Comment

Tax backdown proves one man wields the power

Winston Peters has eliminated any lingering doubt about who holds the reins of power in his thwarting of Jacinda Ardern's flagship capital gains tax, writes Laura Walters.

On Wednesday, the Government announced it would not be introducing a capital gains tax, despite the policy being supported by Labour and the Greens. Not only that - there will never be a CGT under an Arden-led Labour Party.

The policy has been a flagship economic policy for Ardern who has promised to make New Zealand’s tax system fairer and has traded off this coalition Government being transformational.

Ardern and her party have given their all to campaigns for a CGT for the past three elections, and the Green Party has done so since its inception.

But their coalition partner New Zealand First has never supported a broad CGT, beyond the existing bright line test, and after the $2 million exercise of the Tax Working Group, it has finally put the idea to sleep.

Ardern continues to personally support the concept of a CGT, saying she thinks it would make New Zealand fairer, but she doesn’t believe she has a strong enough public mandate.

She certainly does not have the political mandate from one Winston Raymond Peters.

Ardern fronted her press conference looking dejected, following what she describes as a hard-fought battle, which has come to a disappointing end.

“May I remind you, the Labour Party is in government because of my party, we had choices where no other parties did.”

In contrast, Peters met reporters in Parliament looking pleased, saying the decision was the right one, and the country could now move towards next month’s Budget and delivering “the transformation change that this Government has promised will happen without any of these detours or roadblocks”.

Ardern, Peters and Green Party co-leader James Shaw were repeatedly asked whether New Zealand First holds a disproportionate amount of power in the Government.

And predictably they all chalked this one up to the reality of MMP politics.

But there’s nothing proportionate about who held the power in making this decision.

A party that secured just 7.2 percent of the vote has unilaterally thwarted what was supposed to be this Government’s biggest economic policy – despite what credit Simon Bridges and National might claim.

Peters told reporters this decision was about coalition politics, but not about winners and losers, and not about who holds the power.

He then went on to remind everyone exactly who holds the power: “May I remind you, the Labour Party is in government because of my party, we had choices where no other parties did.”

Still transformative?

Despite the inherent mandate that comes with being in government, and the Tax Working Group’s blessing, Ardern says she doesn’t believe there is enough public support for a CGT.

There’s no doubt it’s a controversial issue, as she found out ahead of the 2017 election when Labour began to slide in the polls off the back of announcing its tax plans. Labour got spooked then and may have been spooked again by the business commentary surrounding a potential CGT.

The party doesn’t want to go into 2020 with an unpopular policy, with the risk of losing some of its support from the middle. A Government can’t be transformative after all, if it’s not in government.

But Ardern now struggles to sell that story of a transformative Government when she's been forced to abandon her flagship reform – one so deeply entwined with what she, and her party, stand for.

On Wednesday, Winston Peters resembled the cat that got the canary. Photo: Lynn Grieveson

The Prime Minister says the coalition is still making "incredible progress" and "transformational change".

But it leaves her open to the criticism she abandoned CGT in favour of a safe re-election, over her bold promises to transform the country into a fairer place.

One campaign too few

No doubt Labour and Ardern are wondering whether one more battle may have won the war.

Could things have been different if Ardern and her Labour ministers did not distance themselves from the working group’s recommendations following the release of the report?

Labour fought three election campaigns on CGT, and while ministers also fought for the tax changes at the Cabinet table, that battle happened behind closed doors.

One more public campaign in support of CGT over the past two months may have sold the story to New Zealanders.

James Shaw says he doesn't rank the dead rats he's had to swallow, but it was apparent this was one of the biggest. Photo: Lynn Grieveson

It just might have been the balance needed in an arena flooded with anti-CGT messages from National and key business groups. It may have dispelled some of the public’s fears, rather than leaving Shaw to fight the fight on behalf of the Government.

But as Shaw says, we will never know whether one more Labour campaign for CGT after nine years of campaigning could have sealed the deal.

The race is on

In the meantime, Peters has as good as launched New Zealand First’s unofficial 2020 campaign.

Minutes after Ardern announced CGT had been axed, Peters tweeted a polished, campaign-style message, complete with his picture and a prominent New Zealand First logo.

“We’ve heard, listened, and acted: No capital gains tax," it said.

With New Zealand First at just four percent in the polls, Peters will want to differentiate between his party and Labour as the next election begins to inch closer.

So while Shaw and Ardern are talking about continuing to work constructively together as a Government, with Shaw saying this was not the time to try and gain an advantage on Labour, Peters is shrewd enough to realise the survival of his party come election day 2020 depends on creating that advantage.

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