped the 'flat tax' package that had already been announced. Now Lange and Douglas were in direct conflict. In December 1988 Lange sacked Douglas as Finance Minister.

But Douglas had always been good at finding support. Within eight months he had made a comeback.

Lange had become a lonely figure. Then on the day after his 47th birthday in 1989 he resigned the office of Prime Minister, one of only a few New Zealand Prime Ministers ever to do so. And although friends gathered it was a sad day in Parliament.