Inside the coalition: Who's really running the country?

Until the last-minute suspension of the re-entry to the Pike River Mine, it was to have been a symbolic moment for the Government.

NZ First leader Winston Peters, Labour leader Jacinda Ardern and Green Party co-leader James Shaw were to stand together to watch the re-entry into the drift.

It is one of the precious few policies the three parties have in common. That is why it was one of the first that kicked into action. The difficulties were practical - not political.

It was a policy of change, of delivering to the dead miners' families hope after the previous government refused to do so.

Things were very different on April 17.

Astute observers realised the capital gains tax was on the chopping block when the news came through that Ardern would be making the announcement alone.

Usually one or both of the other parties' leaders stood alongside when a consensus had been reached.

Trouble was at mill.

It was a brutal lesson in just how difficult Ardern's governing arrangement is.

Sure enough, Ardern pointed to NZ First as the reason she could not get the tax over the line. NZ First proudly took ownership of that.

But that party cannot be held responsible for what came next.

Ardern promptly killed off the capital gains tax policy altogether, giving up the chance to look at it again in a second term.

It served as a lightning rod for those on the left who had expected more, and were already somewhat disillusioned that the pace of change had not been faster.

Nor was capital gains tax the first example.

In the very first week of government, Ardern had to back away from the first major policy she announced as leader.

That was the policy to charge for commercial use of water. It was a key part of her policy to clean up waterways.

Employment reforms had to be watered down – including the 90-day trial policy that was so loathed by Labour and the unions.

Almost every major policy initiative has been delayed by months, bogged down in negotiations with NZ First and occasionally the Greens.

They include measures in climate change, employment relations, mental health, a bill to allow trans people to easily change their birth certificates, and Ardern's personal promise of abortion law reform which was supposed to be put up by the end of last year.

Ardern herself is copping some of the blame.

"The Prime Minister needs to do more than speak of kindness and compassion towards our most vulnerable. It needs to introduce tangible policies to narrow the growing gap between the rich and the poor," Auckland Action Against Poverty spokesman Ricardo Menendez March said after the capital gains tax was scrapped.

The Council of Trade Unions and several of Labour's affiliated unions also issued statements about the capital gains tax.

Left-wing commentators such as The Daily Blog's Martyn Bradbury, the Spinoff's Danyl McLauchlan and the Herald 's David Cormack subsequently wrote scathing critiques of the pace of delivery on the "change" agenda.

Grassroots supporters on the left were also disappointed.

Among them is Green Party supporter Sarah Bickerton, a PhD candidate at Victoria University.

Bickerton has watched the "incremental tinkering" of the Government with some disappointment.

She admires Ardern: "but I do consider her a bit of a [Canadian PM] Justin Trudeau to a certain extent, in the sense that she says a lot of the right words but she still plays a very conservative approach to politics. To her, risk is something to be avoided.

"Yes, this is the nature of MMP. It's a simple numbers game. But on [capital gains tax] there was no fight, they didn't dominate the narrative, they didn't speak up."

The year of delivery: The turtle or the hare

Every government faces the struggle of persuading their supporters of the truth in the fable that the turtle will overcome the hare in the end, that incremental reform is better than radical.

Ardern's problem is she previously promised the hare could win.

In the 2017 campaign, then National Party leader Bill English forecast that the "stardust" around Ardern would eventually rub off.

What he meant was that the hype around her, the promise she held out, could not survive the journey into reality.

Ardern's whole campaign was based on change – generational change, government change after nine years of National, and – most importantly for Labour supporters – genuine societal change to what they saw as increasing inequality.

Eighteen months later, English's prognosis for stardust is yet to come to fruition at least when it comes to Ardern herself. In her case, that stardust has only increased.

But when it comes to the change message she carried, things are rather different.

At the start of 2019, Ardern declared it the "year of delivery" after many of the policies Labour proposed were sent to working groups to work out the year before.

