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Justice Minister Andrew Little yesterday decided to not take the repeal of the controversial three-strikes law to Cabinet, after Mr Peters and his NZ First caucus indicated they will not support the change.
This is a major setback for Labour and Mr Little, who obviously did not get backroom support from Mr Peters before pressing ahead with the issue.
The repeal is an issue Labour felt strongly about and it was gaining public support. Whether or not Mr Little can work now to revive the changes needed will be up for scrutiny.
The Sentencing and Parole Reform Act 2010 creates a three-stage system of increasing consequences for repeat serious violent offenders.
There are 40 qualifying offences comprising all major violent and sexual offences with a maximum penalty of seven years or greater imprisonment, including murder, attempted murder, manslaughter, wounding with intent to cause grievous bodily harm, sexual violation, abduction, kidnapping, and aggravated robbery.
A first warning is issued when an offender aged 18 or over at the time of a qualifying offence, with no previous warnings, is convicted of that offence. Once an offender has received a first ``strike'' warning, it stays on their record for good unless the conviction is overturned.
If that offender is subsequently convicted of another qualifying offence, they receive a final warning and, on a third offence, if sentenced to imprisonment, will serve that sentence in full without the possibility of parole. The first and final warnings will stay on the offender's record.
Mr Little also wants fewer people in prison, changes to bail laws and the Government has cancelled a large prison rebuild - all in the name of revising New Zealand's criminal justice landscape.
The Prime Minister's chief science adviser, Sir Peter Gluckman, has said in a recent report tough-on-crime policies are not working. They lead to longer time in prison, creating inmates who pose a greater risk to the society when they are eventually released.
However, some families - the victims of crime - have urged Mr Little to retain the law.
Mr Peters will soon be acting prime minister while Jacinda Ardern is on maternity leave. Although only for six weeks, there will be plenty of pressure on Labour to stay strong and resist attempts by NZ First to shape the dialogue.
Top-ranked Labour MPs have assured all and sundry anything proposed by Mr Peters will need to pass through Cabinet processes. If the latest actions taken by the NZ First leader are any guide, the Government needs to prepare for a rocky ride.
Since Mr Peters burst on to the political scene after overturning the 1978 Hunua result, the MP has never been far from political chaos. He was kicked out of the National Party only to be brought back into the first coalition fold by former National prime minister Jim Bolger. Mr Bolger had to use all of his wile, and MP friends of Mr Peters, to keep him on side.
Mr Peters is often seen as a likeable rogue, fighting for the underdog. History will show he has had a remarkable influence on New Zealand politics.
Getting Labour to agree to the $3billion regional slush fund overseen by Shane Jones, along with the planting of a billion trees, is an example of how much influence he had in forcing Labour to agree to his terms if it wanted to lead the Government.
The Greens are a side act to NZ First and it seems like Labour is becoming the same.
Mr Little says Labour is committed to a meaningful and balanced programme of change and he will be consulting coalition partners and the public on this over the coming months.
He may well be ruing not consulting earlier with Mr Peters.