A humiliating defeat for Jacinda Ardern and Labour on the Capital Gains Tax is a reminder of how political power works and where the struggle for that power – and next year's election – really lies. Peters has swung the tax axe, with impunity

If not now, when? If not this, what? If not her, who? Those are the questions that must be bedeviling Labour and Green Party supporters as Winston Peters has not for the first, second or even third time, put his stamp of authority on this supposedly Labour-led government. New Zealand First has made it impossible for Labour and the Greens to pass even a fig leaf's worth of the proposed Capital Gains Tax (CGT), leaving Jacinda Ardern and her party looking timid and weak. 

Ardern has spent the month since the terrorist attacks in Christchurch at the centre of local and global attention, the darling of much of the western world. She has been a class act – widely admired and rightly wrapped in praise. Now, Peters has reminded her how power works.

Thud. Welcome back to earth, Prime Minister.

Who knew CGT stood for 'carefully generated torpedo'?

Sure, Labour can spin the line that 'Labour listens' and try to claim some initiative by Ardern's promise that there will be no new attempt to introduce a Capital Gains Tax while she's in charge (echoing the words of her predecessor Andrew Little). They can argue they have taken from National's hands the largest hammer the Opposition had to whack them with. Whatever helps them sleep. They are hollow words.

Labour has campaigned on a CGT in every election since 2011. More than that, Norm Kirk's Labour government introduced a 'speculation tax' back in 1973. This policy runs deep. The evidence is clear that while it's no panacea for poverty and comes with fishhooks, it does reduce inequality. As Labour has argued for years, New Zealanders will not get rich selling houses to each other and government needs to incentivise people to invest in things other than 'bricks and mortar'. All those arguments are now as ashes in their mouths

A CGT is not some perfect system, but it is fairer, redistributes wealth and invesment, boosts younger New Zealanders on average at the expense of older generations (yes, there's a whiff of Brexit in all this), and the tax cuts that would have followed would have been targeted at the poorest New Zealanders. The next time New Zealand First tries to campaign on caring for the least of these, that should be remembered.

Not that Peters cares about that when he can deny Ardern at will and keep his older voters happy at the expense of the young.

National Party leader Simon Bridges hit the nail on the head when he said, "At the apex of her power she hasn't been able to deliver".

And that is truly remarkable. She didn't deliver what Labour wanted. She didn't get even a compromise version. She got nothing. Zip. Nada. Nil.

What good is power if you are unable - or too cautious or too timid or not savvy enough - to wield it? If Ardern can't stare down or cajole Peters now, with the world at her feet, voters are left to assume she will never be able to. And if she is not able or prepared to go to the wall for a policy like this – a Labour passion and bugbear, something she made a 'captain's call' on, a policy with inter-generational ramifications – then what will it take?

Even at the 'apex of her power', Peters has made Ardern and her party look weak. Again. Remember the rug being pulled out from under three strikes, the industrial relations reform, the refugee quots and the fact Shane Jones seems to be able to act with impunity. This is not merely 'MMP at work'; there is a pattern of political abuse here. I'm not sure if 'bullying' is the right word; Peters is using his numbers. But if this is a friendship, it's an unhealthy one. If this was one of my children's school friends, I'd be advising them to find a new friend. Sadly, Labour doesn't have that luxury. The choices are few. 

This is why some National Party supporters and MPs were telling themselves after the 2017 election – as they rocked back and forth and sucked their thumbs – that 'at least we won't have to work with him'. As with Labour, whatever helps them sleep.

On the other side, Labour supporters may say 'just wait until the election' and 'we'll take our revenge by leaving Peters out of any second term'. This, however, is a reminder that a Labour-Greens government will be an incredibly hard trick to pull off.

The very things that motivates Labour to win without Winston in 2020 are the very things that make that less likely.

Indeed, this sort of stunt by New Zealand First is the party's platform for 2020. 'Look at what Labour and the Greens would have done without us', the election ads will say. 'You need us,' the billboards will scream: 'I kept the bastards honest'.

And if you're thinking Peters may be at risk of over-reaching, here's the bitter irony for Labour: Ardern's own unassailable popularity is exactly what gives Peters such a free hand. In a tighter race, New Zealand First might need to show more discipline, a more united front. With Labour the hottest of hot favourites to win again next year, Peters can play. He can do what he does best. He can be confident Labour won't call his bluff.

It was summed up in one grab on Newshub tonight.

