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Chapter II
Labour in Power

The country's calm acceptance of Labour's sweeping victory was largely due to confidence in the moderation of Savage, whose manner was urbane and persuasive rather than denunciatory. A good testimonial was given him during the campaign by Forbes who, complaining of the tactics of another opponent, said: “That is not cricket and Joe Savage would not say it.”

Savage and his ministers received their seals of office on 6th December, 1935, and proceeded at once to implement their policy. A sum sufficient to provide an extra five weeks' pay was earmarked as a special Christmas benefit for the unemployed. Pay on all relief work was considerably increased, as were old age and widows' pensions, while provision was made in addition for wives deserted by their husbands. The forty-hour, week was established through Arbitration Court awards. In the 1936 session of Parliament, the major measures passed included: (1) the conversion of the Reserve Bank to complete State ownership, with provision for State control of credit and exchange and the financing of guaranteed prices; (2) conversion of the Mortgage Corporation to State ownership with enlarged powers of borrowing and lending; (3) guaranteed prices for exported dairy produce, with marketing control; (4) abolition of the Boards of Control for railways, unemployment, transport and broadcasting, which came under direct ministerial control; (5) far-reaching amendments to industrial law, including a restoration of compulsory arbitration and the introduction of compulsory trade unionism, a basic wage and a provisional 40-hour week. The Government also announced a three-year public works programme involving 17 millions and a substantial increase in sustenance and relief work rates for the unemployed

In August 1936, Nash presented the Labour Government's first Budget. He said the revenue for the current year was buoyant and no increase of the rates, of tax was necessary to provide for all additional ordinary expenditure, but to provide page 345 a further £1,710,000 for pensions he proposed to obtain a further million from income tax and £800,000 from land tax.

The Minister of Public Works, Robert Semple, was early in the field with a declaration that, while anxious to pay a reasonable amount for a fair day's work, he was not to be coerced into paying high wages for poor work. To Motueka aerodrome workers who complained that, unlike farmers, they could get no guaranteed price, though they were affiliated to the Labour Party, Semple said that in the public works agreement there was an unconditional preference clause for unionists but there was no necessity to affiliate with the Labour Party. He showed that the men were averaging 19s. 8d. a day while the average for the whole country on aerodrome works was 15s. 8d. Before he took charge the average was under ten shillings. No man “with the spine of a whitebait” would stand for offensive resolutions by men who had been so well treated and if they did not withdraw them they would get off the job and make way for men willing to work decently and well. Thus did Semple set the tone for his department which was to accomplish many remarkable performances both in peace and war. Personal knowledge of construction work and the gift for coining a picturesque phrase made Semple a fitting leader in the key department of Public Works.

The abdication crisis of 1936 bewildered New Zealand. Savage expressed the country's feelings when he said: “This is one of the saddest days in the history of the British people. The abdication of King Edward VIII will cause profound sorrow to his millions of subjects throughout the Empire. The affection entertained towards the King as an occupant of the British Throne was deepened in the case of Edward VIII by the manner in which, both as Prince of Wales and King, he identified himself intimately with the welfare of his people. Those in close touch with the situation during these sad days have been aware of the fact that no effort has been spared in an endeavour to find a solution of the problem suitable to his Majesty and acceptable to the people of the British Commonwealth of Nations. That the effort to this end made in Great Britain and in the Dominions was unsuccessful is a matter that occasions profound and universal regret, which will be felt as page 346 keenly in this Dominion as elsewhere in the Empire. I have no hesitation in saying that the loyalty of this Dominion to the Crown is as strong and enduring as ever it was and that the people of New Zealand, while regretting the abdication of Edward VIII, will honour and serve the new King with all their traditional affection and sincerity.”

Nash, who was in London for trade and financial negotiations on the anniversary of Labour's assumption of power, issued a comprehensive review of what had been achieved in the year. In it he said: “The New Zealand Government fully recognizes that the standard of living which is within the grasp of the people of their country under full Socialist development cannot be attained without the co-operation of people outside their Dominion as well as within it…. It is our Government's hope that we will be able to make arrangements with this country for the interchange of our surplus products to the mutual advantage of the people of both countries and that the threats of restricted production which are so inexcusable in the face of pressing human needs will be avoided.”

Before leaving New Zealand for the Coronation and the Imperial Conference of 1937 Savage said migration was one problem that would be discussed. The best investment of British capital was in the British Commonwealth of Nations. If British capital was invested in the Argentine or in some other foreign country British migration would follow it there. The first essential to migration policy was a firm financial foundation and that was something he intended to put before the Imperial Conference as part of New Zealand's contribution to the discussions. Only the investment of capital would enable future development to support the additional population resulting from an active migration scheme. This question, Savage contended with justice, had been somewhat clouded in the past.

