How Labour lost
Yesterday Prime Minister Jacinda Ardern announced a complete backdown on a capital gains tax. Labour lost the debate on CGT despite polls saying that both Labour as a party and Jacinda Ardern as Prime Minister had more than 45 per cent support. In fact, after the March 15 Christchurch atrocities, it appeared for a few weeks that Jacinda Ardern could’ve passed pretty much whatever she wanted without the public blinking at eyelid. Yet Labour lost the CGT debate and they lost it badly. How did this happen?
In the end, the majority of the public looked through the spin and vague statements about “fairness”, and saw CGT for what it is — a tax on those who aspire to getting ahead by investing in productive assets. There are at least a dozen reasons why Labour lost this debate but I’ve summarised the top four.
Appointing Cullen to chair the Tax Working Group
The first major error was appointing Sir Michael Cullen to chair the Tax Working Group (TWG).
Cullen was always going to be seen as a Labour political appointment to deliver them a CGT.
No matter how hard they tried to present the TWG as an objective panel of experts with no preconceived agenda, with Cullen as chair, the public knew the truth. The other problem with the Cullen appointment was he never backed a CGT despite a long career as a Labour senior politician, including nine years as Labour Finance Minister. For Cullen to then chair the TWG and recommend the most extreme CGT anywhere in the world came across as utter hypocrisy.
Perhaps a little unfairly, Cullen became the focus of much of the criticism of CGT mainly because he was the one fronting it for Labour. He was even kept on after the final report was released, on the equivalent of $250,000 a year, to answer questions (which obviously Finance Minister Grant Robertson didn’t want to answer or couldn’t answer). Attempts to deflect from a CGT by calling it by a different name back fired on Labour. Calling CGT a “tax on capital income” was a blunder and only led to questions about why the TWG were using “spin” instead of fact and logic to debate CGT. The debate was already heading for defeat for Labour before the final report was released.
Silence from the PM and Finance Minister
Once the final report was announced in February, the public were at least expecting some major speeches by Finance Minister Grant Robertson and Prime Minister Jacinda Ardern. Instead what we got was almost complete silence from the two main people who should’ve been the biggest advocates for a CGT.
To the media, this was like being invited to a party, turning up all dressed up with a bottle of wine, then the hosts of the party quietly disappearing out the back door.
It was a bad look and, at times, the silence from Labour leadership was deafening. The void created by Labour’s silence meant the media were left to their own devices relying on commentators from both sides.
The CGT debate was dominating the media on a daily basis right up until the Christchurch attacks and Labour were absent from the debate.
The public expected Labour to present well-informed arguments forcefully on why a CGT was needed in New Zealand. Instead all we got was repetition of the word “fairness” with vague assurances that only a select few wealthy elite would be paying it. These arguments were factually wrong and badly presented.
The anti-CGT media dominated the debate and Labour were left looking overwhelmed, ill prepared and out of their depth.
National was also absent from much of the debate, leaving the door open for New Zealand First to take votes from both Labour and National.
New Zealand First’s Winston Peters has not once ever supported a CGT
Did Labour think they could persuade him with, perhaps, the Prime Minister’s personal popularity or some backroom deal?
It’s not obvious why Labour ever thought they could get CGT past New Zealand First. Why embark on the costly and public exercise of a full tax review from the TWG without getting some degree of confidence that CGT would have the support of New Zealand First?
Obviously this was a strategic error by the Labour leadership — not helped by the Greens saying if they couldn’t get CGT into law, then none of them deserved their elected positions.
Labour’s political leverage over New Zealand First on CGT was precisely zero.
The only chance of obtaining their support was winning over the public and, more precisely, Peters’ support base. He was always going to make it difficult (if not impossible) to get a CGT into law but the errors Labour made along the way made his decision easy.
Underestimating the public
Right up until the end, the Prime Minister was still saying that only a very small percentage of New Zealander’s would be paying CGT.
These assurances were without substance and not based on facts. They were in direct contrast to a range of real facts put forward by various experts and even data collected by Government agencies.
There are 600,000 small and medium-size businesses, 200,000 lifestyle block owners, 250,000 bach owners, and 1.2 million KiwiSavers in New Zealand. All of these people would’ve had to pay CGT if Labour introduced it. That is a large chunk of New Zealand society and the public was well aware of that.
For Labour to say that only a small percentage of “rich” people would be affected, was an insult to the intelligence of the public.
This was, in essence, an attempt to deceive the public with wrong information but the public were too smart to fall for it. Many hardworking ordinary New Zealanders, who do not consider themselves rich, would’ve had to pay CGT. Labour’s continued effort to hide that fact was the final nail in the CGT coffin. The public felt deceived by Labour and Winston Peters knew it. Yesterday’s announcement was a loss for Labour and the Greens and a demonstration of the power held by New Zealand First in this coalition Government.