Claire Trevett: Chris Hipkins right to ditch wealth tax as polls put Labour at tipping point[ad_1]
Tomorrow, Labour leader Chris Hipkins will tiptoe into his election campaign when he unveils Labour’s billboard and election slogan in Auckland.
Thus far, the spirit of Hipkins has been the reverse of former Labour leader Jacinda Ardern’s 2017 slogan “let’s do this”.
Hipkins has proceeded along the “let’s not do this” line – starting with his wee bonfire of distracting and superfluous reforms, through to this week when he ruled out a wealth tax or capital gains tax in Labour’s 2023 campaign manifesto.
That latter move has puzzled some, including Labourites who see a wealth tax as a good way to fund modest tax cuts for the rest.
Hipkins was quite right to scotch the initial plan of introducing the “tax switch” in this year’s Budget.
He did that on the grounds that Labour did not have a mandate to make such a move. It had not campaigned on it: if anything, it had signalled it would not bring in a wealth tax.
Labour would have been crucified if it had suddenly sprung it on voters with no advance warning or sales job. That is not a surprise gift, it is an ambush.
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The concern is not that Hipkins identified that, but that Finance Minister Grant Robertson did not. Robertson would have found some comfort in scrapping the idea from Treasury warnings about its impact on the books and inflation.
The question is whether Hipkins was right to rule it out for the foreseeable future, or as long as he is leader.
Hipkins clearly looked at it long and hard and decided he simply would not be able to sell it, and that it would do more harm than good to Labour’s chances on October 14.
That is primarily a political decision. It is possible to sell controversial or unpopular moves. A good parallel is the former National Government’s announcement in 2011 that it would partially privatise state energy companies.
But it has to be done carefully, convincingly and over a long period of time: John Key announced the asset sales plan in January 2011.
The critical difference between Hipkins and Labour now and National in 2011 is the polling.
It helps immensely in selling such moves if your party is high in the polls and your rival is low. Labour could possibly have done it back in 2020, had it not been hamstrung by Ardern’s promises and focus on Covid.
That is simply not the case for Hipkins and Labour now.
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In fact, it is almost the opposite.
This week’s polls drove that message in loud and clear: the Talbot Mills poll (Labour’s pollsters) and the Taxpayers’ Union Curia poll (National’s pollsters) had Labour on 31 per cent.
A miserable 31 per cent.
Now it is crunch time. Hipkins and Labour are at a tipping point in the polls: that teeth-clenching phase of waiting to see if the poll dip is simply a short-term response of voters to recent woes or the beginning of the end.
If the former, it is salvageable – but it relies on cast-iron discipline and messaging, and policy offerings that appeal. It also requires nerves of steel.
The risk is that it is the latter, that voters are starting to decide Labour has got too bogged down and does not have solutions for the troubles that afflict them. That will make them far more willing to tolerate any shortcomings they might see in National and its leader Christopher Luxon – or to look at a smaller party.
Once one side starts to get momentum and the other side starts to lose it, it becomes near impossible to reverse it.
Hipkins himself has recognised things could be at tipping point.
There was little doubt what he was talking about when he referred to “a messy few months”. They were messy largely because of various pratfalls of his ministers derailing his own vow to be focused on the voters.
He’s clearly hoping the double act of bad polls delivers a short, sharp fright to his ministers and MPs.
They sorely need one. Some seem to not care if they lose, while others seem to be suffering from a case of the galloping complacencies, apparently under the illusion - or delusion - they are a shoo-in to win. Some just seem exhausted.
That amounts to a politically toxic cocktail of arrogance, weariness and indifference.
The exception to this is Hipkins himself.
His job is not an impossible one. A saving grace is that National has not yet managed to get the momentum and cement it in. Neither large party is doing that well.
National’s apparent determination to out-Act Act on issues from law and order, rural issues and through nudges on race issues has helped by leaving the centre ground wide open for Labour to fight on.
The big question is whether Hipkins has the wherewithal to do that.
Are decent new ideas coming, or is Labour simply going to offer a bit more of what it offers now?
Hipkins intends to start trying to make pitches for that centre ground in the next week or so starting in two key areas: crime and tax.
On the law and order front, there is concern that National and Act’s message that Labour is soft on crime is starting to affect it.
Announcements are expected soon, understood to be around youth offenders and the consequences they face for their actions. This is Labour, of course, so don’t expect anything too extreme.
On the tax side, there is the pending announcement of whatever Labour will do rather than what it won’t.
His decision to scrap the wealth tax - and accompanying income tax cuts - was aimed at that centre ground. He was intending to neutralise an issue he feared would hurt him with voters in the middle.
In theory, the tax switch should have looked appealing to voters in the centre, who are far more likely to benefit from the tax cut than to pay the wealth tax.
However, there are fishhooks in any such move. For example, the issue of farmers being hit by the wealth tax because of the value of their farms was one factor that gave Hipkins pause for thought.
The last thing Labour wants is yet another fight with farmers - this time farmers subsidising tax cuts for city slickers - but carving out exemptions from taxes is unfair and administratively messy.
Ruling it out in any form while he was leader, ahead of any coalition negotiations, was intended to try to pre-empt National’s claims that Labour would use the Greens or Te Pāti Māori as a Trojan horse to introduce a wealth tax after the election.
That sparked a mini-conflagration on the left: the Greens and Te Pāti Māori claimed it lacked courage and no party could pre-determine what coalition negotiations might include. That was partly for political effect.
The Greens will be quietly stoked about it: they are targeting Labour voters to grow their own voter base. It gives them an opportunity to do just that: a point of difference to persuade those voters that if they want a wealth tax they should vote Green to ensure they have the influence to force Labour’s arm.
So want is left for Labour to deliver on tax?
While Hipkins has said he believed tax thresholds needed adjusting, he has also criticised National’s tax cuts for being expensive, unfunded and delivering a lot to millionaires but little to those on low incomes. That would mean anything Labour offers would have to aim at the bottom tax thresholds. It would also have to be funded - perhaps from a jiggle to the top tax brackets.
However, Hipkins and senior ministers are already dampening down expectations of anything big or exciting on that front.
Labour is effectively hoping voters will reward it for its restraint and be sceptical of how National will afford its tax cuts.
National managed to do that after the global financial crisis, but it’s hardly a rock-solid platform for Labour now.
Hipkins desperately needs to find a solid platform if Labour is to have a fighting chance – and fast.
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