Among them was the Tax Working Group.

The first major "delivery" turned out to be that complete and utter backdown on the capital gains tax.

Ardern may lament that the capital gains tax became something of a litmus test for Labour's change promise.

At the capital gains tax press conference, Ardern pushed back at the suggestion it was a cornerstone policy.

She pointed to child poverty, climate change, housing and mental health as areas integral to her campaign and where the Government was still delivering change.

"We are making incredible progress. Transformational progress, and progress any other Government would not make."

There are, of course, areas in which Labour has indeed delivered on what was on the label.

There was the Families Package, the centrepiece of the "mini-Budget" Labour delivered soon after being elected and key to Ardern's child poverty platform.

There was also the policy for tertiary students to pay no fees for their first year of study or training.

It was one of those policies Ardern presented to put her own stamp as leader, and she spoke of it almost daily on the campaign, visiting universities, polytechnics and schools frequently to do so.

However, it is understood Labour is now re-evaluating the rollout of the next stages of it. It was intended to be extended to cover three years' free tertiary education.

But it is very expensive and in its first year did not have the desired effect of lifting enrolments.

Unless that changes, Labour will consider pulling the pin on the rollout and leaving it at just one year.

In some areas of under-delivery, Labour has only itself to blame.

One is KiwiBuild, which was over-hyped as the solution to the woes of first-home buyers and has now gone back to the drawing board.

But in other areas, the change train has come up against other brick walls.

Brick wall I: Winston Peters

The one that gets most publicity is NZ First and its leader Winston Peters.

When Peters stood in the Beehive Theatrette back on October 19, 2017, it was the dramatic culmination of 26 days of waiting and negotiating.

Peters said his party was given a choice between a "modified status quo and change".

He said he believed a majority of voters wanted change. So he said he would choose change. He chose Labour.

As things have transpired, Peters and NZ First have since often struggled to turn to face the strange, as David Bowie would say.

They have stymied that change time and time again.

The most brutal example was the capital gains tax, which was killed off for the foreseeable future after Peters said no.

It was just one in a list of Labour initiatives to be halted, watered down, put on the backburner for another day, or bogged down in tricky negotiations.

One example kicks into effect on May 6. Labour has long campaigned against 90-day trials for new staff in workplaces. It planned to abolish them.

NZ First convinced them to leave them in place for smaller businesses, with fewer than 20 staff.

Peters would not be interviewed for this piece – his office said he did not have time.

But in the past when asked about measures his party has blocked, Peters simply pointed to the coalition agreement and the Speech from the Throne and said everything else is up for negotiation.

During negotiations over the capital gains tax, it was pointed out to both Ardern and Finance Minister Grant Robertson at various stages that if Labour had indeed been fixed on a capital gains tax it should have included it in that coalition agreement.

So it is that Labour finds itself constantly negotiating over implementing its own policies.

NZ First approaches things one by one.

It does not like horse trading, giving way on one measure in return for getting another.

There have been instances in which NZ First has indicated approval, only to subsequently change their minds.

One such case was the repeal of the "three strikes" legislation.

Justice Minister Andrew Little was given an indication NZ First would support repealing that, and announced it only for the NZ First caucus to subsequently veto it.

Now NZ First Minister Tracey Martin says controversial matters are passed through caucus before any undertakings are given "to avoid anything like that again".

Martin has become a critical link between Labour ministers and NZ First, respected by Ardern. She defends the delays, saying some issues are complicated.

"Some of these issues take longer because they are complicated issues. I'll give you three - carbon, cannabis and abortion.

"NZ First had perspectives they campaigned on and we took into negotiations. For example, on abortion the Greens have a view, Labour has a view. We had a discussion with them to see how close we are in our thinking."

This means things sometimes take a long time.

All of this has caused some frustration for Labour ministers trying to get their work through Cabinet.

