John Armstrong on capital gains backdown: Jacinda Ardern’s sure touch in handling tricky matters has deserted her from go to woe

Goodbye capital gains tax; goodbye Jacinda Ardern’s “transformative” Government?

Hello humiliated prime minister; hello coalition instability?  

Such are the scenarios now hovering in the foreground following New Zealand First’s pulling the rug from under Labour by refusing point-blank to entertain the introduction of a capital gains tax.

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    Jacinda Ardern said her government had realised they did not have a mandate from the public to do so. Source: 1 NEWS

    In retrospect, Winston Peters’ unwillingness to weigh in behind his coalition partner meant there could only be one outcome.

    To think that he could have been persuaded to share the prime minister’s view and hand her the votes she needed to get the required empowering legislation through Parliament to get such a tax in place was both highly optimistic and hopelessly naive. 

    Ardern could have tried to stare Peters down at the risk of rupturing their working relationship. But he would not have budged.

    He instead stared her down. She could have made support for a capital gains tax a matter of collective Cabinet responsibility. But that would have provoked a crisis in the coalition.

    Given the majority of the public either oppose a capital gains tax or do not regard it as a priority, most people would have been left wondering why she was willing to pull her otherwise seemingly fully-functional governing arrangement apart.

    Still it would not be surprising if the words “snap election” did not cross the minds — if only very fleetingly — of some Labour ministers and MPs furious with New Zealand First’s intransigence and inflexibility.

    Labour is on a polling high; the electorate’s love affair with Ardern is on an even higher plane altogether; National is now looking to be on a slow slide; its leader is universally regarded as dead meat; New Zealand First is similarly looking like dog-tucker.

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      The Government today announced it has abandoned plans to introduce the CGT tax. Source: 1 NEWS

      There is the tantalising prospect that Labour and the Greens could win sufficient seats combined not to have to pretend they like Peters. 

      There is a fundamental law of politics, however, that you never relinquish power until you have to do so. You don’t fight an election by picking the losing side of an argument — as Labour would be doing by backing something as unpopular as a capital gains tax.

      Ardern’s reluctance to indulge in the kind of brinkmanship that is second nature for New Zealand First’s veteran leader risks her being accused of a failure of leadership.

      Such a charge is unlikely to stick given the leadership that she displayed in the aftermath of the March 15 killing spree at Christchurch’s two mosques.

      The plaudits that have rained down on the prime minister in that have had little impact though on the debate over a capital gains tax.

      On that score, Ardern’s sure touch in handling tricky matters has deserted her from go to woe. 

      It is difficult to recollect a prime minister looking or sounding so gutted as was Ardern in her making her shock announcement on Wednesday afternoon canning a capital gains tax for as long as she is in charge.

      Her disappointment was written in triplicate across her pained expression.

      For someone fervently in favour of introducing a capital gains tax as a means of addressing the unfairness of New Zealand’s taxation system, Ardern must have found it galling that it fell on her to poleaxe the idea. 

      Ardern need only look in the mirror to find someone to blame for her embarrassment, however.

      Ardern kicked off 2019 with an emphatic promise that this year would be the year of “delivery” on the part of her Administration.

      There has been delivery alright — the delivery of something in which she put huge stock, but which is now a political corpse.

      Thanks — or rather no thanks — to New Zealand First, one of the items at the top of that list of “deliverables” is now more dead than the deadest of dead dodos.

      Ardern has long been riding for a fall, however. Too often there is too much froth in her statements and far too little substance; too much talk and too little walk.

      That deficiency was bound to catch up with her sooner or later. Now it has.

      In dumping a capital gains tax, the prime minister has put a severe dent in her credibly being able to claim she is running a government which puts a premium on radical “transformational” change.

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        The National leader says Jacinda Ardern hasn't been able to deliver her flagship economic policy. Source: 1 NEWS

        Ardern’s stock response to Peters’ exercising of New Zealand First’s current capacity to veto any Labour-initiated measure is that it is simply just a fact of life under a proportional electoral system like MMP — and that the major governing party has no choice but to adjust accordingly.

        That is far too simplistic. The paralysis of policy development cannot be used as an excuse for doing nothing. The absence of single-party majority government puts a huge onus on parties to make a genuine effort to reach a consensus when confronted with tricky and complex issues.

        It is now pretty clear that Labour bent over backwards in offering all sorts of concessions, exemptions and departures from the model of a capital gains tax out forward by the Sir Michael Cullen-chaired tax working group.

        Peters refused to entertain any compromises to the point where the proposed tax would have been diluted to such an extent that it would not have been worth the trouble implementing it.

        There is little doubt Peters’ concerns about the tax could have been addressed. But he wasn’t interested.

        That the national interest has ended up running a long way behind the self-interest of Peters and his party is par for the course in New Zealand’s domestic politics.

        What it all means for the stability of the Government is much harder to assess.

        There are reports that in return for scuttling a capital gains tax, Labour has secured New Zealand First’s backing for its climate change programme.

        If so, Peters has secured the far better deal.

        It is unlikely that Labour and New Zealand First will be confronted by another issue this term where there respective interests clash to such a degree. 

        In that vein, it could be argued that if the Labour-New Zealand First coalition could survive a bust-up over a capital gains tax, then it can survive just about anything.

        As mentioned earlier, it is also argued that Ardern has been far too optimistic in expecting New Zealand First would sign up to something that is anathema to Peters’ core supporters.

        On top of that, Peters has long questioned the efficacy of a capital gains tax. Moreover, prior to the last election, Peters indicated he would find it difficult to sign up to such a tax unless it included provision to compensate for capital losses — something Labour would find problematic.

        It is also worth noting that despite two parties being at loggerheads over a capital gains tax, that did not hamper concurrent negotiations between the two parties to hammer out detail required by the tightening of gun control laws.

        For now looking from the outside, the Labour-New Zealand First coalition gives every appearance of being as stable as it has ever been during its short life.

        With the pressures of a pending election mounting and the days of the coalition becoming numbered, however, things could prove to be a very different story next year.

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          In an embarrassing flip-flop, Prime Minister Jacinda Ardern has been forced to ditch the controversial capital gains tax. Source: 1 NEWS