When Newshub's Political Editor Tova O'Brien asked, "Is New Zealand First the most powerful party in this government?", note how Peters replied, "next question". He can deny any power plays point blank because it's enough the question is asked.

He knew by instinct that a seemingly grumpy, succinct reply would make the six o'clock news, so hundreds of thousands of viewers would be left in no doubt where the power lies.

It's not with Labour. It's not with Ardern. As it stands she is unable to deliver the "transformational" government she promised. The question now is whether she can wrestle some of that power back. And what issues, if any, will she go to the wall on. The most fascinating power struggle over the next 18 months – even more compelling, perhaps, than any forthcoming struggle for the leadership of National – will be the one between the Prime Minister and her deputy.

Comments (19)

by Raymond A Francis on April 18, 2019
Raymond A Francis

Nailed it Tim, if she couldn’t do it now while even the right think she has handled the last month well then the future or rather her future does not look bright.

Time for a Cabinet reshuffle, the Government needs some breakthroughs and the present Ministers just don’t seem to have the work ethics or drive to get results.

Because it is not just the PM who drives the governmen, it’s the a Cabinet who can and should get things done!

by Tim Watkin on April 18, 2019
Tim Watkin

Quite right Raymond. A reshuffle can't be too far away... can it wait until the end of the year? The cabinet needs to do more heavy lifting, but Ardern is the beating heart, lungs and face of this government and this suggests some... issues.

by Lee Churchman on April 18, 2019
Lee Churchman

As it stands she is unable to deliver the "transformational" government she promised.

That's never going to happen until the boomers start shuffling off in numbers. Politics is basically in formaldehyde until then. 

by Alan Johnstone on April 18, 2019
Alan Johnstone

LBJ said that the first rule of politics was to be able to count.  So it remains.

She doesn't have the numbers to pass it and she knows it. Second rule of politics, don't hug a corpse. There is absoulety no benefit in her 

What now ? We'll have the boiling a frog approach.  The bright-line test will be quietly extended, an inch or two at a time, made a little bit longer, add an asset class every year or two

Nothing explicitly called a CGT will be passed, but in 7 years time, I expect something very close to one will have appeared without anyone really noticing or minding.  

 

 

by Colin Fleming on April 18, 2019
Colin Fleming

What's really depressing is how crystal clear this makes it that this government won't do anything substantial about climate change, for all their posturing. Winston doesn't care about it, he'll be dead as will his voters when it becomes a serious problem. Anything even slightly economically uncomfortable will never get any traction, and tinkering around the edges is useless.

For all her faults, Jacinda is really good at speaking to how many kiwis like to see themselves whether or not that actually has any basis in reality. I'd love to see her trying to use that to actually convince people that sometimes uncomfortable things are required for a common good. Sadly, she's been incredibly timid on everything except gun control after the Christchurch attack, and even there she didn't go as far as the Australians did.

by Kat on April 18, 2019
Kat

Thank you Alan Johnstone for some words of sanity. This post by Tim Watkin is either an example of playing devils advocate, tongue in cheek humour or complete ignorance of current politics.

by Lee Churchman on April 18, 2019
Lee Churchman

What's really depressing is how crystal clear this makes it that this government won't do anything substantial about climate change, [..] Anything even slightly economically uncomfortable will never get any traction, and tinkering around the edges is useless.

They can't. They can't even build houses on time. That's not really their fault, since governments don't seem to be able to get stuff done any more.

I grew up next to two large state-owned power stations. Those were built and opened in only a few years. God knows how long it would take these days. Most likely they would never have left the drawing board.

by Tim Watkin on April 19, 2019
Tim Watkin

Kat, this isn’t Twitter. Come here and make an argument if you like, but we don’t do cheap shots.

Alan, in MMP numbers are negotiated. Politics is about deals and compromise and power (amongst other things). She and Labour clearly tried and failed. My point is that if she couldn’t get a policy as important to Labour as this and at a time when she has phenomenal public support, that’s remarkable. I gave some explanations why it came to that, but it suggests she’s being outplayed. The other possibility is that she’s saving her political capital to spend it on something else. That might give you some succour Colin.

But you’ve got to wonder.  