One of those ministers is Justice Minister Andrew Little, who appears to have suffered more than most from having his work programme stymied by NZ First, although he will not criticise them for it.

On issues such as abortion reform and the criminal justice reforms, Little says there were factors other than NZ First which added to delays.

Asked if he believed Labour's supporters had expected more from the so-called "transformational" government, Little says Peters himself had acknowledged they voted for change.

"That said, the reality is, to pass legislation that creates change, you have to have the numbers in the Parliament. And that is why issues are dealt with policy by policy, each is negotiated. That was always going to be the product of MMP."

Little said decisions on abortion reforms were now expected in the next few weeks.
Martin said the details had been confirmed, agreed to by the NZ First caucus, and it would now go to Cabinet.

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• Premium: Exclusive - Breakthrough sees possible abortion reforms back on track

Future wrangling is likely on criminal justice reforms. An interim report is due in the next few weeks and a final report with recommendations was likely in August.

NZ First have already put the kibosh on a repeal of the "three strikes" legislation and traditionally take a stance that is hard on law and order.

Little said he expected "robust debate".

"There should be, and not just from NZ First but from all quarters.

"I think we will get to a point where we will make change and I think NZ First has acknowledged we can't just keep locking up more and more people."

Then there are electoral reforms. Labour and the Greens had been looking at changing the threshold from 5 per cent to 4 per cent, and getting rid of the "coat-tailing" provision. That allows parties which win an electorate but fail to get to the five per cent threshold to bring other MPs in.

NZ First had considered a referendum on that question, but are understood to have pulled the pin on it recently.

NZ First's influence has not gone unnoticed.

CTU head Richard Wagstaff said they were very disappointed by the decision on 90-day trials as well as scrapping the capital gains tax.

"I think they are very influential. All the parties are influential, but NZ First, from our point of view, would appear to have been quite a barrier on the capital gains tax and had an influence on employment relations.

It is becoming clear that this is a coalition government – not a Labour-led government, so to speak. And I think that is having an impact on where the centre of gravity is in terms of the reforms we would like."

However, Wagstaff said the NZ First brake was still preferable to what had come before with the National Government.

There had been improvements in industrial relations and NZ First had supported measures such as rises in the minimum wage.

"I don't want to unfairly demonise NZ First. There is progress, and they have supported that progress."

Dead rat street

The Green Party has suffered the most from the combination of NZ First's influence and the Budget rules.

It is fair to say the Greens have had to swallow more dead rats than NZ First.

They had to support the waka jumping legislation, and see capital gains tax taken out from under them.

Shaw puts a brave face on it.

In fact, he tries to argue that such dead rats fit within the Green Party's long-standing philosophy of getting consensus on every matter, big or small.

Surprisingly, Shaw goes into bat for Peters and NZ First. He points out the party had backed a raft of policies that the Greens did like - from the families package, increasing the refugee quota, rail investment and Department of Conservation funding.

"Yes, NZ First have stopped a couple of things happening and delayed some stuff but every other big thing we've done, they've backed.

"They had to say yes to all of that.

"So I think it is a bit unfair to say that they are just the handbrake on the Government."

However, the Greens have started to face flak from their own supporters for not flexing their own voting power more.

Shaw believes the party's supporters recognise compromise is needed.

"I know people feel those disappointments keenly, but ultimately it's worth it."

Shaw's next big test will be the Carbon Zero legislation, which will guide the Government's goal of zero net emissions by 2050.

That is now months late, but is due to be announced very soon.

Shaw says the delay was due to extensive brokering with NZ First and National to try to get broad support.

Despite that, he does not know whether he has the National Party on board.

That means it will likely not go as far as many of the Green supporters might like.

As for NZ First giving way sometimes?

As a general rule Winston Peters doesn't eat dead rats – he kills them for others to eat.

But he did get on board with the revised Trans Pacific Partnership, largely by pretending it was a different agreement to that arranged by National.

