Prime Minister Chris Hipkins returns home from Europe on Friday with a fight on his hands. Photo / Mark Mitchell
Prime Minister Chris Hipkins returns home from Europe on Friday with a fight on his hands. Photo / Mark Mitchell
Prime Minister Chris Hipkins is set to announce Labour’s new tax policy soon as the party’s struggles in the polls start to bite, with two recent polls putting it near the 30 per cent mark.
Hipkins returns home from Europe tomorrow with a fight on his hands to try to claw back Labour’s support before the election, and yesterday moved to rule out introducing either a wealth tax or a capital gains tax as long as he was leader.
Labour had planned to introduce a wealth tax in the May Budget to pay for a tax-free income threshold - but Hipkins pulled the pin at the last minute, saying the Government did not have a mandate to make such a change. The move to rule out any wealth tax was immediately described as “desperate politics” by National’s leader Christopher Luxon.
Instead, Hipkins will release a new tax policy in the next week or so, but has warned voters to expect “restraint”.
Hipkins has spent almost a fortnight of the past three weeks overseas, and is now battling to get Labour back on message after two polls this week showed its support dropping after a string of ministerial scandals and as inflation and high-interest rates continued to hit households.
Prime Minister Chris Hipkins walks with Australian Prime Minister Anthony Albanese on their way to a dinner during the NATO summit in Lithuania this week. Photo / Supplied
A second poll out yesterday showed a hit to Labour – the Taxpayers’ Union-Curia poll had Labour down to 31 per cent – a two-point drop on its result a month earlier. National was still ahead but had also dropped three points to 33 per cent. The day before, a Talbot Mills poll had Labour dropping five points to 31 per cent – five points below National on 36.
Hipkins was also losing his main advantage over National’s leader Christopher Luxon: his personal popularity. He had dropped from 29 to 23 per cent as preferred Prime Minister in the Curia poll, now just three points ahead of Luxon on 20 per cent.
And the Curia poll also hit a record low for those who believed the country was heading in the wrong direction: 65 per cent said it was heading that way, while only 22 per cent believed it was the right direction.
Hipkins said the polls were a message to Labour that voters thought it had lost its focus after a “messy” few weeks.
“It is an indication that New Zealanders don’t feel like we’ve been focused on the issues that they want us to be focused on, and I think that’s a message that the whole of the Labour Party will hear.”
Finance Minister Grant Robertson would not say what was still in play for Labour’s upcoming tax policy. Photo / Mark Mitchell
The polling period from July 2-10 came just after the fuel tax relief and half-price public transport ended, but Budget measures of free prescriptions and free or half-price public transport for those aged under 25 began.
The Herald’s poll of polls currently gives Labour a slim chance of holding onto the government benches after the election, even with Te Pāti Māori support.
There was slim reprieve on the interest rates front yesterday after the Reserve Bank held the official cash rate at 5.5 - the first time it has not risen since August 2021. However, Reserve Bank Governor Adrian Orr made it clear he would not be rushing to reduce it.
Labour’s proposed wealth tax had been part of a plan to introduce a “tax switch”, which would have used a wealth tax to pay for an income-free tax threshold for income earners.
That income-free tax threshold would have given workers about $1050 in tax cuts a year – about the same as National’s tax cuts programme. It was to be paid for by $10.6 billion raised in a wealth tax on those with assets with a net worth of more than $5 million.
The plan was worked on since at least last December but scrapped just days before Cabinet met to sign off on the Budget on April 11. Treasury had warned it risked being inflationary and delaying the return to surplus.
Hipkins said he halted it because he did not believe a major overhaul of the tax system was the right thing to do during tight economic times. He also believed the Government did not have a mandate for it, having not campaigned on it.
“When I became Prime Minister I said the Government I lead will focus on the basics. Experimenting with a wealth tax doesn’t fit that approach which is why I’m ruling it out.”
Tax policy is now set to be a key battleground for the upcoming election as both National and Labour continue to struggle to win support in the polls.
Hipkins is due to set out Labour’s new tax policy within the next week or so. That is now expected to focus on income tax thresholds rather than other taxes – but Hipkins was dampening expectations, saying in tough economic times it was best to keep things simple and “targeted”.
He said National’s tax cuts were unaffordable and “an inflationary sugar hit” which would deliver little to low and middle-income households.
“Some people might call it boring, but the times call for restraint and simple and smart policies which grow our economy, help drive inflation down and provide targeted help to those families who need it the most.”
Finance Minister Grant Robertson would not say what was still in play for Labour’s upcoming tax policy, but said he still believed a tax-free income threshold was the best way to deliver relief to those on lower incomes. However, that would have to be paid for somehow.
He would not say if Labour had ruled out a new top tax rate to pay for that, saying he did not want to rule anything in or out.
The news Labour would not implement a wealth tax upset its governing partner, the Green Party, who have included a wealth tax in its policy package and hoped to include it in any future coalition.
National leader Christopher Luxon said the Government has been "beavering away quietly, dreaming up new taxes". Photo / Mark Mitchell
Luxon described Hipkins’ wealth tax announcement as “a desperate political move”.
“It’s very difficult to work out what Chris Hipkins actually stands for anymore. He has a bet both ways. He’s been Prime Minister for six months, his government has been beavering away quietly, dreaming up new taxes and actually he could have stopped it at any point.”
He said Hipkins had refused to rule out a wealth tax for the past six months and had only done so this week because of the polls. He also did not believe that Hipkins would hold true to his promise, saying he would buckle if a coalition partner demanded it.
“He’s just being politically expedient and going to say and do anything in order to win an election.”
It’s understood that as well as tax policy, announcements on law and order are coming as Hipkins tries to clear the decks of problem areas for Labour and get back to his original promise to focus on so-called ‘bread and butter issues’ that are concerning voters.
Claire Trevett is the NZ Herald’s political editor, based at Parliament in Wellington. She started at the NZ Herald in 2003 and joined the Press Gallery team in 2007. She is a life member of the Parliamentary Press Gallery.
