Grant Robertson is just as compromised as David Parker in his position on the wealth and capital gains tax and should also stand aside. But because Hipkins has already faced more Cabinet upheavals than any modern PM, Robertson survives
Opinion: David Parker has made the right decision to stand down as Minister of Revenue in the Prime Minister's mini-Cabinet reshuffle after Kiri Allan’s resignation. Parker's clear opposition to Hipkins' captain's call to abandon plans for a wealth tax and a capital gains tax that he, and Minister of Finance Grant Robertson, had been working on, made that inevitable.
The Cabinet Manual states clearly that acceptance of ministerial office also means accepting collective responsibility. That means ministers must support the decisions of Cabinet, regardless of whether they were at the meeting where the decision was made. On the face of it, Parker’s position as Minister of Revenue had become untenable so he had to go.
However, the same also applies to Robertson, given his similar comments after the wealth and capital gains taxes plan was dropped. But he has not been moved aside, nor apparently has he offered to do so. In any case, pragmatism dictated his retention, at least until the election. The last thing Hipkins would have wanted right now, alongside all the other comings and goings within the Cabinet, would have been the departure of his Minister of Finance. So, Robertson remains, for the time being, and the country has been spared an unnecessary and unwelcome bout of financial market jitters.
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Nevertheless, Parker’s decision raises other intriguing questions. The Cabinet Manual provisions are based on the premise of formal Cabinet decision-making, after the process of consideration of a minister’s or ministers’ proposals by a Cabinet committee, and subsequently by the full Cabinet. From that point the doctrine of collective responsibility applies.
But the decisions about the wealth and capital gains taxes do not appear to have followed those processes. They were being developed by both ministers in the context of framing the 2023 Budget. According to papers released by the Treasury, Robertson and Parker presented an oral item to Cabinet on March 27 this year updating ministers on the proposed tax switch they were working on, including the introduction of a wealth tax.
The principle that ministers resign their portfolios if they disagree with government decisions affecting them is well-established. Parker’s decision reflects that and is the correct one
However, given the Cabinet Manual provisions that oral items are opportunities to test preliminary support for an idea, or to update Cabinet on a current issue, it is not clear whether the Cabinet made any formal decisions on the package then.
The Budget is normally finalised by mid-April, so it is unlikely ministers were being informed for the first time about what was being planned. And the requirement for the Prime Minister’s prior approval to raise an oral item shows he was quite happy for the matter to be raised, which implies it was all part of an ongoing decision process.
It has been suggested that in instances where the Prime Minister makes a captain's call to rule out certain policy ideas, the conventions around collective Cabinet responsibility do not apply, and that ministers therefore have more freedom to be publicly critical of government decisions they disagree with. That is certainly the defence Robertson and Parker are offering to their otherwise extraordinary public responses to Hipkins ruling out their pet tax policy project.
It implies their work on capital gains and wealth taxes was simply part of the normal work of ministers looking at various policy options before finalising propositions to put before their Cabinet colleagues. Hipkins’ decision to call a halt was, therefore, in that context no big deal, and certainly not a matter of collective Cabinet responsibility. In any case, Hipkins is on record, before he became Prime Minister, supporting proposals before the Standing Orders committee last year, to allow ministers more freedom to speak out on government decisions they personally disagree with.
But there are problems with that line of argument. For a start, the tax switch plans of which capital gains and wealth taxes were a key part were more than just the idle speculations of the Ministers of Finance and Revenue. Between July 2022 and May 2023, the Treasury and Inland Revenue prepared 51 papers on tax plans for the two ministers. In addition to the March Cabinet oral item, wider aspects of the package, including the increase in the trustee tax rate, changes to Kiwisaver contributions, and overall tax forecasts were considered by the Cabinet on several occasions in that time.
It stretches credibility to imply Cabinet was not aware of Robertson’s and Parker’s other plans and had not expressed any views about them over those months. After all, tax and economic policy are at the core of any government’s programme, and would certainly be discussed in the context of Budget formation.
The Prime Minister is held to be the first among equals in Cabinet and has overall responsibility for government policy. Hipkins was exercising this authority when he curtailed work on the package before the Budget was finalised because he considered the Government lacked a mandate to proceed further. But it is likely this followed Cabinet discussions and that therefore collective responsibility applied.
The principle that ministers resign their portfolios if they disagree with government decisions affecting them is well-established. Parker’s decision reflects that and is the correct one. It may also signal a longer-term wish to leave politics if Labour is unsuccessful at the coming election. He is fortunate that in Barbara Edmonds, a former tax lawyer and Inland Revenue policy adviser, an able replacement is at hand.
But Robertson is just as compromised as Parker and should also therefore stand aside. He will probably also leave Parliament quickly if Labour loses. Like Parker, by losing the tax argument so decisively, his long-term credibility has been irreparably damaged. However, over the last six months Hipkins has already faced more Cabinet upheavals than any modern Prime Minister. The last thing he would want right now is to have to find a new Minister of Finance. So, Robertson survives.
The wider signal that sends is that, like so many other provisions of the Cabinet Manual at present, the collective responsibility of ministers has become contestable and will be upheld only when it suits the government’s political interests.
