Chris Hipkins addresses the media about his leadership status and his intention to continue leading the Labour Party.
Video / Mark Mitchell
A compromise was reached within the Labour Party to quell dissent about the leadership of Chris Hipkins and allay concerns the party had abandoned its base.
Labour’s constitution forces each leader to be endorsed by 60 per cent of their caucus within three months of a general election. That votewas held last week, with Hipkins winning.
This raised some eyebrows, given Hipkins had been clear earlier this year that those taxes had been ruled out under any government he were to lead, whether it be this year, next year, or after the next election.
“I’m confirming today that under a Government I lead there will be no wealth or capital gains tax after the election. End of story,” Hipkins said in July.
Last week Hipkins covered himself, saying the “rule-out” expired with Labour’s loss – although not everyone has been convinced by the explanation.
The Herald understands the decision is every bit the u-turn that it appears to have been, and came about as something of a compromise with the disappointed and disaffected group of MPs who were frustrated with the wealth tax decision.
David Parker has long advocated things like the taxation of wealth. Photo / Mark Mitchell
Parker was the chief architect of the wealth tax idea and quit the revenue portfolio after Hipkins ruled it out.
“It’s a matter between me and the caucus,” Parker said of his vote.
Parker was said to be the chief voice of the caucus dissenters, who felt the wealth tax decision was the wrong call.
Senior MP Phil Twyford, also said to be in the Parker camp, also did not specifically express support for Hipkins outside the meeting last week, even though he thought Hipkins would win.
“Those are the kind of things we discuss inside the caucus room,” he said.
Both sides have claimed to have up-and-comer Arena Williams in their respective camps. Williams was said to be a supporter of more radical change, before being won over by advocates of the status quo. It is unclear where she currently sits.
Chris Hipkins and Carmel Sepuloni after the endorsement vote. Photo / Mark Mitchell
Inside last week’s meeting, the dissenters wanted action on tax, saying it would be difficult to survive the next three years in opposition and fight another election campaign if Hipkins’ rule-out meant wealth and capital gains taxes were in deep freeze.
Hipkins, without putting up much of a fight, agreed to put both back on the table - an olive branch to the dissenters. This doesn’t guarantee either would be included in the party’s 2026 manifesto.
The compromise has worked for now. It helps to neutralise the issue for the meantime, preventing the left of the party from mobilising around it as an issue of contention. The dissenters do not have the numbers to get rid of Hipkins, but they have the muscle to make his life difficult. By offering them something he did not need to, Hipkins has quashed that dissent.
Grumpiness over Hipkins’ decision runs deep. The pro-wealth tax team feel the tax never got a fair hearing. They were not happy with the focus groups, showing the tax to be unpopular, which appeared in the media soon after Hipkins’ decision was made public.
Parker, in particular, was unhappy with the way the tax was marketed, with the focus on the “tax” component and not what it would pay for: a tax-free threshold delivering a gain of $20 a week to most income earners. Taking a leaf out of the John Key-Bill English book, Parker preferred the idea of marketing the policy as a “tax switch” - taxing some people to give tax cuts to others. This had the added benefit of dampening the perennial criticism of Labour as a party of tax-and-spend.
The opposing camp feel the wealth tax camp is placing too much emphasis on the wealth tax decision, which they say would not have significantly altered the outcome of the election. The 2011 and 2014 campaigns showed the party notching up shocking losses when running on a capital gains tax. Helen Clark and Jacinda Ardern won on a policy of lifting the top income tax rate, but not on introducing significant new taxes.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
