Opinion: There has been a lot of unfocused comment, bordering on rage in some cases, after Prime Minister Chris Hipkins ruled out new capital gains or wealth taxes while leader of the Labour Party. Preposterously, some even question his right to make such a call, saying more about the intellectual capacity of those making them than anything else.
There is nothing new in political leaders taking contentious items off their political agendas before an election. Jim Bolger did it before the 1990 election when he reversed National’s stance on repealing Labour’s nuclear-free legislation; Sir John Key dropped abolishing “Working for Families” and KiwiSaver off National’s “to do” list just before the 2008 election; and Dame Jacinda Ardern first ruled out a capital gains tax before the 2017 election.
However, the common thread to all these decisions was that they were made by a party in opposition hoping to or likely to become the government at the coming election. They were all expedient decisions – dropping policy positions that had the potential to derail a party’s campaign, had they been continued. And they were successful – in each case the leader making such a call became Prime Minister at the next election.
Hipkins’ decision follows that tradition, so should hardly have been a surprise to any but the most doctrinaire and blinkered Labour supporters. There is one critical difference, however – Hipkins is already in government. He therefore looks as if he is attacking his own government’s policies. Moreover, having ruled out a capital gains tax before the 2017 election, Labour then set up a Tax Working Group under Sir Michael Cullen, ostensibly to review the tax system, but apparently to provide the rationale for introducing a capital gains tax at a future date. However, when faced with that inevitable recommendation in 2019, Ardern balked once more, and ruled it out as politically unachievable, even though she still personally supported the idea.
After the policy bonfire he lit when he assumed the role earlier this year, Hipkins has rapidly built a reputation as a Prime Minister who stops things, rather than one who gets things done
But that pledge apparently did not deter Finance Minister Grant Robertson and Revenue Minister David Parker from continuing to work on comprehensive plans for a capital gains tax and a wealth tax. These new taxes would have been offset by a universal tax-free threshold of the first $10,000 of income earned, and announced in this year’s Budget, although not implemented until the start of the 2025 tax year. But Hipkins stopped their plans earlier this year when they were at an advanced stage of development and has now made that decision more permanent with his announcement last week.
This was far more than simply taking potentially unpopular items off the Government’s agenda. By ruling them out so long as he is party leader, Hipkins was attempting to extinguish the long-simmering debate within the Labour Party on such matters. In that regard, his move was as much about reshaping Labour’s longer-term direction as it was about taking controversial items off the pre-election agenda.
In the absence of significant new policies, his increasingly tiresome references to being the “boy from the Hutt” focused on “bread and butter issues” simply sound trite and irrelevant
And that further highlights the developing enigma about Hipkins’ Prime Ministership. After the policy bonfire he lit when he assumed the role earlier this year, Hipkins has rapidly built a reputation as a Prime Minister who stops things, rather than one who gets things done. Alongside that, he candidly admits his government has been unnecessarily distracted by the numerous scandals and crises affecting various of his ministers, and now needs to refocus on the things that matter. In the absence of significant new policies, his increasingly tiresome references to being the “boy from the Hutt” focused on “bread and butter issues” simply sound trite and irrelevant.
Ever since he took office in February, Hipkins’ biggest challenge has been time. Given the state of Labour’s polling then, it was always going to be a mighty challenge for him to turn around Labour’s fortunes in a few months. Now, with less than three months to go, after five months of distraction, and Labour’s polling position not having substantially improved, Hipkins’ already difficult task is starting to look Herculean.
He has failed to set a positive narrative for his government. So far, he has stopped or stymied all Labour’s big policy ideas without producing any positive alternatives. It will now be increasingly difficult for him to do so over the next three months without inviting the criticism that Labour has had nearly six years in government to introduce such policies but has not done so. In that sense, Labour today looks like the Labour Party of 1990 – trying desperately to bury its unpopular earlier policies while hoping a sceptical electorate will trust it one more time to be different in the future. It did not work then, and seems unlikely to work now.
While the likes of Robertson, Parker, and others whose policy pet projects Hipkins has dumped, remain ministers and accept his decisions claiming they are “team players” (code for disagreement with the Prime Minister’s captain’s calls), doubts will persist about the credibility and durability of Hipkins’ promises. Compounding those doubts are the threats from potential support partners to demand the restoration of the tax policies in any government-formation negotiations with Labour after the election.
In that regard, Hipkins’ tax announcement, which was intended to quell fears about Labour’s plans and establish some certainty in the way pre-election announcements by previous political leaders have done, may have the opposite effect. The intense reaction of various Labour-aligned groups and commentators, the lingering opposition within the Labour Caucus, and the reaction of potential support partners make it far more likely that the tax issues Hipkins sought to move aside will now feature more prominently in the election campaign.
Shortly before the 1975 election, the National Business Review’s cartoonist Brockie produced a cartoon depicting the then Labour Prime Minister Bill (Wallace) Rowling tied to a stake, about to be burned, while all around him were gathered various dissatisfied interest groups and political scandals of the time. It was captioned, “The Martyrdom of Saint Wallace”. In today’s emerging circumstances, a reprise regarding “The Martyrdom of Saint Chippy” seems increasingly apt.