His pro-development minister Shane Jones also had to suffer through the decision not to allow more mining exploration permits in the Taranaki.

Brick wall II: Money

Labour itself has pointed to money as one of the reasons it cannot deliver on its agenda in areas from health, education and child poverty as quickly as it had believed when in Opposition.

The Budget Responsibility Rules commit Labour to staying in surplus, and keeping debt tracking down as a percentage of GDP.

Labour also blames "neglect" by National for presenting Labour with more of a problem than it anticipated.

National's counter is that Labour simply over-promised to the voters.

Those Budget Responsibility Rules are currently under review.

They have their critics among those who believe they restrict Labour's ability to respond to the very problems they have described as urgent.

Wagstaff said the CTU had always opposed the rules and believed they were much too tight.

He pointed to all the areas Ardern had highlighted as her priorities – housing, health and climate change.

"Our view is they have to be loosened significantly to allow us to do what we need to do. You can't do it without money."

James Shaw is also lukewarm about them, although the Greens signed up to them prior to the election. It is probably fair to say they will not do so again.

Criticism about NZ First's influence and the slow pace of change is largely voiced only by those on the left.

For those on the right, the delays and dilutions are greeted with some surprised delight.

Business NZ head Kirk Hope said it was simply a product of a coalition government, in which talk of "transformation" was irrelevant unless it was included in the deal between the parties.

"In a few key areas for business, we got change. And I think the reason we got change is because NZ First listened to business and negotiated hard on those areas, such as with multi-employer collective agreements, union access and so on. So my view is it is working as it should really."

That kind of response is exactly what Peters wants.

Those he is now targeting are the National Party voters, so that in 2020 he can argue only his party can keep a potential future Labour–Greens government in check.

Brick wall III: Jacinda Ardern. 'Stardust' vs 'pragmatism'

The third brick wall is Ardern herself.

Ardern describes herself as a pragmatic idealist.

All her talk about kindness and compassion had led some to underestimate just how much emphasis Ardern could put on the "pragmatic" side of that.

The sacrifice of the capital gains tax was the clearest example of this – not the failure to get it past NZ First, but her decision to completely rule it out as long as she was leader.

It was to Labour what asset sales were to National – a policy that was considered unpalatable.

Yet National managed to push partial sales through without suffering in the polls, largely courtesy to an extended sales job by Key and English.

Many believe Ardern could have used her prodigious communication skills to do the same thing in a second term.

Other "change" items have simply been put on hold until the political winds may change.

Progress is in sight, despite delays to many government proposals.

James Shaw's Carbon Zero Bill is due to be announced very soon, the welfare reforms package is also nigh and likely to form a big part of the Budget.

Little is hopeful of getting Cabinet sign-off for new legislation on abortion reforms and a cannabis referendum in the next few weeks.

In a month's time, the Budget will be the biggest chance to deliver on the Year of Delivery.

Much has been made of it being the first "wellbeing" Budget – a term that means it will be judged as much on how it delivers to increase social wellbeing as the economic bottom lines.

Thus far, it is buzzwords. The real test will be the policies and programmes within it.

Dining with the devil

Ardern and her team will now be looking forward to what winds they might want to catch in 2020.

Labour's polling is now in the high 40s rather than the mid 30s, as it was in 2017.

It will be in a far more advantageous position in 2020, likely able to form a government with only one other party.

The ideal scenario for Ardern will be what Sir John Key had throughout his tenure. To form as broad a government as possible but be able to form a majority in more than one way.

If that is the case, NZ First will be in a much weaker position.

Labour will also have learned a thing or two about dining with the devil.

The NZ First coalition agreement is Peters' bible.

Under the pressure of forming a government, Labour's negotiating team apparently forgot Peters was a lawyer who operates under "contract".

The trouble is it references only what NZ First will get with any specificity. There is little mention of what Labour will get in return, beyond confidence and supply.

Next time, Ardern will be armed with a long spoon.