The Week in Politics: Transforming NZ easier said than done, the government is finding out

5:05 pm on 1 March 2019

By Peter Wilson*

Analysis - There's little evidence so far that Prime Minister Jacinda Ardern is leading a "government of transformation" and a new test of its commitment to change is just around the corner.

Jacinda Ardern speaks to media after her first major speech of the year to a business audience at a central city hotel in Auckland.

Jacinda Ardern speaks to media after her first major speech of the year to a business audience at a central city hotel in Auckland. Photo: RNZ / Claire Eastham-Farrelly

Before the election, Labour promised to deliver a transformative government.

In October, after nearly a year in office, Prime Minister Jacinda Ardern was holding to that.

"We are a government of change," she said, but there's not much evidence of it.

Transforming housing hasn't worked. KiwiBuild's progress in putting affordable homes on the market fell woefully short of its first interim target.

The government insists it's committed to the 10-year target of 100,000 homes but it can't really believe that's achievable.

The election promise to transform workplace law and take it back to where it was before National came to office, began with strong legislation in Parliament.

It was held up when NZ First didn't like important clauses and eventually emerged much weaker than Labour had intended.

The first priority Ms Ardern set in her October speech about being a government of change was: grow and share New Zealand's prosperity more fairly.

We've heard a lot this week about sharing and fairness. It underpinned the Tax Working Group's mission, Ms Ardern said.

And true to its brief, the working group came up with a plan to do just that.

Impose a broad-based capital gains tax and use the revenue to offset cuts in income tax, a fiscally neutral transformation of the system.

Even before the dust had settled the problems started to appear.

It quickly became apparent that keeping farms and small businesses in the frame was a political hot potato.

Although NZ First leader Winston Peters is yet to show his hand, and he holds all the cards, he had made it clear before the report was released that including farms was not an option.

Farmers weren't speculators, he said, they bought for permanence and they were part of the provinces. "They don't do this stuff you see in Christchurch, Wellington or Auckland."

His attitude was no surprise given NZ First's aspiration to become the champion of regional New Zealand - and win its votes.

Ms Ardern herself had a similar but less forthright message at her post-cabinet press conference on Monday.

The impact of a CGT on farms and small businesses would be "top of mind" when decisions were made, she said.

Asked what that meant, she explained that she grew up in Morrinsville and her first jobs were with small businesses.

She knew what rural folk were saying and thinking.

Ms Ardern denied she was talking down tax changes, but that's what it sounded like.

So transformation is good - but not too much of it.

It now seems almost a certainty that when the government announces its final decisions on reforming the tax system the measures will be a pale shadow of the report's recommendations.

They will therefore bring in less revenue and any income tax cuts are likely to be minimal.

Another transformation test lies ahead, and it's a hard one.

An education taskforce has recommended the biggest shake up in the system in 30 years, including setting up regional hubs to handle zoning, abolishing intermediate schools and replacing the decile-based funding system.

It's out for public consultation with a report back due at the end of April.

Making big changes to the education system could be even more troublesome than reforming taxation. It's very voter-sensitive, and the government knows it.

How far it is prepared to go, or how far it actually wants to go, will be another indication of the strength of its commitment to the transformation agenda.

Huawei controversy gets more complicated

While tax reform was dominating the media, there was a perplexing development in the Huawei controversy.

US Secretary of State Mike Pompeo told Fox News that if any country used the Chinese company's equipment in their critical information systems "we won't be able to share information with them, we won't be able to work alongside them".

He also said use of Huawei's equipment could also have an impact on where the US situated its embassies and military bases.

Mr Pompeo is a very senior US politician, and he went on to explain that the US had shared information about Huawei with countries around the world.

"We think they'll make good decisions when they understand that risk."

It doesn't seem to have shared it with New Zealand, and we're part of the Five Eyes surveillance network that includes the US. It doesn't get much more sensitive than that.

Andrew Little, the minister in charge of the GCSB, said neither he nor the director-general of the GCSB had heard any such message, directly or indirectly.

"New Zealand's security and intelligence relationship with the United States, and indeed the Five Eyes partners, is based on what we contribute to the relationship, not on compliance or acquiescence" he said.

Mr Little may be right about that, but the US has a lot of clout within Five Eyes.

The GCSB vetoed the use of Huawei equipment in Spark's new 5G network, citing security risks. That upset Huawei and China.

Now it's up to Spark to come up with ways to mitigate the risk, which the GCSB will consider.

It could end up on Mr Little's desk. He's probably hoping it doesn't.

*Peter Wilson is a life member of Parliament's press gallery, 22 years as NZPA's political editor and seven as parliamentary bureau chief for NZ Newswire.

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