Analysis: Strike one: Capital Gains Tax. Strike two: Welfare reform. The Labour-led government is running out of chances to be the "transformational" administration Jacinda Ardern promised in the 2017 election campaign.

Photo: RNZ / Rebekah Parsons-King

Today the Welfare Expert Advisory Group handed the government a radical blueprint to not just tinker with welfare, but - in their words - to make "urgent and fundamental change".

It suggested some lower hanging fruit, such as hiring more staff and scrapping the discriminatory sanctions against women and their children if the woman does not declare the father's name to authorities. While that latter policy will be contentious, it was part of Labour's policies ahead of the election, so is something they were expected to do regardless of this report.

The report, however, goes further. Much further. It was scathing about sanctions against beneficiaries, saying evidence shows they do little but create more harm to those already at the bottom of society. And it recommended a massive 47 percent increase in current benefit levels.

Those would be hugely controversial reforms… or, you could say, transformational. And they are not of the cuff ideas.

The current and previous Children's Commissioners have urged such substantial benefit increases as the most effective way to tackle child poverty. In June 2014 the past Children's Commissioner Dr Russell Wills made the radical call of increasing benefits by 50 percent, for the sake of the children. He pointed out that at that time three percent of our elderly lived in hardship, 18 percent of our children did. Dr Wills argued:

"I think that our tax and benefit system are actually part of the same thing. And it's not working. It's way too complicated. People who have entitlements don't get them. So we need to simplify it substantially."

He went onto say that "the science" told him the best solution to child poverty was to return benefit levels to what they were in the 1980s and 90s. It's worth taking a moment to remember the history here. Jim Bolger, Ruth Richardson and Jenny Shipley slashed benefits back in the early 1990s, in part because benefits were so high - they argued - beneficiaries lacked the incentive to work. The gap between life on the dole and life on a wage was not big enough. So they ratcheted up that gap.

What people seldom consider though is that since then wages and salaries have continued to grow. Super, linked to wages, has grown to. But other benefits - with any increases linked to inflation, not wage growth - have not been increased nearly as much. Until, that is, Sir John Key and Bill English famously raised them in 2015. So the gap between work and welfare has grown since the 1990s.

That's why the report today says, "The level of financial support is now so low that too many New Zealanders are living in desperate situations".

In sum, the argument in support of this radical prescription is that you can raise abatements here and offer support there, but the best and least bureaucratic way to tackle poverty is to - wait for it - give the poor more money.

Cue the ideological debate about bludgers and the deserving poor. But the reality that if you want fewer kids in poverty, their parents- whether you like them or not - need more money in their pockets.

So as part of their coalition deal, Labour and the Greens commission this report. They get the transformational advice most of them would have wanted. How do they respond? Welfare Minister Carmel Sepuloni agrees the welfare system is not working. Marama Davidson agrees the welfare system is not working. And then they commit to ignore the report's big recommendations.

They say no to up to 47 percent benefit increases, preferring "a staged implementation". The call for "urgent change" is rejected. Remarkably, Ms Davidson has put her quotes into the same press release, tying the Greens to this approach, when they could have been dissenting from the rafters.

The political and institutional reality is that no government can make these changes overnight. But the cold water thrown on this report underlines what we've learnt about this government in its handling of tax, its debt level, labour reform and more. It is not just incremental, it looks timid. There is certainly no sign of it being transformational.

The closest it has got is on its decision to stop drilling for oil. But on tax and child poverty - two of its most deeply treasured issues - it has kicked for touch. Ms Ardern has political capital to burn after the Christchurch attacks and twice in three weeks she has chosen not to spend it. She has the political cover of National having increased benefits under Sir John (so just how critical could Bridges be?). Yet Labour has chosen not to go to the wall for something it believes in. Again.

Could it be that it simply doesn't want to raise its debt levels or make the hard choices required to find the $5 billion needed to make the working group's changes? Or the party is divided?

Then there's the Greens. National would not support even these few reforms promised, so they have the power to demand more their coalition partners. They have the power to get the wins New Zealand First has achieved on labour reform, three strikes and the CGT. Yet they are backing Labour's cautious approach and promising to back these changes. That's a very odd political calculation.

If the Ardern administration wants to be the transformational government she and her allies think they are in their hearts, they are running out of issues.