It’ll be interesting to see if you’re right about the boiled frog approach. That’s one of the things I was thinking of when I wrote about watching how it plays out between Ardern and Peters over the next year or two. Can she chip away at what she wants?

by Tim Watkin on April 19, 2019
Tim Watkin

Lee, I believe more millennials were of age to vote in the 2017 election than boomers. That change is already happening.

by Dennis Frank on April 20, 2019
Dennis Frank

The Labour-led govt meme seems dead in the water - but I never got the impression any Labour ministers were even attempting to lead the advocacy for the cgt.  Why not?  Could it be tacit acknowledgment that Labour are so divided on the issue that no minister was willing to front on the principle?  If so, that would explain Ardern's lack of leadership as well.

Perhaps they are so addicted to neoliberalism that a fair tax policy seems unreasonable to them?  So their political strategy is to mask this reality, and blaming NZF is a convenient ruse.  After all, if Jacinda genuinely believed that taxing capital along with Labour was the only fair tax policy, she'd say so to demonstrate authenticity, to prove Labour really is progressive - not just pretending.

Instead, she sent us this signal:  the cgt is off her agenda, not just now, but for the entire time she is Labour leader.  No genuinely progressive politician would thus attempt to invalidate an important political principle.  So it looks like we must conclude that she believes unfairness must prevail for the forseeable future.

As for Winston, does he really think multiple-property-owning landlords will vote NZF rather than National, as a result of him letting them off the hook?  He's kidding himself, or desperate.  Unless the next poll puts NZF back above the 5% threshold, proving he made a good call, then his gamble may become a swan song.  Fronting as a roadblock against a fair tax policy isn't really sensible politics.

by Lee Churchman on April 20, 2019
Lee Churchman

Lee, I believe more millennials were of age to vote in the 2017 election than boomers. That change is already happening.

If normal voting patterns continue, they won't make a difference for a fair while yet. To be honest, I'm not that sure they ever will: unapologetic authoritarianism and wilfil ignorance seem to be on the rise. 

by Kat on April 20, 2019
Kat

Tim, I don’t do Twitter, never have, unlikely I ever will.

Here is an “argument”.

Do leaders of political parties just follow on from their predecessors or do they have their own ideas on leadership and policy. Consider that Jacinda Ardern may have very well realised that a CGT would be costly to implement and have little economic return in the diluted form that would only have been accepted by the electorate.

Consider that she may have looked back over the years that Labour had campaigned on a CGT and were never able to get it over the line. Consider that she may have decided to sort this idea of a CGT out as Labour policy once and for all. Consider that it was unlikely she was going to get away with just coming out and stating that a CGT is off the table, she had to put some skin in the game to work it through.

Consider that when Andrew Little took a CGT off the table Jacinda Ardern, when she became leader, made the decision to put it back on so a final resolution could be achieved. The way the PM set out to do this was very clever. First by introducing a possible CGT prior to the election then making a captains call in the setting up of a TWG with the proviso that nothing would be implemented before the next election. This provided rich political discourse from the opposition, vocal media commentators and economists on potential negative outcomes. The result being overwhelmingly against any introduction of a CGT.

Consider that in eighteen months the PM has put to bed a long term Labour policy that was never going to be accepted, never going to produce revenue of any significance and most likely waste another eighteen months of the govts time fending off attacks from the opposition. Even if the PM thought 2020 would still be winnable her govt would always be defending the “tax and spend” moniker. The two million that it has cost to get to this decision is a drop in the bucket but shows the PM was willing to put some political capital on the line to get an outcome. The outcome is a decision that a tax policy in the form of a CGT is off the table while she is leader. That to me shows leadership. The PM and her govt can now move on and focus on other non-politically suicidal ways of raising revenue.

by Charlie on April 21, 2019
Charlie

I think more damage was done waffling about CGT for the last two years than their final axing of it.

I'm agnostic on CGT. In understand the advantages and disadvantages, but if you're intent on implementing it, do it properly! The worst possible option is to exclude the ill-defined 'family home' when property is the very thing you're supposed to be targeting.

It all smacks of a lack of due diligence when in opposition. She was elected on the basis of a smile and a few soundbites, and it shows.

 

by Tim Watkin on April 22, 2019
Tim Watkin

Kat, thanks for the argument. That allows for a conversation.