At the Conference Savage said his Government would like to see the power of consumption in Britain so increased that there would be ample room for the produce of the Dominions, the United States, and other countries as well. But as conditions were, it could not favour the abolition of Imperial preferences and the scrapping of the Ottawa agreements to facilitate a trade treaty between Britain and the United States page 347 giving the latter “most favoured nation” treatment. Despite Savage's efforts to get some concerted and constructive action as a result of the Conference, it cannot be said that he got much more encouragement than Forbes had done. War clouds were gathering but they were not sufficiently threatening to drive the delegates together. “If Great Britain were in a difficulty tomorrow,” said Savage on his return, “I do not think there would be much division. I think about the same would happen as happened last time.”

If he derived little satisfaction from the Imperial Conference Savage must have felt on his return home that the stars in their courses were fighting for Labour. Instead of a predicted heavy deficit in the dairy industry account to cover guaranteed prices, a recovery of the market resulted in a comparatively small demand on the account. The bill for the first year of the guaranteed prices scheme proved to be £650,000, which Nash characterized as “a just Government contribution to farmers.” In Parliament a motion of no confidence in the Government mustered only 17 votes against 52.

Nash recorded in his Budget statement that a combination of satisfactory prices and increased quantities of produce had resulted in a record export of 54 millions for the year to 30th June, 1937, 11 millions more than in the previous year. “The restoration of wages and salaries,” he said, “has been fully justified by results. The guaranteed price system has been most successful, resulting in higher prices to suppliers and improved shipping and marketing arrangements.”

In April 1938, Savage, in a national broadcast, gave details of the Government's social security plan, embracing, for a payment of a shilling in the pound on salaries or wages, a universal general practitioner service free to all requiring medical attention, free hospital or sanatorium treatment for all, free medicines, free maternity services, sickness and incapacity benefits, orphans' pensions, increased pensions for invalids, miners, widows, and deserted wives, increases in family and war veterans' allowances, and eventually universal super-annuation of 30s. weekly at the age of sixty. Savage said a contribution of a shilling in the pound could not pay for all these services and it was never intended that it should. The State would subsidize contributions pound for pound.

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The scheme was timed to come into force on 1st April, 1939, and in the interval the Government, reverting to triennial elections, submitted itself to the electors. The election resulted: Labour 53, Nationalist 25, Independent 2. Savage's personal popularity was shown by his poll of 11,591 votes against 3,584 in his own electorate, but his health was beginning to fail and Fraser acted as his deputy for some weeks in 1939.

The Munich settlement of 1938 and the martyrdom of Czechoslovakia averted war but gave needed impetus to defence measures which had been going on quietly in co-operation with the Imperial authorities.

The Labour regime in New Zealand was not popular with many investors and a flight of capital from the country was arrested by drastic Government measures for the control of imports, licensing of exports, and the suspension of the statutory obligation of the Reserve Bank to give sterling in exchange for its notes. Nash said the principal cause of the drain of sterling funds from New Zealand had been the substantial decline in the value of exports compared with only a slight fall in imports. Savage, defending the sweeping economic powers taken by his Government, said they were adopting a policy of scientific selection of imports because they desired to transfer much of the overseas buying to Britain. They wanted to build up New Zealand industries, protect the standard of living when overseas prices fell, pay off overseas debts, and conserve the amounts necessary for that purpose. Regulation of trade to this extent naturally aroused some opposition, but once more the Labour Government could point to precedent—in 1931—to justify the action. Savage disclaimed any intention to levy a compulsory loan. He resisted efforts by a section of his party, backed by a widespread Douglas Credit movement in the country, to finance Government projects by manipulation of the currency. In his failing health he felt keenly a movement, by a small minority, against his leadership of the party. But the very measures of insulation which aroused so much opposition in 1939 were soon to seem little more than preliminary exercises in the stern lessons of fending for itself which New Zealand had to learn in the war years.

Savage was lying ill when war broke out, but in a broadcast from his home, he used these simple and historic words, whose page 349 truth was to be proved on a thousand fields: “Both with gratitude for the past and confidence in the future, we range ourselves fearlessly beside Britain. Where she goes we go, and where she stands we stand.” Savage died on 27th March, 1940, to the great sorrow of a people who had grown to respect the first Labour Prime Minister as a man and as a leader. He was big enough to delegate authority to others and it was as director rather than as innovator that he shone. He did initiate the broadcasting of Parliamentary proceedings, as he always maintained that Labour was unfairly treated by the Press. Whether Labour's cause was helped by the broadcasting of some of its spokesmen in the House may be doubted, but it survived, and it is a curious fact that while there is universal criticism of the low standard of parliamentary oratory the broadcasts command large audiences. The Dictionary of New Zealand Biography says that Savage had a good command of parliamentary practice, and in his control of Parliament was firm and conciliatory: “He once insisted at a Labour conference that a gain made by subtlety could only be held temporarily. Frank and straightforward, he was never a florid speaker, but he was a keen and effective debater, making his points by sincerity and simplicity of expression rather than by oratorical effect. He made quick decisions which were generally accurate.” Always a man of peace, he was fated to end his days at the beginning of a world struggle. New Zealand owes him much for the level-headed leadership which brought her into the war united against the forces of Fascism.