National’s LNG blunders a warning ahead of election campaign

2026-02-10 - 16:00

Comment: On Monday, Energy Minister Simon Watts triumphantly announced the Government had approved the construction of a $1 billion-plus gas import terminal in Taranaki, funded by a small levy on electricity generation. While the sector was supportive, criticism from expected and unexpected political corners came in hot. Labour leader Chris Hipkins called it a “gas tax” – and he was backed up by an unusual ally, the Taxpayers’ Union, which said it was a “power tax”. “Luxon promised ‘No new taxes’, and he will destroy his credibility if he u-turns now,” the union’s spokesperson, James Ross, said. “You don’t make electricity bills cheaper by taxing them. Dancing on the head of a pin over what is a tax and what is a levy is a Labour Party talking point.” Unsurprisingly, Watts forcefully denied it was a tax when asked about the policy on his way into caucus on Tuesday. But he went on to say it wasn’t a levy, either. “The reality is that what we’ve proposed is neither of those, it is a net savings to Kiwi households on their energy bills, and that will provide downward pressure,” he said. Cue confusion (on the part of journalists and, seemingly, ministers), ridicule (from the Opposition) and another dig (from the Taxpayers’ Union who called it an “unforced error” and unfavourably compared Luxon to Jacinda Ardern). Even Winston Peters admitted a levy was a tax, though by Tuesday afternoon he was running a different line. On Monday it was a levy. On Tuesday it wasn’t. Eventually Watts conceded: “The cost of the insurance that will be incurred every year as a result of the infrastructure that will be put in place will be paid for via a levy on the electricity sector,” he told the House. Other ministers described it as a “charge” or a “fee”, leading Labour’s Megan Woods to describe it as a “tax slash levy slash fee slash charge”. And despite Watts’ backdown, on Tuesday afternoon National put out a Facebook post accusing Hipkins of lying about the policy and doubled down: “This is not a tax or a levy on households.” Although the levy would be on electricity generators, the costs would likely be passed on to consumers, according to official advice. This is not how the Government had hoped its announcement would go down. Energy – and particularly power bills – is likely to be one of the big topics in this year’s election campaign. Most of the Government’s policy in this area has fallen flat. The big outcome of the much-awaited electricity sector review, announced in October, was that Nicola Willis would write a letter to the gentailers telling them to build more generation. LNG has the potential to garner serious attention. It’s a major infrastructure project, which Watts said could be built in under a year. Luxon confirmed the Government would pass a law to automatically consent the facility if that was needed. Showing things can still get built in New Zealand is a win on its own. More importantly, however, the Government had official advice which suggested $50 in savings a year for the average household on their power bills. That’s the net benefit Watts was talking about – sure, there will be a small levy on electricity, but it will be more than offset by the immediate decrease in forward power prices from the certainty of gas availability, he argued. Instead, the Government has found itself debating the finer points of taxes and levies. And while the talking points distributed to ministers meant they tried to bring the conversation back to net benefits, just dodging the question entirely proved a failing strategy. There’s a bigger warning here for National as election year ramps up. This line of attack should have been obvious. Willis and Luxon have made a big deal of Labour’s planned capital gains tax – they should have known the Opposition would turn a levy around and make the same critiques. They seemed unprepared and then unable to salvage the narrative once the severity of the situation became apparent. The slick campaign machine from 2023 looked rusty on Tuesday. With polls showing an incredibly tight election in November – the latest Taxpayers’ Union’s poll from Monday projected a hung Parliament – every little bit will count. National can’t afford a blunder like this on any future major policy announcements. Perhaps the best thing that can be said about all of this for National is that it happened in February instead of September. Messing up this badly once the campaign is in full swing could be a death knell for Luxon’s hopes of a second term as Prime Minister.