But it doesn't add up, for a number of reasons:

a) Ardern proactively didn't just follow on from her predecessor. As you say, after Little did the job you are claiming for her - taking it off the table for Labour once and for all - she went out of her way to put it back on.

b) She has long been a vocal supporter of a capital gains tax. She has been coy while the working group was working, but there is nothing to suggest she didn't want to implement a CGT in whatever form possible. She always actively kept the door open.

c) You'd have to believe $3.4b a year equals "little economic return".

d) You suggest she was clever to put it back on the table in opposition to Little, then take it off again, only to start a working group and have its recommendations fail due to New Zealand First... I don't see how any of that can be considered 'clever'. It's a mess. And one look at her at her press conference or knowledge of the widespread support it had within Labour makes it clear there was nothing clever here, just defeat by Peters & co.

e) Who says it was 'never going to be accepted'? Support for it in some polls has been 40 percent, without any personal championing of the scheme. Plenty of governments have pushed through reforms with less public support than that.

f) You really think Labour won't be attacked as 'tax and spend' in 2020? And that they won't actually look to tax and spend? What they've done with the petrol levy alone means that will be an obvious line of attack for National. Yet again.

g) $2m in govt spending and a working group (which was a pre-election escape route) does not amount to even a drop of political capital. It's nothing. Seriously.

h) It's off the table only because New Zealand First said so. She wanted it passed. That she went further and said 'never while I'm leader' is curious. It's certainly decisive... but what sort of leadership does it show? She wants a CGT but has walked away from it. Presumably so she can focus on other policies and so 2020 won't be yet another battle over a CGT. But surely it's obvious that's a tactical withdrawal, hardly something she is happy about? 

by Tim Watkin on April 22, 2019
Tim Watkin

Charlie, I think it's too easy to dismiss her as a shallow husk with a smile. Were Labour prepared to govern? Not properly. Did they butcher their support for a CGT? I'd argue yes. 

But look at the policies already implemented and her leadership - from oil exploration and the prison population to the Reserve Bank Act changes and her compassion after the mosque attacks. She is an able politician with a lot more to her than smiles and waves.

 

 

 

 

 

 

by Charlie on April 22, 2019
Charlie

Really Tim?

Quite possibly she's an able politician just because all she does is smile and wave. It's a viable approach that might last awhile.

The oil exploration ban: Was an appalling idea from both an economic and environmental perspective. Maybe good MMP politics to appease the Greens but appalling statesmanship whose chickens will come home to roost.

The prison population: So far all I've seen is virtue signalling here. As yet they have no plan to reduce the cause of our high prison population: Violent crime.

Compassion: Give me a break!

by Kat on April 22, 2019
Kat

Tim, with respect there are some glaring inaccuracies in your reply. For instance being a “vocal supporter” of a CGT from Jacinda Ardern is hard to find. Search the parliamentary record from her time as an MP and you mostly find it as a single note in a list of Labour ideals. The PM didn’t go “coy” she simply deferred any questions on a CGT to the TWG. The PM may have taken a CGT off the table but can you confidently say another revenue stream with a catchy acronym is not in the wings waiting to have its benefits extolled.

I could go on but then this commentary appeared today from Sir Michael Cullen, in the Herald of all places. What he writes not only backs up my view on how the PM has handled the CGT situation, it adds more weight. I am sure you will most likely come across it yourself but I have provided a link: https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12224277

by Dennis Frank on April 23, 2019
Dennis Frank

Seems a cogent analysis from Cullen.  This bit even verges on profound:  "liberal/left groups in New Zealand need to learn that overcoming vested interests in the pursuit of a fairer society requires at least the same level of dedication and application as those vested interests demonstrate."

Putting aside the extremely interesting question of whether liberal groups are left or not, I suggest focus ought to be brought to bear on why left groups lack the requisite level of dedication and application.  After all, they seem to have had both qualities before I was born, which made the first Labour govt victorious and enable it to retain power through WWII & beyond.  What went wrong after that??

Clue:  Sue Bradford finally got around to setting up a leftist think-tank several years ago.  It adopted a novel political strategy:  it immediately went into hibernation.  I commented online at the time that the project would only work if leftists could actually think.  Seems like Bradford et al are busy proving me right.  Or, to be charitable, could be they are so busy beavering away there behind the scenes that the feasibility of injecting some intellectual product into the political arena simple hasn't occurred to them...

by Ross on April 25, 2019
Ross

Tim,

By heaping all the blame on Winston, you have over-reached. Maybe you missed that the PM said she will never introduce a CGT. That means that if Winston is no longer an MP after the next election, a CGT will still be off the table under Labour.

But other taxes may be introduced, or existing taxes increased. There's more than one way to skin a cat.

https://www.stuff.co.nz/business/112212288/jacinda-ardern-keeps-window-o...

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