Brigitte Morten: CGT was a political zombie from the start

8:44 am on 19 April 2019

By Brigitte Morten*

Opinion - It was all political games with the capital gains. This was a policy that was never going to be implemented in the way that Labour took to the 2017 election.

An auction sign outside a house for sale in Auckland.

Photo: RNZ / Claire Eastham-Farrelly

The prime minister always knew as she said in her statement that while she believed in the capital gains tax, that the New Zealand public didn't.

It has been clear that a small - predominantly left-wing base - saw this as another way to raise government revenue. It was never going to get widespread support in a country so attached to home ownership.

But what Labour was trying to do was satisfy that base. They knew that they had to play the political game of keeping this issue - so important to this group of voters - alive for as long as possible.

There is no doubt that behind closed doors, they will be making it clear that Coalition Government was the block, and it is out of their hands until they get more votes.

While the prime minister's statement shouldn't have been news to anyone, it was a signal of where the prime minister sees herself - out of step with the New Zealand public. It was a particularly extraordinary statement to make, given how she positioned herself over the last few weeks, so closely in step with our hearts and minds that she delivered gun reform so quickly.

The capital gains tax debate has produced a number of extraordinary statements from politicians that will continue to haunt them. Sir Michael Cullen's backflip to support a CGT in the Tax Working Group, after over a decade of repeated opposition, was clearly done once again to satisfy that Labour base.

The Greens' co-leader James Shaw made the statement that a government that didn't deliver CGT didn't deserve to be re-elected. It is unclear how he navigates around that statement for the next 18 months.

For Opposition Leader Simon Bridges he comes out of the debate unscathed. Not only does this backflip allow him to claim victory but it allows him to continue the narrative this government wastes millions on working groups to produce nothing and that there are still new taxes on the table.

The big winner is NZ First. While Deputy Prime Minister Winston Peters tried to downplay their role in the backflip, it is clear that they were significant.

The mere fact that a decision couldn't be made in Cabinet and was only made hours before the announcement (and after the Labour caucus call was scheduled), points to the fact it was NZ First. The prime minister was certainly not out seeking another round of feedback from the general public.

The other members of NZ First will be playing up the role their party played - particularly those MPs staring at the hard realities of sitting at around 3 percent in the polls. The CGT policy was one that would hurt those in the regions - those that NZ First is directly going after. It is difficult to see how they could have even been expected to support such a tax.

Unfortunately for the prime minister, this is the second failure in her 'year of delivery'. The first was KiwiBuild. And this is another one so closely tied to their 2017 election promise to make home ownership easier.

There will be many within Labour that will be relieved that they don't have to have another conversation over Easter about this policy and that it leaves clear air for Budget in May. But the reputational damage that this does will follow them for much longer. The political games on a CGT may be over but they have come at a cost.

*Brigitte Morten is a senior consultant for Silvereye. Prior to that she was a senior ministerial adviser to the Minister of Education in the previous National-led government, and an adviser and campaign director for Australia's Liberal Party.

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